FIRST AMENDMENT TO THE
                   SUPPLEMENTAL EMPLOYEE RETIREMENT AGREEMENT


         THIS FIRST AMENDMENT TO THE SUPPLEMENTAL  EMPLOYEE RETIREMENT AGREEMENT
is approved as of the 10th day of August,  1998, by and between  Public  Service
Company  of  New  Mexico,  a New  Mexico  Corporation  ("PNM")  and  Max  Maerki
("Maerki").

         WHEREAS, PNM and Maerki entered into a Supplemental Employee Retirement
Agreement ("SERP") on August 4, 1989; and

         WHEREAS,  on April 22, 1997, PNM amended the Public Service  Company of
New Mexico Employees'  Retirement Plan (the "Plan"),  effective January 1, 1997,
limiting the additional accrual of service and freezing salaries for purposes of
pension calculations under the Plan; and

         WHEREAS,  Maerki  acknowledges  the amendment to the Plan and agrees to
incorporate the terms of the amendment in the SERP,  effective  January 1, 1998;
and

         WHEREAS,  paragraph 9 of the SERP permits the SERP to be amended by the
consent of both parties.

         NOW  THEREFORE,  PNM and Maerki do hereby  amend the SERP by this First
Amendment as follows:

         1. Paragraph 1, Supplemental  Employee  Retirement  Benefit,  is hereby
amended to read as follows:

         1. Supplemental Employee Retirement Benefit. PNM shall grant and pay to
         Maerki the following supplemental employee retirement benefits:

                  (a)  benefits  equal to the benefit  which would be payable to
         Maerki under the Retirement Plan,  calculated as though Maerki has been
         in  continuous  employment of PNM since  February 15, 1974,  reduced by
         benefits deemed payable to Maerki under the Retirement Plan.

         2. Paragraph 2(a), Calculation of Supplemental  Retirement Benefits, is
hereby amended and paragraph 2(d) is added to read as follows:

                  (a)  shall be determined based upon the Retirement Plan in 
         effect on January 1, 1997;

                                     *  *  *  *



         3. Except as herein above  amended,  PNM and Maerki hereby  readopt and
redeclare each and every provision of the SERP.

         IN  WITNESS  WHEREOF,  the  parties  hereto,  personally  or  by  their
authorized  representatives,  have  signed  this  First  Amendment  to the  SERP
effective as of the date  specified  herein and by  execution of this  amendment
hereby  declare that this  amendment  fully and  accurately  represents  all the
supplemental retirement benefits agreed upon by PNM and Maerki.

                                       PUBLIC SERVICE COMPANY OF NEW
                                       MEXICO

Date: 10/21/98                         By: /s/ Benjamin F. Montoya
      __________                       ______________________________
                                            Benjamin F. Montoya
                                            President and CEO


                                           /s/ Max H. Maerki
Date: 10/21/98                         ______________________________
      __________                               Max H. Maerki