EX-10.4 SECOND SUPPLEMENTAL GUARANTEE AGREEMENT

GUARANTEE AGREEMENT

SECOND SUPPLEMENTAL GUARANTEE AGREEMENT dated as of December 1, 2006 (this “ Supplemental Guarantee Agreement ”) to the Guarantee Agreement dated as of December 22, 2004 (the “ Guarantee Agreement ”) by and among Reliant Energy, Inc., a Delaware corporation (the “ Company ”), the Subsidiary Guarantors (as defined therein), and The Bank of New York Trust Company, N.A., as trustee (the “ Trustee ”) (as successor to J.P. Morgan Trust Company, National Association), relating to the Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project) Series 2003A, as supplemented by the Supplemental Guarantee Agreement dated as of September 21, 2006 among the Company, Reliant Energy Power Supply, LLC and the Trustee.  Capitalized terms used in this Supplemental Guarantee Agreement, but not defined herein, shall have the respective meanings given to such terms in the Guarantee Agreement.

WITNESSETH:

WHEREAS, Section 9.02 of the Guarantee Agreement provides, among other things, that the Company and the Trustee may amend or supplement the Guarantee Agreement with the consent of the Holders of at least a majority in aggregate principal amount of the Series 2003A Bonds then Outstanding; and

WHEREAS, the Company has solicited the consent of the Holders to certain amendments to the Guarantee Agreement described in the Second Amended and Restated Consent Solicitation Statement dated November 8, 2006 (the “ Consent Solicitation Statement ”) and which have been reflected herein (the “ Amendments ”); and

WHEREAS, the Company has received and filed with the Trustee, in the manner contemplated by the Guarantee Agreement, evidence of the consent of the Holders of at least a majority in aggregate principal amount of the outstanding Series 2003A Bonds, consenting to the Amendments to be effected in the form of this Supplemental Guarantee Agreement; and

NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree as follows:

1.              Amendments to the Guarantee Agreement .

The following amendments are made to the Guarantee Agreement effective as of the date specified in Section 2 below:

(a)            In Section 1.01:

(1)            The definition of “Excluded Securities” is amended in its entirety to read as follows:

Excluded Securities ” means debt or equity securities issued by any Subsidiary of the Company other than RERH Holdings, LLC, IP Trust, IT Trust, Orion Power Holdings, Inc. and REMA (or their successors); provided, however, that “Excluded Securities” shall include beneficial interests in the IP Trust or the IT Trust that are held by RERH Holdings, LLC or its Subsidiaries.

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(2)            The definition of “Excluded Subsidiaries” is amended to delete the reference to “RE Retail Receivables, LLC.”

(3)            The following definition is added:

“ IP Trust ” means Reliant Energy Trademark Trust, a Delaware statutory trust.

(4)            The following definition is added:

“ IT Trust ” means Reliant Energy IT Trust, a Delaware statutory trust.

(5)            The definition of “Permitted Liens” is amended:

(i)             to amend clause (24) in its entirety to read as follows:

(24)          [Reserved];

(ii)            to delete “and” at the end of clause (33);

(iii)           to add the following new clause (34) after clause (33):

(34)          Liens on assets of RERH Holdings, LLC and its Subsidiaries securing obligations of RERH Holdings, LLC or any of its Subsidiaries under (a) Credit Facilities in an aggregate principal amount not to exceed $300,000,000 plus all other obligations due under such Credit Facilities and (b) any agreement for or in support of the supply or sales of energy or products or services related or incidental to the supply or sales of energy or any activities related to the supply or sales of energy or products or services related or incidental to the supply or sales of energy of RERH Holdings, LLC or any of its Subsidiaries, including any agreement providing for the reimbursement of guarantees or collateral postings made on behalf of RERH Holdings, LLC or any of its Subsidiaries; and

; and

(iv)           to renumber existing clause “(34)” as clause “(35).”

(6)            The definition of “Permitted Prior Liens” is amended to substitute “and (33)” with “, (33) and (34).”

(b)            Section 4.08(b) is amended:

(1)            to delete “and” at the end of clause (18);

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(2)            to substitute “; and” for the period at the end of clause (19); and

(3)            to add the following new clause (20) after clause (19):

(20)          restrictions on RERH Holdings, LLC or any of its Subsidiaries contained in (a) the Working Capital Facility dated as of September 24, 2006 among Reliant Energy Power Supply, LLC (“REPS”), the guarantors party thereto, and Merrill Lynch Capital Corporation, (b) the Credit Sleeve and Reimbursement Agreement dated as of September 24, 2006 among REPS, the guarantors party thereto, Merrill Lynch Commodities, Inc., and Merrill Lynch & Co., Inc., and (c) any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the agreements referred to in the preceding clauses (a) and (b), provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements as reasonably determined by the Company.

(c)            The following Subsection (c) is added to Section 4.08:

(c)            Promptly following the last day of each month and so long as such payment is permitted under the terms of the agreements referred to in Section 4.08(b)(20), the Company shall cause RERH Holdings, LLC to pay cash dividends or distributions to the Company in an amount equal to (i) the amount which is permitted under the terms of the agreements referred to in Section 4.08(b)(20) on such day minus (ii)(A) amounts reasonably estimated by the Company to be due and payable by RERH Holdings, LLC and its Subsidiaries on or before the 20th day of the month next occurring plus (B) the lesser of (1) $100,000,000 and (2) the amount permitted under the Credit Agreement on the date the agreements referred to in Section 4.08(b)(20) become effective.

(d)            In Section 4.09(b):

(1)            Subsection (b)(1) of Section 4.09 is amended in its entirety to read as follows:

(1)            the incurrence (A) by the Company and the guarantee by the Guarantors of additional Indebtedness and letters of credit under Credit Facilities, (B) by Securitization Entities of Indebtedness in Qualified Securitization Transactions, and (C) by RERH Holdings, LLC and its Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities (including

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guarantees of such Indebtedness) (provided, however, that (I) the aggregate principal amount of Indebtedness incurred under this clause (C) at any one time outstanding shall not exceed $310,000,000, and (II) the proceeds of Indebtedness incurred under this clause (C) shall be used only for the repayment of Indebtedness and other Obligations of RERH Holdings, LLC and its Subsidiaries or to finance working capital needs of RERH Holdings, LLC and its Subsidiaries, including the payment of sales, general and administrative, and operations and maintenance expenses (including capital expenditures) and all other expenses in the ordinary course of business of RERH Holdings, LLC and its Subsidiaries) in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (1), not to exceed $2.5 billion;

(2)            The following paragraph is added to the end of the section:

Notwithstanding anything in this Section 4.09(b) to the contrary, the aggregate principal amount of Indebtedness of RERH Holdings, LLC and its Subsidiaries at any one time outstanding, other than Indebtedness incurred pursuant to clause (14) of this Section 4.09(b), may not exceed $310,000,000.

(e)            Section 4.10 is amended in its entirety to read as follows:

Section 4.10  Asset Sale Offers .

(a)            Within five Business Days after the receipt of any Net Proceeds from an Asset Sale of the Equity Interests of RERH Holdings, LLC (and its successors), of all or substantially all of the assets of RERH Holdings, LLC and its Subsidiaries (and their successors), or of all or substantially all of the assets of the Company and its Subsidiaries (other than RERH Holdings, LLC and its Subsidiaries (and their successors)), the Company shall make an Asset Sale Offer to all Holders of each Series of Bonds and all holders of other Indebtedness (including the 2014 Notes, the Existing 2010 Notes, and the Existing 2013 Notes) that is pari passu with the Seward Guarantees (other than Credit Agreement Debt) (and so long as this Guarantee Agreement is Equally and Ratably secured with such other pari passu Indebtedness) containing provisions similar to those set forth in this Guarantee Agreement with respect to offers to purchase or redeem with the proceeds of sales of assets, to purchase (or repay, prepay or redeem, as applicable) an aggregate principal amount of each Series of

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Bonds and such other pari passu Indebtedness that may be purchased (or repaid, prepaid or redeemed) equal to the aggregate of such Net Proceeds multiplied by a fraction, the numerator of which consists of (A) the aggregate principal amount then outstanding on each Series of Bonds and all such other pari passu Indebtedness containing such provisions (not including Credit Agreement Debt) and the denominator of which is (B) the sum of (i) such aggregate amount in the preceding clause (A) and (ii) the Credit Agreement Debt then outstanding (an “Asset Sale Offer”). The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest to the date of purchase, and shall be payable in cash.  If any such Net Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Net Proceeds for any purpose not otherwise prohibited by this Guarantee Agreement.  If the aggregate principal amount of each Series of Bonds and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of such Net Proceeds, the Company shall select the Series of Bonds and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Series of Bonds and such other pari passu Indebtedness tendered.

(b)            In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an Asset Sale Offer, it shall follow the procedures specified below.

(c)            The Asset Sale Offer shall be made to all holders of each Series of Bonds and all holders of other Parity Secured Debt (other than Credit Agreement Debt) containing provisions similar to those set forth in this Guarantee Agreement with respect to offers to purchase or redeem with the proceeds of sales of assets.  The Asset Sale Offer shall remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the “Offer Period”).  No later than three Business Days after the termination of the Offer Period (the “Purchase Date”), the Company shall apply a portion of the Net Proceeds as calculated pursuant to the first sentence of Section 4.10(a) hereof (the “Offer Amount”) to the purchase of Notes and such other Parity Secured Debt (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Series of Bonds and other Indebtedness tendered in response to the Asset Sale Offer.  Payment for any bond in a Series of Bonds (each a “Bond”) so purchased shall be made in the same manner as interest payments are made.

(d)            If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Bond is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Bonds pursuant to the Asset Sale Offer.

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(e)            Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders.  The notice will contain all instructions and materials necessary to enable such Holders to tender Bonds pursuant to the Asset Sale Offer.  The notice, which will govern the terms of the Asset Sale Offer, will state:

(i)             that the Asset Sale Offer is being made pursuant to Section 4.10 hereof and the length of time the Asset Sale Offer will remain open;

(ii)            the Offer Amount, the purchase price and the Purchase Date;

(iii)           that any Bond not tendered or accepted for payment will continue to accrue i