Amendment No. 1
                                     To The
                   EARLY PURCHASE AND PARTICIPATION AGREEMENT
                                     Between
                      Public Service Company of New Mexico
                                       and
                            M-S-R Public Power Agency

Public  Service  Company  of New  Mexico  (PNM) and M-S-R  Public  Power  Agency
(M-S-R),  collectively referred to as the Parties,  executed the San Juan Unit 4
Early  Purchase  and  Participation  Agreement  (EPPA) on  September  26,  1983,
pursuant to which PNM  conveyed to M-S-R an  undivided  28.8  percent  ownership
interest  in San Juan Unit 4.  Pursuant  to  Section  4.2.2.2  of the EPPA,  the
Parties  were to agree on the  selection  of a  municipal  bond  underwriter  to
determine an interest rate to be used in connection  with the calculation of the
"levelized  debt service cost" component of the Demand Charge  calculation.  The
purpose of this  Amendment  No. 1 is to  establish  a  different  source for the
needed interest rate other than a municipal bonds underwriter.
Therefore, the Parties agree as follows:

Section 1:

Section  4.2.2.2 of the EPPA is deleted in its  entirety  and is replaced by the
following:

         "4.2.2.2  The  annual  levelized  debt  service  cost  of  all  Capital
Improvements  shall be determined on the assumption  that M-S-R borrows money to
pay such costs and  repayment  is made on a level debt  service  basis,  without
contingency  or reserve  requirements,  over the  remaining  useful  life of the
Capital  Improvements  (or life of the plant,  whichever is less) with levelized
monthly principal and interest payments. The assumed interest rate shall be that
which M-S-R would have paid had tax exempt revenue bonds been issued.  Such rate
shall be taken from the  "Electric  Wholesale"  category of the  Municipal  Bond
Index as published  in the Wall Street  Journal on the last Friday of each month
(or as may be published on another day if the last Friday is a holiday). If this
index is  changed  or the  publication  is  discontinued  such that it no longer
serves the purposes herein, then the Parties shall choose a replacement interest
rate source."





Section 2:

Except as otherwise provided in this Amendment No. 1, the provisions of the EPPA
shall remain in full force and effect.

IT WITNESS WHEREOF,  the Parties have caused this Amendment No. 1 to be executed
as of the 16th day of December 1987.

PUBLIC SERVICE COMPANY OF NEW MEXICO



By:      /s/ J. L. Wilkins
       -----------------------------
Its:     Senior Vice President
            Power Supply
       -----------------------------


M-S-R PUBLIC POWER AGENCY



By:      /s/ Kenneth H. McKinney
       -----------------------------
Its:     General Manager
       -----------------------------