Fitch Rates Rockland Electric Company Transition Funding LLC, Series 2004-1 Bonds 'AAA'.

NEW YORK -- Fitch Ratings has assigned an 'AAA' rating to Rockland Electric Company Transition Funding LLC's issuance of $46.3 million transition bonds, series 2004-1. The bonds are secured primarily by a property right to receive a per kilowatt-hour (kWh) charge (the transition bond charge, or TBC) to be collected from Rockland Electric Company's (RECO) retail electricity customers. The bonds have an expected maturity of approximately 15 years and a legal final maturity of approximately 17 years.

The 'AAA' rating is based on the strength and stability of the underlying tariff cash flows as established by the New Jersey Electric Discount and Energy Competition Act (EDECA, or the act) and the financing order issued by the New Jersey Board of Public Utilities (BPU). The act and the financing order establish the irrevocable and non-bypassable TBC and define bondholders' property rights to the collateral. The transaction will allow RECO to recover deferred costs associated with the provision of basic generation service during the transition period.

Credit enhancement will be provided by a capital account equal to 0.5% of the original principal balance, funded at closing, and overcollateralization equal to 0.5% of the original principal balance, funded over the term of the bonds. Most importantly, however, the act and financing order provide an annual tariff adjustment mechanism known as the true-up, to keep principal amortization and funding of the capital and overcollateralization accounts in line with expected balances. Orange and Rockland Utilities, Inc. (O&R) will act as servicer for the forecasting and collection of the TBC. Fitch rates O&R's senior unsecured debt 'A+' with a Stable Rating Outlook.

RECO serves approximately 71,000 customers in the northern portion of New Jersey. The utility's customer base consists of three principal classes - residential, commercial, and industrial - with residential and commercial classes representing approximately 86% of total electric consumption. The diversification within these customer classes should result in a stable source of cash flow to fund debt service, even under stressed conditions. Exposures to individual customers are limited with RECO's 10 largest customers in 2003 representing a reasonable 8.6% of total usage. Historical chargeoff and delinquency rates have been low and in line with industry averages, as has been the average forecast variance, an essential component of the true-up mechanism.

While the bonds are not guaranteed by the state of New Jersey or any agency of the state, the state pledges not to limit, alter, impair, or revoke the TBC until the transition bonds are paid in full. There is no voter referendum or initiative process in New Jersey.

A more detailed presale report 'Rockland Electric Company Transition Funding LLC, Series 2004-1', dated July 26, 2004 is available on Fitch Ratings' web site at 'www.fitchratings.com'.