TNPC INC, S-1, 2000-07-14

TNPC INC
S-1, 2000-07-14

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

TNPC, INC.

(Name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 4931 52-2208601
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>

10 GLENVILLE STREET
GREENWICH, CONNECTICUT 06831
(203) 531-0400

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

MARC E. MANLY
MANAGING DIRECTOR, LAW AND GOVERNMENT AFFAIRS
10 GLENVILLE STREET
GREENWICH, CONNECTICUT 06831
(203) 531-0400

(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

COPIES TO:

<TABLE>
<S> <C>
SCOTT N. WULFE G. MICHAEL O'LEARY
VINSON & ELKINS L.L.P. ANDREWS & KURTH L.L.P.
1001 FANNIN, SUITE 2300 600 TRAVIS STREET, SUITE 4200
HOUSTON, TEXAS 77002-6760 HOUSTON, TEXAS 77002
(713) 758-2222 (713) 220-4200
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share.............. $400,000,000 $105,600
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION--DATED JULY 14, 2000

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PROSPECTUS
, 2000

[LOGO]

TNPC, INC.

SHARES OF COMMON STOCK
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TNPC, INC.:

- Through our subsidiary, The New Power Company, we intend to become the
first nationally branded provider of electricity and natural gas to
residential and small commercial customers in the United States.

- TNPC, Inc.
10 Glenville Street
Greenwich, Connecticut 06831
(203) 531-0400

PROPOSED SYMBOL & MARKET:

- We intend to apply to list our common stock on the New York Stock Exchange
under the symbol "NPW."

THE OFFERING:

- We are offering shares of our common stock.

- The underwriters have an option to purchase an additional
shares of common stock from us to cover over-allotments.

- This is our initial public offering, and no public market currently exists
for our shares.

- We anticipate that the initial public offering price will be between
$ and $ per share.

- Closing: , 2000.

<TABLE>
------------------------------------------------------------------------------
Per Share Total
------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to TNPC, Inc.:
------------------------------------------------------------------------------
</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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

Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
--------------------------------------------------------------------------------

DONALDSON, LUFKIN & JENRETTE

CHASE H&Q

CIBC WORLD MARKETS

CREDIT SUISSE FIRST BOSTON

PAINEWEBBER INCORPORATED

SALOMON SMITH BARNEY

DLJDIRECT INC.
<PAGE>
Description of Graphics/Map for EDGAR filing:

Two maps of the United States and accompanying statistics. One map shows
which state markets are open in the year 2000 and the other map shows the
markets which will be open by 2002.

2000:

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<CAPTION>
ELECTRICITY & NATURAL GAS ELECTRICITY NATURAL GAS
------------------------- ----------- -----------
<S> <C> <C>
California Arizona Georgia
Massachusetts Connecticut Maryland
New Jersey Michigan New Mexico
New York Rhode Island Ohio
Pennsylvania
</TABLE>

2002:

<TABLE>
<CAPTION>
ELECTRICITY & NATURAL GAS ELECTRICITY NATURAL GAS
------------------------- ----------- -----------
<S> <C> <C>
California Arizona Colorado
Connecticut Arkansas Georgia
Delaware Iowa Illinois
Maine Texas Kansas
Maryland Vermont
Massachusetts Washington, D.C.
Michigan West Virginia
Missouri
Nevada
New Hampshire
New Jersey
New Mexico
New York
Ohio
Oklahoma
Pennsylvania
Rhode Island
Virginia
</TABLE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary........... 1
Risk Factors................. 6
Special Note Regarding
Forward-Looking Statements... 14
Our Background............... 14
Use of Proceeds.............. 15
Dividend Policy.............. 15
Capitalization............... 16
Dilution..................... 17
Selected Financial Data...... 18
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations................. 19
Business..................... 24
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Description of Material
Contracts................ 36
Management................. 42
Related Party
Transactions............... 49
Principal Stockholders..... 50
Description of Capital
Stock...................... 53
Shares Eligible For Future
Sale....................... 58
Underwriting............... 60
Legal Matters.............. 63
Experts.................... 63
Where You Can Find More
Information.............. 64
Index to Financial
Statements................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
AND MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. TO LEARN MORE
ABOUT THE OFFERING AND OUR BUSINESS, YOU SHOULD READ THE ENTIRE PROSPECTUS,
INCLUDING OUR FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. IN THIS PROSPECTUS, THE TERMS "WE," "US" and "OUR" REFER TO
TNPC, INC. AND ITS SUBSIDIARIES.

OUR COMPANY

We intend to become the first nationally branded provider of electricity and
natural gas to residential and small commercial customers in the United States.
Through our subsidiary, The New Power Company, we will offer consumers in
restructured retail energy markets competitive energy prices, flexible payment
and pricing choices, improved customer service, and other innovative products,
services and incentives. Although our initial focus will be on providing
electricity and natural gas, as we develop our business, we will offer
additional products, services and customized solutions for residential and small
commercial customers.

We were formed by Enron Corp., the largest trader and marketer of
electricity and natural gas in North America, to target the rapidly
restructuring residential and small commercial markets for these products. We
believe we are uniquely positioned to succeed because of:

- our access to Enron's technical resources, regulatory and risk management
expertise, and reliable wholesale commodity purchasing power;

- our relationships with market-leading strategic partners such as America
Online, Inc. and International Business Machines Corporation; and

- a management team with significant consumer marketing, energy commodity
risk management, and deregulation experience.

We expect to begin acquiring and serving electricity customers in select
utility markets in Pennsylvania and New Jersey in the second half of 2000 in
order to test and refine our operating systems and marketing strategies.
Following those efforts, we expect to enter several additional open markets
beginning in early 2001. We recently entered into agreements to acquire the
residential and small commercial retail energy business of subsidiaries of
Columbia Energy Group, which includes approximately 285,000 natural gas
customers and 20,000 electricity customers in eight states, primarily Georgia,
Ohio and Pennsylvania. We expect to close this transaction in the second half of
2000, subject to satisfaction of customary closing conditions, including
regulatory approval.

The Columbia customer base, together with residential customers in
California and Ohio to be transferred to us by Enron, will give us a significant
initial customer base of over 325,000 customers. These customers will give us an
opportunity to broaden our understanding of operations and market
characteristics in several geographic areas, and will also offer opportunities
to begin cross-selling other products and services.

OUR MARKET OPPORTUNITY

We estimate that the total residential and small commercial electric and
natural gas marketplace in the United States exceeds $150 billion annually,
making it one of the largest consumer markets to undergo competitive regulatory
restructuring. As of the beginning of 2000, markets in nine states were open to
retail electric competition, and nine states had markets open to retail natural
gas competition. In addition, laws or regulatory plans providing for future
retail electric competition have been adopted in another 15 states plus the
District of Columbia. Although in many of these jurisdictions, final rules
implementing market restructuring are not yet finalized and effective, we
estimate that by the beginning of 2002, roughly 50% of the U.S. population, or
approximately 55 million households, will be in

1
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markets where consumers can choose either their electricity or natural gas
provider or both. As was the case in the deregulation of the long-distance
telephone markets, we believe that a significant percentage of consumers will be
receptive to switching from their monopoly energy providers to competitive
providers.

We believe that current trends in the retail energy markets present
attractive opportunities for us to build a national business providing energy to
residential and small commercial customers. These trends include:

- continuing adoption by regulators and state legislatures of market rules
that we believe provide alternative energy suppliers opportunities to
compete with incumbent utilities and others in retail sales of electricity
and natural gas; and

- growing consumer awareness of the benefits that can be offered by
competitive energy suppliers and a demonstrated willingness by consumers
in newly opened markets to buy energy from sources other than their
incumbent utilities.

OUR STRATEGY

Our success will depend upon our ability to identify and enter favorable
restructured energy markets and to achieve sufficient customer scale to create a
profitable operating cost structure. Specifically, we intend to:

- Pursue our "first mover's" advantage to become the premier nationally
branded provider of residential and small commercial energy services.

- Selectively enter only retail energy markets that have rate structures,
market rules, consumer demographics, energy consumption patterns and risk
management profiles that will enable us to provide savings and flexibility
to our customers at an acceptable margin.

- Focus on customer profitability by directing our marketing efforts to
customers who we believe will be most attracted to energy savings or who
will be receptive to purchasing incremental products and services from
their energy provider.

- Capitalize on our risk management and commodity trading systems, resources
and skills to create a competitive advantage.

- Take advantage of the increasing consumer acceptance of online commerce,
both directly through our website (www. .com) and through our
exclusive interactive marketing agreement with AOL, to reduce our customer
acquisition and service costs and serve our customers more effectively.

- Acquire and serve customers through traditional channels to ensure that we
can reach all customers, regardless of their preferred method for doing
business.

- Develop strategic marketing alliances with established consumer brand
partners to reach our target customers more effectively, including
arrangements to offer airline miles and other incentives.

- Utilize our "best in class" customer care and revenue management systems
that we are developing with IBM to provide superior customer service and
to maintain an attractive cost structure.

- Offer customers flexible pricing and payment alternatives, and tailored
product and service offerings to match their specific needs.

- Cross-sell additional products and services to our customers, such as home
warranties and other home services.

2
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OUR MANAGEMENT

We have assembled an experienced senior management team led by our President
and Chief Executive Officer, H. Eugene Lockhart, former President of AT&T
Consumer Services and Chief Marketing Officer of AT&T, and prior to that,
President and Chief Executive Officer of MasterCard International. In addition,
we have a number of senior executives from the telecommunications and consumer
financial services industries, as well as several former Enron personnel
specializing in energy commodity pricing, marketing, risk management, and
government affairs. We believe the experience gained by our management in other
consumer and energy markets that have undergone regulatory restructuring will
give us an advantage as we operate in restructured retail electric and gas
markets.

OUR STRATEGIC PARTNERS

ENRON. Enron has contributed its retail residential energy business to us,
and has entered into a number of favorable arrangements that we believe will
give us competitive advantages, either through outright ownership of systems or
through services agreements. These arrangements include commodity supply
agreements that provide us electric and natural gas commodities at favorable
wholesale prices, and agreements that give us access to proprietary software and
risk management systems for managing our energy purchasing and delivery
functions, and minimizing our commodity risk exposure.

IBM. We have entered into a ten-year revenue management and customer care
agreement with IBM Global Services, an industry leader in providing similar
customer service functions in many industries. IBM is also developing and
hosting our website for online commerce and billing applications. We believe
these arrangements will enable us to offer superior customer service in a
cost-effective, readily scalable manner. In addition to the revenue management
and customer care agreement, IBM purchased some of our common stock and has
agreed to purchase additional common stock during the first year after this
offering.

AOL. We have entered into a six-year interactive marketing agreement with
AOL, which provides us specified exclusive rights to market electricity and
natural gas to consumers through AOL's online system, including CompuServe and
Digital City. AOL is the largest online access provider in the United States,
with over 23 million subscribers. Our agreement gives AOL the right to receive
equity and other incentives intended to encourage AOL to solicit customers to
sign up for our services. We believe AOL is a premier online marketing channel,
particularly for our targeted consumers.

CAPITAL FUNDING

Since our formation in late 1999, we have raised approximately $210 million
in private equity capital from California Public Employees' Retirement System,
funds managed by DLJMB Partners, GE Capital Equity Investments, Inc., IBM,
Ontario Teachers' Pension Plan Board and others.

3
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THE OFFERING

<TABLE>
<S> <C>
Common stock offered by us...................... shares

Common stock to be outstanding after this
offering and common stock acquirable upon
exercise of Class A warrants.................. shares

Use of proceeds................................. The net proceeds from this offering are estimated
to be approximately $ . We will use the net
proceeds for customer acquisitions, infrastructure
development and general corporate purposes. See
"Use of Proceeds."

Proposed NYSE symbol............................ NPW
</TABLE>

Unless otherwise indicated, the information in this prospectus:

- assumes completion of a 200:1 split of our common stock to be effected
immediately prior to consummation of this offering;

- assumes the issuance of 5,322,693 shares of common stock in connection
with the automatic cashless exercise upon completion of this offering of
Class B warrants, assuming the initial public offering price of our common
stock is equal to the mid-point of the range appearing on the cover page
of this prospectus;

- assumes the issuance of 69,070,800 shares of common stock subject to
issuance after the consummation of this offering under Class A warrants
having an exercise price of $0.05 per share, which will become exercisable
on or after December 31, 2000;

- does not assume the issuance of shares of common stock that may be issued
after this offering pursuant to agreements with IBM, AOL or other
strategic partners;

- does not assume the issuance of shares of common stock that will be
subject to issuance after the consummation of this offering upon the
exercise of options issued under our stock plan or $5 million of
restricted stock to be issued to members of management under our stock
plan based on the initial public offering price; and

- assumes the underwriters' over-allotment option to purchase
additional shares is not exercised.

4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Enron created a subsidiary, Enron Energy Services, LLC, referred to as EES
in this prospectus, on May 1, 1997 to conduct retail marketing and sales of
natural gas and electricity to residential, commercial and industrial customers.
Historically, our business was the residential energy operating unit of EES. The
following table presents summary financial data, since inception, related to the
residential electric and natural gas business of EES in California and Ohio that
was contributed to us in our initial private placement transaction effective
January 6, 2000. Our summary financial data for the period from inception,
May 1, 1997, through December 31, 1997, and as of and for the years ended
December 31, 1998 and 1999 set forth below have been derived from financial
statements audited by Arthur Andersen LLP, independent public accountants. Our
financial data as of and for the three months ended March 31, 1999 and 2000 set
forth below have been derived from unaudited financial statements which, in the
opinion of management, reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial data for these
periods. Our summary financial information also presents summary unaudited pro
forma condensed financial data as of and for the three months ended March 31,
2000 and for the year ended December 31, 1999. The pro forma condensed financial
data gives effect to our contemplated acquisition of assets and customers from
subsidiaries of Columbia Energy Group and a private placement of equity that we
closed in July 2000, as if such transactions occurred on the earliest day of the
periods presented for income statement data and as if such transactions occurred
as of the balance sheet date for balance sheet data.

You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", our financial statements and related notes and our condensed pro
forma financial statements included elsewhere in this prospectus.

Due to our limited operating history and our new business model, we believe
that period-to-period comparisons of our revenues and results of operations are
not meaningful. As a result, you should not rely on our revenues or results of
operations for any period as an indication of our future performance or
prospects.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31, ------------------------------------
MAY 1 TO ------------------------------------ ACTUAL
DECEMBER 31, ACTUAL ACTUAL PRO FORMA ---------------------- PRO FORMA
1997 1998 1999 1999 1999 2000 2000
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $ 766 $ 7,024 $ 7,838 $ 114,508 $ 2,164 $ 2,126 $ 65,554
Cost of sales........... 632 4,679 5,748 115,445 1,514 1,784 58,387
-------- -------- ----------- ----------- ------- ----------- -----------
Gross profit............ 134 2,345 2,090 (937) 650 342 7,167
Operating expenses...... 19,503 19,686 27,117 76,702 4,086 8,956 17,315
-------- -------- ----------- ----------- ------- ----------- -----------
Operating loss.......... $(19,369) $(17,341) $ (25,027) $ (77,639) $(3,436) $ (8,614) $ (10,148)
======== ======== =========== =========== ======= =========== ===========
Basic and diluted net
loss per common
share................. $ (1.25) $ (3.66) $ (0.34) $ (0.38)
Shares used in computing
net loss per common
share................. 20,000,000 21,241,200 22,064,400 23,305,600
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 89,704 $148,204
Working capital............................................. $ 90,083 $182,783
Total assets................................................ $102,805 $213,605
Total stockholders' equity.................................. $ 96,635 $207,435
</TABLE>

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(1) Adjusted to reflect completion of this offering, including the mandatory
cashless exercise of all outstanding

Class B warrants.

5
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RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE YOU DECIDE WHETHER OR NOT TO PURCHASE SHARES OF OUR
COMMON STOCK. IF ANY OF THE ADVERSE EVENTS DESCRIBED BELOW ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS COULD BE MATERIALLY
ADVERSELY AFFECTED. AS A RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

IF COMPETITIVE RESTRUCTURING OF THE ELECTRIC AND NATURAL GAS MARKETS IS DELAYED
OR DOES NOT RESULT IN VIABLE COMPETITIVE MARKET RULES, OUR BUSINESS WILL BE
ADVERSELY AFFECTED.

To date, only a limited number of markets have been opened to retail energy
competition. In many of these markets, the market rules adopted have not
resulted in energy service providers being able to compete successfully with the
incumbent utilities, and customer switching rates have been low. Only recently
have a small number of markets opened to competition under rules that we believe
may offer attractive competitive opportunities. Our business model depends on
other favorable markets opening under viable competitive rules in a timely
manner. In any particular market, there are a number of rules which will
ultimately determine the attractiveness of that market. Markets that we enter
may have both favorable and unfavorable rules. If the trend towards competitive
restructuring of retail energy markets does not continue or is delayed or
reversed, our business prospects and financial condition could be materially
adversely impaired.

Retail energy market restructuring has been and will continue to be a
complicated regulatory process, with competing interests advanced not only by
relevant state and federal utility regulators, but also by state legislators,
federal legislators, incumbent utilities, consumer advocacy groups, and
potential market participants. As a result, the extent to which there are
legitimate competitive opportunities for alternative energy suppliers in a given
jurisdiction may vary widely, and we cannot assure you that regulatory
structures will offer us competitive opportunities to sell energy to consumers
on a profitable basis. The regulatory process could be negatively impacted by a
number of factors, including interruptions of service, significant or rapid
price increases, and other factors which may be attributed by opponents of
competition in these markets to restructuring and to the lack of regulatory
control. The legislative and regulatory processes in some states take prolonged
periods. In a number of jurisdictions, it may be many years from the date
legislation is enacted until restructuring is completed.

In addition, although most retail energy market restructuring has been
conducted at the state and local levels, bills have been proposed in Congress in
the past that would preempt state law concerning the restructuring of the retail
energy markets. Although none of these initiatives has been successful, we
cannot assure you that federal legislation will not be passed in the future that
could materially adversely affect our business.

WE ARE A NEW COMPANY WITHOUT A SUCCESSFUL OPERATING HISTORY.

We are a new company with a limited operating history. Although we acquired
Enron's residential operations in connection with our formation transaction in
January 2000, these operations were limited in scope and do not reflect our
business model going forward. Therefore, we believe that period-to-period
comparisons of our past revenues and results of operations are not meaningful.

Before investing in our common stock, you should consider the risks and
difficulties that we face as a company with an unproven business model in the
new and rapidly evolving restructured retail energy markets. We are currently in
the process of developing and constructing our billing, customer care and
Internet website infrastructure and our marketing strategies. Based on our
current build-out plan, we do not expect to begin acquiring new revenue
producing customers until the second half of 2000, although we have agreed to
acquire customers in our pending acquisition of the residential and small
commercial retail energy business of Columbia Energy Group and its affiliates.
We will need to

6
<PAGE>
expend substantial funds for the development, construction, testing and
deployment of our systems and the promotion of our brand. These activities are
expected to place significant demands on our managerial, operational and
financial resources.

We have only recently assembled our management team. We cannot guarantee
that our new management team will be able to operate effectively or to implement
successfully our business model.

WE EXPECT INITIALLY TO INCUR SUBSTANTIAL OPERATING AND NET LOSSES, AND WE CANNOT
ASSURE YOU WE WILL ATTAIN PROFITABILITY.

We have incurred net losses since inception and based on our current
business plan we expect to continue to incur substantial losses for a
significant period of time. To date, we have recognized minimal revenue and our
ability to generate revenue is subject to uncertainty. In addition, we intend to
increase our operating expenses significantly to develop our business, including
brand development, marketing and other promotional activities and the continued
development of our billing, customer care and Internet website infrastructure.
We expect that our total operating expenses for the year ended December 31, 2000
will be approximately $ to $ million. Our ability to become profitable will
depend on, among other things:

- our ability to attract and to retain a critical mass of customers at a
reasonable cost;

- our ability to develop internal corporate organization and systems;

- the continued competitive restructuring of retail energy markets with
viable competitive market rules; and

- our ability to manage effectively our energy requirements and to sell our
energy at a sufficient margin.

WE MAY HAVE DIFFICULTY OBTAINING A SUFFICIENT NUMBER OF CUSTOMERS.

We anticipate that we will incur significant costs as we enter new markets
and pursue customers by utilizing a variety of marketing methods. In order for
us to recover these expenses, we must attract and retain a large number of
customers to our service.

We may experience difficulty attracting customers because many customers may
be reluctant to switch to a new company for the supply of a commodity as
critical to their well-being as electric power or natural gas. A major focus of
our marketing efforts will be to convince customers that we will be a reliable
provider with sufficient resources to meet our commitments. If our marketing
strategy is not successful, our business, results of operations, and financial
condition will be materially adversely affected.

OUR CERTIFICATE OF INCORPORATION PERMITS US TO PURSUE ONLY LIMITED BUSINESS
ACTIVITIES. IF THESE LIMITED ACTIVITIES ARE NOT SUCCESSFUL, IT WILL BE DIFFICULT
FOR US TO GENERATE POSITIVE OPERATING RESULTS FROM OTHER ENTERPRISES.

In connection with our formation, we agreed in our certificate of
incorporation generally to limit our corporate operations to the retail
marketing and sale of natural gas, electricity and other commodities, products
and services to specifically defined small commercial customers and residential
customers in the United States, for specified periods. Our certificate of
incorporation will thus limit our ability to pursue other potentially profitable
activities, including selling energy or other products and services to larger
commercial or industrial customers. For more information about the limitations
on our corporate purpose, please see the description of the limited purpose
clause contained in our certificate of incorporation in "Description of Capital
Stock."

7
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WE WILL DEPEND ON ENRON, IBM AND OTHER THIRD-PARTIES TO PROVIDE SEVERAL CRITICAL
FUNCTIONS FOR OUR BUSINESS, AND THE LOSS OF THESE FUNCTIONS COULD MATERIALLY
ADVERSELY IMPACT OUR BUSINESS.

As part of our initial private placement, Enron agreed to provide a number
of critical services for our business, such as risk management services and the
wholesale supply of commodities on favorable terms. Under the current contracts
governing these services, Enron is not obligated to provide these services after
the expiration of the terms of the applicable agreements. When those agreements
expire, we will be required to negotiate new agreements with Enron, develop our
own capabilities, or find other providers of the same services. We cannot be
sure that we will be able to develop our own ability to conduct these services
or obtain these services on terms equally favorable at that time.

In addition, we have entered into a ten-year agreement with IBM to design,
construct and operate our back-office functions, including customer billing and
processing. We have also retained IBM to design and construct a website that
will provide our customers with the opportunity to view their bill at any time
and to pay their bill online. Any problems that arise with the design and
construction of our back-office or our website functions could result in
increased expenditures, delays in the launch of our commercial operations, or
unfavorable customer experiences that could materially adversely affect our
business strategy. Also, any interruption of the services provided by IBM could
be disruptive to our business. For a more complete description of the contracts
governing our relationships with Enron and IBM, see "Description of Material
Contracts."

WE MAY HAVE CONFLICTS OF INTEREST WITH ENRON. THESE CONFLICTS MAY MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.

Enron has substantial experience in trading and marketing energy products
and has substantial resources it can devote to its business ventures. Although
our noncompetition agreement with Enron prohibits Enron and its affiliates from
competing against us as a retail provider of power and natural gas to
residential customers for specified periods, that agreement does not restrict
Enron and its affiliates from competing against us as a retail provider of power
and natural gas to any commercial customers, including small commercial
customers. As a result, the possibility exists that we may compete against Enron
in some business areas, which could materially adversely affect our results of
operations and our financial condition. In addition, the noncompetition
agreement will terminate in January 2005, and could terminate sooner if
specified events occur, after which Enron could compete against us in all of our
business segments.

Under the terms of the master services agreement we executed with Enron, we
are entitled to use the services of Enron's government affairs department to
handle various regulatory and legislative issues and activities related to the
restructuring of the power and natural gas markets. Because Enron is actively
involved in the commercial and wholesale power and natural gas markets, the
possibility exists that we may advocate a different regulatory position with
regard to a legislative or regulatory issue than Enron. Under the terms of the
master services agreement, Enron's government affairs department is not required
to take any position on our behalf that Enron believes may conflict with Enron's
own interests. Therefore, the possibility exists that we may need to find other
representation when confronted with legislative or regulatory issues in which
our interests are not aligned with those of Enron, and that Enron may take
regulatory positions that are counter to our interests.

SUBSTANTIAL FLUCTUATIONS IN ENERGY COMMODITY PRICES OR THE COST OF TRANSMITTING
AND DISTRIBUTING THESE ENERGY COMMODITIES COULD MATERIALLY ADVERSELY AFFECT US.

To provide energy to our customers, we must purchase the relevant commodity
in the wholesale energy markets, which are often highly volatile. In particular,
the wholesale electric power market often experiences enormous commodity price
fluctuations during peak load periods. We intend to manage our wholesale
commodity price risk by implementing a risk management strategy that will hedge
against

8
<PAGE>
large price fluctuations in the wholesale energy markets. However, wholesale
energy market prices may fluctuate to such extremes that we are not able to
hedge our positions effectively. Furthermore, to the extent that we enter into
contracts with customers that require us to provide energy at a fixed price over
an extended period of time, we may incur losses caused by rising commodity
prices. Recently, commodity prices have increased significantly. Periods of
rising commodity prices may reduce our ability to compete with incumbent
utilities because their regulated rates may not immediately increase to reflect
these increased costs. Any of these contingencies could substantially increase
our costs of operation if we are forced to purchase commodities at very high
prices, which could have a material adverse effect on our financial condition.

We also are required to arrange for the scheduling and transmission of
energy commodities to the local utilities for distribution over their
distribution networks. In some circumstances we may be unable to obtain
sufficient capacity on the electric grid or the pipeline network to deliver the
energy to the local distribution point in a particular market at the appropriate
time. If we are unable to meet our delivery requirements to the local utilities,
we may be subject to fines and penalties, as well as adverse customer reaction.

WE WILL BE REQUIRED TO RELY ON UTILITIES WITH WHOM WE WILL BE COMPETING TO
PERFORM SOME FUNCTIONS FOR OUR CUSTOMERS.

Under the regulatory structures adopted in most jurisdictions, we will be
required to enter into agreements with local incumbent utilities for use of the
local distribution systems, and for the creation and operation of functional
interfaces necessary for us to serve our customers. Any delay in these
negotiations or our inability to enter into reasonable agreements could delay or
negatively impact our ability to serve customers in those jurisdictions, which
could have a material negative impact on our business, results of operations,
and financial condition.

We will also be dependent on local utilities for maintenance of the
infrastructure through which we will deliver electricity and natural gas to our
customers. We are limited in our ability to control the level of service the
utilities provide to our customers. Any infrastructure failure that interrupts
or impairs delivery of electricity or natural gas to our customers could
materially negatively impact the satisfaction of our customers with our service,
which could materially adversely affect our business.

Regulations in many markets require that the services of reading our
customers' energy meters and the billing and collection process be retained by
the local utility. In those states, we will be required to rely on the local
utility to provide us with our customers' information regarding energy usage and
to pay us for our customers' usage based on what the local utility collects from
our customers. We may be limited in our ability to confirm the accuracy of the
information provided by the local utility and we may not be able to control when
we receive payment from the local utility. We also may be limited in our ability
to create a supplier relationship with our customers. If we do not receive
payments from the local utility on a timely basis, our working capital may be
impaired.

IN SOME MARKETS, WE WILL BE REQUIRED TO BEAR CREDIT RISK AND BILLING
RESPONSIBILITY FOR OUR CUSTOMERS.

In some markets, we are responsible for the billing and collection functions
for our customers. In many of these markets, we may be limited in our ability to
terminate service to customers who are delinquent in payment. Even if we
terminate service to customers who fail to pay their utility bill in a timely
manner, we may remain liable to our suppliers of electricity and natural gas for
the cost of those commodities and to the local utilities for services related to
the transmission and distribution of electricity and natural gas to those
customers. The failure of our customers to pay their bills in a timely manner or
our failure to maintain adequate billing and collection programs could
materially adversely affect our business.

9
<PAGE>
OUR BUSINESS MODEL WILL DEPEND IN PART ON THE CONTINUED USE AND GROWTH OF THE
INTERNET AND E-COMMERCE.

Although we will offer our products and services through many channels, an
important part of our marketing and customer service strategy will be to access
and serve our customers through Internet websites, including through our
marketing agreement with AOL. Our business could be materially adversely
affected if use of the Internet does not continue to develop, develops more
slowly than expected, or becomes regulated in ways that hinder our marketing
efforts.

Capacity constraints caused by growth in the use of the Internet may, unless
resolved, impede further development of the Internet to the extent that users
experience delays, transmission errors and other difficulties. In addition, the
adoption of the Internet for commerce and communications, particularly by those
individuals and companies that have historically relied upon alternative means
of commerce and communication, generally requires the understanding and
acceptance by our customers of a new way of conducting business and exchanging
information. Further, any state or federal regulations that impose taxes upon
commerce conducted over the Internet or define privacy rights with respect to
the use of the Internet could negatively impact the usefulness of the Internet
as a commercial medium. Therefore, if the necessary infrastructure, products,
services or facilities are not developed, or if the Internet does not become a
viable commercial medium, our business, results of operations and financial
condition could be materially adversely affected.

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH SUCCESSFULLY.

We hope to grow and develop our business rapidly. The development of our
operations will depend upon, among other things, our ability to expand our
customer base in our initial markets and to enter new markets in a timely manner
at reasonable costs. In addition, we anticipate that our employee base will grow
to accommodate our increased customer base. As we expand our operations, we may
encounter difficulties integrating new customers and employees as well as any
legacy systems of acquired entities, such as the Columbia business. We also may
experience difficulty managing the growth of a portfolio of customers that is
diverse both with respect to the types of services they will require, the market
rules in their jurisdiction and the infrastructure delivering our products to
those customers.

Expanding our operations may also require continued development of our
operating and financial controls and may place additional stress on our
management and operational resources. If we are unable to manage our growth and
development successfully, our operating results and financial condition could be
materially adversely affected.

WE MAY EXPERIENCE PROBLEMS AS A RESULT OF OUR COLUMBIA ACQUISITION.

We have entered into definitive agreements to acquire the residential and
small commercial business of subsidiaries of Columbia Energy Group. We may
encounter problems in managing the transaction and integrating the operations
and customers into our business. Key personnel from Columbia and its affiliates
who we require to continue to serve the customers and to operate the billing and
other systems we expect to acquire may not accept our offers of employment, or
otherwise strain our management and systems resources as we are preparing to
enter other markets to provide service. Regulators may impose conditions on
transfer certificates, which could delay or impair our ability to serve
customers, and the incumbent utilities may seek to recover switching fees, which
could be substantial. Also, current fixed price contracts with many of the
Columbia customers currently are at rates that do not reflect recent increases
in commodity prices, and will therefore generate losses until those contracts
expire and can be re-priced. Given the substantial increases in wholesale costs
for natural gas this year and the possible volatility in the wholesale price of
electricity, we may experience difficulties in increasing our prices to these
customers as their contracts with Columbia expire, or we

10
<PAGE>
may experience a higher loss of those customers to competitors and incumbent
providers. Upon acquiring these operations and customers, we may discover that
the systems and assets we are acquiring are inadequate, or cannot easily be
migrated to the systems we are developing to run our business, and that the
customers do not have an attractive profile in terms of credit worthiness or
demand characteristics. Any of these factors could materially adversely affect
our business.

WE MAY FACE STRONG COMPETITION FROM INCUMBENT UTILITIES AND OTHER COMPETITORS.

In most markets, our principal competitor may be the local incumbent utility
company or its unregulated affiliates. The incumbent utilities have the
advantage of long-standing relationships with their customers, and they may have
longer operating histories, greater financial and other resources and greater
name recognition in their markets than we do. In addition, incumbent utilities
have been subject to regulatory oversight, in some cases for close to a century,
and thus have a significant amount of experience regarding the regulators'
policy preferences as well as a critical economic interest in the outcome of
proceedings concerning their revenues and terms and conditions of service.
Incumbent utilities may seek to decrease their tariffed retail rates to limit or
to preclude the opportunities for competitive energy suppliers, and otherwise
seek to establish rates, terms and conditions to the disadvantage of competitive
energy suppliers.

Some of our competitors, including incumbent utilities, have formed
alliances and joint ventures in order to compete in the restructured retail
electricity and natural gas industry. Many customers of these incumbent
utilities may decide to stay with their long-time energy provider if they have
been satisfied with its service in the past. Therefore, it may be difficult for
us to compete against incumbent utilities and their affiliates for customers who
are satisfied with their historical utility provider.

In addition to competition from the incumbent utilities and their
affiliates, we may face competition from a number of other energy service
providers, including Internet start-up companies focusing on Internet marketing
and online services, and other energy industry participants who may develop
businesses that will compete with us in both local and national markets. We also
may face competition from other nationally branded providers of consumer
products and services. Some of these competitors or potential competitors may be
larger and better capitalized than us.

WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS OF THIS OFFERING, AND WE MAY
NOT USE THE PROCEEDS EFFECTIVELY.

Our management could spend the proceeds from this offering in ways with
which our stockholders may not agree. A large portion of the proceeds from this
offering is expected to be used to develop our brand name and image, to pursue
marketing strategies, and to create our operational infrastructure. Many of
these expenditures will only create intangible assets that are difficult to
measure and which will not appear as assets on our balance sheet. We may also
use the proceeds in future strategic acquisitions. Until we need to use the
proceeds from this offering, we plan to invest the net proceeds in investment
grade securities. We cannot assure you the proceeds from this offering will be
invested to yield a favorable return.

WE WILL FACE RISKS IF WE UNDERTAKE OTHER ACQUISITIONS.

We may make investments in complementary companies, products or
technologies. If we buy a company or business, we may experience difficulty in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. Furthermore, if
we acquire the residential or small commercial businesses of an incumbent
utility or other energy provider in a particular market, the customers of that
utility may not be under any obligation to use our services. If we make other
types of acquisitions, we may experience difficulty in assimilating the acquired
technology or products into our operations. These difficulties could disrupt

11
<PAGE>
our ongoing business, distract our management and employees, and increase our
expenses. Furthermore, we may use the proceeds of this offering, incur debt, or
issue equity securities to pay for any future acquisitions. If we issue
additional equity securities for acquisitions, our stockholders could experience
dilution. As of the date of this prospectus, we have no agreements or
understandings regarding any future acquisitions other than the Columbia
acquisition described under "Material Contracts."

WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE.

The proceeds from this offering may not be sufficient to fund our marketing
efforts, our build-out program and our working capital requirements. We may need
to incur debt in order to fund working capital or for other purposes. We cannot
be certain that we will be able to obtain additional financing on favorable
terms or at all. If we need additional capital and cannot raise it on acceptable
terms, our financial condition and business will be materially adversely
affected.

ENRON AND OUR OTHER CURRENT PRINCIPAL STOCKHOLDERS MAY BE ABLE TO CONTROL THE
OUTCOME OF MATTERS SUBMITTED TO A STOCKHOLDERS VOTE.

On completion of this offering, the investors in our two private placements
will collectively own % of our outstanding common stock, or % if the
underwriters' over-allotment option is exercised in full. In particular, Enron
and its affiliates will own, directly or indirectly, % of our common stock
calculated on a fully-diluted basis, or % if the underwriters' over-allotment
option is exercised in full. In addition, on completion of this offering,
representatives of the investors in our two private placements will have the
power to elect a majority of our board of directors. As a result, our private
placement investors will be in a position to influence or control the outcome of
matters requiring a stockholder vote, including the election of directors and
the approval of mergers and other significant corporate transactions, which will
reduce the influence of other stockholders with respect to these matters.

OUR SUCCESS MAY DEPEND ON KEY MEMBERS OF OUR MANAGEMENT, THE LOSS OF WHOM COULD
DISRUPT OUR BUSINESS OPERATIONS.

We depend on the continued employment and performance of key management
personnel. Although we have entered into employment agreements with many of our
executive officers that include equity incentives, if our key managers resign or
are unable to continue in their present roles and are not adequately replaced,
our business operations could be materially adversely affected.

WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS, WHICH MAY
REDUCE OR ELIMINATE YOUR ABILITY TO SELL YOUR SHARES FOR A PREMIUM IN A CHANGE
OF CONTROL TRANSACTION.

Various provisions of our certificate of incorporation, bylaws and Delaware
law may discourage, delay or prevent a change in the control of our company that
you may consider favorable. These provisions include:

- authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and to delay or deter a takeover attempt;

- limits on the ability of stockholders to call special meetings of
stockholders;

- prohibiting stockholder action by written consent after this offering; and

- advance notice requirements for nominations of candidates for election to
the board of directors or for proposing matters that can be acted upon by
stockholders at annual stockholder meetings.

12
<PAGE>
PURCHASERS IN THIS OFFERING WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF THE
BOOK VALUE OF THEIR INVESTMENT.

The initial public offering price of our common stock will be substantially
higher than the book value per share of our outstanding common stock. As a
result, if we were liquidated for book value immediately following this
offering, stockholders purchasing in this offering would receive less than the
price they paid for their common stock.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

The market price of our common stock could decline due to sales of a large
number of shares of our common stock in the market after the offering or the
perception that these sales could occur. Further, any additional capital raised
through the sale of equity may dilute your ownership percentage in our company
and reduce the value of your investment. Please read "Shares Eligible for Future
Sale" for information about the number of shares that will be outstanding after
this offering that could be resold after this offering.

DUE TO THE NATURE OF OUR BUSINESS AND THE FACT THAT OUR SHARES HAVE NOT BEEN
PUBLICLY TRADED PREVIOUSLY, THE MARKET PRICE OF OUR COMMON STOCK MAY BE
PARTICULARLY VOLATILE AND COULD DROP UNEXPECTEDLY.

Prior to this offering, there has been no public market for our common
stock. We cannot assure you that an active public trading market for our stock
will develop or be sustained after this offering. The initial public offering
price of our common stock will be determined through negotiations between our
management and the representatives of the underwriters. The market price after
this offering may vary significantly from the initial offering price in response
to a number of factors, some of which are beyond our control.

The stock market in general has recently experienced extreme price
fluctuations. These broad market fluctuations could materially adversely affect
the market price of our common stock after this offering. The market price of
our common stock may fluctuate substantially due to a variety of factors,
including:

- any actual or anticipated fluctuations in our financial condition and
operating results;

- public announcements concerning us or our competitors;

- public announcements regarding the speed, desirability or success of the
restructuring of retail electricity and natural gas markets;

- the introduction or market acceptance of new service offerings by us or
our competitors;

- changes in industry research analysts' estimates;

- sales of our common stock by existing stockholders;

- any loss by us of key personnel; and

- the occurrence or non-occurrence of any of the other risks described
above.

13
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. Forward-looking statements relate to future events
or our future financial performance. In some cases, you can identify
forward-looking statements by terminology like "may," "will," "should,"
"expects," "plans," "projected," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. All projections as to future events contained in this
prospectus are forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our company's or
our industry's actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. In evaluating these statements, you should specifically consider
various factors, including the risks outlined under "Risk Factors." These
factors may cause our actual results to differ materially from any
forward-looking statement.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, except as required by law, we
undertake no obligation to update any of the forward-looking statements after
the date of this prospectus to conform these statements to actual results and do
not intend to do so.

OUR BACKGROUND

We were incorporated in Delaware in November 1999. From the date of our
incorporation until January 6, 2000, all issued and outstanding shares of our
common stock were held by EES. On January 6, 2000, we completed our initial
private placement of common stock and two classes of warrants, which we refer to
as Class A warrants and Class B warrants, under a contribution and subscription
agreement we entered into with various investors, including EES.

In our initial private placement, the investors other than EES made cash
contributions totaling $100 million. EES contributed retail electricity and gas
customer contracts and entered into a services agreement, two commodity supply
agreements and a software agreement, in exchange for shares of our common stock
and Class A warrants. In addition, both Enron and EES entered into a
noncompetition agreement limiting Enron and EES from competing against us in
specified businesses and a business opportunity agreement that governs how we
will address future business opportunities between us. In exchange for these
contributions and agreements, we issued to the investors in our initial private
placement, in the aggregate, 19.8 million shares of our common stock, Class A
warrants to acquire 60 million shares of our common stock, and Class B warrants
to acquire 10.3 million shares of our common stock.

In July 2000, we signed definitive agreements for our second private
placement of Class A warrants and common stock. In our second private placement,
our investors, in the aggregate, have agreed to make cash contributions of
approximately $104 million in exchange for Class A warrants to acquire 9,070,800
shares of common stock and 639,000 shares of common stock.

We are a holding company and we intend to conduct all of our operations
through subsidiaries, including The New Power Company. We expect that state and
federal regulatory permits and certificates related to the retail marketing and
sale of electricity and natural gas will be held by The New Power Company.

Our principal executive offices are located at 10 Glenville Street,
Greenwich, Connecticut 06831, and our telephone number is (203) 531-0400. Our
Internet site is www. .com. The information on our website does not
constitute a part of this prospectus.

14
<PAGE>
USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately
$ million, assuming an initial public offering price of $ per share, and
after deducting the underwriting discounts and commissions and estimated
offering expenses. If the underwriters' over-allotment option is exercised in
full, we estimate that the net proceeds will be approximately $ million, after
deducting the estimated underwriting discounts and commissions and unreimbursed
offering expenses.

We intend to use the net proceeds from this offering for marketing and
customer acquisition, infrastructure development and general corporate purposes.
Pending these uses, the net proceeds of this offering will be invested in
investment grade securities.

DIVIDEND POLICY

We have not declared or paid cash dividends on our capital stock since our
inception, and we do not anticipate declaring or paying any cash dividends in
the foreseeable future. Instead, we currently expect to retain our earnings, if
any, to finance our business. Our board of directors has the authority to
declare and pay dividends on the common stock, in its discretion, as long as
there are funds legally available to do so.

15
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000, on
an actual basis, on a pro forma basis to reflect completion of the Columbia
acquisition and our second round private placement, and as adjusted to reflect:

- the assumed net cashless exercise of all outstanding Class B warrants that
will occur in connection with this offering, based on an assumed initial
public offering price of $ per share;

- the sale of the shares of common stock in this offering; and

- the application of the estimated net proceeds from this offering.

This table should be read in conjunction with "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", our financial statements and the related notes and our condensed
pro forma financial statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AT MARCH 31, 2000
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents:.................................. $ 89,704 $148,204 $
======== ======== ========

Long-term debt:............................................. $ -- $ -- $ --

Stockholders' equity:
Preferred stock, par value $.01 per share, 50,000,000
shares authorized; no shares issued and outstanding..... -- -- --
Common stock, par value $.01 per share, 500,000,000 shares
authorized; 22,064,400 shares issued and outstanding;
shares issued and outstanding, as adjusted(1)..... 221 233
Additional paid-in capital................................ 103,829 214,617
Accumulated deficit....................................... (7,415) (7,415)
-------- -------- --------
Total stockholders' equity.............................. 96,635 207,435
-------- -------- --------
Total capitalization.................................. $ 96,635 $207,435 $
======== ======== ========
</TABLE>

------------------------
(1) Does not include shares of common stock issuable upon exercise
of options issued under our 2000 Stock Plan or $5 million of restricted
stock to be issued to members of our management based on the initial public
offering price. Please read "Management--2000 Stock Plan." Also does not
include 69,070,800 shares of common stock issuable for $0.05 per share upon
exercise of outstanding Class A warrants.

16
<PAGE>
DILUTION

Our net tangible book value as of , 2000 was $ per share of
common stock. Net tangible book value per share is determined by dividing our
tangible net worth (tangible assets less total liabilities) by the total number
of outstanding shares of common stock and shares subject to issuance upon
exercise of outstanding Class A warrants. After giving effect to the sale of the
shares in this offering and the receipt of the estimated net proceeds (after
deducting estimated underwriting discounts and commissions and estimated
expenses of this offering), our net tangible book value at , 2000
would have been $ per share. This represents an immediate increase in the
net tangible book value of $ per share to existing stockholders and an
immediate dilution (i.e., the difference between the initial public offering
price and the pro forma net tangible book value after this offering) to new
investors purchasing common stock in this offering. The following table
illustrates the per share dilution to new investors purchasing common stock in
this offering of $ per share:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $
Net tangible book value per share at , 2000......... $
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution per share to new investors......................... $
=======
</TABLE>

The following table sets forth, as of , 2000, the number of
shares of common stock purchased from us, the total consideration paid therefor,
and the average price per share paid by existing stockholders and by new
investors:

<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONTRIBUTIONS AVERAGE
------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. % $ % $
New investors......................................
------ --- ------- --- -------
Total............................................ 100% $ 100%
====== === ======= === =======
</TABLE>

The foregoing computations assume no exercise of outstanding stock options
granted under our stock option plan. Options to purchase a total of
shares of common stock have been granted under our 2000 Stock Plan, which are
exercisable at a weighted average exercise price of $ per share. In the
event the remaining shares currently subject to outstanding options
under the 2000 Stock Plan were included in the foregoing calculations, the net
tangible book value per share before this offering would be $ , the pro
forma net tangible book value per share after this offering would be $ and
the dilution per share to new investors would be $ . In addition, the
average price per share paid by existing stockholders would increase to $
per share. The foregoing computations also do not include $5 million of
restricted stock to be issued to members of management under our 2000 Stock Plan
based on the initial public offering price.

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<PAGE>
SELECTED FINANCIAL DATA

Enron created a subsidiary, EES, on May 1, 1997 to conduct retail marketing
and sales of natural gas and electricity to residential, commercial and
industrial customers. Historically, our business was the residential energy
operating unit of EES. The following table presents selected financial data,
since inception, related to the residential power and natural gas business of
EES in California and Ohio that was contributed to us in our initial private
placement transaction completed January 6, 2000. Our selected financial data for
the period from inception, May 1, 1997, through December 31, 1997, and as of and
for the years ended December 31, 1998 and 1999 set forth below have been derived
from financial statements audited by Arthur Andersen LLP, independent public
accountants. Our financial data as of and for the three months ended March 31,
1999 and 2000 set forth below have been derived from unaudited financial
statements which, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial data for these periods.

You should read the following selected financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", our financial statements and related notes included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
MAY 1, TO DECEMBER 31, MARCH 31,
DECEMBER 31, ---------------------- ------------------------
1997 1998 1999 1999 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................................... $ 766 $ 7,024 $ 7,838 $ 2,164 $ 2,126
Cost of sales............................... 632 4,679 5,748 1,514 1,784
-------- -------- ----------- -------- -----------
Gross profit................................ 134 2,345 2,090 650 342
Operating expenses.......................... 19,503 19,686 27,117 4,086 8,956
-------- -------- ----------- -------- -----------
Operating loss.............................. (19,369) (17,341) (25,027) (3,436) (8,614)
Interest (income) expense................... -- -- -- -- (1,199)
-------- -------- ----------- -------- -----------
Net loss.................................... $(19,369) $(17,341) $ (25,027) $ (3,436) $ (7,415)
======== ======== =========== ======== ===========
Basic and diluted net loss per common
share..................................... $ (1.25) $ (0.34)
Shares used in computing net loss per common
share..................................... 20,000,000 22,064,400
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------ 2000
1997 1998 1999 ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ -- $ -- $ -- $ 89,704
Working capital...................................... $ 111 $ 1,421 $ 93,306 $ 90,083
Total assets......................................... $ 428 $ 3,673 $ 113,115 $ 102,805
Long-term debt, less current portion................. -- -- -- --
Total stockholders' equity........................... $ 111 $ 1,421 $ 101,239 $ 96,635
</TABLE>

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
financial statements and the related notes included elsewhere in this
prospectus. The discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results anticipated in these forward-looking statements as a result of factors
including, but not limited to those under "Risk Factors" and elsewhere in this
prospectus. We have a limited operating history and intend to expand our
operations significantly. Accordingly, we do not believe the discussion and
analysis of our historical financial condition and results of operations set
forth below are indicative nor should they be relied upon as an indicator of our
future performance.

OVERVIEW

In November of 1999, we were formed by Enron Corp. to target the rapidly
restructuring residential and small commercial markets for electricity and
natural gas. We intend to become the first nationally branded provider of
electricity and natural gas in the United States.

We were capitalized through the contribution of certain assets by EES and a
private placement to outside investors, pursuant to an agreement executed on
December 23, 1999. On January 6, 2000, we completed our initial private
placement of common stock and two classes of warrants in exchange for an
aggregate of $100 million in cash. In exchange for its ownership, EES agreed to
contribute its residential electricity and natural gas customers in California
and Ohio to us, subject to applicable regulatory approvals, and entered into a
number of agreements with us which we believe will offer us competitive
advantages as we grow our business. Pending actual transfer of the Enron
customers to us, Enron will continue to serve those customers, with the economic
benefits and burdens of the customer contracts assigned to us.

In November 1999, we entered into a marketing agreement with AOL to assist
us in reaching a broad customer base in a cost-efficient manner. Under the terms
of the AOL agreement, we will be required to make total payments of $49 million
over the term of the six year agreement, of which $10 million had been paid as
of March 31, 2000.

Since our initial private placement, we have focused our efforts on hiring
our management team, refining our plans for the initial launch of our services
in Pennsylvania and New Jersey in the second half of 2000, developing our
operating infrastructure, negotiating the acquisition of customers from Columbia
and identifying other target markets. In conjunction with these activities, in
May 2000, we entered into an agreement with IBM, pursuant to which IBM will
provide us with systems integration and other services relating to customer
acquisition, customer care and revenue management over a ten-year term. The
agreement provides for a combination of fixed and variable fees to be paid by
us. We estimate the aggregate systems integration service fees will be between
$65 and $75 million, all but approximately $10 million of which will be expensed
as incurred. We anticipate that costs incurred under this agreement will
approximate $50 million for the year ending December 31, 2000.

On June 29, 2000, we entered into a definitive agreement for the acquisition
of the residential and small commercial retail energy business of Columbia
Energy Group and some of its affiliates, which includes approximately 20,000
electricity customers and 285,000 natural gas customers, primarily in Georgia,
Ohio and Pennsylvania. The purchase price will consist of a cash payment of
$11.7 million and the issuance of approximately 600,000 shares of our common
stock. In addition, we will be required to make a payment of up to $3.9 million
one year following closing depending on customer retention levels. Also, in
connection with the acquisition, we will purchase natural gas inventory and
customer accounts receivable for approximately $34 million. The closing of the
acquisition is expected to occur on or about July 31, 2000, subject to the
satisfaction of closing conditions.

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We believe that the historical financial results of the Columbia operations
are not reflective of what could have been achieved if the operations were
conducted in accordance with our business plan, in part because, until January
2000, commodity purchasing activities were conducted through affiliates of
Columbia in transactions that may not have reflected arms-length commodity
pricing or hedging activities. We believe commodity margins for this business
began to improve in January 2000 as a result of Enron beginning to perform
commodity purchasing and risk management functions for the Columbia business
under a wholesale supply agreement entered into in January 2000. The Columbia
financial results also reflect unusually high bad debt and other operating
expenses due to significant billing and infrastructure problems encountered by
Columbia during 1999. We believe that these problems have generally been
resolved as of the date of our purchase agreement and therefore we expect these
relative expense levels for the Columbia operations to improve from what was
experienced in 1999.

We are a party to an agreement with Enron and EES whereby Enron and EES will
provide certain support services for us while we develop our own infrastructure.
Historically, these services were provided by Enron and EES and recorded as
contributions from parent. During the year ending December 31, 2000 we will be
required to reimburse Enron and EES for certain costs they incur on our behalf.

We have a limited operating history on which to evaluate our business and
prospects. We believe that our prospects must be evaluated in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly companies in new and rapidly evolving
markets such as retail energy markets. We believe that our success will depend
in a large part upon our ability to attract and retain a significant number of
customers in each of our principal markets and serve those customers in a
profitable manner. Accordingly, we intend to increase our focus and spending on
sales and marketing, customer acquisition, build-up of our infrastructure,
website development and strategic relationships. We expect that our total
operating expenses for the year ended December 31, 2000 will be approximately
$ to $ million. We have incurred and expect to continue to incur substantial
losses and negative cash flows on both an annual and interim basis and the rate
at which these losses will be incurred will increase significantly from current
levels until we reach a sufficient scale in terms of customers acquired and
retained.

We recognize revenue for the sale of electricity or natural gas once the
commodity has been delivered to the customer. Depending on the particular
regulations regarding energy service providers in the various markets in which
we will operate, our bills may also include charges relating to the transmission
and distribution of the commodity, for which the utility is ultimately
responsible. If we maintain the risk of loss for transmission and delivery, we
will also recognize revenue for these charges. If these charges are passed
through to the customer from the utility, and we do not maintain the risk of
loss, we will not recognize revenue nor costs for the transmission and
distribution charges included in our customers' bills.

RESULTS OF OPERATIONS

Our revenues are derived from the sale and delivery of electricity and
natural gas to retail customers in the United States. For the period from
May 1, 1997 through December 31, 1997 and the years ended December 31, 1998 and
1999 and the three months ended March 31, 1999 and 2000, respectively,
electricity revenues were $0, $4,616,898, $6,037,209, $1,196,653 and $1,317,028,
which constituted 0%, 66%, 77%, 55% and 62% of total revenues. We commenced
sales of electricity in California in the second quarter of 1998, thus there
were no sales prior to this time and the revenues for 1998 represented roughly
three-fourths of a full year of operations. The revenues for the quarterly
periods ended March 31, 1999 and 2000 are less than one fourth of annualized
revenues due to seasonality related to lower consumption of electricity in the
colder winter months.

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For the period from May 1, 1997 through December 31, 1997 and the years
ended December 31, 1998 and 1999 and the three months ended March 31, 1999 and
2000, respectively, natural gas revenues were $765,673, $2,407,079, $1,800,878,
$967,375 and $809,449, which constituted 100%, 34%, 23%, 45% and 38% of total
revenues. We commenced sales of natural gas in Ohio in May of 1997. The natural
gas revenues for the quarterly periods ended March 31, 1999 and 2000 comprise a
significant portion of the annual natural gas revenues as this period contains
the colder winter months during which consumption of natural gas is at its
highest.

Our cost of revenues represents the direct costs of acquiring and delivering
the electricity and natural gas to our customers. For the period from May 1,
1997 through December 31, 1997, and the years ended December 31, 1998 and 1999,
and the three months ended March 31, 1999 and 2000, respectively, the cost of
electricity, as a percentage of electricity revenues, totaled 0%, 71%, 73%, 73%
and 80%. For the same periods, respectively, the cost of natural gas, as a
percentage of natural gas revenues, totaled 83%, 57%, 73%, 66% and 90%. Gross
margins with respect to electricity remained somewhat constant and fluctuated in
connection with market changes in the cost of electricity. Gross margins with
respect to natural gas also fluctuated due to market factors. EES performed risk
management activities on its entire portfolio of business and is not able to
identify hedging activities specifically related to the purchases of commodities
for the residential customers being carved out and contributed to TNPC. As a
result, the cost of sales amounts carved out from EES to represent the cost of
sales of TNPC do not reflect the results of such hedging activities.

Our operating expenses include all those costs incurred related specifically
to acquiring and supporting residential customers that were not part of the
direct process of acquiring and delivering electricity and natural gas to our
customers. For the period from May 1, 1997 through December 31, 1997 and the
years ended December 31, 1998 and 1999 and the three months ended March 31, 1999
and 2000, respectively, operating expenses were $19,502,950, $19,685,903,
$27,116,890, $4,086,247 and $8,956,043. Our operating expenses were greater
during the eight month period ended December 31, 1997 as we initiated our
marketing efforts to acquire residential customers. Operating expenses for the
year ended December 31, 1999 are greater than those for 1998 primarily due to an
$8,000,000 non-cash compensation expense related to the issuance of common
shares of TNPC to an executive of EES and TNPC. Operating expenses for the three
months ended March 31, 2000 are increased over the comparable prior period due
primarily to compensation expenses recorded during the period related to the
recruitment and retention of certain executives to TNPC. Our operating expenses
include certain allocated operating expenses from EES and Enron. Such
allocations and charges are based on a percentage of total operating expenses
for the services provided, based on factors such as headcount or the specific
level of activity directly related to such costs. For the period from May 1,
1997 through December 31, 1997 and the years ended December 31, 1998 and 1999
and for the three months ended March 31, 1999 and 2000, respectively,
approximately $12.9 million, $7.5 million, $13.2 million, $3.4 million and
$1.5 million of operating expenses were allocated to us from Enron and EES.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our activities through contributions from
Enron and, after January 6, 2000, through private placements of our common stock
and warrants to purchase our common stock. In our initial private placement, on
January 6, 2000, we received proceeds of $100 million in exchange for shares of
our common stock and warrants. In May 2000, we sold common stock to IBM for
proceeds of $10 million, $5 million of which has been paid and $5 million of
which is due September 29, 2000. In July 2000 we completed our second private
placement, in which investors agreed to contribute approximately $104 million to
purchase common stock and warrants. Enron will not continue to be a source of
capital to us subsequent to this offering. As of the date of this prospectus, we
plan to use the proceeds from this offering for working capital and other
general corporate purposes as described

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under "Use of Proceeds" elsewhere in this prospectus. We may also use the
proceeds in future strategic acquisitions but do not at present have any
acquisitions planned, other than the Columbia transaction.

We expect to incur debt to finance our purchase of gas inventories and other
working capital requirements associated with the Columbia transaction. We expect
that such debt financing, together with the net proceeds from this offering and
our existing cash balances, will be sufficient to meet our working capital and
capital expenditure needs, excluding acquisitions, indefinitely if our
expectations regarding our future revenues and costs prove to be correct.
However, if our cash requirements prove to be greater than we expect, we will
need to raise additional funds. We cannot be certain that we will be able to
obtain additional financing on favorable terms or at all. If we need additional
capital and cannot raise it on acceptable terms, our financial condition and
business may be materially adversely affected.

Net cash used in operating activities of $19,480,381, $18,650,589 and
$16,610,171 in the period from May 1, 1997 through December 31, 1997 and the
years ended December 31, 1998 and 1999, respectively, and $3,435,368 and
$13,106,904 during the three months ended March 31, 1999 and 2000, respectively,
resulted primarily from net losses of $19,368,940, $17,341,203, $25,027,042,
$3,435,818 and $7,414,721 for each respective period.

We have no debt outstanding and currently do not have a credit facility.
Accordingly, we have not been exposed to near term adverse changes in interest
rates or foreign currency exchange rates. We may, however, experience such
adverse changes if we incur debt in the future. Additionally, we do not expect
inflation to have a material effect on our results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.

SFAS No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. A company may also implement the statement as of the beginning of
any fiscal quarter after issuance; however, SFAS No. 133 cannot be applied
retroactively. We have not yet determined the timing of adoption of SFAS
No. 133. We believe that SFAS No. 133 will not have a material impact on our
accounting for price risk management activities.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

At December 31, 1999, we held no financial instruments or investments which
could be subject to interest rate or equity price risk at December 31, 1999.
Therefore, we were exposed primarily to counterparty risks and risks related to
commodity price changes in the electricity and natural gas markets. We conduct
business solely in the United States and are not subject to foreign operations
risk.

Counterparty risk relates to the risk of loss that we would incur as a
result of nonperformance by counterparties pursuant to the terms of their
contractual obligations. Historically, Enron maintained credit policies with
regard to its counterparties that management believes significantly minimized
its overall counterparty risk.

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Commodity price risk is the risk of loss arising from adverse movements in
commodity prices. Historically, an Enron risk control group, operating
separately from the units that create or actively manage these risk exposures,
monitored commodity price risk to ensure compliance with Enron's stated risk
management policies. Subsequent to our initial public offering, we will
establish a risk control group that will monitor commodity price risk to ensure
compliance with our stated risk management policies. Going forward, our risk
management policies will be to use physical and financial products to manage our
commodity price risk and maintain a balanced commodity portfolio within
specified limits.

SEASONALITY

Our revenues are impacted by seasonality in that electricity sales generally
increase during the warmer summer months, whereas natural gas sales have a
reverse seasonality and increase during the colder winter months. These factors
could cause our financial results to vary from quarter to quarter.

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BUSINESS

- our access to Enron's technical resources, regulatory and risk management
expertise, and reliable wholesale commodity purchasing power;

- our relationships with market-leading strategic partners such as AOL and
IBM; and

- a management team with significant consumer marketing, energy commodity
risk management, and deregulation experience.

We expect to begin acquiring and serving electricity customers in select
utility markets in Pennsylvania and New Jersey in the second half of 2000 in
order to test and refine our operating systems and marketing strategies.
Following those efforts, we expect to enter several additional open markets
beginning in early 2001. We also recently entered into agreements to acquire the
residential and small commercial retail energy business of subsidiaries of
Columbia Energy Group, which includes approximately 285,000 natural gas
customers and 20,000 electricity customers in eight states, primarily Georgia,
Ohio and Pennsylvania. We expect to close this transaction in the second half of
2000, subject to satisfaction of closing conditions, including regulatory
approval of the customer transfers.

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OUR STRATEGY

Our success will depend upon our ability to identify favorable restructured
energy markets and to create a profitable operating cost structure by, among
other things, capitalizing on the scale advantages offered by our relationships
with Enron, IBM and AOL. Specifically, we intend to:

PURSUE OUR "FIRST MOVER'S" ADVANTAGE TO CREATE A NATIONAL BRAND FOR
ENERGY. We intend to become the first company to establish a national brand
for consumer energy and related products and services. Currently, the retail
energy industry is highly fragmented, with no single firm enjoying
significant market share on a national basis. We believe that being first to
establish a nationwide brand will distinguish us in the minds of consumers
as the leader in this emerging market. We believe that this market
positioning, as well as the opportunity to achieve scale efficiencies before
our competitors, will provide important long-term competitive advantages.

ENTER MARKETS SELECTIVELY. We will enter only those retail energy
markets that have rate structures, market rules, consumer demographics,
energy consumption patterns and risk management profiles that we believe
will enable us to operate profitably. As new markets open, we intend to
evaluate the relevant regulatory rules before entering those markets. In
addition, we intend to be active participants in the regulatory process to
foster the adoption of competitive market rules that offer benefits to
consumers and opportunities for us.

FOCUS ON CUSTOMER PROFITABILITY. We will focus our marketing efforts on
acquiring customers that we can serve on a profitable basis. We will analyze
market segmentation data to direct our marketing efforts to customers who we
believe can achieve meaningful savings based on their levels of energy
consumption, or who will be likely to purchase incremental services from
their energy provider.

CAPITALIZE ON OUR RISK MANAGEMENT AND COMMODITY TRADING SYSTEMS AND
SKILLS. We intend to take full advantage of our risk management systems and
resources contributed by Enron to identify favorable margin opportunity, to
reduce our risk exposure, and to create a competitive advantage in our
operations.

TAKE ADVANTAGE OF INCREASING CONSUMER ACCEPTANCE OF ONLINE COMMERCE. We
will capitalize on increasing consumer acceptance of the Internet and online
commerce, both directly through our own website (www. .com) and
through our exclusive interactive marketing agreement with AOL. In addition
to providing a low-cost means of reaching customers, we believe that we can
greatly increase our service offerings through these Internet channels by
providing consumers access to information about their energy consumption
patterns, various pricing and payment plans, and other services and products
that we intend to offer over time.

ACQUIRE AND SERVE CUSTOMERS THROUGH TRADITIONAL CHANNELS. Although we
believe it is important to be able to acquire and service customers online,
we are building the infrastructure necessary to acquire and serve customers
through traditional media such as direct mail, radio, print, television and
telemarketing. This will ensure that we can reach all customers, regardless
of their preferred method for doing business.

MARKET THROUGH STRATEGIC ALLIANCES AND AFFILIATIONS. We will seek to
partner with established consumer brand firms to offer services and benefits
to their customers, including arrangements that will allow us to offer
airline miles and other customer incentives. We believe that these
relationships will help us acquire our target customers in a cost effective
manner.

LEVERAGE OUR INVESTMENT IN "BEST IN CLASS" OPERATING SYSTEMS. We
believe that the revenue management and customer care system being developed
for us by IBM will offer significant

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advantages in scalability of our operations and will permit us to offer
superior customer service and to maintain an attractive cost structure.

OFFER FLEXIBLE PRICING AND PAYMENT ALTERNATIVES. We believe that one of
the principal benefits we will offer consumers is an ability to tailor our
product and service offerings to match their specific needs. To provide
energy savings and price certainty, we may offer various combinations of
floating rate energy pricing, fixed rate energy pricing, fixed bundled
monthly energy billing, pre-paid options, time-of-day pricing and other
specialty offerings such as "environmentally friendly" energy from renewable
resources. We will also offer our customers credit card, direct debit and
other convenient payment options, which we expect will reduce our revenue
management costs.

CROSS-SELL ADDITIONAL SERVICES AND PRODUCTS. Our initial focus will be
on selling electricity and natural gas. However, we believe that as we
develop our business, we will have opportunities to leverage our customer
relationships by offering additional, high margin products and services. We
are evaluating a number of potential product offerings, including home
appliance warranty and maintenance programs, and home air conditioner and
furnace filter delivery service.

OUR STRENGTHS

Although the barriers to becoming a successful nationwide retail energy
provider will be substantial, we believe that we possess a unique combination of
strengths to overcome those barriers relative to potential competitors.

OWNERSHIP OF AND ACCESS TO ENRON SYSTEMS AND RESOURCES

As part of our private placement transaction in January 2000, Enron
contributed its residential business to us. In addition, Enron entered into a
number of favorable arrangements that we believe provide us, either through
outright ownership of systems or through services agreements, a competitive
advantage relative to current or future competitors. Furthermore, a number of
experienced operational and management personnel from Enron have joined us on a
full-time basis.

During the past decade, Enron has been a leading participant in the
development of wholesale and retail markets for electric power and natural gas.
As a result, Enron has developed a substantial base of knowledge and
capabilities in these markets, many of which will be applicable to our business.

COMMODITY SUPPLY AND RISK MANAGEMENT. Because of the volatility of the
wholesale energy markets, buying and selling electricity and natural gas
requires an in-depth knowledge of the marketplace and sophisticated hedging
and risk management systems and infrastructure in order to effectively
manage exposure to significant price variations. In particular, managing
energy requirements requires an ability to forecast seasonal,
weather-related or other variations in demand, both in the market in general
and with respect to a given consumer base, and an understanding of complex
scheduling and distribution operations. As the leading wholesale energy
trader and unregulated retail energy provider in North America, Enron is the
recognized industry leader in successfully performing these functions. In
addition to risk management personnel who have joined us from Enron, our
services and software agreements with Enron provide for our ownership and
use of proprietary systems and resources. We believe this combination of
experience and resources will provide a significant advantage over potential
competitors. Please read "Material Contracts--Services Agreement" for more
information about our services agreement.

WHOLESALE COMMODITY PRICING. Under our commodity supply agreements, we
have rights until January 2004 to acquire electricity and natural gas from
Enron at wholesale index prices, even for commodity purchases that otherwise
would be too small to warrant wholesale pricing. As part of these
agreements, Enron has also agreed to assist us in evaluating energy demand
profiles and

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requirements in connection with our commodity purchasing activities. We are
not obligated to purchase any energy commodities under these agreements, and
will evaluate the markets at all times to obtain the best pricing for our
commodity requirements. However, we believe these agreements offer us a
valuable advantage over potential competitors, who may face higher commodity
costs during their startup phase. Please read "Material Contracts--Commodity
Supply Agreements" for more information about these agreements.

GOVERNMENT AFFAIRS. During the last several years, Enron has been an
active participant in competitive market restructuring initiatives in many
jurisdictions across the nation. Through our master services agreement, we
have access to Enron's government affairs resources until January 2003,
which include a staff of professionals devoted to monitoring and actively
participating in the market restructuring processes at the federal, state
and local levels. These resources provide us valuable insights into the
complex regulatory changes taking place in jurisdictions across the country,
which will permit us to determine the best way to approach those markets,
and to advocate viable regulatory structures and rules in jurisdictions
where we seek to operate. In addition to services available under the master
services agreement, former members of the Enron Government Affairs group
have joined our management team on a full-time basis. Please read "Material
Contracts--Services Agreement" for more information about our services
agreement.

ENRON'S NONCOMPETITION COMMITMENT. As part of our formation, Enron
entered into a noncompetition agreement providing that for up to five years,
but not less than three years, Enron and its subsidiaries will not compete
in the business of selling energy directly to residential customers, with
limited exceptions. We believe this agreement represents an important
commitment on Enron's part to the success of our business in retail
residential energy markets. Please read "Material Contracts--Noncompetition
Agreement" for more information about this agreement.

EXPERIENCED MANAGEMENT AND OPERATIONS PERSONNEL

We have assembled a management team with significant experience in a broad
range of matters that are critical to our strategy and success, including:

- members with significant experience in consumer and small business
marketing;

- veterans of telecommunications deregulation from AT&T;

- members with significant electric power and natural gas market
deregulation and operations experience from Enron; and

- members with significant knowledge and expertise in mass market consumer
account management, billing and service system infrastructure.

In addition to members of our senior management, a number of our operational
personnel have transferred to us from Enron, and they bring significant
experience and understanding of energy markets, risk management and regulatory
affairs. We believe this combination of experience will give us important
leadership skills and insight on how to best approach our opportunities in the
energy markets we expect to serve.

IMPORTANT STRATEGIC RELATIONSHIPS

In addition to our relationships with Enron, we have entered into important
strategic relationships with strong marketing and technical partners:

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IBM CUSTOMER SERVICE OUTSOURCING AGREEMENT. We have entered into a
ten-year revenue management and customer care agreement with IBM Global
Services, an industry leader in providing similar customer service functions
in many industries. IBM is also developing and hosting our website for
online commerce and billing applications. We believe these arrangements will
enable us to offer superior customer service in a cost-effective, readily
scalable manner. In addition to the revenue management and customer care
agreement, IBM made an equity investment and has agreed to purchase
additional common stock during the first year after this offering. Please
read "Material Contracts" for more information about this agreement.

AOL INTERACTIVE MARKETING AGREEMENT. We have entered into a six-year
interactive marketing agreement with AOL, which provides us specified
exclusive rights to market electricity and natural gas to consumers through
AOL's online system, including CompuServe and Digital City. AOL is the
largest online access provider in the United States, with over 23 million
subscribers. Our agreement further gives AOL the right to receive equity and
other incentives intended to encourage AOL to solicit customers to sign up
for our services. We believe AOL is a premier online marketing channel,
particularly for our targeted consumers. Please read "Material Contracts"
for more information about this agreement.

INITIAL CUSTOMER BASE

We believe that the initial residential customers transferred to us by
Enron, together with the approximately 285,000 natural gas customers and 20,000
electricity gas customers we expect to acquire upon completion of the Columbia
acquisition, will give us an important base of customers on which to develop and
refine our operating systems and marketing strategies.

AVAILABLE CAPITAL

We have raised approximately $210 million in equity capital since our
formation in late 1999. These amounts, together with proceeds from this
offering, will provide funds necessary for customer acquisitions, brand
development, further expansion and completion of our infrastructure, and
otherwise to finance the expected growth of our business. We expect that funding
from this offering, together with funds from our private offerings, expected
cash flows from our operations and debt we may incur to finance working capital
requirements, will be sufficient to fund our business plan.

OUR MARKET OPPORTUNITIES

THE RESTRUCTURING OF THE RETAIL ELECTRIC POWER MARKET

OVERVIEW. The electric power industry in the United States is undergoing a
period of fundamental change. Through regulatory and legislative initiatives, an
industry of locally or regionally regulated monopolies is being reconfigured to
create an increasingly open competitive environment in which alternative energy
service providers can compete with traditional utilities. Under the traditional
approach, utilities were viewed as "natural monopolies" and were awarded
exclusive franchise territories in which to provide service. Under this
structure, the rates, terms, and conditions of retail service, as well as the
corporate activities of the franchised monopoly utility, are regulated by state
commissions. Rates under this system are based on the utility's
"cost-of-service," which allows those firms to set rates designed to recover
their operating costs and to receive a "reasonable" rate of return on their
invested capital. In many areas, this has resulted in higher prices for
consumers than might prevail in a competitive market and has created
cross-subsidies of some customer groups by others. With the experience of
favorable results from the restructuring and deregulation of other industries,
such as telecommunications, it has become apparent to federal regulators and to
many state authorities that various aspects of the generation, transmission, and
distribution of electric power could be opened to competition in ways that would
benefit consumers through increased innovation, and better pricing and service
offerings.

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Regulatory restructuring first occurred in wholesale power markets in
response to initiatives by the Federal Energy Regulatory Commission, referred to
as the "FERC" in this prospectus. Specifically, in 1996 the FERC adopted Order
No. 888, which opened the wholesale market for electricity sold in interstate
commerce to competitive market forces. Enron was a leader in capitalizing on
those restructuring initiatives, and is now North America's largest merchant
trader of wholesale electricity.

The FERC's regulatory jurisdiction, however, is limited to transmission and
wholesale power sales in interstate commerce. For the most part, retail power
sales are regulated by state public utility commissions, and retail electric
markets are therefore being opened to competition on a state-by-state basis.
There have been some federal legislative initiatives that have proposed to
preempt state restructuring activities, but none of these initiatives has yet
been adopted.

Following the lead of FERC with respect to the interstate wholesale market,
in 1998 California became the first state to attempt to open its retail power
markets to competition, and the restructuring of retail power markets has now
occurred in several states and is in the process of being adopted in many
others. Restructuring activities are primarily directed at investor-owned
utilities, or IOUs, which serve the concentrated metropolitan markets.
Cooperatives and municipal power utilities, which serve a minority of power
users nationwide, have generally been exempt.

As a retail power market is opened to competition, customers are permitted
to switch from having their power supplied by their local utilities to having
power supplied by other energy providers. In much the same way as with long
distance telephone service restructuring in the 1980's, the local utility
continues to be responsible for maintaining and providing the distribution wires
and other infrastructure over which electricity is delivered to the end user.
The customer's selected energy service provider, or ESP, is responsible for the
generation or purchase in the wholesale markets of the customer's electric power
requirements, arranging for delivery of this power to the local utility for
distribution, determining pricing and service offerings, and otherwise serving
the customer's needs. Depending on the jurisdiction, the ESP may also provide
metering, billing, collection and customer service and response functions. In an
average monthly electricity bill for an average household, which was
approximately $71 in 1999, roughly 45% was for transmission and distribution,
and the remaining amount was for the energy commodity.

Because of the substantial changes involved in a market restructuring, the
incumbent utility typically is afforded a transition period, during which:

- customer choice is implemented, often on a phased basis;

- "stranded costs," which represent invested capital costs for which the
utility is entitled to reimbursement, are determined and recovery methods
are implemented; and

- new market rules are established.

Typically, customers can elect to do nothing and continue to receive service
from the local utility or, in some jurisdictions, an affiliate of the utility.
In any event, a "provider of last resort" or default provider is made available
to customers, which may or may not be the incumbent or an affiliate of the
incumbent.

COMPETITIVE MARKET RULES. Market restructuring has been and will continue
to be a complicated regulatory process, with competing interests advanced not
only by relevant utility regulators, but also by state legislatures, incumbent
utilities, consumer advocacy groups, and potential market participants. Given
this mix of competing interests, the specific market structures adopted in
different jurisdictions, and even among separate utility markets within a
specific state, may vary widely. Although there are some basic features common
to most restructuring efforts among the states, the particular details of these
rules determine whether or not a competitive marketplace will successfully
develop in that jurisdiction.

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The initial experience in California is instructive in this regard. The
rules adopted in California did not offer opportunities for ESPs to compete
successfully, and thus did not create a viable competitive marketplace for
residential electric service. Specifically, the California rules failed to
provide a sufficient commodity margin between the regulated utility rates and
the wholesale commodity prices to allow ESPs to compete with the utilities on
price. The rules also failed to establish sufficient credits against the
incumbent's charges to reimburse ESPs for providing customer service functions
instead of the utilities, which further hindered the ability of ESPs to compete.
Finally, the established rates included high stranded cost recovery surcharges,
which had the effect of insulating consumers from price volatility.

These stranded cost surcharges are beginning to expire in some California
utility markets, which we believe will begin to expose consumers to increased
price volatility in their power bills and will therefore begin to offer ESPs
opportunities to attract customers with innovative and flexible pricing
alternatives. Moreover, although the California rules did not succeed in
creating a competitive market for retail electric sales that benefited
residential consumers, regulators in other states, notably Pennsylvania and New
Jersey, have adopted rules that we believe better foster competition and offer
greater opportunities for ESPs to provide benefits to consumers.

We intend to evaluate each newly opened market carefully to determine
whether the regulatory framework adopted in that market will generate legitimate
competitive opportunities, and will only enter markets on that basis.
Specifically, we will focus on markets where the rules provide for some
threshold combination of the following:

- SUSTAINABLE COMMODITY MARGINS. The most significant aspect of restructured
market rules and rate provisions for ESPs is the potential margin between
the wholesale cost of power and the regulated rate that the incumbent
utility is required to charge in connection with its bundled service. It
is this margin that provides the opportunity for efficient ESPs to offer
energy savings to consumers while still earning an acceptable margin on
their wholesale commodity costs.

- APPROPRIATE MARGIN OR CREDITS FOR PROVISION OF CUSTOMER SERVICE
FUNCTIONS. It is important that market rules enable ESPs to provide
metering, billing, collecting and customer service functions on a
competitive basis. This can be achieved either by providing a commodity
margin that is high enough to allow the ESP to cover those costs, or by
the provision of a credit to the ESP or its customers for providing or
obtaining those services from the ESP instead of the incumbent.

- APPROPRIATE LIMITS ON THE INCUMBENT ADVANTAGES OF THE LOCAL UTILITY AND
ITS AFFILIATES. It is also important that market rules are adopted to
limit the anti-competitive advantages that could be gained by unregulated
affiliates of the incumbent utility through their relationships with the
utilities and their captive ratepayers. For example, fair market rules
should place limits on the affiliates' use of the utility's name and limit
access to customer records and other information not available to
competing ESPs.

OUR INITIAL TARGET MARKETS. Based on our examination of competitive
opportunities in existing open markets, we plan to begin our operations in two
specific markets in the second half of 2000 to test and refine our operating
systems and marketing strategies. Our two selected initial markets are:

- PENNSYLVANIA--PECO. Pennsylvania was opened to competition for residential
electricity customers in January 1999 and includes approximately
4.9 million households, with annual electricity expenditures of
approximately $4.1 billion in 1998. Initially, we intend to focus on the
PECO Energy Co. ("PECO") service territory, which includes approximately
1.3 million households in Eastern Pennsylvania, and which we believe
offers an attractive opportunity.

- NEW JERSEY--PSE&G. New Jersey was opened to competition for residential
electricity customers in October 1999 and includes approximately 3.1
million households with annual electricity expenditures of approximately
$2.6 billion in 1998. Initially, we intend to focus on the Public Service
Electric & Gas Co. ("PSE&G") service territory, which includes
approximately 1.7 million households in New Jersey and which we believe
offers an attractive opportunity.

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Following our initial launch in the PECO and PSE&G markets, we intend to
enter several additional markets beginning in 2001 that we believe have market
rules and characteristics offering attractive competitive opportunities. As the
process of power market restructuring continues across the country, we believe
that regulators in other states, learning from the lack of competition initiated
by the California plan and from the promise of plans such as those implemented
for PECO in Pennsylvania and PSE&G in New Jersey, will adopt restructuring rules
to create additional markets that will support viable competition. In that
regard, we intend to stay actively involved in the regulatory and legislative
process in order to advocate those results. As examples, Ohio and Texas are
currently conducting regulatory proceedings to accomplish restructuring of the
retail power markets within their respective states, and are considering
regulatory structures that we believe will offer favorable opportunities for us
to compete in those markets. We will continue to evaluate all market openings to
determine whether they provide sustainable competitive opportunities and will
enter favorable markets as they become available.

SPECIFIC REGULATORY REQUIREMENTS. To market electric power in a given
jurisdiction, we are generally required to register with the appropriate state
public utility commission, maintain a power marketer certificate from the FERC,
and adhere to statutory and regulatory requirements. For example, most states
will require us to be registered with and comply with the protocols of an
independent system operator or regional transmission organization for scheduling
and moving electricity on the transmission system. Some states mandate that
marketers must also meet a renewable energy portfolio standard under which a
portion of the electricity they sell must be generated by renewable energy
resources. In some states, registration as a retail electric provider simply
requires that we obtain and maintain a certificate or license to do business in
the state. We have been granted the necessary FERC permit, and have applied for
all relevant state license and certificates required in our initial target
markets. We do not believe that compliance with these requirements will have a
material adverse effect on our business.

THE RESTRUCTURING OF THE RETAIL NATURAL GAS MARKET

OVERVIEW. The restructuring of natural gas markets in the United States
began earlier than the restructuring of electric markets, but has not been
extended as quickly to retail markets, in part because regulators have
prioritized efforts to restructure the much larger markets for electricity.

Beginning in the mid-1980s, the FERC issued the first of several orders that
ultimately brought competition and customer choice to the wholesale natural gas
market. Open access on the interstate natural gas transmission system, coupled
with the formation of marketing companies that could purchase and sell natural
gas outside the traditional regulated utility system, allowed local distribution
companies ("LDCs") and large industrial customers to choose their natural gas
supplier, resulting in the development of a robust wholesale market for natural
gas, as well as significant competition to provide natural gas to large
end-users. Enron was a leader in the development and expansion of this market,
and is currently the largest marketer of natural gas in North America.

Recognizing the benefits available to LDCs and industrial customers, many
commercial customers began to seek competitive alternatives for their natural
gas in the late 1980s. In the early 1990s, state regulators began to expand the
benefits of market competition to residential and small commercial natural gas
customers. In 1990, California instituted an aggregation program for small
customers that permitted some residential customers choice in their natural gas
provider. In 1996, Ohio permitted some residential customers to choose their
natural gas provider. Currently, natural gas customers in several markets may
purchase natural gas from competitive providers, although customer switching
rates from the incumbent utilities have so far been low. A number of other
states are actively attempting to provide meaningful choice for residential
customers of natural gas.

As with the electric industry, local distribution of natural gas in
restructured markets will continue to be a regulated service provided by the
incumbent LDCs at regulated rates. The natural gas

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commodity and other competitive services will be offered by competing market
participants. In an average monthly natural gas bill for an average household,
approximately $44 in 1999, roughly 70% of the monthly natural gas bill was for
transportation, storage and distribution, and the remaining amount was for the
commodity. Although we intend initially to focus our new customer acquisition
efforts on electricity customers, we believe that natural gas markets will, over
time, present opportunities similar to those in the electricity market to offer
consumers a broader range of pricing alternatives, products and services.

COMPETITIVE MARKET RULES. The restructuring of retail natural gas markets
differs in many respects from the restructuring of the electric industry. The
terms of natural gas market restructuring has generally tended to be developed
on a utility-by-utility basis as part of the individual tariff proceedings,
rather than under statewide regulations. Although the specific restructuring
process will differ in the retail natural gas markets, considerations similar to
those pertaining to retail electricity markets will determine our market entry
decisions. Specifically, we will review each market open to alternative
suppliers of natural gas to determine whether the market rules provide for a
sufficient commodity margin, appropriate credits for billing and other customer
care functions, and appropriate market rules limiting the ability of the
incumbent LDC and its affiliates to engage in anti-competitive actions. We will
likewise be involved in the regulatory and legislative processes to advocate
restructuring outcomes permitting viable competitive opportunities in the retail
natural gas markets.

NATURAL GAS MARKETS. Initially, our focus in the natural gas markets will
be on servicing the natural gas customers we expect to acquire from Columbia
Energy Services and those contributed by Enron. These customers are located in
several states, but are primarily located in Ohio and Georgia. In addition to
giving us a base of customers upon which to test and refine our operating and
marketing strategies in several attractive markets, these customers will provide
an opportunity for us to cross-sell electric service in markets that have or are
expected to open to competition for the provision of electricity to residential
and small commercial customers.

- OHIO--COLUMBIA. Several natural gas markets in Ohio were opened to
competitive suppliers for residential natural gas customers in 1996.
Including customers transferred to us by Enron, upon the closing of the
Columbia transaction, we will begin serving approximately 129,000
customers on the Columbia Gas of Ohio system, which serves approximately
1.2 million households. Ohio has adopted legislation providing for retail
electric competition beginning in 2001, and we believe this base of
customers will give us an advantage in acquiring customers for electricity
as well.

- GEORGIA--AGL. The Georgia legislature adopted legislation permitting the
LDC serving Atlanta, Atlanta Gas Light ("AGL"), to exit the function of
providing natural gas to consumers. As a result, by late 1999, all natural
gas customers in this market are served by other providers. The AGL market
includes approximately 1.4 million households, with annual natural gas
expenditures of approximately $725 million in 1998. Upon the closing of
the Columbia transaction, we will begin serving approximately 82,000
customers in the AGL market.

In addition to the above markets, we will begin serving smaller numbers of
natural gas customers in Indiana, Maryland, Michigan, New Jersey, Pennsylvania
and Virginia upon consummation of the Columbia transaction.

REGULATORY REQUIREMENTS. Qualification of unregulated marketers to serve
residential natural gas customers is somewhat different from that required of
providers of electricity. Unlike electricity, many states do not require natural
gas providers to obtain a permit from the regulating agency, nor does the FERC
impose any certification requirements. Current programs generally require that
the unregulated natural gas merchant register with the LDC and satisfy the
requirements set forth in the LDC tariff. Typically, these requirements include
creditworthiness conditions and evidence of technical capability.

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The regulatory agency may also impose requirements on natural gas marketers that
serve residential customers, such as providing the regulators with a copy of
their current standard customer contract. However, these state requirements are
in transition. Pennsylvania and Georgia, for example, now require a marketer of
natural gas to register with the state agency in addition to complying with LDC
tariff provisions. In other jurisdictions, the regulators have recognized that
many competitive energy suppliers will offer customers both natural gas and
electric service and are therefore developing common licensing requirements. We
have applied for natural gas marketer certificates in New Jersey, Georgia, and
Pennsylvania. The other states in which we initially intend to operate do not
require similar certificates.

MARKETING AND CUSTOMER CARE

We intend to begin marketing activities for residential electricity
customers in the PECO franchise area in Pennsylvania and the PSE&G franchise
area in New Jersey in the second half of 2000. These markets will enable us to
test our operations systems and to refine our marketing strategies and offers.
Based on our experience in these two initial markets, coupled with what we learn
from the residential customers transferred from Enron and from Columbia Energy
Services, we will refine our marketing efforts.

Our marketing launch in the Pennsylvania and New Jersey markets will use
traditional direct acquisition techniques, as well as our exclusive arrangement
with AOL for web-based marketing. For traditional acquisition channels, we will
use quantitative analysis to develop databases for direct mail, and targeted
newspaper and radio ads. We will also run a campaign through a combination of
radio and television spots in order to create consumer awareness of our company
and its brand, as well as the nature of our specific product and service offers.
Our expectation is that simultaneous brand advertisements through mass media
channels will increase the success of our direct mail offer campaign. Finally,
we expect to increase customer interest in our offers by offering affinity
rewards and other incentives that we can offer with alliance partners.

We will offer our customers several product choices, with separate price
savings guarantees depending on the length of the service contract. The offers
will stress savings over the incumbent's prices, reliability of service, and our
provision of attractive products, services, and customer care experiences. For
example, we expect to offer a service interruption hot line through which our
customers can call us in the event of service interruption in the local
distribution infrastructure (which is provided by the incumbent utility) and we
will contact the incumbent on our customer's behalf. Our research indicates that
poor utility customer service is a significant source of frustration with
customers, and an area where we expect to provide customer value. Additionally,
we will offer incentive programs to attract and retain customers. We are
currently in the process of testing products and services that may be attractive
product and service offerings ancillary to our energy products, several of which
will be launched in our initial markets. Other products and service offers will
be sequenced as we complete customer research and analyze the incremental
financial advantages of these offers.

Our customer service functions will be managed through the infrastructure
being established under our agreement with IBM. We will be as customer-friendly
as possible, no matter what the channel of contact. If customers are attracted
to our offers online, they will be linked to our website to learn about them,
and will be encouraged to sign up for service online. Customers who are
approached through more traditional channels will reach an IBM-managed call
center in Charlotte, North Carolina being created for our exclusive use. We are
also creating a simple and convenient interactive voice response system for
purposes of answering questions, providing offer and account information, and
signing-up customers.

We will offer a variety of billing options for our customers, depending on
the regulatory rules adopted in particular markets. Where permitted, we will
offer online and credit card billing options

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that provide both customer convenience and cost-effective bill rendering and
revenue management. As to traditional mailed bills, such as in the PECO
territory for the time-being, our services will be included on the incumbent's
bill. As a result, we will have less flexibility in tailoring our billing and
cross-marketing or otherwise communicating with our customers. In PSE&G, the
rules permit us to do our own billing, which we will undertake.

COMPETITION

We believe that as retail energy markets are opened to new participants and
new services, competition in these markets will be intense. In general, we
believe our principal competitor in each market will be the incumbent utility or
its unregulated affiliate. Incumbent utilities have been in operation and
subject to regulatory oversight, in some cases for close to a century, and thus
have a significant amount of experience regarding the regulators' policy
preferences as well as a critical economic interest in the outcome of
proceedings concerning their revenues and terms and conditions of service. Many
utility commission proceedings are resolved by settlement, with the result that
amounts and components of bundled utility rates, customer service credits, the
pace of stranded cost recovery, and other matters that may affect the viability
of competition, will vary within states, as well as between states. Moreover,
incumbent utilities may have substantial knowledge of their system
configurations and customers' consumption patterns, high name recognition in
their traditional service territory, and long-established customer
relationships. In addition, these utilities may have received very significant
sums ostensibly to compensate for claimed stranded costs. Although rules will
vary by jurisdiction, the incumbent advantages in many markets are intended to
be limited by regulatory structures that, for example, prohibit the incumbent
from offering non-standard service and pricing structures, limit the ability of
unregulated affiliates to use the utility name to gain marketing advantages,
minimize the opportunity for the regulated business to subsidize the unregulated
business, limit the ability of unregulated affiliates to use information about
utility customers, and limit the ability of the utility to solicit customers
that have switched. We intend to focus carefully on these rules in evaluating
whether we should enter a given market.

In addition to the utilities and their affiliates, we may face competition
from a number of other energy service providers, including Internet start-up
companies focusing on Internet marketing and online service, other energy
industry participants, and possibly other consumer-oriented service providers,
any of whom may develop businesses that will compete with us, both in specific
markets and nationally. Some of these competitors may be larger and better
capitalized than we are.

FACILITIES

Our headquarters are located in Greenwich, Connecticut, and we have an
office in Houston, Texas to conduct our commodity purchasing and risk management
operations. In anticipation of our market entry in New Jersey, we also have an
office in Edison, New Jersey. All of our office space is leased. In addition,
under our agreement with IBM, we have dedicated space at IBM's facilities in
Charlotte, North Carolina where call center and other customer care operations
will be conducted.

EMPLOYEES

We currently have approximately 50 full-time employees.

LITIGATION

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in concert with or participating with EES) from violating such rules with
respect to the sale of Enron branded electricity to California residential
customers. The injunction imposes procedural disadvantages with respect to the
covered parties for any future violations of the injunction, and EES was
required to make certain monetary payments. We do not intend to market or sell
electricity under an Enron brand in California, and therefore, although the
injunction may technically apply to us, we do not believe it will have any
practical application to us.

In October 1999, EES entered into a consent order with the New Jersey
Division of Consumer Affairs and Board of Public Utilities to settle allegations
that an independent marketing company retained by EES had violated marketing
practice rules for retail natural gas sales. The consent order did not
constitute a finding that Enron or its affiliates had engaged in any wrongdoing.
The consent order required monetary payments and an agreement to adopt policies
relating to compliance with marketing rules. We do not expect this settlement to
have a material adverse effect on our business.

From time to time, we are involved in other routine disputes and litigation
in the ordinary course of business, none of which we believe is material to our
business.

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DESCRIPTION OF MATERIAL CONTRACTS

AGREEMENTS WITH ENRON

In connection with our initial private placement transaction in
January 2000, we entered into a number of agreements with Enron and EES. The
following discussion summarizes the material provisions of these agreements.
This discussion is qualified by each of the agreements summarized below, copies
of which have been filed as exhibits to the registration statement of which this
prospectus is a part. We encourage you to review these agreements for a full
understanding of their terms.

MASTER SERVICES AGREEMENT

We have entered into a Master Services Agreement with Enron and EES pursuant
to which Enron and EES have agreed to provide us with administrative and risk
management services over various time periods. In particular:

- EES has agreed to provide us with risk management consulting and hedging
services at no charge until January 6, 2001. We have the option to
continue using EES as our provider for these services after January 6,
2001 for up to three additional years on such terms and for such fees
payable to EES as shall be mutually agreed.

- Enron has also agreed to provide a number of basic services of its
government affairs department at no charge until January 6, 2003 to handle
various government regulatory and legislative issues and activities that
we may confront, but Enron's government affairs department is not required
to take any position on our behalf that Enron believes may conflict with
Enron's own interests. Enron's government affairs department will also
handle specific requests not included among the basic services provided
under our standard service agreement for such fees as shall be mutually
agreed.

- Enron and EES have also agreed to provide us with general corporate
services such as facility maintenance, human resources support and other
services at no charge until October 6, 2000.

- Enron and EES contributed the services of certain of their employees
through July 6, 2000 to work on a full-time basis to handle general
administrative services on our behalf. We agreed to reimburse Enron and
EES for the costs associated with these employees.

We have the option to discontinue any of the services provided by Enron and
EES upon 30 days prior written notice by us to Enron or EES. Our agreement with
Enron and EES does not require that we contract exclusively with them and does
not require that we continue to use some or all of their services in the future.

COMMODITY SUPPLY AGREEMENTS

We have entered into a Master Energy Purchase and Sale Agreement (the
"Electricity Agreement") with Enron Energy Services, Inc. ("EESI"), a subsidiary
of EES, which provides us the ability to purchase up to an aggregate of
2,000,000 kWhs of electric power per hour from EESI on either an interruptible
or firm basis at wholesale prices. We have also entered into a Master Purchase
and Sales Agreement (the "Gas Agreement") with EESI which provides us the
ability to purchase up to an aggregate of 800,000 MMBtus of natural gas per day
from EESI on either an interruptible or firm basis at wholesale prices. Neither
the Electricity Agreement nor the Gas Agreement obligates us to purchase
commodities from EESI. Under both the Electricity Agreement and the Gas
Agreement, we have the option to purchase forward quantities of the applicable
commodity at either EESI's intra-day wholesale sales price or their wholesale
sales price at the close of business on the day of our purchase request based on
specified indices. This wholesale sales price will be adjusted for applicable
load shape, locational basis and, in the case of electric power, service
delivery voltage, but such

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adjustments do not include any premiums for small quantity, odd lot or
liquidity. Under both the Electricity Agreement and the Gas Agreement, we also
have the option to make spot purchases during any month at EESI's then current
intra-day wholesale sales price, subject to the same adjustments set forth
above.

Upon the earlier to occur of our first commodity purchase under the
agreements or December 31, 2000, EESI will provide us management services,
including load forecasting, scheduling, imbalance management services, invoicing
services and, in the case of the Gas Agreement, nominating and position
reporting at no cost for a period of six months. At the end of that six month
period, we may elect to continue receiving some or all of these services at
specified costs set forth in the Electricity Agreement or the Gas Agreement, as
applicable, until the ultimate termination of that agreement.

The Electricity Agreement and the Gas Agreement also entitle us to sell up
to an aggregate of 2,000,000 kWhs of electric power per hour and 800,000 MMBtus
of natural gas per day to EESI for purposes of balancing our commodity supply
against the demand of our customers. We may sell forward quantities of the
applicable commodity at either EESI's intra-day wholesale purchase price or the
wholesale purchase price at the close of business on the day of our purchase
request based on specified indices. This wholesale purchase price will be
adjusted for applicable load shape, locational basis and, in the case of
electric power, service delivery voltage, but such adjustments do not include
any premiums for small quantity, odd lot or liquidity. Under both the
Electricity Agreement and the Gas Agreement, we also have the option to make
spot sales during any month at EESI's then current intra-day wholesale purchase
price, subject to the same adjustments set forth above.

The Electricity Agreement and the Gas Agreement are each effective until
January 2002, but we have the option to extend the term of each agreement until
January 2004 at no additional cost.

NONCOMPETITION AGREEMENT

We have entered into a noncompetition agreement with Enron and EES pursuant
to which Enron and EES have agreed not to engage in certain activities until
January 6, 2005. The noncompetition agreement specifically prohibits Enron and
EES from:

- entering into contracts directly with individuals for the retail sale of
natural gas or electricity for their own use or, with certain exceptions,
acquiring equity interests in an entity that has these contracts; or

- operating, managing or otherwise conducting the business of selling
natural gas or electricity at retail directly to residential customers or
providing any consulting or advisory services in connection with the
operation or management of a business that is engaged in the retail sale
of natural gas or electricity to individuals for their own use.

These restrictions do not preclude Enron or EES from entering into contracts or
agreements for the wholesale sale of natural gas or electricity or any
derivative products or services provided in connection therewith. These
restrictions also do not limit the ability of either Enron or EES to enter into
contracts or agreements with any category of commercial or industrial customers,
including small commercial customers, for the retail sale of natural gas or
electricity.

Under the noncompetition agreement, Enron and EES may, notwithstanding the
above restrictions:

- beneficially hold a five percent or less interest in a public company that
competes with us;

- acquire less than all of the equity securities of a business that competes
with us so long as the fair market value of that competitor's electric or
natural gas residential business component does not exceed $20 million,
provided that following such acquisition Enron and EES conduct business
with such competitor only at arm's length;

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- acquire all of the capital stock or assets of a business that competes
with us, so long as the fair market value of that competitor's electric or
natural gas residential business component or the acquired assets does not
exceed $20 million;

- acquire or invest in a public utility company that is regulated under
state law as a public utility, whether or not such public utility is a
competitor of ours;

- acquire or invest in any entity that is controlled by a governmental
authority, such as a municipality, municipal utility district or a public
power authority, whether or not such entity is a competitor of ours;

- acquire or invest in a cooperative, whether or not such cooperative is a
competitor of ours; and

- permit the activities of specified subsidiaries and any entity in which
Enron, EES and their controlled affiliates own 50% or less of the
outstanding voting securities, even if Enron would be prohibited from
engaging in such activity, as long as Enron and EES do not vote their
stock in that entity in a manner that would result in any such activity
unless required by applicable fiduciary duties.

If Enron or EES makes an investment or acquires an interest in a competitor
of ours and that interest is greater than the amount permitted under the
noncompetition agreement, Enron or EES must offer us the option to participate
in the prohibited business or to acquire that business transaction on terms that
are economically beneficial to us. If we choose not to participate in the
transaction, Enron or EES must divest itself of such interest either directly or
derivatively within one year from the consummation of the acquisition.

The noncompetition agreement will terminate on January 6, 2005, and may be
terminated at any time between January 6, 2003 and January 6, 2005 if Enron and
its controlled affiliates (including EES) own less than 15% of our common stock
on a fully-diluted basis and less than 15% of our directors are affiliated with
Enron or its controlled affiliates. The noncompetition agreement will also
terminate immediately in the event of specified change of control transactions
relating to Enron. In addition, the noncompetition agreement will terminate
immediately as to EES if EES is no longer a controlled affiliate of Enron and
all of our common stock held by EES is transferred to Enron or one or more
controlled affiliates of Enron.

BUSINESS OPPORTUNITY AGREEMENT

We have entered into a business opportunity agreement with Enron pursuant to
which we renounced any interest or expectancy we may have in any business
opportunity that does not consist exclusively of the businesses permitted by our
certificate of incorporation. Subject to the terms of our noncompetition
agreement with Enron and EES, the business opportunity agreement also allows
Enron and its affiliates to engage in the same businesses that we currently
anticipate to be engaged in, even if those business activities cause them to
compete against us. In general, subject to the terms of the noncompetition
agreement, Enron is permitted to engage in any business whatsoever, including
the retail sale of natural gas, electricity, and other commodities, products and
services (whether or not related to natural gas or electricity) that may compete
against us, and Enron may compete in public tenders against us, so long as
(A) the business is conducted and the opportunities are identified and developed
through Enron's own assets and personnel and not through our assets and
personnel, and (B) the business opportunity did not come to the attention of
Enron solely because of an individual associated with Enron who was also serving
in some capacity with us. If a business opportunity in which our certificate of
incorporation will allow us to participate is presented to a person who is an
officer or director of both Enron and us, the business opportunity must first be
offered to us, and we will have a reasonable period of time to decide whether or
not we want to participate in that business opportunity.

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All provisions of the business opportunity agreement are subject to the terms of
the noncompetition agreement so long as the noncompetition agreement is in
effect.

LIMITED CORPORATE PURPOSE CHARTER PROVISION

In connection with our initial private placement, we agreed to include a
limited corporate purpose clause in our charter, in conjunction with the
noncompetition agreement, to mitigate potential conflicts of interest with
Enron's activities. The purpose clause in our certificate of incorporation
limits our ability to engage in business activities other than selling energy
and other products and services to residential and small commercial customers.
Our certificate of incorporation will permit us to engage in the businesses
generally identified in this prospectus, activities incidental to those
businesses, and such other businesses as Enron may approve in its sole
discretion. We have agreed not to amend our certificate of incorporation to
expand this purpose clause without first obtaining the approval of 80% of our
issued and outstanding common stock. The purpose limitations in our certificate
of incorporation will terminate if the noncompetition agreement terminates or if
Enron's ownership of our common stock and the number of our directors associated
with Enron fall below specified levels. For a more detailed description of the
purpose clause in our certificate of incorporation, please read "Description of
Capital Stock."

SOFTWARE AGREEMENT

We entered into a software agreement with EES whereby EES assigned to us a
joint and equal interest in and to specified proprietary risk management
software and documentation, including source code and any intellectual property
rights (other than trademark-related rights) in and to software and related
documentation. Until the termination of the noncompetition agreement described
above, both EES and TNPC have the right to use the software. However, we cannot
transfer, license, or assign to any third party our right to use, copy, modify
or process the software and EES cannot transfer, license, or assign its right to
use or modify the software to any third party competitor engaged in our
business. EES is further prohibited from assigning any portion of the software
agreement until July 2001 to any entity engaged in our business without first
obtaining our consent. Upon the termination of the noncompetition agreement, the
foregoing restrictions in the software agreement regarding the transfer, license
and assignment of the software will terminate.

EES is obligated to provide maintenance and support services to us for the
software until October 6, 2000. On this date, we will have the option to request
that EES deliver a copy of the then-current version of the software. Thereafter,
EES is obligated to offer to provide maintenance and support services to us for
three years on commercially reasonable terms at least as favorable as those
offered by EES to other non-affiliated software customers.

AGREEMENTS WITH OTHER THIRD PARTIES

IBM AGREEMENT

We have entered into an Information Technology Services Agreement with IBM,
pursuant to which IBM will provide us with systems integration services and
other services relating to customer acquisition, customer care and revenue
management over a ten-year term. The agreement provides for a combination of
fixed and variable fees. The aggregate one-time systems integration service fees
are estimated to be between $65 and $75 million. The agreement generally
provides that IBM will be the exclusive provider of most of our revenue
management and customer care services, but allows us to procure third party
services under some circumstances, including IBM achieving $1.5 billion in
aggregate gross revenue under the agreement. The agreement gives us termination
rights in a number of specified circumstances, some of which require us to pay
IBM a termination fee of up to $50 million.

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<PAGE>
In addition to the Information Technology Services Agreement, we have
entered into a Subscription Agreement with IBM pursuant to which IBM agreed to
purchase shares of our common stock. First, IBM agreed to purchase 1,100,400
shares of our common stock in exchange for $10 million, payable in $5 million
installments on May 31, 2000 and September 29, 2000. Second, IBM is obligated to
purchase shares of our common stock at one-half the initial public offering
price in this offering on December 29, 2000 in exchange for $5 million. Finally,
IBM is obligated to purchase $5 million worth of shares of our common stock on
December 31, 2001 at the average daily closing price of our common stock on the
New York Stock Exchange for the twenty trading days prior to December 31, 2001,
as long as the average exceeds 50 percent of the price per share in this
offering. For the second and third equity purchase transactions, IBM has the
option to pay the stated amount in cash or to credit that amount as an offset to
payments that we then owe to IBM under the Information Technology Services
Agreement.

AOL AGREEMENT

On November 24, 1999, we entered into an Interactive Marketing Agreement
with AOL under which AOL agreed to promote us on the America
Online-Registered Trademark- service, CompuServe-Registered Trademark- service
and Digital City-Registered Trademark- service (collectively, the "Designated
Services") for a period of six years. Under the terms of our agreement with AOL,
we agreed to pay AOL $49 million over the six-year period on a semi-annual
basis. We also agreed to issue 258,060 shares of our common stock to AOL for
every 100,000 customers that subscribe to our service through AOL, up to
1 million customers. AOL will receive $25 per customer for every customer over
1 million that signs up for our services through AOL. Our agreement with AOL is
subject to early termination in October 2004 if either party gives notice to the
other party requesting a re-evaluation of the economic terms of the agreement
and the parties do not reach agreement on those terms.

AOL also agreed not to promote on the Designated Services offers of
electricity or natural gas (and certain related products) by other providers to
residential or small commercial customers over the course of our agreement. We
also have the option to declare an eight-month blackout period during which AOL
cannot conduct branding campaigns on behalf of any provider of energy products,
including regulated public utilities in restructured markets. The exclusivity
provisions in our agreement with AOL for a particular market can be terminated
by AOL if we choose not to market actively our services to customers in a
particular restructured market, or if our prices are not competitive in a
particular product. In addition, the exclusivity provisions in our agreement
with AOL can be terminated by AOL for either electricity or natural gas for all
markets if we are not among the top three energy service providers (excluding
incumbent utilities) in terms of markets served in the United States for that
particular product at any time after November 24, 2000. We expect to be able to
satisfy these requirements.

COLUMBIA ENERGY SERVICES AGREEMENTS

On June 29, 2000 we entered an asset purchase agreement with Columbia Energy
Services Corporation, Columbia Energy Retail Corporation, and Columbia Energy
Power Marketing Corporation (collectively "Columbia"), under which we have
agreed to acquire the retail residential and small commercial natural gas
business of those parties, which includes approximately 20,000 electricity
customers and 285,000 natural gas customers.

Pursuant to the asset purchase agreement, we are committed to a cash payment
of approximately $11.7 million and the issuance to Columbia of 602,200 shares of
our common stock. In connection with the acquisition, we will purchase natural
gas inventory and customer accounts receivable for approximately $34.2 million.
In addition, to provide Columbia incentives to help us minimize the loss of the
customers we are acquiring, we have agreed to a further payment to Columbia one
year after the first closing date, based on the number of customers transferred
from Columbia who remain our

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<PAGE>
customers at that time. The maximum potential payment under those provisions is
approximately $3.9 million. The asset purchase agreement provides for
representations and warranties of both buyer and sellers, indemnification
provisions, including a maximum amount for which Columbia might be liable under
the indemnification provisions of the agreement, and other provisions describing
the necessary conditions to the closing, such as obtaining required regulatory
and other governmental approvals.

The asset purchase agreement contemplates two closings. The first closing is
expected to occur on July 31, 2000, subject to closing conditions, and will
include those of Columbia's retail operations with respect to which we have
obtained all required regulatory licenses and approvals as of the first closing
date. The second closing will include the balance of Columbia's retail
operations and will occur at the time we obtain all required regulatory
approvals related to those remaining assets.

The agreements with Columbia include a subscription agreement governing the
TNPC shares of common stock to be issued to Columbia as part of the purchase
price, and a services agreement whereby following the first closing we will
provide specified services related to Columbia's retail operations to be
transferred at the second closing until the second closing date. We will be
reimbursed for providing those services pursuant to the payment terms of the
services agreement. We will also enter into a noncompetition and license
agreement with Columbia's parent, Columbia Energy Group ("CEG"), at the first
closing whereby we will be granted an exclusive, three-year license to use
specified trademarks, service marks, and trade names previously used by Columbia
in its retail operations in the geographic areas of service associated with the
customers we are acquiring, in connection with the provision, promotion and sale
of natural gas, electricity, and related energy products and services to retail
residential and small commercial customers. Pursuant to that agreement, for
three years following the first closing, CEG will agree that, except for its
affiliates that are regulated by the FERC or a state public utility authority,
neither CEG nor its affiliates will compete, directly or indirectly, with us in
the business of retail marketing and sales to residential and small commercial
customers of natural gas and electricity commodities within the jurisdictions of
Georgia, Indiana, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, and
Virginia, the states in which Columbia's residential and small commercial
customers are currently located.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors currently consists of seven members. Each director
will be elected for a period of one year beginning at our annual meeting of
stockholders in 2001 and will serve until the next annual meeting or until his
or her successor is duly elected and qualified. There are no family
relationships among the directors and officers of TNPC. All of our executive
officers serve at the discretion of our board of directors, subject to their
employment agreements described below under "--Employment Agreements."

Following this offering, each of the DLJMB Partners (taken together),
CalPERS and OTP (taken together) and EES will be entitled to nominate one
representative to serve on our board of directors so long as that stockholder
owns in excess of 5% of our common stock calculated on a diluted basis. We have
agreed to use commercially reasonable efforts to cause the designated nominees
of these stockholders to be elected to our board of directors.

The persons who are expected to be directors and executive officers of TNPC
as of the completion of this offering, and their positions and ages as of
, 2000, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------------------------------------------------------
<S> <C> <C>
Lou L. Pai.................. 53 Chairman and Director

H. Eugene Lockhart.......... 50 President, Chief Executive Officer and Director

William I Jacobs............ 58 Managing Director, Chief Financial Officer and Director

James P. Badum.............. 39 Managing Director and Chief Marketing Officer

Marc E. Manly............... 48 Managing Director, Law and Government Affairs

A.S.A. Wyatt................ 50 Managing Director, Operations and Technology

John Henderson.............. 36 Vice President, Risk Management

David A. Eichinger.......... 35 Vice President, Corporate Development

Kathryn A. Johnson.......... 42 Vice President, Human Resources and Communications

Kenneth L. Lay.............. 57 Director

James V. Derrick, Jr........ 55 Director

Andrew S. Fastow............ 38 Director

Peter Grauer................ 54 Director
</TABLE>

Set forth below is a brief description of the business experience of the
directors and executive officers of the Company.

LOU L. PAI is Chairman and a member of our board of directors, positions he
has held since November 1999. He is Chairman and Chief Executive Officer of EES,
a position he has held since March 1997. From August 1995 to February 1997,
Mr. Pai served as President and Chief Operating Officer of Enron Capital & Trade
Resources Corp., a subsidiary of Enron now known as Enron North America Corp.,
and from September 1994 to July 1995, Mr. Pai served as a Managing Director of
Enron Capital & Trade. Mr. Pai has served as a member of the board of directors
of the Woodward Governor Company since July 1999.

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<PAGE>
H. EUGENE LOCKHART joined us in February 2000 and serves as our President
and Chief Executive Officer. Effective as of April 2000, Mr. Lockhart also
serves as a member of our board of directors. Prior to joining TNPC, from
February 1999 to February 2000, Mr. Lockhart was a senior executive at AT&T
Corp., first as its Chief Marketing Officer, and subsequently as the President
of AT&T Consumer Services. From May 1997 to October 1998, Mr. Lockhart served as
President of BankAmerica Corporation's Global Retail Bank. From January 1994 to
May 1997, Mr. Lockhart was President and Chief Executive Officer of MasterCard
International. Mr. Lockhart serves on the boards of directors of Nabisco Group
Holdings, First Republic Bank, IMS Health Inc., yclip.com, Z-university and ST
Technologies and the Royal Academy of Arts in London, and is a trustee of the
Alumni Board of the University of Virginia and the Darden Graduate School of
Business at the University of Virginia.

WILLIAM I JACOBS serves as our Managing Director and Chief Financial
Officer, a position he has held since joining us in June 2000. Effective as of
July, 2000, Mr. Jacobs also serves as a member of our board of directors. Prior
to that time, from January 1999 to June 2000, Mr. Jacobs served as Senior
Executive Vice President, Strategic Ventures for MasterCard International, Inc.
From January 1995 to December 1999, Mr. Jacobs was Executive Vice President,
Global Resources for MasterCard International. Prior to Mr. Jacobs' employment
at MasterCard International, he was the Executive Vice President, Chief
Operating Officer of Financial Security Assurance, Inc., which he co-founded in
1984. Mr. Jacobs serves on the boards of directors of Investment Technology
Group, Inc., Mondex International, and Blackboard, Inc. and is the Chairman of
the Board of Trustees of American University.

JAMES P. BADUM serves as our Managing Director and Chief Marketing Officer,
a position he has held since joining us in April 2000. Prior to his appointment,
from December 1997 to March 2000 Mr. Badum served as Senior Vice President and
then as Managing Director of Consumer Services at EES. From September 1995 to
November 1997, Mr. Badum served as Vice President of Marketing at Paramount
Farms, Inc. Prior to Mr. Badum's employment at Paramount Farms, he was a
director at Taco Bell Corporation, a division of PepsiCo.

MARC E. MANLY serves as our Managing Director, Law and Government Affairs, a
position he has held since joining us in April 2000. From October 1996 to April
2000, Mr. Manly was Vice President and Chief Counsel to AT&T Consumer Services.
From December 1994 to October 1996, Mr. Manly served as the Solicitor General of
AT&T Corp. Prior to that time, he was a partner with the law firm of Sidley &
Austin.

A.S.A. WYATT serves as our Managing Director, Operations and Technology, a
position he has held since joining us in May 2000. Prior to that time, from
October 1999 to April 2000, Mr. Wyatt served as Vice President of Operations,
Technology and Planning at AT&T Corp. From June 1993 to September 1999,
Mr. Wyatt served as Director of Group Development at Guardian Royal Exchange
plc, one of the largest composite insurers in the United Kingdom. Prior to that
time, Mr. Wyatt held a variety of positions at Midland Bank plc in the United
Kingdom.

JOHN HENDERSON serves as our Vice President, Risk Management, a position he
has held since joining us in April 2000. From August 1996 to March 2000,
Mr. Henderson served as Vice President of Retail Risk Management at EES. From
July 1994 to July 1996, Mr. Henderson served as Director of European Gas and
Power Trading at Enron Europe Liquids Processing. Prior to his employment with
Enron, Mr. Henderson held various positions at Drexel Burnham Lambert, and
consulted for Bloomberg Financial Markets.

DAVID A. EICHINGER serves as our Vice President of Corporate Development, a
position he has held since joining us in April 2000. From February 1996 to April
2000, Mr. Eichinger served in various positions at EES and its affiliates. Most
recently, Mr. Eichinger served as Vice President, Corporate Development at EES.
Prior to his employment at Enron, Mr. Eichinger held various corporate finance
positions with Exxon Corporation and Exxon Chemicals.

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<PAGE>
KATHRYN A. JOHNSON serves as our Vice President, Human Resources,
Communications, and Administrative Operations, a position she has held since
joining us in April 2000. From February 1999 to April 2000, Ms. Johnson was
Executive Director, Consumer Services Management at AT&T Corp. From November
1996 to February 1999, Ms. Johnson served as Brand Management Director at AT&T.
From March 1995 to November 1996, Ms. Johnson served as Vice President, Human
Resources and Account Services at Jetson Direct Mail Services. Prior to that
time, Ms. Johnson held a number of consumer marketing and administrative
operations positions in AT&T.

KENNETH L. LAY has been a member of our board of directors since January
2000. He has been Chairman of the Board and Chief Executive Officer of Enron for
over fourteen years. Mr. Lay has been a member of the board of directors of
Enron Corp. since 1985. Mr. Lay serves on the boards of directors of Eli Lilly
and Company, Compaq Computer Corporation, Azurix Corp., EOTT Energy Corp. (the
general partner of EOTT Energy Partners, L.P.), Questia Media, Inc., and Trust
Company of the West.

JAMES V. DERRICK, JR. has been a member of our board of directors since
January 2000. He is Executive Vice President and General Counsel of Enron, a
position he has held since June 1991. Prior to joining Enron in 1991,
Mr. Derrick was a partner at the law firm of Vinson & Elkins L.L.P. for more
than 13 years.

ANDREW S. FASTOW has been a member of our board of directors since
July 2000. He is Executive Vice President and Chief Financial Officer of Enron,
a position he has held since July 1999. From March 1998 to July 1999,
Mr. Fastow served as Senior Vice President and Chief Financial Officer of Enron
and, from July 1997 to March 1998, as Senior Vice President, Finance of Enron.
Mr. Fastow first joined Enron (Enron North America Corp., formerly known as
Enron Capital & Trade Resources Corp.) in December 1990, where he last served as
Managing Director. Mr. Fastow also serves as a director and officer of other
Enron affiliates, is a member of the board of directors of Atlantic Water Trust,
an affiliate of Azurix Corp., and is the Managing Partner of LJM Investments, an
affiliate of LJM2-TNPC, LLC, which is one of our stockholders.

PETER T. GRAUER has been a member of our board of directors since June 2000.
He has been a Managing Director of DLJ Merchant Banking, Inc. since
September 1992. From April 1989 to September 1992, he was a Co-Chairman of
Grauer & Wheat, Inc., an investment firm specializing in leveraged buyouts.
Mr. Grauer serves on the boards of directors of Doane Pet Care Products Company,
Total Renal Care Holdings, Inc., Bloomberg Inc., Formica Corporation and
Thermadyne Holdings, Inc.

In addition to the above, we expect to add additional outside directors on
or before the completion of the offering.

COMMITTEES

Our board of directors will have an audit committee and a compensation
committee. The audit committee will consist of . The audit committee
will make recommendations to the board of directors regarding the selection of
independent accountants, will review the results and scope of audit and other
services provided by our independent accountants and will review and evaluate
our audit and control functions. The compensation committee will consist of
. The compensation committee will administer our stock plans and
make decisions concerning salaries and incentive compensation for our employees.

DIRECTOR COMPENSATION

Our employee directors do not receive any cash compensation from us for
their services as members of our board of directors. We reimburse our
non-employee directors for travel and lodging expenses in connection with their
attendance at board and committee meetings. Additionally, our

44
<PAGE>
non-employee directors will be paid for each board meeting they attend and
for each committee meeting they attend.

EXECUTIVE COMPENSATION

Our company was formed in November 1999, and did not conduct any significant
operations during 1999. Effective January 6, 2000, we issued to Lou L. Pai, our
Chairman, an aggregate of 2,064,400 shares of common stock as compensation for
services performed in connection with our formation. Other than Mr Pai, the
current annualized base salary for our five most highly compensated executive
officers, based on their expected annual salary for 2000, is expected to be as
follows: Mr. Lockhart - $700,000; Mr. Jacobs - $600,000; Mr. Badum - $360,000;
Mr. Manly - $350,000 and Mr. Wyatt - $300,000. In addition, these individuals
will receive bonuses, stock options and other compensation described below under
"--Employment Agreements."

EMPLOYMENT AGREEMENTS

We are in the process of finalizing employment agreements with each of our
executive officers. The following is a summary of the material terms of the
agreements for the executive officers named above under "--Executive
Compensation."

H. EUGENE LOCKHART. We entered into an employment agreement with Mr.
Lockhart effective February 1, 2000. The agreement has a four year term, subject
to an automatic extension of that term on the anniversary date of the agreement,
unless TNPC elects not to extend the term. The agreement provides that Mr.
Lockhart will serve as our President and Chief Executive Officer, and will
receive a minimum annual base salary of $700,000, subject to annual review, and
will also receive a target bonus of 150% of his annual base salary, determined
at the discretion of our board of directors, payable in the first quarter of the
subsequent year. As of the effective date of the agreement, Mr. Lockhart became
entitled to a one time additional payment of $780,000 and a split dollar whole
life insurance policy with a cash balance at inception in the amount of
$4,000,000. In addition, under the agreement, Mr. Lockhart received stock
options to purchase 676,000 shares of common stock at an exercise price of $3.88
per share, which vest in one-third increments on December 31, 2001, 2002 and
2003, and stock options to purchase 1,290,000 shares of common stock at the
initial public offering price, which vest in one-third increments on each of the
first three anniversaries of our initial public offering. All options have a
term of ten years. Mr. Lockhart will also receive $4,000,000 in restricted stock
valued at the initial public offering price of our common stock. Mr. Lockhart
will be allowed to participate in all benefit plans offered by TNPC to other
similarly situated employees.

We may terminate Mr. Lockhart's employment agreement at any time for cause,
death or disability before the expiration of the term of employment. Mr.
Lockhart may voluntarily terminate his employment at any time. If we
involuntarily terminate Mr. Lockhart's employment agreement, which includes
termination without cause, or if TNPC materially breaches a material provision
of the employment agreement which remains uncorrected for 30 days following Mr.
Lockhart's written notice of the breach, then Mr. Lockhart is entitled to
receive his monthly base salary and target bonus as if his employment agreement
had continued for the full term after involuntary termination, unless he accepts
employment with a competitor. Employment after the term expires converts to
employment-at-will, terminable at any time by either TNPC or Mr. Lockhart. The
agreement prohibits Mr. Lockhart from soliciting our employees for a period of
twelve months following termination or from competing with TNPC or soliciting
customers for either twelve months after voluntary termination or six months
after involuntary termination. The employment agreement also contains
confidentiality provisions.

In the event of a change of control of TNPC as specified in our 2000 Stock
Plan described below, Mr. Lockhart's employment would be deemed to be
terminated, unless he entered into a new employment agreement with the successor
entity. In the event of a change of control, Mr. Lockhart

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<PAGE>
would be entitled to the salary and bonus otherwise to be paid over the
remaining term of his employment agreement.

WILLIAM I JACOBS. We entered into an employment agreement with Mr. Jacobs
effective May 1, 2000. The agreement has a four year term, subject to an
automatic extension of that term on the anniversary date of the agreement,
unless TNPC elects not to extend the term. The agreement provides that Mr.
Jacobs will receive a minimum annual base salary of $600,000, subject to annual
review, and will also receive a target bonus of 100% of his annual base salary,
determined at the discretion of our President and Chief Executive Officer,
payable in the first quarter of the subsequent year. In addition, under the
agreement, Mr. Jacobs received stock options to purchase 400,000 shares of
common stock at an exercise price of $9.69 per share, which vest in one-third
increments on December 31, 2001, 2002 and 2003, and stock options to purchase
400,000 shares of common stock at the initial public offering price, which vest
in one-third increments on each of the first three anniversaries of our initial
public offering. All options have a term of ten years. As of the effective date
of the agreement, Mr. Jacobs was granted $6,700,000 as principal amount, subject
to the accumulation of interest, under a deferred compensation plan that is
being finalized. These amounts will vest in one-fifth increments at the
effective date of the agreement, and on December 31, 2000, 2001, 2002 and 2003.
Mr. Jacobs will also receive $1,000,000 in restricted stock valued at the
initial public offering price of our common stock, which will vest in one-fourth
increments on December 31, 2000, 2001, 2002 and 2003. Mr. Jacobs will be allowed
to participate in all benefit plans offered by TNPC to other similarly situated
employees. The other terms of Mr. Jacobs' employment agreement are substantially
similar to the terms of Mr. Lockhart's employment agreement.

JAMES P. BADUM. We entered into an employment agreement with Mr. Badum
effective April 13, 2000. The agreement has a four year term, subject to an
automatic extension of that term on the anniversary date of the agreement,
unless TNPC elects not to extend the term. The agreement provides that upon his
relocation to our office in Greenwich, Connecticut, Mr. Badum will receive a
minimum annual base salary of $360,000, subject to annual review, and will also
receive a target bonus of 100% of his annual base salary, determined at the
discretion of our President and Chief Executive Officer, payable in the first
quarter of the subsequent year. In addition, under the agreement, Mr. Badum
received stock options to purchase 140,000 shares of common stock at an exercise
price of $3.88 per share and 60,000 shares of common stock at an exercise price
of $9.69 per share, all of which vest in one-third increments on December 31,
2001, 2002 and 2003, and stock options to purchase 400,000 shares of common
stock at the initial public offering price, which vest in one-third increments
on each of the first three anniversaries of our initial public offering. All
options have a term of ten years. In addition, in connection with relocation
from Texas to our headquarters location, Mr. Badum will receive a home purchase
assistance loan in the amount of $638,000, which amount will be forgiven in
equal one-fifth amounts over a five year period, so long as he remains employed
with the Company and satisfies other conditions of the loan agreement. Mr. Badum
will be allowed to participate in all benefit plans offered by TNPC to other
similarly situated employees. The other terms of Mr. Badum's employment
agreement are substantially similar to the terms of Mr. Lockhart's employment
agreement.

MARC E. MANLY. We entered into an employment agreement with Mr. Manly
effective April 17, 2000. The agreement has a four year term, subject to an
automatic extension of that term on the anniversary date of the agreement,
unless TNPC elects not to extend the term. The agreement provides that Mr. Manly
will receive a minimum annual base salary of $350,000, subject to annual review,
and will also receive a target bonus of 100% of his annual base salary,
determined at the discretion of our President and Chief Executive Officer,
payable in the first quarter of the subsequent year. In addition, under the
agreement, Mr. Manly received stock options to purchase 200,000 shares of common
stock at an exercise price of $9.69 per share, which vest in one-third
increments on December 31, 2001, 2002 and 2003, and stock options to purchase
300,000 shares of common stock at the initial public offering price, which vest
in one-third increments on each of the first three anniversaries of our initial
public offering. All options have a term of ten years. As of the effective date
of the agreement, Mr. Manly

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<PAGE>
was granted $5,000,000 as principal amount, subject to the accumulation of
interest, under a deferred compensation plan that is being finalized. These
amounts will vest in one-third increments on December 31, 2000, 2001 and 2002.
Mr. Manly will be allowed to participate in all benefit plans offered by TNPC to
other similarly situated employees. The other terms of Mr. Manly's employment
agreement are substantially similar to the terms of Mr. Lockhart's employment
agreement.

A. S. A. WYATT. We entered into an employment agreement with Mr. Wyatt
effective May 22, 2000. The agreement has a four year term, subject to automatic
annual extension for an additional year unless TNPC elects otherwise. The
agreement provides that Mr. Wyatt will receive a minimum annual base salary of
$300,000, subject to annual review, and will also receive a target bonus of 100%
of his annual base salary, determined at the discretion of our President and
Chief Executive Officer, payable in the first quarter of the subsequent year. In
addition, under the agreement, Mr. Wyatt received stock options to purchase
200,000 shares of common stock at an exercise price of $9.69 per share, which
vest in one-third increments on December 31, 2001, 2002 and 2003, and stock
options to purchase 200,000 shares of common stock at the initial public
offering price, which vest in one-third increments on each of the first three
anniversaries of our initial public offering. All options have a term of ten
years. As of the effective date of the agreement, Mr. Wyatt became entitled to a
one time additional payment of $100,000. Mr. Wyatt will be allowed to
participate in all benefit plans offered by TNPC to other similarly situated
employees. The other terms of Mr. Wyatt's employment agreement are substantially
similar to the terms of Mr. Lockhart's employment agreement.

2000 STOCK PLAN

GENERAL. Our board of directors and stockholders have adopted the TNPC,
Inc. 2000 Stock Plan. The plan allows us to grant options or restricted stock to
employees, board members and service providers. The purpose of the plan is to
attract and retain qualified employees, consultants and other service providers
by providing them with additional incentives and opportunities to participate in
our company's ownership and to create an interest in the success and increased
value of our company. The stock plan will be administered by a committee
appointed by the Board of Directors. The committee has the authority to
determine, and to establish guidelines and to delegate to the Chief Executive
Officer the determination of, the persons to whom awards are to be granted, the
time at which awards will be granted, the number of shares to be represented by
each award, and the consideration to be received, if any. The committee also has
the power to interpret the plan and to create or amend its rules.

RESERVATION OF SHARES. Grants of stock options and restricted stock may be
made pursuant to the stock plan. The number of shares of common stock issued
under the plan may not exceed 15,483,800 shares. If any portion of any option or
restricted stock granted under the plan can no longer be exercised or become
vested, or if any common stock is reacquired by us pursuant to an option or
restricted stock agreement, the unexercised portion will be available for grant
or reissuance. If our outstanding common stock is adjusted because of a
recapitalization, stock split, combination of shares, reclassification, stock
dividend, or other similar change, the committee will make appropriate
adjustments to the total number and kind of shares covered by the plan to
preserve as nearly as practical the benefits to the participants. However, in
the event of an equity capital contribution to us, plan participants will have
no recourse to a dilution in their shares of common stock, options and rights to
acquire restricted stock.

STOCK OPTIONS. Stock options granted under the plan are not intended to be
incentive stock options within the meaning of Section 422(b) of the Internal
Revenue Code. The maximum number of shares that may be subject to options
granted under the plan to an individual optionee during any calendar year may
not exceed 3,000,000. The exercise price for an option granted under the stock
plan will be determined by the committee but will be no less than the fair
market value of the common stock on the date the option is granted. The term for
exercise of any option granted will generally be

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ten years from the effective date of the option agreement. The options granted
under the plan are not assignable or transferable unless the committee gives its
approval and are exercisable only by the optionee.

RESTRICTED STOCK. The plan permits the committee to make restricted stock
awards, including performance-based restricted stock awards pursuant to Section
162(m) of the Internal Revenue Code. The committee will establish the
performance criteria. The restricted stock granted under the plan are not
assignable or transferable unless the committee gives its approval.

TERMINATION OF EMPLOYMENT. If the employment of any employee who is party
to an employment agreement is terminated for any reason, other than the
termination of employment by the Company for cause or the voluntary termination
of employment by the employee not as a result of any breach by the Company, then
the plan provides for the accelerated vesting of options and restricted stock
granted to such employee.

CHANGE IN CONTROL. The plan provides for the accelerated vesting of options
and restricted stock granted to participants in the event of a change of control
of the Company. Change of control is deemed to occur in one of four
circumstances: (1) excluding specified existing investors and acquisitions,
where a person or entity acquires more than 25% of the then outstanding shares
of common stock or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; (2) where a majority of the board of the Company is replaced, other
than where individual board members are replaced by a majority vote of the
board; (3) in the event of a merger, consolidation or sale or other disposition
of all or substantially all of the assets of the Company, except for specified
business combinations and transactions, and (4) upon approval by the
shareholders of a complete liquidation or dissolution of the Company.

TERM AND AMENDMENT. The plan has a term of ten years, subject to earlier
termination or amendment by our board of directors. The board of directors may
amend the plan at any time, except that participant approval is required if any
amendment, alteration, suspension or termination substantially affects or
impairs the participant's rights under the plan.

INITIAL GRANTS. Our board of directors has granted options under the stock
plan to a number of employees and non-employee officers or directors.
Specifically, as of , 2000, the board of directors has granted
options to purchase 1,316,600 shares of common stock at an exercise price of
$3.88, 1,510,000 shares of common stock at an exercise price of $9.69 per share,
and shares of common stock at the initial public offering price. In
addition, we have agreed to issue $5,000,000 of restricted stock based on the
initial public offering price for this offering. See "--Employment Agreements"
above for a description of specific option grants and restricted stock awards
made to our top five executive officers.

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<PAGE>
RELATED PARTY TRANSACTIONS

In our initial private placement in January 2000, investors made cash
contributions of $100 million and EES agreed to contribute retail electricity
and gas customer contracts and entered into a services agreement, two commodity
supply agreements, a software agreement and other agreements in exchange for, in
the aggregate, 19.8 million shares of our common stock, Class A warrants to
acquire 60 million shares of our common stock and Class B warrants to acquire
10.3 million shares of our common stock. The Enron customer contracts to be
transferred to us will not be transferred until we receive certain regulatory
approvals. Pending such transfer, Enron will continue to serve the customers,
with the economic benefits and burdens of the customer contracts being assigned
to us.

In our second private placement in July 2000, our investors, in the
aggregate, agreed to make cash contributions of approximately $104 million in
exchange for Class A warrants to acquire 9,070,800 shares of our common stock
and 639,000 shares of common stock. The following stockholders made aggregate
contributions in exchange for our securities in our two private placement
rounds:

<TABLE>
<CAPTION>
CASH SHARES OF CLASS A CLASS B
INVESTOR CONTRIBUTION COMMON STOCK WARRANTS(1) WARRANTS(1)
-------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Enron Energy Services, LLC.................. --(2) 14,800,000 45,000,000 --
DLJMB Partners(3)........................... $42,500,000 1,750,000 5,947,800 3,613,000
GE Capital Equity Investments, Inc.......... 35,000,000 1,750,000 5,250,000 3,613,000
California Public Employees' Retirement
System.................................... 40,000,000 750,000 4,575,800 1,548,400
Ontario Teachers' Pension Plan Board........ 30,000,000 750,000 3,645,600 1,548,400
LJM2-TNPC, LLC.............................. 50,000,000 -- 4,651,600 --
Lou L. Pai.................................. 4,999,844 463,000 -- --
H. Eugene Lockhart.......................... 194,378 18,000 -- --
William I Jacobs............................ 194,378 18,000 -- --
James P. Badum.............................. 194,378 18,000 -- --
Marc E. Manly............................... 194,378 18,000 -- --
A.S.A. Wyatt................................ 64,793 6,000 -- --
David A. Eichinger.......................... 194,378 18,000 -- --
Kathryn A. Johnson.......................... 53,994 5,000 -- --
All other officers as a group............... 809,910 75,000 -- --
</TABLE>

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

(1) The Class A warrants are exercisable for shares of our common stock at an
exercise price of $0.05 per share beginning December 31, 2000 until their
expiration on December 31, 2005. The Class B warrants are subject to
mandatory net cashless exercise upon completion of this offering at an
exercise price of one-half the offering price, subject to a maximum exercise
price of $ per share.

(2) EES contributed certain contracts and entered into certain agreements in
exchange for shares of our common stock and Class A warrants.

(3) The DLJMB Partners include: DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified
Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium Partners,
L.P., DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ Offshore
Partners II, C.V., DLJ EAB Partners, L.P. and DLJ ESC II, L.P.

On May 12, 2000, we entered into an Information Technology Services
Agreement with IBM pursuant to which IBM will provide us with systems
integration services and other services relating to customer acquisition,
customer care and revenue management over a ten-year term. In addition, IBM
agreed to purchase $20 million of our common stock over the next two years at
specified prices, of which $5 million has already been received. Please read
"Material Contracts" for additional information on our related party
transactions, including a number of significant agreements with Enron and its
affiliates.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth, as of , 2000, information with
respect to shares of common stock beneficially owned by:

- each person who we know to be the beneficial owner of more than five
percent of our outstanding shares of common stock;

- each of the executive officers named under "Management--Executive
Compensation";

- each of our directors; and

- all current directors and executive officers as a group.

Common stock ownership in the following table has been adjusted to reflect
the mandatory net cashless exercise of all outstanding Class B warrants upon
completion of this offering at an exercise price of one-half the offering price
in this offering, subject to a maximum exercise price of $ per share. The
percentage ownerships in the following table also reflects the assumed exercise
of all outstanding Class A warrants for shares of common stock, which will
become exercisable at an exercise price of $0.05 per share on December 31, 2000.

To our knowledge, except as indicated in the footnotes to this table or
pursuant to applicable community property laws, upon consummation of this
offering, the persons named in the table have sole voting and investment power
with respect to the shares of common stock indicated.

<TABLE>
<CAPTION>
COMBINED COMBINED
COMMON CLASS A PERCENTAGE PRIOR TO PERCENTAGE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNERS STOCK WARRANTS THE OFFERING(1) THE OFFERING(1)
------------------------------------- --------- ---------- ------------------- ----------------
<S> <C> <C> <C> <C>
Enron Corp.(2)........................ 8,760,400(3) 42,134,200(3) 51.8% %
1400 Smith Street
Houston, Texas 77002
DLJMB Partners(4)..................... 3,612,953 5,947,800 9.7% %
DLJMB Investors
277 Park Avenue
New York, New York 10172
GE Capital Equity Investments, Inc.... 3,612,953 5,250,000 9.0% %
120 Long Ridge Road
Stamford, Connecticut 06927
Ontario Teachers' Pension Plan
Board............................... 2,511,594 5,682,400 8.3% %
5650 Yonge Street, 5th Floor
Toronto, Ontario
Canada M2M 4H5
California Public Employees'
Retirement System................... 1,824,794 5,404,800 7.4% %
Lincoln Plaza
400 "P" Street
Investment Office, Suite 3492
Sacramento, California 92812-2749
Cortez Energy Services, LLC(2)........ 5,000,000 -- 5.1% %
c/o Enron Energy Services, LLC
1400 Smith Street
Houston, Texas 77002
LJM2-TNPC, LLC(2)..................... -- 4,651,600 4.7% %
333 Clay Street, Suite 1203
Houston, Texas 77002
</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
COMBINED COMBINED
COMMON CLASS A PERCENTAGE PRIOR TO PERCENTAGE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNERS STOCK WARRANTS THE OFFERING(1) THE OFFERING(1)
------------------------------------- --------- ---------- ------------------- ----------------
<S> <C> <C> <C> <C>
International Business Machines
Corporation......................... 1,100,400 -- 1.1% %
New Orchard Road
Armonk, New York 10504(5)
H. Eugene Lockhart(6)................. 18,000 -- *% %
William I Jacobs(7)................... 18,000 -- *% %
James P. Badum........................ 18,000 -- *% %
Marc E. Manly......................... 18,000 -- *% %
A.S.A. Wyatt.......................... 6,000 -- *% %
Kenneth L. Lay(8)..................... -- -- --% %
James V. Derrick, Jr.(8).............. -- -- --% %
Lou L. Pai(9)......................... 2,527,400 -- 2.6% %
Andrew S. Fastow(10).................. -- -- --% %
Peter Grauer(11)...................... -- -- --% %
All directors and executive officers
as a group (10 persons)............. 2,605,400 -- 2.7% %
</TABLE>

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

* Less than one percent.

(1) All percentages are calculated assuming the exercise of all outstanding
Class A warrants.

(2) Cortez Energy Services, LLC is a limited liability company with EES as its
managing member and LJM2 Co-Investment, L.P. as its only other member. The
general partner of LJM2 Co-Investment, L.P. is LJM2 Capital Management,
L.P., whose general partner is LJM2 Capital Management, LLC, whose managing
member is Mr. Andrew S. Fastow. Mr. Fastow is Executive Vice President and
Chief Financial Officer of Enron. As a result of Mr. Fastow's positions at
LJM2 Capital Management, LLC and Enron, Enron may be deemed to beneficially
own the Cortez member interests held by LJM2 Co-Investment, L.P., and thus
the shares of common stock held by Cortez as well as the shares of common
stock LJM2 may acquire upon exercise of its Class A warrants. In addition,
because EES is a controlled affiliate of Enron, Enron may be deemed to
beneficially own the Cortez member interests held by EES, and thus the
shares of common stock held by Cortez. Enron disclaims beneficial ownership
of the shares of common stock held by Cortez and LJM2. Pursuant to the terms
of the Contribution and Subscription Agreement executed in connection with
our initial private placement, immediately upon receipt of the 14,800,000
shares of common stock issued to EES in that transaction, EES contributed
5,000,000 of those shares of common stock to Cortez. The Class A warrants
reflected as owned by Enron include 6,766,400 Class A warrants that have
been transferred by Enron to McGarret I, L.L.C. and 8,458,200 Class A
warrants that have been transferred by Enron to McGarret II, L.L.C. Enron is
the sole managing member of these entities.

(3) Includes 8,760,400 shares of common stock and Class A warrants to acquire
42,134,200 shares of common stock owned by EES, a controlled affiliate of
Enron.

(4) The DLJMB Partners include: DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified
Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium Partners,
L.P., DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ Offshore
Partners II, C.V., DLJ EAB Partners, L.P. and DLJ ESC II, L.P.

(5) Does not include $5 million in common stock that IBM has agreed to purchase
upon completion of this offering at a price equal to one-half of the initial
public offering price.

51
<PAGE>
(6) Does not include $4 million of restricted common stock to be issued to
Mr. Lockhart upon completion of this offering, based on the initial public
offering price.

(7) Does not include $1 million of restricted common stock to be issued to
Mr. Jacobs upon completion of this offering, based on the initial public
offering price.

(8) Does not include 8,760,400 shares of common stock and Class A warrants to
acquire 42,134,200 shares of common stock owned by EES with respect to which
Enron has shared voting and dispositive power. Messrs. Lay and Derrick, in
their capacities as Chairman of the Board and Chief Executive Officer and as
Executive Vice President and General Counsel, respectively, of Enron may be
deemed to beneficially own such shares as a result of their positions with
Enron. Messrs. Lay and Derrick disclaim beneficial ownership of these
shares.

(9) Does not include 8,760,400 shares of common stock and Class A warrants to
acquire 42,134,200 shares of common stock owned by EES. Mr. Pai, in his
capacity as Chairman of the Board and Chief Executive Officer of EES, may be
deemed to beneficially own such shares as a result of his position with EES.
Mr. Pai disclaims beneficial ownership of these shares.

(10) Does not include 8,760,400 shares of common stock and Class A warrants to
acquire 42,134,200 shares of common stock owned by EES with respect to which
Enron has shared voting and dispositive power. Mr. Fastow, in his capacity
as Executive Vice President and Chief Financial Officer of Enron, may be
deemed to beneficially own such shares as a result of his position with
Enron. Also does not include Class A warrants to acquire 4,651,600 shares of
common stock owned by LJM2-TNPC, LLC with respect to which LJM Investments
has shared voting and dispositive power. Mr. Fastow, in his capacity as
Managing Partner of LJM Investments may be deemed to beneficially own such
shares, as a result of his position with LJM Investments. Mr. Fastow
disclaims beneficial ownership of these shares.

(11) Does not include 3,612,953 shares of common stock and Class A warrants to
acquire 5,947,800 shares of common stock owned by DLJMB Partners.
Mr. Grauer, in his capacity as a Managing Director of DLJ Merchant Banking,
Inc., may be deemed to beneficially own such shares as a result of his
position with DLJ. Mr. Grauer disclaims beneficial ownership of these
shares.

52
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Immediately following the consummation of this offering, the authorized
capital stock of TNPC will consist of 500,000,000 shares of common stock, par
value $.01 per share, and 50,000,000 shares of preferred stock, par value $.01
per share, the rights and preferences of which may be established from time to
time by our board of directors. Upon completion of this offering, there will be
outstanding shares of common stock ( if the underwriters'
over-allotment option is exercised in full), no outstanding shares of preferred
stock, stock options to purchase shares of common stock and outstanding
Class A warrants to purchase 69,070,800 shares of common stock.

The following discussion summarizes the material provisions of our capital
stock, our limited corporate purpose and the anti-takeover provisions that will
be contained in our certificate of incorporation and bylaws upon consummation of
this offering. This summary is qualified by our certificate of incorporation and
bylaws, copies of which have been filed as exhibits to the registration
statement of which this prospectus is a part and by Delaware law.

COMMON STOCK

Prior to this offering, we had authorized common stock consisting of voting
common stock and non-voting common stock. Upon completion of this offering, all
shares of non-voting common stock automatically convert into shares of common
stock on a one-for-one basis. Holders of common stock are entitled to one vote
per share on all matters to be voted upon by the stockholders. Because holders
of common stock do not have cumulative voting rights, the holders of a majority
of the shares of common stock can elect all of the members of the board of
directors standing for election. Subject to preferences of any preferred stock
that may be issued in the future, the holders of common stock are entitled to
receive such dividends as may be declared by the board of directors. The common
stock is entitled to receive pro rata all of the assets of TNPC available for
distribution to its stockholders. There are no redemption or sinking fund
provisions applicable to the common stock.

PREFERRED STOCK

The board of directors has the authority to issue up to 50,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rates, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of that series, which may be superior to those of the common stock,
without further vote or action by the stockholders. There will be no shares of
preferred stock outstanding upon the closing of the offering and we have no
present plans to issue any preferred stock.

One of the effects of undesignated preferred stock may be to enable the
board of directors to render more difficult or to discourage an attempt to
obtain control of us by means of a tender offer, proxy contest, merger or
otherwise, and as a result to protect the continuity of our management. The
issuance of shares of the preferred stock by the board of directors as described
above may adversely affect the rights of the holders of common stock. For
example, preferred stock issued by us may rank prior to the common stock as to
dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock. Accordingly, the
issuance of shares of preferred stock may discourage bids for the common stock
or may otherwise adversely affect the market price of the common stock.

CLASS A WARRANTS

As of , 2000, there were Class A warrants outstanding and
exercisable to purchase 69,070,800 shares of our common stock at an exercise
price of $0.05 per share. All outstanding Class A warrants may be exercised
starting on December 31, 2000 and will expire on December 31, 2005. The

53
<PAGE>
holders are entitled to exercise some or all of the Class A warrants either for
cash or on a cashless net exercise basis.

The number of shares of common stock into which the Class A warrants may be
converted and the exercise price of the Class A warrants are subject to
customary adjustment in the event that we declare a stock split, reverse stock
split, stock dividend or other subdivision or combination of our common stock.
If we declare a dividend or distribution of cash, debt or other property to the
holders of our common stock, the holders of the Class A warrants are entitled to
receive upon exercise of the Class A warrants such other cash, debt or other
property that we distribute to our stockholders as though such warrantholder had
exercised their Class A warrants into common stock prior to our declaration of
the dividend. If we merge or consolidate with another corporation or if we sell
all or substantially all of our assets, the holders of the Class A warrants will
be entitled to receive upon exercise of the Class A warrants the same
consideration from such merger or sale as the holders of our common stock as if
such warrantholder had exercised their Class A warrants into common stock prior
to the merger, consolidation or sale. If we reclassify or change our common
stock, the holders of the Class A warrants will be entitled to receive the same
kind and amount of shares of stock or other securities, property, cash or any
combination thereof receivable by the holders of our common stock after the
reclassification or change upon such warrantholders exercise of their Class A
warrants.

LIMITED CORPORATE PURPOSE IN OUR CERTIFICATE OF INCORPORATION

Our certificate of incorporation limits the business activities we may
directly or indirectly engage in to the retail marketing and sale of natural
gas, electricity and other commodities, products and services (whether or not
related to natural gas or electricity) to small commercial customers and
residential customers in the United States. These business activities include:

- the research, development, branding and provision or sale of commodities,
products and services for the retail marketing and sale of natural gas,
electricity and other commodities, products and services;

- the ownership of physical and financial portfolios of natural gas,
electricity and other commodities or products;

- the ownership and operation of systems and facilities, including both real
and personal property, necessary for us to carry out our business
purposes;

- entering into agreements with persons to provide certain administrative
services on our behalf related to our business purposes;

- the provision of risk management services for ourselves and other parties
for the purpose of conducting our business purposes; and

- the retention of any financing necessary for us to carry out our business
purpose.

In addition, our certificate of incorporation permits us to enter into
agreements with aggregators, sponsors of small commercial and residential
customers and management companies and tenants of multi-family housing so long
as such agreements provide for the retail marketing or sale of natural gas,
electricity or other commodities, products and services to small commercial
customers or residential customers in the United States. We are also permitted
to hold equity or debt interests in other entities that are engaged in the same
business purposes as ours. Notwithstanding the limitations on our business
activities set forth above, we are permitted to engage in any lawful activity
under Delaware law so long as we first obtain Enron's written consent. Such
consent may be withheld in Enron's sole and unfettered discretion and may be
general in nature or may be confined to a particular activity or a particularly
described expanded business purpose.

54
<PAGE>
As used herein, the following terms are defined in our certificate of
incorporation as set forth below:

- "retail" means any marketing, sale or other business to or with a customer
who to our knowledge is the ultimate recipient or ultimate customer of
commodities, products or services for final consumption or final use, and
to our knowledge does not intend to resell, further distribute or
disseminate such commodities, products or services, or purchase them for
the account of any other person or entity;

- "residential customer" means any and all individuals who purchase or seek
to purchase natural gas, electricity or other commodities, products or
services (whether or not related to natural gas or electricity) at retail
and, to our knowledge, not for commercial purposes, in the United States;
and

- "small commercial customers" means any and all commercial entities who
purchase or seek to purchase natural gas, electricity or other
commodities, products or services (whether or not related to natural gas
or electricity) at retail in the United States, PROVIDED that in the case
of the sale of natural gas or electricity, we do not expect that such
customer's natural gas and electricity needs (or in the case of the sale
of other commodities, products or services, we do not expect that such
customer's natural gas and electricity needs) to exceed:

(1) 250,000 cubic feet (250 Mcf) of natural gas in any calendar month at
any one location in the United States from which such customer or any of
its controlled affiliates conducts business, or more than 750,000 cubic
feet (750 Mcf) of natural gas in any calendar month at any multiple
locations in the United States from which such customer and any of its
controlled affiliates taken together conducts business; and

(2) 36,000 kilowatt hours (36,000 kWh) of electric energy in any calendar
month at any one location in the United States from which such customer
or any of its controlled affiliates conducts business, or more than
108,000 kilowatt hours (108,000 kWh) of electric energy in any calendar
month at any multiple locations in the United States from which such
customer and any of its controlled affiliates taken together conducts
business.

In addition to the limitations on the type of business in which we may
engage, we are limited to the geographic area where we may conduct our business.
Pursuant to the terms of our certificate of incorporation, we are limited to
conducting our business within the 50 states of the United States and the
District of Columbia. We are prohibited from conducting business in any foreign
countries and any of the territories or possessions of the United States,
including Puerto Rico.

The limitations on the type and scope of our business will continue to be in
effect after this offering until such time as (a) Enron and its affiliates own
less than 20% of our common stock on a fully-diluted basis and less than 20% of
our directors are in any way affiliated with Enron or (b) the Noncompetition
Agreement between TNPC, Enron and EES terminates pursuant to the terms stated
therein.

If we inadvertently or unintentionally violate the limitations imposed on
our business purpose as described above, such business activity will not be
deemed or considered ULTRA VIRES or void under our certificate of incorporation.
Upon our discovery of any such offending business activity, we have agreed to
promptly use our best efforts to cure or remedy the offending business or
activity to ensure that we are again in compliance with the limitations imposed
on our business purpose.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW

WRITTEN CONSENT OF STOCKHOLDERS. Our certificate of incorporation provides
that any action by our stockholders must be taken at an annual or special
meeting of stockholders. Special meetings of the

55
<PAGE>
stockholders may be called only by the board of directors, our Chairman, our
President and any one or more holders of record of 10% or more of our common
stock. This provision could have the effect of deterring hostile takeovers or
delaying changes in control. As long as Enron, its subsidiaries and Cortez
Energy Services, LLC, an affiliate of Enron, are holders of record of 10% or
more of our common stock, this provision may not be amended without Enron's
consent.

ADVANCE NOTICE PROCEDURE FOR STOCKHOLDER PROPOSALS. Our bylaws establish an
advance notice procedure for the nomination of candidates for election as
directors as well as for stockholder proposals to be considered at annual
meetings of stockholders. In general, notice of intent to nominate a director at
an annual meeting of stockholders must be delivered to or mailed and received at
our principal executive offices not later than 120 days prior to the anniversary
date of the immediately preceding annual meeting of stockholders.

Notice of stockholders' intent to raise business at an annual meeting
generally must be delivered to or mailed and received at our principal executive
offices not later than 120 days prior to the anniversary date of the preceding
annual meeting of stockholders. These procedures may operate to limit the
ability of stockholders to bring business before a stockholders meeting,
including with respect to the nomination of directors and the consideration of
any transaction that could result in a change in control.

LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS. Our certificate of
incorporation provides that no director shall be personally liable to TNPC or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability as follows:

- for any breach of the director's duty of loyalty to TNPC or its
stockholders;

- for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of the laws;

- for unlawful payment of a dividend or unlawful stock purchase or stock
redemption; or

- for any transaction from which the director derived an improper personal
benefit.

The effect of these provisions is to eliminate the rights of TNPC and its
stockholders, through stockholders' derivative suits on behalf of TNPC, to
recover monetary damages against a director for breach of fiduciary duty as a
director, including breaches resulting from grossly negligent behavior, except
in the situations described above.

DELAWARE TAKEOVER STATUTE. Under the terms of our certificate of
incorporation and as permitted under Delaware law, we have elected not to be
subject to Delaware's anti-takeover law. If it applied to us, this law would
mean that specified persons who, together with affiliates and associates, own,
or within three years did own, 15% or more of the outstanding voting stock of a
corporation could not engage in certain business combinations with the
corporation for a period of three years after the date on which the person
became an interested stockholder.

REGISTRATION RIGHTS

We have entered into agreements with EES, Cortez, CalPERS, OTP, GE Capital,
the DLJMB Partners, and LJM2 that give those stockholders specified rights to
require us to register the shares of common stock owned by such stockholders or
issuable upon the exercise of warrants. Beginning six months after this
offering, EES and Cortez have the right to demand a total of three such
registrations, only one of which may be exercised during any 6-month period
following the date of an offering requested by either such party. The number of
shares requested to be registered must have an aggregate offering price of at
least $50 million. Also beginning six months after this offering, each of
CalPERS, the DLJMB Partners (taken together), OTP, GE Capital, and LJM2 have the
right to

56
<PAGE>
demand one such registration, only one of which may be exercised during any
6-month period following the date of an offering requested by any of those four
stockholders. The number of shares requested to be registered must have an
aggregate offering price of at least $50 million. In addition, all such
stockholders listed above, plus AOL, IBM, Mr. Pai and Columbia, have specified
rights to include their shares in any registration of common stock made by us in
the future.

We have agreed to pay all costs and expenses, other than underwriting
discounts and commissions, related to shares sold by such stockholders in
connection with any such registration. The agreement is for an indefinite term.
Please read "Shares Eligible for Future Sale" and "Risk Factors--Future sales of
our common stock may depress our stock price."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is , and
its telephone number is (800) .

57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Sales of substantial amounts of
our common stock in the public market after any restrictions on sale lapse could
adversely affect the prevailing market price of our common stock and impair our
ability to raise equity capital in the future.

Upon completion of the offering, we will have outstanding shares
of common stock, outstanding options to purchase shares of common stock
and outstanding warrants to purchase 69,070,800 shares of common stock, assuming
the underwriters' over-allotment option is not exercised and other outstanding
options and warrant grants are not exercised. Of the shares sold in the
offering, shares will be subject to the lock-up agreements described
below assuming that we sell all shares reserved under our directed share program
to the entities or persons for whom these shares have been reserved. We expect
that the remaining shares, plus any shares issued upon exercise of the
underwriters' over-allotment option, will be freely tradable without restriction
under the Securities Act, unless purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act.

The remaining shares outstanding and shares subject to
outstanding options and warrants are "restricted securities" within the meaning
of Rule 144. Restricted securities may be sold in the public market only if the
sale is registered or if it qualifies for an exemption from registration, such
as under Rules 144 or 144(k) promulgated under the Securities Act, which are
summarized below. Sales of restricted securities in the public market, or the
availability of such shares for sale, could adversely affect the market price of
our common stock.

LOCK-UP AGREEMENTS

Our directors, officers and various other stockholders, who together hold
substantially all of our securities, have entered into lock-up agreements in
connection with this offering. These lock-up agreements generally provide that
these holders will not offer, pledge, sell, contract to sell or sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible or exercisable or exchangeable for our common stock owned by them
for a period of 180 days after the date of this prospectus without the prior
written consent of DLJ.

RULE 144

In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- one percent of the number of shares of common stock then outstanding, and

- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to requirements with respect to manner of
sale, notice and the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.

58
<PAGE>
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect to file the registration statement covering shares offered pursuant to
the 2000 Stock Plan within 180 days after the date of this prospectus, thus
permitting the resale of such shares by nonaffiliates in the public market
without restriction under the Securities Act.

In addition, after this offering, the holders of approximately 27 million
shares of common stock and 69 million warrants will be entitled to demand
registration rights with respect to registration of such shares of common stock
under the Securities Act. Registration of such shares under the Securities Act
would result in such shares, except for shares purchased by affiliates of TNPC,
becoming freely tradable without restriction under the Securities Act
immediately on the effectiveness of such registration. Please read "Description
of Capital Stock--Registration Rights" for more information about these
registration rights.

59
<PAGE>
UNDERWRITING

Subject to the terms and conditions of an underwriting agreement dated
, 2000, the underwriters named below, who are represented by Donaldson,
Lufkin & Jenrette Securities Corporation, Chase Securities Inc., CIBC World
Markets Corp., Credit Suisse First Boston Corporation, PaineWebber Incorporated,
Salomon Smith Barney Inc. and DLJDIRECT Inc., have severally agreed to purchase
an aggregate of shares of our common stock from us. The number of
shares of our common stock that each underwriter has agreed to purchase is set
forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Chase Securities Inc........................................
CIBC World Markets Corp.....................................
Credit Suisse First Boston Corporation......................
PaineWebber Incorporated....................................
Salomon Smith Barney Inc....................................
DLJDIRECT Inc...............................................
------
Total...................................................
======
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares of our common stock in this
offering are subject to approval by their counsel of certain legal matters and
certain other conditions. The underwriters are obligated to purchase and accept
delivery of all the shares of our common stock (other than those shares covered
by the over-allotment option described below) if they purchase any of the shares
of our common stock.

The underwriters initially propose to offer some of the shares of our common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares of our common stock to
certain dealers (including the underwriters) at the initial public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and these dealers may re-allow, a concession not in excess of $ per
share on sales to certain other dealers. After the initial offering of the
shares of our common stock to the public, the representatives may change the
public offering price and other selling terms at any time without notice.

We have granted to the underwriters an option, exercisable within 30 days
after the date of this prospectus, to purchase from time to time, in whole or in
part, up to additional shares of our common stock at the initial public
offering price less underwriting fees. The underwriters may exercise this option
solely to cover over-allotments, if any, made in connection with this offering.
To the extent that the underwriters exercise this option, each underwriter will
become obligated, subject to certain conditions, to purchase a number of
additional shares of our common stock approximately proportionate to its initial
purchase commitments.

The following table shows the underwriting fees we will pay to the
underwriters in connection with this offering. The amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of our common stock.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
<S> <C> <C>
Per Share............................................ $ $
Total................................................ $ $
</TABLE>

We estimate our expenses relating to this offering to be $
million. We will pay to the underwriters underwriting fees in an amount equal to
the initial public offering price per share of common stock less the amount the
underwriters pay to us for each share of common stock.

60
<PAGE>
An electronic prospectus is available on the Internet site maintained by
DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
the Internet site relating to the offering is not part of this prospectus, has
not been approved or endorsed by us or any underwriter and should not be relied
on by prospective purchasers.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make for these liabilities.

For a period ending 180 days from the date of this prospectus, we and our
executive officers and directors and certain of our stockholders have agreed not
to, without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation:

- offer, pledge, sell, contract to sell or sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock; or

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, whether any such transaction described above is to be settled by
delivery of common stock or other securities, in cash, or otherwise.

However, we may:

- grant stock options pursuant to our 2000 Stock Plan;

- issue shares of our common stock upon the exercise of our options,
warrants or rights or the conversion of currently outstanding securities
or pursuant to currently outstanding agreements to issue securities; and

- issue shares of our common stock or securities convertible or exchangeable
into our common stock as payment of any part of the purchase price for
businesses we acquire so long as such shares issued in this manner shall
not be transferable during the 180-day lock-up period.

In addition, during this 180 day period, we have also agreed not to file any
registration statement for the registration of any shares of our common stock or
any securities convertible into or exercisable or exchangeable for our common
stock, other than with respect to our 2000 Stock Plan, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Likewise, during
this 180 day period, our executive officers and directors and certain of our
shareholders have agreed not to make any demand for, or exercise any right for,
registration of any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock without Donaldson,
Lufkin & Jenrette Securities Corporation's written consent.

At our request, the underwriters have reserved up to five percent of the
shares offered by this prospectus for sale at the initial public offering price
to our officers, directors, employees and their family members and to business
associates of TNPC, including clients, consultants and other friends. These
persons must commit to purchase after the registration statement has become
effective but before the opening of business on the following business day. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase the reserved shares. Any reserved shares not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered hereby.

Application will be made to list our common stock on the New York Stock
Exchange under the symbol "NPW."

61
<PAGE>
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares of our common stock included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisement in connection with the offer and sale of any
shares of our common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons who receive this prospectus
are advised to inform themselves about and to observe any restrictions relating
to this offering of our common stock and the distribution of this prospectus.
This prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of our common stock included in this offering in any jurisdiction where
that would not be permitted or legal.

In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. The underwriters may also bid for and
purchase shares of our common stock in the open market to cover syndicate short
positions or to stabilize the price of our common stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members
and selected dealers if they repurchase previously distributed common stock in
syndicate covering transactions, in stabilizing transactions or otherwise. These
activities may stabilize or maintain the market price of our common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.

Prior to this offering, there has been no established market for our common
stock. The initial public offering price for the shares of our common stock
offered by this prospectus will be determined by negotiation between us and the
representatives of the underwriters. The factors to be considered in determining
the initial public offering price include:

- the history of and the prospects for the industry in which we compete;

- our past and present operations;

- our historical results of operations;

- our prospects for future operational results;

- the recent market prices of securities of generally comparable companies;
and

- general conditions of the securities market at the time of this offering.

Donaldson, Lufkin & Jenrette Securities Corporation has in the past
provided, and may in the future from time to time provide, investment banking
and general financing and banking services to us and our affiliates for which
they have in the past received, and may in the future receive, customary fees
and reimbursement of expenses. In addition, DLJ Merchant Banking Partners II,
L.P. and its affiliated funds, all of which are affiliated with Donaldson,
Lufkin & Jenrette Securities Corporation, own an aggregate of 1,750,000 shares
of our common stock and warrants to purchase in the aggregate 9,560,800 shares
of our common stock. A portion of these warrants will be exercised concurrently
with this offering. Upon consummation of this offering, the DLJ Merchant Banking
funds will beneficially own approximately % of our outstanding common
stock. Peter Grauer, who is a Managing Director at DLJ Merchant Banking Partners
II, L.P., is currently a director of our company. For more information about our
relationship with these parties, please read "Principal Shareholders" and
"Relationships and Related Transactions."

Because DLJ Merchant Banking Partners II, L.P. and its affiliated funds will
beneficially own more than 10% of our outstanding common stock, this offering is
being made in compliance with Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. This rule requires that the

62
<PAGE>
initial public offering price be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Salomon Smith Barney, Inc. will act as the qualified independent
underwriter in connection with this offering and assume the customary
responsibilities of acting as a qualified independent underwriter in pricing and
conducting due diligence for this offering. Salomon Smith Barney, Inc. will
receive a fee of $ for acting as the qualified independent
underwriter.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered by this
prospectus will be passed on for us by Vinson & Elkins L.L.P., Houston, Texas.
Certain legal matters relating to the common stock offered by this prospectus
will be passed on for the underwriters by Andrews & Kurth L.L.P., Houston,
Texas.

EXPERTS

The financial statements for TNPC, Inc. and its subsidiaries for the period
from May 1, 1997 to December 31, 1999 included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

The financial statements for Columbia Mass Markets Business Segment for the
period from January 1, 1998 to December 31, 1999 included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.

63
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
being sold in this offering. This prospectus constitutes a part of that
registration statement. This prospectus does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the
registration statement because some parts have been omitted in accordance with
the rules and regulations of the Commission. For further information about us
and the common stock being sold in this offering, you should refer to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. Statements contained in this prospectus regarding the
contents of any agreement, contract or other document referred to are not
necessarily complete; reference is made in each instance to the copy of the
contract or document filed as an exhibit to the registration statement. Each
statement is qualified by reference to the exhibit. The registration statement,
including related exhibits and schedules, may be inspected without charge at the
Commission's principal office in Washington, D.C. Copies of all or any part of
the registration statement may be obtained after payment of fees prescribed by
the Commission from:

- the Commission's Public Reference Room at the Commission's principal
office, 450 Fifth Street, N.W., Washington, D.C. 20549; or

- the Commission's regional offices in:

- New York, located at 7 World Trade Center, Suite 1300, New York, New
York 10048; or

- Chicago, located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.

You may obtain information regarding the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a
website that contains reports, proxy and information statements and other
information regarding registrants, including us, that file electronically with
the Commission. The address of the site is www.sec.gov.

We intend to furnish holders of our common stock with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports containing unaudited condensed financial
information for the first three quarters of each fiscal year. We intend to
furnish other reports as we may determine or as may be required by law.

64
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PRO FORMA FINANCIAL STATEMENTS

Pro Forma Condensed Financial Statements.................... F-2
Unaudited Pro Forma Condensed Balance Sheet................. F-3
Unaudited Pro Forma Condensed Statement of Income for the
Three Months Ended March 31, 2000......................... F-4
Unaudited Pro Forma Condensed Statement of Income for the
Year Ended December 31, 1999.............................. F-5
Notes to Unaudited Pro Forma Condensed Financial
Statements................................................ F-6

TNPC, INC.

Report of Independent Public Accountants.................... F-8
Balance Sheets as of December 31, 1998, 1999 and March 31,
2000 (unaudited).......................................... F-9
Statements of Operations for the Period ended December 31,
1997, Years Ended December 31, 1998, and 1999, and the
three months ended March 31, 1999 (unaudited) and 2000
(unaudited)............................................... F-10
Statements of Changes in Owners' and Stockholders' Equity
for the Period ended December 31, 1997, Years ended
December 31, 1998, and 1999, and the three months ended
March 31, 2000 (unaudited)................................ F-11
Statements of Cash Flows for the Period ended December 31,
1997, Years Ended December 31, 1998, and 1999, and the
three months ended March 31, 1999 (unaudited) and 2000
(unaudited)............................................... F-12
Notes to Financial Statements............................... F-13

COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

Report of Independent Public Accountants.................... F-24
Balance Sheets as of December 31, 1998, 1999 and March 31,
2000 (unaudited).......................................... F-25
Statements of Income for the Years Ended December 31, 1998
and 1999, and the three months ended March 31, 1999
(unaudited) and 2000 (unaudited).......................... F-26
Statements of Changes in Segment Equity for the Years Ended
December 31, 1998 and 1999 and the three months ended
March 31, 2000 (unaudited)................................ F-27
Statements of Cash Flows for the Years Ended December 31,
1998 and 1999 and the Three Months Ended March 31, 1999,
(unaudited) and 2000 (unaudited).......................... F-28
Notes to Financial Statements............................... F-29
</TABLE>

F-1
<PAGE>
TNPC, INC.

UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

TNPC, Inc. ("TNPC"), formerly named EMW Energy Services Corp., is the
successor to an operating unit of Enron Energy Services, LLC ("EES") which is a
subsidiary of Enron Corp. TNPC, generally through its subsidiary The New Power
Company, provides retail marketing and retail sales of natural gas and
electricity to residential customers in California and Ohio. TNPC is focusing
substantially all of its resources on expanding its current marketing efforts
from servicing regional markets to being recognized as a national retail
provider of energy to residential and small commercial customers as additional
markets continue to restructure the retail sale of energy.

TNPC was incorporated on November 17, 1999 in the state of Delaware, at
which time 200,000 shares of common stock were issued to EES. TNPC was
capitalized through the contribution of certain assets by EES and a private
placement to outside investors, pursuant to an agreement executed on
December 23, 1999. The transfer of assets from EES has been accounted for at
historical costs as a reorganization of companies under common control in a
manner similar to a pooling-of-interests. Accordingly, all assets contributed by
EES have been recorded at their historical basis to EES.

The accompanying unaudited pro forma condensed financial statements are
based on adjustments to the historical financial statements of TNPC to give
effect to the acquisition and financing transactions (the "Contemplated
Transactions") described in Note 1. The pro forma condensed statements of
operations assume the Contemplated Transactions were consummated as of the
beginning of the periods presented. The pro forma condensed balance sheet is
based on the assumption that the Contemplated Transactions occurred as of the
balance sheet date. The pro forma condensed financial statements are not
necessarily indicative of results that would have occurred had the transactions
been consummated as of the dates indicated or that might be attained in the
future.

Certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The pro forma condensed financial statements should be read in
conjunction with the historical financial statements of TNPC, the historical
financial statements of Columbia Energy Mass Markets Business Segment
("Columbia") and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.

F-2
<PAGE>
TNPC, INC.

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------------------------ ADJUSTMENTS COMBINED
TNPC, INC. COLUMBIA COMBINED ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents.......... $ 89,704,184 $ 248,088 $ 89,952,272 $104,400,000 (a) $148,204,184
(11,700,000)(b)
(248,088)(d)
(34,200,000)(f)
Accounts receivable, net........... 2,246,722 29,397,240 31,643,962 (29,397,240)(d) 8,446,722
6,200,000 (f)
Prepaid expenses................... -- 57,952 57,952 (57,952)(d) --
Inventory.......................... -- 1,883,011 1,883,011 (1,883,011)(d) 28,000,000
28,000,000 (f)
Other assets....................... 3,682,540 -- 3,682,540 -- 3,682,540
Due from affiliate................. 619,113 -- 619,113 -- 619,113
------------ ------------ ------------ ------------ ------------
Total current assets............... 96,252,559 31,586,291 127,838,850 61,113,709 188,952,559
------------ ------------ ------------ ------------ ------------
Other assets....................... 6,317,460 6,317,460 6,317,460
Intangible assets.................. 235,000 235,000 18,100,000 (e) 18,335,000
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS......................... $102,805,019 $ 31,586,291 $134,391,310 $ 79,213,709 $213,605,019
============ ============ ============ ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities................ $ 6,169,696 $ 11,940,865 $ 18,110,561 $(11,940,865)(d) $ 6,169,696
Other liabilities.................. -- 61,061,893 61,061,893 (61,061,893)(d) --
------------ ------------ ------------ ------------ ------------
Total liabilities.................. 6,169,696 73,002,758 79,172,454 (73,002,758) 6,169,696
------------ ------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Common stock....................... 220,644 -- 220,644 6,390 (a) 233,056
6,022 (c)
Paid-in capital.................... 103,829,400 -- 103,829,400 104,393,610 (a) 214,616,988
6,393,978 (c)
Accumulated deficit................ (7,414,721) -- (7,414,721) -- (7,414,721)
Owners' equity..................... -- (41,416,467) (41,416,467) 41,416,467 (d) --
------------ ------------ ------------ ------------ ------------
Total stockholders' equity......... 96,635,323 (41,416,467) 55,218,856 152,216,467 207,435,323
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' $102,805,019 $ 31,586,291 $134,391,310 $ 79,213,709 $213,605,019
EQUITY.............................
============ ============ ============ ============ ============
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
condensed financial statements.

F-3
<PAGE>
TNPC, INC.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
---------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------- ADJUSTMENTS COMBINED
TNPC, INC. COLUMBIA ----------- ------------
<S> <C> <C> <C> <C>
REVENUES
Power revenues............................. $ 1,317,028 $ 3,767,075 $ -- $ 5,084,103
Gas revenues............................... 809,449 59,660,155 -- 60,469,604
----------- ----------- ----------- ------------
TOTAL REVENUES............................... 2,126,477 63,427,230 -- 65,553,707
COST OF SALES
Power purchases............................ 1,055,410 3,430,115 -- 4,485,525
Gas purchases.............................. 728,734 53,173,107 -- 53,901,841
----------- ----------- ----------- ------------
TOTAL COST OF SALES.......................... 1,784,144 56,603,222 -- 58,387,366
----------- ----------- ----------- ------------
GROSS PROFIT................................. 342,333 6,824,008 -- 7,166,341
OPERATING EXPENSES........................... 8,956,043 6,850,907 1,508,334 (1) 17,315,284
----------- ----------- ----------- ------------
OPERATING LOSS............................... (8,613,710) (26,899) (1,508,334) (10,148,943)
INTEREST (INCOME) EXPENSE.................... (1,198,989) 630,391 (630,391)(2) (1,198,989)
----------- ----------- ----------- ------------
LOSS BEFORE INCOME TAXES..................... (7,414,721) (657,290) (877,943) (8,949,954)
PROVISION FOR INCOME TAXES................... -- -- -- --
----------- ----------- ----------- ------------
NET LOSS..................................... $(7,414,721) $ (657,290) $ (877,943) $ (8,949,954)
=========== =========== =========== ============
PRO FORMA BASIC AND DILUTIVE NET LOSS PER
COMMON SHARE............................... $ (0.34) $ (0.38)
WEIGHTED AVERAGE SHARES USED TO COMPUTE PRO
FORMA BASIC AND DILUTIVE NET LOSS PER
COMMON SHARE............................... 22,064,400 1,241,200 23,305,600
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
condensed financial statements.

F-4
<PAGE>
TNPC, INC.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ADJUSTMENTS COMBINED
TNPC, INC. COLUMBIA ----------- ------------
<S> <C> <C> <C> <C>
REVENUES
Power Revenues......................... $ 6,037,209 $ 15,377,650 $ -- $ 21,414,859
Gas Revenues........................... 1,800,878 91,292,672 -- 93,093,550
------------ ------------ ----------- ------------
TOTAL REVENUES........................... 7,838,087 106,670,322 -- 114,508,409

COST OF SALES
Power Purchases........................ 4,436,884 16,703,435 -- 21,140,319
Gas Purchases.......................... 1,311,355 92,993,164 -- 94,304,519
------------ ------------ ----------- ------------
TOTAL COST OF SALES...................... 5,748,239 109,696,599 -- 115,444,838
------------ ------------ ----------- ------------
GROSS PROFIT............................. 2,089,848 (3,026,277) -- (936,429)

OPERATING EXPENSES....................... 27,116,890 43,551,910 6,033,334 (1) 76,702,134
------------ ------------ ----------- ------------
OPERATING LOSS........................... (25,027,042) (46,578,187) (6,033,334) (77,638,563)

INTEREST INCOME.......................... (1,364,986) 1,364,986 (2) --
------------ ------------ ----------- ------------
LOSS BEFORE INCOME TAXES................. (25,027,042) (45,213,201) (7,398,320) (77,638,563)

PROVISION FOR INCOME TAXES............... -- --
------------ ------------ ----------- ------------
NET LOSS................................. $(25,027,042) $(45,213,201) $(7,398,320) $(77,638,563)
============ ============ =========== ============
PRO FORMA BASIC AND DILUTED NET LOSS PER
COMMON SHARE........................... $ (1.25) $ (3.66)

WEIGHTED AVERAGE SHARES USED TO COMPUTE
PRO FORMA BASIC AND DILUTED NET LOSS
PER COMMON SHARE....................... 20,000,000 1,241,200 21,241,200
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
condensed financial statements.

F-5
<PAGE>
TNPC, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

NOTE 1--CONTEMPLATED TRANSACTIONS

On June 29, 2000, TNPC signed a definitive agreement to acquire the customer
base and certain assets from subsidiaries of Columbia Energy Group ("Columbia"),
a retail provider of electricity and natural gas to residential and small
commercial customers in the United States. The acquisition will be accounted for
as a purchase. Total purchase consideration is expected to include
$11.7 million in cash and 602,200 shares of common stock of TNPC with an
estimated value of $6.4 million. Up to an additional $3.9 million of cash
consideration can be earned by Columbia if specified levels of customer
retention are maintained over the one year period from the closing of the
acquisition. The contingent consideration will be accrued in the period in which
it becomes probable and can be reasonably estimated. The accrual of contingent
consideration will increase the value of intangible assets acquired and the
related amortization subsequent to the settlement of the contingent liability.
The preliminary allocation of the purchase price is as follows:

<TABLE>
<CAPTION>
AMOUNT
<S> <C>
Non-Competition Agreement................................... $ 5,000,000
Use of Brands and Trademarks................................ 5,000,000
Customer List............................................... 8,100,000
-----------
Total Assets Acquired....................................... $18,100,000
===========
</TABLE>

Also on June 29, 2000, TNPC agreed to pay Columbia an estimated
$34.2 million for natural gas in storage and certain accounts receivable.

In July, 2000, TNPC signed subscription agreements to sell 9,070,800
Class A Warrants to purchase the non-voting common stock of TNPC and 639,000
shares of non-voting common stock of TNPC to a group of investors for
$104,400,000 in cash. As described in Note 2, an adjustment has been recorded to
the condensed pro forma balance sheet as of March 31, 2000 to reflect the
issuance of equity and receipt of cash.

NOTE 2--ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS

ADJUSTMENTS TO BALANCE SHEET

The following pro forma adjustments have been made to the historical
condensed balance sheet as if the Contemplated Transactions described in Note 1
were consummated as of the balance sheet date:

(a) To record the proceeds of the $104,400,000 private placement subscribed
in July 2000 including the issuance of 639,000 shares of non-voting
common stock of TNPC.

(b) To record the payment of $11,700,000 cash consideration pursuant to the
Columbia acquisition.

(c) To record the value of the 602,200 common shares of TNPC to be issued as
part of the consideration to acquire Columbia.

(d) To remove the effects of net assets of Columbia that are not to be
acquired by TNPC.

(e) To adjust the assets of Columbia to be acquired by TNPC to their
estimated fair market value at the date of acquisition.

(f) To record the $34,200,000 cash consideration pursuant to the acquisition
of natural gas in storage and accounts receivable from Columbia.

F-6
<PAGE>
TNPC, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)

ADJUSTMENTS TO STATEMENTS OF INCOME

The following pro forma adjustments have been made to the historical
condensed statements of income as if the Contemplated Transactions described in
Note 1 were consummated as of the beginning of the periods presented:

(1) To reflect the incremental amortization, on a straight-line basis, of
the intangible assets acquired from Columbia as follows:

<TABLE>
<S> <C>
Non-Competition Agreement.............. 3 years
Brands and Trademarks.................. 3 years
Customer List.......................... 3 years
</TABLE>

(2) To remove interest income or expense related to Columbia as related
assets and liabilities are not to be acquired by TNPC.

F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TNPC, Inc.,

After the stock split transaction discussed in Note 7 to TNPC Inc.'s
financial statements is effected, we expect to be in a position to render the
following audit report.

ARTHUR ANDERSEN LLP

HOUSTON, TEXAS
JULY 14, 2000

We have audited the accompanying balance sheets of TNPC, Inc., successor to
an operating unit of Enron Energy Services, LLC (EES) as of December 31 1998 and
1999, and the statements of operations, changes in owners' and stockholders'
equity, and cash flows for the period from May 1, 1997 through December 31, 1997
and the years ended December 31, 1998 and 1999 (see Note 1). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TNPC, Inc. as of
December 31, 1998 and 1999 and the results of its operations and its cash flows
for the period from May 1, 1997 through December 31, 1997 and the years ended
December 31, 1998 and 1999 in conformity with accounting principles generally
accepted in the United States.

F-8
<PAGE>
TNPC, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------- ---------------
1998 1999 2000
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ -- $ -- $ 89,704,184
Accounts receivable, net........................... 3,673,034 2,879,753 2,246,722
Stock subscription receivable...................... -- 100,000,000 --
Other assets....................................... -- 2,301,587 3,682,540
Due from affiliate................................. -- -- 619,113
---------- ------------ ------------
Total current assets............................... 3,673,034 105,181,340 96,252,559
---------- ------------ ------------
Other assets....................................... -- 7,698,413 6,317,460
Intangible assets.................................. -- 235,000 235,000
---------- ------------ ------------
TOTAL ASSETS......................................... $3,673,034 $113,114,753 $102,805,019
========== ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................... $2,086,605 $ 1,615,303 $ 2,127,391
Accrued liabilities................................ 30,702 215,194 42,305
Due to affiliate................................... 134,900 10,045,300 --
Other liabilities.................................. -- -- 4,000,000
---------- ------------ ------------
Total current liabilities.......................... 2,252,207 11,875,797 6,169,696
---------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock.................................... -- -- --
Common stock....................................... -- 200,000 220,644
Paid-in capital.................................... -- 101,038,956 103,829,400
Accumulated deficit................................ -- -- (7,414,721)
Owners' equity..................................... 1,420,827 -- --
---------- ------------ ------------
Total stockholders' equity......................... 1,420,827 101,238,956 96,635,323
---------- ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $3,673,034 $113,114,753 $102,805,019
========== ============ ============
</TABLE>

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

F-9
<PAGE>
TNPC, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
INCEPTION THREE MONTHS ENDED
MAY 1, 1997 TO YEARS ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------------- -------------------------
1997 1998 1999 1999 2000
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Power revenues............ $ -- $ 4,616,898 $ 6,037,209 $ 1,196,653 $ 1,317,028
Gas revenues.............. 765,673 2,407,079 1,800,878 967,375 809,449
------------ ------------ ------------ ----------- -----------
TOTAL REVENUES.............. 765,673 7,023,977 7,838,087 2,164,028 2,126,477

COST OF SALES
Power purchases........... -- 3,296,511 4,436,884 874,218 1,055,410
Gas purchases............. 631,663 1,382,766 1,311,355 639,381 728,734
------------ ------------ ------------ ----------- -----------
TOTAL COST OF SALES......... 631,663 4,679,277 5,748,239 1,513,599 1,784,144
------------ ------------ ------------ ----------- -----------
GROSS PROFIT................ 134,010 2,344,700 2,089,848 650,429 342,333
OPERATING EXPENSES.......... 19,502,950 19,685,903 27,116,890 4,086,247 8,956,043
------------ ------------ ------------ ----------- -----------
OPERATING LOSS.............. (19,368,940) (17,341,203) (25,027,042) (3,435,818) (8,613,710)
INTEREST INCOME............. -- -- -- -- (1,198,989)
------------ ------------ ------------ ----------- -----------
LOSS BEFORE INCOME TAXES.... (19,368,940) (17,341,203) (25,027,042) (3,435,818) (7,414,721)
PROVISION FOR INCOME
TAXES..................... -- -- -- -- --
------------ ------------ ------------ ----------- -----------
NET LOSS.................... $(19,368,940) $(17,341,203) $(25,027,042) $(3,435,818) $(7,414,721)
============ ============ ============ =========== ===========
BASIC AND DILUTED NET LOSS
PER COMMON SHARE.......... $ (1.25) $ (0.34)
WEIGHTED AVERAGE SHARES USED
TO COMPUTE BASIC AND
DILUTED NET LOSS PER
COMMON SHARE.............. 20,000,000 22,064,400
</TABLE>

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

F-10
<PAGE>
TNPC, INC.

STATEMENTS OF CHANGES IN OWNERS' AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
TOTAL OWNERS'
AND
COMMON OWNERS' ACCUMULATED STOCKHOLDERS'
SHARES STOCK PAID-IN CAPITAL EQUITY DEFICIT EQUITY
---------- -------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OWNERS' EQUITY, MAY 1,
1997................... -- $ -- $ -- $ -- $ -- $ --

Capital contribution--
EES.................. -- -- -- 19,480,381 -- 19,480,381

Net loss............... -- -- -- (19,368,940) -- (19,368,940)
---------- -------- ------------ ------------- ----------- ------------

OWNERS' EQUITY,
DECEMBER 31, 1997...... -- $ -- $ -- $ 111,441 $ -- $ 111,441

Capital contribution--
EES.................. -- -- -- 18,650,589 -- 18,650,589

Net loss............... -- -- -- (17,341,203) -- (17,341,203)
---------- -------- ------------ ------------- ----------- ------------

OWNERS' EQUITY,
DECEMBER 31, 1998...... -- $ -- $ -- $ 1,420,827 $ -- $ 1,420,827

Capital contribution--
EES.................. -- -- -- 16,610,171 -- 16,610,171

Net loss............... -- -- -- (25,027,042) -- (25,027,042)

Issuance of common
stock in connection
with incorporation... 200,000 2,000 (6,998,044) 6,996,044 -- --

Common stock and
warrants subscribed
in connection with
capitalization....... 19,800,000 198,000 108,037,000 -- -- 108,235,000
---------- -------- ------------ ------------- ----------- ------------

STOCKHOLDERS' EQUITY,
DECEMBER 31, 1999...... 20,000,000 $200,000 $101,038,956 $ -- $ -- $101,238,956

Issuance of common
stock (unaudited).... 2,064,400 20,644 (20,644) -- -- --

Capital contribution--
EES (unaudited)...... -- -- 2,811,088 -- -- 2,811,088

Net loss (unaudited)... -- -- -- -- (7,414,721) (7,414,721)
---------- -------- ------------ ------------- ----------- ------------

STOCKHOLDERS' EQUITY,
MARCH 31, 2000
(UNAUDITED)............ 22,064,400 $220,644 $103,829,400 $ -- $(7,414,721) $ 96,635,323
========== ======== ============ ============= =========== ============
</TABLE>

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

F-11
<PAGE>
TNPC, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
INCEPTION THREE MONTHS ENDED
MAY 1 TO YEARS ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, --------------------------- --------------------------
1997 1998 1999 1999 2000
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(19,368,940) $(17,341,203) $(25,027,042) $(3,435,818) $ (7,414,721)

Reconciliation of net loss to net cash
used by operating activities
(Increase) decrease in accounts
receivable....................... (427,979) (3,245,055) 793,281 417,899 633,031
Increase (decrease) in accounts
payable.......................... 104,150 1,982,455 (471,302) (287,735) 512,088
Increase (decrease) in accrued
liabilities...................... 15,788 14,914 184,492 5,186 (172,889)
Increase in other assets........... -- -- (10,000,000) -- --
Increase (decrease) in due to
affiliate........................ 196,600 (61,700) 9,910,400 (134,900) (10,664,413)
Non-cash compensation expenses..... -- -- 8,000,000 -- --
Increase in other liabilities...... -- -- -- -- 4,000,000
------------ ------------ ------------ ----------- ------------
NET CASH USED IN OPERATING
ACTIVITIES......................... (19,480,381) (18,650,589) (16,610,171) (3,435,368) (13,106,904)
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES... -- -- -- -- --
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock and warrants issued... -- -- -- -- 100,000,000
Contributions from EES............. 19,480,381 18,650,589 16,610,171 3,435,368 2,811,088
------------ ------------ ------------ ----------- ------------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES......................... 19,480,381 18,650,589 16,610,171 3,435,368 102,811,088
------------ ------------ ------------ ----------- ------------
INCREASE IN CASH AND CASH
EQUIVALENTS.......................... -- -- -- -- 89,704,184

CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR................................. -- -- -- -- --
------------ ------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, ENDING...... $ -- $ -- $ -- $ -- $ 89,704,184
============ ============ ============ =========== ============
</TABLE>

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

F-12
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND FORMATION

TNPC, Inc. ("TNPC"), formerly named EMW Energy Services Corp., is the
successor to an operating unit of Enron Energy Services, LLC ("EES") which is a
subsidiary of Enron Corp. ("Enron"). TNPC, generally through its subsidiary The
New Power Company, provides retail marketing and retail sales of natural gas and
electricity to residential customers in California and Ohio. TNPC is focusing
substantially all of its resources on expanding its current marketing efforts
from servicing regional markets to being recognized as a national retail
provider of energy to residential and small commercial customers as additional
markets continue to restructure the retail sale of energy.

NATURE OF OPERATIONS

TNPC is a new company with a limited operating history and an unproven
business model in the new and rapidly evolving restructured retail energy
markets. The development of TNPC's operations will depend upon, among other
things, favorable markets opening under viable competitive rules, TNPC's ability
to expand its customer base in initial markets and the ability to enter new
markets in a timely manner at reasonable costs. Only recently have a small
number of markets opened to competition under rules that management believes may
offer attractive competitive opportunities.

TNPC has incurred net losses since inception and management expects to
continue to incur losses for a significant period of time. TNPC's ability to
generate revenue is subject to uncertainty and TNPC intends to increase
operating expenses significantly to develop its business. TNPC's ability to
become profitable will depend on, among other things, it's ability to attract
and retain a critical mass of customers at a reasonable cost, to develop
internal corporate organization and systems, and to manage effectively its
energy requirements and sell its energy at a sufficient margin. TNPC is
currently in the process of developing and constructing billing, customer care,
internet website infrastructure and its marketing strategies.

Historically, TNPC has financed its activities through contributions from
EES and, after January 6, 2000, through private placements of its common stock
and warrants to purchase its common stock. As discussed below, TNPC was
capitalized in an initial private placement valued at $100 million and funding
was completed on January 6, 2000. As described in Notes 6 and 7, further private
placements of TNPC common stock and warrants were made in May 2000 and July 2000
valued at $10 million and $104.5 million, respectively. Other than certain
contributed services (see Note 3), EES will not continue to be a source of
capital to TNPC subsequent to an initial public offering ("IPO"). TNPC expects
to offer its securities in an IPO in the second half of 2000. TNPC management
believes it has adequate funding to sustain its operating needs for the year
2000. However, if TNPC's cash requirements prove to be greater than expected,
TNPC will need to obtain additional funding. TNPC cannot be certain that
additional financing can be obtained. TNPC's financial condition and business
may be materially adversely affected if additional capital is needed and cannot
be raised on acceptable terms.

CAPITALIZATION

TNPC was incorporated on November 17, 1999 in the state of Delaware at which
time 200,000 shares of common stock were issued to EES. TNPC was capitalized
(the "Capitalization") through the

F-13
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--ORGANIZATION AND FORMATION (CONTINUED)
contribution of certain assets by EES and a private placement to outside
investors, pursuant to an agreement executed on December 23, 1999, in which TNPC
received the following:

<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
<S> <C>
Subscriptions to Purchase Common Stock...................... $100,000,000
EES Residential Customer Base............................... --
EES Risk Management Software................................ 235,000
Other EES Agreements (Note 3)............................... --
------------
Total..................................................... $100,235,000
============
</TABLE>

The transfer of assets from EES has been accounted for at historical costs
as a reorganization of companies under common control in a manner similar to a
pooling-of-interests. Accordingly, all assets contributed by EES have been
recorded at their historical basis to EES. There was no historical recorded
basis related to EES' residential customer base or the other agreements it
contributed to TNPC.

For contributing its residential customer base, certain risk management
systems and regulatory, risk management, commodity service, and other agreements
to TNPC (see Note 3), EES subscribed to receive 14,800,000 shares of TNPC voting
common stock and Class A warrants to purchase 45,000,000 shares of non-voting
TNPC common stock. EES contributed 5,000,000 of its shares of TNPC's common
stock to an affiliated limited liability company ("LLC"). The LLC is owned by
EES and a limited partner, whose general partner is an executive of Enron.

For their agreement to contribute $100,000,000 of cash to TNPC, other
investors subscribed to receive 5,000,000 shares of TNPC common stock and
Class A warrants to purchase 15,000,000 shares of non-voting TNPC common stock
and Class B warrants to purchase 10,322,800 shares of non-voting TNPC common
stock.

Also in connection with services performed related to the initial private
placement, an executive of EES was granted the right to receive 2,064,400 shares
of non-voting TNPC common stock. The shares issuable under this agreement were
valued at $8.0 million based on their fair market value as of the date of grant.
Operating expenses in 1999 include an $8.0 million expense attributable to the
granting of these shares and the fair value of the shares is reflected at
December 31, 1999 as a component of additional paid-in capital.

Funding of the private placement was completed on January 6, 2000 and all of
the subscribed shares and subscribed Class A and Class B warrants were issued.

In June 2000 EMW Energy Services Corp. changed its name to TNPC, Inc., a
Delaware corporation.

In July 2000, TNPC signed subscription agreements to sell 9,070,800 Class A
Warrants to purchase the non-voting common stock of TNPC and 639,000 shares of
non-voting common stock of TNPC to a group of investors for $104,400,000 in
cash. A limited partnership, whose general partner is an executive of Enron,
subscribed to purchase 4,651,600 Class A Warrants for $50,000,000 in cash.

F-14
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The financial statements present the balance sheets, statements of
operations, statements of changes in owners' and stockholders' equity and cash
flows applicable to operations related to the residential customers contributed
by EES. The underlying data for the financial statements has been derived from
the books and records of EES.

Prior to the Capitalization, TNPC did not maintain corporate treasury,
accounting, tax, purchasing and other similar corporate support functions. For
purposes of preparing the accompanying financial statements, certain EES
corporate costs were allocated to TNPC using the allocation method described in
Note 3.

OWNERS' AND STOCKHOLDERS' EQUITY

Prior to the Capitalization, owners' equity represents the cumulative net
investment of EES in the operations of TNPC. Upon Capitalization, the EES
cumulative net investment at December 31, 1999 was reclassified into paid-in
capital.

As of December 31, 1999 TNPC had authorized (a) 200,000,000 shares of voting
Common Stock, $.01 par value, 200,000 of which were outstanding and 19,800,000
of which were subscribed, (b) 200,000,000 shares of non-voting common stock, of
which none were issued or outstanding and (c) 50,000 shares of Preferred Stock,
$.01 par value, no shares issued or outstanding.

TNPC also issued Class A and Class B warrants to purchase the common stock
of TNPC in connection with the Capitalization. The Class A warrants allow the
purchase of 60,000,000 shares of non-voting common stock of TNPC at an exercise
price of $0.05 per share, exercisable over a five-year period beginning
December 31, 2000. The Class B warrants allow the purchase of 10,322,800 shares
of non-voting common stock of TNPC at a predetermined exercise price per share,
exercisable over a five-year period beginning December 31, 2000. If TNPC
consummates an IPO of its common stock prior to December 31, 2000, the exercise
price of the Class B warrants shall be automatically adjusted, as of the IPO
date, to be the greater of: i) the exercise price in effect immediately
preceding the IPO, or ii) 50% of the IPO price per common share; provided
however that the exercise price will not exceed two times the exercise price
noted in effect immediately preceding the IPO. Upon consummation of an IPO, the
Class B warrants will be subject to mandatory cashless exercise.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited interim financial statements of TNPC as of and for each of the
three month periods ended March 31, 2000 and 1999, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In our opinion, the unaudited interim financial statements contain all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation.

F-15
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining TNPC's assets, liabilities, revenues, and expenses.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

TNPC considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. The recorded carrying amounts of
TNPC's cash and cash equivalents approximate their fair market value.

INCOME TAXES

Prior to the Capitalization, TNPC was not a separate taxable entity for
federal, state or local income tax purposes. Its results of operations were
included in Enron's consolidated federal and state returns. If TNPC's separately
stated tax provision had been prepared in accordance with Statements of
Financial Accounting Standards ("SFAS") No. 109--"Accounting for Income Taxes,"
no tax benefit for TNPC's net operating losses would have been recognized. These
statements reflect the separate return basis approach for all years and periods
prior to the Capitalization.

For years and periods subsequent to the Capitalization, TNPC is no longer a
part of a consolidated tax return and will file a separate tax return.

Deferred taxes result from differences arising between the financial and tax
bases of TNPC's assets and liabilities and are adjusted for changes in tax rates
and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized by TNPC.

STOCK-BASED COMPENSATION

TNPC accounts for stock-based compensation arrangements in accordance with
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees.

REVENUE RECOGNITION

TNPC recognizes revenue for the sale of electricity or natural gas once the
commodity has been delivered to a customer. No revenues or cost of sales are
recorded related to transmission and delivery of the commodities as the
regulations regarding energy service providers in the markets where TNPC has
historically operated are structured such that TNPC does not take risk of loss
for transmission and delivery.

NET LOSS PER COMMON SHARE

TNPC was not a separate legal entity for substantially all of the periods
presented and has no historical capital structure. Therefore, historical
earnings per share prior to 1999 have not been presented in the financial
statements. Net loss per common share for the year ended December 31, 1999 was
determined by dividing net loss by the common shares, of which 200,000 shares
were outstanding and 19,800,000 shares were subscribed at December 31, 1999.
Common equivalent shares

F-16
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
related to stock options and warrants are excluded from the calculation as their
effect is antidilutive. Accordingly, basic and diluted loss per common share are
equivalent.

SEGMENT INFORMATION

TNPC is organized and managed in one operating segment that provides retail
marketing and retail sales of natural gas and electricity to residential
customers in the United States.

CERTAIN RISKS AND CONCENTRATIONS

TNPC sells its energy services to residential customers in the United
States. Reserves are maintained for credit losses. At December 31, 1998 and
1999, and March 31, 2000 the allowance for doubtful accounts was $75,000,
$67,000, and $50,000 (unaudited), respectively.

TNPC's business is subject to many risks and uncertainties including
dependence on favorable regulatory developments, dependence on services provided
by third parties, potential conflicts of interest with principal stockholders,
substantial fluctuations in energy commodity prices, growth and commercial
acceptance of the Internet, activities of competitors, dependence on key
personnel and limited operating history.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.

SFAS No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. A company may also implement the statement as of the beginning of
any fiscal quarter after issuance; however, SFAS No. 133 cannot be applied
retroactively. TNPC will adopt SFAS No. 133 in the first quarter of 2001.
Management believes that SFAS No. 133 will not have a material effect on TNPC's
accounting for price risk management activities.

NOTE 3--RELATED PARTY TRANSACTIONS

MASTER SERVICES AGREEMENT

In connection with the Capitalization, TNPC entered into a Master Services
Agreement ("MSA") with Enron and EES pursuant to which Enron and EES have agreed
to provide TNPC with certain administrative and risk management services over
various time periods. In particular, EES has agreed to provide TNPC with risk
management consulting and hedging services at no charge until January 6, 2001.
TNPC has the option to continue using EES as their provider for these services
after January 6, 2001 for up to three years on such terms and for such fees
payable to EES as shall be mutually agreed.

F-17
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--RELATED PARTY TRANSACTIONS (CONTINUED)
Enron has also agreed to provide certain basic services of its Government
Affairs department at no charge until January 6, 2003 to handle various
government regulatory and legislative issues and activities that may confront
TNPC. Enron's Government Affairs department will also handle specific requests
not included among the basic services provided under TNPC's standard service
agreement for such fees as shall be mutually agreed. Enron and EES have also
agreed to provide TNPC with general corporate services such as facility
maintenance and human resources support at no charge until October 6, 2000.
Finally, Enron and EES have contributed the services of certain of their
employees until July 6, 2000 to work on a full-time basis to handle general
administrative services, on TNPC's behalf. TNPC will reimburse Enron and EES for
their costs associated with these employees. As part of the Capitalization,
Enron agreed to continue to service, on TNPC's behalf, the natural gas and
electricity customers to be transferred to TNPC when TNPC receives necessary
regulatory permits. Prior to that time, the economic benefits and burdens of
these contracts are to be transferred to TNPC.

TNPC has the option to discontinue any of the services provided by Enron and
EES upon thirty days prior written notice. The MSA does not require that TNPC
contract exclusively with Enron and EES and does not require that TNPC continue
to use some or all of the services in the future.

ALLOCATED COSTS

As discussed in Note 2, the financial statements of TNPC reflect certain
allocated operating expenses from EES and Enron. Such allocations and charges
are based on a percentage of total operating expenses for the services provided,
based on factors such as headcount or the specific level of activity directly
related to such costs. For the period from May 1, 1997 through December 31, 1997
and the years ended December 31, 1998 and 1999, approximately $12,865,000,
$7,506,000 and $13,249,000, respectively, of general and administrative costs
were allocated to TNPC.

For the three months ended March 31, 1999 and 2000, $3,405,121 (unaudited),
respectively, and $1,457,638 (unaudited), respectively of operating expenses
were incurred by EES and Enron on behalf of TNPC. These costs relate to general
corporate support such as accounting and treasury and certain costs incurred
under the MSA for which EES and Enron will not be reimbursed by TNPC. These
costs have been recorded as operating expenses by TNPC and reflected in the
statement of owners' and stockholders' equity as paid-in capital from EES.

Management believes that the allocation methods used are reasonable and
reflective of TNPC's proportionate share of such expenses and are not materially
different from those that would have been incurred on a stand-alone basis.

PURCHASES

EES provided TNPC with all of its natural gas and power supply for each
period presented. The purchases were priced at an index price adjusted to
reflect the point of delivery of the commodity.

All purchases and sales of commodity products are based upon physical
transactions. TNPC does not presently utilize commodity derivative instruments;
however, on a portfolio basis, EES utilized such instruments in its commodity
purchase and sale activities. The effects of such usage is not included in the
cost of sales to TNPC.

F-18
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--RELATED PARTY TRANSACTIONS (CONTINUED)
COMMODITY SUPPLY AGREEMENTS

TNPC entered into a Master Energy Purchase and Sale Agreement (the
"Electricity Agreement") effective as of January 6, 2000 with Enron Energy
Services, Inc. ("EESI"), a subsidiary of EES, which provides TNPC the ability to
purchase up to an aggregate of 2,000,000 kWs of electric power per hour from
EESI on either an interruptible or firm basis. TNPC has also entered into a
Master Purchase and Sales Agreement (the "Gas Agreement") effective as of
January 6, 2000 with EESI which provides TNPC the ability to purchase up to an
aggregate of 800,000 MMBtus of natural gas per day from EESI on either an
interruptible or firm basis. Neither the Electricity Agreement nor the Gas
Agreement obligates TNPC to purchase commodities from EESI. Under both the
Electricity Agreement and the Gas Agreement, TNPC has the option to purchase
forward quantities of the applicable commodity at either EESI's intra-day
wholesale sales price or their wholesale sales price at the close of business on
the day of TNPC's purchase request based on specified indices. This wholesale
sales price will be adjusted for applicable load shape, locational basis and, in
the case of electric power, service delivery voltage, but such adjustments do
not include any premiums for small quantity, odd lot or liquidity. Under both
the Electricity Agreement and the Gas Agreement, TNPC also has the option to
make spot purchases during any month at EESI's then current intra-day wholesale
sales price, subject to the same adjustments set forth above.

Upon the earlier to occur of TNPC's first commodity purchase under the
agreements or December 31, 2000, EESI will provide TNPC certain management
services, including load forecasting, scheduling, imbalance management invoicing
and, in the case of the Gas Agreement, nominating and position reporting at no
cost for a period of six months. At the end of that six month period, TNPC may
elect to continue receiving some or all of these services at specified costs set
forth in the Electricity Agreement or the Gas Agreement, as applicable, until
the ultimate termination of that agreement.

The Electricity Agreement and the Gas Agreement are each effective until
January 2002, but TNPC has the option to extend the term of each agreement until
January 2004.

NON-COMPETITION AGREEMENT

TNPC has entered into a non-competition agreement with Enron and EES
pursuant to which Enron and EES have agreed not to engage in certain activities
related to the retail sale of natural gas or electricity to residential
customers until January 6, 2005. The non-competition agreement may be terminated
at any time between January 6, 2003 and January 6, 2005 if Enron and its
controlled affiliates (including EES) own less than 15% of TNPC's common stock
on a fully-diluted basis and less than 15% of TNPC's directors are affiliated
with Enron or its controlled affiliates. The non-competition agreement will also
terminate immediately in the event of specified change of control transactions
relating to Enron. In addition, the non-competition agreement will terminate
immediately as to EES if EES is no longer a controlled affiliate of Enron and
all of TNPC's common stock held by EES is transferred to Enron or one or more
controlled affiliates of Enron.

SOFTWARE AGREEMENT

As part of the Capitalization, TNPC entered into a software agreement with
EES whereby EES assigned to TNPC a joint and equal interest in and to specified
risk management software and

F-19
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--RELATED PARTY TRANSACTIONS (CONTINUED)
documentation, including source code and any intellectual property rights (other
than trademark-related rights) in and to software and related documentation.

EES is obligated to provide maintenance and support services to TNPC for the
software until October 6, 2000. On this date, TNPC will have the option to
request that EES deliver a copy of the then-current version of the software.
Thereafter, EES is obligated to offer to provide maintenance and support
services to TNPC for three years on commercially reasonable terms at least as
favorable as those offered by EES to other non-affiliated software customers.

NOTE 4--FINANCIAL INSTRUMENTS

Historically, market risks have been monitored by a risk control group,
operating separately from the units that create or actively manage these risk
exposures, to ensure compliance with Enron's stated risk management policies at
both the parent and subsidiary levels.

CREDIT RISK

Credit risk relates to the risk of loss that TNPC would incur as a result of
nonperformance by counterparties pursuant to the terms of their contractual
obligations. Historically, EES maintained credit policies with regard to its
counterparties that management believes significantly minimized its overall
credit risk.

NOTE 5--FEDERAL INCOME TAXES

TNPC incurred losses for tax purposes from inception through the
Capitalization that were reported and included in the consolidated Enron group.
The tax losses incurred prior to December 23, 1999 do not carry over to TNPC. No
provision for income taxes has been recorded to reflect any benefits received
resulting from the utilization of the prior losses. As a result, only losses
incurred from December 23, 1999 are available to TNPC as a net operating loss
carryforward to reduce taxes payable on future income.

DEFERRED INCOME TAXES

The principal components of TNPC's deferred income tax liability at
December 31, 1998 and 1999 and March 31, 2000 reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax reporting. The
major types of deferred income tax assets and liabilities are depreciation,
amortization and other deferred debits and credits. A valuation allowance was
provided to completely reserve all deferred tax assets due to the uncertainty of
future taxable income.

As of March 31, 2000, deferred tax assets related to losses incurred since
the Capitalization have been fully reserved with a valuation allowance due to
the uncertainty of future taxable income.

NOTE 6--COMMITMENTS AND CONTINGENCIES

INTERACTIVE MARKETING AGREEMENT

In November 1999, TNPC entered into a marketing agreement with America
Online ("AOL") which gives TNPC exclusive rights to market energy products
directly to consumers through AOL's

F-20
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--COMMITMENTS AND CONTINGENCIES (CONTINUED)
online system. The agreement is for a term of six years ending November 2005 and
requires variable semi-annual payments aggregating $49,000,000. EES paid
$10,000,000 related to this agreement on behalf of TNPC during 1999. Such
amount, which was repaid in January 2000, is reflected in the accompanying
balance sheet as other assets and amount due to affiliate at December 31, 1999.
TNPC will record this amount as expense over the period access is provided to
AOL's online system, which is expected to commence in August 2000. Future
payments will be expensed over the period in which access is provided to AOL's
online system. TNPC will be required to issue up to approximately 2,580,600
shares of its common stock to AOL if certain levels of customer acquisition are
achieved. As the shares are earned by AOL, TNPC will record an operating expense
equal to the fair value of the shares earned during a specific period. No shares
have been earned or issued as of December 31, 1999 or March 31, 2000
(unaudited). Additionally, if total customer acquisition from the agreement
exceeds a pre-determined threshold, TNPC will pay AOL a cash payment based on
the excess number of customers over the specified threshold at a pre-determined
rate per customer.

OUTSOURCING AGREEMENT

TNPC has entered into a services agreement with International Business
Machines Corporation ("IBM"), pursuant to which IBM will provide TNPC with
certain systems integration services and other services relating to customer
acquisition, customer care and revenue management over a ten-year term. The
agreement provides for a combination of fixed and variable fees. The aggregate
systems integration services are estimated to be between $65 and $75 million, of
which approximately $10 million will be capitalized. The agreement generally
provides that IBM will be the exclusive provider of most of TNPC's revenue
management and customer care services, but allows TNPC to procure third party
services under certain circumstances.

In addition to the services agreement, TNPC has entered into a subscription
agreement with IBM pursuant to which IBM agreed to purchase shares of TNPC's
common stock. First, IBM agreed to purchase 1,100,400 shares of TNPC's common
stock in exchange for $10,000,000, payable in equal installments on May 31, 2000
and September 29, 2000. Second, IBM agreed to purchase $5,000,000 of TNPC's
common stock on December 29, 2000 at one-half the price per share in TNPC's
initial public offering of shares. Finally, IBM agreed to purchase shares of
TNPC's common stock on December 31, 2001 at the average daily closing price of
TNPC's common stock on the New York Stock Exchange for the twenty trading days
prior to December 31, 2001 in exchange for $5,000,000, as long as such average
exceeds 50% of the price per share in the IPO.

LITIGATION

In February 2000, EES entered into a final judgement and permanent
injunction with the State of California to settle allegations that EES had
violated laws relating to advertising directed to residential consumers for
sales of electric power in 1997 and 1998. The injunction enjoins EES (and all
persons, corporations, successors, assigns or other entities acting by, through
or under or on behalf of or acting in concert with or participating with EES)
from violating such rules with respect to the sale of Enron branded electricity
to California residential customers. The injunction imposes procedural
disadvantages with respect to the covered parties for any future violations of
the injunction, and EES was required to make certain monetary payments. TNPC
does not intend to market or sell electricity under an Enron brand in
California, and therefore, although the injunction may technically apply to
TNPC, TNPC does

F-21
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--COMMITMENTS AND CONTINGENCIES (CONTINUED)
not believe it will have any practical application to TNPC. Accordingly, in the
opinion of management, such injunction will have no effects on the financial
position or results of operations of TNPC.

In October 1999, EES entered into a consent order with the New Jersey
Division of Consumer Affairs and Board of Public Utilities to settle allegations
that an independent marketing company retained by EES had violated marketing
practice rules for retail natural gas sales. The consent order did not
constitute a finding that Enron or its affiliates had engaged in any wrongdoing.
The consent order required monetary payments and an agreement to adopt policies
relating to compliance with marketing rules. Accordingly, in the opinion of
management, such injunction will have no effects on the financial position or
results of operations of TNPC.

At December 31, 1999, TNPC was engaged in routine disputes and litigation
arising in the ordinary course of business. In the opinion of management, the
ultimate liability thereunder, if any, will not have a material adverse effect
on the financial position or results of TNPC.

NOTE 7--SUBSEQUENT EVENTS (UNAUDITED)

On June 29, 2000, TNPC signed a definitive agreement to acquire the customer
base and certain assets of the Columbia Energy Mass Markets Business Segment
("Columbia"), a retail provider of electricity and natural gas to residential
and small commercial customers in the United States. The acquisition will be
accounted for as a purchase. Total purchase consideration is expected to include
$11.7 million in cash and 602,200 shares of common stock of TNPC with an
estimated value of $6.4 million. Up to an additional $3.9 million of cash
consideration can be earned by Columbia if specified levels of customer
retention are maintained over the one-year period from the closing of the
acquisition. The contingent consideration will be accrued in the period in which
it becomes probable and can be reasonably estimated. The accrual of contingent
consideration will increase the value of intangible assets acquired and the
related amortization subsequent to the settlement of the contingent liability.
The preliminary allocation of the purchase price is as follows:

Also on June 29, 2000, TNPC agreed to pay Columbia an estimated
$34.2 million for natural gas in storage and certain accounts receivable.

The following unaudited pro forma condensed financial information for the
year ended December 31, 1999 and the three month period ended March 31, 2000 is
presented to show the results of TNPC as if the acquisition from Columbia
occurred at the beginning of the periods presented. The pro forma results
include certain adjustments, including increased amortization related to
intangibles,

F-22
<PAGE>
TNPC, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
and are not necessarily indicative of what the results would have been had the
transaction actually occurred on the aforementioned dates.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
(UNAUDITED)
<S> <C> <C>
Revenues.......................................... $114,508,409 $65,553,707
Gross Profit...................................... $ (936,429) $ 7,166,341
Net Loss.......................................... $(77,638,563) $(8,949,954)
Basic and diluted loss per share.................. $ (3.66) $ (0.38)
</TABLE>

2000 STOCK PLAN

TNPC plans to adopt the 2000 Stock Plan (the "Plan"). The Plan will allow
TNPC, through a committee of TNPC's board of directors (the "Committee"), to
grant options or restricted stock to employees, board members and service
providers. A total of up to 15,483,800 shares may be issued under the plan and
no single optionee may be granted more than 3,000,000 shares in any calendar
year. The exercise price for options granted under the plan, as determined by
the Committee, will be no less than market value of the TNPC common stock on the
date the option is granted. The term of exercise for options granted under the
plan will generally be ten years from the effective date of the option
agreement. The plan has a term of ten years. During the three months ended March
31, 2000, TNPC granted options to purchase 1,016,600 shares under the plan at a
price of $3.88 per share based on the value of the private placement closed in
January 2000 and described in Note 1. Grants subsequent to March 31, 2000
include options to purchase 300,000 shares of common stock at an exercise price
of $3.88 per share, options to purchase 1,510,000 shares of common stock at an
exercise price of $9.69 per share based on the value of a May 2000 private sale
of common stock, and options to purchase 4,776,400 shares of common stock at the
initial public offering price.

EMPLOYMENT AGREEMENTS

During 2000 TNPC has entered into employment agreements with its key
executives. As part of these arrangements the employees will receive salaries,
performance bonuses, options to purchase common stock of TNPC under the Plan and
certain executives will receive compensation from TNPC to make them whole for
equity interests in their former employer which they forfeited to join TNPC.
During the period ended March 31, 2000, a charge of $4,000,000 has been recorded
to operating expenses and reflected as an other current liability related to
arrangements under the make whole provisions of the employment agreements.

STOCK SPLIT

Subsequent to March 31, 2000, TNPC's board of directors elected to amend
TNPC's Certificate of Incorporation to increase the number of authorized common
shares from 2,000,000 to 500,000,000 and is currently effecting a 200 for 1
split of its common stock. All share and per share information herein has been
retroactively restated as if the split occurred as of the earliest date
presented.

F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Columbia Energy Group:

We have audited the accompanying balance sheets of Columbia Energy Mass
Markets Business Segment (the Company), a business operation of Columbia Energy
Group, as of December 31, 1998 and 1999, and the related statements of income,
changes in segment equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

As discussed in Note 1 to the financial statements, the accompanying
financial statements represent the retail gas and electric marketing operations
of Columbia Energy Group, as represented by the operations of Columbia Energy
Retail Corporation and the electric retail operations of Columbia Energy Power
Marketing Corporation as reflected in the books and records of such operations
during the periods presented.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Columbia Energy Mass Markets
Business Segment as of December 31, 1998 and 1999 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred recurring
losses and negative cash flows from operations since its inception in 1998 and
has a net capital deficiency that raises substantial doubt about its ability to
continue as a going concern (see Note 7 to the financial statements). The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

ARTHUR ANDERSEN LLP

New York, New York
June 12, 2000
(except with respect to Note 7,
which date is June 29, 2000).

F-24
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------- ----------------
1998 1999 2000
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ -- $ 186,577 $ 248,088
Accounts receivable............................... 11,613,104 25,603,139 29,397,240
Storage inventory and imbalances.................. 8,857,735 23,813,586 1,883,011
Prepayments....................................... 479,027 50,692 57,952
------------ ------------ ------------
Total current assets................................ 20,949,866 49,653,994 31,586,291

Property, plant & equipment, net.................... 5,233,789 27,130 --
------------ ------------ ------------
Total assets........................................ $ 26,183,655 $ 49,681,124 $ 31,586,291
============ ============ ============

LIABILITIES AND SEGMENT EQUITY
CURRENT LIABILITIES:
Accounts payable trade............................ $ 1,028,193 $ 1,580,647 $ 10,742,362
Accrued expenses.................................. 2,194,120 3,274,826 898,503
Other current liabilities......................... -- 750,000 300,000
------------ ------------ ------------
Total current liabilities........................... 3,222,313 5,605,473 11,940,865
------------ ------------ ------------
Due to affiliates................................... 38,507,318 84,834,828 61,061,893
Total liabilities................................... 41,729,631 90,440,301 73,002,758
Segment equity...................................... (15,545,976) (40,759,177) (41,416,467)
------------ ------------ ------------
Total liabilities and segment equity................ $ 26,183,655 $ 49,681,124 $ 31,586,291
============ ============ ============
</TABLE>

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

F-25
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------- ----------------------------
1998 1999 1999 2000
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Gas sales............................. $ 27,856,624 $ 91,292,672 $ 37,508,221 $59,660,155
Power sales........................... -- 15,377,650 138,763 3,767,075
------------ ------------ ------------ -----------
Total revenue........................... 27,856,624 106,670,322 37,646,984 63,427,230

Cost of sales:
Gas purchases......................... 25,165,401 92,993,164 36,154,807 53,173,107
Power purchases....................... -- 16,703,435 542,612 3,430,115
------------ ------------ ------------ -----------
Total cost of sales..................... 25,165,401 109,696,599 36,697,419 56,603,222
------------ ------------ ------------ -----------
Gross margin............................ 2,691,223 (3,026,277) 949,565 6,824,008

Operating expenses
General & administrative.............. 17,605,604 31,385,834 8,171,503 3,857,492
Bad debt expense...................... 435,835 5,501,699 2,723,533 2,966,285
Depreciation & amortization........... 195,760 6,664,377 295,138 27,130
------------ ------------ ------------ -----------
Total operating expenses................ 18,237,199 43,551,910 11,190,174 6,850,907

Operating loss.......................... (15,545,976) (46,578,187) (10,240,609) (26,899)
Interest (income) expense (Note 3).... -- (1,364,986) (297,291) 630,391
------------ ------------ ------------ -----------
Net loss................................ $(15,545,976) $(45,213,201) $ (9,943,318) $ (657,290)
============ ============ ============ ===========
</TABLE>

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

F-26
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT
STATEMENTS OF CHANGES IN SEGMENT EQUITY

<TABLE>
<S> <C>
Balance, January 1, 1998.................................... $ --
Net loss for 1998........................................... (15,545,976)
------------
Balance, December 31, 1998.................................. $(15,545,976)
Capital contribution........................................ 20,000,000
Net loss for 1999........................................... (45,213,201)
------------
Balance, December 31, 1999.................................. $(40,759,177)
Net loss for the period ended March 31, 2000 (unaudited).... (657,290)
------------
Balance, March 31, 2000 (unaudited)......................... $(41,416,467)
============
</TABLE>

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

F-27
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------- -----------------------------
1998 1999 1999 2000
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................... $(15,545,976) $(45,213,201) $ (9,943,318) $ (657,290)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Depreciation and amortization........ 195,760 6,664,377 295,138 27,130
Changes in operating assets and
liabilities:
Accounts receivable................ (11,613,104) (13,990,035) (10,965,589) (3,794,101)
Inventories........................ (8,857,735) (14,955,851) 7,656,803 21,930,575
Prepaid expenses................... (479,027) 428,335 479,027 (7,260)
Accounts payable................... 1,028,193 552,454 2,234,952 9,161,715
Accrued expenses................... 2,194,120 1,080,706 (170,269) (2,376,323)
Other liabilities.................. -- 750,000 -- (450,000)
------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities........... (33,077,769) (64,683,215) (10,413,256) 23,834,446
------------ ------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures................. (5,429,549) (1,457,718) (577,910) --
------------ ------------ ------------ ------------
Net cash used in investing
activities..................... (5,429,549) (1,457,718) (577,909) --
------------ ------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany accounts payable........ 38,507,318 46,327,510 (8,810,867) (23,772,935)
Capital Contribution................. -- 20,000,000 20,000,000 --
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities........... 38,507,318 66,327,510 11,189,133 (23,772,935)
------------ ------------ ------------ ------------
CHANGE IN CASH......................... -- 186,577 197,968 61,511
CASH, beginning of year................ -- -- -- 186,577
------------ ------------ ------------ ------------
CASH, end of year...................... $ -- $ 186,577 $ 197,968 $ 248,088
============ ============ ============ ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest........................... $ -- $ -- $ -- $ 630,391
Income taxes....................... $ -- $ -- $ -- $ --
</TABLE>

The accompanying notes are an integral part of these financial statements

F-28
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Columbia Energy Mass Markets Business Segment is comprised of Columbia
Energy Retail Corporation (CERC) and the residential and small commercial
electric business of Columbia Energy Power Marketing Corporation (CPM)
(collectively referred to as the "Company"). Both CERC and CPM are presently
separate legal entities. CERC provides service to retail customers only, while
CPM serves retail and wholesale customers. As noted, the accompanying financial
statements reflect all the operations of CERC and only the retail operations of
CPM. Both CERC and CPM are wholly-owned subsidiaries of Columbia Energy Services
("CES"). CES is a wholly-owned subsidiary of Columbia Energy Group ("Columbia").
The Company provides retail marketing and retail sales of natural gas and
electricity to residential and small commercial customers in the United States,
generally pursuant to "customer choice" programs. All gas is acquired from
affiliates. Electricity was acquired from unaffiliated third parties for
participation in PECO Energy Company's electric customer choice program in
Pennsylvania. For financial reporting purposes, the Company's operations
commenced on January 1, 1998. The accompanying financial statements represent
the assets, liabilities, revenues and expenses of the Company as reflected in
its books and records during such periods. Separate books and records were
maintained for CERC. CPM's books and records included both retail and wholesale
operations. However, the retail sales and purchases, accounts receivable and
accounts payable were specifically identified in the accounting records. Total
Company sales for CPM approximated $1 billion for 1999.

In 1999, CES made a $20,000,000 investment in the Company, which has been
reflected in Segment Equity in the accompanying financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

As noted, the accompanying financial statements reflect the financial
position, results of operations, cash flows and changes in segment equity
applicable to the operations of the Company. The financial statements are
derived from the historical books and records of the Company. These financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States.

The Company does not maintain corporate treasury, legal, tax, purchasing and
other similar corporate support functions. Certain corporate costs were
allocated to the Company as discussed in Note 3.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Because of the use of estimates is inherent in the
financial reporting process, actual results could differ from those estimates.

INVENTORIES

Inventories represent natural gas in storage, and are stated at the lower of
cost or market. The Company continually assesses the appropriateness of the
inventory valuations.

F-29
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment generally represent computer equipment, office
furniture and fixtures and are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the respective assets.

REVENUE RECOGNITION

The Company recognizes revenue when the natural gas or electricity has been
delivered to its customer.

ADVERTISING COSTS

Advertising costs are expensed as incurred.

INCOME TAXES

The Company is not a separate taxable entity for federal income tax
purposes. Its results of operations are included in the consolidated Columbia
federal income tax returns. Pursuant to a tax sharing agreement with Columbia,
the Company will receive the benefit of its income tax losses when such losses
are realized by the Company on a separate return basis. Management believes that
realization of such losses is not likely, and therefore a valuation allowance
has been recorded.

SEGMENT INFORMATION

The Company is organized and managed as one operating segment that provides
retail marketing and retail sales of natural gas and electricity to residential
and small commercial customers.

RISK MANAGEMENT ACTIVITIES

Through December 31, 1999, all purchases and sales of commodity products
were based upon physical transactions. The Company did not utilize commodity
derivative instruments; however, CES-Wholesale utilized such instruments in its
gas purchase activities, and consequently, the effects of such usage is included
in the transfer price of gas to the Company (see Note 3). As of January 1, 2000,
the Company began utilizing swap instruments to hedge natural gas commodity and
basis exposure risk associated with its fixed price contracts (see Note 6). In
these swap instruments the Company pays the counter-parties the amount by which
the floating variable price (settlement price) is below the fixed swap price and
receives the amount by which the settlement price exceeds the fixed swap price.
The results of the swap transactions will be included in income when the related
purchase of gas occurs and will generally result in a realized margin
represented by the difference between the fixed sales price and the fixed swap
price.

The following table sets forth selected financial data associated with the
Company's swap transactions outstanding at March 31, 2000 (unaudited):

<TABLE>
<CAPTION>
TYPE OF CONTRACT FISCAL YEAR FIXED PRICE VOLUME FAIR
VALUE OF MATURITY PER DTH (DTH) ($000)
---------------- ----------- ----------- ---------- ------
<S> <C> <C> <C> <C>
Swaps-Commodity 2000-2001 $ 2.557 21,118,000 9,235
Swaps-Basis 2000-2001 $ 0.238 11,967,000 (1,025)
</TABLE>

The fair values shown in the above table represent the amounts the Company
would have received or paid if it had closed the derivative positions on March
31, 2000.

F-30
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING REQUIREMENTS

In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. The Company
believes that SFAS No. 133 will not have a material impact on its financial
statements.

3. RELATED PARTY TRANSACTIONS

CES and Columbia perform certain administrative services for the benefit of
the Company including Senior Executive oversight, Human Resource administration,
Legal, Information Technology, Internal Audit and Business Development.
Depending on the nature of the services provided, the costs are either directly
related or allocated. Such costs were $2,552,000 and $6,905,000 in 1998 and
1999, respectively, and are included in general and administrative expenses. No
allocations of general and administrative costs were made from CPM to the retail
operation as any such allocations would have been insignificant.

As noted, during 1998 and 1999, CES provided the Company with 100% of its
natural gas supply, as well as certain commodity management and risk management
services.

The cost of purchases from affiliates were:

<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
CES-Wholesale:
Natural Gas...................................... $25,165,401 $92,982,717
Inventory........................................ $ 9,278,214 $10,411,883
</TABLE>

The transfer price applicable to related party commodity purchases is
generally based on the cost of such commodity to CES-Wholesale, which includes
transportation and applicable storage costs. Although the transfer price is
intended to approximate the cost of procuring supply from an unaffiliated
vendor, transactions between affiliates can not be considered to be at
arms-length.

The cost for Commodity management and risk management services provided to
the Company by CES was $0 and $363,000, in 1998 and 1999 respectively, and is
included in general & administrative costs in the accompanying statement of
income.

The Company has been primarily financed through equity investments and
intercompany payables. No interest has been charged to the Company related to
such payables. To the extent the Company had cash received from commodity sales,
it invested such cash on a short-term basis in Columbia's "money pool" which
allows Columbia's operating companies to invest/borrow funds, as needed. During
the year ended December 31, 1999, interest income of approximately $1,400,000
was earned by the Company from these short-term investments in Columbia's "money
pool".

F-31
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company participates in Columbia's noncontributory, qualified defined
benefit pension plan covering essentially all employees. Benefits are based
primarily on years of credited service and employee's highest three-year average
annual compensation in the final five years of service. Effective January 1,
2000, Columbia adopted a cash balance feature to the pension plan that provides
benefits based on a percentage, which may vary with age and years of service, of
current eligible compensation and current interest credits. Columbia's funding
policy complies with Federal laws and tax regulations.

The Company also participates in Columbia's medical and life insurance
programs offered to retirees. Essentially all active employees are eligible for
these benefits upon retirement, after completing ten consecutive years of
service after age 45. Normally, spouses and dependents of retirees are also
eligible for medical benefits. The information presented below is as of
September 30 rather than December 31. The effect of utilizing September 30
rather than December 31 is not significant. Company employees account for less
than 1% of the employees participating in the plans.

Pension costs as well as other post-employment benefit costs are allocated
to the Company by Columbia; related pension and other post-employment benefit
obligations and assets, as described in the tables below, are not allocated
separately by Columbia to the Company. Pension expense charged to the Company
for the years ended December 31, 1998 and 1999 were $2,000 and $0, respectively.
Other post-employment benefit costs charged to the Company for the years ended
December 31, 1998 and 1999 were $40,000 and $30,000, respectively.

F-32
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The following table provides a reconciliation of the plans' funded status
and amounts reflected in Columbia's consolidated balance sheets at December 31:

<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year..................... 888.9 946.8 309.8 198.9
Service cost................................................ 31.3 30.6 13.0 12.6
Interest cost............................................... 64.7 62.9 23.4 14.0
Plan participants' contributions............................ -- -- 2.8 2.4
Plan amendments............................................. -- 3.9 (2.2) 4.5
Actuarial (gain) loss....................................... 56.0 (59.8) 6.1 (12.2)
Settlements................................................. -- -- (130.3) (24.5)
Actual expense paid......................................... (5.2) (4.7) -- --
Benefits paid............................................... (88.9) (95.9) (23.7) (13.5)
------- ------- ------ ------
Benefit obligation at end of year........................... 946.8 883.8 198.9 182.2
======= ======= ====== ======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.............. 1,164.6 1,091.5 242.9 117.0
Actual return on plan assets................................ 20.8 210.0 11.2 26.0
Columbia contributions...................................... -- -- 32.4 15.5
Plan participants' contributions............................ -- -- 2.8 2.4
Settlements................................................. -- -- (146.9) (31.6)
Actual expense paid......................................... (5.2) (4.7) (1.7) --
Benefits paid............................................... (88.7) (95.7) (23.7) (13.5)
------- ------- ------ ------
Fair value of plan assets at end of year.................... 1,091.5 1,201.1 117.0 115.8
======= ======= ====== ======
Funded status of plan at end of year........................ 144.7 317.3 (81.9) (66.4)
Unrecognized actuarial net gain............................. (237.8) (403.4) (41.5) (54.1)
Unrecognized prior service cost............................. 45.1 45.2 (2.2) 2.6
Unrecognized transition obligation.......................... 4.6 3.5 -- --
Fourth quarter contributions................................ -- -- 4.5 3.3
------- ------- ------ ------
ACCRUED BENEFIT COST........................................ (43.4) (37.4) (121.1) (114.6)
======= ======= ====== ======
</TABLE>

F-33
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

<TABLE>
<CAPTION>
PENSION
BENEFITS OTHER BENEFITS
---------------------- ----------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30,
Discount rate assumption.................................... 6.75% 7.75% 6.75% 7.75%
Compensation growth rate assumption......................... 4.40% 4.50% 4.40% 4.50%
Medical cost trend assumption............................... -- -- 5.50% 5.50%
Assets earnings rate assumption*............................ 9.00% 9.00% 9.00% 9.00%
</TABLE>

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

* One of the several established medical trusts is subject to taxation which
results in an after-tax asset earnings rate that is less than 9.00%

<TABLE>
<CAPTION>
PENSION OTHER
BENEFITS BENEFITS
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
NET PERIODIC COST
Service cost................................................ 31.3 30.6 13.0 12.6
Interest cost............................................... 64.7 62.9 23.5 14.0
Expected return on assets................................... (99.7) (94.1) (18.3) (9.4)
Amortization of transition obligation....................... 1.2 1.2 -- --
Recognized gain............................................. (17.5) (10.2) (10.3) (2.1)
Prior service cost amortization............................. 3.7 3.7 -- (0.4)
Settlement gain............................................. -- -- (46.6) (6.1)
----- ----- ----- ----
NET PERIODIC BENEFITS COST (BENEFIT)........................ (16.3) (5.9) (38.7) 8.6
===== ===== ===== ====
</TABLE>

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
1% POINT 1% POINT
INCREASE DECREASE
-------- --------
<S> <C> <C>
Effect on service and interest components of net periodic
cost.................................................... $ 2.6 $ (2.4)
Effect on accumulated postretirement benefit obligation... $15.0 $(13.8)
</TABLE>

During 1998 and 1999, trusts established by Columbia purchased insurance
policies that provide both medical and life insurance with respect to
liabilities to a selected class of current retirees (none of which relate to the
Company). As a result, pre-tax gains were recorded in 1998 and 1999, in
Columbia's consolidated financial statements.

5. CREDIT RISK AND CUSTOMER CONCENTRATION

As noted, the Company provides retail marketing and retail sales of natural
gas and electricity to residential and small commercial customers. The Company
primarily operates in areas where the local distribution company servicing the
Company's customers bills on the Company's behalf.

F-34
<PAGE>
COLUMBIA ENERGY MASS MARKETS BUSINESS SEGMENT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

The Company, under certain fixed rate commodity contracts, has committed to
purchase 85,600 megawatt hours at prices ranging from $25.70 - $31.15 per
megawatt hour through May 2000.

The Company has committed to supply its customers with their natural gas
supply for a period up to two years. The Company estimates, based on historical
experience and current trends, that it will be required to meet the following
demand:

<TABLE>
<CAPTION>
CONTRACT
EXPIRATION SUPPLY VOLUME SALES PRICE
---------- ------------- -------------
(1,000 DTH) (PER DTH)
<S> <C> <C>
2000............................................. 31,926 $2.40 - $4.79
2001............................................. 3,728 $2.40 - $4.79
</TABLE>

The Company has commitments to purchase, at market prices, approximately
8,200,000 dth of natural gas from January, 2000 through March, 2001.

The Company's rent expense for the years ended December 31,1998 and 1999 was
$192,000 and $845,000, respectively. The Company does not have future minimum
rental payments required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year.

The Company is involved in various claims and legal actions arising in the
normal course of its businesses. It is management's opinion that the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or cash flow.

7. SALE OF COMPANY

On June 29, 2000, The New Power Company ("New Power") signed a definitive
agreement to acquire the customer base and certain assets of the Company. Total
purchase consideration is expected to include $11.7 million in cash and 602,200
shares of common stock of TNPC, Inc., New Power's parent. Up to an additional
$3.9 million of cash consideration can be earned by CES if specified levels of
customer retention are maintained over the one year period from the closing of
the acquisition. Also on June 29, 2000, New Power agreed to pay the Company an
estimated $34.2 million for natural gas in storage and certain accounts
receivable. These sales to New Power are expected to close on or around
July 31, 2000. The success of future operations of the Company during the next
twelve month period is dependent upon, among other things, the acquisition of
the Company by TNPC, Inc.

F-35
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

[LOGO]

TNPC, INC.

SHARES OF COMMON STOCK

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

PROSPECTUS
-------------------

DONALDSON, LUFKIN & JENRETTE
CHASE H&Q
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
DLJDIRECT INC.

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of TNPC have
not changed since the date hereof.

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

Until , 2000 (25 days after the date of this prospectus), all dealers that
effect transactions in these shares of common stock may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.

--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fees.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $105,600
NASD filing fee............................................. $30,500
NYSE listing fee............................................ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Printing expenses........................................... *
Transfer Agent fees......................................... *
Miscellaneous............................................... *
-------
TOTAL..................................................... $
=======
</TABLE>

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

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise), against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.

The certificate of incorporation of TNPC, Inc. ("TNPC") provides that
indemnification shall be to the fullest extent permitted by the DGCL for all
current or former directors or officers of TNPC.

II-1
<PAGE>
As permitted by the DGCL, the certificate of incorporation provides that
directors of TNPC shall have no personal liability to TNPC or its stockholders
for monetary damages for breach of fiduciary duty as a director, except (1) for
any breach of the director's duty of loyalty to TNPC or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (3) under Section 174 of the DGCL or
(4) for any transaction from which a director derived an improper personal
benefit.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

TNPC has not sold any securities, registered or otherwise, within the past
three years, except as set forth below.

In connection with the initial capitalization of TNPC, in November 1999,
TNPC issued 200,000 shares of its common stock to Enron Energy Services, LLC
("EES") in exchange for a $1,000 cash contribution.

On January 6, 2000, TNPC issued 14,800,000 shares of its common stock and
Class A warrants to acquire 45,000,000 shares of its common stock, subject to
adjustment as set forth therein, to EES in exchange for the contribution of
certain services to be performed by EES and Enron Corp. ("Enron") and customer
contracts in California and Ohio as set forth in the Contribution and
Subscription Agreement dated January 6, 2000 by and between DLJMB Funding
II, Inc., DLJ Merchant Banking Partners II, L.P., DLJ Merchant Banking Partners
II-A, L.P., DLJ Diversified Partners, L.P., DLJ Diversified Partners-A, L.P.,
DLJ Millennium Partners, L.P., DLJ Millennium Partners-A, L.P., DLJ First ESC
L.P., DLJ Offshore Partners II, C.V., DLJ EAB Partners, L.P., DLJ ESC II, L.P.
(collectively, the "DLJMB Partners"), GE Capital Equity Investments, Inc. ("GE
Capital"), California Public Employees' Retirement System ("CalPERS"), Ontario
Teachers' Pension Plan Board ("OTP"), TNPC, EES, and Cortez Energy Services, LLC
("Cortez") (the "Contribution Agreement"). Immediately after closing of the
Contribution Agreement, EES contributed 5,000,000 shares of common stock that it
received under the Contribution Agreement to Cortez.

Also on January 6, 2000, TNPC issued 1,750,000 shares of its common stock,
Class A warrants to acquire 5,250,000 shares of its common stock, subject to
adjustment as set forth therein, and Class B warrants to acquire 3,613,000
shares of its common stock, subject to adjustment as set forth therein, to the
DLJMB Partners for $35,000,000; 1,750,000 shares of its common stock, Class A
warrants to acquire 5,250,000 shares of its common stock, subject to adjustment
as set forth therein, and Class B warrants to acquire 3,613,000 shares of its
common stock, subject to adjustment as set forth therein, to GE Capital for
$35,000,000; 750,000 shares of its common stock, Class A warrants to acquire
2,250,000 shares of its common stock, subject to adjustment as set forth
therein, and Class B warrants to acquire 1,548,400 shares of its common stock,
subject to adjustment as set forth therein, to CalPERS for $15,000,000; and
750,000 shares of its common stock, Class A warrants to acquire 2,250,000 shares
of its common stock, subject to adjustment as set forth therein, and Class B
warrants to acquire 1,548,400 shares of its common stock, subject to adjustment
as set forth therein, to the OTP for $15,000,000.

Also on January 6, 2000, TNPC agreed to issue 258,060 shares of its common
stock to America Online, Inc. ("AOL") for every 100,000 customers that subscribe
to TNPC's service through AOL, up to 1 million customers. TNPC shall be under no
obligation to continue to issue shares of common stock to AOL if the Interactive
Marketing Agreement between TNPC and AOL is terminated in accordance with its
terms.

Also on January 6, 2000, TNPC agreed to issue 2,064,400 shares of its common
stock to Lou L. Pai in consideration of services he had rendered to TNPC in the
past.

On May 15, 2000, TNPC agreed to issue shares of its common stock to
International Business Machines Corporation ("IBM"). First, TNPC agreed to issue
1,100,400 shares of common stock to IBM

II-2
<PAGE>
in exchange for $10 million, payable in equal installments on May 31, 2000 and
September 29, 2000. Upon consummation of this initial public offering, TNPC
agreed to issue to IBM such number of shares of common stock equal to the
quotient of (x) $5 million and (y) one-half of the initial public offering price
per share of the common stock offered pursuant to this initial public offering
in exchange for a contribution of $5 million. Finally, TNPC agreed to issue to
IBM on December 31, 2000 such number of shares of common stock equal to the
quotient of (a) $5,000,000 and (b) the average daily closing price of TNPC's
common stock on the New York Stock Exchange for the twenty trading days prior to
December 31, 2001 in exchange for $5 million, as long as such average exceeds
50% of the price per share in this initial public offering.

On June 29, 2000, in connection with the asset purchase agreement, TNPC
entered into with Columbia Energy Services Corporation, Columbia Energy Retail
Corporation, and Columbia Energy Power Marketing Corporation (collectively, the
"Columbia Group"), TNPC agreed to issue to Columbia Energy Services Corporation
602,200 shares of its common stock as partial consideration for the acquisition
of the retail residential and small commercial natural gas business of the
Columbia Group. These shares will be issued to Columbia Energy Services
Corporation at the closing of the asset purchase agreement.

On July 12, 2000, TNPC issued Class A warrants to acquire 697,800 shares of
its common stock, subject to adjustment as set forth therein, to the DLJMB
Partners for $7,500,000; Class A warrants to acquire 2,325,800 shares of its
common stock, subject to adjustment as set forth therein, to CalPERS for
$25,000,000; Clas A warrants to acquire 1,395,600 shares of common stock,
subject to adjustment as set forth therein, to OTP for $15,000,000; and Class A
warrants to acquire 4,651,600 shares of its common stock, subject to adjustment
as set forth therein, to LJM2-TNPC, LLC for $50,000,000.

Also on July 12, 2000, TNPC agreed to issue, in the aggregate, 176,000
shares of its common stock to certain of its executive officers in exchange for
cash contributions totaling $1,900,588. Also on July 12, 2000, TNPC agreed to
issue 463,000 shares of its common stock to Lou L. Pai, its Chairman, in
exchange for a cash contribution of $5,000,000. All shares of common stock
issued to certain officers of TNPC and to Mr. Pai will be issued upon payment
therefor by such individual, which in any event must occur on or before
August 22, 2000.

There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities described above were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering. In all of such transactions, the recipients of securities
represented their intention to acquire the securities for investment purposes
only and not with a view to or for sale in connection with any distribution
thereof, and appropriate legends were affixed to the securities issued.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS:

<TABLE>
<C> <C> <S>
1.1* -- Form of Underwriting Agreement

3.1* -- Amended and Restated Certificate of Incorporation

3.2* -- Amended and Restated Bylaws

4.1* -- Form of common stock certificate

4.2 -- Form of Class A warrant

5.1* -- Opinion of Vinson & Elkins L.L.P.
</TABLE>

II-3
<PAGE>
<TABLE>
<C> <C> <S>
10.1 -- Contribution and Subscription Agreement dated as of
December 23, 1999 by and among DLJMB Funding II, Inc., DLJ
Merchant Banking Partners II, L.P., DLJ Merchant Banking
Partners II-A, L.P., DLJ Diversified Partners, L.P., DLJ
Diversified Partners-A, L.P., DLJ Millennium Partners, L.P.,
DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ
Offshore Partners II, C.V, DLJ EAB Partners, L.P., DLJ ESC
II, L.P., GE Capital Equity Investments, Inc., California
Public Employees' Retirement System, Ontario Teachers'
Pension Plan Board, Enron Energy Services, LLC, Cortez
Energy Services, LLC and EMW Energy Services Corp.

10.2 -- Business Opportunity Agreement dated as of January 6, 2000
between Enron Corp. and TNPC, Inc.

10.3 -- Noncompetition Agreement dated as of January 6, 2000 among
Enron Corp., Enron Energy Services, LLC and TNPC, Inc.

10.4 -- Master Services Agreement dated as of January 6, 2000 among
Enron Corp., Enron Energy Services, LLC and TNPC, Inc.

10.5 -- Software Agreement dated as of January 6, 2000 between Enron
Energy Services, LLC and TNPC, Inc.

10.6 -- Master Energy Purchase & Sale Agreement dated as of
January 6, 2000 between Enron Energy Services, Inc. and
TNPC, Inc.

10.7 -- Master Purchase & Sale Agreement dated as of January 6, 2000
between Enron Energy Services, Inc. and TNPC, Inc.

10.8* -- Interactive Marketing Agreement dated as of November 24,
1999 between America Online, Inc. and TNPC, Inc.

10.9* -- Subscription Agreement dated as of January 6, 2000 among
America Online, Inc., Enron Energy Services, LLC and
TNPC, Inc.

10.10* -- Information Technology Services Agreement dated May 12, 2000
between TNPC, Inc. and International Business Machines
Corporation

10.11* -- Subscription Agreement dated as of May 15, 2000 among
International Business Machines Corporation, TNPC, Inc. and
Enron Energy Services, LLC

10.12 -- Subscription Agreement dated as of July 10, 2000 among DLJMB
Funding II, Inc., DLJ Merchant Banking Partners II, L.P.,
DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified
Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millennium Partners, L.P., DLJ Millennium Partners-A, L.P.,
DLJ First ESC L.P., DLJ Offshore Partners II, C.V., DLJ EAB
Partners, L.P., DLJ ESC II, L.P., GE Capital Equity
Investments, Inc., TNPC, Inc., California Public Employees'
Retirement System, Ontario Teachers' Pension Plan Board, and
LJM2-TNPC, LLC.

10.13 -- Form of Subscription Agreement between TNPC, Inc. and
certain officers of TNPC, Inc.

10.14* -- Form of employment agreement between TNPC, Inc. and certain
executive officers of TNPC, Inc.

10.15* -- TNPC, Inc. 2000 Stock Plan

10.16* -- TNPC, Inc. Deferred Compensation Plan
</TABLE>

II-4
<PAGE>
<TABLE>
<C> <C> <S>
10.17* -- Amended and Restated Stockholders Agreement dated as of
, 2000 between DLJMB Funding II, Inc., DLJ
Merchant Banking Partners II, L.P., DLJ Merchant Banking
Partners II-A, L.P., DLJ Diversified Partners, L.P., DLJ
Diversified Partners-A, L.P., DLJ Millennium Partners, L.P.,
DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ
Offshore Partners II, C.V., DLJ EAB Partners, L.P., DLJ ESC
II, L.P., TNPC, Inc., California Public Employees'
Retirement System, Ontario Teachers' Pension Plan Board,
LJM2-TNPC, LLC, GE Capital Equity Investments, Inc., Enron
Energy Services, LLC and Cortez Energy Services, LLC

10.18* -- Asset Purchase Agreement dated as of June 29, 2000 by and
among Columbia Energy Services Corporation, Columbia Energy
Retail Corporation, Columbia Energy Power Marketing
Corporation, The New Power Company and TNPC, Inc.

10.19* -- Noncompetition and License Agreement dated as of ,
2000 between Columbia Energy Group and The New Power Company

10.20* -- Subscription Agreement dated as of , 2000 by and
among Columbia Energy Services Corporation, TNPC, Inc. and
Enron Energy Services, LLC

10.21* -- Services Agreement dated as of , 2000 between
The New Power Company and Columbia Energy Services
Corporation

10.22 -- Subscription Agreement dated as of July 12, 2000 between
TNPC, Inc. and Lou L. Pai

10.23 -- Stockholders Agreement entered into and effective as of
January 6, 2000 between TNPC, Inc. and Lou L. Pai

21.1* -- List of subsidiaries of the Company

23.1 -- Consent of Arthur Andersen LLP (TNPC)

23.2 -- Consent of Arthur Andersen LLP (Columbia)

23.3* -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1
hereto)

24.1 -- Powers of Attorney for Directors
</TABLE>

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

* To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULE

All schedules are omitted because the information is contained in the
Financial Statements or Notes.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the undersigned registrant pursuant to the
foregoing provisions described in Item 14 or otherwise, the undersigned
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
undersigned registrant of expenses incurred or paid by a director, officer, or
controlling person of the undersigned registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
undersigned registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such

II-5
<PAGE>
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

(b) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.

(c) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the undersigned registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(d) For purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Greenwich,
State of Connecticut, on the 14th day of July, 2000.

<TABLE>
<S> <C> <C>
TNPC, INC.

By: /s/ H. EUGENE LOCKHART
-----------------------------------------
H. Eugene Lockhart
President, Chief Executive Officer and
Director
(Principal Executive Officer)
</TABLE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LOU L. PAI Chairman and Director July 14, 2000
----------------------------
Lou L. Pai

/s/ H. EUGENE LOCKHART President, Chief Executive Officer and Director July 14, 2000
----------------------------
H. Eugene Lockhart

/s/ WILLIAM I JACOBS Managing Director, Chief Financial Officer and July 14, 2000
---------------------------- Director (Principal Financial Officer)
William I Jacobs

* Controller (Principal Accounting Officer) July 14, 2000
----------------------------
Stephen Nolan

* Director July 14, 2000
----------------------------
Kenneth L. Lay

* Director July 14, 2000
----------------------------
James V. Derrick

* Director July 14, 2000
----------------------------
Andrew S. Fastow

* Director July 14, 2000
----------------------------
Peter Grauer
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ MARC E. MANLY
--------------------------------------
Attorney in Fact
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<C> <C> <S>
1.1* -- Form of Underwriting Agreement

3.1* -- Amended and Restated Certificate of Incorporation

3.2* -- Amended and Restated Bylaws

4.1* -- Form of common stock certificate

4.2 -- Form of Class A warrant

5.1* -- Opinion of Vinson & Elkins L.L.P.

10.1 -- Contribution and Subscription Agreement dated as of
December 23, 1999 by and among DLJMB Funding II, Inc., DLJ
Merchant Banking Partners II, L.P., DLJ Merchant Banking
Partners II-A, L.P., DLJ Diversified Partners, L.P., DLJ
Diversified Partners-A, L.P., DLJ Millennium Partners, L.P.,
DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ
Offshore Partners II, C.V, DLJ EAB Partners, L.P., DLJ ESC
II, L.P., GE Capital Equity Investments, Inc., California
Public Employees' Retirement System, Ontario Teachers'
Pension Plan Board, Enron Energy Services, LLC, Cortez
Energy Services, LLC and EMW Energy Services Corp.