Acquisition - Part 1

National Grid Group PLC
5 September 2000

                                   
PART 1                                      
                                      
                                      
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO CANADA, AUSTRALIA OR
                                    JAPAN

                                      
  NATIONAL GRID ANNOUNCES $3.0 BILLION AGREED ACQUISITION OF NIAGARA MOHAWK
                       DOUBLING SIZE OF US OPERATIONS
                                      

National Grid and Niagara Mohawk today announce that they have signed a Merger
Agreement under which National Grid will acquire all of the outstanding shares
of Niagara Mohawk for a combination of New National Grid Shares and cash.  The
terms of the agreement value each Niagara Mohawk Share at $19.00 and the
equity of Niagara Mohawk at approximately $3.0 billion (£2.1 billion) and the
enterprise value of Niagara Mohawk at approximately $8.9 billion (£6.1
billion), including net debt of approximately $5.9 billion (£4.0 billion) as
at 30 June 2000.

Niagara Mohawk is a focused transmission and distribution business with
limited non-core businesses.  It is the second largest combined  electricity
and  gas  utility in New York State serving over 1.5 million electricity and
over 540,000 gas customers.  For the year ended 31 December 1999, Niagara
Mohawk reported earnings before interest, tax and depreciation of $1.3 billion
on revenues of $4.1 billion and had net assets of $3.0 billion as at that
date.

Strategic benefits of the Acquisition

The Acquisition

* builds upon the proven success of National Grid's US strategy through the 
  acquisition of NEES, its experience of introducing incentive based  
  regulatory settlements and the integration skills demonstrated in the    
  acquisition of EUA;

* provides substantial upside potential from a combination of:
  *  synergies, where National Grid expects to generate annual cost savings
     of approximately $90 million, representing some 10 per cent. of the 
     enlarged group's electricity controllable cost base, within four years of
     Completion with the objective of achieving savings of approximately 50 
     per cent. of this amount in the first full financial year;
  *  improvements in the efficiency of Niagara Mohawk's core transmission and 
     distribution operations to bring its operating performance into line with
     National Grid USA's; and
  *  working with New York regulators to structure long term rate plans that
     benefit customers and shareholders and include incentives for cost 
     control and good customer service;
  
* enhances National Grid's earnings per share, after the amortisation of 
  goodwill, in the first full financial year after Completion, and 
  substantially enhances National Grid's cash flow per share immediately
  following Completion;

* more than doubles the size of National Grid's US operations and reinforces  
  its position as a leading player in the Northeast US, where it would own and
  operate the most extensive transmission network and be the second largest   
  distribution business.  The Acquisition also creates the ninth largest 
  electricity utility nationally;

* improves the profile of the enlarged National Grid group with more than half
  the group's operating profits after Completion being derived from the US, 
  where National Grid is able to achieve higher returns on investment than
  in the UK; and

* offers other potential upsides from:
  *  the consolidation of National Grid and Niagara Mohawk's transmission
     networks which offers opportunities for delivering greater value to 
     customers and shareholders in line with the Federal Energy Regulatory 
     Commission's vision for independent, incentivised regional transmission  
     organisations;
  *  the opportunity to extend National Grid USA's dark fibre 
     telecommunications business into Niagara Mohawk's service territory; and
  *  Niagara Mohawk's minority investment in Telergy, a competitive local
     exchange carrier which, in contrast to National Grid USA's 
     telecommunications business, provides integrated broadband 
     telecommunications services to large corporates and other carriers in the
     Northeast US.  Telergy has proposed to list its shares through an initial
     public offering.

Following Completion, Rick Sergel will continue as President and Chief
Executive Officer of the enlarged National Grid USA and William E. Davis will
be appointed Chairman of National Grid USA and will join the National Grid
board as an executive director for two years.  In addition, one of Niagara
Mohawk's non-executive directors will join the National Grid board as a non-
executive director.  Upon Completion, National Grid USA will be organised into
two geographic divisions covering New York and New England.  The headquarters
of the New York division will continue to be in Syracuse.

The Acquisition is subject to a number of conditions, including regulatory and
other consents and approvals in the US, the sale of Niagara Mohawk's nuclear
facilities or other satisfactory arrangements being reached and the approval
of the shareholders of both National Grid and Niagara Mohawk.  The Acquisition
is expected to complete by late 2001.

David Jones, Chief Executive of National Grid, said:
'This, our third acquisition in the US, builds perfectly on our successful US
strategy.  It builds on both the platform we have created and our top quality
US management team.  With Niagara Mohawk, we double the size of our US
business reinforcing our position as a leading  player in the Northeast region
and becoming a top tier utility in the US as a whole.'

'In contrast to our existing US business, Niagara Mohawk has recently
underperformed its peer group principally due to its substantial exposure to
above market power purchase contracts.  Niagara Mohawk's management has
expended considerable effort in restructuring these contracts, successfully
implementing a plan that provides a stable future for the company.  We can now
focus with Niagara Mohawk's management on improving the efficiency of Niagara
Mohawk's business.  This, together with the synergies from combining our
businesses and the potential opportunities we see in transmission and
telecommunications, makes the timing of this acquisition ideal and offers
substantial potential upside.'

William E. Davis, Chairman and Chief Executive of Niagara Mohawk, said:
'We are delighted to be joining forces with National Grid to become an
important part of one of the largest and most efficient energy delivery
companies in the world.  This transaction is in the best interests of our
shareholders, and will yield significant benefits for our customers, employees
and the communities we serve.  Direct savings and sharing of best practices
will create a more efficient company, leading to lower energy costs and
enhanced customer service, making upstate New York a more attractive region
for economic growth.'


Rothschild is advising National Grid and Niagara Mohawk is being advised by
Donaldson, Lufkin & Jenrette Securities Corporation.  Merrill Lynch
International and Credit Suisse First Boston are brokers to National Grid.

This summary should be read in conjunction with the attached announcement.

For ease of reference, in this document, all currency conversions between
pounds sterling and US dollars have been made at a rate of $1.46:£1.00.

Analysts' and press briefings

There will be a presentation to analysts at 9.30 a.m. and a press conference
at 11.30 a.m. today at Merrill Lynch International, 20 Farringdon Road, London
EC1M 3NH.  Should you be unable to attend the analyst presentation in person,
there will be a dial in facility available as follows:

From the UK    Dial in = 020 8515 2310
From the US    Dial in = [phone]

This presentation will have a replay facility, available until close of
business on Friday, 8 September, which can be accessed as follows:

From the UK    Dial in = 020 8797 2499, Access code = 113949
From the US    Dial in = [phone], Access code = 756164

There will also be a teleconference, followed by a Q&A session, for UK and US
institutions at 3.15pm UK time (10.15am EDT).  To participate in this call:

From the UK    Dial in = 020 8240 8243
From the US    Dial in = [phone]

This presentation will also have a replay facility, available until close of
business on Friday, 8 September, which can be accessed as follows:

From the UK    Dial in = 020 8288 4459, Access code = 689352
From the US    Dial in = [phone], Access code = 802684.

All other enquires should be made to the following:

Enquiries

National Grid Group plc                         020 7312 5600

David Jones             Chief Executive
Stephen Box             Finance Director
Susan Stevens           Director of Group Corporate Affairs
Jill Sherratt           Investor Relations Manager
Fred Mason              Vice President, Corporate Communications,
                        National Grid USA       001 508 389 3568

Niagara Mohawk                                  001 315 474 1511

William E. Davis        Chairman of the Board and Chief Executive Officer
William F. Edwards      Senior Vice President and Chief Financial Officer
Joseph M. Russo         Vice President, Public Affairs and Corporate 
                        Communications
Leon Mazur              Director, Investor Relations

Rothschild

UK                                              020 7280 5000
Nicholas Wrigley        Managing Director, Investment Banking
James Douglas-Hamilton  Director, Investment Banking

US                                              001 212 403 3500
Yves-Andre Istel        Vice Chairman
Kevin Joyce             Director
Matthew Savage          Director


Citigate Dewe Rogerson                          020 7638 9571

Anthony Carlisle
Duncan Murray

DLJ                                             001 212 892 3000

Michael Ranger          Managing Director
Gavin Wolfe             Vice President

This announcement does not constitute an offer or invitation to purchase
securities.

These materials contain certain statements that are neither reported financial
results nor other historic information.  These statements are forward looking
statements within the meaning of the safe-harbor provisions of the U.S.
federal securities laws.  Because these forward-looking statements are subject
to risks and uncertainties, actual future results may differ materially from
those expressed in or implied by the statements.  Many of these risks and
uncertainties relate to factors that are beyond the companies' ability to
control or estimate precisely, such as future market conditions, currency
fluctuations, the behaviour of other market participants, the actions of
governmental regulators and other risk factors detailed in National Grid's and
Niagara Mohawk's reports filed with the SEC.  Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date of this document.  The companies do not undertake any obligation
to publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date of these materials.

In connection with the Acquisition, National Grid and Niagara Mohawk will file
a combined proxy statement and prospectus with the SEC.  Investors are urged
to read the combined proxy statement and prospectus and other documents filed 
with the SEC when they become available, because they will contain important
information concerning the transaction.  Investors will be able to obtain a
free copy of the combined proxy statement and prospectus (when available) and
other documents filed by National Grid and Niagara Mohawk at the SEC's
website, http //www.sec.gov or at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20459.  In addition, documents filed by Niagara
Mohawk with the SEC can be obtained by contacting Leon Mazur, Niagara Mohawk
Holdings, Inc. 300 Erie Boulevard West, Syracuse, NY 13202, telephone: 001 315
474 1511.  Documents filed with the SEC by National Grid can be obtained by
contacting: David Forward, National Grid Group plc, 15 Marylebone Road, London
NW1 5JD, telephone: [phone].

Niagara Mohawk, its directors, executive officers and certain other members
of  Niagara Mohawk management and employees may be soliciting proxies from
Niagara Mohawk shareholders in favour of the Acquisition.  Information
concerning the participants will be set forth in the combined proxy statement
and prospectus when it is filed with the SEC.

N M Rothschild & Sons Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting exclusively for National Grid and no
one else in connection with the Acquisition and will not be responsible to
anyone other than National Grid for providing the protections afforded to
their customers or for giving advice in relation to the Acquisition.


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