SECOND AMENDMENT TO THE
                      PENSION SERVICE ADJUSTMENT AGREEMENT
                             FOR BENJAMIN F. MONTOYA


         THIS SECOND  AMENDMENT TO THE PENSION SERVICE  ADJUSTMENT  AGREEMENT is
effective the 7th day of December,  1998, by and between Public Service  Company
of New Mexico, a New Mexico corporation ("PNM" or the "Company") and BENJAMIN F.
MONTOYA ("Montoya").

         WHEREAS,  PNM and Montoya  entered  into a Pension  Service  Adjustment
Agreement  ("Agreement")  effective  November 15, 1993, and entered into a First
Amendment to the Agreement on June 9, 1998;

         WHEREAS,  paragraph  9 of the  Agreement  permits  it to be  amended by
mutual consent.

         WHEREAS,  on December 7, 1998,  the  Compensation  and Human  Resources
Committee of the PNM Board of Directors  approved certain benefits upon a Change
in Control (as defined in the First  Restated  and Amended  Executive  Retention
Plan) and  authorized  certain  amendments  to affected  plans,  including  this
Agreement; and

         WHEREAS, the Company desires to amend this Agreement to incorporate the
approved  Change in Control  benefits to provide full and sufficient  funding of
the Public Service Company of New Mexico and Paragon  Resources,  Inc.  Deferred
Compensation Trust Agreement (the "Rabbi Trust") for any obligations or benefits
accrued as of the date of the occurrence of the Change in Control.

         NOW,  THEREFORE,  PNM and Montoya do hereby amend the Agreement by this
Second Amendment as follows:

         ITEM 1. Paragraph 7, Source of Payments of Benefits,  is hereby amended
to add a new last paragraph, as follows:

         Notwithstanding  the above,  upon a Change in Control as defined in the
         First Restated and Amended Executive  Retention Plan effective December
         7,  1998 and  incorporated  herein  by  reference,  the  Company  shall
         sufficiently  fund the Public Service Company of New Mexico and Paragon
         Resources,  Inc.  Deferred  Compensation  Trust  Agreement  (the "Rabbi
         Trust")  to  provide  in  full  for any  benefits  accrued  under  this
         Agreement as of the date of the occurrence of the Change in Control.

         ITEM 2. Except as herein above amended,  PNM and Montoya hereby readopt
and redeclare each and every provision of the Agreement, as amended.




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         IN  WITNESS  WHEREOF,  the  parties  hereto,  personally  or  by  their
authorized  representatives,  have signed this Second Amendment to the Agreement
effective as of the date specified herein.



                                   PUBLIC SERVICE COMPANY OF NEW MEXICO


Date:_________________              By_________________________________________
                                                  JOHN T. ACKERMAN
                                          Chairman of the Board of Directors


Date:_________________              _________________________________________
                                          BENJAMIN F. MONTOYA










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