Retail Agreement - Reliant Energy Inc. and Reliant Resources Inc.


                                RETAIL AGREEMENT

     THIS RETAIL AGREEMENT (the "Agreement") is entered into as of December 31,
2000, by and between Reliant Energy, Incorporated ("REI"), a Texas corporation,
and Reliant Resources, Inc. ("Resources"), a Delaware corporation, as an
Ancillary Agreement pursuant to that certain Master Separation Agreement ("MSA")
between REI and Resources, dated as of December 31, 2000, as follows:

1.   Definitions. Unless otherwise defined herein, terms used herein which are
     defined in the MSA shall have the meanings ascribed to them in the MSA.

2.   Scope of Agreement. In order to implement the Business Separation Plan,
     effective as of January 1, 2001, all retail electric functions performed by
     REI shall become the responsibility of Resources, and personnel performing
     those functions shall become employees of a member of the Resources Group
     as of that date. This Agreement sets forth the understanding of the parties
     regarding the transfer of those functions and personnel and regarding
     certain transition services to be performed between REI and Resources to
     implement the transfer of those functions until the Choice Date as defined
     in the MSA but which is currently expected to be January 1, 2002.

3.   Customer Care Services.

     3.1  Customer Care Personnel. On or before January 1, 2001, REI shall
          terminate from its employment and Reliant Energy Customer Care LLC
          ("Customer Care") shall employ those personnel of REI (including
          management and contractor personnel) who are then engaged in providing
          the following services for the Reliant Energy HL&P Division ("HL&P")
          (and, in the case of remittance processing services, REI's regulated
          gas utility divisions Entex and Arkla):

     (a)      Call Center services,

     (b)      Credit and Collections,

     (c)      Remittance processing, and

     (d)      Revenue accounting,

     excepting only those certain individuals identified by REI to Resources as
     required to be retained by REI in order to prepare for the implementation
     similar functions on behalf of REI following Choice Date.

     3.2  Equipment. As of January 1, 2001, REI shall contribute to Customer
          Care the remittance processing equipment described on 



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          Schedule 2.2, which will be used by Customer Care to provide services
          to the REI Group.

          In addition, REI does hereby grant to Customer Care the right and
          license to use its remaining remittance processing machine and other
          equipment of REI currently utilized in providing customer care
          services but which is not sold hereunder until such time as Customer
          Care ceases to provide services under this Agreement to REI with
          respect to retail electric customers. Customer Care shall utilize this
          machine as a backup for its processing, and shall be responsible for
          operation and maintenance costs associated with the machine until its
          rights to use such machine terminate.

          Such right and license is granted to Customer Care on a no-cost basis,
          AS IS AND WITHOUT WARRANTY OR REPRESENTATION AND WITH ALL FAULTS.

     3.3  Office Space. REI will lease to Customer Care approximately 150,000
          square feet of office and equipment space currently occupied in space
          owned or leased by REI in order to perform services under this
          Agreement for the duration of services provided by Customer Care.
          Office services and other shared service support functions will be
          provided by REI to Customer Care pursuant to the terms of the
          Transition Services Agreement executed between REI and Resources
          contemporaneously with the MSA (the "Transition Services Agreement").

     3.4  Other Services by REI. REI will continue to provide services for
          printing retail electric bills and inserting them for mailing. These
          services will be provided by REI personnel pursuant to the Transition
          Services Agreement. Following Choice Date, REI will continue to
          provide these services pursuant to the terms of the Transition
          Services Agreement to the member of the Resources Group succeeding to
          its retail electric customers.

     3.5  Services Provided by Customer Care to HL&P. During the period from
          January 1, 2001 until Choice Date, Customer Care shall provide the
          services traditionally provided by the personnel transferred pursuant
          to Section 3.1 for REI and its regulated electric and gas distribution
          utility operations, including providing call center, credit and
          collections and revenue accounting services for HL&P and receiving and
          processing payments for HL&P, Arkla and Entex. Such services shall be
          provided with personnel hired by Customer Care from HL&P and other
          personnel hired or otherwise engaged by Customer Care to provide such
          services. Customer Care shall provide no services to other members of
          the Resources Group (except processing payments under the General Land
          Office contract for Reliant Energy Solutions, Inc. and with respect to
          customers purchasing from members of the Resources 




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          Group under the retail pilot program provided for in the Utilities
          Code) or to third parties during the period services are provided
          under this section. The parties shall develop a mutually agreeable
          service level agreement regarding such services which will provide for
          levels of service generally consistent with those historically
          provided by HL&P and which, when developed, shall be attached hereto
          as Schedule 3.5. The parties recognize that Resources will need to
          train Customer Care personnel on its new systems that will be in place
          as of Choice Date. To that end, Resources shall be free to rotate its
          personnel into training after September 2001 provided that (i)
          Resources substitutes appropriate contractor personnel to ensure that
          customer service does not decline during the training period and (ii)
          the costs to HL&P during the training are not greater than costs would
          have been had the training rotations not been made.

     3.6  Termination of Services. Services provided by Customer Care shall
          terminate at Choice Date, and Resources shall be free to provide these
          services to other business units of the Resources Group or to third
          parties.

     3.7  Changes to Services. Customer Care agrees to add or delete specific
          services upon reasonable request from a member of the REI Group so
          long as they are generally within the scope of the services provided
          under this Section 3, provided that the costs of any increase or
          decrease in personnel or equipment required to implement such change
          are borne by the member of the REI Group requesting them.

     3.8  Code of Conduct and Reporting Requirements. During the period Customer
          Care provides services related to retail electric customers of REI,
          all personnel of Customer Care shall continue to observe the Code of
          Conduct adopted for HL&P personnel, and management personnel of
          Customer Care shall report for operational and organizational purposes
          only to an Executive Vice President of Resources and not to any
          personnel of Resources who are engaged in providing unregulated retail
          electric service for any business in the Resources Group.

     3.9  Charges for Services. For the services provided by Customer Care,
          members of the REI Group shall reimburse Customer Care for the fully
          allocated direct and indirect costs incurred by Customer Care to
          provide the services, and shall reimburse Customer Care for
          out-of-pocket expenditures to third parties incurred to perform
          services. Charges will be made on a basis that allocates such costs on
          a fair nondiscriminatory basis. It is understood that all salary and
          salary-related costs attributable to the personnel transferred to
          Customer Care from HL&P shall be borne by the REI Group for services
          prior to Choice Date.




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     3.10 Payment Terms. Charges and collections for services rendered pursuant
          to this Agreement shall continue to be made using the methodology and
          procedures for intracompany billing in use as of the date of this
          Agreement unless and until either party elects to discontinue such
          procedures, in which case Customer Care shall thereafter bill members
          of the REI Group receiving the services monthly for all charges
          pursuant to this Agreement and such members receiving the services
          shall pay Customer Care for all services within thirty days after
          receipt of an invoice therefor. Charges shall be supported by
          reasonable documentation (which may be maintained in electronic form),
          consistent with past practices. Late payments shall bear interest at
          the lesser of the prime rate announced by The Chase Manhattan Bank and
          in effect from time to time plus two percent (2%) per annum or the
          maximum non-usurious rate of interest permitted by applicable law.

     3.11 Error Correction; True-ups; Accounting. Customer Care shall make
          adjustments to charges as required to reflect the discovery of errors
          or omissions in charges. Customer Care and REI shall conduct an annual
          true up process to adjust charges based on a reconciliation of
          differences in budgeted usage and costs with actual experience. It is
          the intent of the parties that such true-up process will be conducted
          using substantially the same process, procedures and methods of review
          as have been heretofore in effect among members of the REI Group.
          Services under this Agreement and charges therefor shall be subject to
          the provisions of Section 10.5 of the Separation Agreement (Audit
          Rights).

     3.12 Severance Costs. Upon the termination of services provided by Customer
          Care, REI will reimburse Resources for the actual costs of severance
          incurred under a previously approved severance plan for personnel (i)
          who were hired by Customer Care from REI pursuant to this Agreement,
          (ii) who are terminated by Resources within 60 days after Customer
          Care terminates its services for REI (other than employees who are
          terminated during such period due to death, disability or cause) and
          (iii) who are not employed by a member of the REI Group within 30 days
          after their separation from the Resources Group. No severance costs
          shall be payable with respect to any personnel hired by any member of
          the Resources Group from REI other than personnel hired by Customer
          Care to perform services under this Section 3 of this Agreement. Nor
          shall REI be responsible for severance costs related to personnel
          initially hired by Customer Care from REI but who subsequently are
          transferred to employment by another member of the Resources Group
          prior to their termination from Resources.






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     3.13 Indemnification. REI agrees to defend, indemnify and hold Resources
          and Customer Care and their respective personnel harmless against
          liability on claims made by the personnel for whom REI has agreed to
          reimburse Resources for severance (the "Personnel") to the extent
          claims relate to: (i) the severance of the Personnel and their
          severance payments, (ii) employment of the Personnel with REI prior to
          their transfer to Customer Care (including their selection for
          transfer to Customer Care), (iii) policies and personnel of REI and
          (iv) benefits provided to the Personnel with respect to their
          employment with REI, including in such indemnity, indemnification
          against employment grievances, equal employment or sexual harassment
          charges or other employment related claims of the Personnel. As a
          condition for REI providing this indemnity, Resources and Customer
          Care agree to cooperate fully with REI on the defense of such claims
          and to provide REI with all information available to them and, to the
          extent within their control, witnesses necessary with respect to the
          defense of such claims. The compromise or settlement of any claims
          against Resources or Customer Care for which indemnity is provided by
          REI shall be the sole responsibility of REI, provided that any such
          compromise or settlement, unless Resources shall otherwise agree,
          shall include a full and unconditional release of Resources and
          Customer Care from liability and shall not impose injunctive relief or
          require admissions of fault or liability from Resources or Customer
          Care. This indemnity shall not extend to, and REI will not indemnify
          Resources against, claims related to employment grievances, equal
          employment or sexual harassment charges or other employment related
          claims made by the Personnel with respect to policies or conduct of
          Resources during the period the Personnel are employed by Customer
          Care; provided, however, that REI will on request of Resources assume
          the defense of Resources against any such claims which are asserted in
          conjunction with claims for which REI has agreed to indemnify
          Resources. Resources shall be responsible for and shall control the
          compromise or settlement of claims for which REI has not indemnified
          Resources.

4.   Services After Choice Date. As of the Choice Date and thereafter, the
     electric retail customers of Reliant Energy HL&P will become customers of
     an unregulated Retail Electric Provider pursuant to the Utilities Code, and
     a member of the Resources Group which qualifies as a Retail Electric
     Provider will succeed to those customers who do not elect an alternative
     supplier. For those customers, all customer care functions will be assumed
     by a member of the Resources Group. Following Choice Date, Customer Care
     will provide no further services for REI to REI's electric customers, and
     REI will provide customer care functions related to its electric
     transmission and distribution functions from its own resources.






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     4.1  Services to Members of REI Group. Following Choice Date, Reliant
          Energy Retail Services LLC (Retail Services), or another member of the
          Resources Group providing customer services will, upon request,
          provide remittance processing services to the gas utilities which are
          members of the REI Group. Compensation for these services will be on
          the same basis as compensation paid to Customer Care for similar
          services prior to Choice Date. The members of the REI Group may
          terminate such services at any time upon ninety (90) days prior
          written notice, and in any event such services shall terminate as of
          January 1, 2004, unless continued under a separate agreement between
          the parties.

5.   Limitation of Liability. Neither Resources nor Customer Care shall have any
     liability to any member of the REI Group with respect to its furnishing any
     of the services hereunder except for liabilities arising out of or
     resulting from the gross negligence or willful misconduct of Resources or
     any member of the Resources Group. Resources will indemnify, defend and
     hold harmless each member of the REI Group receiving services under this
     Agreement in respect of all such liabilities arising out of or resulting
     from such gross negligence or willful misconduct. Such indemnification
     obligation shall be a Liability of Resources for purposes of the MSA and
     the provisions of Article III of the MSA with respect to indemnification
     shall govern with respect thereto. IN NO EVENT SHALL RESOURCES OR ANY
     MEMBER OF THE RESOURCES GROUP HAVE ANY LIABILITY UNDER THIS AGREEMENT OR
     OTHERWISE ARISING OUT OF OR RESULTING FROM THE PERFORMANCE OF, OR THE
     FAILURE TO PERFORM, SERVICES FOR LOSS OF ANTICIPATED PROFITS BY REASON OF
     ANY BUSINESS INTERRUPTION, FACILITY SHUTDOWN OR NON-OPERATION, LOSS OF DATA
     OR OTHERWISE OR FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL
     DAMAGES, WHETHER OR NOT CAUSED BY OR RESULTING FROM NEGLIGENCE, INCLUDING
     GROSS NEGLIGENCE, AND WHETHER OR NOT RESOURCES OR ANY MEMBER OF THE
     RESOURCES GROUP WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF SUCH
     DAMAGES. IN NO EVENT SHALL RESOURCES OR ANY MEMBER OF THE RESOURCES GROUP
     HAVE ANY LIABILITY HEREUNDER OR OTHERWISE ARISING OUT OF OR RESULTING FROM
     THE PERFORMANCE OF, OR FAILURE TO PERFORM, SERVICES IN AN AGGREGATE AMOUNT
     EXCEEDING THE TOTAL CHARGES PAID OR PAYABLE TO RESOURCES HEREUNDER.

     REI shall indemnify and hold harmless Customer Care in respect of all
     Liabilities arising out of or resulting from Customer Care's furnishing or
     failing to furnish the services provided for in this Agreement, other than
     Liabilities arising out of or resulting from the gross negligence or
     willful misconduct of Customer Care or any other member of the Resources
     Group. The provisions of this indemnity shall apply only to losses which
     relate directly to the provision of services hereunder. Such
     indemnification obligation shall be a Liability of REI for purposes of the
     Separation Agreement and the provisions of Article III of the Separation
     Agreement with respect to indemnification shall govern with respect
     thereto. IN NO EVENT SHALL REI OR ANY MEMBER OF THE REI GROUP HAVE 





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     ANY LIABILITY UNDER THIS AGREEMENT OR OTHERWISE ARISING OUT OF OR RESULTING
     FROM THE PERFORMANCE OF, OR THE FAILURE TO PERFORM, SERVICES FOR LOSS OF
     ANTICIPATED PROFITS BY REASON OF ANY BUSINESS INTERRUPTION, FACILITY
     SHUTDOWN OR NON-OPERATION, LOSS OF DATA OR OTHERWISE OR FOR ANY INCIDENTAL,
     INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT CAUSED BY OR
     RESULTING FROM NEGLIGENCE, INCLUDING GROSS NEGLIGENCE, OR BREACH OF
     OBLIGATIONS HEREUNDER AND WHETHER OR NOT REI OR ANY MEMBER OF THE REI GROUP
     WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF SUCH DAMAGES.

6.   Taxes. (a)(a) Each member of the REI Group receiving services under this
     Agreement shall bear all sales and use taxes, duties and other similar
     charges (and any related interest and penalties), imposed as a result of
     their receipt of services under this Agreement.

          (b) Sales Tax Liability and Payment. Notwithstanding Section 6(a),
     each member of the REI Group that receives services under this Agreement
     shall be liable for and will indemnify and hold harmless each member of the
     Resources Group from all sales, use and similar taxes (plus any penalties,
     fines or interest thereon) (collectively, "Sales Taxes") assessed, levied
     or imposed by any governmental or taxing authority on the providing of
     services by a member of the Resources Group to a member of the REI Group.
     Resources shall collect from REI any Sales Tax that is due on the service
     it provides to a member of the REI Group and shall pay such Sales Tax so
     collected to the appropriate governmental or taxing authority.

7.   Responsibility for Errors; Delays. Customer Care's sole responsibility to
     the member of the REI Group receiving the services:

          (i) for errors or omissions in services, shall be to furnish correct
     information and/or adjustment in the services, at no additional cost or
     expense to the receiving company; provided, the receiving company must
     promptly advise Customer Care of any such error or omission of which it
     becomes aware after having used reasonable efforts to detect any such
     errors or omissions in accordance with the standard of care provided for in
     this Agreement; and provided, further, that the responsibility to furnish
     correct information or an adjustment of services at no additional cost or
     expense to the receiving company shall not be construed to require Customer
     Care to make any payment or incur any Liability for which it is not
     responsible, or with respect to which it is provided indemnity, under
     Section 5; and

          (ii) for failure to deliver any service because of Impracticability,
     shall be to use commercially reasonable efforts, subject to the next
     sentence, to make the services available and/or to resume performing the
     services as promptly as reasonably practicable. Customer Care shall not be
     required to provide any service to the extent the performance of such
     service becomes "Impracticable" as a result of a cause or causes outside
     the reasonable control of Customer Care including 





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     unfeasible technological requirements, or to the extent the performance of
     such services would require Customer Care to violate any applicable laws,
     rules or regulations or would result in the breach of any software license
     or other applicable contract in effect on the date of this Agreement.

8.   Dispute Resolution. Any dispute arising under this Agreement among REI,
     Resources or a member of their respective groups shall be exclusively
     resolved under the dispute resolution provisions of Article IX of the MSA,
     and each party, for itself and all its Affiliates, hereby waives any right
     to seek judicial resolution of such disputes except for enforcement of an
     arbitration award made in accordance with such dispute resolution
     provisions.

9.   Miscellaneous Provisions.

     9.1  Amendments. This Agreement shall not be supplemented, amended or
          modified in any manner whatsoever (including by course of dealing or
          of performance or usage of trade) except in writing signed by the
          parties.

     9.2  Successors and Assignments. This Agreement shall be binding upon and
          inure to the benefit of the parties and their respective successors
          and permitted assigns. No party shall assign this Agreement or any
          rights herein without the prior written consent of the other party,
          which may be withheld for any or no reason.

     9.3  Books and Records and Audit Rights. Maintenance of books and records
          relating to this Agreement and audit rights shall be as prescribed in
          the MSA.

     9.4  Notices. Any notice, demand, offer, request or other communication
          required or permitted to be given by either party pursuant to the
          terms of this Agreement shall be in writing and shall be deemed
          effectively given the earlier of (i) when received, (ii) when
          delivered personally, (iii) one (1) business day after being delivered
          by facsimile (with receipt of appropriate confirmation), (iv) one (1)
          business day after being deposited with an overnight courier service
          or (v) four (4) days after being deposited in the U.S. mail, First
          Class with postage prepaid, and addressed to the attention of the
          party's General Counsel at the address of its principal executive
          office or such other address as a party may request by notifying the
          other in writing.

     9.5  Governing Law. This Agreement shall be governed by and construed in
          accordance with the laws of the State of Texas.

     9.6  Headings. The various headings used in this Agreement are for
          convenience only and are not to be used in interpreting the text of
          the Articles or Sections in which they appear or to which they relate.






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     9.7  Severability. Wherever possible, each provision of this Agreement
          shall be interpreted in such a manner as to be effective and valid
          under applicable law. If any portion of this Agreement is declared
          invalid for any reason, such declaration shall have no effect upon the
          remaining portions of this Agreement, which shall continue in full
          force and effect as if this Agreement had been executed with the
          invalid portions thereof deleted.

     9.8  Counterparts. This Agreement may be executed in two or more
          counterparts, each of which shall be deemed an original, and all of
          which shall constitute one and the same instrument.

     9.9  Rights of the Parties. Nothing expressed or implied in this Agreement
          is intended or will be construed to confer upon or give any person or
          entity, other than the Parties and their respective Subsidiaries and
          Affiliates, as the case may be, any rights or remedies under or by
          reason of this Agreement or any transaction contemplated thereby.

     9.10 Waiver of Rights. The waiver by either party of any of its rights or
          remedies afforded hereunder or at law is without prejudice and shall
          not operate to waive any other rights or remedies which that party
          shall have available to it, nor shall such waiver operate to waive the
          party's rights to any remedies due to a future breach, whether of a
          similar or different nature. The failure or delay of a party in
          exercising any rights granted to it hereunder shall not constitute a
          waiver of any such right and that party may exercise that right at any
          time. Any single or partial exercise of any particular right by a
          party shall exhaust the same or constitute a waiver of any other
          right.

     9.11 Entire Agreement. All understandings, representations, warranties and
          agreements, if any, heretofore existing between the parties regarding
          the subject matter hereof are merged into this Agreement, which fully
          and completely express the agreement of the parties with respect to
          the subject matter hereof.

     9.12 No Sale, Transfer, Assignment. Neither REI nor any member of the REI
          Group may sell, transfer, assign or otherwise use the services
          provided hereunder, in whole or in part, for the benefit of any Person
          other than a member of the REI Group.

     9.13 Resolution of Disputes. If a dispute, claim or controversy results
          from or arises out of or in connection with this Agreement or the
          performance of, or failure to perform, the services required to be
          provided hereunder, the parties agree to use the procedures set forth
          in Article IX of the MSA, in lieu of other available remedies, to
          resolve the same.



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     IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.

                                       RELIANT ENERGY, INCORPORATED



                                       By  /s/ David M. McClanahan
                                           ------------------------------
                                              David M. McClanahan
                                              Vice Chairman

                                       RELIANT RESOURCES, INC.



                                       By  /s/ R. S. Letbetter
                                           ------------------------------
                                              R. S. Letbetter
                                              Chairman, President and
                                              Chief Executive Officer





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