NIAGARA MOHAWK POWER CORPORATION
OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE
FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK
AT THE PURCHASE PRICES PER SHARE INDICATED BELOW
<Table>
<Caption>
PURCHASE PRICE
CUSIP NO. SERIES PER SHARE
- --------- ---------------------------------------------------------- --------------
653522771 Fixed/Adjustable Rate Cumulative Preferred Stock, Series $53.76
D.........................................................
653522201 Cumulative Preferred Stock, 3.40% Series.................. $63.43
653522300 Cumulative Preferred Stock, 3.60% Series.................. $67.16
653522409 Cumulative Preferred Stock, 3.90% Series.................. $72.76
653522508 Cumulative Preferred Stock, 4.10% Series.................. $76.49
653522607 Cumulative Preferred Stock, 4.85% Series.................. $90.49
653522706 Cumulative Preferred Stock, 5.25% Series.................. $93.58
</Table>
EACH OFFER AND YOUR WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON WEDNESDAY, MARCH 27, 2002,
UNLESS EXTENDED OR EARLIER TERMINATED (THE "EXPIRATION DATE").
February 27, 2002
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated February 27,
2002 (the "Offer to Purchase") and the related letters of transmittal (the
"Letters of Transmittal") relating to the offer by Niagara Mohawk Power
Corporation, a New York corporation ("Purchaser" and the "Company") and an
indirect wholly owned subsidiary of National Grid Group plc, to purchase all
outstanding shares of the series of preferred stock listed in the table above
(each, a "Series" and, collectively, the "Preferred Shares"), of the Company
upon the terms and subject to the conditions set forth in the Offer to Purchase.
Each offer to purchase a Series of Preferred Shares is referred to as an "Offer"
and the offers to purchase all of the Series of Preferred Shares are referred to
as the "Offers." Each Offer is being made independently of the other Offers.
Also enclosed is the Letter to Shareholders of the Company from the Treasurer of
the Company.
WE (OR OUR NOMINEES) ARE THE HOLDER OF RECORD OF PREFERRED SHARES HELD BY
US FOR YOUR ACCOUNT. A TENDER OF SUCH PREFERRED SHARES CAN BE MADE ONLY BY US AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTERS OF
TRANSMITTAL ARE FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO
TENDER PREFERRED SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Preferred Shares held by us for your account pursuant to the terms and
conditions set forth in the Offers.
Your attention is directed to the following:
1. The offer price for each Series of Preferred Shares is as follows
per Preferred Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions of the Offers:
<Table>
<Caption>
PURCHASE PRICE
SERIES PER SHARE
- ------ --------------
Fixed/Adjustable Rate Cumulative Preferred Stock, Series
D......................................................... $53.76
Cumulative Preferred Stock, 3.40% Series.................... $63.43
Cumulative Preferred Stock, 3.60% Series.................... $67.16
Cumulative Preferred Stock, 3.90% Series.................... $72.76
Cumulative Preferred Stock, 4.10% Series.................... $76.49
Cumulative Preferred Stock, 4.85% Series.................... $90.49
Cumulative Preferred Stock, 5.25% Series.................... $93.58
</Table>
2. The Company's board of directors believes that the Offers are fair
to unaffiliated holders of Preferred Shares and has unanimously approved
the Offers. See Section 6, "Special Factors." While the Company's board of
directors has unanimously approved the Offers, it is not making any
recommendation as to whether or not you should tender your Preferred
Shares. The Company believes that this is a personal investment decision
for its preferred shareholders. You must decide whether to tender your
Preferred Shares and, if so, how many Preferred Shares to tender.
3. THE OFFERS AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON WEDNESDAY, MARCH 27, 2002, UNLESS THE OFFERS ARE EXTENDED BY
THE PURCHASER, IN WHICH EVENT THE TERM "EXPIRATION DATE" SHALL MEAN THE
LATEST TIME AT WHICH THE OFFERS, AS SO EXTENDED BY THE PURCHASER, WILL
EXPIRE.
4. The Offers are not contingent upon any minimum number of Preferred
Shares being tendered and the Offer for any series of Preferred Shares is
not conditioned upon any minimum number of shares of another Series being
tendered. The Offers are, however, subject to certain other conditions as
described in the Offer to Purchase under Section 11, "Conditions to the
Offers."
5. Any stock transfer taxes applicable to a sale of Preferred Shares
to the Purchaser will be borne by the Purchaser, except as otherwise
provided in Instruction 6 of the applicable Letter of Transmittal.
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions to the dealer manager, the depositary or the information
agent or, except as set forth in Instruction 6 of the applicable Letter of
Transmittal, transfer taxes on the purchase of Preferred Shares by the
Purchaser pursuant to the Offers. However, federal income tax backup
withholding at a rate of 30% may be required, unless an exemption is
provided or unless the required taxpayer identification information is
provided. See Instruction 8 of the applicable Letter of Transmittal.
If you wish to have us tender any of or all the Preferred Shares held by us
for your account, please so instruct us by completing, executing, detaching and
returning to us the instruction form on the detachable part hereof. An envelope
to return your instructions to us is enclosed. If you authorize the tender of
your Preferred Shares, all such Preferred Shares will be tendered unless
otherwise specified on the detachable part hereof. YOUR INSTRUCTIONS SHOULD BE
FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF
PRIOR TO THE EXPIRATION DATE.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE
PREFERRED SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE
OFFERS OR ANY DELAY IN MAKING SUCH PAYMENT.
No Offer is being made to, nor will tenders be accepted from or on behalf
of, holders of Preferred Shares in any jurisdiction in which the making of the
applicable Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offers to be made by a licensed broker or dealer, the
Offers are being made on behalf of the Purchaser by Merrill Lynch & Co., the
dealer manager for the Offers, or one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
2
INSTRUCTIONS WITH RESPECT TO THE
NIAGARA MOHAWK POWER CORPORATION
OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF THE
FOLLOWING SERIES OF CUMULATIVE PREFERRED STOCK
AT THE PURCHASE PRICES PER SHARE INDICATED BELOW
<Table>
<Caption>
PURCHASE PRICE
CUSIP NO. SERIES PER SHARE
- --------- ---------------------------------------------------------- --------------
653522771 Fixed/Adjustable Rate Cumulative Preferred Stock, Series $53.76
D.........................................................
653522201 Cumulative Preferred Stock, 3.40% Series.................. $63.43
653522300 Cumulative Preferred Stock, 3.60% Series.................. $67.16
653522409 Cumulative Preferred Stock, 3.90% Series.................. $72.76
653522508 Cumulative Preferred Stock, 4.10% Series.................. $76.49
653522607 Cumulative Preferred Stock, 4.85% Series.................. $90.49
653522706 Cumulative Preferred Stock, 5.25% Series.................. $93.58
</Table>
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase dated February 27, 2002 (the "Offer to Purchase") and the
accompanying Letters of Transmittal relating to shares of preferred stock listed
in the table above (the "Preferred Shares"), of Niagara Mohawk Power
Corporation, a New York corporation.
This will instruct you to tender the number of Preferred Shares indicated
below held by you for the account of the undersigned, on the terms and subject
to the conditions set forth in the Offer to Purchase and applicable Letter(s) of
Transmittal.
Number of Preferred Shares to be Tendered:*
---------------------------------------- Shares of
Fixed/Adjustable Rate Series D
---------------------------------------- Shares of
3.40% Series
---------------------------------------- Shares of
3.60% Series
---------------------------------------- Shares of
3.90% Series
---------------------------------------- Shares of
4.10% Series
---------------------------------------- Shares of
4.85% Series
---------------------------------------- Shares of
5.25% Series
SIGN HERE
Signature(s):
- --------------------------------------------------------------------------------
Please Type or Print Name(s):
- --------------------------------------------------------------------------------
Type or Print Address(es):
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- ---------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
- ---------------------------------------------------------------
Dated:
- --------------- , 2002
* Unless otherwise indicated, it will be assumed that all your shares of any
particular series are to be tendered.
3