PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 19, 1996

                                  $100,000,000            Filed pursuant to Rule
                         Arizona Public Service Company   424(b)(5)(Form S-3
                          6 3/4 % Senior Notes Due 2006   Registration Nos. 33-
                                                          61228, 33-55473, 33- 
                                                          64455 and 333-15379
                     
Interest payable May 15 and November 15                    Due November 15, 2006

                                   ----------

  The Offered Notes will mature on November 15, 2006. Interest on the Offered
Notes is payable semiannually on May 15 and November 15 of each year, commencing
May 15, 1997. The Offered Notes are redeemable prior to Maturity at a redemption
price equal to the sum of (i) the principal of the Offered Notes being redeemed
 plus accrued interest thereon to the redemption date plus (ii) the Make-Whole
Amount. For other terms of the Offered Notes, see "Certain Terms of the Offered
Notes" herein and "Description of Senior Notes" in the accompanying Prospectus.
   The Notes will be represented by one or more Global Securities (as defined
  herein) registered in the name of a nominee of The Depository Trust Company.


Until the Release Date (as defined in the accompanying Prospectus), the Offered
          Notes will be secured by the Company's first mortgage bonds
       issued and delivered to the Senior Note Trustee. See "Description
               of Senior Notes -- Security; Release Date" in the
               accompanying Prospectus. ON THE RELEASE DATE, THE
                 OFFERED NOTES WILL CEASE TO BE SECURED BY SUCH
 FIRST MORTGAGE BONDS, WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY
   AND WILL RANK ON A PARITY WITH OTHER UNSECURED INDEBTEDNESS OF THE COMPANY
        (UNLESS OTHERWISE SECURED AS DESCRIBED HEREIN UNDER THE CAPTION
         "CERTAIN TERMS OF THE OFFERED NOTES -- LIMITATION ON LIENS").

                                   ----------

  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
       EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
           SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
             COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
                  PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
              REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                                            UNDERWRITING
                                PRICE TO    DISCOUNTS AND   PROCEEDS TO
                                PUBLIC(1)    COMMISSIONS   COMPANY(1)(2)
                              ------------  -------------  -------------

Per Offered Note ..........        99.639%     0.650%            98.989%
Total .....................   $99,639,000   $650,000        $98,989,000


(1) Plus accrued interest, if any, from November 15, 1996.
(2) Before deduction of expenses payable by the Company estimated at $175,000.

                                   ----------

   The Offered  Notes are offered by the several  Underwriters  when,  as and if
issued by the Company, delivered to and accepted by the Underwriters and subject
to their right to reject  orders in whole or in part.  It is  expected  that the
delivery  of the  Offered  Notes in  book-entry  form will be made  through  the
facilities  of The  Depository  Trust  Company on or about  November  22,  1996,
against payment therefor in immediately available funds.

CS First Boston
                Salomon Brothers Inc
                                     PaineWebber Incorporated

          The date of this Prospectus Supplement is November 19, 1996.

   IN CONNECTION WITH THIS OFFERING,  THE  UNDERWRITERS  MAY OVERALLOT OR EFFECT
TRANSACTIONS  WHICH  STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED NOTES
AT A LEVEL ABOVE THAT WHICH MIGHT  OTHERWISE  PREVAIL IN THE OPEN  MARKET.  SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

                                   ----------

                             APPLICATION OF PROCEEDS

   The Company  intends to apply the net  proceeds  from the sale of the Offered
Notes to the  payment at maturity  on January  15,  1997 of the  Company's  $150
million  First  Mortgage  Bonds,  7 1/8 % Series  due  1997.  Any  proceeds  not
immediately so applied will be invested  temporarily,  pending such application,
in United  States  government  or agency  obligations,  commercial  paper,  bank
certificates  of deposit,  or  repurchase  agreements  collateralized  by United
States government or agency obligations, or will be deposited with banks.

                       CERTAIN TERMS OF THE OFFERED NOTES

   The  following  description  of the  particular  terms of the  Offered  Notes
offered hereby  supplements  the description of the general terms and conditions
of Senior Notes set forth under the heading "Description of Senior Notes" in the
Prospectus,  to which  description  reference  is  hereby  made.  The  terms and
conditions set forth herein will apply to each Offered Note.  Capitalized  terms
not  defined  under  this  heading  have the  meanings  assigned  to them in the
Prospectus or the Indenture (the "Senior Note Indenture"),  dated as of November
15, 1996,  between the Company and The Bank of New York, as Trustee (the "Senior
Note Trustee").

GENERAL

   The  Offered  Notes  offered  hereby  will be issued  under the  Senior  Note
Indenture  as  supplemented  by the First  Supplemental  Indenture,  dated as of
November 15, 1996 (the  "Supplemental  Indenture"),  between the Company and the
Senior Note Trustee.  The Offered Notes  constitute a single series for purposes
of the Senior Note Indenture,  limited to an aggregate  principal  amount not to
exceed $100,000,000.

   The Offered Notes will initially be represented by a Global Note that will be
deposited   with,   or  on  behalf  of,  The   Depository   Trust  Company  (the
"Depositary").  See  "Description  of  Senior  Notes  --  Global  Notes"  in the
accompanying Prospectus.  The Offered Notes will be issuable in denominations of
$1,000 and any integral multiple thereof.

   The Offered Notes will mature on November 15, 2006 (the "Maturity").

   The Offered Notes will bear interest from and including  November 15, 1996 or
from and including the most recent  Interest  Payment Date with respect to which
interest on such Offered Note (or any predecessor Offered Note) has been paid or
duly provided for to but excluding,  the relevant Interest Payment Date at 6 3/4
% per annum until the principal  thereof is paid or made  available for payment.
The  Interest  Payment  Dates  will  be May 15 and  November  15 of  each  year,
commencing May 15, 1997.  Interest will be payable to the person (which,  in the
case of the  Global  Note,  shall be the  Depositary)  in whose  name an Offered
Security is registered at the close of business on May 1 or November 1 (each,  a
"Regular  Record Date") next  preceding  such Interest  Payment Date;  provided,
however,  that the interest payable at Maturity will be payable to the person to
whom principal shall be payable.  The amount of interest  payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months.

REDEMPTION

   The Offered  Notes may be redeemed at any time at the option of the  Company,
in whole or from time to time in part, at a redemption price equal to the sum of
(i) the  principal  amount of the  Offered  Notes  (or  portion  thereof)  being
redeemed  plus  accrued  interest  thereon to the  redemption  date and (ii) the
Make-Whole  Amount (as defined below), if any, with respect to the Offered Notes
(or portion thereof) being redeemed (the "Redemption Price").
                                       S-2

   If notice has been given as provided in the Senior Note  Indenture  and funds
for the  redemption  of any Offered  Notes (or any portion  thereof)  called for
redemption  shall have been made available on the redemption date referred to in
such notice,  such  Offered  Notes (or any portion  thereof)  will cease to bear
interest on the date fixed for such redemption  specified in such notice and the
only right of the Holders of such  Offered  Notes will be to receive  payment of
the Redemption Price.

   Notice of any  optional  redemption  of any  Offered  Notes  (or any  portion
thereof) will be given to Holders at their  addresses,  as shown in the security
register for such Offered Notes, not more than 60 nor less than 30 days prior to
the date fixed for  redemption.  The notice of redemption  will  specify,  among
other items,  the Redemption Price and the principal amount of the Offered Notes
held by such Holder to be redeemed. If less than all of the Offered Notes are to
be redeemed at the option of the  Company,  the Trustee  shall  select,  in such
manner as it shall deem fair and appropriate,  such Offered Notes to be redeemed
in whole or in part.

   As used herein:

      "MAKE-WHOLE  AMOUNT" means, in connection with any optional  redemption of
   any Offered Notes, the excess,  if any, of (i) the aggregate present value as
   of the date of such redemption of each dollar of principal being redeemed and
   the  amount  of  interest  (exclusive  of  interest  accrued  to the  date of
   redemption)  that would have been  payable in respect of each such  dollar if
   such  redemption  had  not  been  made,  determined  by  discounting,   on  a
   semi-annual  basis,  such  principal  and interest at the  Reinvestment  Rate
   (determined  on the third  Business  Day  preceding  the date such  notice of
   redemption is given) from the  respective  dates on which such  principal and
   interest would have been payable if such  redemption had not been made,  over
   (ii) the aggregate principal amount of the Offered Notes being redeemed.

      "REINVESTMENT  RATE"  means 0.10% plus the  arithmetic  mean of the yields
   under the  respective  heading  "Week  Ending"  published  in the most recent
   Statistical Release under the caption "Treasury Constant  Maturities" for the
   maturity  (rounded to the nearest month)  corresponding to the remaining life
   to maturity,  as of the payment date of the principal being  redeemed.  If no
   maturity exactly  corresponds to such maturity,  yields for the two published
   maturities  most closely  corresponding  to such maturity shall be calculated
   pursuant to the  immediately  preceding  sentence and the  Reinvestment  Rate
   shall be  interpolated  or  extrapolated  from such yields on a straight-line
   basis,  rounding in each of such relevant  periods to the nearest month.  For
   the purpose of calculating the Reinvestment Rate, the most recent Statistical
   Release published prior to the date of determination of the Make-Whole Amount
   shall be used.

      "STATISTICAL  RELEASE" means the statistical release designed  "H.15(519)"
   or any successor publication which is published weekly by the Federal Reserve
   System  and  which  establishes  yields  on  actively  traded  United  States
   government   securities  adjusted  to  constant   maturities,   or,  if  such
   statistical  release is not published at the time of any determination  under
   the Indenture,  then such other  reasonably  comparable  index which shall be
   designated by the Company.

      The Offered Notes will not be subject to any sinking fund.

SECURITY

   Upon the issuance of the Offered Notes, the Company will simultaneously issue
and deliver to the Senior Note Trustee, as security for the Offered Notes, First
Mortgage Bonds, Senior Note Series A (the "Series A First Mortgage Bonds").  The
Series A First Mortgage Bonds will have the same interest rate, Interest Payment
Dates,  Maturity and  redemption  provisions,  and will be in the same aggregate
principal amount as the Offered Notes.

   Subject to the provisions of the Senior Note Indenture governing disbursement
of funds  following  an event of  default,  payment by the Company to the Senior
Note Trustee of the principal and interest on the Series A First  Mortgage Bonds
will be applied by the Senior Note Trustee to satisfy the Company's  obligations
with respect to the principal and interest on the Offered Notes.  As provided in
the  supplemental  indenture  setting  forth  the  terms  of the  Series A First
Mortgage Bonds, the Company's obligation
                                       S-3

to make payments with respect to the principal,  premium, and/or interest on the
Series A First Mortgage  Bonds shall be fully or partially,  as the case may be,
satisfied  and  discharged to the extent that, at the time that any such payment
shall be due, the  corresponding  amount of principal,  premium,  if any, and/or
interest then due, on the Offered Notes shall have been fully or partially paid,
as the case may be, or there  shall have been  deposited  with the  Senior  Note
Trustee  pursuant to the Senior Note Indenture trust funds  sufficient under the
provisions  of  the  Senior  Note  Indenture  to  fully  or  partially  pay  the
corresponding amount of principal,  premium, if any, and/or interest then due on
the Offered Notes.

   Reference is made to "Description Of Senior Notes -- Security;  Release Date"
in the  accompanying  Prospectus  for a description of the  circumstances  under
which all or part of the Senior Note Mortgage Bonds will cease to be held by the
Senior Note  Trustee as  security  for the Senior  Notes.  As  explained  in the
Prospectus,  the Senior  Notes  will  cease to be  secured  by the  Senior  Note
Mortgage Bonds on the Release Date and will become unsecured general obligations
of the Company. However, the Senior Notes can become secured by certain property
of the Company  from and after the  Release  Date as  explained  below under the
caption "-- Limitations on Liens."

   LIMITATIONS ON LIENS.  The  Supplemental  Indenture  provides that,  from and
after the Release Date and so long as any of the Offered Notes are  outstanding,
the Company may not issue,  assume or  guarantee  any debt  evidenced  by notes,
debentures,  bonds,  or other  securities  for money  borrowed  ("Debt") that is
secured by any mortgage,  security  interest,  pledge or lien ("mortgage") of or
upon any  Operating  Property of the Company,  whether  owned at the date of the
Senior Note Indenture or thereafter  acquired,  and will not permit to exist any
Debt  secured  by any such  mortgage  created on or prior to the  Release  Date,
without in any case  effectively  securing the Offered Notes  (together with, if
the Company  shall so  determine,  any other Senior Notes or Debt of the Company
ranking senior to, or equally with, the Senior Notes) with such Debt equally and
ratably,  except that this  restriction  will not apply to: (1) mortgages on any
property existing at the time of its acquisition; (2) mortgages on property of a
corporation existing at the time such corporation is merged into or consolidated
with, or disposes of  substantially  all its properties (or those of a division)
to, the Company; (3) mortgages to secure the cost of acquisition,  construction,
development or substantial  repair,  alteration or improvement of property or to
secure  indebtedness  incurred  to  provide  funds for any such  purpose  or for
reimbursement of funds previously  expended for any such purpose,  provided such
mortgages  are created or assumed  contemporaneously  with,  or within 18 months
after,   such  acquisition  or  completion  of   construction,   development  or
substantial  repair,  alteration or  improvement  or within 6 months  thereafter
pursuant to a commitment for financing arranged with a lender or investor within
such 18 month period;  (4) mortgages in favor of the United States of America or
any State  thereof,  or for the benefit of holders of  securities  issued by any
such  entity,  or  any  department,   agency  or  instrumentality  or  political
subdivision of the United States of America or any State thereof,  to secure any
Debt incurred for the purpose of financing all or any part of the purchase price
or the cost of constructing,  developing or substantially repairing, altering or
improving the property subject to such mortgages; or (5) any extension,  renewal
or replacement (or successive extensions, renewals or replacements), in whole or
in part,  of any  mortgage  referred to in clauses (1)  through  (4);  provided,
however,  that the  principal  amount of Debt secured  thereby and not otherwise
authorized by said clauses (1) to (4), inclusive, shall not exceed the principal
amount of Debt,  plus any  premium or fee  payable in  connection  with any such
extension,  renewal or  replacement,  so secured at the time of such  extension,
renewal or replacement. However, the foregoing restriction does not apply to the
issuance,  assumption  or guarantee by the Company of Debt secured by a mortgage
which  would  otherwise  be  subject  to  the  foregoing  restrictions  up to an
aggregate amount which, together with all other secured Debt of the Company (not
including  secured Debt permitted under the foregoing  exceptions) and the Value
(as defined  below) of all Sale and Lease-Back  Transactions  (as defined below)
existing at such time (other than Sale and Lease-Back  Transactions the proceeds
of which have been applied to the retirement of certain  indebtedness,  Sale and
Lease-Back Transactions in which the property involved would have been permitted
to  be  mortgaged  under  the  foregoing  exceptions  and  Sale  and  Lease-Back
Transactions that are permitted by the first sentence of "-- Limitations on Sale
and Lease-Back  Transactions"  below), does not exceed the greater of 10% of Net
Tangible Assets (as defined below) or 10% of Capitalization (as defined below).
(Section 201 of Supplemental Indenture).
                                       S-4

   LIMITATIONS ON SALE AND LEASE-BACK  TRANSACTIONS.  The Supplemental Indenture
provides that,  from and after the Release Date and so long as any Offered Notes
are  outstanding,  the  Company  may not  enter  into any  Sale  and  Lease-Back
Transaction with respect to any Operating Property and will not permit to remain
in effect any Sale and  Lease-Back  Transaction  with  respect to any  Operating
Property  entered into on or prior to the Release Date (except in each case, for
transactions  involving leases for a term, including any renewal thereof, of not
more than 48 months), if the purchaser's commitment is or was obtained more than
18 months after the later of the completion of the acquisition,  construction or
development  or the placing in operation of such  Operating  Property or of such
Operating Property as constructed,  developed or substantially repaired, altered
or  improved.  This  restriction  will  not  apply if (a) the  Company  would be
entitled  pursuant to the  provisions  described in the first sentence under "--
Limitations  on Liens"  above to issue,  assume or  guarantee  Debt secured by a
mortgage on such Operating  Property  without  equally and ratably  securing the
Offered Notes, (b) after giving effect to such Sale and Lease-Back  Transaction,
the Company  could  incur  pursuant to the  provisions  described  in the second
sentence under "--Limitation of Liens," additional Debt secured by mortgages, or
(c) the  Company  applies  within 180 days an amount  equal to, in the case of a
sale or transfer for cash,  the net proceeds (not exceeding the net book value),
and, otherwise, an amount equal to the fair value (as determined by its Board of
Directors) of the Operating Property so leased to the retirement of Senior Notes
or other Debt of the  Company  ranking  senior to, or equally  with,  the Senior
Notes,  subject  to  reduction  as set forth in the  Supplemental  Indenture  in
respect  of Senior  Notes and such  Debt  retired  during  such  180-day  period
otherwise than pursuant to mandatory  sinking fund or prepayment  provisions and
payments at stated maturity. (Section 202 of Supplemental Indenture).

   DEFINITIONS.  The  term  "Capitalization"  shall  mean  the  total of all the
following  items appearing on, or included in, the balance sheet of the Company:
(i) liabilities for  indebtedness  maturing more than 12 months from the date of
determination; and (ii) common stock, preferred stock, premium on capital stock,
capital surplus, capital in excess of par value, and retained earnings, less, to
the extent not  otherwise  deducted,  the cost of shares of capital stock of the
Company held in its treasury.

   The term "Net Tangible Assets" shall mean the amount shown as total assets on
the  consolidated  balance  sheet  of  the  Company,  less  the  following:  (i)
intangible assets  including,  but without  limitation,  such items as goodwill,
trademarks,  trade names,  patents and unamortized debt discount and expense and
other  regulatory  assets  carried as an asset on said balance  sheet;  and (ii)
appropriate adjustments, if any, on account of minority interests.

   The term  "Operating  Property"  shall mean (i) any interest in real property
owned by the Company and (ii) any asset owned by the Company that is depreciable
in accordance with generally accepted accounting principles.

   The term "Sale and Lease-Back  Transaction"  shall mean any arrangement  with
any person  providing for the leasing to the Company of any  Operating  Property
(except for leases for a term,  including any renewal thereof,  of not more than
48 months), which Operating Property has been or is to be sold or transferred by
the Company to such person.

   The  term  "Value"  shall  mean,  with  respect  to  a  Sale  and  Lease-Back
Transaction,  as of any particular  time, the amount equal to the greater of (i)
the net proceeds to the Company from the sale or transfer of the property leased
pursuant to such Sale and  Lease-Back  Transaction or (ii) the net book value of
such property,  as determined in accordance with generally  accepted  accounting
principles by the Company at the time of entering into such Sale and  Lease-Back
Transaction,  in either case  multiplied  by a fraction,  the numerator of which
shall be equal to the number of full years of the term of the lease that is part
of such Sale and Lease-Back  Transaction  remaining at the time of determination
and the  denominator of which shall be equal to the number of full years of such
term, without regard, in any case, to any renewal or extension options contained
in such lease.

DEFEASANCE

   The provisions  described in the  accompanying  Prospectus  under the caption
"Description of Senior Notes -- Defeasance and Covenant Defeasance" are
applicable to the Offered Notes.
                                       S-5

                                  UNDERWRITING

   The  Underwriters  named below have  severally  agreed to  purchase  from the
Company the following respective principal amounts of Offered Notes:

                                          PRINCIPAL
       UNDERWRITER                         AMOUNT
       -----------                      ------------

CS First Boston Corporation .           $ 34,000,000
Salomon Brothers Inc ........             33,000,000
PaineWebber Incorporated  ...             33,000,000
                                        ------------
Total .......................           $100,000,000
                                        ============

   The Distribution  Agreement provides that the obligations of the Underwriters
are subject to certain conditions  precedent,  and that the Underwriters will be
obligated to purchase all of the Offered Notes if any are purchased.

   The Company has been advised by the several Underwriters that they propose to
offer the Offered Notes to the public initially at the public offering price set
forth on the cover page of this Prospectus  Supplement and to certain dealers at
such price less a concession  not in excess of .400% of the principal  amount of
the Offered Notes. The  Underwriters may allow, and such dealers may reallow,  a
discount not in excess of .250% of the principal  amount of the Offered Notes to
certain other dealers.  After the initial public  offering,  the public offering
price, concession and discount may be changed.

   The Offered Notes are a new issue of securities  with no established  trading
market.  The Company has been  advised by the  Underwriters  that they intend to
make a market  in the  Offered  Notes,  but are not  obligated  to do so and may
discontinue  market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Offered Notes.

   Certain  of  the  Underwriters  have  provided  various   investment  banking
services,  including  serving as  commercial  paper  dealers under the Company's
commercial  paper program,  to the Company and its affiliates from time to time,
for which they have received customary compensation. In addition, certain of the
Underwriters have provided various  investment banking services to Pinnacle West
Capital  Corporation,  the Company's  parent,  from time to time, for which they
have received customary compensation.

   The  Company  has  agreed  to  indemnify  the  Underwriters  against  certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
                                       S-6

                                  $175,000,000

                         ARIZONA PUBLIC SERVICE COMPANY

                              FIRST MORTGAGE BONDS
                                  SENIOR NOTES
                                 DEBT SECURITIES

                                   ----------

   Arizona Public Service Company (the  "Company")  intends from time to time to
issue up to $175,000,000  aggregate principal amount of its first mortgage bonds
(the "New  Bonds"),  senior  notes  (the  "Senior  Notes"),  or  unsecured  debt
securities ("Debt Securities") of the Company (collectively,  the "Securities"),
in one or more  series at prices  and on terms to be  determined  at the time of
sale.

   For each issue of Securities  for which this  Prospectus  is being  delivered
(the  "Offered  Bonds,"  the  "Offered  Senior  Notes,"  or  the  "Offered  Debt
Securities"  and,  collectively,  the  "Offered  Securities"),  there will be an
accompanying  Prospectus  Supplement  (the  "Prospectus  Supplement")  that sets
forth,   without  limitation  and  to  the  extent   applicable,   the  specific
designation,  aggregate principal amount,  denomination,  maturity,  premium, if
any, rate of interest  (which may be fixed or variable) or method of calculation
thereof, time of payment of interest, any terms for redemption, any sinking fund
provisions, any subordination provisions, the initial public offering price, the
names of any  underwriters  or agents,  the  principal  amounts,  if any,  to be
purchased by the underwriters,  the compensation of such underwriters or agents,
and any other special terms of the Offered Securities. The Prospectus Supplement
relating  to any  series of Offered  Securities  will also  contain  information
concerning  certain  United  States  federal  income  tax   considerations,   if
applicable to the Offered Securities.

   The Company may sell Securities directly to purchasers or through agents
designated from time to time by the Company or to or through underwriters or
a group of underwriters which may be managed by one or more underwriters. If
any agents of the Company or any underwriters are involved in the sale of
Securities in respect of which this Prospectus is being delivered, the names
of such agents or underwriters and any applicable commission or discount will
be set forth in the applicable Prospectus Supplement. The net proceeds to the
Company from the sale of Securities will be the public offering price of such
Securities less such discount, in the case of an offering through an
underwriter, or the purchase price of such Securities less such commission,
in the case of an offering through an agent, and less, in each case, other
expenses of the Company associated with the issuance and distribution of such
Securities.
                                   ----------


  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
       EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
           SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
             COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
               PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                                CRIMINAL OFFENSE.
                                   ----------

                     The date of this Prospectus is 19, 1996.

                              AVAILABLE INFORMATION

   Arizona   Public   Service   Company  (the   "Company")  is  subject  to  the
informational  requirements  of the Securities  Exchange Act of 1934, as amended
(the "1934 Act"), and in accordance  therewith files reports,  proxy statements,
and  other  information  with  the  Securities  and  Exchange   Commission  (the
"Commission").  Such reports,  proxy  statements,  and other  information can be
obtained at prescribed rates from the Public Reference Section of the Commission
or may be inspected and copied at the public reference facilities  maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington,  D.C. 20549 and
at certain of its regional  offices  located at 500 West Madison  Street,  Suite
1400,  Chicago,  Illinois 60661;  and Seven World Trade Center,  Suite 1300, New
York, New York 10048. In addition,  such material may be accessed electronically
by means of the  Commission's  Web Site on the  Internet at  http://www.sec.gov.
Certain  securities  of the Company  are listed on the New York Stock  Exchange.
Reports,  proxy materials,  and other information  concerning the Company can be
inspected  at the office of this  exchange at 20 Broad  Street,  7th Floor,  New
York, New York 10005.
                                   ----------

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   The following  documents  previously filed with the Commission by the Company
(File No. 1-4473) are incorporated by reference in this Prospectus:

   1. The Company's Form 10-K Report for the fiscal year ended December 31, 1995
(the "1995 10-K Report");

   2. The Company's  Form 10-Q Reports for the fiscal  quarters  ended March 31,
June 30 and September 30 ("the September 10-Q Report"), 1996; and

   3. The Company's Form 8-K Report dated August 28, 1996. 

   All documents filed by the Company pursuant to Sections 13(a),  13(c), 14, or
15(d) of the 1934 Act after the filing  date of the  September  10-Q  Report and
prior to the termination of the offering of the securities  offered hereby shall
be deemed to be  incorporated  by reference in this  Prospectus and to be a part
hereof from the date of filing of such documents.

   Any statement contained in a document  incorporated by reference herein shall
be deemed to be modified or  superseded  for purposes of this  Prospectus to the
extent  that a statement  contained  herein or in any other  subsequently  filed
document which is also  incorporated by reference  herein modifies or supersedes
such  statement.  Any statement so modified or  superseded  shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.

   The  Company  will  provide  without  charge to each  person,  including  any
beneficial owner, to whom a copy of this Prospectus is delivered,  upon the oral
or  written  request  of  such  person,  a copy  of any or all of the  documents
referred to above which have been or may be  incorporated  in this Prospectus by
reference, other than exhibits to such documents. Request for such copies should
be directed to Arizona Public Service Company, Office of the Secretary,  Station
9068, P.O. Box 53999, Phoenix, Arizona 85072-3999, (602) 250-3252.
                                        2

- --------------------------------------------------------------------------------
                             SELECTED INFORMATION

   The  following  material is  qualified  in its  entirety by  reference to the
detailed information and financial statements  incorporated by reference in this
Prospectus.

                                  THE OFFERING


Securities Offered .....................  Up to $175,000,000 of any  combination
                                          of First Mortgage Bonds, Senior Notes,
                                          and Debt Securities.
Application of  Proceeds................  Except as otherwise  described in  the
                                          Prospectus    Supplement,    the   net
                                          proceeds  of  the  Offered  Securities
                                          will  be  applied   primarily  to  the
                                          redemption,  repurchase, repayment, or
                                          retirement       of        outstanding
                                          indebtedness, and temporary investment
                                          pending such application.

                                  THE COMPANY

Business ...............................  Electric        utility      servicing
                                          approximately 705,000  customers in an
                                          area that includes  all  or part of 11
                                          of Arizona's 15 counties.
Generating Fuel Mix (estimated for the
 twelve months ended September 30, 
 1996)..................................  Coal--43%;               Nuclear--33%;
                                          Purchases--22%; Other--2%.

FINANCIAL DATA (THOUSANDS OF DOLLARS):



                                                   TWELVE MONTHS ENDED
                                    --------------------------------------------------
                                                              DECEMBER 31,
                                                  ------------------------------------
                                    SEPTEMBER 30,
                                       1996(1)       1995         1994         1993
                                    ------------  ----------   ----------   ----------
                                                                       
Electric Operating Revenues ......   $1,687,542   $1,614,952   $1,626,168   $1,602,413
                                     ==========   ==========   ==========   ==========
Net Income .......................   $  264,471   $  239,570   $  243,486   $  250,386
                                     ==========   ==========   ==========   ==========
Ratio of Earnings to Fixed Charges         3.01         2.77         2.96         2.99


CAPITALIZATION DATA (THOUSANDS OF DOLLARS):


                                         AS OF
                                  SEPTEMBER 30, 1996   PERCENTAGE
                                  ------------------   ----------

Total Debt (including current         $2,212,650           53.1%
 maturities)
Redeemable Preferred Stock ...            53,000            1.3
Non-Redeemable Preferred Stock           170,391            4.1
Common Stock Equity ..........         1,726,644           41.5
                                      ----------        -------
Total Capitalization .........        $4,162,685          100.0%
                                      ==========        =======

_______________

(1) Financial  information as of and for the twelve months ended  September  30,
    1996 is unaudited but, in the judgment of the Company's management, contains
    all necessary  adjustments for a fair presentation of the financial position
    of the Company on such date and the results of operations for such period.

(2) It is  assumed  that the net  proceeds  from  the  issuance  of the  Offered
    Securities  will  be used  for the  redemption,  repurchase,  repayment,  or
    retirement of a similar amount of outstanding long-term debt.
                                        3

                                   THE COMPANY

   The  Company  was  incorporated  in 1920  under  the laws of  Arizona  and is
principally  engaged  in  providing  electricity  in the State of  Arizona.  The
principal  executive  offices of the  Company  are  located  at 400 North  Fifth
Street, Phoenix, Arizona 85004 and its telephone number is (602) 250-1000.

                             APPLICATION OF PROCEEDS

   Except as otherwise described in the Prospectus Supplement,  the net proceeds
of  the  Offered  Securities  will  be  applied  primarily  to  the  redemption,
repurchase,  repayment, or retirement of outstanding indebtedness.  Any proceeds
not  immediately so applied when received may be invested  temporarily,  pending
such application, in United States government or agency obligations,  commercial
paper, bank certificates of deposit, or repurchase agreements  collateralized by
United States government or agency obligations, or will be deposited with banks.

                                 EARNINGS RATIOS

   The following table sets forth the Company's  historical ratio of earnings to
fixed charges for each of the indicated periods:



                               TWELVE MONTHS ENDED
- --------------------------------------------------------------------------------
 SEPTEMBER 30,                                DECEMBER 31,
                ----------------------------------------------------------------
     1996        1995         1994           1993           1992           1991
- ---------------  ----         ----           ----           ----           ----
      3.01       2.77         2.96           2.99           2.73            (1)

_______________
(1) A write-off  resulting from a December 1991 Arizona  Corporation  Commission
    ("ACC") order  settling the Company's  then-pending  rate case resulted in a
    negative coverage ratio and an earnings coverage deficiency of approximately
    $317 million for the twelve  months ended  December 31, 1991.  Excluding the
    effects of the  write-off,  the coverage  ratio would have been 2.11 for the
    same period.

   For the purposes of these computations,  "earnings" are defined as the sum of
pre-tax  income plus fixed charges of the Company and its  subsidiaries;  "fixed
charges"  consist of interest on debt,  amortization of debt discount,  premium,
and expense and an estimated interest factor in rentals.

                                   SECURITIES

   The  Securities  may be  issued in one or more  series as (i) first  mortgage
bonds ("New  Bonds"),  (ii) notes secured by New Bonds or, in the  circumstances
described under the caption  "Description  of Senior Notes -- Security;  Release
Date," as unsecured notes (such notes are herein referred to as "Senior Notes"),
or (iii)  unsecured  debt  securities  ("Debt  Securities").  From and after the
"Release Date" (as defined below),  any outstanding  Senior Notes secured by New
Bonds when issued will cease to be secured and will become unsecured obligations
of the Company. The New Bonds are described below under the caption "Description
of  New  Bonds,"  the  Senior  Notes  are  described  below  under  the  caption
"Description of Senior Notes," and the Debt Securities are described below under
the caption "Description of Debt Securities."

                            DESCRIPTION OF NEW BONDS

GENERAL

   The New Bonds may be issued in one or more new series  under the Mortgage and
Deed of Trust  dated as of July 1, 1946  between the Company and The Bank of New
York, as successor  Trustee ("Bond  Trustee"),  which as heretofore  amended and
supplemented is herein referred to as the "Mortgage," and which is to be further
amended  and  supplemented  by  appropriate   Supplemental   Indentures   ("Bond
Supplemental Indentures"). The following summary does not purport to be complete
and is subject in all  respects to the  provisions  of, and is  qualified in its
entirety by reference to, the Mortgage, the New Bonds,
                                        4

and the Bond Supplemental  Indentures,  the forms of which are filed, or will be
filed, as exhibits to the registration  statement of which this Prospectus forms
a part.  Whenever  particular  provisions or defined terms in such documents are
referred to herein or in a Prospectus  Supplement,  such  provisions  or defined
terms are incorporated by reference herein or therein, as the case may be.

   Reference is made to the  Prospectus  Supplement  relating to any  particular
issue of Offered Bonds for the  following  terms:  (1) the  aggregate  principal
amount of the Offered  Bonds;  (2) the date on which such Offered  Bonds mature;
(3) the rate per annum at which such Offered Bonds will bear  interest;  (4) the
times at which such interest will be payable;  (5) the date, if any, after which
such  Offered  Bonds  may be  redeemed  at the  option  of the  Company  and the
redemption  price;  (6)  whether any of such  Offered  Bonds will be issuable in
whole or in part in the form of one or more  Global  Securities  and, if so, the
Depositaries for such Global Securities, the form of any legend or legends to be
borne by any such Global Security,  and any  circumstances  under which any such
Global  Security  may be  exchanged  in  whole  or in part  for  Offered  Bonds,
registered  in the names of persons  other than the  Depositary  for such Global
Security or its nominee; and (7) any other special terms.  Interest will be paid
to the person in whose name the  Offered  Bonds are  registered  at the close of
business on the record date, as established in the Bond  Supplemental  Indenture
relating  thereto,  preceding the interest payment date in respect thereof.  The
New  Bonds  will be  issued  as fully  registered  bonds,  without  coupons,  in
denominations  of  $1,000  and  multiples   thereof.   The  New  Bonds  will  be
transferable  at any time without any service or other charge,  except  transfer
taxes and other governmental charges, if any.

   Except as otherwise described under the heading  "Description of New Bonds --
Issuance of Additional  Bonds" or in the  Prospectus  Supplement,  the covenants
contained in the Mortgage and the New Bonds would not afford  holders of the New
Bonds protection in the event of a  highly-leveraged  transaction  involving the
Company.

REDEMPTION

   The Offered Bonds are  redeemable as set forth in the  Prospectus  Supplement
relating thereto and, subject to any  qualifications  or variations set forth in
any such Prospectus Supplement,  are also subject to redemption, in each case at
the principal  amount of the Offered Bonds to be redeemed  together with accrued
interest  to the date  fixed  for  redemption,  (i) in whole or in part with the
proceeds from  mortgaged  property of the Company taken under eminent domain by,
or otherwise  sold to, a governmental  body or agency;  (ii) in whole or in part
with the  Proceeds of Released  Property,  including  proceeds  from the sale or
other disposition (including a sale and leaseback) of property released from the
lien of the  Mortgage  as  specified  in  section  (b) of the second to the last
paragraph under the heading  "Description of New Bonds -- Security"  below;  and
(iii) in whole, together with all other first mortgage bonds of the Company then
outstanding,  within  twelve  months of certain  mergers  or other  transactions
involving the transfer of substantially  all of the property subject to the lien
of the Mortgage,  as then amended. In addition,  after the date and at the price
set forth in the Prospectus  Supplement,  Offered Bonds may be redeemed in whole
or in part with cash deposited in the replacement fund discussed below.

SECURITY

   The New Bonds will rank pari passu,  except as to any sinking fund or similar
fund provided for a particular  series,  with all bonds at any time  outstanding
under  the  Mortgage.   The  Mortgage  constitutes  a  first  mortgage  lien  on
substantially  all the  fixed  property  owned by the  Company  (which  does not
include a combined cycle plant or certain  interests in Unit 2 of the Palo Verde
Nuclear  Generating  Station being  leased),  other than  property  specifically
excepted by the Mortgage.  Such lien and the  Company's  title to certain of its
properties  are  subject to Excepted  Encumbrances,  to minor  leases,  defects,
irregularities, and deficiencies, and to the considerations discussed below with
respect to the Four Corners and Navajo Plant locations. The lien of the Mortgage
will  also  extend  to all  after-acquired  property  (other  than the  excepted
classes)  located in the  jurisdictions  in which the necessary  recordations or
filings have been  accomplished,  subject to Excepted  Encumbrances and to liens
existing  or  placed  on such  property  at the time of its  acquisition  by the
Company.

   Both the Four Corners and the Navajo  Plants are located on property  held by
the plant participants under leases from the Navajo Tribe and easements from the
Secretary of the Interior. The leases extend
                                        5

from  their  respective  effective  dates in 1966 and 1969 for terms of 50 years
with rights of renewal for up to 25  additional  years.  The  easements  are for
50-year terms from the same effective  dates.  While the Company owns the rights
conferred upon it by the leases from the Navajo Tribe, the Company does not make
any representation with respect to the Tribe's interest in the lands leased (but
is not  aware of any  assertion  of a  contesting  claim to such  lands) or with
respect to the enforceability of the leases against the Tribe.

   The Mortgage requires the Company to keep the property  encumbered thereby as
an operating system or systems in good repair and working order, but permits the
permanent  discontinuance or reduction in capacity of any such properties which,
in the judgment of the Board of  Directors  of the Company,  is desirable in the
conduct of its business or which is ordered by a  regulatory  authority or which
properties are to be sold or disposed of by the Company.

   When not in default  under the  Mortgage,  the Company may obtain the release
from the lien thereof of (a) property that has become  unserviceable,  obsolete,
or unnecessary  for use in the Company's  operations,  provided that it replaces
such  property  with,  or  substitutes  for the  same,  an equal  value of other
property,  and (b) other  property that has been sold or otherwise  disposed of,
provided  that the Company  deposits  with the Bond  Trustee  cash in an amount,
waives  the  right  to issue  additional  bonds on the  basis of  retired  bonds
previously issued in an amount,  or utilizes as a credit net Property  Additions
acquired by the Company  within the preceding five years and having a fair value
(not more than Cost), equal to the fair value of the property to be released.

   The Bond  Trustee  may,  and upon  request of the Company  shall,  cancel and
discharge  the lien of the  Mortgage  and all  indentures  supplemental  thereto
whenever all indebtedness secured by the Mortgage has been paid.

ISSUANCE OF ADDITIONAL BONDS

   Additional bonds may be issued under the Mortgage in a principal amount equal
to (a) 60% of net  Property  Additions,  (b) the  principal  amount  of  certain
redeemed or retired bonds previously issued, and/or (c) deposited cash, provided
that the Company's Adjusted Net Earnings over a twelve-month period are at least
two times the annual interest on all bonds to be outstanding  under the Mortgage
after the issuance and on  indebtedness  secured by prior liens.  Exceptions  to
this  earnings  coverage  requirement  apply to  bonds  issued  on the  basis of
redeemed or retired bonds where the redeemed or retired bonds bore a higher rate
of interest and where certain other conditions are satisfied.  In addition,  the
Company's  articles  of  incorporation  allow the  Company  to issue  additional
preferred stock when certain earnings coverage  requirements are met. Exceptions
to this earnings  coverage  requirement  apply to preferred stock issued for the
purpose of redeeming or retiring other preferred stock.

   As of September  30, 1996,  the Company  estimates  that the Mortgage and the
articles  of  incorporation  would  have  allowed  the  Company  to  issue up to
approximately  $1.7 billion and $1.4 billion of additional  first mortgage bonds
and preferred stock, respectively.

   In  addition  to the  Mortgage  restrictions  on the  Company's  issuance  of
additional  bonds,  the Company must obtain ACC approval  before  issuing equity
securities or incurring long-term debt. Existing ACC orders allow the Company to
have  approximately  $501 million in aggregate par value of preferred  stock and
approximately  $2.6 billion in principal amount of long-term debt outstanding at
any one time. The Company does not expect these provisions or  authorizations to
limit the Company's ability to meet its capital requirements.

   Property Additions,  and in many instances redeemed or retired bonds, as well
as  deposited  cash,  may be used for  certain  alternative  purposes  under the
Mortgage,  including  the  release  of  property  from the lien  thereof  or the
satisfaction of sinking or replacement fund requirements.  The Mortgage contains
restrictions  on the  issuance  of bonds,  withdrawal  of cash,  or  release  of
property on the basis of property  subject to prior liens.  Property  located on
leaseholds or easements  (as, for example,  the Four Corners and Navajo  Plants)
will constitute  fundable Property Additions if the leasehold or easement has an
unexpired  term of, or the term is extendable  at the  Company's  option for, at
least 30 years after the time of funding,  or if the  property may be removed by
the Company without compensation.
                                        6

REPLACEMENT FUND

   So long as any of the New Bonds are outstanding,  the Company is required for
each  calendar  year to deposit  with the Bond  Trustee  cash in a  formularized
amount  related to net  additions  to the  Company's  mortgaged  utility  plant;
however, the Company may satisfy all or any part of the requirement by utilizing
redeemed or retired bonds, net Property Additions, or property retirements.  For
1995, such requirement amounted to approximately $128 million. Any cash that may
be deposited by the Company pursuant to the requirement may, upon request by the
Company, be applied to the redemption or purchase of bonds and, if not withdrawn
against  Property  Additions  or retired  bonds  within five  years,  must be so
applied,  subject in each case to any  restrictions  on any such  redemption  or
purchase  as set forth in the  Prospectus  Supplement  relating  to the issue of
bonds to be redeemed or purchased.

EVENTS OF DEFAULT

   The  following  are  defaults  under the  Mortgage:  (a)  failure  to pay the
principal of any bond outstanding  under the Mortgage when due and payable;  (b)
failure to pay interest on any bond  outstanding  under the  Mortgage  within 60
days after the same is due and payable;  (c) failure to pay any  installment  of
any  fund  required  to be  applied  to the  purchase  or  redemption  of  bonds
outstanding under the Mortgage within 60 days after the same is due and payable;
(d) certain events in bankruptcy, insolvency, or reorganization; and (e) failure
to perform  any other  covenant  of the  Mortgage  continuing  for 90 days after
notice by the Bond  Trustee or holders of 15% in  principal  amount of  Eligible
bonds.  The  Mortgage  allows  the Bond  Trustee to  withhold  notice of certain
defaults,  not including any default in the payment of principal of, or interest
on,  any  bond  outstanding,  or in the  payment  of any  sinking,  improvement,
replacement,  or purchase fund installment,  if it in good faith determines that
the withholding of such notice is in the interests of the bondholders.

   The holders of not less than a majority in principal amount of Eligible bonds
may direct the time,  method,  and place of conducting  any  proceeding  for any
remedy available to the Bond Trustee under the Mortgage; provided, however, that
the   Trustee  may  decline  to  follow  any  such   direction   under   certain
circumstances,  including a determination made in good faith by the Bond Trustee
that it will not be sufficiently indemnified for any expenditures, including its
own charges, in any action or proceeding so directed. The Company is required to
file with the Bond Trustee,  on or before July 1 of each year, a certificate  to
the effect that,  except as otherwise  stated therein,  the Company has complied
with  all of the  provisions  of  the  Mortgage  and  is  not  then  in  default
thereunder.

MODIFICATION OF THE MORTGAGE

   The Mortgage and the rights of  bondholders  may be modified with the consent
of the  Company,  and of the Bond  Trustee if deemed  affected,  and the vote or
assent of the holders of not less than 70% in  principal  amount of the Eligible
bonds, and of not less than 70% in principal amount of the Eligible bonds of any
one or more series  (less than all)  affected by any such  modification;  except
that the  bondholders,  without the consent of the holder of each bond affected,
have no power to (a) reduce the principal  thereof,  or the premium,  if any, or
rate of interest  thereon or otherwise modify the terms of payment of principal,
premium,  or  interest,  or extend the  maturity  of any  bonds,  (b) permit the
creation  of any  lien  ranking  prior  to or on a  parity  with the lien of the
Mortgage  with  respect  to any of  the  mortgaged  property,  (c)  deprive  any
nonassenting  bondholder of a lien upon the mortgaged  property for the security
of his or her bonds,  or (d) reduce the percentage of bondholders  authorized to
effect any such modification.

GLOBAL SECURITIES

   Some or all of the New Bonds of any series may be represented, in whole or in
part, by one or more "Global  Securities" which will have an aggregate principal
amount equal to that of the New Bonds represented thereby.  Each Global Security
will be registered in the name of a depositary or a nominee  thereof  identified
in the applicable Prospectus Supplement,  will be deposited with such depositary
or  nominee  or a  custodian  therefor  and  will  bear a legend  regarding  the
restrictions on exchanges and registration of transfer thereof referred to below
and any such other  matters as may be provided  for  pursuant to the  applicable
Bond Supplemental Indenture.
                                        7

   Notwithstanding  any  provision  of the  Mortgage  or any New Bond  described
herein,  no Global  Security  may be exchanged in whole or in part for New Bonds
registered,  and no  transfer  of a Global  Security  in whole or in part may be
registered,  in the name of any person other than the depositary for such Global
Security  or any  nominee  of such  depositary  unless  (i) the  depositary  has
notified the Company  that it is  unwilling or unable to continue as  depositary
for  such  Global  Security  or has  ceased  to be  qualified  to act as such as
required by the  Mortgage,  (ii) there shall have  occurred and be  continuing a
default with  respect to the New Bonds  represented  by such Global  Security or
(iii) there shall exist such circumstances, if any, in addition to or in lieu of
those described  above as may be described in the applicable  Bond  Supplemental
Indenture and Prospectus  Supplement.  All  securities  issued in exchange for a
Global  Security or any portion  thereof will be registered in such names as the
depositary may direct.

   As long as the  depositary,  or its nominee,  is the  registered  holder of a
Global  Security,  the  depositary or such nominee,  as the case may be, will be
considered  the sole owner and holder of such Global  Security and the New Bonds
represented  thereby  for all  purposes  under the New  Bonds and the  Mortgage.
Except in the  limited  circumstances  referred to above,  owners of  beneficial
interests in a Global Security will not be entitled to have such Global Security
or any New Bonds represented thereby registered in their names, will not receive
or be  entitled  to  receive  physical  delivery  of  certificated  New Bonds in
exchange therefor and will not be considered to be the owners or holders of such
Global Security or any New Bonds  represented  thereby for any purpose under the
New Bonds or the  Mortgage.  All  payments of  principal  of and any premium and
interest on a Global Security will be made to the depositary or its nominee,  as
the case may be, as the holder thereof.  The laws of some jurisdictions  require
that certain  purchasers of securities take physical delivery of such securities
in  definitive  form.  These laws may impair the ability to transfer  beneficial
interests in a Global Security.

   Ownership of  beneficial  interests in a Global  Security  will be limited to
institutions   that  have   accounts   with  the   depositary   or  its  nominee
("participants")  and to  persons  that may hold  beneficial  interests  through
participants.  In  connection  with the  issuance  of any Global  Security,  the
depositary will credit, on its book-entry  registration and transfer system, the
respective  principal amounts of New Bonds represented by the Global Security to
the accounts of its participants.  Ownership of beneficial interests in a Global
Security  will be shown only on, and the transfer of those  ownership  interests
will be effected  only  through,  records  maintained  by the  depositary  (with
respect to  participants'  interests) or any such  participant  (with respect to
interests  of persons  held by such  participants  on their  behalf).  Payments,
transfers,  exchanges,  and other matters relating to beneficial  interests in a
Global Security may be subject to various policies and procedures adopted by the
depositary from time to time. None of the Company, the Bond Trustee or any agent
of the Company or the Bond Trustee will have any responsibility or liability for
any aspect of the depositary's or any participant's  records relating to, or for
payments made on account of, beneficial  interests in a Global Security,  or for
maintaining,  supervising,  or reviewing any records relating to such beneficial
interests.

OTHER

   The  Mortgage  restricts  the  payment of  dividends  on common  stock of the
Company under certain  conditions  which have not existed in the past and do not
currently exist.

   The Bond Trustee,  security registrar, and paying agent under the Mortgage is
The Bank of New York. The Company maintains normal banking arrangements with The
Bank of New York, which includes (i) two commitments in the aggregate  principal
amount  of  approximately  $35.7  million  by The Bank of New York  pursuant  to
reimbursement  agreements  related to letters of credit  issued on behalf of the
Company in connection with issuances of pollution control bonds, the proceeds of
which were made available to the Company,  and (ii) a $25 million  commitment by
The Bank of New York pursuant to a revolving credit agreement, $0 and $6 million
of which, respectively,  were outstanding at September 30, 1996. The Bank of New
York also serves as (i) trustee for the holders of several  issues of  pollution
control bonds issued on behalf of the Company,  (ii) trustee under the Indenture
relating  to  the  subordinated   Debt  Securities  (see  "Description  of  Debt
Securities"  below),  (iii) trustee under the Senior Note  Indenture (as defined
below),  (iv)  investment  manager for the  Company's  nonunion  post-retirement
medical fund,  and (v) custodian of  international  fixed-income  assets for the
Company's pension plan.
                                        8

                           DESCRIPTION OF SENIOR NOTES

GENERAL

   The Senior  Notes may be issued in one or more new series  under an Indenture
(the "Senior Note  Indenture")  between the Company and The Bank of New York, or
any other  trustee to be named,  as Trustee  (the "Senior  Note  Trustee").  The
following summary does not purport to be complete and is subject in all respects
to the  provisions  of, and is qualified  in its  entirety by reference  to, the
Senior Note Indenture pursuant to which the Senior Notes are to be issued and to
the Senior Notes, the forms of which are filed, or will be filed, as exhibits to
the  registration  statement  of which this  Prospectus  forms a part.  Whenever
particular provisions or defined terms in the Senior Note Indenture are referred
to  herein  or  in  a  Prospectus  Supplement,  such  provisions  or  terms  are
incorporated by reference herein or therein, as the case may be.

   Until the Release Date (as defined  below),  the Senior Notes will be secured
by one or more series of New Bonds  ("Senior  Note Mortgage  Bonds")  issued and
delivered by the Company to the Senior Note Trustee.  See "Description of Senior
Notes -- Security;  Release  Date." On the Release  Date,  the Senior Notes will
cease to be  secured  by Senior  Note  Mortgage  Bonds,  will  become  unsecured
obligations  of the  Company,  and will rank on a parity  with  other  unsecured
senior indebtedness of the Company, including senior Debt Securities. The Senior
Note Indenture  provides  that, in addition to the Senior Notes offered  hereby,
additional  Senior  Notes may be issued  thereunder,  without  limitation  as to
aggregate principal amount, provided that, prior to the Release Date, the amount
of Senior Notes that may be issued  cannot  exceed the amount of first  mortgage
bonds that the Company is able to issue under its Mortgage.  See "Description of
New Bonds -- Issuance of Additional Bonds."

   Reference is made to the  Prospectus  Supplement  relating to any  particular
issue of Offered  Senior Notes for the  following  terms:  (1) the title of such
Senior  Notes;  (2) any limit on the aggregate  principal  amount of such Senior
Notes or the series of which they are a part; (3) the date or dates on which the
principal of any of such Senior Notes will be payable;  (4) the rate or rates at
which any of such Senior  Notes will bear  interest,  if any,  the date or dates
from which any such  interest will accrue,  the Interest  Payment Dates on which
any such  interest  will be payable  and the  Regular  Record  Date for any such
interest payable on any Interest Payment Date; (5) the place or places where the
principal  of and any premium and  interest on any of such Senior  Notes will be
payable if other than as described under  "Description of Senior Notes - Payment
and Paying Agents";  (6) the period or periods within which, the price or prices
at which and the terms and  conditions  on which any of such Senior Notes may be
redeemed, in whole or in part, at the option of the Company; (7) the obligation,
if any, of the Company to redeem or purchase any of such Senior  Notes  pursuant
to any  sinking  fund or  analogous  provision  or at the  option of the  Holder
thereof,  and the period or periods  within which,  the price or prices at which
and the terms and  conditions on which any of such Senior Notes will be redeemed
or  purchased,  in whole or in part,  pursuant to any such  obligation;  (8) the
denominations in which any of such Senior Notes will be issuable,  if other than
denominations of $1,000 and any integral multiple thereof;  (9) if the amount of
principal  of or any  premium or  interest  on any of such  Senior  Notes may be
determined  with  reference to an index or pursuant to a formula,  the manner in
which such  amounts will be  determined;  (10) if other than the currency of the
United States of America, the currency,  currencies,  or currency units in which
the  principal of or any premium or interest on any of such Senior Notes will be
payable and the manner of determining the equivalent  thereof in the currency of
the  United  States of  America  for any  purpose,  including  for  purposes  of
determining  the principal  amount deemed to be Outstanding at any time; (11) if
the principal of or any premium or interest on any of such Senior Notes is to be
payable,  at the election of the Company or the Holder  thereof,  in one or more
currencies,  or currency  units other than those in which such Senior  Notes are
stated to be  payable,  the  currency,  currencies  or  currency  units in which
payment of any such  amount as to which such  election  is made will be payable,
the periods within which and the terms and  conditions  upon which such election
is to be made and the amount so payable  (or the manner in which such  amount is
to be determined);  (12) if other than the entire principal amount thereof,  the
portion  of the  principal  amount of any of such  Senior  Notes  which  will be
payable upon  declaration of acceleration of the Maturity  thereof;  (13) if the
principal amount payable at the Stated Maturity of any of such Senior Notes will
not be determinable as of any one or more dates prior to the
                                        9

Stated Maturity,  the amount which will be deemed to be such principal amount as
of any such date for any purpose,  including the principal  amount thereof which
will be due and  payable  upon any  Maturity  other than the Stated  Maturity or
which  will be deemed  to be  Outstanding  as of any such date (or,  in any such
case,  the manner in which such deemed  principal  amount is to be  determined);
(14) if applicable,  that such Senior Notes, in whole or any specified part, are
defeasible  pursuant to the  provisions of the Senior Note  Indenture  described
under  "Description  of Senior Notes --  Defeasance  and Covenant  Defeasance --
Defeasance  and  Discharge" or  "Description  of Senior Notes -- Defeasance  and
Covenant Defeasance -- Covenant  Defeasance," or under both such captions;  (15)
whether  any of such  Senior  Notes will be  issuable in whole or in part in the
form of one or more Global  Securities  and, if so, the respective  Depositaries
for such Global Securities, the form of any legend or legends to be borne by any
such Global  Security in addition to or in lieu of the legend  referred to under
"Description of Senior Notes -- Global  Securities" and, if different from those
described  under such  caption,  any  circumstances  under which any such Global
Security may be exchanged in whole or in part for Senior Notes  registered,  and
any transfer of such Global  Security in whole or in part may be registered,  in
the names of Persons other than the Depositary  for such Global  Security or its
nominee;  (16) if any of such Senior Notes are to be issued prior to the Release
Date,  the  designation  of the  series  of  Senior  Note  Mortgage  Bonds to be
delivered to the Senior Note Trustee as security for such Senior Notes; (17) any
addition to or change in the Events of Default  applicable to any of such Senior
Notes and any change in the right of the  Trustee or the  Holders to declare the
principal amount of any of such Senior Notes due and payable;  (18) any addition
to or change in the covenants in the Senior Note  Indenture;  and (19) any other
terms of such Senior Notes not  inconsistent  with the  provisions of the Senior
Note Indenture. (Section 301).

   Senior Notes,  including  Original  Issue  Discount  Notes,  may be sold at a
substantial discount below their principal amount. Certain special United States
federal income tax considerations (if any) applicable to Senior Notes sold at an
original  issue   discount  may  be  described  in  the  applicable   Prospectus
Supplement.  In addition,  certain  special  United States federal income tax or
other  considerations  (if  any)  applicable  to  any  Senior  Notes  which  are
denominated  in a currency or currency unit other than United States dollars may
be described in the applicable Prospectus Supplement.

   Except as otherwise  described in the  Prospectus  Supplement,  the covenants
contained in the Senior Note Indenture  would not afford holders of Senior Notes
protection  in the  event  of a  highly-  leveraged  transaction  involving  the
Company.

FORM, EXCHANGE, AND TRANSFER

   The Senior  Notes of each series will be  issuable  only in fully  registered
form  without  coupons  and,  unless  otherwise   specified  in  the  applicable
Prospectus  Supplement,  in  denominations  of $1,000 and any integral  multiple
thereof. (Section 302).

   At the  option  of the  Holder,  subject  to the  terms  of the  Senior  Note
Indenture and the limitations  applicable to Global Securities,  Senior Notes of
any series will be  exchangeable  for other Senior Notes of the same series,  of
any authorized  denomination and of like tenor and aggregate  principal  amount.
(Section 305).

   Subject  to the  terms  of the  Senior  Note  Indenture  and the  limitations
applicable to Global  Securities,  Senior Notes may be presented for exchange as
provided above or for  registration  of transfer (duly endorsed or with the form
of transfer  endorsed thereon duly executed) at the office of the Note Registrar
or at the  office of any  transfer  agent  designated  by the  Company  for such
purpose.  No service  charge  will be made for any  registration  of transfer or
exchange  of  Senior  Notes,  but  the  Company  may  require  payment  of a sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith. Such transfer or exchange will be effected upon the Note Registrar or
such transfer  agent,  as the case may be, being satisfied with the documents of
title and identity of the person  making the request.  The Company has appointed
the Senior Note Trustee as Note  Registrar.  Any transfer  agent (in addition to
the Note  Registrar)  initially  designated  by the Company for any Senior Notes
will be  named in the  applicable  Prospectus  Supplement.  (Section  305).  The
Company  may at any time  designate  additional  transfer  agents or rescind the
designation of any transfer agent or approve a change in the
                                       10

office  through which any transfer  agent acts,  except that the Company will be
required  to  maintain a transfer  agent in each Place of Payment for the Senior
Notes of each series. (Section 1102).

   If the Senior Notes of any series (or of any series and specified  tenor) are
to be  redeemed,  the Company  will not be required to (i) issue,  register  the
transfer  of, or exchange  any Senior Note of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
Senior  Note that may be  selected  for  redemption  and  ending at the close of
business on the day of such mailing or (ii) register the transfer of or exchange
any Senior  Note so selected  for  redemption,  in whole or in part,  except the
unredeemed  portion of any such  Senior Note being  redeemed  in part.  (Section
305).

GLOBAL NOTES

   Some or all of the Senior Notes of any series may be represented, in whole or
in part,  by one or more  Global  Notes which will have an  aggregate  principal
amount equal to that of the Senior Notes represented  thereby.  Each Global Note
will be registered in the name of a Depositary or a nominee  thereof  identified
in the applicable Prospectus Supplement,  will be deposited with such Depositary
or  nominee  or a  custodian  therefor  and  will  bear a legend  regarding  the
restrictions on exchanges and registration of transfer thereof referred to below
and any such other  matters as may be provided  for  pursuant to the Senior Note
Indenture.

   Notwithstanding any provision of the Senior Note Indenture or any Senior Note
described herein, no Global Note may be exchanged in whole or in part for Senior
Notes  registered,  and no  transfer of a Global Note in whole or in part may be
registered,  in the name of any Person other than the Depositary for such Global
Note or any nominee of such  Depositary  unless (i) the  Depositary has notified
the Company that it is unwilling  or unable to continue as  Depositary  for such
Global  Note or has ceased to be  qualified  to act as such as  required  by the
Senior Note Indenture, (ii) there shall have occurred and be continuing an Event
of Default with respect to the Senior Notes  represented  by such Global Note or
(iii) there shall exist such circumstances, if any, in addition to or in lieu of
those  described  above  as  may  be  described  in  the  applicable  Prospectus
Supplement.  All securities  issued in exchange for a Global Note or any portion
thereof will be registered in such names as the Depositary may direct. (Sections
204 and 305).

   As long as the  Depositary,  or its nominee,  is the  registered  Holder of a
Global  Note,  the  Depositary  or such  nominee,  as the case  may be,  will be
considered  the sole owner and Holder of such Global  Note and the Senior  Notes
represented  thereby for all purposes under the Senior Notes and the Senior Note
Indenture.  Except in the limited  circumstances  referred  to above,  owners of
beneficial  interests  in a Global Note will not be entitled to have such Global
Note or any Senior Notes represented thereby registered in their names, will not
receive or be entitled to receive physical delivery of certificated Senior Notes
in exchange  therefor and will not be  considered to be the owners or Holders of
such Global Note or any Senior Notes  represented  thereby for any purpose under
the Senior Notes or the Senior Note Indenture.  All payments of principal of and
any premium and interest on a Global Note will be made to the  Depositary or its
nominee,  as  the  case  may  be,  as the  Holder  thereof.  The  laws  of  some
jurisdictions  require that  certain  purchasers  of  securities  take  physical
delivery  of such  securities  in  definitive  form.  These  laws may impair the
ability to transfer beneficial interests in a Global Note.

   Ownership  of  beneficial  interests  in a Global  Note  will be  limited  to
institutions   that  have   accounts   with  the   Depositary   or  its  nominee
("participants")  and to  persons  that may hold  beneficial  interests  through
participants. In connection with the issuance of any Global Note, the Depositary
will credit, on its book-entry  registration and transfer system, the respective
principal amounts of Senior Notes represented by the Global Note to the accounts
of its participants.  Ownership of beneficial interests in a Global Note will be
shown only on, and the transfer of those  ownership  interests  will be effected
only  through,   records   maintained  by  the   Depositary   (with  respect  to
participants'  interests) or any such participant  (with respect to interests of
persons  held  by such  participants  on  their  behalf).  Payments,  transfers,
exchanges,  and others matters relating to beneficial interests in a Global Note
may be subject to various policies and procedures adopted by the Depositary from
time to time. None of the Company, the Senior
                                       11

Note  Trustee or any agent of the Company or the Senior Note  Trustee  will have
any  responsibility  or  liability  for any  aspect of the  Depositary's  or any
participant's  records  relating  to,  or  for  payments  made  on  account  of,
beneficial  interests  in a Global Note,  or for  maintaining,  supervising,  or
reviewing any records relating to such beneficial interests.

PAYMENT AND PAYING AGENTS

   Unless otherwise indicated in the applicable Prospectus  Supplement,  payment
of interest on a Senior Note on any  Interest  Payment  Date will be made to the
Person in whose name such Senior Note (or one or more Predecessor  Senior Notes)
is  registered  at the close of  business  on the  Regular  Record Date for such
interest. (Section 307).

   Unless otherwise indicated in the applicable Prospectus Supplement, principal
of and any premium and interest on the Senior Notes of a particular  series will
be payable at the office of such  Paying  Agent or Paying  Agents as the Company
may designate  for such purpose from time to time,  except that at the option of
the Company  payment of any  interest may be made by check mailed to the address
of the Person  entitled  thereto as such address  appears in the Note  Register.
Unless  otherwise  indicated  in  the  applicable  Prospectus  Supplement,   the
corporate  trust  office of the Senior Note Trustee in The City of New York will
be designated  as the  Company's  sole Paying Agent for payments with respect to
Senior Notes of each series. Any other Paying Agents initially designated by the
Company  for the  Senior  Notes  of a  particular  series  will be  named in the
applicable  Prospectus  Supplement.  The  Company  may  at  any  time  designate
additional  Paying  Agents or rescind  the  designation  of any Paying  Agent or
approve a change in the office through which any Paying Agent acts,  except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Senior Notes of a particular series.
(Section 1102).

   All  moneys  paid by the  Company  to a Paying  Agent for the  payment of the
principal  of or any  premium or  interest  on any  Senior  Notes  which  remain
unclaimed at the end of two years after such principal,  premium or interest has
become due and  payable  will be repaid to the  Company,  and the Holder of such
Senior  Notes  thereafter  may look only to the  Company  for  payment  thereof.
(Section 1103).

CONSOLIDATION, MERGER, AND SALE OF ASSETS

   The  Company  may not  consolidate  with or merge  into any  other  Person or
convey,  transfer  or lease  its  properties  and  assets  "substantially  as an
entirety" to any Person,  and may not permit any Person to  consolidate  with or
merge into the Company or convey,  transfer,  or lease its properties and assets
substantially as an entirety to the Company, unless (a) the successor Person (if
any) is a corporation,  partnership, trust or other entity organized and validly
existing  under  the  laws of any  domestic  jurisdiction  and (i)  assumes  the
Company's  obligations on the Senior Notes and under the Senior Note  Indenture,
and (ii) if such consolidation,  merger,  conveyance,  transfer, or lease occurs
prior to the Release Date,  assumes the Company's  obligations  under the Senior
Note Mortgage Bonds and under the Mortgage;  (b) immediately after giving effect
to the  transaction,  no Event of Default,  and no event which,  after notice or
lapse of time or both, would become an Event of Default, shall have occurred and
be  continuing   and  (iii)  certain   other   conditions   are  met.  The  term
"substantially  as an  entirety"  means 50% or more of the  total  assets of the
Company as shown on the  Company's  consolidated  balance sheet as of the end of
the  calendar  year  immediately  preceding  the day of the year in  which  such
determination is made. (Section 901).

SECURITY; RELEASE DATE

   Until the Release Date (as defined  below),  the Senior Notes will be secured
by one or more series of Senior Note Mortgage  Bonds issued and delivered by the
Company to the Senior Note Trustee (see  "Description  of the New Bonds").  Upon
the issuance of a series of Senior Notes prior to the Release Date,  the Company
will  simultaneously  issue and deliver to the Senior Note Trustee,  as security
for such series of Senior  Notes,  a series of Senior Note  Mortgage  Bonds that
will have the same stated rate or rates of interest (or interest  calculated  in
the same manner), Interest Payment Dates, Stated Maturity and
                                       12

redemption provisions, and will be in the same aggregate principal amount as the
series of the Senior Notes being  issued.  (Sections  401-403).  Payments by the
Company to the Senior Note Trustee of principal  of,  premium and interest on, a
series of Senior Note Mortgage  Bonds will be applied by the Senior Note Trustee
to satisfy the Company's  obligations  with respect to principal of, premium and
interest on, the related  series of Senior Notes (Section 312). THE RELEASE DATE
WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS ("FIRST  MORTGAGE  BONDS") OF THE
COMPANY  ISSUED AND  OUTSTANDING  UNDER THE  MORTGAGE,  OTHER THAN  SENIOR  NOTE
MORTGAGE  BONDS,  HAVE BEEN RETIRED (AT,  BEFORE OR AFTER THE MATURITY  THEREOF)
THROUGH PAYMENT,  REDEMPTION, OR OTHERWISE. ON THE RELEASE DATE, THE SENIOR NOTE
TRUSTEE WILL DELIVER TO THE COMPANY FOR  CANCELLATION  ALL SENIOR NOTE  MORTGAGE
BONDS AND THE COMPANY  WILL CAUSE THE SENIOR NOTE  TRUSTEE TO PROVIDE  NOTICE TO
ALL HOLDERS OF SENIOR NOTES OF THE  OCCURRENCE OF THE RELEASE DATE. AS A RESULT,
ON THE RELEASE  DATE,  THE SENIOR NOTE  MORTGAGE  BONDS WILL CEASE TO SECURE THE
SENIOR NOTES, AND THE SENIOR NOTES WILL BECOME UNSECURED GENERAL  OBLIGATIONS OF
THE COMPANY.  (SECTION 407) SEE  "DESCRIPTION  OF SENIOR NOTES -- DEFEASANCE AND
COVENANT  DEFEASANCE -- DEFEASANCE  AND  DISCHARGE"  FOR A DISCUSSION OF ANOTHER
SITUATION IN WHICH OUTSTANDING  SENIOR NOTES WOULD NOT BE SECURED BY SENIOR NOTE
MORTGAGE  BONDS.  Each series of Senior Note Mortgage  Bonds will be a series of
New Bonds,  all of which are secured by a lien on certain  property owned by the
Company.  See  "Description of New Bonds -- Security." In certain  circumstances
prior to the Release  Date,  the Company is  permitted  to reduce the  aggregate
principal  amount of a series of Senior Note  Mortgage  Bonds held by the Senior
Note Trustee, but in no event to an amount lower than the aggregate  outstanding
principal   amount   of  the   series   of   Senior   Notes   initially   issued
contemporaneously with such Senior Note Mortgage Bonds. (Section 409). Following
the  Release  Date,  the  Company  will cause the  Mortgage to be closed and the
Company will not issue any  additional  First Mortgage Bonds under the Mortgage.
(Section  403) While the Company will be  precluded  after the Release Date from
issuing additional First Mortgage Bonds, the Company will not be precluded under
the Senior Note  Indenture or the Senior  Notes from  issuing or assuming  other
secured debt, or incurring liens on its property,  unless otherwise indicated in
the applicable Prospectus Supplement.

EVENTS OF DEFAULT

   Each of the  following  will  constitute an Event of Default under the Senior
Note  Indenture  with respect to Senior Notes of any series:  (a) failure to pay
principal  of or any  premium  on any  Senior  Note of  that  series  when  due,
continued for five days;  (b) failure to pay any interest on any Senior Notes of
that  series  when due,  continued  for sixty  days;  (c) failure to deposit any
sinking  fund  payment,  when due, in respect of any Senior Note of that series;
(d)  failure to perform  any other  covenant  of the  Company in the Senior Note
Indenture  (other than a covenant  included in the Senior Note Indenture  solely
for the benefit of a series other than that series), continued for 90 days after
written  notice has been given by the Senior Note  Trustee,  or the Holders of a
majority in principal amount of the Outstanding  Senior Notes of that series, as
provided  in the Senior  Note  Indenture;  (e) prior to the  Release  Date,  the
occurrence  of a Default under the Mortgage  (see  "Description  of the Bonds --
Events of Default"), of which the Trustee under the Mortgage, the Company or the
Holders of at least 25% in aggregate  principal amount of the outstanding Senior
Notes have given  written  notice  thereof to the Senior Note  Trustee;  and (f)
certain events in bankruptcy, insolvency or reorganization. (Section 601).

   If an Event of Default  (other than an Event of Default  described  in clause
(f)  above)  with  respect  to the  Senior  Notes  of  any  series  at the  time
Outstanding shall occur and be continuing, either the Senior Note Trustee or the
Holders of a majority in  principal  amount of the  Outstanding  Senior Notes of
that series by notice as provided in the Senior Note  Indenture  may declare the
principal  amount of the Senior  Notes of that  series  (or,  in the case of any
Senior Note that is an Original Issue  Discount Note or the principal  amount of
which is not then  determinable,  such portion of the  principal  amount of such
Senior Note, or such other amount in lieu of such  principal  amount,  as may be
specified in the terms of such Senior  Note) to be due and payable  immediately.
If an Event of Default  described in clause (f) above with respect to the Senior
Notes of any series at the time Outstanding shall occur, the principal amount of
all the Senior Notes of that series (or, in the case of any such Original  Issue
Discount Note or other Senior Note, such specified  amount) will  automatically,
and without any action by the Senior Note Trustee or any
                                       13

Holder,  become immediately due and payable.  After any such  acceleration,  but
before (i) a judgment or decree  based on  acceleration  or (ii) the Senior Note
Trustee's   receipt  from  the  Trustee  under  the  Mortgage  of  a  notice  of
acceleration  of Senior  Note First  Mortgage  Bonds such  acceleration  will be
automatically  waived and  rescinded  if all Events of  Default,  other than the
non-payment  of accelerated  principal (or other  specified  amount),  have been
cured or waived as provided in the Indenture.  (Section 602). For information as
to waiver of defaults, see "Modification and Waiver."

   Subject to the provisions of the Senior Note Indenture relating to the duties
of the  Senior  Note  Trustee  in case an Event of  Default  shall  occur and be
continuing,  the Senior Note Trustee will be under no obligation to exercise any
of its  rights or powers  under the  Senior  Note  Indenture  at the  request or
direction of any of the Holders,  unless such Holders  shall have offered to the
Senior  Note  Trustee  reasonable  indemnity.  (Section  703).  Subject  to such
provisions for the indemnification of the Senior Note Trustee,  the Holders of a
majority in principal amount of the Outstanding  Senior Notes of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Senior Note Trustee,  or exercising any trust or
power conferred on the Senior Note Trustee,  with respect to the Senior Notes of
that series. (Section 612).

   No Holder of a Senior Note of any series will have any right to institute any
proceeding with respect to the Senior Note Indenture,  or for the appointment of
a receiver or a trustee,  or for any other  remedy  thereunder,  unless (i) such
Holder has  previously  given to the Senior  Note  Trustee  written  notice of a
continuing  Event of Default  with  respect to the Senior  Notes of that series,
(ii)  the  Holders  of at  least  25%  in  aggregate  principal  amount  of  the
Outstanding  Senior  Notes of that series have made  written  request,  and such
Holder or Holders have offered reasonable indemnity,  to the Senior Note Trustee
to institute  such  proceeding  as trustee and (iii) the Senior Note Trustee has
failed to institute such proceeding,  and has not received from the Holders of a
majority in aggregate  principal amount of the Outstanding  Senior Notes of that
series a direction  inconsistent  with such  request,  within 60 days after such
notice, request and offer. (Section 607). However, such limitations do not apply
to a suit instituted by a Holder of a Senior Note for the enforcement of payment
of the  principal  of or any premium or interest on such Senior Note on or after
the applicable due date specified in such Senior Note. (Section 608).

   The Company  will be required to furnish to the Trustee  annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the  performance or observance of any of the terms,  provisions
and conditions of the Indenture and, if so,  specifying all such known defaults.
(Section 1104).

MODIFICATION AND WAIVER

   Modifications  and amendments of the Senior Note Indenture may be made by the
Company  and the  Senior  Note  Trustee  with the  consent  of the  Holders of a
majority in  principal  amount of the  Outstanding  Senior  Notes of each series
affected by such  modification  or amendment;  provided,  however,  that no such
modification  or  amendment  may,  without  the  consent  of the  Holder of each
Outstanding Senior Note affected thereby,  (a) change the Stated Maturity of the
principal of, or any instalment of principal of or interest on, any Senior Note,
(b) reduce the  principal  amount of, or any premium or interest  on, any Senior
Note,  (c) reduce the amount of principal of an Original  Issue Discount Note or
any other Senior Note payable upon  acceleration  of the Maturity  thereof,  (d)
change  the place or  currency  of payment of  principal  of, or any  premium or
interest  on, any Senior Note,  (e) impair the right to  institute  suit for the
enforcement  of any payment on or with respect to any Senior Note,  (f) prior to
the Release  Date,  (i) impair the  interest  of the Senior Note  Trustee in the
Senior Note Mortgage  Bonds,  (ii) reduce the principal  amount of any series of
Senior Note Mortgage  Bonds to an amount less than the  principal  amount of the
related  Series of Notes,  or (iii) alter the payment  provisions  of the Senior
Note  Mortgage  Bonds in a manner  adverse to the  Holders of the Notes,  or (g)
reduce the  percentage in principal  amount of  Outstanding  Senior Notes of any
series,  the consent of whose Holders is required for  modification or amendment
of the Senior Note  Indenture,  reduce the  percentage  in  principal  amount of
Outstanding  Senior Notes of any series  necessary for waiver of compliance with
certain  provisions  of the  Senior  Note  Indenture  or for  waiver of  certain
defaults or modify such  provisions  with  respect to  modification  and waiver.
(Section 1002).
                                       14

   The Holders of a majority in principal amount of the Outstanding Senior Notes
of any series may waive  compliance  by the  Company  with  certain  restrictive
provisions  of the Senior  Note  Indenture.  (Section  1108).  The  Holders of a
majority in principal  amount of the Outstanding  Senior Notes of any series may
waive any past default under the Senior Note Indenture,  except a default in the
payment of principal,  premium, or interest and certain covenants and provisions
of the Senior Note Indenture  which cannot be amended without the consent of the
Holder of each Outstanding Senior Note of such series affected. (Section 613).

   The Senior Note Indenture provides that in determining whether the Holders of
the requisite  principal  amount of the  Outstanding  Senior Notes have given or
taken any direction,  notice, consent,  waiver, or other action under the Senior
Note  Indenture as of any date,  (i) the principal  amount of an Original  Issue
Discount  Note that will be deemed to be  Outstanding  will be the amount of the
principal  thereof  that  would  be  due  and  payable  as  of  such  date  upon
acceleration of the Maturity thereof to such date, (ii) if, as of such date, the
principal  amount  payable  at the  Stated  Maturity  of a  Senior  Note  is not
determinable  (for  example,  because  it is based on an index),  the  principal
amount of such Senior Note deemed to be  Outstanding  as of such date will be an
amount  determined in the manner  prescribed  for such Senior Note and (iii) the
principal amount of a Senior Note denominated in one or more foreign  currencies
or currency units that will be deemed to be Outstanding  will be the U.S. dollar
equivalent,  determined as of such date in the manner prescribed for such Senior
Note, of the  principal  amount of such Senior Note (or, in the case of a Senior
Note  described  in clause (i) or (ii) above,  of the amount  described  in such
clause).  Certain Senior Notes,  including those for whose payment or redemption
money has been  deposited  or set aside in trust for the  Holders and those that
have been fully  defeased  pursuant  to Section  1402,  will not be deemed to be
Outstanding. (Section 101).

   Except in certain limited circumstances,  the Company will be entitled to set
any  day as a  record  date  for the  purpose  of  determining  the  Holders  of
Outstanding  Senior Notes of any series  entitled to give or take any direction,
notice, consent, waiver, or other action under the Senior Note Indenture, in the
manner and subject to the limitations provided in the Senior Note Indenture.  In
certain limited circumstances, the Senior Note Trustee will be entitled to set a
record date for action by Holders.  If a record date is set for any action to be
taken by  Holders  of a  particular  series,  such  action  may be taken only by
persons who are Holders of Outstanding Senior Notes of that series on the record
date.  To be  effective,  such action must be taken by Holders of the  requisite
principal  amount of such Senior Notes within a specified  period  following the
record date.  For any  particular  record date,  this period will be 180 days or
such other shorter period as may be specified by the Company (or the Senior Note
Trustee, if it set the record date), and may be shortened or lengthened (but not
beyond 180 days) from time to time. (Section 104).

DEFEASANCE AND COVENANT DEFEASANCE

   If and to the extent indicated in the applicable Prospectus  Supplement,  the
Company may elect,  at its option at any time, to have the provisions of Section
1402,  relating to defeasance  and discharge of  indebtedness,  or Section 1403,
relating  to  defeasance  of certain  restrictive  covenants  in the Senior Note
Indenture,  applied to the Senior Notes of any series,  or to any specified part
of a series. (Section 1401).

   DEFEASANCE AND DISCHARGE.  The Senior Note Indenture  provides that, upon the
Company's  exercise of its option (if any) to have  Section  1402 applied to any
Senior  Notes,  the Company will be  discharged  from all its  obligations  with
respect to such Senior  Notes  (except for  certain  obligations  to exchange or
register  the transfer of Senior  Notes,  to replace  stolen,  lost or mutilated
Senior  Notes,  to maintain  paying  agencies  and to hold moneys for payment in
trust)  upon the  deposit in trust for the benefit of the Holders of such Senior
Notes of money or U.S.  Government  Obligations,  or both,  which,  through  the
payment of principal and interest in respect  thereof in  accordance  with their
terms,  will provide  money in an amount  sufficient to pay the principal of and
any  premium  and  interest  on  such  Senior  Notes  on the  respective  Stated
Maturities  in accordance  with the terms of the Senior Note  Indenture and such
Senior Notes.  UPON SUCH DEFEASANCE AND DISCHARGE,  THE SENIOR NOTE TRUSTEE WILL
DELIVER TO THE COMPANY FOR  CANCELLATION ALL SENIOR NOTE MORTGAGE BONDS SECURING
SUCH SENIOR  NOTES,  AFTER WHICH TIME THE SENIOR NOTES WILL NO LONGER BE SECURED
BY SENIOR NOTE MORTGAGE BONDS.  Such defeasance and discharge may occur only if,
among other things, the Company has
                                       15

delivered  to the Senior  Note  Trustee an Opinion of Counsel to the effect that
the Company has received from, or there has been published by, the United States
Internal  Revenue  Service a ruling,  or there has been a change in tax law,  in
either case to the effect that Holders of such Senior  Notes will not  recognize
gain or loss for  federal  income  tax  purposes  as a result  of such  deposit,
defeasance,  and discharge and will be subject to federal income tax on the same
amount,  in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur.
(Sections 1402 and 1404).

   DEFEASANCE OF CERTAIN  COVENANTS.  The Senior Note  Indenture  provides that,
upon the Company's  exercise of its option (if any) to have Section 1403 applied
to any Senior  Notes,  the Company may omit to comply with  certain  restrictive
covenants that may be described in the applicable Prospectus Supplement, and the
occurrence of certain Events of Default, which are described above in clause (d)
(with respect to such restrictive  covenants) under "Description of Senior Notes
- -- Events of Default" and any that may be described in the applicable Prospectus
Supplement, will be deemed not to be or result in an Event of Default will cease
to be effective, in each case with respect to such Senior Notes. The Company, in
order to exercise  such  option,  will be required to deposit,  in trust for the
benefit  of  the  Holders  of  such  Senior  Notes,  money  or  U.S.  Government
Obligations,  or both,  which,  through the payment of principal and interest in
respect thereof in accordance with their terms,  will provide money in an amount
sufficient  to pay the  principal of and any premium and interest on such Senior
Notes on the respective  Stated  Maturities in accordance  with the terms of the
Senior Note Indenture and such Senior Notes.  The Company will also be required,
among  other  things,  to  deliver  to the  Trustee an Opinion of Counsel to the
effect that  Holders of such Senior  Notes will not  recognize  gain or loss for
federal  income tax  purposes  as a result of such  deposit  and  defeasance  of
certain  obligations  and will be  subject  to  federal  income  tax on the same
amount,  in the same manner and at the same times as would have been the case if
such  deposit  and  defeasance  were not to  occur.  In the  event  the  Company
exercised  this option with  respect to any Senior  Notes and such Senior  Notes
were declared due and payable because of the occurrence of any Event of Default,
the amount of money and U.S. Government  Obligations so deposited in trust would
be  sufficient  to pay  amounts  due on such  Senior  Notes at the time of their
respective  Stated  Maturities  but may not be  sufficient to pay amounts due on
such Senior Notes upon any acceleration resulting from such Event of Default. In
such case, the Company would remain liable for such payments. (Sections 1403 and
1404).

NOTICES

   Notices to Holders of Senior Notes will be given by mail to the  addresses of
such Holders as they may appear in the Note Register. (Sections 101 and 106).

TITLE

   The  Company,  the Senior Note  Trustee,  and any agent of the Company or the
Senior  Note  Trustee  may  treat  the  Person  in whose  name a Senior  Note is
registered as the absolute owner thereof (whether or not such Senior Note may be
overdue) for the purpose of making payment and for all other purposes.  (Section
308).

GOVERNING LAW

   The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the law of the State of New York. (Section
112).

REGARDING THE SENIOR NOTE TRUSTEE

   The Senior Note Trustee is The Bank of New York. The Company maintains normal
banking  arrangements  with  The  Bank  of New  York,  which  includes  (i)  two
commitments in the aggregate  principal amount of approximately $35.7 million by
The Bank of New York pursuant to reimbursement  agreements related to letters of
credit issued on behalf of the Company in connection with issuances of pollution
control  bonds,  the proceeds of which were made  available to the Company,  and
(ii) a $25 million  commitment  by The Bank of New York  pursuant to a revolving
credit agreement, $0 and $6 million of
                                       16

which, respectively, was outstanding at September 30, 1996. The Bank of New York
also serves as (i) trustee under the  Mortgage,  (ii) trustee for the holders of
several issues of pollution control bonds issued on behalf of the Company, (iii)
trustee under the Company's  Indenture  relating to subordinated Debt Securities
(see below), (iv) investment manager for the Company's nonunion  post-retirement
medical fund,  and (v) custodian of  international  fixed-income  assets for the
Company's pension plan.

                        DESCRIPTION OF DEBT SECURITIES

GENERAL

   The  Debt  Securities  may be  issued  in one or more  new  series  under  an
Indenture  between  the  Company  and (i) The Bank of New  York,  in the case of
subordinated Debt Securities,  and (ii) The Chase Manhattan Bank, in the case of
senior Debt  Securities,  or any other trustees to be named, as Trustee (each, a
"Trustee"). The following summary does not purport to be complete and is subject
in all  respects  to the  provisions  of, and is  qualified  in its  entirety by
reference to, the Indentures  pursuant to which the subordinated and senior Debt
Securities are to be issued and to the Debt  Securities,  the forms of which are
filed, or will be filed, as exhibits to the registration statement of which this
Prospectus forms a part. Whenever particular provisions or defined terms in such
documents are referred to herein or in a Prospectus Supplement,  such provisions
or terms are incorporated by reference herein or therein, as the case may be.

   The Debt  Securities will be unsecured  obligations of the Company.  Separate
Indentures  will be used  for  senior  Debt  Securities  and  subordinated  Debt
Securities,  respectively,  although the  description  of the Indenture  herein,
except as specifically stated otherwise, applies to both Indentures.

   Reference is made to the  Prospectus  Supplement  relating to any  particular
issue of Offered Debt Securities for the following  terms: (1) the title of such
Debt  Securities;  (2) any limit on the aggregate  principal amount of such Debt
Securities  or the  series  of which  they are a part;  (3) the date or dates on
which the principal of any of such Debt Securities will be payable; (4) the rate
or rates at which any of such Debt  Securities  will bear interest,  if any, the
date or dates from which any such  interest  will accrue,  the Interest  Payment
Dates on which any such interest will be payable and the Regular Record Date for
any such interest  payable on any Interest Payment Date; (5) the place or places
where  the  principal  of and any  premium  and  interest  on any of  such  Debt
Securities will be payable if other than as described under "Description of Debt
Securities - Payment and Paying Agents"; (6) the period or periods within which,
the price or prices at which and the terms and  conditions  on which any of such
Debt  Securities  may be  redeemed,  in whole or in part,  at the  option of the
Company; (7) the obligation, if any, of the Company to redeem or purchase any of
such Debt Securities  pursuant to any sinking fund or analogous  provision or at
the option of the Holder  thereof,  and the period or periods within which,  the
price or prices at which and the terms and  conditions on which any of such Debt
Securities will be redeemed or purchased,  in whole or in part,  pursuant to any
such obligation; (8) the denominations in which any of such Debt Securities will
be issuable,  if other than  denominations  of $1,000 and any integral  multiple
thereof;  (9) if the amount of principal of or any premium or interest on any of
such Debt Securities may be determined with reference to an index or pursuant to
a formula,  the manner in which such amounts will be  determined;  (10) if other
than the currency of the United States of America, the currency,  currencies, or
currency  units in which the  principal  of or any premium or interest on any of
such  Debt  Securities  will  be  payable  and the  manner  of  determining  the
equivalent  thereof  in the  currency  of the United  States of America  for any
purpose, including for purposes of determining the principal amount deemed to be
Outstanding at any time;  (11) if the principal of or any premium or interest on
any of such Debt Securities is to be payable,  at the election of the Company or
the Holder  thereof,  in one or more  currencies,  or currency  units other than
those in which such Debt  Securities  are stated to be  payable,  the  currency,
currencies  or  currency  units in which  payment of any such amount as to which
such  election is made will be payable,  the periods  within which and the terms
and conditions  upon which such election is to be made and the amount so payable
(or the manner in which such amount is to be determined); (12) if other than the
entire principal  amount thereof,  the portion of the principal amount of any of
such Debt Securities  which will be payable upon  declaration of acceleration of
the  Maturity  thereof;  (13) if the  principal  amount  payable  at the  Stated
Maturity of any of such Debt  Securities  will not be determinable as of any one
or more dates prior to the Stated  Maturity,  the amount which will be deemed to
be such
                                       17

principal  amount as of any such date for any purpose,  including  the principal
amount  thereof  which will be due and payable upon any Maturity  other than the
Stated  Maturity or which will be deemed to be  Outstanding  as of any such date
(or, in any such case, the manner in which such deemed principal amount is to be
determined);  (14) if  applicable,  that such Debt  Securities,  in whole or any
specified  part,  are  defeasible  pursuant to the  provisions  of the Indenture
described  under  "Description  of Debt  Securities --  Defeasance  and Covenant
Defeasance -- Defeasance and Discharge" or  "Description  of Debt  Securities --
Defeasance and Covenant  Defeasance -- Covenant  Defeasance," or under both such
captions;  (15) whether any of such Debt Securities will be issuable in whole or
in part in the form of one or more Global  Securities and, if so, the respective
Depositaries for such Global Securities, the form of any legend or legends to be
borne  by any such  Global  Security  in  addition  to or in lieu of the  legend
referred to under  "Description of Debt Securities -- Global Securities" and, if
different from those described under such caption, any circumstances under which
any  such  Global  Security  may be  exchanged  in  whole  or in part  for  Debt
Securities  registered,  and any transfer of such Global Security in whole or in
part may be  registered,  in the names of Persons other than the  Depositary for
such  Global  Security  or its  nominee;  (16) any  addition to or change in the
Events of Default  applicable to any of such Debt  Securities  and any change in
the right of the Trustee or the Holders to declare the  principal  amount of any
of such Debt  Securities due and payable;  (17) any addition to or change in the
covenants in the Indenture; and (18) any other terms of such Debt Securities not
inconsistent with the provisions of the Indenture. (Section 301).

   Debt Securities, including Original Issue Discount Securities, may be sold at
a substantial  discount below their  principal  amount.  Certain  special United
States federal income tax  considerations (if any) applicable to Debt Securities
sold at an original issue discount may be described in the applicable Prospectus
Supplement.  In addition,  certain  special  United States federal income tax or
other  considerations  (if any)  applicable  to any Debt  Securities  which  are
denominated  in a currency or currency unit other than United States dollars may
be described in the applicable Prospectus Supplement.

   Except as otherwise  described in the  Prospectus  Supplement,  the covenants
contained  in  the  Indenture  would  not  afford  holders  of  Debt  Securities
protection in the event of a highly-leveraged transaction involving the Company.

SUBORDINATION

   The Indenture  relating to the  subordinated  Debt Securities  provides that,
unless otherwise provided in a supplemental indenture or a Board Resolution, the
Debt Securities will be subordinate and subject in right of payment to the prior
payment in full of all Senior Debt of the Company, whether outstanding as of the
date of the Indenture or thereafter incurred. (Section 1401). The balance of the
information  under  this  "Subordination"  heading  assumes  that  the  relevant
supplemental  indenture or Board Resolution results in the corresponding  series
of Debt Securities being subordinated obligations of the Company.

   No payment of principal of (including  redemption and sinking fund payments),
premium, if any, or interest on, the subordinated Debt Securities may be made if
any Senior Debt is not paid when due, any  applicable  grace period with respect
to such default has ended and such  default has not been cured or waived,  or if
the  maturity  of any  Senior  Debt has been  accelerated  because of a default.
(Section 1402). Upon any distribution of assets of the Company to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
principal  of, and  premium,  if any,  and interest due or to become due on, all
Senior  Debt must be paid in full before the  holders of the  subordinated  Debt
Securities are entitled to receive or retain any payment.  (Section  1403).  The
rights of the holders of the  subordinated  Debt Securities will be subordinated
to the rights of the holders of Senior Debt to receive payments or distributions
applicable  to Senior Debt until all amounts  owing on the Debt  Securities  are
paid in full.
(Section 1404).

   The term "Senior Debt" shall mean the principal of, premium, if any, interest
on and  any  other  payment  due  pursuant  to any  of  the  following,  whether
outstanding  at the date of execution of the Indenture or  thereafter  incurred,
created or assumed:
                                       18

      (a) all indebtedness of the Company evidenced by notes, debentures, bonds,
   or other  securities  sold by the  Company  for  money,  including  all first
   mortgage bonds of the Company outstanding from time to time;

      (b) all  indebtedness  of others of the kinds  described in the  preceding
   clause (a) assumed by or guaranteed in any manner by the Company; and

      (c) all renewals,  extensions,  or refundings of indebtedness of the kinds
   described in any of the preceding clauses (a) and (b);

unless,  in the  case of any  particular  indebtedness,  renewal,  extension  or
refunding,  the instrument  creating or evidencing the same or the assumption or
guarantee  of the same  expressly  provides  that  such  indebtedness,  renewal,
extension  or  refunding is not superior in right of payment to or is pari passu
with the Debt Securities. (Section 101).

   The  Indenture  does not limit the  aggregate  amount of Senior Debt that the
Company  may issue.  As of  September  30,  1996,  outstanding  Senior  Debt and
subordinated debt of the Company  aggregated  approximately $2.1 billion and $75
million,  respectively.  Any Senior Notes issued by the Company would constitute
Senior Debt,  whether  before or after the Release  Date.  See  "Description  of
Senior Notes -- Security; Release Date."

FORM, EXCHANGE, AND TRANSFER

   The Debt Securities of each series will be issuable only in fully  registered
form  without  coupons  and,  unless  otherwise   specified  in  the  applicable
Prospectus  Supplement,  in  denominations  of $1,000 and any integral  multiple
thereof. (Section 302).

   At the option of the Holder,  subject to the terms of the  Indenture  and the
limitations applicable to Global Securities,  Debt Securities of any series will
be exchangeable for other Debt Securities of the same series,  of any authorized
denomination and of like tenor and aggregate principal amount. (Section 305).

   Subject  to the terms of the  Indenture  and the  limitations  applicable  to
Global  Securities,  Debt  Securities  may be presented for exchange as provided
above  or for  registration  of  transfer  (duly  endorsed  or with  the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at the  office of any  transfer  agent  designated  by the  Company  for such
purpose.  No service  charge  will be made for any  registration  of transfer or
exchange  of Debt  Securities,  but the  Company  may  require  payment of a sum
sufficient to cover any tax or other  governmental  charge payable in connection
therewith.  Such  transfer  or  exchange  will be  effected  upon  the  Security
Registrar or such transfer  agent,  as the case may be, being satisfied with the
documents  of title and identity of the person  making the request.  The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in addition
to the  Security  Registrar)  initially  designated  by the Company for any Debt
Securities will be named in the applicable Prospectus Supplement. (Section 305).
The Company may at any time designate  additional transfer agents or rescind the
designation  of any  transfer  agent or approve a change in the  office  through
which any  transfer  agent acts,  except  that the  Company  will be required to
maintain a transfer  agent in each Place of Payment for the Debt  Securities  of
each series. (Section 1002).

   If the Debt  Securities of any series (or of any series and specified  tenor)
are to be redeemed,  the Company will not be required to (i) issue, register the
transfer of, or exchange any Debt Security of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
Debt  Security  that may be selected for  redemption  and ending at the close of
business on the day of such mailing or (ii) register the transfer of or exchange
any Debt Security so selected for  redemption,  in whole or in part,  except the
unredeemed  portion of any such Debt Security being  redeemed in part.  (Section
305).

GLOBAL SECURITIES

   Some or all of the Debt Securities of any series may be represented, in whole
or in part,  by one or more  Global  Securities  which  will  have an  aggregate
principal amount equal to that of the Debt Securities
                                       19

represented  thereby.  Each Global  Security will be registered in the name of a
Depositary  or  a  nominee  thereof  identified  in  the  applicable  Prospectus
Supplement,  will be deposited  with such  Depositary  or nominee or a custodian
therefor and will bear a legend  regarding  the  restrictions  on exchanges  and
registration of transfer thereof referred to below and any such other matters as
may be provided for pursuant to the Indenture.

   Notwithstanding any provision of the Indenture or any Debt Security described
herein,  no  Global  Security  may be  exchanged  in  whole  or in part for Debt
Securities registered,  and no transfer of a Global Security in whole or in part
may be registered,  in the name of any Person other than the Depositary for such
Global Security or any nominee of such Depositary  unless (i) the Depositary has
notified the Company  that it is  unwilling or unable to continue as  Depositary
for  such  Global  Security  or has  ceased  to be  qualified  to act as such as
required by the  Indenture,  (ii) there shall have occurred and be continuing an
Event of Default with respect to the Debt Securities  represented by such Global
Security or (iii) there shall exist such  circumstances,  if any, in addition to
or in lieu of  those  described  above  as may be  described  in the  applicable
Prospectus  Supplement.  All securities issued in exchange for a Global Security
or any portion  thereof will be registered in such names as the  Depositary  may
direct. (Sections 204 and 305).

   As long as the  Depositary,  or its nominee,  is the  registered  Holder of a
Global  Security,  the  Depositary or such nominee,  as the case may be, will be
considered  the sole  owner and  Holder  of such  Global  Security  and the Debt
Securities  represented  thereby for all purposes under the Debt  Securities and
the Indenture.  Except in the limited circumstances referred to above, owners of
beneficial  interests  in a Global  Security  will not be  entitled to have such
Global Security or any Debt Securities  represented  thereby registered in their
names,  will  not  receive  or be  entitled  to  receive  physical  delivery  of
certificated  Debt Securities in exchange therefor and will not be considered to
be the  owners  or  Holders  of such  Global  Security  or any  Debt  Securities
represented  thereby for any purpose under the Debt Securities or the Indenture.
All payments of  principal of and any premium and interest on a Global  Security
will be made to the Depositary or its nominee, as the case may be, as the Holder
thereof.  The laws of some  jurisdictions  require  that certain  purchasers  of
securities take physical  delivery of such securities in definitive  form. These
laws may  impair  the  ability  to  transfer  beneficial  interests  in a Global
Security.

   Ownership of  beneficial  interests in a Global  Security  will be limited to
institutions   that  have   accounts   with  the   Depositary   or  its  nominee
("participants")  and to  persons  that may hold  beneficial  interests  through
participants.  In  connection  with the  issuance  of any Global  Security,  the
Depositary will credit, on its book-entry  registration and transfer system, the
respective  principal  amounts  of Debt  Securities  represented  by the  Global
Security to the accounts of its participants.  Ownership of beneficial interests
in a Global  Security will be shown only on, and the transfer of those ownership
interests  will be effected only through,  records  maintained by the Depositary
(with respect to participants'  interests) or any such participant (with respect
to interests of persons held by such  participants  on their behalf).  Payments,
transfers,  exchanges,  and others matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time.  None of the Company,  the Trustee or any agent of
the Company or the Trustee will have any  responsibility  or  liability  for any
aspect of the  Depositary's  or any  participant's  records  relating to, or for
payments made on account of, beneficial  interests in a Global Security,  or for
maintaining,  supervising,  or reviewing any records relating to such beneficial
interests.

PAYMENT AND PAYING AGENTS

   Unless otherwise indicated in the applicable Prospectus  Supplement,  payment
of interest on a Debt Security on any Interest  Payment Date will be made to the
Person  in whose  name  such  Debt  Security  (or one or more  Predecessor  Debt
Securities)  is registered  at the close of business on the Regular  Record Date
for such interest. (Section 307).

   Unless otherwise indicated in the applicable Prospectus Supplement, principal
of and any premium and interest on the Debt  Securities  of a particular  series
will be  payable  at the  office of such  Paying  Agent or Paying  Agents as the
Company may designate for such purpose from time to time, except that at the
                                       20

option of the Company payment of any interest may be made by check mailed to the
address of the Person  entitled  thereto as such address appears in the Security
Register.  Unless otherwise indicated in the applicable  Prospectus  Supplement,
the  corporate  trust  office  of the  Trustee  in The City of New York  will be
designated as the Company's  sole Paying Agent for payments with respect to Debt
Securities of each series.  Any other Paying Agents initially  designated by the
Company  for the Debt  Securities  of a  particular  series will be named in the
applicable  Prospectus  Supplement.  The  Company  may  at  any  time  designate
additional  Paying  Agents or rescind  the  designation  of any Paying  Agent or
approve a change in the office through which any Paying Agent acts,  except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Debt Securities of a particular series. (Section 1002).

   All  moneys  paid by the  Company  to a Paying  Agent for the  payment of the
principal  of or any  premium or  interest  on any Debt  Security  which  remain
unclaimed at the end of two years after such principal,  premium or interest has
become due and  payable  will be repaid to the  Company,  and the Holder of such
Debt  Security  thereafter  may look only to the Company  for  payment  thereof.
(Section 1003).

CONSOLIDATION, MERGER, AND SALE OF ASSETS

   Unless  otherwise  indicated in the  applicable  Prospectus  Supplement,  the
Company  may not  consolidate  with or merge  into any other  Person or  convey,
transfer or lease its properties and assets  substantially as an entirety to any
Person,  and may not  permit any  Person to  consolidate  with or merge into the
Company or convey, transfer, or lease its properties and assets substantially as
an  entirety  to the  Company,  unless  (i) the  successor  Person (if any) is a
corporation,  partnership,  trust or other entity organized and validly existing
under  the  laws  of  any  domestic   jurisdiction  and  assumes  the  Company's
obligations on the Debt  Securities and under the  Indenture,  (ii)  immediately
after giving effect to the transaction, no Event of Default, and no event which,
after notice or lapse of time or both,  would become an Event of Default,  shall
have occurred and be continuing  and (iii)  certain  other  conditions  are met.
(Section 801).

EVENTS OF DEFAULT

   Each of the following will constitute an Event of Default under the Indenture
with respect to Debt  Securities of any series:  (a) failure to pay principal of
or any premium on any Debt  Security of that series when due; (b) failure to pay
any interest on any Debt  Securities  of that series when due,  continued for 30
days;  (c) failure to deposit any sinking fund payment,  when due, in respect of
any Debt Security of that series;  (d) failure to perform any other  covenant of
the Company in the  Indenture  (other than a covenant  included in the Indenture
solely for the benefit of a series  other than that  series),  continued  for 90
days after  written  notice has been given by the Trustee,  or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series,
as provided in the Indenture;  and (e) certain events in bankruptcy,  insolvency
or reorganization. (Section 501).

   If an Event of Default  (other than an Event of Default  described  in clause
(e)  above)  with  respect  to the Debt  Securities  of any  series  at the time
Outstanding shall occur and be continuing,  either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
that  series by notice as provided in the  Indenture  may declare the  principal
amount  of the  Debt  Securities  of that  series  (or,  in the case of any Debt
Security that is an Original Issue Discount  Security or the principal amount of
which is not then  determinable,  such portion of the  principal  amount of such
Debt Security,  or such other amount in lieu of such principal amount, as may be
specified in the terms of such Debt Security) to be due and payable immediately.
If an Event of Default  described  in clause (e) above with  respect to the Debt
Securities  of any series at the time  Outstanding  shall occur,  the  principal
amount of all the Debt  Securities  of that  series (or, in the case of any such
Original Issue Discount Security or other Debt Security,  such specified amount)
will automatically,  and without any action by the Trustee or any Holder, become
immediately due and payable. After any such acceleration,  but before a judgment
or  decree  based on  acceleration,  the  Holders  of a  majority  in  aggregate
principal  amount of the  Outstanding  Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration if
                                       21

all Events of Default,  other than the non-payment of accelerated  principal (or
other specified amount), have been cured or waived as provided in the Indenture.
(Section 502). For information as to waiver of defaults,  see  "Modification and
Waiver."

   Subject to the  provisions  of the  Indenture  relating  to the duties of the
Trustee in case an Event of Default shall occur and be  continuing,  the Trustee
will be under no  obligation  to exercise  any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable  indemnity.  (Section 603). Subject
to such  provisions  for the  indemnification  of the Trustee,  the Holders of a
majority in principal  amount of the  Outstanding  Debt Securities of any series
will have the  right to direct  the time,  method  and place of  conducting  any
proceeding for any remedy  available to the Trustee,  or exercising any trust or
power  conferred on the Trustee,  with  respect to the Debt  Securities  of that
series. (Section 512).

   No Holder of a Debt  Security of any series will have any right to  institute
any  proceeding  with  respect to the  Indenture,  or for the  appointment  of a
receiver  or a  trustee,  or for any other  remedy  thereunder,  unless (i) such
Holder has previously  given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series,  (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
of that  series  have made  written  request,  and such  Holder or Holders  have
offered  reasonable  indemnity,  to the Trustee to institute such  proceeding as
trustee and (iii) the Trustee has failed to institute such  proceeding,  and has
not received from the Holders of a majority in aggregate principal amount of the
Outstanding  Debt Securities of that series a direction  inconsistent  with such
request,  within 60 days after such notice,  request and offer.  (Section  507).
However,  such  limitations  do not apply to a suit  instituted by a Holder of a
Debt Security for the  enforcement of payment of the principal of or any premium
or interest on such Debt Security on or after the  applicable due date specified
in such Debt Security. (Section 508).

   The Company  will be required to furnish to the Trustee  annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the  performance or observance of any of the terms,  provisions
and conditions of the Indenture and, if so,  specifying all such known defaults.
(Section 1004).

MODIFICATION AND WAIVER

   Modifications  and amendments of the Indenture may be made by the Company and
the  Trustee  with the  consent  of the  Holders  of not  less  than 66 2/3 % in
aggregate  principal  amount of the  Outstanding  Debt Securities of each series
affected by such  modification  or amendment;  provided,  however,  that no such
modification  or  amendment  may,  without  the  consent  of the  Holder of each
Outstanding Debt Security  affected  thereby,  (a) change the Stated Maturity of
the  principal  of, or any  instalment  of principal of or interest on, any Debt
Security, (b) reduce the principal amount of, or any premium or interest on, any
Debt Security,  (c) reduce the amount of principal of an Original Issue Discount
Security or any other Debt Security  payable upon  acceleration  of the Maturity
thereof,  (d) change the place or  currency of payment of  principal  of, or any
premium or interest  on, any Debt  Security,  (e) impair the right to  institute
suit for the enforcement of any payment on or with respect to any Debt Security,
(f) reduce the percentage in principal  amount of Outstanding Debt Securities of
any  series,  the  consent of whose  Holders is  required  for  modification  or
amendment  of the  Indenture,  reduce  the  percentage  in  principal  amount of
Outstanding  Debt  Securities  of any series  necessary for waiver of compliance
with certain  provisions of the  Indenture or for waiver of certain  defaults or
modify such provisions with respect to modification and waiver. (Section 902).

   The Holders of not less than 66 2/3 % in  aggregate  principal  amount of the
Outstanding  Debt  Securities of any series may waive  compliance by the Company
with certain  restrictive  provisions  of the  Indenture.  (Section  1008).  The
Holders of a majority in principal  amount of the Outstanding Debt Securities of
any series may waive any past default under the  Indenture,  except a default in
the payment of  principal,  premium,  or  interest  and  certain  covenants  and
provisions of the Indenture  which cannot be amended  without the consent of the
Holder of each Outstanding Debt Security of such series affected. (Section 513).
                                       22

   The  Indenture  provides  that in  determining  whether  the  Holders  of the
requisite  principal  amount of the  Outstanding  Debt  Securities have given or
taken  any  direction,  notice,  consent,  waiver,  or other  action  under  the
Indenture as of any date, (i) the principal amount of an Original Issue Discount
Security  that  will be  deemed  to be  Outstanding  will be the  amount  of the
principal  thereof  that  would  be  due  and  payable  as  of  such  date  upon
acceleration of the Maturity thereof to such date, (ii) if, as of such date, the
principal  amount  payable  at the Stated  Maturity  of a Debt  Security  is not
determinable  (for  example,  because  it is based on an index),  the  principal
amount of such Debt Security deemed to be Outstanding as of such date will be an
amount  determined in the manner prescribed for such Debt Security and (iii) the
principal  amount  of a  Debt  Security  denominated  in  one  or  more  foreign
currencies or currency units that will be deemed to be  Outstanding  will be the
U.S. dollar equivalent,  determined as of such date in the manner prescribed for
such Debt  Security,  of the principal  amount of such Debt Security (or, in the
case of a Debt  Security  described  in clause (i) or (ii) above,  of the amount
described in such clause).  Certain Debt  Securities,  including those for whose
payment or  redemption  money has been  deposited  or set aside in trust for the
Holders and those that have been fully defeased  pursuant to Section 1302,  will
not be deemed to be Outstanding. (Section 101).

   Except in certain limited circumstances,  the Company will be entitled to set
any  day as a  record  date  for the  purpose  of  determining  the  Holders  of
Outstanding  Debt  Securities  of any  series  entitled  to  give  or  take  any
direction,  notice, consent, waiver, or other action under the Indenture, in the
manner and  subject to the  limitations  provided in the  Indenture.  In certain
limited  circumstances,  the  Trustee  will be entitled to set a record date for
action by Holders. If a record date is set for any action to be taken by Holders
of a particular series, such action may be taken only by persons who are Holders
of  Outstanding  Debt  Securities  of that  series  on the  record  date.  To be
effective,  such  action  must be taken by  Holders of the  requisite  principal
amount of such Debt Securities  within a specified  period  following the record
date. For any particular record date, this period will be 180 days or such other
shorter period as may be specified by the Company (or the Trustee, if it set the
record date),  and may be shortened or lengthened (but not beyond 180 days) from
time to time. (Section 104).

DEFEASANCE AND COVENANT DEFEASANCE

   If and to the extent indicated in the applicable Prospectus  Supplement,  the
Company may elect,  at its option at any time, to have the provisions of Section
1302,  relating to defeasance  and discharge of  indebtedness,  or Section 1303,
relating  to  defeasance  of certain  restrictive  covenants  in the  Indenture,
applied to the Debt  Securities  of any series,  or to any  specified  part of a
series. (Section 1301).

   DEFEASANCE AND  DISCHARGE.  The Indenture  provides that,  upon the Company's
exercise  of its  option  (if  any) to have  Section  1302  applied  to any Debt
Securities, the Company will be discharged from all its obligations with respect
to such Debt Securities (except for certain  obligations to exchange or register
the transfer of Debt  Securities,  to replace  stolen,  lost or  mutilated  Debt
Securities, to maintain paying agencies and to hold moneys for payment in trust)
upon the deposit in trust for the benefit of the Holders of such Debt Securities
of money or U.S. Government Obligations,  or both, which, through the payment of
principal and interest in respect thereof in accordance  with their terms,  will
provide  money in an amount  sufficient  to pay the principal of and any premium
and interest on such Debt  Securities  on the  respective  Stated  Maturities in
accordance  with the  terms of the  Indenture  and such  Debt  Securities.  Such
defeasance or discharge  may occur only if, among other things,  the Company has
delivered  to the  Trustee an Opinion of Counsel to the effect  that the Company
has received  from, or there has been  published by, the United States  Internal
Revenue Service a ruling,  or there has been a change in tax law, in either case
to the effect that Holders of such Debt  Securities  will not recognize  gain or
loss for federal  income tax purposes as a result of such  deposit,  defeasance,
and discharge and will be subject to federal  income tax on the same amount,  in
the same  manner  and at the same  times  as  would  have  been the case if such
deposit, defeasance and discharge were not to occur. (Sections 1302 and 1304).

   DEFEASANCE  OF CERTAIN  COVENANTS.  The  Indenture  provides  that,  upon the
Company's  exercise of its option (if any) to have  Section  1303 applied to any
Debt  Securities,  the  Company  may omit to  comply  with  certain  restrictive
covenants that may be described in the applicable Prospectus Supplement, and the
occurrence of certain Events of Default, which are described above in clause (d)
(with respect to such
                                       23

restrictive  covenants)  under "Events of Default" and any that may be described
in the applicable Prospectus  Supplement,  will be deemed not to be or result in
an  Event  of  Default  and the  provisions  of  Article  Fourteen  relating  to
subordination   (included  in  the  Indenture   relating  to  subordinated  Debt
Securities)  will cease to be effective,  in each case with respect to such Debt
Securities.  The Company,  in order to exercise such option, will be required to
deposit, in trust for the benefit of the Holders of such Debt Securities,  money
or U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect  thereof in  accordance  with their terms,  will provide
money in an  amount  sufficient  to pay the  principal  of and any  premium  and
interest  on  such  Debt  Securities  on the  respective  Stated  Maturities  in
accordance with the terms of the Indenture and such Debt Securities. The Company
will also be required,  among other things, to deliver to the Trustee an Opinion
of Counsel to the effect that Holders of such Debt Securities will not recognize
gain or loss for federal  income tax  purposes  as a result of such  deposit and
defeasance of certain  obligations  and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit and defeasance  were not to occur. In the event the Company
exercised  this  option  with  respect  to any Debt  Securities  and  such  Debt
Securities  were declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government  Obligations so deposited in
trust would be sufficient to pay amounts due on such Debt Securities at the time
of their respective  Stated  Maturities but may not be sufficient to pay amounts
due on such Debt Securities upon any  acceleration  resulting from such Event of
Default. In such case, the Company would remain liable for such payments.
(Sections 1303 and 1304).

NOTICES

   Notices to Holders of Debt  Securities will be given by mail to the addresses
of such Holders as they may appear in the Security  Register.  (Sections 101 and
106).

TITLE

   The  Company,  the  Trustee,  and any agent of the Company or the Trustee may
treat the Person in whose name a Debt  Security is  registered  as the  absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308).

GOVERNING LAW

   The Indenture and the Debt  Securities  will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112).

REGARDING THE TRUSTEES

   The Trustee under the Indenture  relating to the subordinated Debt Securities
is The Bank of New York. The Company maintains normal banking  arrangements with
The Bank of New  York,  which  includes  (i) two  commitments  in the  aggregate
principal amount of approximately $35.7 million by The Bank of New York pursuant
to reimbursement agreements related to letters of credit issued on behalf of the
Company in connection with issuances of pollution control bonds, the proceeds of
which were made available to the Company,  and (ii) a $25 million  commitment by
The Bank of New York pursuant to a revolving credit agreement, $0 and $6 million
of which, respectively,  were outstanding at September 30, 1996. The Bank of New
York also serves as (i) trustee  under the  Mortgage  (see  "Description  of New
Bonds"),  (ii) trustee for the holders of several  issues of  pollution  control
bonds  issued on behalf of the  Company,  (iii)  trustee  under the Senior  Note
Indenture (see "Description of Senior Notes"),  (iv) investment  manager for the
Company's   nonunion   post-retirement   medical  fund  and  (v)   custodian  of
international  fixed-income  assets for the Company's  pension plan. The Trustee
under  the  Indenture  relating  to the  senior  Debt  Securities  is The  Chase
Manhattan Bank. The Company maintains normal banking arrangements with The Chase
Manhattan  Bank.  The Chase  Manhattan  Bank also (i) serves as trustee  for the
holders of several series of bonds secured by, among other things, the Company's
payments  under its Palo Verde Nuclear  Generating  Station  leases (these bonds
were issued by a party unaffiliated with the Company), (ii) serves as an issuing
and paying agent with respect to the Company's commercial
                                       24

paper  program, and (iii) has a commitment to lend the Company up to $55 million
under a revolving credit  agreement,  $14 million of which was outstanding as of
September 30, 1996. In addition, an affiliate of The Chase Manhattan Bank is the
lessor  with  respect  to a lease  with  the  Company  relating  to the sale and
leaseback of a portion of Unit 2 of the Palo Verde Nuclear Generating Station.

                              PLAN OF DISTRIBUTION

   The Company intends to sell up to $175 million in aggregate  principal amount
of the Offered  Securities to or through  underwriters or dealers,  and may also
sell the Offered  Securities  directly to other purchasers or through agents, as
described  in  the  Prospectus  Supplement  relating  to  an  issue  of  Offered
Securities.

   The distribution of the Offered  Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market  prices  prevailing  at the time of sale,  at prices  related  to such
prevailing market prices, or at negotiated prices.

   In  connection  with the sale of the  Offered  Securities,  underwriters  may
receive  compensation from the Company or from purchasers of Offered  Securities
for  whom  they may act as  agents  in the form of  discounts,  concessions,  or
commissions. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts,  concessions, or
commissions  from the  underwriters  and/or  commissions from the purchasers for
whom they may act as agents. Underwriters,  dealers, and agents that participate
in the distribution of Offered Securities may be deemed to be underwriters,  and
any discounts or commissions received by them from the Company and any profit on
the  resale of  Offered  Securities  by them may be  deemed  to be  underwriting
discounts and commissions under the Securities Act of 1933 (the "1933 Act"). Any
such person who may be deemed to be an underwriter  will be identified,  and any
such compensation received from the Company will be described, in the Prospectus
Supplement.

   Under  agreements  which may be entered  into by the  Company,  underwriters,
dealers,  and  agents  who  participate  in  the  distribution  of  the  Offered
Securities may be entitled to  indemnification  by the Company  against  certain
liabilities, including liabilities under the 1933 Act.

                                     EXPERTS

   The  financial  statements  and the  related  financial  statement  schedules
incorporated in this Prospectus by reference to the Company's 1995 Annual Report
on Form 10-K have been audited by Deloitte & Touche LLP,  independent  auditors,
as stated in their report,  which is incorporated herein by reference,  and have
been so  incorporated  in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

   With respect to the unaudited interim  financial  information for the periods
ended  March 31 and June 30,  1996 and  1995,  which is  incorporated  herein by
reference,  Deloitte & Touche LLP have applied limited  procedures in accordance
with professional standards for a review of such information. However, as stated
in their reports  included in the Company's  Quarterly  Reports on Form 10-Q for
the quarters  ended March 31 and June 30, 1996,  and  incorporated  by reference
herein,  they did not audit and they do not  express an opinion on that  interim
financial information.  Accordingly,  the degree of reliance on their reports on
such  information  should be  restricted  in light of the limited  nature of the
review  procedures  applied.  Deloitte  &  Touche  LLP  are not  subject  to the
liability  provisions  of  Section  11 of the  Securities  Act of 1933 for their
reports on the unaudited interim financial information because those reports are
not "reports" or a "part" of the registration statement prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Act.

                                LEGAL OPINIONS

   The  validity of the  Securities  offered  hereby will be passed upon for the
Company by Snell & Wilmer L.L.P.,  One Arizona Center,  Phoenix,  Arizona 85004,
and, it is currently anticipated, for any underwriters of Securities by Sullivan
& Cromwell,  444 South Flower Street,  Los Angeles,  California 90071. In giving
                                       25

their  opinions,  Sullivan & Cromwell and Snell & Wilmer  L.L.P.  may rely as to
matters  of New Mexico law upon the  opinion  of  Keleher & McLeod,  P.A.,  1200
Public Service Building,  Albuquerque, New Mexico 87102, Sullivan & Cromwell may
rely as to all matters of Arizona law upon the opinion of Snell & Wilmer L.L.P.,
and Snell & Wilmer  L.L.P.  may rely as to all  matters of New York law upon the
opinion of Sullivan & Cromwell.
                                       26

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   NO  DEALER,  SALESPERSON  OR OTHER  PERSON  HAS BEEN  AUTHORIZED  TO GIVE ANY
INFORMATION  OR TO MAKE ANY  REPRESENTATION  NOT  CONTAINED  IN THIS  PROSPECTUS
SUPPLEMENT  OR THE  PROSPECTUS  AND,  IF  GIVEN  OR MADE,  SUCH  INFORMATION  OR
REPRESENTATION  MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY  UNDERWRITER.  THIS  PROSPECTUS  SUPPLEMENT  AND THE PROSPECTUS DO NOT
CONSTITUTE  AN  OFFER  TO SELL OR A  SOLICITATION  OF AN OFFER TO BUY ANY OF THE
SECURITIES  OFFERED  HEREBY  IN ANY  JURISDICTION  TO ANY  PERSON  TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH  JURISDICTION.  NEITHER THE DELIVERY OF THIS
PROSPECTUS  SUPPLEMENT  OR THE  PROSPECTUS  NOR  ANY  SALE  MADE  HEREUNDER  AND
THEREUNDER  SHALL,  UNDER ANY  CIRCUMSTANCES,  CREATE ANY  IMPLICATION  THAT THE
INFORMATION  HEREIN IS CORRECT AS OF ANY TIME  SUBSEQUENT  TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

                                   ----------
                                TABLE OF CONTENTS
                              Prospectus Supplement

                                          PAGE
                                        --------

Application of Proceeds ..................S-2
Certain Terms of the Offered Notes  ......S-2
Underwriting .............................S-6

                PROSPECTUS
Available Information ....................2
Incorporation of Certain Documents by     2
 Reference ...............................
Selected Information .....................3
The Company ..............................4
Application of Proceeds ..................4
Earnings Ratios ..........................4
Securities ...............................4
Description of New Bonds .................4
Description of Senior Notes ..............9
Description of Debt Securities ...........17
Plan of Distribution .....................25
Experts ..................................25
Legal Opinions ...........................25
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                             Arizona Public Service
                                     Company

                                   [APS LOGO]


                                  $100,000,000
                          6 3/4 % Senior Notes Due 2006

                              PROSPECTUS SUPPLEMENT

                                 CS First Boston
                              Salomon Brothers Inc
                            PaineWebber Incorporated
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