RELIANT ENERGY INC
FORM OF STOCK OPTION AGREEMENT
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<TYPE>EX-10.7
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<FILENAME>h98350exv10w7.txt
<DESCRIPTION>FORM OF STOCK OPTION AGREEMENT
<TEXT>
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                                                                    EXHIBIT 10.7

                   1994 Long-Term Incentive Compensation Plan
                        NON-QUALIFIED STOCK OPTION NOTICE


[NAME]                                      Grant Date:            March 6, 2001
[ADDRESS]                                   Shares Granted:
[CITY, STATE ZIP]                           Stock Option Price:
                                            Last Date to Exercise: March 5, 2011


We are pleased to inform you that the Compensation Committee of the Board has
granted you an option to purchase Reliant Energy's common stock. Your grant has
been made under the Company's 1994 Long-Term Incentive Compensation Plan (the
"Plan"), which together with the terms contained in this Notice, sets forth the
terms and conditions of your grant and is incorporated herein by reference. A
copy of the Plan is attached. Please review it carefully.

VESTING:
Subject to the terms of the Plan, shares vest according to the following vesting
schedule:

<Table>
<Caption>
      DATE OF VESTING          NUMBER SHARES VESTING
--------------------------------------------------------
<S>                           <C>
        03/06/2002
--------------------------------------------------------
        03/06/2003
--------------------------------------------------------
        03/06/2004
--------------------------------------------------------
</Table>


EXERCISE:
You may exercise this Option, in whole or in part, to purchase a whole number of
vested shares at any time, by following the exercise procedures set up by the
Company. All exercises must take place before the Last Date to Exercise, or such
earlier date as is set out in the Plan following your death, disability or your
ceasing to be an employee. The number of shares you may purchase as of any date
cannot exceed the total number of shares vested by that date, less any shares
you have previously acquired by exercising this Option.

EMPLOYMENT REQUIREMENTS:
Standard: Upon termination of employment all vesting of shares on this grant
will cease and the unvested portion will be canceled. However, the vested
portion shall remain exercisable for three (3) years from your date of
termination or until the expiration of the grant on 03/05/2011, whichever occurs
first.

Death, Disability or Retirement: Upon termination after age 60 but prior to age
65 the vested portion of your Option shall remain exercisable for three (3)
years from your date of termination or until the expiration of the grant on
03/05/2011, whichever occurs first. However, if your termination is due to
retirement at or after the age of 65, your option shall automatically become
fully vested and will remain exercisable for three (3) years from your date of
retirement or until the expiration of the grant on 03/05/2011, whichever occurs
first.

TAXES AND WITHHOLDING:
This option is not intended to be an Incentive Stock Option, as defined under
Section 422(b) of the Internal Revenue Code. Therefore, upon exercise of a
Non-Qualified Stock Option, you will need to remit payment for all taxes in
accordance with the Plan.

ADJUSTMENT OF OPTION:
As provided in the Plan, the exercise price of this Option and/or the number of
shares granted under this Option may be adjusted upon any recapitalization,
merger, distribution, or other change in the capital stock of the Company.
Accordingly, assuming the proposed spin-off of Reliant Resources, Inc. occurs
during the term of this Option, the exercise price of this Option and/or number
of shares granted under this Option may be adjusted in such equitable manner as
prescribed by the Committee. You will be notified of any such change.


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