EAS Energy East Corp

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    X   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

The aggregate market value of the common stock held by nonaffiliates of Energy East Corporation as of June 30, 2007, the last business day of Energy East's most recently completed second fiscal quarter, was $4.1 billion, based on the closing sale price as reported on the New York Stock Exchange.

The number of shares of common stock (Par value $.01 per share) outstanding as of February 15, 2008, was 158,302,145.

This Amendment No. 1 on Form 10-K/A (the "Amendment") amends an Annual Report on Form 10-K of Energy East Corporation ("Energy East, company, we, our, us) for the year ended December 31, 2007, filed with the Securities and Exchange Commission (the "SEC") on February 29, 2008. The company is filing this Amendment to include (i) certain information required by Part III that we intended to be incorporated by reference from our 2008 Proxy Statement, which will not be filed within the requisite time period allowing such incorporation by reference and (ii) a stock performance graph in Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

This Form 10-K/A does not attempt to modify or update any other disclosures set forth in our Form 10-K filing, except as required to reflect the additional information mentioned above and included in Part II and Part III of this Form 10-K/A. Additionally, this Form 10-K/A, except for the additional information included in Part II and Part III, is as of the filing date of the 10-K and does not update or discuss any other company developments subsequent to the date of the 10-K.

The company's Form 10-K and 10-K/A are available on the company's website: www.energyeast.com. Shareholders may obtain a free copy of our Form 10-K and Form 10-K/A by contacting Investor Relations at
207-688-4386.

Below is our disclosure regarding required certifications and our disclosure regarding indemnification insurance for the company and its officers and directors.

On July 12, 2007, Energy East submitted to the New York Stock Exchange its Annual Chief Executive Officer Certification under Section 303A of the New York Stock Exchange Corporate Governance Rules.

Energy East filed with the Securities and Exchange Commission the Certifications of its Chief Executive Officer and Chief Financial Officer as required under Section 302 of the Sarbanes-Oxley Act of 2002. The certifications were filed as Exhibits 31-1 and 31-2 to Energy East's Form 10-K for the fiscal year ended December 31, 2007, dated February 29, 2008.

State law requires the company to inform stockholders of the initiation or renewal of insurance indemnifying itself and its officers and directors. That insurance, which is carried with Allied World Assurance Company, Associated Electric & Gas Insurance Services Limited (AEGIS), Energy Insurance Mutual Limited (EIM), XL Insurance (Bermuda) Ltd., and Zurich American Insurance Company, has been renewed through April 28, 2009, at an annualized gross rated premium of $2,892,295. In addition, the Pension Trust Liability Insurance, which is carried with AEGIS, American International Group, AXIS Specialty Insurance Co., Chubb Insurance Company, EIM, RLI Corp. and Zurich American Insurance Company, covering the company, its subsidiaries and its directors and those officers considered fiduciaries under the Employee Retirement Income Security Act of 1974, has been renewed through December 1, 2008, at a premium of $672,416.

The following graph shows the yearly change in the cumulative total shareholder return on Energy East's common stock during the five years ending December 31, 2007, compared with the cumulative total return on the Standard & Poor's 500 Index and the Standard & Poor's Utilities Index assuming $100 was invested on December 31, 2002, and assuming reinvestment of dividends.

James H. Brandi
Member of Hill Street Capital LLC, New York, NY from November 2005 to present; former Managing Director and Deputy Global Head of the Energy and Power Group of UBS Securities, LLC from 2000 to November 2005. Mr. Brandi, 59, is a director of Armstrong Land, LLC, Madisonville, KY, and Approach Resources Inc., Forth Worth, TX; and a trustee of The Kenyon Review, Gambier, OH. Mr. Brandi has been a director of the company since 2006. Mr. Brandi serves on the company's Compensation and Management Succession Committee and Corporate Responsibility Committee.

John T. Cardis
Former partner of Deloitte & Touche USA, LLP, New York, NY from June 1974 to May 2004; member of the executive committee of Deloitte & Touche from June 1986 to May 2004; member of Deloitte & Touche board of directors from September 1986 to August 1994. Mr. Cardis, 66, is a director of Edwards Lifesciences Corporation, Irvine, CA and Avery Dennison Corporation, Pasadena, CA and Trustee of the St. John's Medical Center, Jackson, WY. Mr. Cardis has been a director of the company since 2005. Mr. Cardis serves on the company's Compensation and Management Succession Committee (Chairperson) and Nominating and Corporate Governance Committee.

Thomas B. Hogan, Jr.
Former partner of Deloitte & Touche USA, LLP, New York, NY from June 1978 to June 2006; Chief Operating Officer of the Northeast practice of Deloitte & Touche USA, LLP from June 2004 to June 2006. Mr. Hogan, 62, is a director and Chairperson of the Audit Committee of Pictometry Corporation, Rochester, NY and director and former chairperson of Junior Achievement of New Jersey, Princeton, NJ. Mr. Hogan has been a director of the company since 2007. Mr. Hogan serves on the company's Audit Committee and Corporate Responsibility Committee.

G. Jean Howard
Chief of Staff, Office of the Mayor, City of Rochester, NY. Trustee of: True North Preparatory Academy, Rochester, NY; McQuaid Jesuit High School, Rochester, NY; Pluta Cancer Center, Inc., Rochester, NY; and Greater Rochester Health Foundation, Rochester, NY; and a member of the Community Advisory Board, Key Bank, Rochester, NY. Ms. Howard, 64, has been Chief of Staff, Office of the Mayor, City of Rochester, NY since January 2006. Prior to that time, she served as Executive Director of Wilson Commencement Park from 1990 to January 2006; Ms. Howard has been a director of the company since 2002, and was a director of RGS Energy Group, Inc. prior to its merger with the company. Ms. Howard serves on the company's Corporate Responsibility Committee and Nominating and Corporate Governance Committee.

David M. Jagger
President and Treasurer of Jagger Brothers, Inc., Springvale, ME. Director of Western Mountains Foundation, Carrabasset, ME; Trustee of Industrial Development Corporation, Sanford, ME. Mr. Jagger, 66, has been President and Treasurer of Jagger Brothers, Inc. since 1972 and has been a director of the company since 2000. Mr. Jagger was Chairman of the Board of CMP Group, Inc. and Central Maine Power Company from 1996 to 2000. Mr. Jagger serves on the company's Audit Committee and Nominating and Corporate Governance Committee.

Seth A. Kaplan
Coadjutant member of the faculty at Rutgers University School of Law-Newark, Newark, NJ. Former Partner of Wachtell, Lipton, Rosen & Katz, New York, NY from 1989 to 2004. Mr. Kaplan, 52, has been a director of the company since 2005. Mr. Kaplan serves as a lead director and is a member of the company's Audit Committee and Nominating and Corporate Governance Committee (Chairperson).

Ben E. Lynch
President of Winchester Optical Company, Elmira, NY. Past Chairman of Arnot-Ogden Medical Center, Elmira, NY. Past president of Horseheads Board of Education, Horseheads, NY. Former Trustee of the Pennsylvania College of Optometry, Philadelphia, PA; and of the Optometric Center of New York Foundation, New York, NY. Mr. Lynch, 70, has been President of Winchester Optical Company since 1965, and has been a director of the company (including its predecessor company) since 1987. Mr. Lynch serves on the company's Audit Committee (Chairperson) and Compensation and Management Succession Committee.

Peter J. Moynihan
Former Senior Vice President and Chief Investment Officer of UNUM Corporation, Portland, ME. Former Director of Maine Yankee Atomic Power Company, Wiscasset, ME. Mr. Moynihan was Senior Vice President and Chief Investment Officer of UNUM Corporation from 1987 until his retirement in 1999. Mr. Moynihan, 64, has been a director of the company since 2000 and was a director of CMP Group, Inc. prior to its merger with the company. Mr. Moynihan serves on the company's Audit Committee and Corporate Responsibility Committee (Chairperson).

Patricia M. Nazemetz
Vice President, Human Resources and Ethics for Xerox Corporation, Stamford, CT from 2007 to present and formerly Vice President, Human Resources for Xerox Corporation, Stamford, CT from 1999 to 2007; Ms. Nazemetz, 58, is a director of Catholic Health Services of Long Island, Rockville Center, NY, TransforMED, Leawood, KS, and WMS Industries, Inc., Waukegan, IL; and is a Trustee of Fordham University, New York, NY. Ms. Nazemetz has been a director of the company since 2007. Ms. Nazemetz serves on the company's Compensation and Management Succession Committee and the Nominating and Corporate Governance Committee.

Wesley W. von Schack
Chairman, President & Chief Executive Officer of the company, Portland, ME. Director of: The Bank of New York Mellon Corporation, New York, NY; Teledyne Technologies, Inc., Thousand Oaks, CA; and The Gettysburg Foundation, Washington, D.C.; Trustee of the American Gas Association Foundation, Washington, D.C.; Chairman of the Board and Director of Associated Electric & Gas Insurance Services Limited, East Rutherford, NJ. Mr. von Schack, 63, has been Chairman, President, Chief Executive Officer and a director of the company (including its predecessor company) since 1996.

The company's Code of Conduct demands the highest ethical standards in the conduct of the company's business and applies to directors and every employee of the company including its principal executive, financial and accounting officers. In 2007, our Board adopted a formal written policy regarding approval of any related-party transactions. The Corporate Governance Guidelines, the Code of Conduct, the Related-Party Transactions Policy, as well as the charters of the Audit Committee, the Compensation and Management Succession Committee and the Nominating and Corporate Governance Committee are available on the company's Website: www.energyeast.com and are available in printed form upon request.

The Audit Committee members are Messrs. Lynch (its Chairperson), Hogan, Jagger, Kaplan and Moynihan. Each member of the Audit Committee is financially literate and meets the independence requirements of the New York Stock Exchange and the SEC. Each member of the Committee also possesses accounting or financial management expertise as defined by the New York Stock Exchange. The Board of Directors has determined that Messrs. Lynch, Hogan and Moynihan are "audit committee financial experts" as defined under the rules of the SEC. Mr. Lynch is a chief executive officer, Mr. Hogan is a certified public accountant, and Mr. Moynihan was a chief investment officer.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons holding ten percent or more of the Company's equity securities to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. Such reporting persons are also required to provide the company with copies of all Section 16(a) forms they file. SEC regulations specify due dates for these reports. Based solely on its review of the copies of the reports received by it and certain written representations from certain reporting persons, the company believes that during 2007 all filing requirements were satisfied by its directors and executive officers.

This Compensation Discussion and Analysis describes our executive compensation policies, objectives and decisions. For a full understanding of the information presented, you should read and consider the following narrative discussion, together with the information in the tables that follow and the specific discussions that accompany the tables, as well as the Report of the Compensation and Management Succession Committee and the description of the role of our Compensation and Management Succession Committee. Further, due to the pending merger which will result in the company becoming a wholly-owned subsidiary of Iberdrola, S.A., the company has made certain commitments with respect to compensation matters that are discussed throughout this discussion and analysis.

Guiding Principles and Policies

The company's executive compensation program has two primary objectives:

The company adheres to the following fundamental principles as the basis for its executive compensation program:

Overview of Executive Compensation Components

The company's compensation programs for its named executive officers consist of the components set forth in the table below.

Additional Information Regarding Compensation Program Design

The Committee collects and analyzes compensation market data annually. Compensation of the named executive officers is compared to survey data of comparable positions at companies in both the energy industry and general industry. For 2007 pay decisions for the named executive officers, the Committee relied on market competitive analysis performed by Towers Perrin in the fall of 2006. The market data for the named executive officer roles was size-adjusted using regression to a revenue of $5.5 billion and based on a 50/50 blend of energy industry and general industry information. The energy industry data is derived from the Towers Perrin's Energy Industry Executive Compensation Database which includes compensation information from nearly 100 energy and utility companies. The general industry market data is derived from the Towers Perrin's Executive Compensation Database, which contains compensation information from over 800 companies from a variety of industries.

The Committee targets median levels for total compensation as well as for base pay, short-term and long-term incentives. Ultimately, the independent members of the Board, acting on the Committee's recommendation, have the final decision in determining the appropriate compensation amounts to retain, motivate, and reward the CEO and other named executive officers. The named executive officers 2007 total compensation was at market median levels.

In 2007 the Committee engaged Hewitt Associates as its independent executive compensation consultant on a go-forward basis.

The Compensation and Management Succession Committee recommends to the Board the base salaries of the named executive officers in accordance with the general philosophy described above, comparing the named executive officers' current levels with those at the median of the market. Base salaries are evaluated annually however, adjustments are made as necessary-generally less frequently than on an annual basis. In addition to market competitiveness, the Committee also considers a number of quantitative and qualitative factors, including: (i) our overall financial and operational achievements, as well as the performance of the business or function for which the individual is responsible; (ii) the individual's experience and responsibilities; (iii) the individual's effectiveness in performing those responsibilities; (iv) the individual's role in leading or helping implement our short-term and long-term strategies; and (v) the market for individuals with the relevant skills, experience and expertise. As requested by the Committee, the CEO and the Committee's independent compensation consultant provides input for the base salary recommendations for all named executive officers other than the CEO, for whom only the compensation consultant provides input.

The Annual Executive Incentive Plan (AEIP or Plan), directly ties compensation to specific company financial goals, as well as individual performance objectives. Individual performance objectives are identified by the Committee as a means of promoting the fundamental compensation principles outlined above (including rewarding customer service and operational excellence) and are consistent with objectives generally used in short-term incentive plans in the utility industry. Awards under the Plan are based on attainment of corporate earnings goals and assessments of individual performance goal achievement which can be objective or subjective assessments depending on the nature of the goal.

At the beginning of the year, the Committee recommends to the Board an earnings performance threshold and maximum earnings range for the administration of the AEIP. If the threshold is not achieved, awards are not made under the Plan (irrespective of the named executive officer's individual performance). At the same time, the Board approves individual performance objectives for each of the named executive officers. Each named executive officer other than the CEO has several individual performance objectives, for example: predetermined corporate and business area financial targets and operating plan objectives such as the completion of critical business projects in energy delivery and reliability, customer satisfaction, regulatory, merger development and consummation, workforce diversity, employee safety, and succession planning. The CEO's AEIP award is determined differently than the other named executive officers' AEIP award. The CEO's incentive award is also based on the company's earnings performance relative to target but the individual component is based on the average performance of those executives that report to him (named executive officers as well as other executives) compared to their objectives. As requested by the Committee, the CEO and Chief Administrative Officer provide input regarding these objectives (and the achievement of these objectives) for named executive officers other than themselves.

In 2007 the named executive officers had the following ranges of potential payouts, as a percentage of base salary, based upon attainment of corporate earnings goals and achievement of individual performance objectives: Mr. von Schack-threshold met 0-100%, maximum achieved 0-200%; Messrs. Rude, McClain, Kump and Connolly -threshold met 0-55%, maximum achieved 0-110%. Those percentages are determined based on market-competitiveness and comparison of the individual named executive officers' roles and responsibilities.

The following is an example of how the AEIP is calculated, assuming: (i) a named executive officer had a total AEIP opportunity of 55% at threshold to 110% at maximum, (ii) the executive achieved all of his individual performance objectives, (iii) the threshold earnings goal set by the Committee was $X/share, (iv) the maximum earnings goal set by the Committee was $Z/share, and (v) the actual earnings were $Y/share (Y being the midpoint between X and Z); the named executive officer would receive an AEIP award of 82.5% of base salary.

The company's long-term incentive program consists of stock options and performance-accelerated restricted stock. The Committee establishes guidelines for long-term incentive awards for each level of management and in setting the guidelines, it considers an individual's organizational position, historical performance, prior awards, current performance and potential future contribution to the company. As requested by the Committee, the CEO and Chief Administrative Officer provide input for those guidelines for all named executive officers.

The Committee in the past few years has granted the named executive officers approximately 10% stock options/tandem SARs and 90% performance-accelerated restricted stock, based on value. The Committee's long-term awards emphasize performance-accelerated restricted shares rather than stock options/tandem SARs because utilities such as the company generally have modest growth and, therefore, a significant portion of shareholder value would be expected to come from dividends. Recipients of performance-accelerated restricted stock under the Restricted Stock Plan are entitled to receive the cash equivalent of any dividends declared thereon and to vote the shares.

We only issue SARs in tandem with stock options, although they may be issued on a free-standing basis. Tandem SARs represent the holder's right to receive an amount equal to the excess of the fair market value of a share of the company's common stock (determined on the date of the exercise of the SAR) over the exercise price of the related option. In accordance with the terms of the Stock Option Plan the exercise price is set at the closing price of the common stock on the date prior to the date of grant. The Stock Option Plan provides for the award of shares of the company's common stock to individuals, subject to restrictions on transfer, including those imposed by the Securities Act and the Exchange Act, and such other restrictions as the Committee may impose. An individual may not receive awards covering more than 400,000 shares of common stock in any one calendar year. Options must be exercised within 10 years of the date of grant or they are forfeited. Stock options/SARs vest within two years; with one-third vesting immediately at grant, a second third vesting on the first day of the year following their grant, and the final third vesting a year later.

The Committee has the flexibility under the Stock Option Plan and the Restricted Stock Plan to accelerate vesting of awarded shares. The Committee has provided for acceleration of vesting for both outstanding stock options and shares of restricted stock upon consummation of the merger with Iberdrola.

Base Salary. The Compensation and Management Succession Committee determines the base salaries of the named executives in accordance with the general compensation philosophy described above and typically reviews base salaries on an annual basis. In recommending any increase, the Committee considers general industry and utility industry compensation information and the named executive officer's individual performance and prior salary increases.

On February 8, 2007, Mr. McClain was promoted to Senior Vice President and Chief Development and Integration Officer; and Mr. Kump was promoted to Senior Vice President and Chief Financial Officer. The Board of Directors, on the recommendation of the Compensation and Management Succession Committee, increased the base salaries of these officers and Messrs. Rude and Connolly. The increases were the first for these officers since March 2005, other than Mr. Connolly who started employment on January 1, 2006, and were based on a review of their performance and the results of a peer compensation competitive analysis prepared by Towers Perrin. The new salaries, which became effective on February 18, 2007, are: Mr. Rude - $325,000; Mr. McClain - $355,000; Mr. Kump - $350,000; and Mr. Connolly - $325,000.

Annual Executive Incentive Plan. The Compensation and Management Succession Committee set the 2007 AEIP objectives to be challenging and require significant individual and company achievement to be accomplished. Over the past seven years, on average, the company has achieved threshold earnings 100% of the time and maximum earnings approximately 29% of the time. On average over the last seven years, a named executive officer has been awarded approximately 79% of the maximum incentive opportunity. The degree of difficulty in achieving the 2007 objectives was expected to be similar to that of objectives in prior years. In 2007 the company achieved the maximum earnings level under the Plan. Based on both the company's earnings performance and their individual performance, the named executive officers had the following AEIP awards for 2007:

Mr. von Schack: Based on the company's earnings performance (at maximum) and based on the average performance of his direct reports (92.1% of goal), he received an AEIP bonus of 184.2% of base salary.

Mr. Rude: Based on the company's earnings performance (at maximum) and based on achievement of 100% of his individual objectives including achievement of predetermined corporate and business area financial targets (70%) and satisfactory operating plan execution (40%) in such business areas as regulatory, merger development and consummation, energy delivery and reliability and succession planning, Mr. Rude received an AEIP bonus of 110% of base salary.

Mr. McClain: Based on the company's earnings performance (at maximum) and based on achievement of 100% of his individual objectives including achievement of predetermined corporate and business area financial targets (70%) and satisfactory operating plan execution (40%) in such business areas as IT infrastructure, regulatory, merger development and consummation, energy delivery and reliability and succession planning, Mr. McClain received an AEIP bonus of 110% of base salary.

Mr. Kump: Based on the company's earnings performance (at maximum) and based on achievement of 100% of his individual objectives including achievement of predetermined corporate and business area financial targets (70%) and satisfactory operating plan execution (40%) in such business areas as regulatory, merger development and consummation, energy delivery and reliability and succession planning, Mr. Kump received an AEIP bonus of 110% of base salary.

Mr. Connolly: Based on the company's earnings performance (at maximum) and based on achievement of 100% of his individual objectives including achievement of predetermined corporate and business area financial targets (70%) and satisfactory operating plan execution (40%) in such business areas as regulatory, merger development and consummation, energy delivery and reliability and succession planning, Mr. Connolly received an AEIP bonus of 110% of base salary.

Long-Term Incentive Plan. When determining long-term incentive award levels the Committee considers external practices regarding long-term incentives including market competitive values, the performance and potential of each individual named executive officer, and the strategic importance of each named executive officer's role.

In 2007 the named executive officers received the following stock options/tandem SARs under the Stock Option Plan: Mr. von Schack 75,000; Mr. Rude 15,000; Mr. McClain 15,000; Mr. Kump 15,000; and Mr. Connolly 11,000.

In 2007 the named executive officers received the following performance-accelerated restricted stock awards under the Restricted Stock Plan; Mr. von Schack 140,000 shares; Mr. Rude 15,000 shares; Mr. McClain 15,000 shares; Mr. Kump 15,000 shares; and Mr. Connolly 9,500 shares. Mr. von Schack received additional shares of performance-accelerated restricted stock under the terms of his employment agreement (this award is described in the Grants of Plan-Based Awards Table).

The restricted stock vests on January 1, 2013, subject to early vesting as follows: (i) one-half of each grant vests on the day following any December 31 ^st on which the total shareholder return (stock price appreciation, dividends and any other shareholder distributions) from the date of grant is at least equal to 25%, and (ii) the remaining half vests on the day following any December 31 ^st on which the total shareholder return from the date of grant is at least equal to 50%. Dividends on restricted stock are paid as compensation prior to vesting and are paid after vesting in a manner consistent with all dividends on nonrestricted Energy East common stock. All assumptions made in the valuation of awards of stock and options were made in accordance with FAS 123R and such assumptions are discussed in footnote 11 to the company's audited financial statements for 2007 included in the company's Annual Report on Form 10-K for the period ended December 31, 2007.

Long-term incentives are at risk for two reasons. First, multiyear vesting schedules require continued service before awards are earned-if a nonretirement eligible executive leaves or is terminated for cause, awards are forfeited. Second, in the case of stock options, no value is delivered to executives unless Energy East's stock price increases after the date of grant. The following table illustrates the allocation percentage of total direct compensation among salary, short-term and long-term incentive compensation for the named executive officers (additional detail regarding the compensation paid to these individuals in 2007 is contained in the Summary Compensation Table).

The named executive officers are eligible to receive benefits under qualified and nonqualified retirement plans. The nonqualified plans include: (i) a plan designed to restore benefits that would have been paid to the named executive officer if certain federal tax limitations were not in effect-the ERISA Excess Plan, and (ii) a Supplemental Executive Retirement Plan or SERP, which provides eligible employees with a total retirement benefit (including benefits under all company plans and Social Security based on age and/or years of service) of up to 75% of the average of their highest three consecutive years of eligible compensation within the last five years of employment. A detailed description of each of the retirement plans is located in the narrative to the Pension Benefits Table.

Named executive officers must maintain a prescribed level of ownership in the company to closely align their interests with those of shareholders and demonstrate their confidence in the company, including their long-term commitment to it. All stock holdings count toward this requirement, including both vested and unvested restricted stock grants; options do not count toward the ownership requirement. The named executive officers' stock ownership guidelines as a multiple of base salary is as follows: Mr. von Schack 5x; Mr. Rude 3x; Mr. Kump 3x; Mr. McClain 3x and Mr. Connolly 2x. Named executive officers have until five years after their appointment to their current position to satisfy these guidelines. The Committee oversees compliance with this policy. Considering the time frames described above, in 2007 all named executive officers were in compliance with the stock ownership guidelines.

The company has entered into employment agreements with the following named executive officers, (certain details of the agreements are set forth in the relevant compensation tables and the related notes and narratives included below).

Mr. von Schack has an agreement with a term ending on June 30, 2008, that provides for automatic one-year extensions unless either party to the agreement gives notice that such agreement is not to be extended. This agreement provides a minimum base salary, long-term incentive grants, and a SERP benefit. The details of the long-term incentive grant provisions are discussed in the Outstanding Equity Awards Table narrative, and the SERP benefit is discussed in the narrative to the Pension Benefits Table. The agreement was entered into in order to provide Mr. von Schack with incentives to transform the company and to remain market competitive. Upon the merger with Iberdrola becoming effective, Mr. von Schack's agreement will be replaced by an amended and restated employment agreement that provides for a two-year term from the date the merger becomes effective, during which he will continue to serve as the company's Chairman, President and Chief Executive Officer. The term may be extended for an additional one-year period with the consent of Iberdrola, Mr. von Schack and the company. The independent members of the Energy East Board of Directors have approved an amendment to Mr. von Schack's new amended and restated employment agreement to provide for reimbursement of any 280G excise taxes that Mr. von Schack may incur as a result of the merger becoming effective. It is not anticipated that any 280G excise taxes will be due. The amendment requires the consent of Iberdrola.

Mr. McClain has an agreement with a three-year term that is automatically extended each month unless either party gives written notice that the agreement is not to be extended. This agreement provides a minimum base salary, SERP benefit, and severance provisions. Details on the SERP benefit are provided in the narrative to the Pension Benefits Table and details of the severance provisions are located in the Potential Payments Upon Termination or Change-in-Control Table and narrative. The agreement was entered into to assist in retaining Mr. McClain, and to remain market competitive.

Consistent with its historic practices, the Committee generally awards stock options/SARs and performance-accelerated restricted stock shares and determines annual incentives at its February meeting. The Committee considers what, if any, material nonpublic information exists at the time it approves equity award grants. As previously stated, base salary changes are made on an ad hoc basis, generally less frequently than on an annual basis.

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a company for compensation in excess of one million dollars paid to a company's CEO and each of the next four most highly compensated executive officers, except that qualifying performance-based compensation that meets certain specified criteria is not subject to Section 162(m). While the Committee recognizes the importance of tax deductibility, it believes that it is critical to balance tax deductibility with ensuring that the company's programs are designed appropriately to recognize and reward executive performance. Thus, the Committee reviews tax consequences as well as other relevant considerations when making compensation decisions within the context of the overall operation of the company's compensation program and considers what actions should be taken, if any, to operate the compensation program in a tax-effective manner. We are generally not able to deduct awards made under our AEIP, Stock Option and Restricted Stock plans.

The company currently has no policy with respect to recovery or the granting of additional awards when the performance measures upon which they are based are restated or otherwise adjusted in a manner that would reduce or increase the size of an award or payment. The company has not had a restatement or adjustment of earnings that would have required an increase or reduction in the size of awards previously granted.

The Committee has reviewed and discussed the Compensation Discussion and Analysis beginning on page III-4 with management. Based upon such review, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company's Annual Report on Form 10-K for the year ended December 31, 2007.

(2)  (a) 331 ¤ 3% vested on grant date, February 17, 2007; (b) an additional 331 ¤ 3% vested on January 1,      2008; and (c) the remaining 331 ¤ 3% will vest on January 1, 2009.

(3)  Restricted shares were unvested on December 31, 2007, and 50% vested on January 1, 2008. The      remaining restricted shares on January 1, 2008, will vest on January 1, 2010, if not vested sooner      under performance acceleration provisions.

(4)  Restricted shares will vest on January 1, 2011, if not vested sooner under performance
     acceleration provisions.

(5)  Restricted shares will vest on January 1, 2012, if not vested sooner under performance
     acceleration provisions.

(6)  Restricted shares will vest on January 1, 2013, if not vested sooner under performance
     acceleration provisions.

(1)  The Value Realized on Exercise is equal to the difference between the option exercise price and the closing price of a share of common stock on the New York Stock Exchange on the date of exercise.

(2)  The Value Realized on Vesting is equal to the market value of the underlying shares on the vesting date multiplied by the number of shares acquired on vesting.

Narrative to the Pension Benefits Table

The additional service credits provided to Mr. McClain and Mr. Connolly were provided as part of their compensation packages at the time they were initially hired by the company and were provided as an inducement to secure the services of these two executives.

Named executive officers of Energy East participate in various qualified pension plans as shown below. Qualified pension plans are offered to virtually all employees as part of a market competitive compensation package. The qualified pension plans are noncontributory, tax-qualified defined benefit plans and are funded under trust arrangements and, in some cases, insurance contract(s). Amounts contributed by the company into the qualified pension plan trusts are computed on an actuarial basis.

The Retirement Benefit Plan for Employees of New York State Electric & Gas Corporation ("NYSEG Retirement Plan") provides qualified retirement benefits for hourly and salaried employees, the named executive officers of the company and certain of its affiliates, based on length of service and average earnings (including performance-based awards paid beginning in 2002 for salaried employees) for the five highest paid consecutive years during the last 10 years of employment service. The NYSEG Retirement Plan provides normal retirement benefits at age 65, unreduced early retirement benefits at age 60, and reduced early retirement benefits at age 55 with 10 years of service. For participants terminating before eligibility for retirement, the plan pays a deferred to age 65 benefit under the plan formula. Participants may elect to receive a lump sum distribution of their deferred to age 65 benefit at any time after terminating with five or more years of service.

The NYSEG Retirement Plan pays benefits in an annuity form or as a lump sum at the election of the participant. The lump sum is based on a deferred to age 65 benefit and does not include any early retirement enhancements. The following company executives participate in the NYSEG Retirement Plan and their current eligibility for benefits is as follows: Mr. von Schack is eligible for unreduced retirement; Messrs. Rude, McClain and Kump are eligible for a deferred to age 65 benefit.

The Cash Balance Plan for Employees of Energy East Management Corporation ("EEMC Cash Balance Plan") provides retirement benefits for salaried employees, including officers of the company, with pay credits equal to a percentage of each year's earnings (including performance-based bonuses) which is accumulated with interest throughout the employees' period of employment service.

The EEMC Cash Balance Plan provides for normal retirement benefits at age 65. Participants may elect to commence reduced benefits after 5 years of service. The EEMC Cash Balance Plan pays benefits in an annuity form or as a lump sum at the election of the participant. Mr. Connolly participates in the EEMC Cash Balance Plan but is not currently eligible for benefits.

The Energy East Corporation ERISA Excess Plan ("Excess Plan") provides that all salaried employees, including the named executive officers of the company and senior executives of certain of its subsidiaries who have completed five years of service, shall receive the benefits of the tax-qualified benefit plan in which they participate without regard to any compensation and benefit limitations imposed by the federal tax law. The specific purpose of the Excess Plan is to restore benefits that would have been paid to the named executive officers if the IRS limits were not in effect. The Excess Plan pays benefits, upon termination with five years of service, in the form of a lump sum equal to the present value of the annual retirement benefit determined under the tax-qualified benefit plan formula without regard to any compensation and benefit limitations offset by benefits payable from the tax-qualified plan and according to the retirement eligibility and early retirement reduction provisions of those plans. The present value of the annual retirement benefit is based on the same interest rate and mortality basis as is used to determine the lump sum values under the participants' underlying tax-qualified plan. The following company named executive officers participate in the Excess Plan and their current eligibility for benefits is as follows: Mr. von Schack is eligible for unreduced retirement; Messrs. Rude, McClain and Kump are eligible for a deferred to age 65 benefit. Mr. Connolly is not currently eligible for benefits.

The Energy East Corporation Supplemental Executive Retirement Plan ("SERP") provides that key employees, including the named executive officers of the company and senior executives of certain of its subsidiaries, who have completed five years of service, and who retire at age 55 or later, shall receive a total retirement benefit (including benefits under a company-sponsored tax-qualified benefit plan, Excess Plan, and Social Security), based on years of service of up to 75% of the average of their highest three consecutive years of eligible compensation (including base pay plus AEIP awards) within the last five years of employment.

Normal retirement benefits are payable at age 65. No benefits are payable for termination prior to early retirement eligibility (age 55 with five years of service). Benefits payable prior to age 60 are reduced 3% per year. The SERP pays benefits in the form of a lump sum equal to the present value of the annual retirement benefit (including the value of the benefit payable to a spouse upon participant's death) determined under the plan formula. The present value of the annual retirement benefit is based on the same interest rate and mortality basis as is used to determine the lump sum values under the participants' underlying tax qualified plan. The following company named executive officers participate in the SERP and their current eligibility for benefits are as follows: Messrs. von Schack and Connolly are eligible for unreduced retirement; Mr. McClain is eligible for early retirement; Messrs.  Rude and Kump are not currently eligible for benefits.

The named executive officers are entitled to certain post-employment termination payments pursuant to agreements that they have with the company. None of these arrangements changed during 2007, either in anticipation of the proposed merger with Iberdrola or following entering into an agreement with Iberdrola. The following narrative explains the potential post-employment termination payments pursuant to these agreements.

Mr. McClain's employment agreement provides that, if his employment is terminated by the company other than for cause or disability or by him for good reason, he will receive a lump sum payment equal to: (i) his base salary at the rate in effect at the time of termination for the remainder of the term of the employment agreement; (ii) the value of incentive compensation for the remainder of the term of the employment agreement, calculated on the basis of the value of short-term incentive compensation paid to him in the most recently completed fiscal year and the value of any long-term incentive compensation awards determined on the projected target value of the awards; (iii) the value of continued participation in all employee welfare plans (with the exception of the medical plan); (iv) reimbursement for outplacement services of $10,000; and (v) the value of the fringe benefits that he would have received through the term of the employment agreement. This payment will not be made to Mr. McClain until six months after his employment is terminated. In addition, Mr. McClain will receive an additional service credit under the SERP for the remainder of the term of the employment agreement. To ensure that he receives the full value of his severance benefits in the event of a change-in-control, in the event that any payments made under the agreement or otherwise would subject him to federal excise tax, as an excess parachute payment, Mr. McClain is entitled to be made whole for the payment of any such taxes, including any income tax due as a result of payments to Mr. McClain to pay such federal excise tax. The agreement was amended in February 2007 to: (i) provide for a lump sum severance payment rather than continuation of salary and benefits for the term of the agreement; (ii) make certain changes required by the American Jobs Creation Act of 2004 relating to the timing of severance payments; and (iii) eliminate eligibility for continued participation in the company's health and welfare benefit plans after termination of employment (he would be eligible to receive the cash equivalent value if he retires before age 65).

Messrs. Rude, Kump and Connolly each have change-in-control agreements and general severance agreements. General severance is provided in the Employee Invention and Confidentiality Agreement. The change-in-control agreements provide for certain payments if, generally, within two years following a change in control of the company, the individual's employment is terminated either by the company without cause or by the individual for good reason. These agreements were amended in February 2007 to: (i) make certain changes required by the American Jobs Creation Act of 2004 relating to the timing of severance payments; and (ii) eliminate the individual's eligibility for continued participation in the company's health and welfare benefit plans after termination of employment. The change-in-control agreements have terms ending on December 31, 2008, with automatic one-year extensions unless either party to an agreement gives notice that the agreement is not to be extended. The benefits consist of a lump-sum severance payment equal to two times the sum of: (i) the individual's then annual base salary; and (ii) the higher of any award paid to the individual under the AEIP with respect to the year immediately preceding the year in which the termination occurs or the average of the AEIP awards paid to the individual in the three years preceding the year in which the change-in-control occurs. This payment will not be made to the individual until six months after his employment is terminated. The individual will also receive a lump-sum payment equal to the value of the health and welfare benefit plans for 24 months and $10,000 for outplacement counseling. This lump sum payment will not be made until six months after termination of employment. In addition, the individual will receive an amount equal to all earned but unpaid awards under the AEIP and a pro rata portion of any award under the AEIP at the threshold level with respect to the year in which the termination occurs, provided, however, that there shall be no duplication of payments made pursuant to his agreement and the AEIP. Also, in the event of such termination, the individual will receive an additional two years of age and service credit under the SERP.

To ensure that these individuals receive the full value of their severance benefits in the event of a change-in-control, in the event that any payments made under the agreement or otherwise would subject the individual to federal excise tax, as an excess parachute payment, Messrs.  Rude, Kump and Connolly are entitled to be made whole for the payment of any such taxes, including any income tax due as a result of payments to the individuals to pay such federal excise tax.

In Messrs. Rude, Kump and Connolly's change-in-control agreements, a change-in-control of the company shall be deemed to have occurred: (i) if a person acquires beneficial ownership of 25% or more of the combined voting power of the then outstanding shares of its common stock entitled to vote in the election of directors; (ii) if during any two consecutive years, a change occurs in the composition of the Board such that the incumbent directors (as defined in the agreement) at the beginning of the period cease for any reason to constitute at least a majority of the Board; or (iii) a merger or consolidation of the company is consummated, excluding transactions pursuant to which: (x) persons who beneficially own 75% or more of the combined voting power of the then outstanding shares of its common stock entitled to vote in the election of directors immediately prior to the transaction, continue to own substantially the same amount of stock after the transaction is completed; or (y) the company is recapitalized and after the completion of the transaction, no person, other than the company, its affiliates or employee benefit plans own more than 50% of the combined voting power of the then outstanding shares of its common stock entitled to vote in the election of directors; or (iv) the shareholders of the company approve a complete liquidation or a plan for the disposition of substantially all of the assets of the company. The merger with Iberdrola will constitute a change-in-control under these agreements.

Messrs. Rude, Kump and Connolly also have Employee Invention and Confidentiality Agreements. Those Employee Invention and Confidentiality Agreements were amended in February 2007 to: (i) provide for a lump sum severance payment rather than continuation of salary and benefits for the term of the agreement; and (ii) make certain changes required by the American Jobs Creation Act of 2004 relating to the timing of severance payments. The Employee Invention and Confidentiality Agreements provide that, so long as they are not entitled to receive payments under their change-in-control agreements, the three named executive officers are entitled to a lump-sum payment on termination from employment (voluntary or involuntary) equal to: (i) one year's base salary, and (ii) the value of certain health insurance premiums for one year. This lump sum payment will not be made until six months after termination from employment.

Under the Employee Invention and Confidentiality Agreement Messrs. Rude, Kump and Connolly may not disclose confidential information about the company or its subsidiaries to any other person or entity. On termination from employment the individuals, for a period of 12 months following the termination, may not be employed by or render any services to a major competitor of the company within the states of New York, New Jersey, Pennsylvania, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island and Vermont. In exchange for severance benefits, the individuals may not disclose confidential information about the company or its subsidiaries to any other person or entity. These agreements were amended in February of 2007 to make the following changes with regard to the severance benefit: (i) provide for a lump sum payment equal to one year's base salary (rather than continuation of monthly salary), and (ii) to make certain changes required by the American Jobs Creation Act of 2004, relating to the timing of severance payments. These agreements were entered into to prevent confidential company information from being publicly revealed.

In addition to the potential post-employment termination payments under the agreements the named executive officers have with the company under the terms of the Energy East Supplemental Executive Retirement Plan, Messrs. Rude and Kump, who are not already eligible for benefits under the SERP, become eligible for such benefits on a change-in-control. As described above, the Committee also has accelerated vesting under both the Energy East Stock Option Plan and the Energy East Restricted Stock Plan in the event the merger with Iberdrola is completed.

The following table provides a summary of the potential post-employment termination payments as of December 31, 2007, ⁽¹⁾ for the named executive officers.

Compensation for services to the company and its subsidiaries for 2007 of the nonemployee directors who served in such capacities on December 31, 2007, was: