SAN JUAN PROJECT PARTICIPATION AGREEMENT

AMONG

PUBLIC SERVICE COMPANY OF NEW MEXICO

TUCSON ELECTRIC POWER COMPANY

THE CITY OF FARMINGTON, NEW MEXICO

M-S-R PUBLIC POWER AGENCY

THE INCORPORATED COUNTY OF LOS ALAMOS, NEW MEXICO

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY

CITY OF ANAHEIM

UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS

TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.

TABLE OF CONTENTS

SECTION PAGE
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I. PARTIES AND INTRODUCTORY MATTERS

1 PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 EFFECTIVE DATE AND TERMINATION . . . . . . . . . . . . . . . . . 8
5 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10

II. OWNERSHIP OF SAN JUAN PROJECT

6 OWNERSHIPS AND TITLES . . . . . . . . . . . . . . . . . . . . . 19
7 CAPITAL IMPROVEMENTS AND RETIREMENTS OF SAN JUAN PROJECT
AND PARTICIPANTS' SOLELY OWNED FACILITIES . . . 23

8 WAIVER OF RIGHT TO PARTITION . . . . . . . . . . . . . . . . . . 27
9 BINDING COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 28
10 MORTGAGE AND TRANSFER OF PARTICIPANTS' INTERESTS . . . 30
11 RIGHTS OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . 33
12 RIGHTS OF PNM AND TEP IN WATER AND COAL . . . . . . . . . . . . 38
13 SEVERANCE OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . 39

III. ENTITLEMENTS TO OUTPUT OF SAN JUAN PROJECT

14 ENTITLEMENT TO CAPACITY AND ENERGY . . . . . . . . . . . . . . . 40
15 CAPACITY ALLOCATION OF SWITCHYARD FACILITIES . . . . . . . 42
16 USE OF FACILITIES DURING CURTAILMENTS . . . . . . . . . . . . . 44

17 START-UP AND AUXILIARY POWER AND ENERGY REQUIREMENTS . . . . . 46

IV. ADMINISTRATION

18 COORDINATION COMMITTEE . . . . . . . . . . . . . . . . . . . . . 47
19 ENGINEERING AND OPERATING COMMITTEE . . . . . . . . . . . . . . 51
20 FUELS COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . 55
21 AUDITING COMMITTEE . . . . . . . . . . . . . . . . . . . . . . 61

V. BUDGETS AND OPERATING EXPENSES

22 OPERATION AND MAINTENANCE EXPENSES . . . . . . . . . . . . . . . 64
23 FUEL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24 ANNUAL BUDGETS . . . . . . . . . . . . . . . . . . . . . . . . 78
25 PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . 79
26 MATERIALS AND SUPPLIES . . . . . . . . . . . . . . . . . . . . 80
27 EMERGENCY SPARE PARTS . . . . . . . . . . . . . . . . . . . . . 82

VI. OPERATING AGENT

28 OPERATION AND MAINTENANCE . . . . . . . . . . . . . . . . . . . 83
29 OPERATING EMERGENCY . . . . . . . . . . . . . . . . . . . . . . 89
30 PAYMENT OF EXPENSES BY PARTICIPANTS . . . . . . . . . . . . . . 92
31 OPERATING INSURANCE . . . . . . . . . . . . . . . . . . . . . . 94
32 SURPLUS OR RETIRED PROPERTY . . . . . . . . . . . . . . . . . . 98
33 REMOVAL OF OPERATING AGENT . . . . . . . . . . . . . . . . . . . 99
34 DEFAULTS BY OPERATING AGENT . . . . . . . . . . . . . . . . . . 101

VII. DEFAULTS, LIABILITY AND ARBITRATION

35 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
36 LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
37 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 115

VIII. RETIREMENT AND RECONSTRUCTION

38 DESTRUCTION, DAMAGE OR CONDEMNATION OF A UNIT . . . . . . . . . 118
39 RIGHTS OF PARTICIPANTS UPON TERMINATION . . . . . . . . . . . . 120
40 DECOMMISSIONING OF THE PROJECT . . . . . . . . . . . . . . . . . 121

IX. MISCELLANEOUS PROVISIONS

41 RELATIONSHIP OF PARTICIPANTS . . . . . . . . . . . . . . . . . . 122
42 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
43 OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 125
44 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . 128
45 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 129

EXHIBIT I Real Property
EXHIBIT II Annual Minimum Coal
EXHIBIT III Switchyard Facilities
EXHIBIT IV Ownership of Equipment
EXHIBIT V O&M of Equipment
EXHIBIT VI A&G Expenses
EXHIBIT VII Coal Allocation and Billing
EXHIBIT VIII Adjustment of Voting Requirements
EXHIBIT IX Fixed Fuel Expense

iii

PART I

PARTIES AND INTRODUCTORY MATTERS

1.0 PARTIES:

The parties to this San Juan Project Participation Agreement
("Agreement") are: PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation ("PNM"); TUCSON ELECTRIC POWER COMPANY, an Arizona corporation
("TEP"); THE CITY OF FARMINGTON, NEW MEXICO, an incorporated municipality and a
body politic and corporate, existing as a political subdivision under the
constitution and laws of the State of New Mexico ("Farmington"); M-S-R PUBLIC
POWER AGENCY, a joint exercise of powers agency organized under the laws of the
State of California ("M-S-R"); THE INCORPORATED COUNTY OF LOS ALAMOS, NEW
MEXICO, a body politic and corporate, existing as a political subdivision under
the constitution and laws of the State of New Mexico ("LAC"); SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY, a joint exercise of powers agency organized
under the laws of the State of California ("SCPPA"); THE CITY OF ANAHEIM, a
municipal corporation organized under the laws of the State of California
("Anaheim"); UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS, a political subdivision of
the State of Utah ("UAMPS"); and TRI-STATE GENERATION AND TRANSMISSION
ASSOCIATION, INC., a Colorado cooperative corporation ("Tri-State"). These
parties are the participants in the San Juan Project, and are hereinafter
sometimes referred to individually as a "Participant" and collectively as
"Participants."

2.0 RECITALS: This Agreement is made with reference to the following
facts, among others:

2.1 PNM is an electric utility engaged in the generation,
transmission and distribution of electric power and energy in a part of
the State of New Mexico.

2.2 TEP is an electric utility engaged in the generation,
transmission and distribution of electric power and energy in a part of
the State of Arizona.

2.3 Farmington operates a municipal electric utility engaged
in the generation, transmission and distribution of electric power and
energy in a part of the State of New Mexico.

2.4 M-S-R is a public entity engaged in the generation,
transmission, purchase and sale of electric power and energy in the
western United States for the benefit of its member public agencies.

2.5 LAC operates a municipal electric utility engaged in the
generation, transmission and distribution of electric power and energy
in a part of the State of New Mexico.

2.6 SCPPA is a public entity created to acquire, construct,
finance, operate and maintain generation and transmission projects on
behalf of its members.

2.7 Anaheim operates a municipal utility in the State of
California engaged in the generation, transmission and distribution of
electric power.

2.8 UAMPS is a public entity created to plan, finance,
develop, acquire, construct, improve, better, operate and maintain
projects, or ownership interests or capacity rights therein, for the
generation, transmission and distribution of electric energy for the
benefit of its members.

2.9 Tri-State is a cooperative corporation created pursuant to
the laws of the State of Colorado. Tri-State's primary functions
involve the generation, transmission, transformation and sale of
electricity to its member distribution cooperatives.

2.10 PNM and TEP each has an undivided one-half (1/2)
ownership interest in the real property associated with the San Juan
Project, which real property is described in Exhibit I, attached hereto
and incorporated herein, and is identified therein as Parcels A through
F.

2.11 PNM and TEP have entered into the Coal Sales Agreement
with San Juan Coal Company ("SJCC"), pursuant to which SJCC agreed to
supply the San Juan Project with coal.

2.12 PNM contracted with the United States Department of the
Interior, Bureau of Reclamation, under the Colorado River Storage
Project Act to purchase 20,200 acre feet of water per year from Navajo
Reservoir under Contract 14-06-400-4821 dated April 11, 1968. Said
contract was amended by an amendatory contract dated September 29,
1977, wherein the United States Department of the Interior, Bureau of
Reclamation (i) acknowledged PNM's assignment to TEP of an undivided
one-half (1/2) interest in PNM's rights and obligations imposed under
the April 11, 1968, contract; and (ii) revised the amount of water
available for consumptive use by the San Juan Project from the Navajo
Reservoir from 20,200 acre feet per year to 16,200 acre feet per year.

2.13 The San Juan Project Co-Tenancy Agreement was executed as
of February 15, 1972, effective as of July 1, 1969. The original
Co-Tenancy Agreement was modified by joint action of PNM and TEP, as
follows: Modification No. 1 on May 16, 1979, Modification No. 2 on
December 31, 1983, Modification No. 3 on July 17, 1984, Modification
No. 4 on October 25, 1984, Modification No. 5 on July 1, 1985,
Modification No. 6 on April 1, 1993, Modification No. 7 on April 1,
1993, Modification No. 8 on September 15, 1993, Modification No. 9 on
January 12, 1994 and Modification No. 10 on November 30, 1995 (the
original of such Co-Tenancy Agreement, as amended by Modifications 1
through 10, is referred to herein as the "Co-Tenancy Agreement").

2.14 The San Juan Project Operating Agreement was executed as
of December 21, 1973, effective as of July 1, 1969. The original
Operating Agreement was modified by joint action of PNM and TEP, as
follows: Modification No. 1 on May 16, 1979, Modification No. 2 on
December 31, 1983, Modification No. 3, on July 17, 1984, Modification
No. 4 on October 25, 1984, Modification No. 5 on July 1, 1985,
Modification No. 6 on April 1, 1993, Modification No. 7 on April 1,
1993, Modification No. 8 on September 15, 1993, Modification No. 9 on
January 12, 1994 and Modification No. 10 on November 30, 1995 (the
original of such Operating Agreement, as amended by Modifications 1
through 10, is referred to herein as the "Operating Agreement").

2.15 A San Juan Project Construction Agreement was executed as
of December 21, 1973, effective as of July 1, 1969, to govern the
construction of the San Juan Project; this agreement was thereafter
modified from time to time and was terminated in 1995 by action of PNM
and TEP.

2.16 On May 16, 1979, TEP and PNM entered into an agreement
whereby on that date TEP conveyed to PNM TEP's 50 percent undivided
ownership interest in Unit 4.

2.17 On November 17, 1981, PNM transferred an 8.475 percent
undivided ownership interest in Unit 4 to Farmington.

2.18 On December 31, 1983, PNM transferred a 28.8 percent
undivided ownership interest in Unit 4 to M-S-R.

2.19 On October 31, 1984, TEP transferred its 50 percent
undivided ownership interest in Unit 3 to Alamito Company, which later
changed its name to Century Power Company ("Century").

2.20 On July 1, 1985, PNM transferred a 7.2 percent undivided
ownership interest in Unit 4 to LAC.

2.21 On July 1, 1993, Century transferred a 41.8 percent
undivided ownership interest in Unit 3 to SCPPA.

2.22 On August 12, 1993, PNM transferred a 10.04 percent
undivided ownership interest in Unit 4 to Anaheim.

2.23 On June 2, 1994, PNM transferred a 7.028 percent
undivided ownership interest in Unit 4 to UAMPS.

2.24 On January 2, 1996, Century transferred an 8.2 percent
undivided ownership interest in Unit 3 to Tri-State.

2.25 Farmington, M-S-R, LAC, SCPPA, Anaheim, UAMPS and
Tri-State were classified as "Unit Participants" in the San Juan
Project, pursuant to the Co-Tenancy Agreement.

2.26 As of April 29, 1994, PNM, TEP, Century, SCPPA,
Farmington, M-S-R, LAC and Anaheim executed the San Juan Project
Designated Representative Agreement (the "DR Agreement") to implement
the requirements of the federal Clean Air Act Amendments of 1990; the
DR Agreement was thereafter accepted by UAMPS and Tri-State at the time
of their respective purchases of ownership interests in the San Juan
Project.

2.27 The Participants desire, in this Agreement, to amend and
restate, and to replace in their entirety, the Co-Tenancy Agreement and
the Operating Agreement and to set out in one instrument all of the
matters previously included in the Co-Tenancy Agreement and the
Operating Agreement.

3.0 AGREEMENT: The Participants, for and in consideration of the mutual
covenants to be by them kept and performed, agree as follows.

4.0 EFFECTIVE DATE AND TERMINATION:

4.1 Except as otherwise provided in Section 4.3, this
Agreement shall become effective upon the later of the following dates:
(a) the date upon which the FERC accepts for filing this Agreement;
provided that, if the FERC orders a hearing to determine whether this
Agreement is just and reasonable, this Agreement shall not become
effective until the date when an order, no longer subject to judicial
review, has been issued by the FERC determining this Agreement to be
just and reasonable without changes or modifications unacceptable to
the Participants; or (b) the date upon which the Rural Utilities
Service ("RUS") approves this Agreement on behalf of Tri-State.

4.2 Following execution by all Participants, PNM shall file a
copy of this Agreement with the FERC in a timely manner. In such
filing, PNM shall request waiver of applicable FERC notice requirements
in order to allow this Agreement to become effective as of the earliest
feasible date. All other Participants shall support PNM's filing by the
prompt filing of a certificate or letter of concurrence or intervention
in support of the filing.

4.3 Following (a) an order by the FERC or any other regulatory
agency having jurisdiction, or (b) a letter or other communication from
the RUS, the Participants shall each review such order, letter or
communication to determine if the FERC, RUS or any agency having
jurisdiction has changed or modified a condition or conditions, deleted
a condition or conditions, or imposed a new condition or conditions
with regard to this Agreement; or has conditioned its approval of this
Agreement upon changes or modifications to a condition or conditions,
deletion of a condition or conditions or imposition of a new condition
or conditions. The Participant receiving such order, letter or
communication shall promptly provide a copy of such order, letter or
communication to the other Participants. Within fifteen (15) business
days after receipt by the other Participants of the copy of the order,
letter or communication, the Participants shall indicate to each other
in writing their acceptance or rejection of this Agreement based upon
any changes, modifications, deletions or new conditions required by the
FERC, RUS or any agency having jurisdiction. A failure to notify within
said fifteen (15) day period shall be the equivalent to a notification
of acceptance. If any Participant rejects this Agreement because the

FERC, RUS or any agency having jurisdiction has modified a condition,
deleted a condition or imposed a new condition in this Agreement, or
has conditioned its approval on such a change, modification, deletion
or new condition, the Participants will be deemed to have rejected this
Agreement and they shall attempt, in good faith, to renegotiate the
terms and conditions of this Agreement to resolve such changed,
modified, deleted or new condition to the satisfaction of the
Participants within one hundred twenty (120) days after the date of
such order, letter or communication and thereafter to obtain requisite
regulatory approval of such renegotiated agreement.

4.4 This Agreement shall continue in force and effect until
July 1, 2022, unless otherwise agreed in writing by the Participants.

5.0 DEFINITIONS: The following terms, when used herein with initial
capitalization, and whether in the singular or the plural, shall have the
meaning specified:

5.1 ACCOUNTING PRACTICE: Generally accepted accounting
principles in accordance with FERC Accounts applicable to electric
utility operations.

5.2 AGREEMENT: This San Juan Project Participation Agreement,
including all exhibits and attachments hereto, and as may be modified
or amended from time to time.

5.3 ANNUAL MINIMUM COAL DELIVERY: The quantities of coal set
forth on Exhibit H to the Coal Sales Agreement, which amounts are shown
on Exhibit II, attached hereto and incorporated herein.

5.4 AUDITING COMMITTEE: A committee which is described in
Section 21.

5.5 AVAILABLE OPERATING CAPACITY: The maximum net electrical
capacity of each installed and operating Unit which is available at any
given time to the Participants at the 345 kV buses.

5.6 CAPACITY: Electrical rating expressed in megawatts ("MW").

5.7 CAPITAL IMPROVEMENTS: Any property, land or land rights
added to the San Juan Project or the substitution, replacement,
enlargement or improvement of any Units of Property, structures,
facilities, equipment, property, land or land rights constituting a
part of the San Juan Project, which in accordance with Accounting
Practice would be capitalized, and also including the costs of removal,
salvage or disposal of any Units of Property being replaced or
substituted.

5.8 CARRY-OVER TONS: Coal deliveries made annually to the San
Juan Project by SJCC in excess of the Annual Minimum Coal Delivery, as
more fully described in the Coal Sales Agreement.

5.9 CARRY-OVER TONS ACCOUNT: A record system established and
maintained by the Operating Agent to allocate to each Participant
Carry-over Tons earned by the San Juan Project.

5.10 COAL SALES AGREEMENT: Agreement between PNM, TEP and SJCC
executed on August 18, 1980, as amended or modified and as may be
amended and modified from time to time.

5.11 CONTROL AREA: An area comprised of an electric system or
systems, bounded by interconnection metering and telemetry, and capable
of controlling generation to maintain its interchange schedule with
other control areas and contributing to frequency regulation of the
interconnection.

5.12 COORDINATION COMMITTEE: A committee which is described in
Section 18.

5.13 CO-TENANCY AGREEMENT: The agreement described in Section
2.13.

5.14 DR AGREEMENT: The agreement described in Section 2.26, as
amended from time to time.

5.15 EMERGENCY COAL STORAGE PILE: The coal storage pile for
the San Juan Project, sometimes referred to as the "minimum coal
storage pile," which is to be drawn upon when fuel deliveries are
interrupted.

5.16 EMERGENCY SPARE PARTS: Spare parts or auxiliary
equipment, the cost of which is capitalized, which are stocked for
emergency use for the San Juan Project and which are not scheduled for
periodic replacement.

5.17 ENERGY: The accumulated amount of power produced over a
stated time interval, expressed in kilowatt hours ("kWh") or megawatt
hours ("MWh").

5.18 ENGINEERING AND OPERATING COMMITTEE: A committee which is
described in Section 19.

5.19 EXCESS FIXED FUEL EXPENSE: Annual Fixed Fuel Expenses in
excess of Minimum Fixed Fuel Expense.

5.20 FC LINE: That 345 kV transmission line between the San
Juan generating station and the Four Corners generating plant.

5.21 FIXED FUEL EXPENSE: Those expenses itemized on Exhibit
IX, attached hereto and incorporated herein.

5.22 FERC: The Federal Energy Regulatory Commission or any
successor thereto.

5.23 FERC ACCOUNTS: The FERC Uniform System of Accounts
prescribed for Public Utilities and Licensees (Class A and Class B).
References in this Agreement to a specific FERC account number shall
mean the number in effect as of the date of this Agreement and any
successor account number.

5.24 FUELS COMMITTEE: A committee which is described in
Section 20.

5.25 MATERIALS AND SUPPLIES: Those materials and supplies, the
cost of which is charged to FERC Account 154, which are stocked for use
in the operation and maintenance of the San Juan Project.

5.26 MINIMUM FIXED FUEL EXPENSE: Fixed Fuel Expense associated
with the Annual Minimum Coal Delivery.

5.27 MINIMUM NET GENERATION: The lowest net load at which each
Unit can be reliably maintained in service on a continuous basis on
coal fuel.

5.28 NET EFFECTIVE GENERATING CAPACITY: The maximum continuous
ability of each Unit to produce power, less auxiliary power
requirements.

5.29 NET ENERGY GENERATION: The Energy generated by each Unit
which is available to the respective Participants at the 345 kV bus.

5.30 OPERATING ACCOUNT: The bank account(s) in the names of
the Participants established by the Operating Agent pursuant to Section
28.

5.31 OPERATING AGENT: The Participant or other entity which
has been selected by the Participants as the entity responsible for the
operation and maintenance of the San Juan Project pursuant to this
Agreement.

5.32 OPERATING AGREEMENT: The agreement described in Section
2.14.

5.33 OPERATING EMERGENCY: An unplanned event or circumstance
at the San Juan Project which reduces or may reduce the availability of
Capacity or Energy from a Unit.

5.34 OPERATING FUNDS: Monies advanced to, and disbursed by,
the Operating Agent on behalf of the Participants in accordance with
this Agreement.

5.35 OPERATING INSURANCE: Policies of insurance secured or to
be secured and maintained in accordance with Section 31.

5.36 OPERATING WORK: Engineering, contract preparation and
administration, purchasing, repair, supervision, training, expediting,
inspection, testing, protection, operation, use, management,
replacement, retirement, reconstruction and maintenance of and for the
benefit of the San Juan Project pursuant to this Agreement, including
the administration of this Agreement and of any other Project
Agreements and the procurement of fuel and water and other necessary
materials and supplies.

5.37 PARTICIPANT: PNM, TEP, Farmington, M-S-R, LAC, SCPPA,
Anaheim, UAMPS or Tri-State.

5.38 PARTICIPANT MINIMUM FIXED FUEL EXPENSE: For each
Participant, the Minimum Fixed Fuel Expense, as provided in Section 23,
multiplied by that Participant's Participation Share as provided in
Section 6.2.6.

5.39 PARTICIPATION SHARE: Each Participant's percentage
ownership interest in the various elements of the San Juan Project as
set forth in Section 6.

5.40 PROJECT AGREEMENTS: This Agreement and such other
agreements as are determined by the Coordination Committee to be
necessary to define the rights and duties of the Participants with
respect to the San Juan Project.

5.41 PRUDENT UTILITY PRACTICE: Any of the practices, methods
and acts engaged in or approved by a significant portion of the
electric utility industry during the relevant time period, or any of
the practices, methods and acts which, in the exercise of reasonable
judgment in the light of the facts known at the time the decision was
made, could have been expected to accomplish the desired result at a
reasonable cost consistent with good business practices, reliability,
safety and expedition. Prudent Utility Practice is intended to be
acceptable practices, methods or acts generally accepted in the
industry, as such practices may be affected by special operational
design characteristics of the San Juan Project, the quality and
quantity of fuel delivered in accordance with the Coal Sales Agreement
or successor agreement, the rights and obligations of the Participants
in accordance with this Agreement and any other special circumstances
affecting the Operating Work.

5.42 SAN JUAN PROJECT: The four unit, coal-fired electric
generation plant located in San Juan County, New Mexico, near
Farmington, New Mexico. The San Juan Project includes all facilities,
structures, transmission and distribution lines incident to the
four-unit electric generating plant. The San Juan Project does not
include distribution lines, transmission lines, equipment in the
Switchyard Facilities or other facilities owned exclusively by a
Participant.

5.43 SWITCHYARD FACILITIES: The switchyard facilities required
for the San Juan Project as shown by materials listed in Exhibit III,
attached hereto and incorporated herein.

5.44 TOTAL MONTHLY COAL COST: The amount charged the Operating
Agent by SJCC in accordance with the Coal Sales Agreement.

5.45 UNIT: Unit 1, Unit 2, Unit 3 or Unit 4.

5.46 UNIT 1: The second operating unit of the San Juan
Project, which was placed in commercial service on December 31, 1976
and which presently has a net capacity rating of 327 MW.

5.47 UNIT 2: The first operating unit of the San Juan Project,
which was placed in commercial service on November 30, 1973 and which
presently has a net capacity rating of 316 MW.

5.48 UNIT 3: The third operating unit of the San Juan Project,
which was placed in commercial service on December 31, 1979 and which
presently has a net capacity rating of 497 MW.

5.49 UNIT 4: The fourth operating unit of the San Juan
Project, which was placed in commercial service on April 27, 1982 and
which presently has a net capacity rating of 507 MW.

5.50 UNITS OF PROPERTY: Property as described in the FERC's
list of units of property for use in connection with the Uniform System
of Accounts Prescribed for Public Utilities and Licensees Subject to
the Provisions of the Federal Power Act, contained in 18 CFR Part 116,
in effect on the effective date of this Agreement, as thereafter
modified or amended.

5.51 VARIABLE FUEL EXPENSES: All fuel expenses not
specifically identified as Fixed Fuel Expenses.

5.52 WATER CONTRACT: The contract with the United States
Department of the Interior, Bureau of Reclamation, under the Colorado
River Storage Project Act, as more fully described in Section 2.12.

5.53 WILLFUL ACTION:

5.53.1 Action taken or not taken by a Participant (or
the Operating Agent), at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action is
knowingly or intentionally taken or not taken with conscious
indifference to the consequences thereof or with intent that
injury or damage would probably result therefrom; or

5.53.2 Action taken or not taken by a Participant (or
the Operating Agent) at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action has been
determined by final arbitration award or final judgment or
judicial decree to be a material default under a Project
Agreement and which action occurs or continues beyond the time
specified in such arbitration award or judgment or judicial
decree for curing such default, or if no time to cure is
specified therein, occurs or continues beyond a reasonable
time to cure such default; or

5.53.3 Action taken or not taken by a Participant (or
the Operating Agent), at the direction of its directors,
members of its governing body, officers or employees having
management or administrative responsibility affecting its
performance under a Project Agreement, which action is
knowingly or intentionally taken or not taken with the
knowledge that such action taken or not taken is a material
default under a Project Agreement.

5.53.4 The phrase "employees having management or
administrative responsibility," as used in this Section 5.53,
means employees of a Participant who are responsible for one
or more of the executive functions of planning, organizing,
coordinating, directing, controlling and supervising such
Participant's performance under a Project Agreement; provided
however, that, with respect to employees of the Operating
Agent acting in its capacity as such and not in its capacity
as a Participant, such phrase shall refer only to (i) the
senior employee of the Operating Agent on duty at the San Juan
Project who is responsible for the operation of the Units, and
(ii) anyone in the organizational structure of the Operating
Agent between such senior employee and an officer.

5.53.5 Willful Action does not include any act or
failure to act which is merely involuntary, accidental or
negligent.

PART II
OWNERSHIP OF SAN JUAN PROJECT

6.0 OWNERSHIPS AND TITLES:

6.1 PNM and TEP, respectively, each has an undivided one-half
(1/2) ownership interest in the real property interests described in
Exhibit I as Parcels A through F.

6.2 Unless otherwise provided in Exhibit IV, the Units and
other facilities of the San Juan Project and Capital Improvements shall
be owned and title held by the Participants, in the following
percentages:

6.2.1 For Units 1 and 2 and for all equipment and
facilities directly related to Units 1 and 2 only, in
accordance with the following percentages:

6.2.1.1 PNM: 50 percent
6.2.1.2 TEP: 50 percent
6.2.1.3 M-S-R: 0 percent
6.2.1.4 Farmington: 0 percent
6.2.1.5 Tri-State: 0 percent
6.2.1.6 LAC: 0 percent
6.2.1.7 SCPPA: 0 percent
6.2.1.8 Anaheim: 0 percent
6.2.1.9 UAMPS: 0 percent

6.2.2 For Unit 3 and for all equipment and facilities
directly related to Unit 3 only, in accordance with the
following percentages:

6.2.2.1 PNM: 50 percent
6.2.2.2 TEP: 0 percent
6.2.2.3 M-S-R: 0 percent
6.2.2.4 Farmington: 0 percent
6.2.2.5 Tri-State: 8.2 percent
6.2.2.6 LAC: 0 percent
6.2.2.7 SCPPA: 41.8 percent
6.2.2.8 Anaheim: 0 percent
6.2.2.9 UAMPS: 0 percent

6.2.3 For Unit 4 and for all equipment and facilities
directly related to Unit 4 only, in accordance with the
following percentages:

6.2.3.1 PNM: 38.457 percent
6.2.3.2 TEP: 0 percent
6.2.3.3 M-S-R: 28.8 percent
6.2.3.4 Farmington: 8.475 percent
6.2.3.5 Tri-State: 0 percent
6.2.3.6 LAC: 7.20 percent
6.2.3.7 SCPPA: 0 percent
6.2.3.8 Anaheim: 10.04 percent
6.2.3.9 UAMPS: 7.028 percent

6.2.4 For equipment and facilities common to Units 1
and 2 only, in accordance with the following percentages:

6.2.4.1 PNM: 50 percent
6.2.4.2 TEP: 50 percent
6.2.4.3 M-S-R: 0 percent
6.2.4.4 Farmington: 0 percent
6.2.4.5 Tri-State: 0 percent
6.2.4.6 LAC: 0 percent
6.2.4.7 SCPPA: 0 percent
6.2.4.8 Anaheim: 0 percent
6.2.4.9 UAMPS: 0 percent

6.2.5 For equipment and facilities common to Units 3
and 4 only, in accordance with the following percentages:

6.2.5.1 PNM: 44.119 percent
6.2.5.2 TEP: 0 percent
6.2.5.3 M-S-R: 14.4 percent
6.2.5.4 Farmington: 4.249 percent
6.2.5.5 Tri-State: 4.1 percent
6.2.5.6 LAC: 3.612 percent
6.2.5.7 SCPPA: 20.9 percent
6.2.5.8 Anaheim: 5.07 percent
6.2.5.9 UAMPS: 3.55 percent

6.2.6 For equipment and facilities common to all of
the Units in accordance with the following percentages:

6.2.6.1 PNM: 46.297 percent
6.2.6.2 TEP: 19.8 percent
6.2.6.3 M-S-R: 8.7 percent
6.2.6.4 Farmington: 2.559 percent
6.2.6.5 Tri-State: 2.49 percent
6.2.6.6 LAC: 2.175 percent
6.2.6.7 SCPPA: 12.71 percent
6.2.6.8 Anaheim: 3.10 percent
6.2.6.9 UAMPS: 2.169 percent

6.2.7 San Juan Project equipment and facilities not
included in Sections 6.2.1 through 6.2.6 which were in service
as of May 16, 1979 remain in individual one-half (1/2)
ownership, with each of PNM and TEP retaining title to an
equal undivided one-half (1/2) interest therein; provided,
however, that subsequent to the in-service date of Unit 4,
PNM, on behalf of itself and the Participants to which PNM
conveyed ownership interests and generation entitlements in
the San Juan Project, shall have the right to use sixty-five
percent (65%), and TEP, on behalf of itself and the
Participants which succeeded to TEP-conveyed ownership
interests and generation entitlements in the San Juan Project,
shall have the right to use thirty-five percent (35%) of the
real property associated with the San Juan Project, the water,
the coal inventory, the then existing oil for ignition and
flame stabilization, and the use of the 345 kV switchyard
capacity up to the combined installed capacity of Units 1, 2,
3 and 4, except as otherwise provided in Section 7, and except
that, subject to Section 15.2.3, PNM and TEP shall each be
entitled to use 50 percent (50%) of switchyard capacity in
excess of combined installed capacity of Units 1, 2, 3 and 4
for the San Juan Project.

6.2.8 Exhibit IV (a through h), attached hereto and
incorporated herein, is a partial list of equipment and
facilities of the San Juan Project and reflects the

Participants' ownership interests therein. This exhibit is to
provide the Engineering and Operating Committee, the Auditing
Committee, the Fuels Committee and the Coordination Committee
with guidelines for carrying out their duties under this
Agreement.

6.2.9 In areas where ownership of equipment and
facilities is not clearly defined by Sections 6.2.1 to 6.2.7,
the Engineering and Operating Committee shall make a
determination of such ownership in accordance with Section 19.
Disputes arising from such determination shall be resolved by
the Coordination Committee in accordance with Section 18.

6.2.10 Materials and Supplies shall be owned by the
Participants in proportion to their respective current
investments in the Materials and Supplies.

6.3 The Emergency Coal Storage Pile shall be owned by the
Participants in proportion to their respective investments in the
Emergency Coal Storage Pile.

6.4 In the event that a Participant transfers or assigns any
of its rights, titles or interests in and to the San Juan Project in
accordance with the terms and conditions of this Agreement, the
Participants (including the transferee or assignee of a Participant)
shall jointly make, execute and deliver a supplement to this Agreement
in recordable form which shall describe with particularity and in
detail the rights, titles and interests of each Participant following
such transfer or assignment.

6.5 PNM and TEP own as tenants in common the Switchyard
Facilities described in Exhibit III in equal, undivided one-half (1/2)
interests.

7.0 CAPITAL IMPROVEMENTS AND RETIREMENTS OF SAN JUAN PROJECT AND
PARTICIPANTS' SOLELY OWNED FACILITIES:

7.1 The Participants recognize that from time to time it may
be necessary or desirable to make Capital Improvements to and
retirements of facilities comprising the San Juan Project.

7.2 Any such Capital Improvements and retirements shall be
noted by an appropriate revision in or supplement to the appropriate
exhibits hereto attached.

7.3 The rights, titles and interests, including Participation
Shares, of a Participant in and to any Capital Improvements shall be as
provided for the respective classes of property described in Section 6.
The Participants shall be obligated for the costs of such Capital
Improvements in the same percentages as their Participation Shares.

7.4 All Capital Improvements, and a contingency allowance for
capital expenditures necessitated by an Operating Emergency or
otherwise deemed justifiable by the Operating Agent, shall be included
in the annual capital expenditures budget. The Engineering and
Operating Committee may authorize Capital Improvements not included in
the annual capital expenditures budget; provided, that such Capital
Improvements shall not exceed the sum of five hundred thousand dollars
($500,000) for each such Capital Improvement, unless also authorized by
the Coordination Committee.

7.5 The Operating Agent shall submit to the Participants a
forecast of cash requirements by months for Capital Improvements. Said
forecast will be submitted on a yearly basis after final budget
approvals have been made. A revised forecast shall be submitted when
the capital expenditures budget is revised, or when significant changes
in monthly expenditures from those previously forecast are anticipated.
The Operating Agent shall be authorized to make additional expenditures
related to Capital Improvements; provided, however, that such
additional expenditures for Capital Improvements shall not exceed the
sum of one hundred thousand dollars ($100,000) or cause the total
expenditure limit contained in the capital expenditures budget to be
exceeded, unless also authorized by the Engineering and Operating
Committee, or by the Coordination Committee if the total expenditure
for such Capital Improvement exceeds five hundred thousand dollars
($500,000).

7.6 In the event of the removal or retirement of any
facilities comprising part of the San Juan Project, any proceeds
realized from the salvage of such facilities shall be distributed to
the Participants in accordance with their Participation Shares therein,
or shall be applied on account of the Participant's obligations to pay
for Capital Improvements replacing facilities removed or retired. Units
of Property retired from service shall be disposed of by the Operating
Agent on the best available terms as soon as practicable.

7.7 Each Participant shall have the right, at its own expense,
to add facilities to the Switchyard Facilities, provided the
Engineering and Operating Committee approves the design of such
additional facilities and determines that space is available therefor,
and that such committee also determines that such additional facilities
will not (i) infringe upon the rights of another Participant in the
Switchyard Facilities, (ii) unreasonably interfere with future
expansion plans at the San Juan Project, (iii) impair or interfere with
the contractual rights of another Participant, or (iv) jeopardize the
reliability of another Participant's system. The Engineering and
Operating Committee shall have authority to impose conditions on a
Participant allowed to make such additions in order to protect the
other Participants. Such facilities shall be and remain the sole and
exclusive property of the Participant installing same until and unless
the Coordination Committee determines that such facilities are
necessary and beneficial for operation of the San Juan Project as a
whole. In the event of such determination, the facilities shall be
acquired as a part of the San Juan Project by the Participants and
compensation shall be paid to the selling Participant by the
Participants acquiring such interest based on the net book value of
such facilities.

7.8 Each Participant shall have the right, at its own expense,
to add protective relay or communication equipment to facilities solely
owned by it, if the Participant determines the protective relay or
communication equipment is needed for the protection of its electric
system, provided the Engineering and Operating Committee approves the
design of such additional equipment and determines that space is
available therefor, and that such committee also determines that such
additional facilities will not (i) infringe upon the rights of another
Participant in the facilities, (ii) unreasonably interfere with future
expansion plans at the San Juan Project, (iii) impair or interfere with
the contractual rights of another Participant, or (iv) jeopardize the
reliability of another Participant's system.

7.9 Transportation and motorized equipment which is to be
utilized by the Operating Agent for Operating Work may be purchased or
leased by the Operating Agent upon receipt of the approval referred to
in Section 19.3.4. Ownership of such purchased equipment and the
purchase price thereof shall be allocated between and paid by the
Participants in proportion to the percentages established in Section 6.
Lease payments made by the Operating Agent for such leased equipment
shall be apportioned between and paid by the Participants in accordance
with Section 22.1. No allowance to the Operating Agent for
administrative and general expense shall be included in or added to
such lease payments for transportation and motorized equipment which,
in lieu of acquiring such equipment by purchase, has been leased on a
long-term basis.

7.10 Upon retirement of leased transportation and motorized
equipment utilized for Operating Work, an amount, which shall be
treated as a charge (or credit), shall be determined by multiplying the
difference between the salvage value and the unamortized balance owing
to the leasing company for each piece of such equipment by a fraction,
the numerator of which is the sum of the monthly lease payments for
such equipment charged to Operating Work and the denominator of which
is the sum of all monthly lease payments made by the Operating Agent
for such equipment. Such charge or credit shall be allocated among the
Participants in accordance with the applicable percentages set forth in
Section 22.

7.11 Administrative and general expenses which have been
incurred by the Operating Agent which are applicable to authorized
Capital Improvements, shall be applied monthly to construction costs
incurred during the preceding month. A rate will be developed by the
Operating Agent every three (3) years in conjunction with the
administrative and general ("A&G") expenses study referenced in
Attachment A to Exhibit VI. The current methodology for calculating the
A&G Ratio for Capital Improvements is set forth in Exhibit VI,
Attachment E. If any Participant believes that the method used in
determining the A&G Ratio for Capital Improvements results in an
unreasonable burden on such Participant(s), such Participant(s) may
request that said method used in determining said ratio be submitted to
the Auditing Committee for review in accordance with the procedures set
out in Sections 22.6.1 through 22.6.4.

7.12 Excluded from the charges in Section 7.11 are expenses
incurred under Section 36.2.

8.0 WAIVER OF RIGHT TO PARTITION:

8.1 The Participants accept title to their respective
interests in the San Juan Project, water rights, lands, land rights and
improvements thereon as tenants in common, and agree that their
interests therein shall be held in such tenancy in common for the
duration of the term of this Agreement, including any extensions
thereof. While this Agreement, including any extensions thereof,
remains in force and effect, each Participant agrees as follows:

8.1.1 That it hereby waives the right to partition
the San Juan Project, water rights, lands, land rights or the
improvements built thereon (whether by partitionment in kind
or by sale and division of the proceeds thereof), and

8.1.2 That it will not resort to any action at law or
in equity to partition (in either such manner) the San Juan
Project, water rights, lands, land rights or the improvements
built thereon and waives the benefits of all laws that may now
or hereafter authorize such partition.

9.0 BINDING COVENANTS:

9.1 Except as otherwise provided in Section 9.3, all of the
respective covenants and obligations of each of the Participants set
forth and contained in the Project Agreements shall bind and shall be
and become the respective obligations of:

9.1.1 Each Participant;

9.1.2 All mortgagees, trustees and secured parties
under all present and future mortgages, indentures and deeds
of trust, and security agreements which are or may become a
lien upon any of the properties of each Participant;

9.1.3 All receivers, assignees for the benefit of
creditors, bankruptcy trustees and referees of a Participant;

9.1.4 All other persons, firms, partnerships or
corporations claiming through or under any of the foregoing;
and

9.1.5 Any successors or assigns of any of those
mentioned in Sections 9.1.1 to 9.1.4, inclusive,

and shall be obligations running with the Participants' rights, titles
and interests in the San Juan Project, with all of the rights, titles
and interests (if any) of each Participant in, to and under this
Agreement and with their rights, titles and interests in the water
rights, lands, land rights and the improvements thereon. It is the
specific intention of this provision that all of such covenants and
obligations shall be binding upon any party which acquires any of the
rights, titles and interests of any of the Participants in the San Juan
Project, in, to and under this Agreement, and/or in the water rights,
lands, land rights or the improvements thereon, and that all of the
above-described persons and groups shall be obligated to use such
Participant's rights, titles and interests in the San Juan Project, in,
to and under this Agreement, and in the water rights, lands, land
rights and the improvements thereon, for the purpose of discharging its
covenants and obligations under this Agreement.

9.2 The rights, titles and interests of each Participant in
the San Juan Project, its rights, titles and interests in, to and under
this Agreement and its rights, titles and interests in and to the water
rights, lands, land rights and improvements thereon, shall inure to the
benefit of its successors and assigns.

9.3 Any mortgagee, trustee or secured party, or any receiver
or trustee appointed pursuant to the provisions of any present or
future mortgage, deed of trust, indenture or security agreement
creating a lien upon or encumbering the rights, titles or interests of
any Participant in the San Juan Project, in, to and under this
Agreement and/or in the water rights, lands, land rights or the
improvements thereon, and any successor thereof by action of law or
otherwise, and any purchaser, transferee or assignee of any thereof,
shall not be obligated to pay any monies accruing on account of any of
the obligations or duties of such Participant under this Agreement
incurred prior to the taking of possession or the initiation of
foreclosure or other remedial proceedings by such mortgagee, trustee or
secured party.

9.4 In the event that any or all of the provisions of this
Section 9 shall not be legally effective as to any Participant, or its
mortgagees, trustees, secured parties, receivers, successors or
assigns, then such Participant shall not be deemed in violation of this
Section 9 by reason thereof.

9.5 Nothing in this Section 9 or in this Agreement shall be
deemed to change any rights, titles or interests to water rights,
lands, land rights and the improvements thereon.

10.0 MORTGAGE AND TRANSFER OF PARTICIPANTS' INTERESTS:

10.1 The Participants shall have the right at any time and
from time to time to mortgage, create or provide for a security
interest in or convey in trust their respective rights, titles and
interests in the San Juan Project, their respective rights, titles and
interests in, to and under a Project Agreement and/or their rights,
titles and interests in the water rights, lands, land rights or the
improvements to be built thereon to a trustee or trustees under deeds
of trust, mortgages or indentures, or to secured parties under a
security agreement, as security for their present or future bonds or
other obligations or securities, and to any successors or assigns
thereof without need for the prior consent of the other Participants,
and without such mortgagee, trustee or secured party assuming or
becoming in any respect obligated to perform any of the obligations of
the Participants.

10.2 Any mortgagee, trustee or secured party under present or
future deeds of trust, mortgages, indentures or security agreements of
any of the Participants and any successor or assign thereof, and any
receiver, referee, or trustee in bankruptcy or reorganization of any of
the Participants, and any successor by action of law or otherwise, and
any purchaser, transferee or assignee of any thereof may, without need
for the prior consent of the other Participants, succeed to and acquire
all the rights, titles and interests of such Participant in the San
Juan Project, in, to and under the Project Agreements and/or the
rights, titles and interests of such Participant in the water rights,
lands, land rights and improvements thereon, and may take over
possession of or foreclose upon said property, rights, titles and
interests of such Participant.

10.3 Except as otherwise provided in Sections 10.1, 10.2 or
10.4 or, with respect to a transfer or assignment by a Participant to
another Participant as provided in Section 11, no Participant shall
transfer or assign its respective rights, titles and interests in the
San Juan Project, in, to and under this Agreement and/or in the water
rights, land, land rights and the improvements thereon, without the
prior written consent of the other Participants, which consent shall
not be unreasonably withheld.

10.4 Each Participant shall have the right to transfer or
assign its respective rights, titles and interests in the San Juan
Project, in, to and under this Agreement and/or in the water rights,
land, land rights and the improvements thereon, without the need for
prior consent of the other Participants, at any time to any of the
following:

10.4.1 To any corporation or other entity acquiring
all or substantially all of the property of such Participant;
or

10.4.2 To any corporation or entity into which or
with which such Participant may be merged or consolidated; or

10.4.3 To any corporation or entity the stock or
ownership of which is wholly owned by a Participant; or

10.4.4 To any corporation or other entity which owns
all of the outstanding common stock or other ownership
interest of a Participant (its "Parent"); or

10.4.5 To any corporation or other entity the common
stock or other ownership interest of which is wholly owned by
the Parent of a Participant.

10.5 Except as otherwise provided in Sections 10.1, 10.2 and
9.3, any successor to the rights, titles and interests of a Participant
in the San Juan Project, to the rights, titles and interests of a
Participant in, to and under the Project Agreements and/or in the water
rights, lands, land rights or improvements thereon shall assume and
agree to fully perform and discharge all of the obligations hereunder
of such Participant, and such successor shall notify the other
Participants in writing of such transfer, assignment or merger, and
shall furnish to the other Participants evidence of such transfer,
assignment or merger. Any such successor shall specifically agree in
writing with the remaining Participants at the time of such transfer,
assignment or merger that it will not transfer or assign any rights,
titles and interests acquired from the assigning Participant without
complying with the terms and conditions of Section 11.

10.6 No Participant shall be relieved of any of its
obligations and duties to the other Participants by a transfer,
assignment or merger under this Section 10 without the express prior
written consent of the remaining Participants, which consent shall not
be unreasonably withheld.

10.7 Except as otherwise provided in Section 10.5, any
transfer, assignment or merger made pursuant to the provisions of this
Section 10 shall not be subject to the terms and conditions set forth
and contained in Section 11.

11.0 RIGHTS OF FIRST REFUSAL:

11.1 The purpose of this Section 11 is to set forth the manner
in which all existing or future rights of first refusal, pertaining to
the transfer of interests in the San Juan Project, shall be exercised.
Except as provided in Section 10, PNM has a right of first refusal with
respect to the proposed transfer of any ownership interest in the San
Juan Project by any Participant and TEP has a right of first refusal
with respect to PNM's proposed transfer of an interest in Unit 1 or
Unit 2 and associated common property. The existence of other rights of
first refusal shall be as provided in other instruments to which
Participants are parties. Nothing in this Section 11 shall be construed
to limit or expand the rights of first refusal of any Participant.

11.2 Except as provided in Section 10, should a Participant
desire to assign, transfer, convey or otherwise dispose of (hereinafter
collectively referred to as "Assign") its rights, titles and interests
in the San Juan Project, or its rights, titles and interests in, to and
under the Project Agreements, or its rights, titles and interests in
the water rights, lands, land rights or the improvements thereon or any
part thereof or interest therein (hereinafter referred to as "Transfer
Interest"), to any person, company, corporation or governmental agency
(hereinafter referred to as "Outside Party"), the Participant desiring
to Assign shall first make an offer to sell the Transfer Interest to a
Participant(s) having a right of first refusal, on the basis of the
applicable amount as set out in either Section 11.2.1 or Section
11.2.2:

11.2.1 Where the Outside Party proposes to purchase
for a specified monetary amount, from the Participant desiring
to Assign, an interest only in the San Juan Project and/or in
contract rights, water rights, lands, land rights and
improvements associated therewith, the amount of (i) a bona
fide written offer from an Outside Party ready, willing and
able (subject to obtaining any required regulatory approvals)
to purchase the Transfer Interest; or, in the absence of a
bona fide written offer, (ii) a purchase price set out in a
bona fide purchase and sale agreement between the Participant
desiring to Assign and an Outside Party ready, willing and
able (subject to obtaining any required regulatory approvals)
to purchase the Transfer Interest; or

11.2.2 Where the Outside Party proposes to purchase
from the Participant desiring to Assign, (i) as part of a
non-monetary offer (such as in the case of an asset swap) or
(ii) when a segregated value for the Transfer Interest is not
available (such as in the case of a bundled or packaged sale
of assets), or (iii) where the Outside Party proposes to
purchase an interest not only in the San Juan Project and/or
in contract rights, water rights, lands, land rights and
improvements associated therewith, but also in other property
of the Participant desiring to Assign, the fair market value
of the Transfer Interest. As used herein, the term "fair
market value" means the amount of money which a purchaser,
willing but not obligated to buy the property, will pay to an
owner, willing but not obligated to sell it, taking into
consideration all of the uses to which the Transfer Interest
is adapted and might in reason be applied.

11.3 At least three (3) months prior to its intended date to
Assign, and after its receipt of a bona fide written offer, or
execution of a bona fide purchase and sale agreement, of the type
described in Section 11.2, the Participant desiring to Assign its
Transfer Interest shall serve written notice of its intention to do so
upon the Participant(s) having a right of first refusal, in accordance
with Section 42. Such notice shall: (i) have attached as an exhibit a
copy of the bona fide offer of an Outside Party or of the bona fide
purchase and sale agreement between the Outside Party and the
Participant desiring to Assign (an "Outside Offer"); and (ii) shall
contain a statement of the approximate proposed date to Assign.

11.4 The Participant(s) having the right of first refusal
shall signify its (their) desire to purchase the entire Transfer
Interest, or not purchase the entire Transfer Interest, by serving
written notice of its (their) intention upon the Participant desiring
to Assign pursuant to Section 42 within sixty (60) days after such
service pursuant to Section 11.3 of the written notice of intention to
Assign. Failure by a Participant to serve notice as provided hereunder
within the time period specified shall be conclusively deemed to be
notice of its intention not to purchase the Transfer Interest.

11.5 When intention to purchase the entire Transfer Interest
has been indicated by notices duly given hereunder by the
Participant(s) desiring to purchase the Transfer Interest, the affected
Participants shall thereby incur the following obligations:

11.5.1 The Participant desiring to Assign and a
Participant desiring to purchase the Transfer Interest shall
be obligated to proceed in good faith and with diligence to
obtain all required authorizations and approvals to Assign;

11.5.2 The Participant desiring to Assign shall be
obligated to obtain the release of any liens imposed by or
through it upon any part of the Transfer Interest and to
Assign the Transfer Interest at the earliest practicable date
thereafter; and

11.5.3 A Participant desiring to purchase the
Transfer Interest shall be obligated to perform all terms and
conditions required of it to complete the purchase of the
Transfer Interest.

The purchase of the Transfer Interest shall be fully consummated within
six (6) months following the date upon which all notices required to be
given under this Section 11 have been duly served, unless the
Participant is then diligently pursuing applications to appropriate
regulatory bodies (if any) for required authorizations to effect such
assignment or is then diligently prosecuting or defending appeals from
orders entered or authorizations issued in connection with such
applications.

11.6 If the intention to purchase the entire Transfer Interest
has not been indicated by notices given within the time periods
specified in this Section 11 by a Participant desiring to purchase the
Transfer Interest, the Participant desiring to Assign shall be free to
Assign all, but not less than all, of its Transfer Interest to the
Outside Party that made the Outside Offer, upon the terms and
conditions set forth in the Outside Offer. If such assignment of the
entire Transfer Interest to the Outside Party is not completed within
three (3) years after the approximate proposed date to Assign specified
in the notice given pursuant to Section 11.3, the Participant desiring
to Assign its Transfer Interest must, unless it is then diligently
pursuing its applications to appropriate regulatory bodies (if any) for
required authorizations to effect such assignment, or is then
diligently prosecuting or defending appeals from orders entered or
authorizations issued in connection with such applications, give
another complete new right of first refusal to the Participant(s)
desiring to purchase pursuant to the provisions of this Section 11,
before such Participant shall be free to Assign a Transfer Interest to
said Outside Party.

11.7 No assignment of a Transfer Interest, whether to another
Participant or to an Outside Party, shall relieve the assigning
Participant from full liability and financial responsibility for
performance after any such assignment: (i) of all obligations and
duties incurred by such Participant prior to such assignment under the
terms and conditions of the Project Agreements; and/or (ii) of all
obligations and duties provided and imposed after such assignment upon
such assigning Participant under the terms and conditions of the
Project Agreements, unless and until the assignee shall agree in
writing with the remaining Participants to assume the obligations and
duties of a Participant hereunder; provided further, however, that such
assignor shall not be relieved of any of its obligations and duties by
an assignment under this Section 11, without the express prior written
consent of the remaining Participants, which consent shall not be
unreasonably withheld.

11.8 Any transferee, successor or assignee, or any party who
may succeed to the Transfer Interest pursuant to this Section 11, shall
specifically agree in writing with the remaining Participants at the
time of such transfer or assignment that it will not transfer or assign
all or any portion of the Transfer Interest so acquired without
complying with the terms and conditions of this Section 11.

11.9 The provisions of Section 11.8 shall not be applicable to
any assignment of a Transfer Interest by one Participant to another
Participant, provided that payment in full of such Transfer Interest,
as defined in Section 11, has been made by the Participant who is the
assignee thereof.

11.10 A Participant may, for the purpose of financing its
interest in pollution control systems and facilities at the San Juan
Project, sell, transfer or convey such interests pursuant to the New
Mexico Pollution Control Revenue Bond Act, and any such sale, transfer
or conveyance shall not be deemed as an assignment, transfer,
conveyance or other disposal within the meaning of this Section 11.

12.0 RIGHTS OF PNM AND TEP IN WATER AND COAL:

12.1 If, pursuant to the terms and conditions of the Coal
Sales Agreement, or the sublease dated August 18, 1980 (as amended to
date and as such sublease may be amended from time to time), between
Western Coal Company and Utah International, Inc. or their successors
("Sublease"), PNM and TEP succeed to any interest in coal lands, coal
leases, water rights, or other property, the rights, titles and
interests of PNM and TEP therein shall be held as tenants in common,
with each of PNM and TEP having an equal undivided one-half (1/2)
interest therein, and such rights, titles and interests shall be
subject to all the terms and conditions set forth and contained in this
Agreement.

13.0 SEVERANCE OF IMPROVEMENTS:

13.1 All facilities, structures, improvements, equipment and
property of whatever kind and nature constructed, placed or affixed on
the rights-of-way, easements, patented lands, fee lands and leased
lands as part of, or as Capital Improvements, to the San Juan Project,
as against all parties and persons whomsoever (including, without
limitation, any party acquiring any interest in the rights-of-way,
easements, patented, fee or leased lands or any interest in or lien,
claim or encumbrance against any of such facilities, structures,
improvements, equipment and property of whatever kind and nature) shall
be deemed to be and remain personal property of the Participants, not
affixed to the realty.

PART III
ENTITLEMENTS TO OUTPUT OF SAN JUAN PROJECT

14.0 ENTITLEMENT TO CAPACITY AND ENERGY:

14.1 Subject to the provisions of Section 16, the Participants
shall be entitled to the Net Effective Generating Capacity of each of
Unit 1, Unit 2, Unit 3 and Unit 4 in proportion to their respective
Participation Shares. Each Participant shall be entitled to schedule
its Energy up to the Available Operating Capacity.

14.2 The Operating Agent shall keep the system dispatcher of
each Participant advised of the Available Operating Capacity.

14.3 When a Participant's request for its share of the
Available Operating Capacity necessitates the operation of a Unit, each
Participant shall schedule for its account not less than its share of
Minimum Net Generation. If, however, a Participant has scheduled an
amount of Energy in excess of its share of the Minimum Net Generation,
the other Participants shall be allowed to reduce their scheduled
Energy to an amount that will maintain the Unit at the Minimum Net
Generation level.

14.4 The delivery of Energy from the San Juan Project shall be
scheduled by each Participant in advance with the Operating Agent and
accounted for on the basis of integrated hourly actual generation, all
in accordance with any operating procedures which may be established or
approved by the Engineering and Operating Committee. Such operating
procedures shall provide for modifying such schedules to meet the needs
of day-to-day and hour-by-hour operation, including emergencies on a
Participant's system.

14.5 The Operating Agent shall, to the extent possible,
generate Energy at the San Juan Project in accordance with schedules
submitted by each Participant, as such schedules may be revised from
time to time, as long as such schedules do not jeopardize the operation
of the San Juan Project.

14.6 The Participants shall revise their schedules in the
event of an Operating Emergency or other incident beyond the control of
the Operating Agent to reflect the actual Energy available from the San
Juan Project during the period of the Operating Emergency or incident.

14.7 The Energy generated at the San Juan Project shall be
controlled within PNM's Control Area; provided, that such control shall
not diminish the rights of any Participant to receive its entitlement
of Energy from the San Juan Project.

15.0 CAPACITY ALLOCATION OF SWITCHYARD FACILITIES:

15.1 The electrical capacity in the Switchyard Facilities
shall be made available to PNM and TEP in the manner and in the amounts
as set forth in Section 6.2.7. For the purposes of this Agreement, the
FC Line shall be considered a part of the Switchyard Facilities.

15.1.1 The transmission capacity of the FC Line shall
be as measured at the Four Corners terminal. PNM and TEP each
shall be entitled to fifty percent (50%) of the designated FC
Line Capacity.

15.1.2 The transmission capacity of the FC Line
termination and other contract matters concerning the Four
Corners Project shall be handled individually by PNM and TEP.

15.2 The points of attachment to the San Juan 345 kV
Switchyard Facilities for the purposes of this Section 15 are:

No. 1: TEP/PNM No. 1 345 kV transmission line;
No. 2: TEP/PNM No. 2 345 kV transmission line;
No. 3: PNM/TEP Four Corners Generating Plant 345
kV switchyard (through the FC Line);
No. 4: PNM's WW 345 kV transmission line;
No. 5: PNM's OJ 345 kV transmission line;
No. 6: Colorado Public Service Company/Western
Area Power Administration/Tri-State Rifle
345 kV transmission line
No. 7: Western Area Power Administration-Shiprock
345 kV transmission line

15.2.1 The Participants collectively shall not
schedule more Power and Energy through any of the foregoing
individual points of attachment than the established rating of
that facility.

15.2.2 The Participants' individual transmission
capacity rights into or out of the Switchyard Facilities
attachment points shall be the same as the ownership or
contract rights of the Participant(s) in the attached facility
up to the limits specified in this Section 15.

15.2.3 Any transmission capacity in the Switchyard
Facilities specified to be available in Section 15.2.1 or
otherwise determined to be available by the Engineering and
Operating Committee, but not allocated to the individual
Participants under Section 15.2.2, shall be declared "excess
capacity" by the Engineering and Operating Committee. The
Engineering and Operating Committee shall allocate such excess
transmission capacity to PNM or TEP or such Participants
having an ownership interest in the Switchyard Facilities,
upon request in the amount requested for specified periods of
time to the extent and for such time as the Engineering and
Operating Committee finds such excess capacity to be
available.

16.0 USE OF FACILITIES DURING CURTAILMENTS:

16.1 If the Net Effective Generating Capacity of all Units is
reduced because of factors (including, but not limited to, equipment
failures, scheduled or unscheduled outages, fuel or fuel deliveries,
water supply, air quality limitations) which commonly influence the
total output of all Units, each Participant's entitlement to Capacity
during such period shall be reduced in proportion to the percentages
specified in Section 6.2.6 during each hour of such curtailment unless
otherwise specified in a separate agreement.

16.2 If factors which influence the operation of a Unit cause
a curtailment of that Unit, then the capacity entitlement from that
Unit for each Participant in that Unit shall be in proportion to the
Participant's Participation Share of that Unit.

16.3 If, because of factors which influence the operation
solely of Units 1 and 2, or solely of Units 3 and 4, there shall be a
curtailment of Units 1 and 2, or of Units 3 and 4, as the case may be,
the curtailment for each Participant in Units 1 and 2, or Units 3 and
4, shall be allocated in proportion to the percentages specified in
Sections 6.2.4 and 6.2.5, respectively.

16.4 To the extent that a curtailment results from scarcity of
resources and not from mechanical or legal limitations, Participants
may agree in writing to modify their schedules to allocate the use of
such resources to such Unit(s) or to such times as to make the most
efficient use thereof, consistent with Prudent Utility Practice, during
the pendency of such curtailment. Notwithstanding the provisions of
Section 23.2, the Operating Agent shall, during such curtailments,
account for coal inventory on a Participant by Participant basis. Upon
the conclusion of such curtailment, the provisions of Section 23.2
shall apply to any remaining coal inventory.

16.5 Curtailment of the transmission capacity in the
Switchyard Facilities shall be allocated to the Participants in the
manner and in the amounts as set forth in Section 6.2.7.

16.6 No Participant shall exercise its rights relating to the
San Juan Project so as to endanger or unreasonably interfere with the
operation of the San Juan Project or the right of any other Participant
to use its share of Capacity and Energy from the San Juan Project.

17.0 START-UP AND AUXILIARY POWER AND ENERGY REQUIREMENTS:

17.1 Each Participant shall be obligated to provide its
Participation Share of the Energy requirements to start up and operate
each Unit, and such requirements shall be provided by the Participants
based upon the Participant's percentage of operating costs in
accordance with Section 22.1. Appropriate metering facilities shall be
installed to assure measurement of such Energy. Such requirements for
Energy shall be scheduled in advance by the Operating Agent in
accordance with operating procedures approved by the Engineering and
Operating Committee.

PART IV
ADMINISTRATION

18.0 COORDINATION COMMITTEE:

18.1 As a means of securing effective cooperation and
interchange of information and of providing consultation on a prompt
and orderly basis among the Participants in connection with various
administrative and technical problems which may arise from time to time
under this Agreement, the Coordination Committee shall remain in
existence during the term of this Agreement. Except as otherwise
expressly provided in this Agreement, the Coordination Committee shall
have no authority to modify any of the provisions of this Agreement.

18.2 The Coordination Committee shall consist of one
representative from each Participant who shall be an officer or other
duly authorized representative of a Participant. Any of the
Participants may designate an alternate or substitute to act as its
representative on the Coordination Committee in the absence of the
regular representative on the Coordination Committee or to act on
specified occasions or with respect to specified matters. Each
Participant shall notify the other Participants promptly, in writing,
of the designation of its representative and alternate representative
on the Coordination Committee and of any subsequent changes in such
designations.

18.3 The Coordination Committee shall have the following
functions and responsibilities:

18.3.1 Provide liaison between and among the
Participants.

18.3.2 Exercise general supervision over the
Engineering and Operating Committee, the Fuels Committee and
the Auditing Committee.

18.3.3 Consider and act upon all matters referred to
the Coordination Committee by the Engineering and Operating
Committee, the Fuels Committee and the Auditing Committee.

18.4 Any action or determination of the Coordination Committee
shall require a vote of the Participants in accordance with Sections
18.4.1, 18.4.2 or 18.4.3. A Participant's Coordination Committee
representative shall be entitled to vote on all matters except those
actions or determinations which relate solely to a Unit or to common
property in which such Participant does not have a Participation Share
or as provided in Section 35.4.1. If a Participant's right to vote has
been suspended pursuant to Section 35.4.1, the requisite majorities for
actions or determinations specified in Sections 18.4.1, 18.4.2 and
18.4.3 shall be adjusted in proportion to the number of Participants
whose right to vote has not been suspended. An example of such an
adjustment is provided in Exhibit VIII, attached hereto and
incorporated herein. Maintenance scheduling and operation during
periods of curtailment of the total San Juan Project are not matters
which relate solely to a Unit, but are deemed to be matters affecting
all Units.

18.4.1 Except as provided in Sections 18.4.2 and
18.4.3, any actions or determinations brought before the
Coordination Committee shall require the following vote:

(a) More than a sixty-six and two thirds
percent (66 2/3%) majority of the Participation
Shares of the Participants in a Unit or common
property as defined in Section 6.2; and

(b) More than a sixty-six and two thirds
percent (66 2/3%) majority of the number of
individual Participants having a Participation Share
in a Unit or common property as defined in Section
6.2.

18.4.2 Any action or determination of the
Coordination Committee related to common property as set forth
in Section 6.2.6 and involving an expenditure greater than
five million dollars ($5,000,000) shall require the following
vote:

(a) More than an eighty-two percent (82%)
majority of the Participation Shares of the
Participants as defined in Section 6.2.6; and

(b) A minimum of sixty-six and two thirds
percent (66 2/3%) majority of the number of the
individual Participants.

18.4.3 Any action or determination of the
Coordination Committee regarding any amendment of the Coal
Sales Agreement, replacement of the Coal Sales Agreement with
a new agreement or any interim coal pricing agreement related
to the Coal Sales Agreement (or its successor) shall require
the following vote:

(a) More than an eighty-two percent (82%)
majority of the Participation Shares of the
Participants as defined in Section 6.2.6; and

(b) A minimum of sixty-six and two thirds
percent (66 2/3%) majority of the number of
individual Participants.

18.5 The Coordination Committee shall keep written minutes and
records of all meetings. Any action or determination made by the
Coordination Committee shall be reduced to writing and shall become
effective when signed by the representatives of the Participants
entitled to vote thereon, representing a voting majority of the members
of the Coordination Committee, as defined in Section 18.4; provided,
however, in the event of an Operating Emergency, actions or
determinations may be made on the basis of oral agreements among duly
authorized representatives of the respective Participants entitled to
vote thereon, and such action or determination subsequently shall be
reduced to writing.

18.6 Except for matters subject to the voting requirements of
Section 18.4.3, in the event the Coordination Committee fails to reach
agreement on any matter, which such committee is authorized to
determine, approve or otherwise act upon after a reasonable opportunity
to do so, then the Operating Agent shall be authorized and obligated to
take such reasonable and prudent action, consistent with Prudent
Utility Practice, as is necessary to the successful and proper
operation and maintenance of the San Juan Project, pending the
resolution, by arbitration or otherwise, of any such inability or
failure to agree.

18.7 In the event the Coordination Committee fails to reach
agreement on a matter subject to the voting requirements of Section
18.4.3, then an impasse shall be deemed to exist and the Participants
which are signatories to the Coal Sales Agreement then in effect shall
have the obligation and the responsibility, consistent with Prudent
Utility Practice, to maintain a supply of coal to the San Juan Project.

19.0 ENGINEERING AND OPERATING COMMITTEE:

19.1 The Engineering and Operating Committee shall remain in
existence during the term of this Agreement. Except as expressly
provided in this Agreement, the Engineering and Operating Committee
shall have no authority to modify any of the provisions of this
Agreement.

19.2 The Engineering and Operating Committee shall consist of
up to two representatives from each Participant who shall collectively
have one vote. Any of the Participants may designate an alternate or
substitute to act as its representative on the Engineering and
Operating Committee in the absence of a regular representative on the
Engineering and Operating Committee or to act on specified occasions or
with respect to specified matters. Each Participant shall notify the
other Participants promptly, in writing, of the designation of its
representatives and alternate representative on the Engineering and
Operating Committee and of any subsequent change in the designation.

19.3 The Engineering and Operating Committee shall have the
following functions and responsibilities:

19.3.1 Review and approve the following items related
to the performance of Operating Work.

19.3.1.1 Capital Improvements and the annual
Capital Improvements budget.

19.3.1.2 The annual staffing table.

19.3.1.3 The annual operation and
maintenance budget.

19.3.1.4 Such written statements of
operating procedures as may be submitted to the
Engineering and Operating Committee.

19.3.1.5 The planned annual maintenance
schedule.

19.3.1.6 The policies for establishing the
Emergency Spare Parts inventory.

19.3.1.7 The policies for establishing the
inventory for Materials and Supplies.

19.3.1.8 The statistical and administrative
reports, budgets and information and other similar
records, and the form thereof, to be kept and
furnished by the Operating Agent, in accordance with
Section 28.3.15 (excluding accounting records used
internally by the Operating Agent for the purpose of
accumulating financial and statistical data, such as
books of original entry, ledgers, work papers and
source documents).

19.3.1.9 The determination of Net Effective
Generating Capacity, Minimum Net Generation and Net
Energy Generation of the San Juan Project, based upon
recommendations of the Operating Agent.

19.3.1.10 The principles and procedures for
establishing communication channels among
Participants.

19.3.1.11 The operating procedures for
performance and efficiency testing.

19.3.1.12 The operating procedures for
maintaining complete and accurate Capacity and Energy
accounting.

19.3.1.13 The Operating Agent's estimate and
analysis of the total expenditures resulting from an
Operating Emergency, as provided in Section 29.7.

19.3.1.14 The results and expenditures of
programs and contracts on environmental control and
data collection for which the Operating Agent has
contracted.

19.3.2 Establish procedures for the operation of the
San Juan Project during any period of curtailed operations
which reduces or may reduce the Net Effective Generating
Capacity.

19.3.3 Except for an Operating Emergency, as provided
in Section 29, designate a construction agent responsible for
the design, construction and acquisition of Capital
Improvements.

19.3.4 Approve the list of transportation and
motorized equipment to be purchased or leased by the Operating
Agent for use in the performance of Operating Work.

19.3.5 Perform such other functions and
responsibilities as may be assigned to it from time to time by
the Coordination Committee.

19.4 Any action or determination of the Engineering and
Operating Committee shall require a vote of the Participants, in the
manner provided for in Sections 18.4.1 and 18.4.2. A Participant's
Engineering and Operating Committee voting representative shall be
entitled to vote on all matters except those actions or determinations
which relate solely to a Unit or to common property in which such
Participant does not have a Participation Share or as provided in
Section 35.4.1. If a Participant's right to vote has been suspended
pursuant to Section 35.4.1, the requisite majorities for actions or
determinations specified in Sections 18.4.1 and 18.4.2 shall be
adjusted in proportion to the number of Participants whose right to
vote has not been suspended. An example of such an adjustment is
provided in Exhibit VIII. Maintenance scheduling and operation during
periods of curtailment of the total San Juan Project are not matters
which relate solely to a Unit, but are deemed to be matters affecting
all Units.

19.5 The Engineering and Operating Committee shall keep
written minutes and records of all meetings. Any action or
determination made by the Engineering and Operating Committee shall be
reduced to writing and shall become effective when signed by the
representatives of the Participants entitled to vote thereon,
representing a voting majority of the members of the Engineering and
Operating Committee, as defined in Section 19.4; provided, however, in
the event of an Operating Emergency, actions or determinations may be
made on the basis of oral agreements among duly authorized
representatives of the respective Participants entitled to vote
thereon, and such action or determination subsequently shall be reduced
to writing.

19.6 In the event that less than a requisite majority of the
Engineering and Operating Committee is obtained, the matter shall be
referred to the Coordination Committee for decision upon the request of
any Participant's Engineering and Operating Committee representative.

19.7 In the event the Engineering and Operating Committee
fails to reach agreement on any matter which such committee is
authorized to determine, approve or otherwise act upon after a
reasonable opportunity to do so, then the Operating Agent shall be
authorized and obligated to take such reasonable and prudent action,
consistent with Prudent Utility Practice, as is necessary to the
successful and proper operation and maintenance of the San Juan
Project, pending the resolution, by arbitration or otherwise, of any
such inability or failure to agree.

20.0 FUELS COMMITTEE:

20.1 As a means of establishing a centralized forum to
facilitate the timely and candid consideration and discussion between
all Participants of policies and issues associated with the procurement
of coal for the San Juan Project, there is hereby established a Fuels
Committee, which shall remain in existence during the term of this
Agreement. The Participants do not intend that the operation of the
Fuels Committee shall affect the day-to-day operational
responsibilities of the fuels management department of the Operating
Agent, except as otherwise specifically provided in this Section 20.
The Fuels Committee shall have no authority to modify any of the
provisions of this Agreement.

20.2 The Fuels Committee shall consist of one representative
from each Participant. Any of the Participants may, by written notice
to the other Participants, designate an alternate or substitute to act
as its representative on the Fuels Committee in the absence of the
regular representative on the Fuels Committee or to act on specified
occasions or with respect to specified matters. Each Participant shall
notify the other Participants promptly in writing of the designation of
its representative on the Fuels Committee and of any subsequent change
in such designation. The chairperson of the Fuels Committee shall be a
representative employed by a Participant that is a signatory to the
Coal Sales Agreement. The Fuels Committee shall meet regularly, but in
no event less than semiannually. Special meetings shall be called by
the chairperson if requested in writing by any three (3) Participants.

20.3 The Fuels Committee shall have the following functions
and responsibilities:

20.3.1 To conduct studies, or cause studies to be
conducted, regarding criteria pertaining to the acquisition of
coal supplies and the negotiation and approval of coal
agreements. Such studies and recommendations may include, but
are not limited to:

20.3.1.1 Annual fuel supply budgets

20.3.1.2 Coal cost

20.3.1.3 Coal delivery rates and minimum
take obligations

20.3.1.4 Coal quality

20.3.1.5 Contract terms

20.3.1.6 Economic requirements

20.3.1.7 Negotiation strategies

20.3.1.8 Potential coal suppliers

provided, however, that prior to any such study being
conducted, the Participant(s) desiring that the study be
performed shall have made suitable arrangements therefor,
including payment arrangements with the provider of the study.
Nothing in this Section 20.3 shall be construed to require the
Operating Agent or any Participant which is a signatory to the
Coal Sales Agreement to undertake any uncompensated or
unfunded study which it would not otherwise perform.

20.3.2 To obtain input from all Participants
regarding individual criteria and economic requirements
necessary to vote on matters entrusted to the Fuels Committee
or to make collective recommendations to the Coordination
Committee.

20.3.3 To receive progress reports from and provide
recommendations to negotiators acting on behalf of
Participants in the negotiation of coal supply agreements.

20.3.4 To provide regular progress reports to the
Engineering and Operating and to the Coordination Committees,
as requested by such committees.

20.3.5 To establish the amount of coal to be
maintained in the Emergency Coal Storage Pile.

20.3.6 To establish operating procedures for delivery
of coal to the Emergency Coal Storage Pile.

20.3.7 To perform such other functions and
responsibilities as may be assigned to it from time to time by
the Coordination Committee.

20.4 The following special procedures shall apply to all
negotiations or discussions with SJCC regarding amendment, interim
pricing agreements, termination or succession of the Coal Sales
Agreement, or with any other coal supplier or potential supplier.

20.4.1 Each Participant which is a signatory to the
Coal Sales Agreement shall be entitled to have at least two
(2) representatives present at any such negotiations or
discussions. Participants not signatories to the Coal Sales
Agreement or its successors (for purposes of this Section
20.4.1, the "Remaining Participants") shall have the
collective right to have two (2) representatives present at
any such negotiations or discussions. The Remaining
Participants may jointly or separately designate
representatives, but in no case may the total number of
representatives so designated by all of the Remaining

Participants exceed two (2). Any dispute among the Remaining
Participants regarding the naming of representatives shall be
subject to resolution pursuant to Section 37 and shall not
restrict the rights of any other representatives to engage in
any ongoing negotiations or discussions. Representatives shall
be designated in writing by the Participants which are
signatories to the Coal Sales Agreement and Remaining
Participants. If such representatives are not employees of a
Participant or a Remaining Participant, such fact shall be
disclosed in writing to all Participants and Remaining
Participants. Representatives shall agree in writing to: (i)
avoid any conflict of interest that would be detrimental to
the operation of the San Juan Project; and (ii) maintain all
proprietary information obtained through such negotiations and
discussions in confidence. The form of such confidentiality
agreements shall be prepared by the Fuels Committee, and shall
be subject to the approval of the Participants which are
signatories to the Coal Sales Agreement, such approval not to
be unreasonably withheld. Such confidentiality agreements
shall be executed by a Participant's Coordination Committee
representative or, as appropriate, the person authorized by
such Participant or Representative to execute such documents.
Representatives may be changed by Participants or Remaining
Participants by the giving of written notice to all other
Participants and Remaining Participants.

20.4.2 Representatives shall make regular reports to,
coordinate with, and obtain the recommendations of the Fuels
Committee regarding the progress of and issues involved in
such coal negotiations or discussions. No representative or
Participant shall engage in bilateral negotiations or
discussions concerning coal supply to the San Juan Project
with SJCC or any other coal supplier or potential supplier;
provided, however, that nothing herein shall be construed to
prevent the Operating Agent or the Participants which are
signatories to the Coal Sales Agreement, in the regular
conduct of its or their fuel-related activities, from
maintaining routine business contacts and communications with
SJCC or other coal suppliers or potential suppliers to the San
Juan Project.

20.5 Any proposed action or determination regarding any
amendment of the Coal Sales Agreement, replacement of the Coal Sales
Agreement with a new agreement or any interim coal pricing agreement
related to the Coal Sales Agreement (or its successor) shall be
submitted to the vote of the representatives of the Participants on the
Fuels Committee. Any such action or determination shall require the
affirmative vote as established in Section 18.4.3, except that if a
Participant's right to vote has been suspended pursuant to Section
35.4.1, the requisite majority for actions or determinations specified
in Section 18.4.3 shall be adjusted in proportion to the number of
Participants whose right to vote has not been suspended. An example of
such an adjustment is provided in Exhibit VIII.

20.5.1 If, upon such vote, the requisite votes are
obtained, the Participants which are signatories to the Coal
Sales Agreement then in effect shall proceed in accordance
with the affirmative vote of the Fuels Committee without
further action of any other San Juan Project committee.

20.5.2 If, upon such vote, the requisite votes are
not obtained, the matter giving rise to the vote shall, not
later than thirty (30) days after the negative vote of the
Fuels Committee, be submitted to the Coordination Committee
for its vote in accordance with Section 18. If the requisite
majorities are obtained in the Coordination Committee vote,
the Participants which are signatories to the Coal Sales
Agreement then in effect shall proceed in accordance with the
affirmative vote of the Coordination Committee.

20.5.3 If the requisite votes are not obtained in the
Coordination Committee vote, then consistent with Section
18.7, the Participants which are signatories to the Coal Sales
Agreement then in effect shall have the obligation and the
responsibility, consistent with Prudent Utility Practice, to
maintain a supply of coal to the San Juan Project.

20.6 The Fuels Committee shall keep written minutes and
records of all meetings. Any action or determination made by the Fuels
Committee shall be reduced to writing and shall become effective when
signed by the representatives of the Participants representing a voting
majority.

21.0 AUDITING COMMITTEE:

21.1 The Auditing Committee shall remain in existence during
the term of this Agreement. The Auditing Committee shall have no
authority to modify any of the provisions of this Agreement.

21.2 The Auditing Committee shall consist of one
representative from each Participant. Any of the Participants may
designate an alternate or substitute to act as its representative on
the Auditing Committee in the absence of the regular representative on
the Auditing Committee or to act on specified occasions or with respect
to specified matters. Each Participant shall notify the other
Participants promptly, in writing, of the designation of its
representative and alternate representative on the Auditing Committee
and of any subsequent changes in such designation.

21.3 The Auditing Committee shall have the following
functions and responsibilities under this Agreement:

21.3.1 Review accounting, financial and internal
control aspects of Operating Work and Capital Improvements
and, not less than every two years, audit the records
maintained by the Operating Agent in its performance of
Operating Work, Capital Improvements and any other records
maintained by the Operating Agent in support of its billings
to the Participants.

21.3.2 Review and approve the format and content of
the Operating Agent's accounting records and reports for
Operating Work and Capital Improvements.

21.3.3 Certify to the Participants, for management
purposes and for the use of the Participants only, that the
Operating Agent's results of operations and accounting methods
and records, including any allocations for Operating Work and
Capital Improvements, are in accordance with the Project
Agreements and Accounting Practice.

21.3.4 Review and make recommendations to the
Coordination Committee regarding a Participant's
administrative and general expense allowance and other normal
loadings when such Participant acts as construction agent for
Capital Improvements.

21.3.5 Review and approve the Operating Agent's cost
and expense allocations between (i) electric generation and
related functions and (ii) unrelated functions.

21.3.6 Advise and make recommendations to the
Coordination Committee and Operating Agent on matters
involving auditing and financial transactions.

21.3.7 Develop procedures for proper accounting and
financial liaison between Participants in connection with the
Operating Work and Capital Improvements.

21.3.8 Perform such functions and responsibilities as
may be assigned to it from time to time by the Coordination
Committee or as otherwise provided in this Agreement.

21.4 Any action or determination of the Auditing Committee
shall require a vote of the voting Participants in accordance with
Section 18.4.1. A Participant's Auditing Committee representative shall
be entitled to vote on all matters except those actions or
determinations which relate solely to a Unit or common property in
which such Participant does not have a Participation Share except that
if a Participant's right to vote has been suspended pursuant to Section
35.4.1, the requisite majority for actions or determinations specified
in Section 18.4.1 shall be adjusted in proportion to the number of
Participants whose right to vote has not been suspended. An example of
such an adjustment is provided in Exhibit VIII.

21.5 The Auditing Committee shall keep written minutes and
records of all meetings, and any action or determination by the
Auditing Committee shall be reduced to writing and shall become
effective when signed by the representatives of the Participants
entitled to vote thereon, representing a voting majority of the members
of the Auditing Committee.

21.6 In the event less than a requisite majority of the
Auditing Committee is obtained, the matter shall be referred to the
Coordination Committee for decision upon the request of any
Participant's Auditing Committee representative.

21.7 In the event the Auditing Committee fails to reach
agreement on a matter which such committee is authorized to determine,
approve or otherwise act upon after a reasonable opportunity to do so,
then the Operating Agent shall be authorized and obligated to take such
reasonable and prudent action, consistent with Prudent Utility
Practice, as is necessary to the successful and proper operation and
maintenance of the San Juan Project, pending the resolution, by
arbitration or otherwise, of any such inability or failure to agree.

PART V

BUDGETS AND OPERATING EXPENSES

22.0 OPERATION AND MAINTENANCE EXPENSES:

22.1 The expenses for the operation and maintenance of the San
Juan Project in the performance of Operating Work (which, for purposes
of this Section 22, and as defined more particularly herein, are
referred to as the "O&M Expenses") shall be apportioned among the
Participants, in accordance with the following percentages:

22.1.1 For Units 1 and 2 and for all equipment and
facilities directly related to Units 1 and 2 only, in
accordance with the following percentages:

22.1.1.1 PNM - 50 percent
22.1.1.2 TEP - 50 percent
22.1.1.3 M-S-R - 0 percent
22.1.1.4 Farmington - 0 percent
22.1.1.5 Tri-State - 0 percent
22.1.1.6 LAC - 0 percent
22.1.1.7 SCPPA - 0 percent
22.1.1.8 Anaheim - 0 percent
22.1.1.9 UAMPS - 0 percent

22.1.2 For Unit 3 and all equipment and facilities
directly related to Unit 3 only, in accordance with the
following percentages:

22.1.2.1 PNM - 50 percent
22.1.2.2 TEP - 0 percent
22.1.2.3 M-S-R - 0 percent
22.1.2.4 Farmington - 0 percent
22.1.2.5 Tri-State - 8.2 percent
22.1.2.6 LAC - 0 percent
22.1.2.7 SCPPA - 41.8 percent
22.1.2.8 Anaheim - 0 percent
22.1.2.9UAMPS - 0 percent

22.1.3 For Unit 4 and for all equipment and
facilities directly related to Unit 4 only, in accordance with
the following percentages:

22.1.3.1 PNM - 38.457 percent
22.1.3.2 TEP - 0 percent
22.1.3.3 M-S-R - 28.8 percent
22.1.3.4 Farmington - 8.475 percent
22.1.3.5 Tri-State - 0 percent
22.1.3.6 LAC - 7.20 percent
22.1.3.7 SCPPA - 0 percent
22.1.3.8 Anaheim - 10.04 percent
22.1.3.9 UAMPS - 7.028 percent

22.1.4 For equipment and facilities common to Units 1
and 2 only, in accordance with the following percentages:

22.1.4.1 PNM - 50 percent
22.1.4.2 TEP - 50 percent
22.1.4.3 M-S-R - 0 percent
22.1.4.4 Farmington - 0 percent
22.1.4.5 Tri-State - 0 percent
22.1.4.6 LAC - 0 percent
22.1.4.7 SCPPA - 0 percent
22.1.4.8 Anaheim - 0 percent
22.1.4.9 UAMPS - 0 percent

22.1.5 For equipment and facilities common to Units 3
and 4 only, in accordance with the following percentages:

22.1.5.1 PNM - 44.119 percent
22.1.5.2 TEP - 0 percent
22.1.5.3 M-S-R - 14.4 percent
22.1.5.4 Farmington - 4.249 percent
22.1.5.5 Tri-State - 4.1 percent
22.1.5.6 LAC - 3.612 percent
22.1.5.7 SCPPA - 20.9 percent
22.1.5.8 Anaheim - 5.07 percent
22.1.5.9 UAMPS - 3.55 percent

22.1.6 For the Switchyard Facilities except as
otherwise provided in Section 15, in accordance with the
following percentages:

22.1.6.1 PNM - 65 percent
22.1.6.2 TEP - 35 percent
22.1.6.3 M-S-R - 0 percent
22.1.6.4 Farmington - 0 percent
22.1.6.5 Tri-State - 0 percent
22.1.6.6 LAC - 0 percent
22.1.6.7 SCPPA - 0 percent
22.1.6.8 Anaheim - 0 percent
22.1.6.9 UAMPS - 0 percent

22.1.7 Except as provided in Exhibit V(g), attached
hereto and incorporated herein, for equipment and facilities
common to all of the Units, and all San Juan Project expenses
not identifiable by Unit and not otherwise listed above, in
accordance with the following percentages:

22.1.7.1 PNM - 46.297 percent
22.1.7.2 TEP - 19.8 percent
22.1.7.3 M-S-R - 8.7 percent
22.1.7.4 Farmington - 2.559 percent
22.1.7.5 Tri-State - 2.49 percent
22.1.7.6 LAC - 2.175 percent
22.1.7.7 SCPPA - 12.71 percent
22.1.7.8 Anaheim - 3.10 percent
22.1.7.9 UAMPS - 2.169 percent

22.1.8 In the event of a permanent shutdown of either
of Unit 1 or Unit 2, the expenses incurred in connection with
the shutdown (which may include removal, salvage, cleanup and
protection service) shall be allocated as set forth in Section
22.1.1. In the event of a permanent shutdown of Unit 3, said
expenses shall be allocated as set forth in Section 22.1.2. In
the event of a permanent shutdown of Unit 4, said expenses
shall be allocated as set forth in Section 22.1.3. Expenses
which are attributable to equipment and facilities common to
more than one Unit shall be apportioned in accordance with
Section 22.1, as applicable.

22.1.9 Exhibit V, attached hereto and incorporated
herein, is a partial list of equipment and facilities of the
San Juan Project for use by the Engineering and Operating
Committee as a guideline in determining the allocation of
operation and maintenance costs among the Participants.

22.1.10 In areas where the allocation of costs of
operation and maintenance of equipment and facilities among
the Participants is not clearly defined by Sections 22.1.1 to
22.1.8, the Engineering and Operating Committee shall make a
determination of such allocation of costs.

22.1.11 The following shall apply in the event of a
declaration of default against a Participant and a suspension
of that Participant's right to receive all or any part of its
proportionate share of the Net Effective Generating Capacity,
as provided for in Section 35.4.1: those non-defaulting
Participant(s) having a Participation Share in each affected
Unit, who are entitled to schedule and receive for their
accounts proportionate shares of the Net Effective Generating
Capacity of the defaulting Participant, shall bear
proportionate shares of the defaulting Participant's
responsibility for expenses of the operation and maintenance
of the San Juan Project, as provided in Section 35.5.

22.2 O&M Expenses chargeable to the following FERC Accounts
shall be apportioned among the Participants in accordance with Sections
22.1.1, 22.1.2, 22.1.3, 22.1.4, 22.1.5 and 22.1.7, as applicable:

22.2.1 Power Production/Steam Power Generation: FERC
Accounts 500, 502, 505, 506, 507, 509 and 510 through 514 (charged by
on-site San Juan Project employees and operations-related departments
located off-site); provided, however, that limestone costs (chemicals)
chargeable to FERC Account 502 shall be apportioned among the
Participants in accordance with Section 23.3.2.1.

22.2.2 Administrative and General Expenses directly
chargeable to FERC Accounts 920, 921, 923, 926, 930.2, 931 and 935, by
on-site San Juan Project employees and by A&G related departments
located off-site as set forth in Exhibit VI, Attachment A, which have
not been included as a part of the A&G Ratio or charged to FERC Account
935, in accordance with Section 22.4. Such direct A&G charges must be
supported by the Operating Agent and are subject to audit and approval
by the Auditing Committee. If the Auditing Committee is unable to agree
on the appropriateness of direct A&G charges, the Auditing Committee
shall submit the entire matter to the Coordination Committee.

22.2.3 O&M Expenses chargeable to FERC Account 501
shall be apportioned among the Participants in accordance with Section
23.
22.2.4 The cost of the property insurance for the San
Juan Project chargeable to FERC Account 924 and any uninsured loss or
expense thereunder and the cost of general liability or workers'
compensation insurance for the San Juan Project chargeable to FERC
Account 925 shall be apportioned among the Participants according to
Section 22.1.
22.2.5 Costs or revenues chargeable to the following
FERC Operating and Non-Operating Accounts: 411.8, 411.9, 412, 421 and
426.

22.3 Power Production Expense chargeable to FERC Account 500
(for employees of PNM's fuels management department), Non San Juan
Project Specific, shall be allocated among all of PNM's fossil-fueled
power plants, including the San Juan Project, based on the percentage
of labor charged to each fossil-fueled power plant as a percentage of
labor charged to all of PNM's fossil-fueled power plants.

22.4 The O&M Expenses for the Switchyard Facilities chargeable
to FERC Accounts 560 through 573 and FERC Account 935 shall be
apportioned among the Participants in accordance with Section 22.1.6.

22.5 The O&M Expenses for the portion of system control and
load dispatching expenses (allocated between PNM and the San Juan
Project based on the number of megawatts of San Juan Project capacity
as a percentage of PNM's total generating capacity) chargeable to FERC
Accounts 556, 560 and 561 shall be apportioned among the Participants
in accordance with Section 22.1.7.

22.6 Payroll loads for administrative and general expenses,
payroll taxes, injuries and damages and pension and benefits, shall be
added to the monthly billings in proportion to the dollars of direct
labor billed and apportioned among the Participants in accordance with
Sections 22 and 23. The current methodologies for calculating the A&G
Ratio, Payroll Tax Ratio, Injuries and Damages Ratio and Pension and
Benefits Ratio are set forth in Exhibit VI (Attachments A, B, C and D
thereto), attached hereto and incorporated herein.

22.6.1 If any Participant believes that the method
used in determining A&G Ratio, Payroll Tax Ratio, Injuries and
Damages Ratio and Pension and Benefits Ratio, in accordance
with Exhibit VI (Attachments A, B, C and D thereto), results
in an unreasonable burden on such Participant(s), such
Participant(s) may request that said method used in
determining said ratios be submitted to the Auditing Committee
for review. After any such request, the Auditing Committee
shall review said method and shall endeavor to agree upon
whether or not said unreasonable burden does actually exist.
If, after such review, the Auditing Committee determines that
the application of said method does result in an unreasonable
burden on the Participant, the Auditing Committee shall
determine and recommend a modified method to the Coordination
Committee to eliminate such unreasonable burden. If, after
such review, the Auditing Committee is unable to agree upon
whether or not such unreasonable burden does exist or is
unable to agree on a modified method for eliminating said
unreasonable burden, the Auditing Committee shall submit the
entire matter to the Coordination Committee.

22.6.2 The Coordination Committee shall review the
recommendation of the Auditing Committee pursuant to Section
22.6.1. If, as a result of such review, the Coordination
Committee agrees that such unreasonable burden does exist and
that a modified method eliminates such unreasonable burden,
the Coordination Committee shall adopt said modified method.

22.6.3 If the Auditing Committee has not submitted a
recommended modified method and the Coordination Committee
agrees that such unreasonable burden does exist, the
Coordination Committee shall endeavor to agree on a modified
method. If, after such review, the Coordination Committee is
unable to agree that such unreasonable burden does exist or on
a modified method which will eliminate such unreasonable
burden, upon request of a Participant, either matter may be
submitted to arbitration pursuant to Section 37.

22.6.4 Any modified method adopted by the
Coordination Committee or determined through arbitration shall
be retroactive for the length of the period of inequity up to
a maximum period of three (3) years and shall become effective
on the first day following such date of adoption.

22.7 As soon as possible after the end of each calendar year,
the Operating Agent shall calculate the actual ratios for: A&G, payroll
tax, injuries and damages, and pension and benefits for such year in
accordance with the methodologies described in Exhibit VI (Attachments
A, B, C and D thereto). To the extent such expenses are more or less
than those already paid by the Participants during said year, the
Operating Agent shall bill or credit the Participants for the amount of
such difference.

22.8 At the start of each calendar year, the Operating Agent
shall calculate new ratios for: A&G, payroll tax, injuries and damages
and pension and benefits. Such ratios shall be calculated in accordance
with the methodologies described in Exhibit VI (Attachments A, B, C and
D thereto). Such ratios may be adjusted to more nearly reflect the
anticipated expenses of the current year because of tax legislation,
labor contract negotiations or other factors not reflected in the prior
year's costs.

22.9 The Operating Agent shall bill to the requesting
Participant(s) the costs and expenses, including A&G expenses, incurred
by the Operating Agent (including, but not limited to, fees of outside
legal counsel or consultants, time of in-house legal counsel and other
employees and agents of the Operating Agent) in performing tasks
requested by a Participant in relation to (i) the offering or sale of
bonds or other type of security by a Participant in connection with the
acquisition or ownership of an interest in the San Juan Project; and
(ii) the attempted or contemplated sale by a Participant of any portion
of its ownership interest in the San Juan Project. The Operating Agent
shall establish and maintain appropriate accounting procedures to
identify such costs and expenses incurred by the Operating Agent.

23.0 FUEL COSTS:

23.1 The quantity of coal delivered to the San Juan Project
shall be determined by the belt scales, in accordance with the Coal
Sales Agreement.

23.2 The Operating Agent shall maintain a coal inventory
including an Emergency Coal Storage Pile for all Units, wherein the
Participants shall have Participation Shares as provided in Section
6.2.6. The Fuels Committee shall establish an optimum coal inventory
tonnage for all Units in total. Coal inventory shall be accounted for
in FERC Account 151.

23.3 Costs of the coal inventory and fuel expense shall be
apportioned among and paid for by the Participants on the following
basis:

23.3.1 Costs that are classified as Fixed Fuel
Expenses shall be charged to FERC Account 151. Such Fixed Fuel
Expenses shall then be charged monthly to FERC Account 501 and
shall be apportioned among and paid for by the Participants on
the basis of the percentage that each Participant's monthly
Net Energy Generation and auxiliary generation bears to the
total monthly Net Energy Generation and auxiliary generation.
The Fixed Fuel Expense balance in FERC Account 151 shall be
reduced to zero monthly by charging Fixed Fuel Expense to FERC
Account 501. Such Fixed Fuel Expense shall be adjusted to an
annual reconciliation among the Participants based on the
Participation Shares as provided in Section 6.2.6.

23.3.2 Costs that are classified as Variable Fuel
Expenses shall be charged to the fuel inventory or credited
(as withdrawn) to FERC Account 151 and such costs shall be
apportioned among and paid for by the Participants on the
basis of the Participation Shares as provided in Section
6.2.6. Variable Fuel Expenses related to coal requirements
shall be charged to FERC Account 501 as determined by dividing
the total number of tons of coal at the beginning of the
month, plus the coal delivered during the month, into the
total recorded variable cost and multiplying the cost per ton
so derived by the number of tons withdrawn. The Variable Fuel
Expenses shall be apportioned among and paid for by the
Participants on the basis of the percentage that each
Participant's monthly Net Energy Generation bears to the total
monthly Net Energy Generation of the Unit(s).

23.3.2.1 Limestone costs (chemicals)
chargeable to FERC Account 502 shall be apportioned among and
paid for by the Participants on the basis of the percentage
that each Participant's monthly Net Energy Generation bears to
the total monthly Net Energy Generation of the Unit(s).

23.3.3 All other Variable Fuel Expenses (including,
but not limited to, fuel oil, fuel handling and ash and gypsum
disposal) incurred which are chargeable to FERC Account 501
shall be apportioned among the Participants in accordance with
Section 23.3.2.

23.3.4 All Participants acknowledge and recognize the
terms and conditions of the Coal Sales Agreement, wherein,
among other terms and conditions, an annual Fixed Fuel Expense
must be paid by the San Juan Project each year to SJCC. Each
Participant shall pay its Participant's Minimum Fixed Fuel
Expense plus a proportional share of Excess Fixed Fuel
Expense. Such Excess Fixed Fuel Expense shall be allocated to
the Participants based on each Participant's percentage share
of Carry-over Tons created during that calendar year.

23.3.5 All Participants acknowledge and recognize
that the monthly allocation of Fixed Fuel Expenses based on
the monthly Net Energy Generation, as described in Section
23.3.1, may result in an individual Participant having been
allocated Minimum Fixed Fuel Expense and Excess Fixed Fuel
Expense equal to, less than, or greater than its proportional
share of such expenses. Any overpayment or underpayment of a
Participant's Minimum Fixed Fuel Expense and Excess Fixed Fuel
Expense shall be included as an adjustment to the final
Participant fuel invoices in a given year. Payments received
from Participants which have underpaid during the year shall
be used by the Operating Agent to pay SJCC for any Minimum
Fixed Fuel Expense not paid and to compensate other
Participants which have overpaid.

23.3.6 All Participants acknowledge and recognize the
provisions of the Coal Sales Agreement that create Carry-over
Tons. To the extent that Carry-over Tons are created and paid
for by individual Participants, the Carry-over Tons will be
allocated to each Participant's Carry-over Tons Account in
proportion to each Participant's allocation of Excess Fixed
Fuel Expense for the calendar year. At the direction of a
Participant, the Operating Agent shall transfer Carry-over
Tons from an individual Participant's Carry-over Tons Account
to another Participant's Carry-over Tons Account. Carry-over
Tons shall be accounted for on the basis of tonnage only, with
no financial value attached thereto. Participants shall apply
any existing Carry-over Tons from their account to the payment
of a minimum tonnage deficiency invoice. When Carry-over Tons
are used by the San Juan Project, Participants whose
Carry-over Tons Accounts are reduced shall be compensated by
Participants whose Carry-over Tons Accounts have no balance or
an inadequate balance to meet their obligation for the Annual
Minimum Coal Delivery. The value of this compensation shall be
based on the actual cost billed by SJCC.

23.3.7 All Participants acknowledge and recognize the
provisions of Exhibit VII, attached hereto and incorporated
herein, as representative of the allocation and billing
methodology agreed upon. Exhibit VII reflects the allocation
of expenses among the Participants based on actual expenses
incurred for fuel expense for the month of January 1993.

23.4 The Operating Agent shall provide the Participants a
monthly written report on the following items related to coal
deliveries at the San Juan Project:

23.4.1 Annual Minimum Coal Delivery for the year.

23.4.2 Annual Minimum Coal Delivery allocated among
the Participants.

23.4.3 Total actual coal deliveries by SJCC to the
San Juan Project for each month and for the year to date.

23.4.4 Total actual coal deliveries to the San Juan
Project for each month and for the year to date, allocated to
the Participants.

23.4.5 Total cost and tonnage of inventory allocated
to the Participants.

23.4.6 Fixed Fuel Expense and Variable Fuel Expense
allocated to the Participants for each month and for the year
to date.

23.4.7 Status of Carry-over Tons for the San Juan
Project, allocated to the Participants.

23.5 The Operating Agent shall replace the tons of coal
withdrawn from inventory on a ton for ton basis according to the coal
withdrawn from inventory for the month, except where modified to
reflect anticipated generation usage in the following month. The cost
of this replacement shall be apportioned among the Participants in
accordance with Sections 23.2 and 23.3.

23.6 In the event that SJCC defaults in its obligations under
the Coal Sales Agreement, the Operating Agent may assume or make such
arrangements for the assumption of such of SJCC's operation as
permitted by the Coal Sales Agreement. Costs associated with the coal
operations shall become a part of the Total Monthly Coal Cost as
applicable and, with the costs and expenses of fuel and emission
residuals and ash disposal, shall be apportioned between and paid for
by the Participants in accordance with this Section 23.

23.7 The monthly costs of coal allocated between the
Participants in accordance with this Section 23 shall be estimated by
the Operating Agent as soon as practicable after the end of each month
and a preliminary bill shall be presented and paid in the manner set
forth in Section 30.3.3. Adjustments in the estimated preliminary bill
due to quality and quantity of coal delivered, and estimates of
escalation, shall be made in the next succeeding month or on the
earliest possible billing thereafter.

23.8 In the event of a catastrophic occurrence which results
in a sustained outage of a Unit and a declaration that an
uncontrollable force exists under the Coal Sales Agreement, then in
such event, FERC Account 151 will be allocated to the commercial and
non-commercial Units. The portion of FERC Account 151 allocated to the
non-commercial Unit(s) shall remain frozen until such time as such
Unit(s) is restored to commercial operation. New costs of coal
chargeable to FERC Account 151 will be apportioned among the
Participants on the basis of the Participants' Participation Share in
the generating capacity of the commercial Units. At such time as a
damaged Unit is restored to commercial operation, the frozen portion of
Account 151 will be merged into the operating unit(s) portion of
Account 151 and to the extent that a Participant is adversely impacted
by an incremental increase in the average unit cost of coal an
allocation of such incremental cost will be made and the net difference
paid to the Participant having a credit balance.

23.9 The accounting practice as stated in this Section 23 is
applicable at the present time. If, however, at a later time the
practice is proven to be inadequate or another practice later proves to
be more equitable in the opinion of the Auditing Committee, the
Coordination Committee, upon the recommendation of the Auditing
Committee, may authorize changes and revisions to the accounting
practices.

24.0 ANNUAL BUDGETS:

24.1 Not less than ninety (90) days prior to the beginning of
each calendar year, the Operating Agent shall prepare and submit to the
Engineering and Operating Committee for its review and approval the
proposed capital budget, manpower budget and a budget for the
performance of Operating Work for such calendar year.

24.2 The Engineering and Operating Committee shall approve the
budgets described in Section 24.1 in final form not less than thirty
(30) days prior to their effective date. In the event that any such
budget is not so approved, the Operating Agent will nevertheless
continue to perform Operating Work in a manner consistent with Prudent
Utility Practice until such time as a budget has been approved.

24.3 Any information required from the Participants by the
Operating Agent in preparing such proposed budgets will be supplied by
the Participants, if possible, within thirty (30) days following a
request by the Operating Agent.

24.4 The Engineering and Operating Committee may at any time
during the year approve revisions to the approved capital expenditures
budget, manpower budget and a budget for the performance of Operating
Work.

25.0 PAYMENT OF TAXES:

25.1 The Participants shall use their best efforts to have any
taxing authority imposing any taxes or assessments on the San Juan
Project, assess and levy such taxes or assessments directly against
each Participant in accordance with its respective Participation Share
in the property taxed.

25.2 All taxes or assessments levied against each
Participant's ownership interest in the San Juan Project, excepting
those taxes or assessments levied against an individual Participant on
behalf of other Participants, shall be the sole responsibility of the
Participant upon whom said taxes and assessments are levied.

25.3 If any property taxes and other taxes and assessments are
levied and assessed in a manner other than specified in Section 25.1,
it shall be the responsibility of the Coordination Committee to
establish equitable standard practices and procedures for the
apportionment among the Participants of such taxes and assessments and
the payment thereof.

26.0 MATERIALS AND SUPPLIES:

26.1 The Operating Agent from time to time may increase or
reduce the inventory of Materials and Supplies by changing the maximum
or the minimum quantities to be maintained in inventory in accordance
with the procedures established by the Engineering and Operating
Committee.

26.2 The Operating Agent shall prepare a list of the items for
inclusion in Materials and Supplies for the operation and maintenance
of each Unit. The list shall include the estimated cost of each
individual item of such Materials and Supplies and specify the maximum
and minimum quantity of each such individual item to be maintained in
inventory. The list shall be submitted to the Engineering and Operating
Committee by the Operating Agent for review and approval.

26.3 The Operating Agent shall purchase and take control of
Materials and Supplies for inventory, so that the total inventory of
Materials and Supplies on hand remains in accordance with the policies
established by the Engineering and Operating Committee.

26.4 Materials and Supplies withdrawn from inventory and used
in the operation and maintenance of the San Juan Project shall be
accounted for as a component of operation and maintenance expense and
allocated among the Participants in accordance with Section 22.

26.5 Materials and Supplies withdrawn from inventory and used
in connection with Capital Improvements shall be accounted for as a
capital expenditure and allocated among the Participants in accordance
with Section 7.

26.6 Materials and Supplies removed from service shall be
returned to inventory if reusable, or if junk or obsolete, shall be
disposed of by the Operating Agent under the best available terms. The
proceeds, if any, received shall be credited or distributed to the
Participants in the same proportion as their Participation Shares
therein.

26.7 A separate Materials and Supplies account and
undistributed stores expense account will be established by the
Operating Agent in accordance with FERC Accounts. Such charges and
credits so allocated to Materials and Supplies shall be allocated to
the Participants as a component of operation and maintenance expense in
accordance with Section 22, or as a Capital Improvement in accordance
with Section 7, as the case may be.

26.8 The inventory value of any item withdrawn from or
returned to Materials and Supplies shall be the average cost of like
items in inventory.

27.0 EMERGENCY SPARE PARTS:

27.1 The Operating Agent shall prepare a list of the Emergency
Spare Parts for each Unit and common facilities. Such list shall
include the estimated costs for each individual item of such Emergency
Spare Parts and shall specify the quantity of each such individual item
to be maintained in inventory. Such list shall be submitted to the
Engineering and Operating Committee by the Operating Agent for review
and approval.

27.2 The Operating Agent shall purchase Emergency Spare Parts
from time to time as replacements for those withdrawn from inventory in
accordance with the policies established by the Engineering and
Operating Committee.

27.3 Emergency Spare Parts shall be owned by and the costs
thereof shall be allocated between the Participants in accordance with
their Participation Shares.

27.4 The Operating Agent shall notify the Participants
promptly after Emergency Spare Parts are withdrawn from inventory and
shall also notify the Participants of the value of such parts so
withdrawn and of the accounting treatment with respect thereto.

PART VI

OPERATING AGENT

28.0 OPERATION AND MAINTENANCE:

28.1 PNM is the Operating Agent, unless replaced in accordance
with Section 33.

28.2 All Participants hereby appoint PNM as their agent, and
PNM agrees to undertake, as the agent of the Participants and as
principal on its own behalf, the responsibility for the performance of
Operating Work in accordance with this Agreement.

28.3 Subject to the provisions, conditions, limitations and
restrictions of this Agreement, the Operating Agent shall:

28.3.1 Perform the Operating Work in accordance with
the Project Agreements and Prudent Utility Practice.

28.3.2 Contract for, furnish or obtain the services
and studies necessary for performance of Operating Work.

28.3.3 Arrange for the placement and maintenance of
Operating Insurance.

28.3.4 Execute all contracts in the name of the
Operating Agent, acting as principal on its own behalf and as
agent for the Participants, in connection with the performance
of Operating Work.

28.3.5 Furnish and train the necessary personnel for
performance of Operating Work.

28.3.6 Have the coal replaced which has been removed
from the Emergency Coal Storage Pile at the earliest practical
time following resumption of normal coal deliveries.

28.3.7 Enforce and comply with all contracts entered
into for the performance of Operating Work.

28.3.8 Comply with any and all laws and regulations
applicable to the performance of Operating Work.

28.3.9 Maintain the Operating Account and expend the
Operating Funds only in accordance with this Agreement.

28.3.10 Keep and maintain records of monies expended
and received, obligations incurred, credits accrued and
contracts entered into in the performance of this Agreement,
and make such records available for inspection by the
Participants at reasonable times and places.

28.3.11 Not suffer any liens to remain in effect
unsatisfied against the San Juan Project (other than the liens
permitted under Section 10.1, for taxes or assessments not yet
delinquent, for labor and material not yet delinquent or
undetermined charges or liens incidental to the performance of
Operating Work); provided, that the Operating Agent shall not
be required to pay or discharge any such lien as long as a
proceeding shall be pending in which the lawfulness or
validity of such lien shall be contested in good faith and
which shall operate during the pendency thereof to prevent the
collection or enforcement of such lien so contested.

28.3.12 Recommend minimum notification times and lead
times for changing scheduled Energy required for the
Participants to the Engineering and Operating Committee for
its approval.

28.3.13 Act as operating representative or agent in
connection with the administration and enforcement of the Coal
Sales Agreement.

28.3.14 Recommend programs to the Engineering and
Operating Committee to make environmental studies and, upon
approval of the Engineering and Operating Committee, supervise
the performance of such programs.

28.3.15 Provide the Engineering and Operating
Committee with all written statistical and administrative
reports, written budgets, information and other records
relating to Operating Work which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.

28.3.16 Provide the Fuels Committee with all written
reports, written budgets, information and other records
relating to Operating Work which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.
28.3.17 Provide the Auditing Committee with all
accounting records, information, reports and other records
relating to Operating Work, which may be necessary to permit
such committee to perform its responsibilities under this
Agreement.
28.3.18 Perform Operating Work so as to comply with
the Water Contract and make such tests and measurements and
keep such records as are required by the United States Bureau
of Reclamation.

28.3.19 Keep the Participants fully and promptly
advised of material changes in conditions or other material
developments affecting the performance of Operating Work and
furnish the Participants with copies of any notices given or
received pursuant to the Project Agreements.

28.3.20 Present claims to any insurer for losses and
damages covered by valid and collectible Operating Insurance
procured by the Operating Agent directly from the insurer.
Investigate, adjust, settle, decline and defend claims against
the Participants arising out of the performance of Operating
Work when said claims or portions thereof are not covered by
valid and collectible Operating Insurance; provided that the
Operating Agent shall obtain the agreement of the
Participants, acting through the Coordination Committee, prior
to disposing of any claims or combination of claims arising
out of the same occurrence which exceeds one hundred thousand
dollars ($100,000).

28.3.21 Assist, as requested, other Participants and
their insurers in the investigation, adjustment and settlement
of any loss or claim arising out of Operating Work for which
payment may be made on account of valid and collectible
additional insurance applicable thereto procured by any such
Participant; provided, that the Operating Agent may agree (by
separate agreement) that a Participant procuring any policy or
policies of additional insurance shall have the authority and
the responsibility to (i) present, investigate, adjust,
settle, decline and defend claims or potential claims covered
by said policies in favor of the Participants and against any
one or more of said insurers; and (ii) present, investigate,
adjust, settle, decline and defend claims against the
Participants arising out of the performance of Operating Work
when said claims or portions thereof are not covered by said
policies; and provided further, that such Participant shall
obtain the agreement of the Participants, acting through the
Coordination Committee, prior to the settlement of any claim
or combination of claims arising out of the same occurrence
which exceeds one hundred thousand dollars ($100,000).

28.3.22 Notwithstanding anything in Section 28.3.20
and 28.3.21 to the contrary, any Participant may at any time,
at its own expense, employ its own counsel to assist in
investigating, adjusting, settling, declining and defending
claims of the types referred to in Sections 28.3.20 and
28.3.21 and the Operating Agent and its employees and counsel
shall cooperate fully with such counsel and permit such
counsel to participate fully in all of the foregoing
activities.

28.3.23 Keep the Participants fully and promptly
informed of any known default under the Project Agreements.

28.3.24 Determine switching and clearance procedures
to be followed by the Participants at the San Juan Project.

28.3.25 Determine Available Operating Capacity from
time to time and make recommendations to the Engineering and
Operating Committee regarding items referenced in Section
19.3.1.9.

28.3.26 Upon the request of a Participant, provide
such Participant, in reasonable quantity without direct charge
therefor, a copy or copies of any report, record, list,
budget, manual, accounting or billing summary, classification
of accounts, or other documents or revisions of any of the
foregoing items, all as prepared in accordance with this
Agreement.

28.3.27 In the event of the failure of the
Participants which are signatories to the Coal Sales Agreement
then in effect to reach agreement on a matter described in
Sections 18.7 and 20.5.3, maintain a supply of coal to the San
Juan Project, consistent with Prudent Utility Practice.

28.3.28 Manage the activities of the "designated
representative" pursuant to the DR Agreement.

28.3.29 Perform all of the duties and obligations set
out in this Agreement as duties and obligations of the
Operating Agent.

28.4 The Participants shall lend and be properly reimbursed
for all necessary and available assistance as may be requested by the
Operating Agent in the performance of Operating Work.

28.5 The Operating Agent shall be the agent of the
Participants and shall exercise only such authority as is conferred
upon it by this Agreement. The Operating Agent shall not receive any
fee or profit hereunder, unless otherwise agreed unanimously by the
Participants.

29.0 OPERATING EMERGENCY:

29.1 In the event of an Operating Emergency, the Operating
Agent shall take any and all steps reasonably necessary and required to
terminate the Operating Emergency, subject to the provisions of this
Section 29.

29.2 As soon as practicable after the commencement of an
Operating Emergency, the Operating Agent shall advise the Participants
of the occurrence of the Operating Emergency, its nature and the steps
taken or to be taken to terminate the Operating Emergency, including a
preliminary estimate of the expenditures required to terminate the
Operating Emergency.

29.3 In the event that the estimated cost to cure an Operating
Emergency with respect to any Unit or to any equipment and facilities
common to any of the Units does not exceed two hundred and fifty
thousand dollars ($250,000), the Operating Agent shall have the
authority to expend, in its discretion, no more than two hundred and
fifty thousand dollars ($250,000) to terminate such Operating
Emergency.

29.4 In the event the Operating Agent determines that the
estimated amount required to terminate the Operating Emergency exceeds
the amount which it is authorized to expend, the Operating Agent shall
so notify the Participants and shall call a meeting of the Engineering
and Operating Committee to be held not later than five (5) days
following such determination. At such meeting, the Operating Agent
shall submit the following information:

29.4.1 The estimated date when the Operating
Emergency can be terminated.

29.4.2 The person or persons who would perform the
work and furnish the materials required to terminate the
Operating Emergency.

29.4.3 The estimated amount of overtime, if any,
which would be necessary in order to expedite the termination
of the Operating Emergency.

29.4.4 The costs that are proposed to be capitalized,
and salvage realized.

29.4.5 The costs that are proposed to be charged as
maintenance expense.

29.4.6 The proposed administrative and general
expense allowance applicable to such repair or reconstruction.

29.4.7 Such other information as may be necessary and
required by the Engineering and Operating Committee to
determine the manner in which the Operating Emergency is to be
terminated.

29.5 The Engineering and Operating Committee shall review and
approve the proposed repair or reconstruction, including the estimated
cost thereof or shall agree upon an alternative.

29.6 Costs incurred in terminating an Operating Emergency may
be billed to the Participants by the Operating Agent on the basis of
its estimate of such costs with adjustment to be made in accordance
with Section 29.8 when final cost determination has been made.

29.7 Following the termination of the Operating Emergency, the
Operating Agent shall submit to the Participants a report containing a
summary of the costs incurred and expenditures made in connection with
the repair or reconstruction and such other information as may be
required by the Engineering and Operating Committee.

29.8 The Operating Agent shall allocate to the Participants
the costs incurred or expenditures made in such repair or
reconstruction, as follows: (i) costs charged as maintenance expense,
in accordance with Section 22; and (ii) any other such repair or
reconstruction costs, in accordance with Section 7.

30.0 PAYMENT OF EXPENSES BY PARTICIPANTS:

30.1 All amounts required to be advanced by the Participants
in accordance with this Agreement shall be made payable to the
Operating Account established by the Operating Agent. The Operating
Funds shall be owned by the Participants in proportion to their
respective balances therein at any given time, and the Operating Agent
in its capacity as such shall not have any right or title therein
except to maintain custody of and to disburse the Operating Funds as a
conduit between the Participants and those to whom such disbursements
shall be made.

30.2 The Engineering and Operating Committee shall establish a
minimum amount for the Operating Funds which will be available to pay
for expenditures or obligations incurred by or on behalf of the
Participants in accordance with this Agreement. Such minimum amount of
Operating Funds may be revised by the Engineering and Operating
Committee at any time. The minimum amount of the Operating Funds and
any increases therein shall be advanced by the Participants in
accordance with the percentages set forth in Section 22, and shall be
due and payable within fifteen (15) business days following
notification of the establishment of the minimum amount to be kept in
Operating Funds or the date on which any increase in such amount
authorized by the Engineering and Operating Committee shall become
effective. In the event the Engineering and Operating Committee
decreases such minimum amount, then each Participant shall receive a
credit which shall be equal to the product of its percentage, as set
forth in Section 22, and the amount of any such decrease.

30.3 Each Participant shall advance Operating Funds on the
basis of notices (hereinafter called bills) submitted by the Operating
Agent reflecting such Participant's share of costs and expenses in
accordance with this Agreement, as follows:

30.3.1 Expenses described in Sections 30 and 22 shall
be billed in writing as follows:

30.3.1.1 The payroll costs to be paid to the
Operating Agent's employees for each pay period.

30.3.1.2 On the 20th day of each month, the
total expenses incurred the previous month and
described in Section 22 less those expenses billed
under Section 30.3.1.1.

30.3.2 Bills submitted under Section 30.3.1 shall be
due and payable within seven (7) business days following
receipt of the bill.

30.3.3 Expenses described in Sections 31 and 23 shall
be billed in writing at least ten (10) business days prior to
their due date, and funds therefor shall be deposited with the
Operating Agent not less than three (3) business days prior to
their due date. If such bills do not have a specific due date,
they shall be billed within a reasonable time following their
incurrence.

30.3.4 Expenses described in Sections 7, 26, 27 and
29 shall be billed monthly, except when such expenses exceed
the minimum amount in the Operating Funds in which case
billing will be made immediately and payable within seven (7)
business days following receipt of the bill.

31.0 OPERATING INSURANCE:

31.1 Unless otherwise specified by the Coordination Committee,
during the performance of Operating Work, the Operating Agent shall
procure and maintain in force, or cause to be procured and maintained
in force, policies of Operating Insurance providing coverage against
the following risks, hazards and perils:

31.1.1 Risks covered by the standard form of
commercial liability insurance, including bodily injury,
personal injury and property damage risk, hazards of
automobiles liability, contractual liability, contractor's
protective liability and liability for products and completed
operations, in an amount not less than twenty-five million
dollars ($25,000,000).

31.1.2 Risks covered by the standard form of "all
risk" property insurance providing coverage against all risk
of loss, except those risks excluded in the standard form of
"all risk" property insurance. Such insurance shall provide
boiler and pressure vessel coverage, including reasonable
expediting expense.

31.1.3 Risks covered by the standard form of workers'
compensation and employers liability insurance, covering
employees of the Operating Agent engaged in the performance of
Operating Work, or other compliance by the Operating Agent
with requirements of the laws of the State of New Mexico as to
such coverage.

31.1.4 Risks covered by the standard form of employee
dishonesty bond covering loss of property or funds due to
dishonest or fraudulent acts committed by an officer or
employee of the Operating Agent.

31.2 Except for Operating Insurance described in Sections
31.1.3 and 31.1.4, each Participant shall be a named insured
individually and jointly and in accordance with its Participation Share
as established in Section 6. Operating Insurance referred to in Section
31.1.1 shall carry cross-liability coverage.

31.3 In the event that another Participant's insurance program
affords equal or better coverage on a more favorable cost basis than
that available to the Operating Agent, the Participants may agree (by
separate agreement) that such insurance program may be utilized to
afford all or part of the insurance coverage required by Section 31.1.

31.4 The insurance company used, the insurable values, limits,
deductibles, retentions and other special terms, covenants and
conditions of the Operating Insurance shall be agreed upon by the
Coordination Committee.

31.4.1 Any deductibles shall be shared by the
Participants in accordance with the percentages established in
Section 22.1.

31.5 The Operating Agent shall furnish each of the
Participants with either a certified copy of each of the policies of
Operating Insurance or a certified copy of each of the policy forms of
Operating Insurance, together with a line sheet therefor (and any
subsequent amendments) naming the insurers and underwriters and the
extent of their participation. When the policies or policy forms of
Operating Insurance have been approved in writing by all of the
Participants, said policies or policy forms shall not be modified or
changed by any Participant without the prior written consent of all of
the Participants, except for minor and insubstantial changes or
modifications, as to which notification shall be given by the Operating
Agent to the Participants.

31.6 Each of the Operating Insurance policies shall be
endorsed so as to provide that all named insureds shall be given thirty
(30) days notice of cancellation or material change.

31.7 Operating Insurance policies shall be primary insurance
for all purposes and shall be so endorsed. Any insurance carried by a
Participant individually shall not participate with the Operating
Insurance as respects any loss or claim for which valid and collectible
Operating Insurance shall apply. Such other insurance shall apply
solely as respects the individual interest of the Participant carrying
such other insurance.

31.8 Nothing herein shall prohibit the Operating Agent or any
Participant from furnishing a policy of Operating Insurance which
combines the coverage required by this Agreement with coverage outside
the scope of that required by this Agreement. If the Operating Agent or
any Participant furnishes a policy of Operating Insurance which
combines the coverage required by this Agreement with coverage outside
the scope of that required by this Agreement, the Coordination
Committee shall agree on the portion of the total premium cost which is
allocable to Operating Insurance. If the Participants are unable to
agree on such allocation, the Operating Agent may make an estimated
allocation and bill the Participants on the basis thereof, with
adjustment to be made when the dispute is resolved.

31.9 If a Participant desires changes in any Operating
Insurance policy, such Participant shall notify the Operating Agent and
the other Participants in writing of the desired changes. Upon
agreement of the Coordination Committee to such change, the Operating
Agent shall obtain the insurance within sixty (60) days from the date
of agreement. If the Operating Agent is unable to obtain the type of
policy or coverage required herein or believed by the Operating Agent
to be adequate, then the Operating Agent shall immediately notify the
Participants.

31.10 In the event the Coordination Committee is unable to
agree upon any matters relating to the Operating Insurance, the
Operating Agent, pending the resolution of such disagreement, shall
procure or cause to be procured such policies of insurance, consistent
with Prudent Utility Practice, as are necessary to protect the
Participants against the insurable risks for which Operating Insurance
is required. During any period of negotiations with an insurer, or
other negotiations which are pending at the expiration of the period of
coverage of an Operating Insurance policy, or in the event an Operating
Insurance policy is canceled, the Operating Agent shall renew or bind
policies as an emergency measure, or may procure policies of insurance
which are identical to those which were canceled, or may to the extent
possible secure replacement policies which will provide substantially
the same coverage as the policy expiring or canceled.

31.11 Each Participant shall have the right to request that
any mortgagee, trustee or secured party be named on all or any of the
Operating Insurance policies as loss payees or additional assureds as
their interests may appear. Such request shall be submitted to the
Operating Agent specifying the name or names of such mortgagee, trustee
or secured party and such additional information as may be necessary or
required to permit it to be included on the policies of Operating
Insurance.

31.12 On an annual basis, the Operating Agent shall advise the
Participants on the status of insurance coverage for the San Juan
Project and shall make appropriate recommendations concerning insurance
issues to the Coordination Committee.

32.0 SURPLUS OR RETIRED PROPERTY:

The Operating Agent shall dispose of surplus property or property no
longer used or useful in the operation of the San Juan Project and report such
disposal to the Participants, both in accordance with practices and procedures
established by the Engineering and Operating Committee. The proceeds from such
disposition shall be credited to the Participants in accordance with their
Participation Shares.

33.0 REMOVAL OF OPERATING AGENT:

33.1 The Operating Agent shall serve as such during the term
of this Agreement unless it resigns as Operating Agent by giving notice
to the Participants at least one (1) year in advance of the date of
resignation or until receipt by the Operating Agent of notice of its
removal as provided in Section 33.2.

33.2 The Operating Agent may be removed as Operating Agent for
any one of the following reasons:

33.2.1 The Operating Agent may be removed by action
of the Coordination Committee if, in the judgment of the
Coordination Committee (voting as provided for in Section
18.4), the best interests of the San Juan Project require that
a new Operating Agent be selected. Any Participant seeking a
Coordination Committee determination to remove the Operating
Agent shall provide to the Operating Agent and to all of the
Participants a written statement, detailing the reasons why,
in the judgment of the initiating Participant, the Operating
Agent should be removed. Within thirty (30) days after receipt
by the Operating Agent of this written statement, the
Operating Agent shall prepare and serve upon all of the
Participants its response which shall contain a detailed
rebuttal of the allegations made in the initiating statement.
Within the same thirty (30) day period, any other Participant
may also prepare and serve upon the Operating Agent and the
Participants a statement responding to the allegations in the
initiating statement. Within twenty (20) days after service of
all such response statements, the Coordination Committee shall
meet to consider what action, if any, to take with regard to
the removal of the Operating Agent. If, pursuant to this
Section 33.2.1, the Coordination Committee removes the
Operating Agent, such removal shall be effective upon the date
established by the Coordination Committee. If the Operating
Agent or any Participant is dissatisfied with the action of
the Coordination Committee, it shall have the right to seek
arbitration under Section 37, but no demand for arbitration
shall stay the decision of the Coordination Committee to
remove the Operating Agent.

33.2.2 If, pursuant to the provisions of Section 34,
it is determined that the Operating Agent is in default of its
obligations under this Agreement, the Operating Agent may be
removed by written notice given by any Participant under
Section 34.1.2, which notice shall state the effective date of
the removal of the Operating Agent.

33.2.3 Notwithstanding the pendency of any actions to
remove the Operating Agent, the Operating Agent shall continue
in good faith to exercise its obligations as Operating Agent.

33.3 Prior to the effective date of a resignation of the
Operating Agent, or prior to the date of removal of the Operating Agent
in accordance with Section 33.2, the Coordination Committee shall by
written agreement designate a new Operating Agent, which may, but need
not, be a Participant. The Coordination Committee may designate an
interim Operating Agent pending selection of a permanent Operating
Agent. Acceptance by the new Operating Agent of its appointment as such
shall constitute its agreement to perform the obligations of the
Operating Agent under this Agreement.

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34.0 DEFAULTS BY OPERATING AGENT:

34.1 The following provisions shall apply solely in regard to
violations or allegations of violations of this Agreement by the
Operating Agent on the basis of which removal of the Operating Agent is
sought:

34.1.1 In the event any Participant shall be of the
opinion that an action taken or failed to be taken by the
Operating Agent constitutes a violation of this Agreement, it
may give written notice thereof to the Operating Agent and the
other Participants, together with a statement of the basis for
its opinion. Thereupon, the Operating Agent may prepare a
statement of the reasons justifying its action or failure to
take action. If agreement in settling the dispute is not
reached between the Operating Agent and such Participant which
gave such notice, then the matter shall be submitted to
arbitration in the manner provided in Section 37. During the
continuance of the arbitration proceedings, the Operating
Agent may continue such action taken or failed to be taken in
the manner it deems most advisable and consistent with this
Agreement.

34.1.2 If it is determined that the Operating Agent
is violating this Agreement, then the Operating Agent shall
act with due diligence to end such violation and shall, within
thirty (30) days or within such lesser time following the
determination as may be prescribed in the determination, take
action or commence action in good faith to terminate such
violation. In the event that the complaining Participant is of
the opinion that the Operating Agent has not taken such action
to correct, or to commence action to correct, the violation
within such allowed period, the complaining Participant shall
be entitled to submit the question of the Operating Agent's
good faith action to terminate such violation to arbitration
as provided in Section 37. If it is determined that the
Operating Agent has not acted with due diligence or good faith
to terminate such violation, it shall be deemed to be in
default and shall be subject to removal, after the arbitration
determination, within fifteen (15) days after receipt of
notice executed by the complaining Participant in accordance
with Section 42.

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34.1.3 The provisions of Section 35, excepting
Sections 35.8 and 35.9, shall not apply to disputes as to
whether or not an action or non-action of the Operating Agent,
in its capacity as Operating Agent, is a violation or default
under this Agreement.

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PART VII

DEFAULTS, LIABILITY AND ARBITRATION

35. DEFAULTS:

35.1 Each Participant shall pay all monies and carry out all
other performances, duties and obligations agreed to be paid or
performed by it pursuant to all of the terms and conditions set forth
and contained in the Project Agreements, and a default by any
Participant in the covenants and obligations to be by it kept and
performed pursuant to the terms and conditions set forth and contained
in any of the Project Agreements shall be an act of default under this
Agreement.

35.2 In the event of a default by a Participant in any of the
terms and conditions of this Agreement to be performed by that
Participant, the following shall apply:

35.2.1 The Operating Agent shall give a written
notice of the default to the defaulting Participant and the
other Participants in accordance with Section 35.2.2.

35.2.2 The notice of default shall specify the
existence, nature and extent of the default. Upon receipt of
the notice of default, the defaulting Participant shall
immediately take all steps necessary to cure the default as
promptly and completely as possible.

35.3 In the event that any Participant shall dispute an
asserted default by it, then such Participant shall pay the disputed
payment or perform the disputed obligation, but may do so under
protest. The protest shall be in writing, shall accompany the disputed
payment or precede the performance of the disputed obligation(s), and
shall specify the reason upon which the protest is based. Copies of
such protest shall be mailed by such Participant to all other
Participants and to the Operating Agent. Payments not made under
protest shall be deemed correct, except to the extent that periodic or

103

annual audits may reveal over or under payment by a Participant or may
necessitate adjustments. In the event it is determined by arbitration,
pursuant to the provisions of this Agreement or otherwise, that the
protesting Participant is entitled to a refund of all or any portion of
a disputed payment or payments, or is entitled to the reasonable
equivalent in money of non-monetary performance of a disputed
obligation theretofore made, then, upon such determination, the
non-protesting Participant(s) shall reimburse such amount to the
protesting Participant, together with interest thereon at the rate of
ten percent (10%) per annum, or the maximum legal rate of interest,
whichever is lesser, from the date of payment or of the performance of
a disputed obligation to the date of reimbursement.

35.4 In the event a default shall continue for a period of ten
(10) days or more after the notice given by the Operating Agent in
accordance with Section 35.2 without having been cured by the
defaulting Participant, or without such defaulting Participant having
commenced or continued action in good faith to cure such default, the
following shall apply:

35.4.1 If the defaulting Participant has failed to
cure such default or to commence such good faith action during
said ten (10) day period, the Operating Agent shall make a
written report to the Engineering and Operating Committee
concerning the status of the default and shall, on the next
working day after such ten (10) day period, notify the
defaulting Participant in writing that the Operating Agent
intends to declare the defaulting Participant in default under
the Project Agreements unless there is a prompt cure of the
default. Seven (7) days after the giving of such notice to the
defaulting Participant, the Operating Agent shall make a
second written report to the Engineering and Operating
Committee concerning the status of the default and the

104

efforts, if any, of the defaulting Participant to cure the
default. If, within seven (7) additional days, the defaulting
Participant has neither cured nor reasonably commenced to cure
the default, the Operating Agent shall declare the defaulting
Participant in default under the Project Agreements and shall
provide written notification of the declaration of default to
the defaulting Participant and to the Engineering and
Operating Committee. Thereafter, and for so long as the
default is not remedied and the declaration of default is not
revoked by the Operating Agent, all rights of the defaulting
Participant under the Project Agreements shall be suspended,
including the right to vote on all committees and to receive
all or any part of its proportionate share of the Net
Effective Generating Capacity.

35.4.2 Within seventeen (17) days after the notice by
the Operating Agent, as provided for in Section 35.2, the
Operating Agent shall prepare special operating procedures for
approval by the Engineering and Operating Committee that will
apply during the period of suspension under Section 35.4.1.
Upon approval by the Engineering and Operating Committee, the
Operating Agent shall provide notice to each Participant of
such special procedures. These special procedures shall
include:

35.4.2.1 A tabulation in form similar to
Section 6.2 of the percentages of costs to be borne by the
non-defaulting Participants pursuant to Section 35.5;

35.4.2.2 Billing and accounting of such
costs;

35.4.2.3 Dispatch and scheduling of the
defaulting Participant's proportionate share of Net Effective
Generating Capacity; and

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35.4.2.4 Any other items required for the
optimal use of the San Juan Project and the mitigation of
damages by the non-defaulting Participants.

35.4.2.5 If the Operating Agent proposes to
broker all or a portion of the defaulting Participant's
proportionate share of Net Effective Generating Capacity on
behalf of one or more non-defaulting Participants, the form of
such an agreement shall be incorporated in such procedures.

35.4.3 Within twenty (20) days after the declaration
of a default, as provided for in Section 35.4.1, the
defaulting Participant and the non-defaulting Participants
shall convene a meeting to address the defaulting
Participant's situation and its intentions with regard to
curing its default. The defaulting Participant shall promptly
prepare a cure plan for approval by the members of the
Coordination Committee entitled to vote thereon. The cure plan
shall address the defaulting Participant's plan to cure the
default and restore itself to full participation as an owner
of the San Juan Project. The Coordination Committee, by vote
of the members of the Coordination Committee entitled to vote
thereon, will monitor the defaulting Participant's compliance
with the terms and conditions of the cure plan and if it
appears to the Coordination Committee that the defaulting
Participant is or will be unable to comply with the terms of
an approved cure plan, the Coordination Committee shall
consider what actions may be required to address such
inability, including, but not limited to, directing the
Operating Agent to take such actions as may be appropriate. It
is the intent of the Participants that any defaults shall be
cured on as expeditious a basis as reasonably possible.

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35.4.4 A demand for arbitration of an asserted
default pursuant to Section 37 shall not stay the suspension
of the rights of the defaulting Participant, but in the event
that the board of arbitrators shall determine that the
asserted default did not in fact exist or occur, the
arbitrators shall specify a method of fully and fairly
compensating the Participant which, under Section 35.4.1, was
denied the right to vote on committee actions and to receive
all or any part of its proportionate share of the Net
Effective Generating Capacity.

35.5 During any period when the suspension provided for in
Section 35.4.1 is in effect, the non-defaulting Participant(s) having a
Participation Share in the affected Unit or Units: (i) shall bear a
proportionate share of all expenses, including but not limited to, the
operation and maintenance costs, insurance costs, fuel costs, capital
expenditures and other expenses otherwise payable by the defaulting
Participant under the Project Agreements, including any obligations
related to common equipment and facilities, based upon the relation of
the Participation Share of each such non-defaulting Participant(s) to
the Participation Shares of all non-defaulting Participants in the
specific Unit or Units; and (ii) shall be entitled to schedule and
receive for their accounts their proportionate share of the Net
Effective Generating Capacity of the defaulting Participant.

35.6 In connection with its cure of the default, the
defaulting Participant shall pay promptly upon demand to the
non-defaulting Participant(s) the total amount of money (and/or the
reasonable equivalent in money of non-monetary performance) paid and/or
made by such non-defaulting Participant(s) pursuant to Section 35.5 in
order to cure any default by the defaulting Participant, together with
interest thereon at the rate of ten percent (10%) per annum, or the
maximum legal rate of interest, whichever is the lesser, from the date
of the expenditure of such money (or the making of such other
performance) by the non-defaulting Participant(s), to the date of such
reimbursement by the defaulting Participant, or such greater amount as
may be otherwise provided in the Project Agreements. Any payment
obligation of the defaulting Participant shall be reduced by mitigation
measures undertaken by the non-defaulting Participants; provided,
however, that the payment obligations of the defaulting Participant
shall not be reduced by any profits or gains achieved by the
non-defaulting Participants as the result of taking a proportionate
share of the Net Effective Generating Capacity due to the default of
the defaulting Participant.

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35.7 The suspension of a defaulting Participant shall be
terminated and its full rights under the Project Agreements restored
when the default(s) have been cured and all compensable costs incurred
by the non-defaulting Participant(s) hereunder have been paid by the
defaulting Participant or other arrangements acceptable to the
non-defaulting Participant(s) have been made.

35.8 No waiver by a non-defaulting Participant of its rights
with respect to a default under this Agreement, or with respect to any
other matter arising in connection with this Agreement, shall be
effective unless the non-defaulting Participant(s) waive in writing
their respective rights and any such waiver shall not be deemed to be a
waiver with respect to any subsequent default or matter. No delay short
of the statutory period of limitations in asserting or enforcing any
right hereunder shall be deemed a waiver of such right.

35.9 The rights and remedies provided in this Agreement shall
be in addition to the rights and remedies of the Participants as set
forth and contained in any other Project Agreement or any rights and
remedies the Participants have in law or equity.

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36.0 LIABILITY:

36.1 Except for any judgment debt for damage resulting from
Willful Action and except to the extent any judgment debt is
collectible from valid insurance, and subject to the provisions of
Sections 36.1.1, 36.4, 36.5, 36.6 and Section 37, each Participant
hereby extends to all other Participants, their directors, members of
their governing bodies, officers and employees, its covenant not to
execute, levy or otherwise enforce a judgment obtained against any of
them, including recording or effecting a judgment lien, for any direct,
indirect, or consequential loss, damage, claim, cost, charge or
expense, whether or not resulting from the negligence of such
Participant, its directors, members of its governing body, officers,
employees or any person or entity whose negligence would be imputed to
such Participant from (i) Operating Work, the design and construction
of Capital Improvements or the use or ownership of the San Juan Project
or (ii) the performance or nonperformance of the obligations of any
Participant under any of the Project Agreements, other than the
obligation to pay any monies becoming due.

36.1.1 In the event any insurer providing insurance
refuses to pay any judgment obtained by a Participant against
any other Participant, its directors, members of its governing
body, officers or employees on account of liability referred
to in Section 36.1, the Participant, its directors, members of
its governing body, officers or employees against whom the
judgment is obtained shall, at the request of the prevailing
Participant and in consideration for the covenant granted in
Section 36.1, execute such documents as may be necessary to
effect an assignment of its contractual rights against the
nonpaying insurer and thereby give the prevailing Participant
the opportunity to enforce its judgment directly against such
insurer. In no event when a judgment debt is collectible from
valid insurance shall the Participant obtaining the judgment
execute, levy or otherwise enforce the judgment (including
recording or effecting a judgment lien) against the
Participant, its directors, members of its governing body,
officers or employees against whom the judgment was obtained.

109

36.1.2 To the extent that Section 41-3-5, New Mexico
Statutes Annotated, 1978 compilation (as such section may be
amended), shall be applicable and for the purpose of relieving
each Participant, its directors, members of its governing
body, officers and employees of any liability to make
contribution to other non-Participant tortfeasors, the
foregoing covenant not to execute hereby effects a reduction
of all injured Participants' damages recoverable against all
other non-Participant tortfeasors to the extent of the pro
rata share (as referred to in Section 41-3-5, New Mexico
Statutes Annotated, 1978 compilation, as such section may be
amended) of the other Participants, their directors, members
of their governing bodies, officers and employees.

36.1.3 Each Participant agrees, upon request by any
other Participant, to make, execute and deliver any and all
documents or take such other action as may reasonably be
required to effectuate the intent of this Section 36.1.

36.2 Except as provided in Sections 36.4, 36.5 and 36.6, the
costs and expenses of discharging all work liability imposed upon one
or more of the Participants, for which payment is not made by
insurance, shall be allocated among the Participants in proportion to
their respective Participation Shares in the property giving rise to
the work liability. Work liability is defined as liability of one or
more Participants for any loss, damage, claim, cost, charge or expense
of any kind or nature (including direct, indirect or consequential)
suffered or incurred by any party other than a Participant, whether or
not resulting or to result in the future from the negligence of any
Participant, its directors, members of its governing body, officers,
employees or any other person or entity whose negligence would be
imputed to such Participant, that has resulted or may result in the
future from (i) performance or nonperformance of the work herein
described, (ii) operation, maintenance, use or ownership of the San
Juan Project, and (iii) past or future performance or nonperformance of
the obligations of any Participant under any of the Project Agreements.

110

36.3 If it cannot be determined which property gave rise to
work liability, the allocation for discharging costs and expenses
associated therewith shall be as specified in Section 22.1.7.

36.4 Except for liability resulting from Willful Action (which
subject to the provisions of Section 36.6 shall be the responsibility
of the willfully acting Participant), any Participant whose electric
customer shall have a claim or bring an action against any other
Participant for any death, injury, loss or damage arising out of or in
connection with electric service to such customer caused by the
operation or failure of operation of the San Juan Project or any
portion thereof shall indemnify and hold harmless such other
Participant, its directors, members of its governing body, officers and
employees from and against any liability for such death, injury, loss
or damage.

36.5 Each Participant shall be responsible for any damage,
loss, claim, cost, charge or expense that is not covered by insurance
and results from its own Willful Action as defined in Section 5.53.2
and shall indemnify and hold harmless the other Participants, their
directors, members of their governing bodies, officers and employees,
from any such damage, loss, claim, cost, charge or expense.

111

36.6 Except as provided in Section 36.5, the aggregate
liability of any Participant to all other Participants for Willful
Action not covered by insurance shall be determined as follows:

36.6.1 All such liability for damages, losses,
claims, costs, charges or expenses of such Participant shall
not exceed ten million dollars ($10,000,000) per occurrence.
Each Participant extends to each other Participant, its
directors, members of its governing body, officers and
employees its covenant not to execute, levy or otherwise
enforce a judgment against any of them for any such aggregate
liability in excess of ten million dollars ($10,000,000) per
occurrence.

36.6.2 A claim based on Willful Action must be
perfected by filing suit in a court of competent jurisdiction
within three (3) years after the Willful Action occurs. All
claims made thereafter relating to the same Willful Action
shall be barred by this Section 36.6.2. The award to each
nonwillfully acting Participant from each Participant
determined to have committed Willful Action shall be
determined as follows: (i) Each Participant who successfully
files suit for remuneration shall receive the lesser of (a)
its final judgment awarded (or settlement made) or (b) its pro
rata Participation Share of the ten million dollar
($10,000,000) maximum recovery established in Section 36.6.1;
(ii) When all pending suits are resolved, those Participants
who were awarded judgments or reached settlements but whose
claims were not fully satisfied pursuant to Section 36.6.2(i)
shall be entitled to participate in any remaining portion of
the ten million dollar ($10,000,000) maximum recovery limit,
based upon the ratio of the unsatisfied portion of such
Participant's judgment or settlement to the total unsatisfied
portion of all such judgments and settlements. Such
participation shall be limited to the Participants'
unsatisfied judgments or settlements.

112

36.7 The provisions of this Section 36 shall not be construed
so as to relieve any insurer of its obligation to pay any insurance
proceeds in accordance with the terms and conditions of valid and
collectible insurance policies.

36.8 If a court of competent jurisdiction determines upon a
challenge by a Participant or third party that the provisions of
Section 56-7-1, New Mexico Statutes Annotated, 1978 compilation, are
applicable to this Agreement, the Participants agree that any agreement
to indemnify contained in this Agreement shall not extend to liability,
claims, damages, losses or expenses, including attorney's fees, arising
out of:

(i) the preparation or approval of maps, drawings,
opinions, reports, surveys, change orders, designs or
specifications by the indemnitee, or the agents or employees
of the indemnitee; or

(ii) the giving of or the failure to give directions
or instructions by the indemnitee, or the agents or employees
of the indemnitee, where such giving or failure to give
directions or instructions is the primary cause of bodily
injury to persons or damage to property.

The word "indemnify" as used in this Section 36.8 includes,
without limitation, an agreement to remedy damage or loss caused in
whole or in part by the negligence, act or omission of the indemnitee,
the agents or employees of the indemnitee, or any legal entity for
whose negligence, acts or omissions any of the foregoing may be liable.

113

36.9 The Participants agree that the aggregate liability limit
of ten million dollars ($10,000,000) referenced in Sections 36.6.1 and
36.6.2 may be determined in the future to be inappropriate and shall,
at the request of any Participant, make a good faith effort to evaluate
and, if appropriate, revise said limit.

114

37.0 ARBITRATION:

37.1 If a dispute between or among any of the Participants
(which term, for purposes of this Section 37, shall be deemed to
include the Operating Agent) should arise in relation to any aspect of
the San Juan Project, any Participant(s) may call for submission of the
dispute to arbitration, which call shall be binding upon all of the
other affected Participant(s).

37.2 The Participant(s) calling for arbitration shall give
written notice to all other Participants, setting forth in such notice
in adequate detail the entity(ies) against whom relief is sought, the
nature of the dispute, the amount or amounts, if any, involved in such
dispute, and the remedy sought by such arbitration proceedings. Within
twenty (20) days after receipt of such notice, any other Participant(s)
involved may, by written response to the first Participant(s), as well
as the other Participant(s), submit its or their own statement of the
matter at issue and set forth in adequate detail additional related
matters or issues to be arbitrated. Thereafter, the Participant(s)
first submitting its or their notice of the matter at issue shall have
ten (10) days in which to submit a written rebuttal statement, copies
of which shall be provided to all other Participants.

37.3 Within ten (10) days following delivery of the last
written submittal pursuant to Section 37.2, the affected
Participant(s), acting through their respective representatives, shall
meet for the purpose of selecting arbitrators. Each affected
Participant, or group of Participants, representing one side of the
dispute, shall designate an arbitrator. The arbitrators so selected
shall meet within twenty (20) days following their selection and shall
select additional arbitrator(s), the number of which additional
arbitrators shall be one (1) less than the total number of arbitrators
selected by the affected Participants. If the arbitrators selected by
the affected Participants, as herein provided, shall fail to select
such additional arbitrator(s) within said twenty (20) day period, then
the arbitrators shall request from the American Arbitration Association

115

(or similar organization if the American Arbitration Association should
not exist at the time) a list of arbitrators who are qualified and
eligible to serve as hereinafter provided. The arbitrators selected by
the affected Participants shall take turns striking names from the list
of arbitrators furnished by the American Arbitration Association, and
the last name(s) remaining on said list shall be the additional
arbitrator(s). All arbitrators shall be persons skilled and experienced
in the field which gives rise to the dispute, and no person shall be
eligible for appointment as an arbitrator who is an officer or employee
of any of the Participants to the dispute or is otherwise interested in
the matter to be arbitrated.

37.4 Except as otherwise provided in this Section 37 or
otherwise agreed by the Participants to the dispute, the arbitration
shall be governed by the rules and practices of the American
Arbitration Association (or rules and practices of a similar
organization if the American Arbitration Association should not exist
at that time) from time to time in force, except that if such rules and
practices, as modified herein, shall conflict with New Mexico Rules of
Civil Procedure or any other provisions of New Mexico law then in force
which are specifically applicable to arbitration proceedings, such New
Mexico laws shall govern.

37.5 Included in the issues which may be submitted to
arbitration pursuant to this Section 37 is the issue of whether the
right to arbitrate a particular dispute is permitted under the Project
Agreements.

37.6 The arbitrators shall hear evidence submitted by the
respective Participants or group or groups of Participants and may call
for additional information, which additional information shall be
furnished by the party having such information. The decision of a
majority of the arbitrators shall be binding upon all the Participants
and shall be based on the provisions of the Project Agreements and New
Mexico law.

116

37.7 This agreement to arbitrate shall be specifically
enforceable and the award of the arbitrators shall be final and binding
upon the Participants to the extent provided by the laws of the State
of New Mexico. Any award may be filed with the clerk of any court
having jurisdiction over the Participants or any of them against whom
the award is rendered, and, upon such filing, such award, to the extent
permitted by the laws of the jurisdiction in which said award is filed,
shall be specifically enforceable or shall form the basis of a
declaratory judgment or other similar relief.

37.8 Each Participant or group of Participants shall be
responsible for the fees and expenses of the arbitrator selected by
that Participant or group of Participants, unless the decision of the
arbitrators shall specify some other apportionment of such fees and
expenses. The fees and expenses of the neutral arbitrators shall be
shared among the affected Participants equally, unless the decision of
the arbitrators shall specify some other apportionment of such fees and
expenses. All other expenses and costs of the arbitration, including
attorney fees, shall be borne by the Participant incurring the same.

37.9 In the event that any Participant(s) shall attempt to
institute or to carry out the provisions herein set forth in regard to
arbitration, and such Participant(s) shall not be able to obtain a
valid and enforceable arbitration decree, such Participant(s) shall be
entitled to seek legal remedies in a court having jurisdiction in the
premises, and the provisions in this Section 37 referring to
arbitration decisions shall then be deemed applicable to final
decisions of such court.

117

PART VIII

RETIREMENT AND RECONSTRUCTION

38.0 DESTRUCTION, DAMAGE OR CONDEMNATION OF A UNIT:

38.1 If all, or substantially all, of a Unit is destroyed,
damaged or condemned, then the Participants with Participation Shares
in that Unit by unanimous agreement may elect to repair or reconstruct
the damaged, destroyed or condemned Unit in such a manner as to restore
the Unit to substantially the same general character or use as the
original, or to such other character or use as the Participants may
then mutually agree. In the event of such election, it shall be the
obligation of the Participants to pay for the costs of such repair or
reconstruction in accordance with the Participation Shares of the
respective Participants in such Unit, and, upon completion thereof, the
Participants' rights, titles and interests therein shall be as provided
in this Agreement.

38.2 Failure to reach unanimous agreement as provided in
Section 38.1 shall be deemed to be an election not to repair or
reconstruct the damaged, destroyed or condemned Unit, in which event
the proceeds from any insurance or from any award shall be distributed
to the Participants in accordance with their respective Participation
Shares in such Unit. The facilities not destroyed, damaged or condemned
shall be disposed of by the Participants in a manner to be mutually
agreed upon, and the proceeds from such disposition shall be
distributed in accordance with the Participation Shares of the
respective Participants in such Unit. Nothing in this section shall be
deemed to preclude any Participant or group of Participants in the Unit
from agreeing to repair, reconstruct or replace the damaged, destroyed
or condemned Unit.

118

38.3 In the event that less than substantially all of a Unit
is destroyed, damaged or condemned, then it shall be the obligation of
the Participants having a Participation Share in such Unit to repair or
reconstruct such Unit. Each Participant shall be obligated to pay its
proportionate share of the costs of such repair or reconstruction in
accordance with Section 6.2.

38.4 In the event that any common equipment and/or facility is
destroyed, damaged or condemned, then it shall be the obligation of the
Participants having a Participation Share in such common equipment
and/or facilities to repair or reconstruct such damaged, destroyed or
condemned equipment and/or facilities. Each Participant shall be
obligated to pay its proportionate share of the costs of such repair or
reconstruction in accordance with Section 6.2.

119

39.0 RIGHTS OF PARTICIPANTS UPON TERMINATION:

39.1 In the event the Participants by unanimous agreement
abandon, retire or otherwise terminate or suspend operation of the San
Juan Project prior to the termination of this Agreement, the facilities
forming the San Juan Project shall be disposed of by the Participants
in a manner to be unanimously agreed upon and the proceeds from such
disposition shall be distributed to the Participants in accordance with
their respective Participation Shares.

120

40.0 DECOMMISSIONING OF THE PROJECT:

40.1 The Participants acknowledge the appropriateness of
incorporating in a future amendment to this Agreement, or in another
appropriate contractual instrument, provisions which address the
decommissioning of the San Juan Project and/or of one or more Units. It
is recognized, however, that the resolution of issues associated with
San Juan Project decommissioning will require protracted study. The
Participants therefore agree to establish a task force or other forum
for the careful and deliberate consideration of decommissioning issues
so that these issues may be addressed and resolved in a timely manner.
The Operating Agent shall propose to the Participants a methodology and
a schedule for addressing decommissioning issues.

121

PART IX

MISCELLANEOUS PROVISIONS

41.0 RELATIONSHIP OF PARTICIPANTS:

41.1 The covenants, obligations and liabilities of the
Participants are intended to be several and not joint or collective,
and nothing herein contained shall ever be construed to create an
association, joint venture, trust or partnership, or to impose a trust
or partnership covenant, obligation or liability on or with regard to
any one or more of the Participants. Each Participant shall be
individually responsible for its own covenants, obligations and
liabilities as herein provided. No Participant or group of Participants
shall be under the control of or shall be deemed to control any other
Participant or the Participants as a group. No Participant shall be the
agent of or have a right or power to bind any other Participant without
its express written consent, except as expressly provided herein.

41.2 The Participants hereby elect to be excluded from the
application of Subchapter "K" of Chapter 1 of Subtitle "A" of the
Internal Revenue Code of 1986, or such portion or portions thereof as
may be permitted or authorized by the Secretary of the Treasury or its
delegate insofar as such subchapter, or any portion or portions
thereof, may be applicable to the Participants hereunder.

122

42.0 NOTICES:

42.1 Any notice, demand or request provided for in this
Agreement, or served, given or made in connection with it, shall be
deemed properly served, given or made if delivered in person or sent by
registered or certified mail, postage prepaid, return receipt
requested, to the persons specified below:

42.1.1 Public Service Company of New Mexico
c/o Secretary
Alvarado Square
Albuquerque, New Mexico 87158

42.1.2 Tucson Electric Power Company
c/o Secretary
Post Office Box 711
Tucson, Arizona 85702

42.1.3 City of Farmington
c/o City Clerk
800 Municipal Drive
Farmington, NM 87401

42.1.4 M-S-R Public Power Agency
c/o General Manager
P. O. Box 4060
Modesto, CA 95352

42.1.5 Southern California Public Power Authority
c/o Executive Director
225 South Lake Ave, Suite 1410
Pasadena, CA 91101

42.1.6 City of Anaheim
c/o City Clerk
200 South Anaheim Boulevard
Anaheim, CA 92805

with a copy to:

Public Utilities General Manager
201 South Anaheim Boulevard
Suite 1101
Anaheim, CA 92805

123

42.1.7 Incorporated County of
Los Alamos, New Mexico
c/o Utilities Manager
P.O. Drawer 1030
901 Trinity Drive
Los Alamos, NM 87544

42.1.8 Utah Associated Municipal Power Systems
c/o General Manager
2825 E. Cottonwood Parkway
Suite 200
Salt Lake City, UT 84121

42.1.9 Tri-State Generation and Transmission
Association, Inc.
c/o General Manager
P. O. Box 33695
Denver, CO 80233

42.2 A Participant may, at any time or from time to time, by
written notice to the other Participants, change the designation or
address of the person so specified as the one to receive notices
pursuant to this Agreement.

42.3 The Operating Agent shall provide to each Participant a
copy of any material notice, demand or request given or received by it
in connection with the San Juan Project.

124

43.0 OTHER PROVISIONS:

43.1 Each Participant agrees, upon request by another
Participant, to make, execute and deliver any and all documents
reasonably required to implement the terms of this Agreement.

43.2 No Participant shall be considered to be in default in
the performance of any of the obligations hereunder (other than
obligations of a Participant to pay costs and expenses) if failure of
performance shall be due to uncontrollable forces. The term
"uncontrollable forces" shall mean any cause beyond the control of the
Participant affected, including but not limited to failure of
facilities, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, labor dispute, sabotage, restraint by court
order or public authority, or failure to obtain approval from a
necessary governmental authority which by exercise of due diligence and
foresight such Participant could not reasonably have been expected to
avoid and which by exercise of due diligence it shall be unable to
overcome. Nothing contained herein shall be construed so as to require
a Participant to settle any strike or labor dispute in which it may be
involved. Any Participant rendered unable to fulfill any obligation by
reason of uncontrollable forces shall exercise due diligence to remove
such inability with all reasonable dispatch.

43.3 The captions and headings appearing in this Agreement are
inserted merely to facilitate reference and shall have no bearing upon
the interpretation of the provisions hereof.

43.4 This Agreement is made under and shall be governed by the
laws of the State of New Mexico.

125

43.5 The covenants and obligations set forth and contained in
this Agreement are to be deemed to be independent covenants, not
dependent covenants, and the obligation of a Participant to perform all
of the obligations and covenants to be by it kept and performed is not
conditioned on the performance by another Participant of all of the
covenants and obligations to be kept and performed by it.

43.6 In the event that any of the terms or conditions of this
Agreement, or the application of any such term or condition to any
person or circumstance, shall be held invalid by any court having
jurisdiction in the premises, the remainder of this Agreement, and the
application of such terms or conditions to persons or circumstances
other than those as to which it is held invalid, shall not be affected
thereby.

43.7 All costs or expenses, including all taxes that the
Operating Agent is required to pay (but not specifically referred to in
other sections of this Agreement), which are incurred by the Operating
Agent in connection with the performance of its obligations under this
Agreement and which are not specifically allocated to the Participants
in accordance with this Agreement shall be equitably allocated among
the Participants in a manner to be established by the Coordination
Committee.

43.8 Should a change in circumstances, economic factors, or
basic technology occur which results or may result in a substantial
increase or decrease in the benefits to or expenses incurred by a
Participant, including the Operating Agent, which such change was not
within the reasonable contemplation of the Participants at the time of
the execution of this Agreement, the Participants, including the
Operating Agent, shall negotiate in good faith in order that an
appropriate and equitable adjustment shall be made in the reimbursement
of the Operating Agent and in the allocation of expenses among the
Participants. Such adjustment shall be fair and equitable as to both
the Operating Agent and the other Participants.

126

43.9 This Agreement shall be subject to filing with, and to
such changes or modifications as may from time to time be directed by,
competent regulatory authority, if any, in the exercise of its
jurisdiction.

43.10 It is the intent of the Participants in executing this
Agreement to set out in one instrument the entire agreement of the
Participants with respect to the subject matter hereof, and on the
effective date hereof to explicitly amend and restate, and to replace
in their entirely, the Co-Tenancy Agreement and the Operating Agreement
and all modifications thereto. Accordingly, on the effective date
hereof, the Co-Tenancy Agreement and the Operating Agreement are no
longer in force and effect except as incorporated herein; provided,
however, that the interim coal billing arrangements reflected in side
agreements shall continue in effect through their stated term.

43.11 The execution of this Agreement shall not affect any
rights or obligations of the Participants which shall have accrued
prior to the effective date of this Agreement, including any obligation
to pay money or take other actions in accordance with the Co-Tenancy
Agreement and the Operating Agreement or any other agreement.

127

44.0 EXECUTION IN COUNTERPARTS:

44.1 This Agreement may be executed in any number of counterparts, and
each executed counterpart shall have the same force and effect as an original
instrument as if all the Participants to the aggregated counterparts had signed
the same instrument. Any signature page of this Agreement may be detached from
any counterpart thereof without impairing the legal effect of any signatures
thereon and may be attached to any other counterpart of this Agreement identical
in form thereto but having attached to it one or more additional pages.

128

45.0 AMENDMENTS:

45.1 Except as provided in Section 45.2, this Agreement may be amended
only by written instrument executed by all of the Participants with the same
formality as this Agreement.

45.2 The Coordination Committee, by unanimous vote, may amend any one
or more of the exhibits attached to this Agreement. In the event of any such
action by the Coordination Committee, a copy of the new exhibit shall be
attached to this Agreement to replace the old or superseded exhibit, without the
necessity of formally amending this Agreement. Any such action shall not affect
other provisions of this Agreement, including other exhibits thereto.

129

IN WITNESS WHEREOF, the Participants, by their duly authorized
representatives, have caused this Agreement to be made as of this 27th day of
October, 1999.

PUBLIC SERVICE COMPANY
OF NEW MEXICO

By /s/ Patrick J. Goodman
-------------------------
Its Vice President
-------------------------

TUCSON ELECTRIC POWER COMPANY

By /s/ T. A. Delawder
-------------------------
Its Vice President
-------------------------

THE CITY OF FARMINGTON, NEW MEXICO

By /s/ William E. Standley
-------------------------
Its Mayor
-------------------------

M-S-R PUBLIC POWER AGENCY

By /s/ William C. Walbridge
-------------------------
Its General Manager
-------------------------

THE INCORPORATED COUNTY OF LOS ALAMOS,
NEW MEXICO

By /s/ Christine Chandler
-------------------------
Its Council Chair
-------------------------

130

SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY

By /s/ Joseph F. Hsu
-------------------------
Its President
-------------------------

CITY OF ANAHEIM

By /s/ Brian G. Thomas
---------------------------
Its Accounting General Manager
---------------------------

UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS

By /s/ Wayne McArthur
-------------------------
Its Chairman
-------------------------

TRI-STATE GENERATION AND TRANSMISSION
ASSOCIATION, INC.

By /s/ Frank R. Knutson
-------------------------
Its General Manager
-------------------------

131

STATE OF NEW MEXICO )
)ss.
COUNTY OF BERNALILLO )

The foregoing instrument was acknowledged before me on this 27th day of
October, 1999, by Patrick J. Goodman, Vice President of Public Service Company
of New Mexico, a New Mexico corporation, on behalf of the corporation.

/s/ Bridgett S. Alvarez
-----------------------
Notary Public

My commission expires:

November 14, 2000
- ---------------------

STATE OF ARIZONA )
)ss.
COUNTY OF PIMA )

The foregoing instrument was acknowledged before me on this 13th day of
September, 1999, by T. Delawder, Vice President of Tucson Electric Power
Company, an Arizona corporation, on behalf of the corporation.

/s/ Bertha A. Kissinger
-----------------------
Notary Public

My commission expires:

January 21, 2003
- ---------------------

132

STATE OF NEW MEXICO )
)ss.
COUNTY OF SAN JUAN )

The foregoing instrument was acknowledged before me on this 11th day of
August, 1999, by William E. Standley, Mayor of The City of Farmington, New
Mexico, a New Mexico municipal corporation, on behalf of the municipal
corporation.

/s/ Debra L. Jackson
-----------------------
Notary Public

My commission expires:

August 14, 2000
- ---------------------

STATE OF CALIFORNIA )
)ss.
COUNTY OF PLACER )

The foregoing instrument was acknowledged before me on this 21st day of
July, 1999, by William Walbridge, who personally appeared before me and
acknowledged to me that he is the General Manager of M-S-R Public Power Agency,
a California joint powers agency, and that he executed the instrument on behalf
of said joint powers agency.

/s/ Alicia A. Phillips
-----------------------
Notary Public

My commission expires:

October 22, 2000
- ---------------------

133

STATE OF NEW MEXICO )
)ss.
COUNTY OF LOS ALAMOS )

The foregoing instrument was acknowledged before me on this 7th day of
October, 1999, by Christine Chandler, Council Chair of The Incorporated County
of Los Alamos, New Mexico, a New Mexico Class H County, on behalf of said
county.

/s/ Sandra Cordova
-------------------------
Notary Public

My commission expires:

March 30, 2000
- ---------------------

STATE OF CALIFORNIA )
)ss.
COUNTY OF LOS ANGELES )

The foregoing instrument was acknowledged before me on this 15th day of
July, 1999, by Joseph F. Hsu, who personally appeared before me and acknowledged
to me that he is the President of Southern California Public Power Authority, a
California joint powers agency, and that he executed the instrument on behalf of
said joint powers agency.

/s/ Candace Toscano
-----------------------
Notary Public

My commission expires:

May 12, 2003
- ----------------------

134

STATE OF CALIFORNIA )
)ss.
COUNTY OF ORANGE )

The foregoing instrument was acknowledged before me on this 25th day of
August, 1999, by Brian G. Thomas, who personally appeared before me and
acknowledged to me that he is the Accounting General Manager of the City of
Anaheim, a California municipal corporation, and that he executed the instrument
on behalf of the said municipal corporation.

/s/ Lenorah Ertel
--------------------------
Notary Public

My commission expires:

November 29, 1999
- ----------------------

STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )

The foregoing instrument was acknowledged before me on this 18th day of
August, 1999, by Wayne McArthur, Chairman of Utah Associated Municipal Power
Systems, a political subdivision of the State of Utah, on behalf of said entity.

/s/ Jacqueline Makin
--------------------------
Notary Public

My commission expires:

April 23, 2001
- ----------------------

135

STATE OF COLORADO )
)ss.
COUNTY OF ADAMS )

The foregoing instrument was acknowledged before me on this 1st day of
September, 1999, by Frank R. Knutson, General Manager of Tri-State Generation
and Transmission Association, Inc., a Colorado cooperative corporation, on
behalf of the said cooperative corporation.

/s/ Robin S. Wilkins
------------------------
Notary Public

My commission expires:

September 13, 2000
- ----------------------

136

REFERENCES TO EXHIBITS IN
PARTICIPATION AGREEMENT

Exhibit No. References in Agreement Subject Matter
- ---------- ----------------------- --------------
I ss.ss.2.10, 6.1 Real Property
II ss. 5.3 Annual Minimum Coal
III ss.ss.5.43, 6.5 Switchyard Facilities
IV ss.ss.6.2, 6.2.8 Ownership of Equipment
V ss.ss.22.1.7, 22.1.9 O&M of Equipment
VI ss.ss.7.11, 22.2.2, 22.6, 22.7, 22.8 A&G Expenses
VII ss.ss.5.21, 23.3.7 Coal Allocation and Billing
VIII ss.ss.18.4, 19.4, 20.5, 21.4 Adjustment of Voting
IX ss. 5.21 Fixed Fuel Expense

EXHIBIT I TO PARTICIPATION AGREEMENT

This Exhibit I to the San Juan Project Participation Agreement contains
a map of the San Juan Project Generating Station site and the River Weir site,
showing Parcels A, B, C, C-1 D, E and F, the parcels of real property underlying
the San Juan Project and River Weir sites. Also included in the Exhibit are
property descriptions and separate maps showing Parcels A through F. PNM and TEP
each has a one-half undivided ownership interest in the parcels described as
Parcels A, B, C, D, E and F; and PNM and TEP each has a one-half leasehold
interest in Parcel C-1.

Exh. I - 1

PARCEL A
--------

The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:

Section 16: SW 1/4
Section 20: NE 1/4, N 1/2 SE 1/4, SW 1/4 SE 1/4
Section 21: NW 1/4 NW 1/4
Section 29: NE 1/4

PARCEL B
--------

The following portions of Township 30 North, Range 15 West, N.M.P.M, San
Juan County, New Mexico:

Section 19: SE 1/4 SW 1/4, SW 1/4 SE 1/4 Section
20: E 1/2 NW 1/4, NE 1/4 SW 1/4 Section 29: NW
1/4, N 1/2 SW 1/4 Section 30: NE 1/4, E 1/2 NW
1/4, N 1/2 SE 1/4

PARCEL C
--------

That part of Lot 6 in Section 4 and of Lot 5 in Section 3, Township 29
North, Range 15 West, N.M.P.M., San Juan County, New Mexico, described as
follows:

Beginning at a point which is 772.69 feet, South 88(degree)12' 03" East
from Northwest Corner of Lot 6:

Thence, S. 55(degree)50'29" E., 205.55 feet; thence, N.
78(degree)21'34" E., 457.06 feet; thence N. 88(degree)29'07"E., 746.61
feet; thence, S. 25(degree)38'00" W., 1,177.50 feet; thence, N.
54(degree)32'00" W., 1,291.70 feet; thence, N. 32(degree)1'00" E.,
372.20 feet to the point of beginning. Containing 21.039 acres, more
or less.

Exh. I - 2

PARCEL C-1
----------

A tract of land situated adjacent to the southerly side of the San Juan
River in Sections 3, 4, 9 and 10, Township 29 North, Range 15 West, N.M.P.M.,
San Juan County, New Mexico, and more particularly described as follows:

Beginning at point A, from which the comer common to Sections 33 and
34, T.30 N., R. 15 W., and Sections 4 and 3, T. 29 N., R. 15 W., bears
N. 06(degree)09'45" E., 4,966.7 feet; thence N. 49(degree)00'00" E.,
351.95 feet to point B located on the approximate centerline of the
San Juan River; thence along the centerline of the River S.
50(degree)44'26" E., 268.63 feet to point C; thence continuing along
the centerline of the River, S. 41(degree)18'31" E., 263.59 feet to
point D; thence S. 21(degree)12'40" E., 678 feet to point E; thence S.
51(degree)00'00" W., 209 feet to point F; thence N. 39(degree)00'00"
W., 1,160.00 feet to the point of beginning; containing 9.3 76 acres,
more or less.

PARCEL D
--------

The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:

Section 17: SE 1/4 SW 1/4, S 1/2 SE 1/4

PARCEL E
--------

The following portions of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:

Section 19: SE 1/4 SE 1/4 NE 1/4 SE 1/4 E 1/2 NW 1/4 SE
1/4 S 1/2 S 1/2 SE 1/4 NE 1/4

Section 20: SE 1/4 SW 1/4
SW 1/4 SW 1/4
NW 1/4 SW 1/4
S 1/2 SW 1/4 SW 1/4 NW 1/4

Containing 235 acres, more or less.

PARCEL F
--------

The following portion of Township 30 North, Range 15 West, N.M.P.M., San
Juan County, New Mexico:

Section 20: SE 1/4 SE 1/4

Exh. I - 3

EXHIBIT II

EXHIBIT H TO COAL SALES AGREEMENT

SAN JUAN GENERATING STATION
FUEL SOURCE MINIMUM DELIVERIES
1981-2017

COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
San Juan Surface Mine Total Annual La Plata Surface Mine
Fruitland Leases Minimum Deliveries La Plata Leases
Year Annual Tons Tons Annual Tons

1980 280,834 289,296
1981 4,058,000 4,307,120
1982 4,900,000 5,283,120
1983 4,725,000 5,988,370
1984 4,425,000 5,967,174
1985 4,425,000 5,989,620
1986 4,000,000 5,909,565 600,000
1987 3,900,000 5,877,554 1,500,000
1988 3,871,000 5,587,667 1,500,000
1989 3,939,000 5,649,750 1,500,000
1990 3,942,000 5,873,500 1,500,000
1991 4,100,000 5,873,500 1,500,000
1992 4,100,000 5,873,500 1,500,000
1993 4,100,000 5,873,500 1,500,000
1994 4,100,000 5,857,500 1,500,000
1995 4,100,000 5,857,500 1,500,000
1996 4,100,000 5,857,500 1,500,000
1997 4,100,000 5,857,500 1,500,000
1998 4,100,000 5,857,500 1,500,000
1999 4,100,000 5,857,500 1,500,000
2000 4,100,000 5,817,500 1,500,000
2001 4,100,000 5,692,500 1,500,000
2002 4,100,000 5,512,500 1,500,000
2003 4,100,000 5,480,500 1,500,000
2004 4,100,000 5,480,500 1,500,000
2005 3,667,000 5,126,000 1,500,000
2006 1,000,000 5,126,000 1,500,000
2007 1,000,000 5,126,000 1,500,000
2008 1,000,000 5,118,000 1,500,000
2009 1,000,000 4,810,000 1,500,000
2010 1,000,000 4,810,000 1,500,000
2011 1,000,000 4,810,000 1,500,000
2012 1,000,000 4,810,000 1,500,000
2013 1,000,000 4,500,000 1,500,000
2014 1,000,000 4,500,000 1,500,000

Exh. II - 1

COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
San Juan Surface Mine Total Annual La Plata Surface Mine
Fruitland Leases Minimum Deliveries La Plata Leases
Year Annual Tons Tons Annual Tons

2015 1,000,000 3,860,000 1,500,000
2016 1,000,000 3,860,000 1,500,000
2017 1,000,000 1,086,000 1,500,000
----------- ----------- ----------
115,798,834 195,014,866 47,100,000

Exh. II - 2

EXHIBIT III

SAN JUAN PROJECT SWITCHYARD FACILITIES

Material List
-------------

Phase I - Project (DWG, ED-54, ED-55)

QUANTITY DESCRIPTION
-------- -----------

5 345 kV Circuit Breakers - (G.E. A.T.B.'s)
16 345 kV Motor Operated Disconnect Switches with Stands
2 345 kV S&C Circuit Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
4 Line Deadend Towers
5 Intermediate Bus Towers
1 Start-Up Transformers 345/12.47/4.16 kV, 24/32/40 MVA
1 Set of 4.16 kV Switchgear
1 4.16 kV Start-Up Cable Run into Plant
2 4.16 kV Station Service Transformers
1 Set of 12.45 kV Switchgear
3 12.47 kV Zig-Zag Grounding Transformer
6 345 kV PCM Potential Transformers with Stands (Bus #1, Bus #2)
6 345 kV Bus Lightning Arresters with Stands

1 Control House 40' x 72'
2 Sets of Batteries & Chargers, 125 v and 48 v
1 Microwave Tower
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying,
Fault Recorder
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations, Fencing, Grading, Grounding

1 Line Trap (FC Line)
1 345 kV PCM Potential Transformer/Coupling Capacitor with Stand
3 345 kV Line Lightning Arresters with Stands
Lot Line Relaying, Carrier, Microwave
1 345-69-12470 Transformer
1 345/230-12470 Transformer, 230 yard
1 Reactor - 12.47 kV, 345 yard

Exh. III - 1

Phase 2 - Project (DWG. SK-135)
- ----------------- -------------

QUANTITY DESCRIPTION
-------- -----------

4 345 kV Circuit Breakers
3 345 kV Motor Operated Disconnect Switches with Stands

Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Intermediate Bus Tower
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations, Grounding

Phase 3 - Project (DWG. SK-316)
- -------------------------------

3 345 kV Circuit Breakers
6 345 kV Motor Operated Disconnect Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Line Deadend Tower
2 Intermediate Bus Towers
Lot Cable Troughs, Equipment Controls, Breaker Failure Relaying
Lot Metering - Indication, Billing and Telemetry Transducers
Lot Switchyard Foundations and Grounding

Phase 3 - Project (DWG. SK-317)
- -------------------------------

2 345 kV Circuit Breakers
4 345 kV Motor Operated Disconnect Switches with Stands
Lot Strain Bus and Fittings
Lot Rigid Bus and Fittings
1 Intermediate Bus Tower
Lot Switchyard Foundations, Grounding

Exh. III - 2

EXHIBIT IV

EXHIBIT IV(a)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 1

Ownership

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC- 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers

11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment.)

12. Fly Ash System

Exh. IV - 1

EXHIBIT IV(a)
(continued)

13. Building HVAC System

14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas
Reheat System including the 650-pound Reheat Steam Line and
Desuperheater from the Plant Main Steam Line but not including the
165-pound Control Valve and Branch Line to the Chemical Plant

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. SSR Protection System

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

Exh. IV - 2

EXHIBIT IV(b)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 2

Ownership

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers

11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment.)

12. Fly Ash System

Exh. IV - 3

EXHIBIT IV(b)
(continued)

13. Building HVAC System

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

Exh. IV - 4

EXHIBIT IV(c)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 3

Ownership

PNM - 50% TEP - 0%
M-S-R - 0% Farmington - 0%
Tri-State - 8.2% LAC - 0%
SCPPA - 41.8% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Unit Auxiliary 3A and 3B Transformers*

11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, Storage Tank, and Pump House

12. Fly Ash System

Exh. IV - 5

EXHIBIT IV(c)
(continued)

13. Building HVAC System

14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Fuel Oil Ignitor Heaters and Unit Specific Piping

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

19. Coal Reclaim Hoppers, Feeders, Feeder Belts, Belt Scales, Fire Protection
System, and 3C Conveyor to the Secondary Crusher Building

20. SSR Protection System

21. Auxiliary Steam Header Piping System:

a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant

* PNM and TEP each owns a 50% interest in the main unit transformer

Exh. IV - 6

EXHIBIT IV(d)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNIT NO. 4

Ownership

PNM - 38.457% TEP - 0%
M-S-R - 28.8% Farmington - 8.475%
Tri-State - 0% LAC - 7.2%
SCPPA - 0% Anaheim - 10.04%
UAMPS - 7.028%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Unit Auxiliary 4A and 4B Transformers

11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, Storage Tank, and Pump House

12. Fly Ash System

Exh. IV - 7

EXHIBIT IV(d)
(continued)

13. Building HVAC System

14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Fuel Oil Ignitor Heaters and Unit Specific Piping

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

19. Coal Reclaim Hoppers, Feeders, Feeder Belts, Belt Scales, Fire Protection
System, and 3D Conveyor to the Secondary Crusher Building

20. Auxiliary Steam Header Piping System:

a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant

Exh. IV - 8

EXHIBIT IV(e)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNITS NO. 1 AND 2

Ownership

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Bearing Cooling Water System

2. Bottom Ash Dewatering Facility including: Dewatering Tank, Settling Tank,
Surge Tank, Storage Tank, and Pump House

3. Demineralizer System including: Clarifier, Storage Tanks, and Sump Pump

4. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization)

5. Premix Tank Facility (This was the wastewater neutralizer facility and
is now operated as part of the Water Management System.)

6. Instrument Air system, except Unit Piping

7. Chemical Feed System, except Unit Piping

a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System

8. Plant Air System, except Unit Piping

9. Sootblowing Air System, except Unit Piping

10. Hydrogen Storage System, except Unit Piping

Exh. IV - 9

EXHIBIT IV(e)
(continued)

11. Coal Handling Reclaim Systems A and B including: Hoppers, Feeders, Reclaim
Conveyors, Belt Scales, and Sprinkler System

12. Coal Tripper System south of column, Line 12 including Dust Collection
System

13. Turbine Lube Oil Storage and Transfer System

14. Control Room, Equipment Rooms, and Associated HVAC System

15. Turbine Crane south of column, Line 12

16. Fuel Oil, Ash, and Water Pipe Racks

17. Boiler Fill System for Units 1 and 2

18. All spare parts common to either unit

19. SO2 Backup Scrubber-Absorber Transformer

20. SAR Multiplexer Control System

Exh. IV - 10

EXHIBIT IV(f)

FACILITIES AND EQUIPMENT SPECIFIC
TO SAN JUAN UNITS NO. 3 AND 4

Ownership

PNM - 44.119% TEP - 0%
M-S-R - 14.4% Farmington - 4.249%
Tri-State - 4.1% LAC - 3.612%
SCPPA - 20.9% Anaheim - 5.07%
UAMPS - 3.55%

1. Bearing Cooling Water System

2. Demineralizer System: including Sump Pumps, Filter Beds, and Storage Tanks

3. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization except
Ignitor Heaters and Unit Specific Piping)

4. Wastewater Neutralizer Facility (This facility is operated as part of Water
Management System.)

5. Instrument Air System except Unit Piping

6. Chemical Feed System except Unit Piping

a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System

7. Plant Air System except Unit Piping

8. Sootblowing Air System except Unit Piping

9. Start-Up Transformers and Nonseg Bus to Units 3 and 4 Switchgear

10. Hydrogen Storage System except Unit Piping

11. Coal Tripper System Serving Units 3 and 4 including Dust Collection Systems

Exh. IV - 11

EXHIBIT IV(f)
(continued)

12. Turbine Lube Oil Storage and Transfer System

13. Control Room, Equipment Rooms, and Associated HVAC System

14. Boiler Fill System for Units 3 and 4

15. Auxiliary Cooling Systems including Auxiliary Cooling Tower No. 1 and
Pumps, but excepting No. 4 Tower Pumps and Piping which is Unit Specific

16. CO2 Storage System

17. Start-Up Boiler Feed Pump

18. Turbine Bay Crane north of column, Line 12

19. Fuel Oil, Ash, and Water Pipe Racks

20. Fire Water Booster and Jockey Pumps

21. Halon Fire Protection System

22. Cooling Tower Multiplex Control System

23. All spare parts common to either unit

Exh. IV - 12

EXHIBIT IV(g)

FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS

Ownership

PNM - 46.29% TEP - 19.8%
M-S-R - 8.7% Farmington - 2.559%
Tri-State - 2.49% LAC - 2.175%
SCPPA - 12.71% Anaheim - 3.10%
UAMPS - 2.169%

1. River and Raw Water System including:

a. Diversion and intake structures, including all equipment and pump
building.
b. Raw Water line to reservoir.
c. Reservoir, pump buildings, and all equipment.
d. Raw water lines to plant yard.
e. All above and underground fire protection system to each vendor
supplied or unit specific fire protection system.

2. Auxiliary Boiler

3. SO2 Removal System except Absorbers

NOTE: The new SO2 Absorber Feed System is being placed in-service to
replace the SO2 Chemical Plant previously used by the Project. The SO2 Chemical
Plant facilities will be retired in place and will be salvaged or decommissioned
at a later date. Section 3.1 describes the new SO2 Absorber Feed System while
Section 3.2 describes the old SO2 Chemical Plant.

3.1 SO2 Absorber Feed System

a. Limestone Handling System
b. Limestone Preparation System
c. Dewatering System
d. Gypsum Stack Out System

Exh. IV - 13

EXHIBIT IV(g)
(continued)

3.2 SO2 Chemical Plant

a. Double effect evaporator train systems.
b. Fly ash filter system.
c. Absorber product and feed tanks.
d. Condensate collection, storage, and transfer systems.
e. Soda ash storage, mixing, and distribution systems.
f. Sulfate purge system including: crystallizers, centrifuges,
evaporators, and salt cake system.
g. Sulfuric acid plant system including storage tanks and load out
system.
h. Auxiliary. No. 2 cooling tower, pumps, and systems.

4. Spare-Main Transformer 345/24 kV for all units.

5. Maintenance, Office, and Warehousing Facilities

6. Chemical Laboratory

7. Coal and Ash Handling Control Facilities

8. Roads and grounds such as fencing, yard lighting, guard facilities,
drainage, and dikes.

9. Potable Water System

10. Environmental Monitoring systems including Air, Water, and Ground.
Excludes Stack Monitoring Systems which are unit specific.

11. Transportation such as trucks, cars, and dozers (not otherwise charged).

12. Water Management System

a. Wastewater Recovery System -- Northside

1. Reverse osmosis system including lime/soda softening clarifier
system.
2. Brine concentrator Nos. 4 and 5.
3. Process pond No. 3 and pump system
4. North evaporation ponds 1, 2, and 3.

Exh. IV - 14

EXHIBIT IV(g)
(continued)

b. SO2 Waste Treatment System -- Southside

1. Process ponds 1A, 1 B, 2 and pumping system.
2. Premix tank and clarifier system.
3. Oxidation towers.
4. Brine concentrator Nos. 2 and 3.
5. South evaporation ponds Nos. 1, 2, 3, 4, and 5.

c. Data Acquisition System
d. Solid Waste Disposal Pit
e. Coal pile runoff pond

13. Coal Transfer Facilities from the Reclaim Conveyors to the Head-End of Plat
Belts 4A and 4B and Dust Suppression Systems

14. Maintenance Bay Facilities including: Bay Bridge Crane, all Offices, and
Support Facilities

15. Sewage Treatment Facilities

16. On each of Units 1 and 2, the Chemical Plant 165-pound Control Valve,
and Branch Line from the Unit Specific 650-pound Rehear Steam Line

17. On each of Units 3 and 4, the Chemical Plant Branch Steam Line from the Unit
Specific Auxiliary Steam Header System

Exh. IV - 15

EXHIBIT IV(h)

SAN JUAN PROJECT
SWITCHYARD FACILITIES

Cost Allocation (%)

Replacements/Improvements
-------------------------
Installed Cost Betterments
-------------- -----------
PNM TEP PNM TEP
--- --- --- ---

345 kV Bus 1 & 3 (East Bus) 50 50 50 50
Bus 2 (West Bus) 50 50 50 50

Circuit Breakers
- ----------------

06582 (345/230) 50 50 50 50
05482 50 50 50 50
04382 (OJO) 50 50 50 50

12982 (McKinley) 50 50 50 50
11882 50 50 50 50
10782 (Unit 4) 50 50 50 50

09882 (McKinley) 58.33 41.67 62.5 37.5
08782 54.16 45.84 56.25 43.75
07682 (Unit 3) 50 50 50 50

15282 (Four Comers) 50 50 50 50
14182 50 50 50 50
13082 (Unit 2) 50 50 50 50

18582 (West Mesa) 50 50 50 50
17482 50 50 50 50
16382 (Unit 1) 50 50 50 50
20782 50 50 50 50

Shunt Reactors
- --------------

Ojo 100 0 100 0
McKinley 1 5.36 94.64 5.36 94.64
McKinley 2 16.67 83.33 25 75
WW (BA) 100 0 100 0

Exh. IV - 16

EXHIBIT IV(h)
(continued)

Replacements/Improvements
-------------------------
Installed Cost Betterments
-------------- -----------
PNM TEP PNM TEP
--- --- --- ---
Transformers
- ------------

Station Aux. No. 2 100 0 100 0
400 MVA, 345/230-12.5
Station Aux. No. 1 50 50 50 50
345/4.16-12.5
Station Aux. No. 3 50 50 50 50
90 MVA, 345/69-12.5

Future Facilities
- -----------------

345/69/12 kV 66.67 33.33 66.67 33.33
2-345 kV Bkrs (Durango) 50 50 50 50

Lower Voltage
- -------------

230 kV Control Hse 83.33 16.67 83.33 16.67
230/69 kV Trf 66.67 33.33 66.67 33.33
Shiprock 230 kV line 100 0 100 0

Exh. IV - 17

EXHIBIT V

EXHIBIT V(a)

FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 1

Operation and Maintenance Costs

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers

11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water Pump
building and equipment)

12. Fly Ash System

Exh. V - 1

EXHIBIT V(a)
(continued)

13. Building HVAC System

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. SSR Protection System

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

Exh. V - 2

EXHIBIT V(b)

FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 2

Operation and Maintenance Costs

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Start-Up, Unit Auxiliary, and SO2 Scrubber Transformers

11. Bottom Ash System (Up to but not including Dewatering Tank or Ash Water
Pump building and equipment)

12. Fly Ash System

Exh. V - 3

EXHIBIT V(b)
(continued)

13. Building HVAC System

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

Exh. V - 4

EXHIBIT V(c)

FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 3

Operation and Maintenance Costs

PNM - 50% TEP - 0%
M-S-R - 0% Farmington - 0%
Tri-State - 8.2% LAC - 0%
SCPPA - 41.8% Anaheim - 0%
UAMPS - 0%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Unit Auxiliary 3A and 3B Transformers

11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, and Pump House

12. Fly Ash System

Exh. V - 5

EXHIBIT V(c)
(continued)

13. Building HVAC System

14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System including the Reheat Steam Line from the Auxiliary Steam Header

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Fuel Oil Ignitor Heaters and Unit Specific Piping

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

19. SSR Protection System

20. Auxiliary Steam Header Piping System:

a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant

Exh. V - 6

EXHIBIT V(d)

FACILITIES AND EQUIPMENT
SPECIFIC TO SAN JUAN UNIT NO. 4

Operation and Maintenance Costs

PNM - 38.457% TEP - 0%
M-S-R - 28.8% Farmington - 8.475%
Tri-State - 0% LAC - 7.2%
SCPPA - 0% Anaheim - 10.04%
UAMPS - 7.028%

1. Turbine Generator

2. Condenser

3. Condensate and Feedwater System

a. Condensate Pumps
b. Feedwater Heaters
c. Boiler Feed Pumps
d. Storage Tanks

4. Boiler including: Air Heaters, Pulverizers, Bunkers, Feeders and Blowdown
Tanks

5. Forced Draft Fans and Primary Air Fans

6. Precipitator

7. Stack and Stack Monitoring System

8. Cooling Tower

9. Circulating Water Pumps

10. Main, Unit Auxiliary 4A and 4B Transformers

11. Bottom Ash System including: Hopper, Dewatering Tank, Setting Tank, Surge
Tank, and Pump House

12. Fly Ash System

Exh. V - 7

EXHIBIT V(d)
(continued)

13. Building HVAC System

14. SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and Flue Gas Reheat
System including the Reheat Steam Line from the Auxiliary Steam Header

15. Emergency Diesel Generator

16. Electrical and Control Systems

17. Fuel Oil Ignitor Heaters and Unit Specific Piping

18. Unit Specific Piping for all Air Systems, Chemical Feed Systems, and
Hydrogen

19. Auxiliary Steam Header Piping System:

a. Including the Unit Specific Branch Line to the Reheat System
b. Not included is the Branch Line to the Chemical Plant

Exh. V - 8

EXHIBIT V(e)

FACILITIES AND EQUIPMENT
COMMON TO SAN JUAN UNITS NO. 1 AND 2

Operation and Maintenance Costs

PNM - 50% TEP - 50%
M-S-R - 0% Farmington - 0%
Tri-State - 0% LAC - 0%
SCPPA - 0% Anaheim - 0%
UAMPS - 0%

1. Bearing Cooling Water System except Unit Piping

2. Bottom Ash Dewatering Facility including: Dewatering Tank, Settling Tank,
Surge Tank, Storage Tank, and Pump House

3. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization)

4. Instrument Air System, except Unit Piping

5. Chemical Feed System, except Unit Piping

a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System

6. Plant Air System, except Unit Piping

7. Sootblowing Air System, except Unit Piping

8. Hydrogen Storage System, except Unit Piping

9. Coal Tripper System including Dust Collection System

10. Turbine Lube Oil Storage and Transfer System

11. Control Room, Equipment Rooms, and Associated HVAC System

Exh. V - 9

EXHIBIT V(e)
(continued)

12. SO2 Backup Scrubber-Absorber Transformer

13. Turbine Crane south of column, Line 12

14. Fuel Oil, Ash, and Water Pipe Racks

15. Boiler Fill System

16. SAR Multiplexer Control System

Exh. V - 10

EXHIBIT V(f)

FACILITIES AND EQUIPMENT
COMMON TO SAN JUAN UNITS NO. 3 AND 4

Operation and Maintenance Costs

PNM - 44.119% TEP - 0%
M-S-R - 14.4% Farmington - 4.249%
Tri-State - 4.1% LAC- 3.612%
SCPPA - 20.9% Anaheim - 5.07%
UAMPS - 3.55%

1. Bearing Cooling Water System except Unit Piping

2. Fuel Oil System (Fuel Oil for Ignition and Flame Stabilization except
Ignitor Heaters and Unit Specific Piping)

3. Instrument Air System except Unit Piping

4. Chemical Feed System except Unit Piping

a. Condensate and Feedwater System
b. Boiler
c. Bearing Cooling Water System
d. Cooling Tower Systems
e. Chlorination System

5. Plant Air System except Unit Piping

6. Sootblowing Air System except Unit Piping

7. Start-Up Transformers and Nonseg Bus to Units 3 and 4 Switchgear

8. Hydrogen Storage System except Unit Piping

9. Coal Tripper System including Dust Collection Systems

10. Turbine Lube Oil Storage and Transfer System

11. Control Room, Equipment Rooms, and Associated HVAC System

Exh. V - 11

EXHIBIT V(f)
(continued)

12. Boiler Fill System

13. Auxiliary Cooling Systems including Auxiliary Cooling Tower No. 1 and
Pumps, but excepting No. 4 Tower Pumps and Piping which is Unit Specific

14. CO2 Storage System except Unit Piping

15. Start-Up Boiler Feed Pump except Unit Piping

16. Turbine Bay Crane north of column, Line 12

17. Fuel Oil, Ash, and Water Pipe Racks

18. Fire Water Booster and Jockey Pumps

19. Halon Fire Protection System

20. Cooling Tower Multiplex Control System

Exh. V - 12

EXHIBIT V(g)

FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS

Operation and Maintenance Costs

PNM - 46.297% TEP - 19.8%
M-S-R - 8.7% Farmington - 2.559%
Tri-State - 2.49% LAC - 2.175%
SCPPA - 12.71% Anaheim - 3.10%
UAMPS - 2.169%

1. River and Raw Water System including:

2. Auxiliary Boiler

3. SO2 Removal System except Absorbers

NOTE: In April 1998 the new SO2 Absorber Feed System went in-service and
replaced the SO2 Chemical Plant previously used by the Project. The SO2 Chemical
Plant facilities are retired in place and will be salvaged or decommissioned at
a later date. Section 3.1 describes the new SO2 Absorber Feed System while
Section 3.2 describes the old SO2 Chemical Plant.

3.1 SO2 Absorber Feed System

a. Limestone Handling System
b. Limestone Preparation System
c. Dewatering System
d. Gypsum Stack Out System

Exh. V - 13

EXHIBIT V(g)
(continued)

3.2 SO2 Chemical Plant

4. Spare-Main Transformer 345/24 kV for all units.

5. Maintenance, Office, and Warehousing Facilities

6. Chemical Laboratory

7.* Coal and Ash Handling Control Facilities

8. Roads and grounds such as fencing, yard lighting, guard facilities,
drainage, and dikes.

9. Potable Water System

10. Environmental Monitoring systems including Air, Water, and Ground.
Excludes Stack Monitoring Systems which are unit specific.

11. Transportation such as trucks, cars, and dozers (not otherwise charged).

12. Water Management System

a. Wastewater Recovery System -- Northside

1. Neutralization system including premix tank, neutralization
tank, clarifier/thickener, and pumps. 2. Reverse osmosis
system including lime/soda softening clarifier system.
3. Brine concentrator Nos. 4 and 5.
4. Process pond No. 3 and pump system.
5. North evaporation ponds 1, 2, and 3.

Exh. V - 14

EXHIBIT V(g)
(continued)

b. SO2 Waste Treatment System -- Southside

1. Process ponds 1A, 1B, 2 and pumping system.
2. Premix tank and clarifier system.
3. Oxidation towers.
4. Brine concentrator Nos. 2 and 3.
5. South evaporation ponds Nos. 1, 2, 3, 4, and 5.

c. Data Acquisition System
d. Solid Waste Disposal Pit
e. Coal pile runoff pond

13.* Coal Handling Equipment -- all equipment from all reclaim hoppers
ending at the chutes to the tripper conveyors. This includes: hoppers.
feeders. feeder belts, reclaim conveyors, plant conveyors, belt scales,
fire protection systems, dust suppression systems, magnetic separators,
all electrical and controls, and heating and ventilation systems.

14. Maintenance Bay Facilities including: Bay Bridge Crane, all Offices, and
Support Facilities

15. Sewage Treatment Facilities

16. All Demineralizer Systems including: Clarifier, Storage Tanks, Sump Pumps,
Filter Beds, and Control Systems.

17. The Chemical Plant 165-pound Control Valve and Branch Line from each of
Units 1 and 2 Unit Specific 650-pound Reheat Steam Line.

18. The Chemical Plant Branch Steam Line from (but not including) the Unit
Specific Auxiliary, Steam Header System on each of Units 3 and 4.

*Maintenance Only

Exh. V - 15

EXHIBIT V(h)

FACILITIES AND EQUIPMENT
COMMON TO ALL FOUR SAN JUAN UNITS

Operation Costs Only

PNM)
M-S-R)
TEP)
Farmington)
Tri-State) Variable split based on generation by unit
LAC)
SCPPA)
Anaheim)
UAMPS)

1. Coal and Ash Handling Control Facilities

2. Coal Handling Equipment

All equipment from all reclaim hoppers ending at the chutes to the
tripper conveyors. This includes: hoppers, feeders, feeder belts,
reclaim conveyors, plant conveyors, belt scales, fire protection
systems, dust suppression systems, magnetic separators, all electrical
and control, and heating and ventilation systems.

Exh. V - 16

EXHIBIT V(i)

SWITCHYARD FACILITIES AND EQUIPMENT

OPERATION AND MAINTENANCE COSTS

PNM - 65% TEP - 35%

Exh. V - 17

EXHIBIT VI

San Juan Project Participation Agreement
Exhibit VI-Attachment A

A&G RATIO APPLICABLE TO OPERATION AND MAINTENANCE FOR THE SAN JUAN
------------------------------------------------------------------
GENERATING STATION ("SJGS")
---------------------------

The Operating Agent determines, in accordance with Accounting Practice,
the appropriate A&G expense incurred for the benefit of the SJGS and to
be billed to the SJGS as follows:

1. A&G expenses directly chargeable by on-site San Juan Project
employees as set forth in Section 22.2.2;

2. A&G expenses directly chargeable by A&G related departments located
off-site as set forth in Section 22.2.2; and

3. Indirect A&G expenses included in the development of the A&G ratio.

Except as set forth in Section 22.0, individuals located off-site must
either charge their time and expenses direct to the SJGS or be included
in the A&G pool in the development of the A&G Ratio. Costs incurred for
the same purpose must be either all charged direct to the SJGS or all
be included in the A&G pool, e.g., all staff persons within the same
department must either charge direct to the SJGS or to the A&G pool.

A. The Operating Agent conducts an A&G study every three years. However,
periodic reviews will be performed to determine if significant
organizational changes have occurred that may require the Operating
Agent to conduct an A&G study on a basis more frequently than three
years. This study determines the appropriate amount of indirect A&G
expense to utilize in the development of the A&G Ratio described below.

The FERC A&G accounts included in the A&G study are: 920, 921, 923,
930.2, 931 and 935.

Background
----------

The responsibility for the SJGS resides in the Operating Agent's Bulk
Power Business Unit. The A&G expenses charged to this Business Unit are
derived from two areas. The first component is an allocation of A&G
expenses from the Operating Agent's Corporate Office to the Bulk Power
Business Unit. These allocations are based on pre-determined
methodologies. The second component of costs are A&G expenses that are
directly charged to the Bulk Power Business Unit. Note: Any A&G
expenses charged directly to the SJGS are excluded from the
determination of the A&G Ratio and are not subject to the A&G Ratio.

Exh. VI - 1

A questionnaire is sent to all managers that have A&G charges to the
Bulk Power Business Unit to determine what percentage of their A&G
expenses should be included in the development of the A&G Ratio.

The percentages derived from the questionnaires are then applied to the
actual A&G amounts charged to the Bulk Power Business Unit for the
study year. Amounts are split between labor and other.

B. Labor Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) (See
Exhibit VI Attachments B, C and D) are applied to the labor portion of
the A&G determined above.

C. Other costs included in the development of the A&G Ratio are
Depreciation of General Plant (FERC Account 403), Property Insurance
(FERC Account 924) and Property Taxes (FERC Account 408) for the
Operating Agent's headquarters buildings and energy management facility
and Amortization of Computer Software (FERC Account 404) for certain
software applications that provide benefit to the SJGS.

The portion of the costs related to the Operating Agent's headquarters
buildings included in the development of the A&G Ratio are derived by
applying certain ratios obtained from the A&G study questionnaires. The
costs included in the A&G Ratio for the Operating Agent's energy
management facility are based on the number of MW of SJGS capacity as a
percentage of the Operating Agent's total generating capacity. In
addition, ratios for determining the amount of software costs to
include in the A&G Ratio are based on the specific software
application. For example, if the Operating Agent installed a new
payroll system, the amount of costs for this system that would be
included in the A&G Ratio calculation would be based on the number of
employees at the SJGS as a percent of the Operating Agent's total
employees. The Operating Agent reviews each specific software
application to determine the method for assigning the appropriate
amount of costs to be included in the A&G Ratio calculation.

The A&G ratio shall be applied to the following SJGS costs:

1) Labor charged to the operation and maintenance expenses included in
Sections 22.2.1, 22.3, 22.4, 22.5 and 23.3.3 of the San Juan Project
Participation Agreement. Such labor dollars are utilized as the
denominator in the calculation of the A&G Ratio described below.

The A&G Ratio shall be derived annually based on the preceding year's
experience, as set forth herein unless otherwise agreed to by the participants.
The A&G Ratio will be adjusted to actuals at year-end and the adjustment will be
used in the computation of the A&G Ratio for the following year.

A&G Ratio = A/B

Exh. VI - 2

Where A = Administrative and general expense chargeable to FERC Accounts
920, 921, 923, 930.2, 931 and 935, including Labor Ratios for
Payroll Taxes (FERC Account 408), Injuries and Damages (FERC
Account 925) and Pension and Benefits (FERC Account 926) plus
other related costs for the Operating Agent's headquarters
buildings and energy management facility for Property Taxes FERC
Account (408), Depreciation of General Plant FERC Account (403),
and Property Insurance FERC Account (924) plus amortization of
certain Computer Software costs charged to FERC Account (404).

B = Total SJGS operation and maintenance labor paid and accrued
excluding labor expenses chargeable to FERC accounts 920 through
935 inclusive.

Note: Any modifications to the methodology utilized for calculating the A&G
Ratio described above shall be developed by the San Juan Auditing
Committee and approved by the San Juan Coordination Committee.

Exh. VI - 3

San Juan Project Participation Agreement
Exhibit VI-Attachment B
-----------------------

PAYROLL TAX RATIO FOR THE SAN JUAN GENERATING STATION ("SJGS")
--------------------------------------------------------------

The Payroll Tax Ratio shall be applied to the following SJGS costs:

1) Labor charged to operation and maintenance expenses included in
Sections 22.2.1, 22.2.2, 22.2.4, 22.2.5 22.3, 22.4, 22.5 and 23.3.3
of the San Juan Project Participation Agreement.
2) Labor charged to other primary accounts including, but not limited
to, FERC Accounts 107, 108, 163, 183, 186 and 188.

The Payroll Tax Ratio shall be determined annually on the basis of the Operating
Agent's preceding years experience adjusted for known changes to comply with
regulations applicable to Social Security and Unemployment Compensation as set
forth herein unless otherwise agreed to by the participants. The Payroll Tax
Ratio will be adjusted to actuals at year-end and the adjustment will be used in
the computation of the ratio for the following year.

Payroll Tax Ratio = T/P

Where T = The Operating Agent's total payroll tax expense chargeable to FERC
Account 408.

P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances.

Notes: (1 Base labor is defined as an employee's hourly rate times the
number of hours worked plus an accrual for time-off allowances.
In addition, base labor also includes overtime pay and special
pay.

(2) Time-off allowances are defined as vacation, illness and holiday
time.

(3) Special pay is defined as any other compensation an employee
receives that is not part of his/her regular base pay. Examples
include employee recognition awards as well as results based
pay, the Operating Agent's bonus pay plan.

(4) Any modifications to the methodology utilized for calculating
the Payroll Tax Ratio described above shall be developed by the
San Juan Auditing Committee and approved by the San Juan
Coordinating Committee.

Exh. VI - 4

San Juan Project Participation Agreement
Exhibit VI-Attachment C
-----------------------

INJURIES AND DAMAGES RATIO FOR THE
----------------------------------
SAN JUAN GENERATING STATION ("SJGS")
------------------------------------

The Injuries and Damages Ratio shall be applied to the following SJGS costs:

The Injuries and Damages Ratio shall be determined annually on the basis of the
Operating Agent's preceding year's experience as set forth herein unless
otherwise agreed to by the participants. The Injuries and Damages Ratio will be
adjusted to actuals at year-end and the adjustment will be used in the
computation of the ratio for the following year.

Injuries and Damages Ratio = I/P

Where I = The Operating Agent's total injuries and damages expense
chargeable to FERC Account 925, including payroll taxes, and
pension and benefits on labor chargeable to FERC Account 925.
The amount of payroll taxes and pension and benefits to be added
are based on the ratios included in Exhibit VI, Attachments B
and D, respectively. Note: Any injuries and damages expense
charged direct to the SJGS are excluded from the determination
of the Injuries and Damages Ratio.

P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances less special pay and wages charged direct to FERC
Account 925.

(2) Any modifications to the methodology utilized for calculating
the Injuries and Damages Ratio described above shall be
developed by the San Juan Auditing Committee and approved by the
San Juan Coordination Committee.

Exh. VI - 5

San Juan Project Participation Agreement
Exhibit VI-Attachment D
-----------------------

PENSION AND BENEFITS RATIO FOR THE
----------------------------------
SAN JUAN GENERATING STATION ("SJGS")
------------------------------------

The Pension and Benefits Ratio shall be applied to the following SJGS costs:

The Pension and Benefits Ratio shall be determined annually on the basis of the
Operating Agent's preceding year's experience as set forth herein unless
otherwise agreed to by the participants. The Pension and Benefits Ratio will be
adjusted to actuals at year-end and the adjustment will be used in the
computation of the ratio for the following year.

Pension and Benefits Ratio = B/P

Where B = The Operating Agent's total pension and benefits expense
chargeable to FERC Account 926, including payroll taxes, and
injuries and damages on labor chargeable to FERC Account 926.
The amount of payroll taxes and injuries and damages to be added
are based on the ratios included in Exhibit VI, Attachments B
and C, respectively.

P = The Operating Agent's total base labor paid and accrued, less
wages paid for time-off allowances plus accruals for time-off
allowances, less overtime, part-time, special pay not eligible
for pension and benefits and wages charged direct to FERC
Account 926.

Notes: (1) Special pay is defined as any other compensation an employee
receives that is not part of his/her regular base pay. Examples
include employee recognition awards as well as results based
pay, the Operating Agent's bonus pay plan. Employee recognition
awards are not eligible for pension and benefit loadings.
(2) Any modifications to the methodology utilized for calculating
the Pension and Benefits Ratio described above shall be
developed by the San Juan Auditing Committee and approved by the
San Juan Coordination Committee.

Exh. VI - 6

San Juan Project Participation Agreement
Exhibit VI-Attachment E
-----------------------

CAPITALIZED A&G RATIO APPLICABLE TO CAPITAL PROJECTS FOR THE SAN
----------------------------------------------------------------
JUAN GENERATING STATION ("SJGS")
--------------------------------

The Operating Agent determines the appropriate A&G expense incurred for
the benefit of the SJGS and to be billed to the SJGS as follows:

The FERC A&G accounts included in the A&G study are: 920, 921, 923,
930.2, 931 and 935.

Background
----------

A questionnaire is sent to all managers that have A&G charges to the
Bulk Power Business Unit to determine what percentage of their A&G
expenses are capital-related and should be included in the development
of the Capitalized A&G Ratios. Amounts are split between labor and
other.

B. Labor Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) (see
Exhibit VI Attachments B, C and D) are applied to the labor portion of
the A&G determined above.

The Capitalized A&G Ratios, shall be applied to all SJGS construction costs
except for long-term leased transportation and motorized equipment. The total
amount of these construction dollars are utilized as the denominator in the
calculation of the A&G Ratio described below.

Exh. VI - 7

Capitalized A&G Ratio = A/B

Where A = Administrative and general expense chargeable to FERC
Accounts 920, 921, 923, 930.2, 931 and 935, including Labor
Ratios for Payroll Taxes (FERC Account 408), Injuries and Damages
(FERC Account 925) and Pension and Benefits (FERC Account 926) as
categorized separately in the A&G questionnaire for major and
minor construction expenditures for the study period.

B = Total SJGS capital project amounts for the Bulk Power Business
Unit as categorized between major and minor construction projects
for the study period chargeable to FERC Accounts 107 and 108.

Exh. VI - 8

EXHIBIT VII

Attachment C
Page 1

BHP MINERALS INC.
SAN JUAN COAL COMPANY
P. O. BOX 155
FRUITLAND, NEW MEXICO 87416

February 9, 1993 cc: Tani Cambra - BHP
Chris Seymour - SJM
Public Service Company of New Mexico Rick Franklin - TEP
414 Silver Avenue, S.W. Rick Sarracino - PNM
Albuquerque, New Mexico 87102 Harry Schanning - PNM
Jay Clatworthy - LPM

Attention: Suzy Braun, Fuel Accounting

Dear Ms. Braun:

Enclosed is the current billing for coal sales for the month of January 1993.

The following invoices are included:

INVOICE SAN JUAN LA PLATA SJ TRANSPORTATION
- -------------------- ------------- ------------- --------------------

ASH DISPOSAL $ 273,244.00
93-01 $9,324,192.00* $3,384,804.00** $ 1,259,928.00***
------------- ------------- --------------
$9,597,436.00 $3,384,804.00 $ 1,259,928.00
============= ============= ==============

TOTAL PAYMENT DUE $14,242,168.00
==============

If you have any questions, please call me at (505) 598-4235.

Sincerely,

Ed A. Becenti
San Juan Coal Company

Enclosures

* Detail on Attachment C, Page 1
** Detail on Attachment C, Page 4
*** Detail on Attachment C, Page 6

Attachment C
Page 2

SAN JUAN COAL COMPANY INVOICE NO.: 593-01
P. O. BOX 15 DATE: JAN. 31, 1993
FRUITLAND, NM 87416

SAN JUAN COAL SALES AGREEMENT

TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P. O. BOX 2267
ALBUQUERQUE, NM 87103
- --------------------------------------------------------------------------------

JAN. 1993 COAL DELIVERIES
- --------- ---------------

TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 369,845
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
--------------

TOTAL COAL DELIVERED YEAR TO DATE 369,845
==============

PARAGRAPH INVOICE AMOUNT
--------- --------------

9.2(A), 9.3(A),9.4, 9.5(A) OPERATING COSTS (SCHEDULE A) $5,759,716.00
9.2(B), 9.3(B), 9.5(B) CAPITAL INVEST. ELEMENT (SCH. B) 2,833,025.00
9.2(D), 9.3(D), 9.5(D) ADMINISTRATIVE COMPONENT (SCH. D) 161,231.00
9.6 EFFICIENCY ELEMENT (SCHEDULE E) 0.00
-------------

TOTAL SALES VALUE 8,753,972.00

LESS: INVOICE NUMBER N/A 0.00
-------------

ADJUSTED SALES VALUE $8,753,972.00

PLUS: TAX (SCHEDULE T) 570,220.00
-------------
SUBTOTAL INVOICE $9,324,192.00

LESS: INCREMENTAL TONS 0.00
-------------

TOTAL INVOICE $9,324,192.00
=============

REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT

COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
BHP MINERALS INC - SAN FRANCISCO OFFICE (2)
SAN JUAN COAL COMPANY (2)

* Details on Attachment C, Page 3

Attachment C
Page 3
SAN JUAN COAL COMPANY SCHEDULE B

INVOICE NO.: S93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993

I. FRUITLAND CAPITAL INVESTMENT ELEMENT
- ---------------------------------------

FRUITLAND TONS MINED & DELIVERED (SCHEDULE P)

TIMES: C1 (SCHEDULE S-2)

= 256,849 X $6.131 = $1,574,741.00

LESS: DISCOUNT TONS

= 0 X $0.000 = $ 0.00
-------------

SUBTOTAL 1,574,741.00

II. PROCESSING CAPITAL INVESTMENT ELEMENT
- ------------------------------------------

TONS APPLICABLE (SCHEDULE P)

TIMES: PC1 (SCHEDULE S-3)

= 564,760 X $2.228 = 1,258,284.00
-------------

TOTAL CAPITAL INVESTMENT ELEMENT $2,833,025.00*
=============

* Forward to Attachment C, Page 2

Attachment C
Page 4
SAN JUAN COAL COMPANY
C/O LA PLATA MINE L93-01
P.O. BOX 155 JAN. 31, 1993
FRUITLAND, NM 87416

SAN JUAN COAL SALES AGREEMENT
- -----------------------------

TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P.O. BOX 2267
ALBUQUERQUE, NM 87103

JAN. 1993 COAL DELIVERIES
- --------- ---------------

TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 112,996
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
-------------
TOTAL COAL DELIVERED YEAR TO DATE 112,996
=============

PARAGRAPH INVOICE AMOUNT

9.3 (A) OPERATING COSTS (SCHEDULE A) $2,064,762.00
9.3 (B) CAPITAL INVEST. ELEMENT (SCH. B) 1,071,767.00*
9.3 (C) MIN. AGGREGATE CAPITAL INVEST. ELEMENT (SCH. C) 0.00
9.3 (D) ADMINISTRATIVE COMPONENT (SCH. D) 43,199.00
-------------
TOTAL SALES VALUE $3,179,728.00

LESS: INVOICE NUMBER N/A 0.00
-------------
ADJUSTED SALES VALUE $3,179,728.00

PLUS: TAX (SCHEDULE T) 205,076.00
-------------
SUBTOTAL INVOICE $3,384,804.00

LESS: INCREMENTAL TONS 0.00
-------------
TOTAL INVOICE $3,384,804.00
=============

REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT

COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
SAN JUAN COAL COMPANY (1)

* Details on Attachment C, Page 5

Attachment C
Page 5
SAN JUAN COAL COMPANY SCHEDULE B
LA PLATA MINE
INVOICE NO.: L93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993

I. LA PLATA MINING CAPITAL INVESTMENT ELEMENT
- ---------------------------------------------

LA PLATA TONS MINED & DELIVERED (SCHEDULE P)

TIMES: NC1 (SCHEDULE S-2)

= 112,996 X $9.485 = $1,071,767.00

LESS: DISCOUNT TONS

= 0 X $2.250 = $ 0.00
-------------

TOTAL CAPITAL INVESTMENT ELEMENT $1,071,767.00*
=============

* Forward to Attachment C, Page 4

Attachment C
Page 6

SAN JUAN TRANSPORTATION COMPANY INVOICE NO: T93-01
P.O. BOX 155 JAN. 31, 1993
FRUITLAND, NM 87416

SAN JUAN TRANSPORTATION AGREEMENT
- ---------------------------------

TO: PUBLIC SERVICE COMPANY OF NEW MEXICO
P.O. BOX 2267
ALBUQUERQUE, NM 87103

JAN. 1993 COAL DELIVERIES
- --------- ---------------

TONS OF COAL DELIVERED CURRENT MONTH (SCHEDULE P) 112,996
TONS OF COAL DELIVERED PREVIOUSLY DURING THE YEAR 0
-------------

TOTAL COAL DELIVERED YEAR TO DATE 112,996
=============

PARAGRAPH INVOICE AMOUNT

7.2 (A) OPERATING COSTS (SCHEDULE A) $ 525,827.00
7.2 (B) CAPITAL INVEST. ELEMENT (SCH. B) 658,993.00*
7.3 (C) MIN. AGGREGATE CAPITAL INVEST. ELEMENT (SCH. C) 0.00
7.3 (D) ADMINISTRATIVE COMPONENT (SCH. D) 8,011.00
-------------

TOTAL SALES VALUE $1,192,831.00

LESS: INVOICE NUMBER N/A 0.00
-------------

ADJUSTED SALES VALUE $1,192,831.00

PLUS: GROSS RECEIPTS TAX @ 5.625% 67,097.00
-------------

TOTAL INVOICE $1,259,928.00
=============

REMIT TO: SAN JUAN COAL COMPANY
C/O BHP MINERALS INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
ATTENTION: TREASURY DEPARTMENT

COPIES TO: PUBLIC SERVICE COMPANY OF NEW MEXICO (3)
TUCSON ELECTRIC POWER COMPANY (1)
SAN JUAN COAL COMPANY (1)

* Details on Attachment C, Page 7

Attachment C
Page 7

SAN JUAN COAL COMPANY SCHEDULE B

INVOICE NO.: T93-01
DATE: JAN. 31, 1993
MONTH: JAN. 1993

I. CAPITAL INVESTMENT ELEMENT
- ------------------------------

TONS DELIVERED

TIMES: C1 (SCHEDULE S-2)

= 112,996 X $5.832 = $658,993.00
-----------

TOTAL CAPITAL INVESTMENT ELEMENT $658,993.00*
===========

* Forward to Attachment C, Page 6

Attachment C
Page 8

MONTHLY FIXED COST CALCULATION
January 1993

A) San Juan CIE (Schedule B) (Attachment C, Page 3) 1,574,741.00
B) Processing (Schedule B) (Attachment C, Page 3) 1,258,284.00
C) Royalty @12.5% 434,954.00 J X .125
------------
D) Sub-Total 3,267.979.00 A + B + C

E) Sub-Total--Royalty Subject to RET and CT 2,833,025.00 D - C

F) Resource Excise Tax @ .75% 21,247.69 E X .0075
G) Conservation Tax @ .18% 5,099.45 E X .0018
------------
H) Amount Subject to GRT 3,294,326.14 D + F + G

I) Gross Receipts Tax @ 5.625% 185,305.85 H X .05625
------------
J) TOTAL SAN JUAN CIE & PROCESSING 3,479,631.99 H + I

A) La Plata CIE (Schedule B) (Attachment C, Page 5) 1,071,767.00
B) Royalty @ 12.5% 164,548.26 I X .125
------------
C) Sub-Total 1,236,315.26 A + B

D) Sub-Total--Royalty Subject to RET and CT 1,071,767.00 C - B

E) Resource Excise Tax @ .75% 8,038.25 D X .0075
F) Conservation Tax @ .18% 1,929.18 D X .0018
------------
G) Amount Subject to GRT 1,246,282.69 C + E + F

H) Gross Receipts Tax @ 5.625% 70,103.40 G X .05625
------------

I) TOTAL LA PLATA CIE 1,316,386.09 G + H
Transportation CIE (Schedule B)
(Attachment C, Page 7) 658,993.00
------------
658,993.00
Gross Receipts Tax @ 5.625% 37,068.36
------------
TOTAL TRANSPORTATION CIE 696,061.36
------------
TOTAL FIXED COSTS INVOICED 1/93: 5,492,079.44
------------

Attachment C
Page 9

Removal of Fixed Expenses from Coal Inventory

Total Coal Invoice $14,242,168.00
(Attachment C, p. 1)

Less Ash Expense $273,244.00
(Attachment C, p. 1)

Less Fixed Fuel Expenses

San Juan & Processing CIE $3,479,631.99
(Attachment C, p. 8)

La Plata CIE $1,316,386.09
(Attachment C, p. 8)

Transportation CIE $696,061.36
(Attachment C, p. 8)

Net Variable Fuel Expense
To Inventory $8,476,844.56

Attachment C
Page 10

TONS COST
SAN JUAN COAL INVENTORY DELIVERED TOTAL DELIVERED AVERAGE
- ----------------------- BURNED TONS BURNED TOTAL COST PRICE
DATE DESCRIPTION AND SOLD TO DATE AND SOLD TO DATE PER TON
---- ----------- -------- ------- -------- ------- -------

Beg. Bal. 744,453 $21,422,710.42
January 1993
Deliveries 369,845 1,114,298 8,476,844.56** 29,899,554.98
Stockpile deliveries 0 1,114,298 0.00 29,899,554.98
Adjustment to deliveries 0 1,114,298 0.00 29,899,554.98
Employee sales 0 1,114,298 0.00 29,899,554.98
Adjustments to prior burns 0 1,114,298 0.00 29,899,554.98 26.832638
Unit 1 burn gen. (92,339.05) 1,021,959 (2,477,700.30) 27,421,854.68
Unit 2 burn gen. (92,202.40) 929,757 (2,474,033.62) 24,947,821.06
Unit 3 burn gen. (143,098.82) 786,658 (3,839,718.84) 21,108,102.22
Unit 4 burn gen. (162,852.47) 623,805 (4,369,761.37) 16,738,340.85
Unit 1 burn chem. 0.00 623,805 0.00 16,738,340.85
Unit 2 burn chem. 0.00 623,805 0.00 16,738,340.85
Unit 3 burn chem. (5,240.98) 618,564 (140,629.32) 16,597,711.53
Unit 4 burn chem. (6,032.98) 612,531 (161,880.77) 16,435,830.76
Adjustments to burn 0.00 612,531 0.00 16,435,830.76
----------- ---------- -------------- --------------

Total Tons/Dollars (501,766.70) 612,531 (13,463,724.22) 16,435,830.76
----------- ---------- -------------- --------------

**Attachment C, Page 9

Attachment C
Page 11
MONTHS--January 1993 CIE Revision

GENERATION DATA UNIT 1 UNIT 2 UNIT 3 UNIT 4 TOTALS
- --------------- ------ ------ ------ ------ ------

1) METERED GROSS GEN. 179,880.00 172,030.00 271,300.00 316,450.00 939,660.00

A. START-UP POWER 685.00 698.00 200.00 0.00 1,583.00
B. UNIT AUXILIARY 20,440.00 20,941.30 28,230.00 23,840.00 93,451.30
C. COMMON AUXILIARY 2,431.80 2,304.50 3,707.40 4,463.00 12,906.70
D. 1 & 2 COMMON AUX. 0.00 0.00 0.00 0.00 0.00
E. 3 & 4 COMMON AUX. 0.00 0.00 0.00 0.00 0.00

2) TOTAL METERED AUX. 23,556.80 23,943.80 32,137.40 28,303.00 107,941.00
3) METERED NET GEN. 156,323.20 148,086.20 239,162.60 288,147.00 831,719.00

4) PNM'S SHARE-----* 80,603.30 74,833.80 127,017.10 179,725.50 462,179.70
5) TEP'S SHARE-----* 75,719.90 73,252.40 91,928.20 0.00 240,900.50
6) COF'S SHARE-----* 0.00 0.00 11,934.50 11,972.70 23,907.20
7) MSR'S SHARE-----* 0.00 0.00 0.00 83,843.30 83,843.30
8) LAC SHARE-------* 0.00 0.00 8,282.80 12,605.50 20,888.30
9) # OF DAYS IN MONTH 31.00

SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 12

For the month ended January 1993 CIE Revision

Unit 1 Breakdown
- ----------------

PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----
Start-up 342.50 342.50 685.00 (Attachment C, Page 11)
Unit auxiliary 10,220.00 10,220.00 20,440.00 (Attachment C, Page 11)
Common auxiliary 1,253.98 481.50 62.23 211.57 369.83 52.69 2,431.80 (Attachment C, Page 11)
Units 1 and 2 common auxiliary 0.00 0.00 0.00 (Attachment C, Page 11)
----------- ---------- ------ ------ ------ ------ ----------
Total start-up and auxiliary 11,816.48 11,044.00 62.23 211.57 369.83 52.69 23,556.60

Net generation (metered shares) 80,603.30 75,719.90 156,323.20 (Attachment C, Page 11)
----------- ---------- ------ ------ ------ ------ ----------
Total 92,419.78 86,763.90 62.23 211.57 369.83 52.69 179,880.00

Gross generation--Unit 1 179,860.00

FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 0.00
Coal cost for the month $2,477,700.30
Oil cost for the month $ 55,628.38
-------------
Total fuel cost for the month $2,533,328.68
-------------

UNIT 1 ALLOCATION PERCENTAGE (From Total Line-Unit 1 Breakdown above)
- ----------------------------
PNM 0.5138
TEP 0.4823
CITY 0.0003
MSR 0.0012
CPC 0.0021
LAC 0.0003 1.0000

ALLOCATION OF UNIT 1 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL

PNM $1,273,042.42 $28,560.83 $0.00 1-501001-770-722-1656-5850 $0.00 $1,273,042.42 $1,273,042.42
TEP $1,194,994.85 $28,628.60 $0.00 1-501001-789-722-1656-5850 $0.00 $1,194,994.85 $1,194,994.85
CITY $743.31 $16.89 $0.00 1-501001-774-722-1656-5850 $0.00 $743.31 $743.31
MSR $2,973.24 $68.75 $0.00 1-501001-773-752-1656-5850 $0.00 $2,973.24 $2,973.24
CPC $5,203.17 $118.82 $0.00 1-501001-772-722-1656-5850 $0.00 $5,203.17 $5,203.17
LAC $743.31 $16.89 $0.00 1-501001-771-722-1656-5850 $0.00 $743.31 $743.31
------------- ---------- -----
Total $2,477,700.30 $55,628.38 $0.00 1-151000-768-800-1998-0000-1998 $0.00 $55,628.38

ACCOUNTING ENTRY
----------------

1-501401-770-722-1658-5850 $28,580.83
1-501401-769-722-1656-5850 $28,528.80
1-501401-774-722-1656-5850 $16.89
1-501401-773-722-1656-5850 $68.75
1-501401-772-722-1656-5850 $116.82
1-501401-771-722-1656-5850 $16.89

$2,477.700.30 1-501001-765-800-1998-0000-1998

SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 13

For the month ended January 1993 CIE Revision

Unit 2 Breakdown
- ----------------

PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----

Start-up 349.00 349.00 698.00 (Attachment C, Page 11)
Unit auxiliary 10,470.65 10,470.65 20,941.30 (Attachment C, Page 11)
Common auxiliary 1,188.34 456.29 59.07 200.40 350.28 50.12 2,304.50 (Attachment C, Page 11)
Units 1 and 2 common auxiliary 0.00 0.00 0.00 (Attachment C, Page 11)
---------- --------- ------ ------ ------ ------ ----------
Total start-up and auxiliary 12,007.99 11,275.94 59.07 200.40 350.28 50.12 23,943.60

Net generation (metered shares) 74,833.80 73,252.40 148,086.20 (Attachment C, Page 11)
---------- --------- ------ ------ ------ ------ ----------
Total 86,841.79 84,528.34 59.07 200.40 350.28 50.12 172,030.00

Gross generation--Unit 2 172,030.00

FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 0.00
Coal cost for the month $2,474,033.62
Oil cost for the month $ 57,921.54
-------------
Total fuel cost for the month $2,531,955.16
-------------

UNIT 2 ALLOCATION PERCENTAGE (From Total Line-Unit 2 Breakdown above)
- ----------------------------
PNM 0.5048
TEP 0.4814
CITY 0.0003
MSR 0.0012
CPC 0.0020
LAC 0.0003 1.0000

ALLOCATION OF UNIT 2 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL

PNM $1,248,892.17 $29,236.79 $0.00 1-501002-770-722-1656-5850 $0.00 $1,248,892.17 $1,248,892.17
TEP $1,215,740.12 $28,483.64 $0.00 1-501002-789-722-1656-5850 $0.00 $1,215,740.12 $1,215,740.12
CITY $742.21 $17.38 $0.00 1-501002-774-722-1656-5850 $0.00 $742.21 $742.21
MSR $2,968.04 $50.31 $0.00 1-501002-773-752-1656-5850 $0.00 $2,968.84 $2,968.84
CPC $4,949.07 $115.84 $0.00 1-501002-772-722-1656-5850 $0.00 $4,949.07 $4,949.07
LAC $742.21 $17.38 $0.00 1-501002-771-722-1656-5850 $0.00 $742.21 $742.21
------------- ---------- ------
Total $2,474,033.82 $57,921.34 $0.00 1-151000-768-800-1998-0000-1998 $0.00

ACCOUNTING ENTRY
----------------

1-501402-770-722-1656-5850 $29,236.78
1-501402-769-722-1656-5850 $28,483.64
1-501402-774-722-1656-5850 $17.38
1-501402-773-722-1656-5850 $50.31
1-501402-772-722-1656-5850 $115.84
1-501402-771-722-1656-5850 $17.38

$2,474.033.62 1-501001-765-800-1998-0000-1998 $57,921.34

SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 14

For the month ended January 1993 CIE Revision

Unit 3 Breakdown
- ----------------

PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)
--- --- ---- --- --- --- -----

Start-up 100.00 0.00 100.00 200.00 (Attachment C, Page 11)
Unit auxiliary 11,857.14 0.00 1,220.76 14,115.00 1,037.10 28,230.00 (Attachment C, Page 11)
Common auxiliary 1,911.75 734.07 94.87 322.54 563.52 80.64 3,707.40 (Attachment C, Page 11)
Units 3 and 4 common auxiliary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
---------- ------ --------- ------ ---------- -------- ----------
Total start-up and auxiliary 13,868.89 734.07 1,315.63 322.54 14,778.52 1,117.74 32,137.40

Net generation (metered shares) 127,017.10 0.00 11,934.50 91,928.20 8,282.80 239,162.60 (Attachment C, Page 11)
---------- ------ --------- ------ ---------- -------- ----------
Total 140,885.99 734.07 13,250.13 322.54 106,706.72 9,400.54 271,300.00

Gross generation--Unit 3 271,300.00

FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 140,829.32
Coal cost for the month $3,838,718.84
Oil cost for the month $ 25,465.56
-------------
Total fuel cost for the month $4,005,013.72
-------------

UNIT 3 ALLOCATION PERCENTAGE (From Total Line-Unit 3 Breakdown above)
- ----------------------------
PNM 0.5194
TEP 0.0027
CITY 0.0488
MSR 0.0012
CPC 0.3933
LAC 0.0346 1.0000

ALLOCATION OF UNIT 3 FUEL EXPENSE
- ---------------------------------

COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL

PNM $1,994,349.97 $13,226.81 $72,516.91 1-501003-770-722-1656-5850 $72,516.91 $1,994,349.97 $2,066,866.88
TEP $10,367.24 $68.78 $27,844.61 1-501003-789-722-1656-5850 $27,844.61 $10,367.24 $38,211.85
CITY $187,378.28 $1,242.72 $3,598.70 1-501003-774-722-1656-5850 $3,598.70 $187,378.28 $190,976.98
MSR $4,607.66 $30.56 $12,234.75 1-501003-773-752-1656-5850 $12,234.75 $4,607.66 $16,842.41
CPC $1,510,161.42 $10,015.60 $21,375.66 1-501003-772-722-1656-5850 $21,375.66 $1,510,161.42 $1,531,537.08
LAC $132,854.27 $881.11 $3,058.69 1-501003-771-722-1656-5850 $3,058.69 $132,854.27 $135,912.96
------------- ---------- -----------
Total $3,838,718.84 $25,465.58 $140,629.32 1-151000-768-800-1998-0000-1998

ACCOUNTING ENTRY
----------------

1-501403-770-722-1656-5850 $13,226.81
1-501403-769-722-1656-5850 $68.76
1-501403-774-722-1656-5850 $1,242.72
1-501403-773-722-1656-5850 $30.58
1-501403-772-722-1656-5850 $10,015.60
1-501403-771-722-1656-5850 $881.11

$3,980.348.16 1-501001-765-800-1998-0000-1998 $25,465.58

SAN JUAN FUEL EXPENSE ALLOCATION Attachment C, Page 15

For the month ended January 1993 CIE Revision

Unit 4 Breakdown
- ----------------

PNM TEP CITY MSR CPC LAC TOTAL (Attachment C, Page 11)

Start-up 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
Unit auxiliary 15,105.62 0.00 1,010.22 6,865.92 0.00 858.24 23,840.00 (Attachment C, Page 11)
Common auxiliary 2,301.39 583.37 114.21 388.28 678.38 97.07 4,463.00 (Attachment C, Page 11)
Units 3 and 4 common auxiliary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (Attachment C, Page 11)
---------- ------ --------- --------- ------ --------- ----------
Total start-up and auxiliary 17,407.01 583.37 1,124.43 7,254.20 678.38 955.31 28,303.00

Net generation (metered shares) 179,725.80 0.00 11,972.70 83,843.30 0.00 12,905.50 288,147.00 (Attachment C, Page 11)
---------- ------ --------- --------- ------ --------- ----------
Total 197,132.81 583.37 13,097.13 91,097.50 678.38 13,860.81 316,450.00

Gross generation--Unit 4 318,450.00

FUEL COST CALCULATION
- ---------------------
Chemical cost for the month $ 161,880.77
Coal cost for the month $4,369,761.37
Oil cost for the month $ 24,896.56
-------------
Total fuel cost for the month $4,556,538.70
-------------

UNIT 4 ALLOCATION PERCENTAGE (From Total Line-Unit 4 Breakdown above)
- ----------------------------
PNM 0.6229
TEP 0.0028
CITY 0.0414
MSR 0.2879
CPC 0.0021
LAC 0.0429 1.0000

ALLOCATION OF UNIT 4 FUEL EXPENSE
- ---------------------------------
COAL OIL CHEM Unit 1 Coal Burn (984) CHEM GEN TOTAL

PNM $2,721,924.36 $15,508.07 $83,475.43 1-501004-770-722-1656-5850 $83,475.43 $2,721,924.38 $2,805,399.79
TEP $12,235.33 $69.71 $32,052.39 1-501004-789-722-1656-5850 $32,052.39 $12,235.33 $44,287.72
CITY $180,908.12 $1,030.72 $4,142.43 1-501004-774-722-1656-5850 $4,142.43 $180,908.12 $185,050.65
MSR $1,258,054.30 $7,167.72 $14,083.83 1-501004-773-752-1656-5850 $14,083.83 $1,258,054.30 $1,272,137.93
CPC $9,176.50 $52.28 $24,805.88 1-501004-772-722-1656-5850 $24,605.88 $9,176.50 $33,782.38
LAC $187,462.76 $1,068.06 $3,320.81 1-501004-771-722-1656-5850 $3,320.91 $187,462.76 $190,983.67
------------- ---------- ------------
Total $4,369,761.37 $24,896.56 $161,880.77 1-151000-768-800-1998-0000-1998

ACCOUNTING ENTRY

1-501404-770-722-1656-5850 $15,508.07
1-501404-769-722-1656-5850 $69.71
1-501404-774-722-1656-5850 $1,030.72
1-501404-773-722-1656-5850 $7,167.72
1-501404-772-722-1656-5850 $52.28
1-501404-771-722-1656-5850 $1,068.06

$4,531.642.14 1-501001-767-800-1998-0000-1998 $24,896.56

Attachment C
Page 16

JAN JAN AS PROPOSED
BURN UNDER MODIFICATION 8
TONS BASE BURN EXPENSE

Unit 1 92,339.05 Unit 1 2,477,700.30 (Attachment C, Page 12)
Stm 0.00 Stm 0.00
Unit 2 92,202.40 Unit 2 2,474,033.62 (Attachment C, Page 13)
Stm 0.00 Stm 0.00
Unit 3 143,098.82 Unit 3 3,839,718.84 (Attachment C, Page 14)
Stm 5,240.98 Stm 140,629.32
Unit 4 162,852.47 Unit 4 4,369,761.37
Stm 6,032.98 Stm 161,880.77 (Attachment C, Page 15)
Total 501,766.70 Total 13,463,724.22

Participation Allocation (%) Participation Allocation (%)
Unit 1 (Attachment C, Page 12) Unit 1
PNM 0.5138 PNM 0.5138
TEP 0.4823 TEP 0.4823
COF 0.0003 COF 0.0003
MSR 0.0012 MSR 0.0012
CPC 0.0021 CPC 0.0021
LAC 0.0003 LAC 0.0003
1.0000 1.0000

Unit 2 (Attachment C, Page 13) Unit 2
PNM 0.5048 PNM 0.5048
TEP 0.4914 TEP 0.4914
COF 0.0003 COF 0.0003
MSR 0.0012 MSR 0.0012
CPC 0.0020 CPC 0.0020
LAC 0.0003 LAC 0.0003
1.0000 1.0000

Unit 3 (Attachment C, Page 14) Unit 3
PNM 0.5194 PNM 0.5194
TEP 0.0027 TEP 0.0027
COF 0.0488 COF 0.0488
MSR 0.0012 MSR 0.0012
CPC 0.3933 CPC 0.3933
LAC 0.0346 LAC 0.0346
1.0000 1.0000

Unit 4 (Attachment C, Page 15) Unit 4
PNM 0.6229 PNM 0.6229
TEP 0.0028 TEP 0.0028
COF 0.0414 COF 0.0414
MSR 0.2879 MSR 0.2879
CPC 0.0021 CPC 0.0021
LAC 0.0429 LAC 0.0429
1.0000 1.0000

CIE: 5,492,079.44

TONS BASE BURN CIE* TOTAL 501
BURNED EXPENSE EXPENSE EXPENSE

PNM 275,567.44 PNM 7,394,201.26 3,016,219.03 10,410,420.29
TEP 92,917.98 TEP 2,493,234.54 1,017,032.27 3,510,266.81
COF 14,069.18 COF 377,513.15 153,993.99 531,507.14
MSR 48,259.23 MSR 1,294,922.42 528,220.63 1,823,143.05
CPC 58,714.71 CPC 1,575,470.70 642,660.93 2,218,131.63
LAC 12,238.16 LAC 328,382.15 133,952.59 462,334.74

501,766.70 13,463,724.22 5,492,079.44 18,955,803.66

*Attachment C, page 8

EXHIBIT VIII

Proportional Adjustment of Voting Requirements
----------------------------------------------
in Case of a Default and Suspension of the Rights of a Participant
------------------------------------------------------------------
to Vote Pursuant to Section 35.4.1.
-----------------------------------

Example Calculation Based on Hypothetical Ownership Percentages:

In the following table, Participant D with Participation Shares in Units 3 and 4
is assumed to be the defaulting Participant. Participation Shares for Voting and
Number of Participants for Voting are shown under original or pre-default
conditions and are then adjusted as provided in Sections 18.4, 19.4, 20.5, and
21.4 after the right of Participant D to vote is suspended pursuant to Section
35.4.1.

Participation Shares for voting pursuant to Sections 18.4.1(a), 18.4.2(a), and
18.4.3(a) are adjusted as follows:

For Units:

The Adjusted Participation Share for a Participant =
(That Participant's Participation Share)/(The sum of
the Participation Shares of all non-defaulting
Participants in the affected Unit)

For Common Facilities:

Adjustments related to common facilities shall be proportional
to any differing Participation Shares between Units.
The above formula would be applied to each Unit and
then summed and normalized over the applicable common
facilities. Because San Juan Units are of unequal
ratings, the normalization will be in proportion to
each Unit's rating rather than the even fractions in
the example below where equally sized units were used
for simplicity.

The numbers of Participants used for voting purposes pursuant to the
requirements of Sections 18.4.1(b), 18.4.2(b), and 18.4.3(b) are adjusted by
subtracting the number of defaulting Participants from the total number of
Participants voting under those Sections.

Exh. VIII - 1

Original Adjusted
Original Number of Adjusted Number of
Participation Participants Participation Participants
Shares for For Voting Shares for for Voting
Voting: Purposes: for Voting- Purposes -
ss.18.4.1(a), ss.18.4.1, ss.18.4.1(a), ss.18.4.1(b),
ss.18.4.2(a),& ss.18.4.1(b),& ss.18.4.2(a),& ss.18.4.2(b),&
Unit or Facility ss.18.4.3(a) ss.18.4.3(b) ss.18.4.3(a) ss.18.4.3(b)
- ---------------- -------------- -------------- -------------- --------------

Unit 1 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%

Unit 2 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%

Unit 3 4 3
Participant A 20.00% 28.57% 1
Participant B 20.00% 28.57%
Participant C 30.00% 42.86%
Participant D 30.00% 0.00%

Unit 4 5 4
Participant A 10.00% 12.50% 2
Participant B 10.00% 12.50%
Participant C 20.00% 25.00%
Participant D 20.00% 0.00%
Participant E 40.00% 50.00%

Unit 1 & 2 Common 2 2
Participant A 50.00% 50.00%
Participant B 50.00% 50.00%

- --------
1 Computed on Unit 3 Participation Shares as follows: (Participant A)/
(Participant A + Participant B + Participant C) = 20%/(20%+20%+30%) = 28.57%
2 Computed on Unit 4 Participation Shares as follows: (Participant A)/
(Participant A + Participant B + Participant C + Participant E) =
10%/(10%+10%+20%+40%) = 12.50%

Exh. VIII - 2

Unit 3 & 4 Common 5 4
Participant A 15.00% 20.536% 3
Participant B 15.00% 20.536%
Participant C 25.00% 33.928%
Participant D 25.00% 0.00%
Participant E 20.00% 25.000%

Plant Common 5 4
Participant A 32.50% 35.268% 4
Participant B 32.50% 35.268%
Participant C 12.50% 16.964%
Participant D 12.50% 0.00%
Participant E 10.00% 12.500%

3 Computed on Unit 3 and 4 Common Participation Shares as follows: Unit 3
Contribution = (Participant A) / (Participant A + Participant B + Participant
C) = 20%/(20%+20%+30%) = 28.571%; Unit 4 Contribution = (Participant A) /
(Participant A + Participant B + Participant C + Participant E) =
10%/(10%+10%+20%+40%) = 12.500%. Unit 3 & 4 Common = (Unit 3 Rating)/(Sum of
Unit 3 and 4 Ratings) * (Unit 3 Contribution) + (Unit 4 Rating)/(Sum of Unit 3
and 4 Ratings) * (Unit 4 Contribution) = 1/2 (28.571%) + 1/2 (12.500%) =
20.536%

4 Computed on Plant Common Participation Shares as follows: Unit 1 Contribution
= (Participant A) / (Participant A + Participant B) = 50%/(50%+50%) = 50.000%;
Unit 2 Contribution = (Participant A) / (Participant A + Participant B) =
50%/(50%+50%) = 50.000%. Unit 3 Contribution = (Participant A) / (Participant
A + Participant B + Participant C) = 20%/(20%+20%+30%) = 28.571%; Unit 4
Contribution = (Participant A) / (Participant A + Participant B + Participant
C + Participant E) = 10%/(10%+10%+20%+40%) = 12.500%. Plant Common = (Unit 1
Rating)/(Plant Rating) * (Unit 1 Contribution) + (Unit 2 Rating)/(Plant
Rating) * (Unit 2 Contribution) + (Unit 3 Rating)/(Plant Rating) * (Unit 3
Contribution) + (Unit 4 Rating)/(Plant Rating) * (Unit 4 Contribution) = 1/4
(50.000%) + 1/4 (50.000%) + 1/4 (28.571%) + 1/4 (12.500%) = 35.268%

Exh. VIII - 3

EXHIBIT IX

FIXED FUEL EXPENSE

SAN JUAN COAL SALES AGREEMENT (As Amended)
- ------------------------------------------

SECTION 9.2(B):
San Juan (Fruitland) Mine Capital Investment Element

SECTION 9.3(b):
La Plata Mine Capital Investment Element

SECTION 9.5(b):
Processing Capital Investment Element

TRANSPORTATION AGREEMENT (As Amended)
- -------------------------------------

SECTION 7.2(b):
Transportation Capital Investment Element

Exh. IX - 1