EXHIBIT 10.06
exhibit1006_image1.gif [exhibit1006_image1.gif]

AMRAD TO ARTESIA
345 KV TRANSMISSION SYSTEM AND DC TERMINAL
PARTICIPATION AGREEMENT
between
EL PASO ELECTRIC COMPANY
and
TEXAS-NEW MEXICO POWER COMPANY

Execution Copy

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TABLE OF CONTENTS

SECTION
TITLE
PAGE
 
 
 
1
Parties
1
2
Recitals
1
3
Agreement
2
4
Definitions
2
5
Ownership of and Cost Responsibility
 
 
For the Components
12
6
Capacity and Entitlement in the System
13
7
Administration and Committees
18
8
Performance and Completion of Construction-
 
 
Transmission System Project Manager
27
8A
Performance and Completion of Construction-
 
 
DC Terminal Project Manager
33
9
Transmission System Operating Agent
34
9A
DC Terminal Operating Agent
39
10
Operating Emergency
39
11
Curtailment of Operating Capacity in
 
 
the Transmission System
41
12
Transmission System Spare Parts
42
12A
DC Terminal Spare Parts
43
13
Transmission System Construction Costs
43
13A
DC Terminal Construction Costs
50
14
Transmission System Operation and Maintenance
 
 
Costs
50
14A
DC Terminal Operation and Maintenance Costs
52

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TABLE OF CONTENTS
(Continued)

SECTION
TITLE
PAGE
 
 
 
15
Advancement of Funds for the Transmission System
52
15A
Advancement of Funds for the DC Terminal
56
16
Taxes
56
17
Nonpartitionment
57
18
Mortgage and Transfer of Interest
58
19
Destruction
61
20
Severance of Improvements
63
21
Capital Betterments
64
22
Transmission System Insurance
65
23
Participants' Insurance
67
24
Liability
69
25
Authorizations and Approvals
71
26
Defaults
72
27
Actions Pending Resolution of Disputes
75
28
Removal of Project Manager or Operating Agent
75
29
Arbitration
78
30
Relationship of Parties
81
31
Uncontrollable Forces
81
32
Governing Law
84
33
Nondedication of Facilities
83
34
General Provisions Governing Project Agreements
83

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TABLE OF CONTENTS
(Continued)

SECTION
TITLE
PAGE
 
 
 
35
Term and Termination
84
36
Assignment of Interests
84
37
Equal Opportunity
84
38
Control, Communication, and Relaying
89
39
Notices
93
40
Execution
94

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AMRAD TO ARTESIA
345 KV TRANSMISSION SYSTEM AND DC TERMINAL
PARTICIPATION AGREEMENT

SECTION 1
PARTIES

1.1    The parties to this Participation Agreement are: EL PASO ELECTRIC
COMPANY, a Texas corporation hereinafter referred to as "EPE" and TEXAS-NEW
MEXICO POWER COMPANY, a Texas corporation, hereinafter referred to as "TNP."

1.2    TNP and EPE are also referred to collectively as "Participants"
and singularly as a "Participant."

SECTION 2
RECITALS

2.1    This Participation Agreement is made with reference to the following
facts, among others:

2.2    The Participants recognize that it is in their mutual interest to
participate and to do so jointly, in the ownership, construction, maintenance,
and operation of the Transmission System and DC Terminal described in this
Participation Agreement.

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2.3    This Participation Agreement is made with the expectation that a
DC Terminal Construction Agreement will be executed.

SECTION 3
AGREEMENT

3.1    In consideration of the mutual covenants herein, the Participants agree
as follows:

SECTION 4
DEFINITIONS

4.1    The following terms, when used herein and in the appendices attached
hereto, shall have the meanings specified below:

4.1.1    Account(s): Any bank account or accounts selected and established by
the Transmission System Project Manager or Transmission System Operating Agent
to receive and disburse funds, pursuant to Section 15 hereof, for Construction
Work, Operating Work, Capital Betterments, Capital Replacement, and Capital
Additions.

4.1.2    Accounting Practice: Generally accepted accounting principles
in accordance with the FERC accounts as defined in Section 4.1.26 hereof.

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4.1.3    Administrative Committee: The committee established pursuant to Section
7 hereof.

4.1.4    Auditing Committee: The committee established pursuant to Section 7
hereof.

4.1.5    Capacity: Electrical rating expressed in megawatts (MW).

4.1.6    Capital Additions: Any items of tangible property which are added to
the Transmission System or DC Terminal and which do not substitute for any
pre-existing structures, facilities, or equipment constituting a part of the
Transmission System or DC Terminal and which, in accordance with sound
accounting principles, would be capitalized.

4.1.7    Capital Betterments: Enlargement or improvement of any structures,
facilities, or equipment constituting a part of the Transmission System or DC
Terminal, or the substitution thereof of other structures, facilities, or
equipment, where the substitution constitutes an enlargement or improvement as
compared with that for which it is substituted and which, in accordance with
sound accounting principles, would be capitalized.

4.1.8    Capital Replacements: The substitution of any units of property
constituting a part of the Transmission System or DC Terminal or

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other units of property where the substitution does not constitute an
enlargement or improvement of the item for which it is substituted and which, in
accordance with sound accounting principles, would be capitalized.

4.1.9    Common Facilities: Those facilities required for a total switchyard or
microwave repeater site in general including, but not limited to: site
preparation (grading, fencing, surfacing); grounding; trenching and conduit;
yard lighting; control house and equipment therein; switchyard service power
facilities; and power and control cables.

4.1.10    Component(s): Any element of the Transmission System or DC Terminal
described in Appendix A hereto, including associated land and land rights.

4.1.11    Construction Agreement: Any agreement entered into by the Transmission
System or DC Terminal Project Manager for the design, engineering, construction,
or installation of any Component for the Transmission System or DC Terminal
including, without limitation, engineering, design, construction, supervisory,
licensing, or consulting services in connection with the Construction Work.

4.1.12    Construction Costs: The costs of constructing the Transmission System
and DC Terminal as described in Section 13 hereof.

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4.1.13    Construction Funds: Monies advanced to the Transmission System or DC
Terminal Project Manager for Construction Work by or on behalf of the
Participants in accordance with this Agreement or any other Project Agreements.

4.1.14    Construction Insurance: Policies of insurance to be procured and
maintained or caused to be procured and maintained by the Transmission System or
DC Terminal Project Manager.

4.1.15    Construction Schedule: The schedule of Construction Work to be
prepared semiannually and approved by the Engineering and Operating Committee
within the milestones as established by the Administrative Committee and set
forth in Appendix D hereto.

4.1.16    Construction Work: All engineering, design, contract preparation,
purchasing, rights-of-way acquisition, construction, excess material and
equipment disposal, supervision, negotiation, preparation and performance of
Construction Agreements, all reports required by regulatory authorities and the
conduct of hearings, conferences, and other activities incidental to obtaining
requisite permits, licenses, and certificates for the construction and operation
of each Component prior to the completion of Construction Work for such
Component.

4.1.17    Cost Responsibility: The financial liability percentage of each
Participant for Construction Costs and Operating Funds concerning each Component
or Components of the Transmission System and DC Terminal described in Section 5
and shown in Appendix B hereto.

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4.1.18    Date of Firm Operation: The date with respect to each Component on
which the Engineering and Operating Committee determines such Component to be
reliable for the transmission of power and such Component can be expected to
operate continuously at any load up to its Operating Capacity.

4.1.19    DC Terminal: The facilities, including associated land and land
rights, as described in Appendix A hereto.

4.1.20    DC Terminal Operating Agent: The party designated as agent for the
Participants and responsible for the performance of Operating Work and making
Capital Betterments, Capital Replacements, and Capital Additions as more
particularly described in Section l4A hereof.

4.1.21    DC Terminal Project Manager: The party designated as agent for the
Participants and responsible for the performance of Construction Work as more
particularly described in Section 8A hereof.

4.1.22    DC Terminal Spare Parts: Spare parts or equipment, the cost of which
is capitalized, which are stocked for the DC Terminal.

4.1.23    Energy: Megawatt-hours (MWH).

4.1.24    Engineering and Operating Committee (E&O Committee): The committee
established pursuant to Section 7 hereof.

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4.1.25    Entitlement: The right, expressed in megawatts, of a Participant to
utilize the components of the Transmission System or DC Terminal singularly or
collectively for the transmission of power and energy as detailed in Section 6.2
and as identified in Appendix G.

4.1.26    FERC System of Accounts: The Federal Energy Regulatory Commission's
"Uniform System of Accounts Prescribed for Public Utilities and Licensees (Class
A and Class B)" in effect as of the date of this Agreement and as such system of
accounts may be amended from time to time.

4.1.27    Final Completion Report: A complete summary of Construction Costs, a
description of the Transmission System, and a summary of each Participant's
contributions to Construction Costs.

4.1.28    Materials and Supplies: Materials and supplies which are stocked as
defined in FERC Account 154.

4.1.29    Operating Capacity: That portion of the Components of the Transmission
System and DC Terminal actually available for power transfers under normal
system operating conditions as identified in Appendix F which may be modified by
the E&O Committee.

4.1.30    Operating Emergency: An unforeseen event or circumstance which changes
the amount of Operating Capacity in the Transmission System and DC Terminal that
would otherwise be made available to the

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Participants under normal system operating conditions as more
particularly described in Section 10 hereof.

4.1.31    Operating Funds: Monies advanced to the Transmission System or DC
Terminal Operating Agent for Operating Work or Capital Betterments, Capital
Replacements or Capital Additions by or on behalf of the Participants in
accordance with the Project Agreements.

4.1.32    Operating Insurance: Policies of insurance to be procured and
maintained or caused to be procured and maintained by the Transmission System or
DC Terminal Operating Agent in accordance with the Project Agreements.

4.1.33    Operating Work: Engineering, contract preparation, purchasing, repair,
supervision, recruitment, training, expediting, inspection, operations
accounting, testing, protection, operation, use, management, retirement,
reconstruction, and maintenance associated with operating the Transmission
System and DC Terminal including any work undertaken by the Transmission System
or DC Terminal Operating Agent pursuant to Sections 14 and l4A hereof and any
work necessitated by an Operating Emergency, but excluding all work undertaken
to make any Capital Betterments, Capital Replacements or Capital Additions.

4.1.34    Participant: Any Participant hereto and any successor assignee of such
Participant under Section 36 hereof.

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4.1.35    Payroll Taxes: Taxes of a Participant based on remuneration paid to
its employees.

4.1.36    Power: Megawatts electric (MWe).

4.1.37    Project: The construction and operation of the Transmission System and
DC Terminal pursuant to the Project Agreements.

4.1.38    Project Insurance: Construction Insurance and Operating Insurance.

4.1.39    Project Agreements: All documents executed by the Participants or
between the Participants and SPS to construct or operate the Transmission System
and DC Terminal as defined in Appendix A.

4.1.40    Transmission System: The transmission facilities including associated
land and land rights, as described in Appendix A hereto, to be constructed by
the Transmission System Project Manager and operated by the Transmission System
Operating Agent.

4.1.41    Transmission System Operating Agent: The Participant responsible for
the performance of Operating Work as more particularly described in Section 14
hereof, and making Capital Betterments, Capital Replacements, and Capital
Additions as more particularly described in Section 21 hereof.

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4.1.42    Transmission System Project Manager: The Participant responsible for
the performance of Construction Work as more particularly described in Section 8
hereof.

4.1.43    Transmission System Spare Parts: Spare Parts or equipment, the cost of
which is capitalized, which are stocked for the Transmission System.

4.1.44    Units of Property: Units of property as described in the Federal
Energy Regulatory Commission's "Lists of Units of Property for Use in Connection
with Uniform System of Accounts Prescribed for Public Utilities and Licensees,"
in effect as of the date of this Agreement, and as such list may be amended from
time to time.

4.1.45    Willful Action:

4.1.45.1 Action taken or not taken by a Participant (including the Transmission
System Project Manager or the Transmission System Operating Agent) at the
direction of its directors, officers, or employees having management or
administrative responsibility affecting its performance under any of the Project
Agreements, which action is knowingly or intentionally taken or failed to be
taken with conscious indifference to the consequences thereof or with intent or
knowledge that injury, damage or delay of the Project would result or would
probably result therefrom.

4.1.45.2 Action taken or not taken by a Participant (including the Transmission
System Project Manager or Transmission System Operating

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Agent) at the direction of its directors, officers, or employees having
management or administrative responsibility affecting its performance under any
of the Project Agreements, which action has been determined by final arbitration
award or final judgment or judicial decree to be a material default under any of
the Project Agreements and which occurs or continues beyond the time specified
in such arbitration award or judgment or judicial decree for curing such default
or, if no time to cure is specified therein; occurs or continues beyond a
reasonable time to cure such default.

4.1.45.3 Action taken or not taken by a Participant (including the Transmission
System Project Manager or the Transmission System Operating Agent) at the
direction of its directors, officers, or employees having management or
administrative responsibility affecting its performance under any of the Project
Agreements, which action is knowingly or intentionally taken or failed to be
taken is a material default under any of the Project Agreements.

4.1.45.4 The phrase "employees having management responsibility" as used in this
Section 4.1.47 means employees of a Participant (including the Transmission
System Project Manager or the Transmission System Operating Agent) who are
responsible for one or more of the executive functions of planning, organizing,
coordinating, directing, controlling, and supervising such performance under any
of the Project Agreements.

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

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SECTION 5
OWNERSHIP OF AND COST RESPONSIBILITY FOR THE COMPONENTS

5.1    Each Participant shall accept and hold title to an undivided interest as
a tenant in common in the Transmission System and DC terminal in proportion to
its Cost Responsibility in the system, as shown in Appendix B.

5.2    The ownership of and title to the components of the Transmission System
and DC Terminal described in Appendix A of this Agreement, the control and
communication system, as described in Appendix C, and all Capital Betterments,
Capital Replacements, and Capital Additions shall vest simultaneously in the
Participants so that the estate of each of them shall be deemed to be concurrent
as to time, right, and priority.

5.3    The Participants shall be responsible for the Construction Costs, for the
operation and maintenance (O&M) expenses, and for Capital Replacements, Capital
Additions, and Capital Betterments of the Components of the Transmission System
and the DC Terminal in accordance with their Cost Responsibilities.

5.4    In the event any Participant transfers or assigns any of its undivided
rights, title, or interest in and to the Transmission System and DC Terminal in
accordance with Section 18 hereof, the Participants and any successor shall
jointly make, execute, and deliver a supplement to this Agreement, and, if
appropriate, other Project Agreements, in recordable form which shall describe
with such particularity and detail,

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as may be warranted under the circumstances, the rights, title, and interest of
each Participant and any successor following such transfer or assignment.

5.5    The communication equipment as described in Appendix C hereto, shall be
operated and maintained by EPE. Cost associated with expansion and modification
of the existing communication facilities shall be shared by the Participants in
proportion to their Cost Responsibility as detailed in Appendix B or in Section
38.

5.6    Each Participant, excluding any nonparticipating third parties, shall own
and have nonexclusive rights to the engineering work, drawings, and
specifications, and such work, drawings, and specifications related to the
Transmission System and DC Terminal. By mutual agreement of the Participants,
the engineering work, drawings and specifications may be sold and the proceeds
from such sale shall be distributed according to the Participants' Cost
Responsibilities in this Project.

SECTION 6
CAPACITY AND ENTITLEMENT IN THE SYSTEM

6.1    System Capacity

6.1.1    All of the Components of the Transmission System and DC Terminal shall
have an initial Operating Capacity to be determined by the E&O Committee. The
Participants agree to modify the Operating Capacity of the Components of the
Transmission System and DC Terminal

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whenever found to be appropriate by the E&O Committee; such modification of the
Operating Capacity will be considered whenever the Transmission System and DC
Terminal is closely paralleled by any additional transmission lines that
materially affects the Operating Capacity, by power plant construction, or upon
written request by one of the Participants. All Operating Capacity ratings will
be bi-directional as identified in Appendix F, subject to review by the E&O
Committee.

6.1.2    Should the Operating Capacity of any of the Components of the
Transmission System and DC Terminal change from time to time, as determined by
the E&O Committee, increases or decreases in entitlement shall be reapportioned
according to the Entitlement percentages of the Participants, presented in
Appendix G.

6.1.3    Either Participant shall be able to exercise the option, at any time,
to increase the Operating Capacity of the DC Terminal, Transmission System, or
both. Either Participant may exercise its option by giving written notice to the
other Participant.

6.1.3.1 In the event either Participant exercises its option to increase the
Operating Capacity of the Dc Terminal, Transmission System, or both, the other
Participant shall have a right of first refusal to participate in such increase
of Operating Capacity up to its Entitlement.  Either Participant shall exercise
its right of first refusal ("election") by giving the other Participant written
notice of its election to participate within ninety (90) days of receipt of
written notice from the Participant wishing to increase the Operating Capacity.

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In the event that such election is made, each Participant shall pay for, and
shall own, a percentage share of the increased Operating Capacity equal to its
Cost Responsibility in increasing the Operating Capacity.

In the event that a Participant elects not to participate in increasing the
Operating Capacity of the DC Terminal, Transmission System, or both, the other
Participant shall have the right to proceed with increasing the Operating
Capacity at its own cost and expense, provided that such increase of Operating
Capacity does not materially effect the operation of the electrical system or
the Entitlement in this Transmission System and DC Terminal of the Participant
electing not to increase the Operating Capacity.

In the event that only one Participant makes such increase in Operating
Capacity, that Participant shall acquire the title to and use of the increased
Operating Capacity itself.

6.2    Entitlement

6.2.1    Upon completion and placement into firm operation of the Transmission
System and DC Terminal, each Participant shall be entitled to use the
Transmission System and DC Terminal for:

6.2.1.1 Transmission of Power and Energy on a firm basis, as supplied by the
Participant less losses, not to exceed the Operating Capacity of the
Transmission System and DC Terminal multiplied by the

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Participants' respective Percentage Apportionment of Operating Capacity found in
Appendix G.

6.2.1.2 Transmission of Power and Energy, as supplied by the Participant less
losses, above that entitlement as determined in paragraph 6.2.1.1 above,
provided that:

6.2.1.2.1 Such Capacity is not being used by the other Participant, as
determined solely by the Participant having spare Capacity.

6.2.1.2.2 Appropriate agreement for such use has been reached.

6.2.1.2.3 Such use does not interfere with the other Participant's rights to use
of its Entitlement and does not impair the capability of the system nor
jeopardize continuity of service, all as determined solely by the Transmission
System Operating Agent.

6.3    Interconnections and Additions

6.3.1    Besides the interconnections listed in Appendix A as preapproved
interconnections, each Participant shall be entitled to interconnect the
Transmission System and DC Terminal with its own or third parties transmission
systems provided that:

6.3.1.1 Such Participant shall secure through the E&O Committee, the consent of
the other Participant; to include arrangements for operation and control of
facilities affecting the Transmission System and DC Terminal.

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6.3.1.2 Such Participant shall pay all costs of the interconnection, including,
where applicable, a proportionate share of the cost of Common Facilities
previously installed.

6.3.1.3 A Participant establishing additional interconnections shall not be
deemed to acquire additional transmission entitlement, nor shall
such interconnection reduce the Capacity Entitlements of the other Participant.

6.3.2    Interconnections by third party(s) must be approved by the E&O
Committee; all costs of such interconnections, including where applicable
an apportionate share of the cost of Common Facilities previously
installed, must be borne by third party(s) desiring such interconnection, and
such interconnections must not reduce Capacity Entitlements of the Participants.

6.3.3    Third parties interconnecting with the system may engage in
transactions with the Participants or other third parties at the point of
interconnection to the extent that each has rights and in amounts such that it
does not affect the rights of the Participants, is within the technical
capability of the system, and provided that approval of the E&O Committee has
been received.

6.4    No Participant shall construct or operate any portion of its separate
transmission system, including interconnections with others, in such a manner as
to unduly interfere with the rights of the other Participants. The Participants
hereby authorize and support the

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Transmission System or DC Terminal Operating Agent in such action it may deem
prudent or necessary to restore the rights of the Participants.

6.5    Wheeling service to third parties.

6.5.1    Wheeling Service over the Transmission System and DC Terminal shall be
afforded to third parties provided that such third party's wheeling service does
not materially affect the system operation of the Participants and such wheeling
service conforms with the wheeling criteria established by the E&O Committee.

6.5.2    The Participants will each dedicate portions of Entitlement and collect
the corresponding revenues from this wheeling service based on either their
existing apportionment percentage of Operating Capacity in the Transmission
System and DC Terminal, or on any other mutually agreeable division.

SECTION 7
ADMINISTRATION AND COMMITTEES

7.1    As a means of securing effective cooperation and interchange of
information and of providing consultation on a prompt and orderly basis
between the Participants in connection with various administrative and technical
matters which may arise from time to time in connection with the terms and
conditions of this Agreement, the Participants establish the committees
described in this Section 7. The chairman for each of the committees shall be
the representative of the Transmission System Project

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Manager or the Transmission System Operating Agent and shall be responsible for
calling meetings and establishing agendas as required by the Participants. The
various committees must meet at least annually. The responsibility and authority
of each such committee shall be limited to matters in connection with the
carrying out of the provisions of the Project Agreements and shall not extend to
other affairs of the Participants. The following committees are hereby
established and shall have the functions and responsibilities described herein.

7.1.1    An Administrative Committee consisting of one (l) representative
appointed by each Participant which representative shall be an officer of said
Participant or the authorized designee of the officer of the Participant.

7.1.2    An Engineering and Operating Committee consisting of two (2)
representatives appointed by each Participant.

7.1.3    An Auditing Committee consisting of two (2) representatives appointed
by each Participant.

7.2    Within thirty (30) days after the execution of this Participation
Agreement, each Participant shall designate its representatives on the
committees hereby established and give written notice thereof to the other
Participant.

7.3    The Administrative Committee, the Engineering and Operating Committee,
and the Auditing Committee shall keep written minutes and records of all
meetings.

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7.4    Any action or determination of a committee must be unanimous and shall be
effective when set forth in writing and signed by each Participant's
representatives.

7.5    The committees shall· have no authority to modify any of the terms,
covenants, or conditions of this Agreement except as specifically authorized in
this Agreement.

7.6    The Administrative Committee shall have the following functions:

7.6.1    Provide liaison among the Participants at the management level.

7.6.2    Exercise, under the provisions of the Project Agreements, general
supervision and guidance over, and assign other duties to, the Engineering and
Operating Committee, the Auditing Committee, and any other standing or ad hoc
committees established pursuant to Section 7.12 hereof.

7.6.3    Review, discuss, resolve, or make recommendations relating to disputes
among the Participants and SPS arising under the Project Agreements.

7.6.4    At the request of any Participant on such terms and conditions as the
Administrative Committee may deem appropriate, authorize the installation on the
property comprising the Transmission System and DC

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Terminal of any structures, facilities, or equipment by any Participant or any
third party for its or their own use, which structures, facilities, or
equipment, shall not become a part of the Transmission System and DC Terminal.

7.6.5    Establish or modify milestone activity dates for inclusion as Appendix
D to this Agreement.

7.6.6    Perform such other functions and duties as may be assigned to it in
this Agreement.

7.7    The Engineering and Operating Committee shall have the following
functions:

7.7.1    Provide liaison between the Participants, and the Transmission System
or DC Terminal Project Manager, and the Transmission System or DC Terminal
Operating Agent with respect to progress, performance, and completion of
Construction Work and performance of Operating Work.

7.7.2    Be responsible for the approval of the annual capital expenditures
budget, the annual operation and maintenance (O&M) budget, and the estimated
quarterly cash requirements. Such budgets and cash requirements shall be
prepared by the Transmission System Project Manager or Transmission System and
Operating Agent, as appropriate.

7.7.3    Be responsible for planning scheduled outages for maintenance.

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7.7.4    Develop the criteria for the review, approval or modification of the
written statistical and administrative reports, written budgets, information and
other similar records, and the form thereof, to be kept and furnished by the
Transmission System or DC Terminal Operating Agent. However, such criteria shall
not apply to accounting records used internally by the Transmission System or DC
Terminal Operating Agent for the purpose of accumulating financial and
statistical data, such as books of original entry, ledgers, work papers, and
source documents.

7.7.5    Be responsible for the development and review of the procedures for
Power and Energy accounting.

7.7.6    Be responsible for the development of the practices and procedures for
the delivery of Power and Energy by the Components in accordance with the
Participants' schedules. Such practices and procedures shall provide for
modifying said schedules to meet the needs of day-to-day or hour-by-hour
operation, including emergencies on a Participant's system.

7.7.7    Defining those situations that would constitute an Operating Emergency
and developing the methods and procedures to be utilized in calculating any
resulting reduction in the Operating Capacity of any Component.

7.7.8    Establish procedures and calculations to be applied by the Transmission
System or DC Terminal Operating Agent for determining losses on the Components.

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7.7.9    Determine the Date of Firm Operation for each Component, within the
milestone dates of the Construction Schedule as established in Appendix D.

7.7.10    Be responsible for design concepts and any changes thereto; type and
configuration of major Components of the Transmission System and the DC
Terminal; and the projected cash flow for construction for the Transmission
System and the DC Terminal. The E&O Committee shall discharge its responsibility
detailed above within a time frame that is consistent with the Project schedule
and recognizing external commitments and constraints. No such responsibility
shall extend retroactively to decisions or commitments made before the effective
date of this Agreement.

7.7.11    Review, approve, modify or otherwise act upon proposals concerning,
but not limited to, bidders list for major equipment, the bid evaluation
process, selection of architects, engineers, and/or constructors. The E&O
Committee shall discharge its responsibility detailed above within a time frame
that is consistent with the Project schedule and recognizing external
commitments and constraints. No such right of approval shall be extended
retroactively to decisions or commitments made before the effective date of this
Agreement.

7.7.12    Review and modify, if required, the Operating Capacity of the
Components at least annually.

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7.7.13    Review, approve, modify or otherwise establish a wheeling criteria for
third parties and act upon proposals for wheeling service from third parties
pursuant to Section 6.5.

7.7.14    Perform such other duties as may be assigned to it under the
provisions of any Project Agreement or by the Administrative Committee.

7.8    The Auditing Committee shall have the following functions:

7.8.1    Review internal control and make audits on either an annual basis, or
any other basis agreed to by the Audit Committee, of the records maintained by
the Transmission System and DC Terminal Project Manager and the Transmission
System and DC Terminal Operating Agent in performance of Transmission System and
DC Terminal construction and of operation and maintenance, as well as of any
other company records maintained by the DC Terminal Project Manager or the DC
Terminal Operating Agent in support of its billings to the Participants.

7.8.2    Review and approve the format and contents of the Transmission System
and DC Terminal Project Managers' and Transmission System and DC Terminal
Operating Agents' accounting records and reports for Transmission System and DC
Terminal construction and O&M.

7.8.3    Verify to the Participants that the Transmission System and DC Terminal
Project Managers' and Transmission System and DC Terminal Operating Agents'
billings to the Participants resulting from construction, operation, and
maintenance of the Transmission System and

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DC Terminal are in accordance with this Agreement and with generally accepted
Accounting Practices.

7.8.4    Review, approve, or modify the method for calculating the Participant's
loadings as detailed in Appendix E when such Participant acts as construction
agent for Capital Additions, Capital Betterments, or Capital Replacements.

7.8.5    Establish the minimum and maximum balances to be maintained in the
accounts for construction funds and operating funds pursuant to Section 15.4
hereof.

7.8.6    Perform such other duties as may be assigned to it under the provisions
of any Project Agreement or by the Administrative Committee.

7.9    Each Participant shall notify the other Participant promptly of any
change in the designation of its representatives on the committees.
A Participant may designate an alternate to act as its representative on any
committee in the absence of the regular member or to act on specified occasions
with respect to specified matters. Any alternate representative appearing at a
committee meeting shall be deemed to have authority to act on behalf of the
Participant he represents.

7.10    If the Engineering and Operating Committee or the Auditing Committee
fail to reach agreement while performing the functions and duties delegated to
it in this Agreement, then such disagreement shall be referred in writing within
30 days to the Administrative Committee for

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resolution. Pursuant to Paragraph E.7.2 of Appendix E, the Audit Committee shall
have the option for an initial 60 day study period prior to the aforementioned
30 day limit for referring disagreements to the Administrative Committee.
Notwithstanding the terms and provisions of this Section 7.10, if in the
Transmission System such disagreement will affect the Date of Firm Operation of
the Transmission System or DC Terminal, then the Transmission System Project
Manager shall have the right to directly refer the disputed issue to the
Administrative Committee for Resolution.

7.11    If the Administrative Committee fails to reach agreement while
performing the respective functions and duties assigned to it in this Agreement,
then such disagreement shall be referred in writing within 30 days to chief
executive officers of the Participants for resolution. If the dispute cannot be
resolved by the chief executive officers within thirty (30) days, the dispute
shall be resolved by arbitration pursuant to Section 29.

7.12    The Participants, acting through the Administrative Committee,
shall have the right to establish standing or ad hoc committees. The authority
and duties of any such committee shall be set forth in writing by the
Administrative Committee.

7.13    Any expenses incurred by any member of the Administrative Committee,
Audit Committee, E&O Committee, or any standing or ad hoc committees in
connection with his duties on such committee shall be paid and borne by the
Participant whom they represents, and shall not be directly included in
Construction Costs or in costs for Operating Work.

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SECTION 8
PERFORMANCE AND COMPLETION OF CONSTRUCTION WORK –
TRANSMISSION SYSTEM PROJECT MANAGER

8.1    The Transmission System shall be designed and constructed in accordance
with practices generally accepted in the electric utility industry as such
practices may be affected by special operational design characteristics of the
Transmission System. The Transmission System Project Manager shall be
responsible for the design and construction of the Transmission System.

8.2    EPE shall be the Transmission System Project Manager.

8.3    The Participants hereby appoint EPE as their agent, and EPE shall
undertake as the agent for the other Participant and as principal on its own
behalf, to perform, or have performed, the Construction Work and to carry out
the duties and the responsibilities required by the Transmission System Project
Manager under the Project Agreements

8.4    The Transmission System Project Manager shall on behalf of the
Participants:

8.4.1    Execute, administer, perform, and enforce all Construction Agreements
in the name of the Transmission System Project Manager, acting as agent for the
other Participant and as principal on its own, and their behalf, whether or not
expressed or manifested, in which all Participants

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shall have undivided interests as tenants in common equal to their respective
Cost Responsibility.

8.4.2    Furnish each member of the E&O Committee with copies of all contracts
with the architect, engineer, constructor, contractors, and principal
subcontractors, vendors, and consultants for their review pursuant to Section
7.7.11.

8.4.3    Arrange for placement of Construction Insurance pursuant to Section 22
hereof.

8.4.4    Determine which contractors, if any, shall be required to furnish any
portion of the Construction Insurance, other insurance, and faithful performance
and payment bonds.

8.4.5    Investigate, settle, or defend and pay any judgments pertaining to
uninsured third party claims arising out of the construction of the Transmission
System. The Administrative Committee shall investigate, settle, or defend and
direct the Transmission System Project Manager to pay any judgments pertaining
to uninsured third party claims arising out of the Transmission System when any
one claim or combination of claims exceeds $100,000 per occurrence.

8.4.6    Comply with: (a) any and all laws applicable to the performance of
Construction Work, including without limitation all applicable laws, rules, and
regulations for protection of the environment and all applicable provisions of
any Worker's Compensation laws; and

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(b) the terms and conditions of any contract, permit, or license relating to the
Transmission System.

8.4.7    Expend the funds advanced to the Transmission System Project Manager as
required for construction of the Transmission System in accordance with the
terms and conditions of the Project Agreements.

8.4.8    Keep and maintain records of monies received and expended, obligations
incurred, credits accrued, the conduct of the Construction Work, and of
contracts entered into in the performance of Construction Work as may be
necessary or useful in performing the functions of the Transmission System
Project Manager under the Project Agreements or required to permit an audit of
the Construction Work, and, upon reasonable notice, make such records available
for inspection and copying by the Auditing Committee at the Transmission System
Project Manager's principal place of business and during normal business hours.

8.4.9    Not suffer any liens to remain in effect unsatisfied against the
Transmission System, other than liens permitted by Section 18 hereof; provided,
however, that the Transmission System Project Manager shall not be required to
pay or discharge any such lien as long as a proceeding shall be commenced or
pending in which the lawfulness or validity of such lien shall be contested in
good faith.

8.4.10    Obtain or cause to be obtained necessary construction permits,
temporary access rights, and other licenses and approvals requisite to the
performance and completion of Construction Work and

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initiation of Operating Work; however, the Transmission System Project Manager
is not required to pursue any approvals required solely by any Participant for
owning, constructing, or operating the Transmission System.

8.4.11    As soon as practicable after the completion of Construction Work of
each Component, and in no case later than twelve (12) months from the Date of
Firm Operation of each Component, provide each Participant with a summary of the
Construction Costs classified to appropriate FERC accounts.

8.4.12    As soon as practicable after the commencement of Construction Work,
furnish the E&O Committee with an estimate of total Construction Costs broken
down by major categories of equipment and services and a forecast of the cash
requirements of each Participant to meet such Construction Costs. Such forecast
shall set forth cash requirements for:  (a) each quarterly period commencing on
the first day of January, April, July and October of the current year in which
Construction Costs shall become due; and (b) each month of the first two
quarterly periods immediately following the issuance of such forecast. Such
forecast shall be revised and furnished to each Participant every three (3)
months thereafter until completion of Construction Work.

8.4.13    Furnish a Participant any information reasonably available pertaining
to the construction of the Transmission System that shall assist said
Participant in responding to a request for such information by any federal,
state, or local regulatory authority, or lender.

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8.4.14    Keep the Participants fully and promptly advised of significant
developments in connection with the progress, performance, and completion of
Construction Work, as required by the Administrative Committee or the E&O
Committee.

8.4.15    Prepare and distribute the Final Completion Report to each Participant
as soon as practicable, but not later than twelve (12) months after completion
of Construction Work performed by the Transmission System Project Manager on the
final Component, unless such time is extended by the Administrative Committee.

8.4.16    Provide the Administrative Committee with all necessary and required
records and information for its use in the performance of its responsibilities
under the Project Agreements.

8.4.17    Construct the Transmission System so as to comply with the Project
Agreements.

8.4.18    Provide for and enforce any and all warranties on equipment,
facilities, materials, and services sold to or furnished for the Transmission
System, except that any equipment warranties which expire more than one (1) year
after the completion of Construction Work for the final Component to be
constructed by the Transmission System Project Manager shall be enforced by the
Transmission System Operating Agent.

8.4.19    Secure or cause to be secured the necessary land and land rights for
the Transmission System. Rights-of-way required for

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construction, operation, and maintenance of the Transmission System across
patented lands shall be procured by the Transmission System Project Manager in
the names of the Participants. Such rights-of-way may be procured by purchase or
exercise of the power of eminent domain of the fee interest in or by a grant of
easement across any parcel of such lands as the Transmission System Project
Manager shall in its sole discretion deem advantageous to the Participants.
Prior to the exercise of the power of eminent domain, suitable notice, including
a list of condemnees, will be given to the Participants. Rights-of-way or
easements across nonprivate lands will be acquired by the Transmission System
Project Manager in the names of the Participants.

8.4.19.1 In the case of rights-of-way or easements across military lands, the
Project Manager will include in its application package to the military the 115
KV associated transmission line contemplated by TNP even though it is not part
of this Project.

8.4.20    Dispose of excess material and equipment after completion of
Construction Work in the best interest of all Participants and distribute
proceeds from such disposal to the Participants in proportion to their
Cost Responsibilities for the associated Component.

8.5    Each Participant shall provide to the extent possible all assistance
required by the Transmission System Project Manager in the performance of its
obligations hereunder and such Participant shall be reimbursed for its costs and
expenses incurred in providing such assistance on such terms and conditions as
may be agreed upon by such

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Participant and the Transmission System Project Manager. Each Participant shall,
within sixty (60) days after the execution of this Participation Agreement,
submit to the Transmission System Project Manager any special requirement it may
have regarding accounting, records, or information in order that all required
records may be maintained in the same manner throughout the construction and
final completion of the Transmission System. The Transmission System Project
Manager shall accommodate said special requirements as specified by the
committee established in Section 7 hereof.

8.6    The Project Manager shall construct the Transmission System with the
objective of having the respective Components available for energization, for
tests, and for operation in accordance with Appendix C, hereto, unless and until
Appendix C is revised by the Administrative Committee.

SECTION 8A
PERFORMANCE AND COMPLETION OF CONSTRUCTION WORK­
DC TERMINAL PROJECT MANAGER

8A.1    The performance and completion of the Construction Work and the duties
of the DC Terminal Project Manager shall be defined in the DC Terminal
Construction Agreement executed between Southwestern Public Service Company
(SPS) and the Participants attached hereto for reference, but is not made part
of this Agreement.

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SECTION 9
TRANSMISSION SYSTEM OPERATING AGENT

9.1    The Participants hereby appoint EPE and as the Transmission System
Operating Agent. EPE shall undertake as the agent for the Participants and as
principal on its own and their behalf, to perform or have performed the
Operating Work, Capital Betterments, Capital ·Replacement and Capital Additions,
and to carry out the duties and responsibilities required by the Transmission
System Operating Agent under the Project Agreements.

9.2    The Transmission System Operating Agent shall on behalf of the
Participants:

9.2.1    Execute, administer, enforce, and perform or have performed the
Operating Work, Capital Betterments Capital Replacement and Capital Additions as
approved by the E&O Committee so as to comply with the Project Agreements and in
a manner consistent with generally accepted practices in the electric utility
industry, recognizing that such practices may be affected by the design and
operational characteristics of the Transmission System, the rights and
obligations of the Participants under this Participation Agreement, and other
special circumstances affecting the Operating Work and Capital Betterments,
Capital Replacement and Capital Additions.

9.2.2    Furnish from its own resources, or contract for and obtain from any
other sources as approved by the E&O Committee, the services and

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studies necessary for performance of Operating Work, Capital Betterments,
Capital Replacements, or Capital Additions.

9.2.3    Execute, administer, perform, and enforce Project Agreements in the
name of the Transmission System Operating Agent, acting as agent for the
Participants and as principal on its own behalf, whether or not expressed or
manifested, for Operating Work, Capital Betterments, Capital Replacement, and
Capital Additions, including without limitation any and all warranties on
equipment, facilities, materials, and services furnished pursuant to any such
contracts.

9.2.4    Administer, perform, and enforce all other contractual obligations and
arrangements, including all warranties applicable thereto, entered into by the
Transmission System Project Manager and continuing beyond the period ending one
(1) year after the completion of Construction Work for the final Component.

9.2.5    Furnish or recruit the necessary personnel and provide for such
training as may be required to qualify them to perform the Operating Work or
Capital Betterments, Capital Replacements and Capital Additions, and to meet all
requirements established by law.

9.2.6    Comply with: (a) any and all laws applicable to the performance of
Operating Work, Capital Betterments, Capital Replacements, and Capital
Additions, including, without limitation, all applicable laws, rules, and
regulations for protection of the environment and all applicable provisions of
any Worker's Compensation Laws; and (b) the

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terms and conditions of any contract, permit, or license relating to the
Transmission System.

9.2.7    Purchase and procure, as approved by the E&O Committee, in the name of
the Participants, with undivided interests as tenants in common in accordance
with the Project Agreements, the equipment, apparatus, machinery, tools,
materials and supplies, and Transmission System Spare Parts necessary for the
performance of Operating Work, Capital Betterments, Capital Replacements, and
Capital Additions.

9.2.8    Expend the Operating Funds advanced to the Transmission System
Operating Agent in accordance with the terms and conditions of the
Project Agreements.

9.2.9    Keep and maintain adequate records of monies received and expended,
obligations incurred, credits accrued, the conduct of Operating Work, making
Capital Betterments, Capital Replacements, and Capital Additions, and of Project
Agreements entered into in the performance of Operating Work, Capital
Betterments, Capital Replacements, and Capital Additions as may be necessary or
useful in performing the functions of the Transmission System Operating Agent
under the Project Agreements. And, upon reasonable notice, make such records
available for inspection and copying during normal business hours by the
Auditing Committee at the Transmission System Operating Agent's principal place
of business.

9.2.10    Not suffer any liens to remain in effect unsatisfied against the
Transmission System, other than liens permitted by Section 18 hereof;

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provided, however, that the Transmission System Operating Agent shall not be
required to pay or discharge any lien as long as a proceeding shall be commenced
or pending in which the lawfulness or validity of such lien shall be contested
in good faith.

9.2.11    Arrange for the placement and maintenance of Operating Insurance as
provided in Section 22 hereof.

9.2.12    Investigate, settle, or defend, and pay any judgments pertaining to
uninsured third party claims arising out of the operation of the Transmission
System. The Administrative Committee shall investigate, settle, or defend, and
direct the Transmission System Operating Agent to pay and judgments pertaining
to uninsured third party claims arising out of the Transmission System when any
one claim or a combination of claims exceeds $100,000 per occurrence.

9.2.13    Keep the Participants fully and promptly advised of material changes
in conditions or other material developments affecting the performance of
Operating Work, or Capital Betterments, or Capital Replacements or Capital
Additions, and furnish the other Participant with copies of any notices given or
received pursuant to the Project Agreements.

9.2.14    Provide the Administrative, Engineering and Operating, Auditing, and
any standing and ad hoc committees, with all written statistical and
administrative reports, accounting records, written budgets, information, and
other records relating to Operating Work,

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Capital Betterments, Capital Replacements, and Capital Additions necessary or
useful in the performance of their respective responsibilities under the Project
Agreements.

9.2.15    Prepare recommendations covering the matters which are to be reviewed
and approved by the Engineering and Operating Committee pursuant to Section 7.7
hereof.

9.2.16    Carry out and follow the practices and procedures and directions which
have been approved and issued by the Administrative Committee, the Engineering
and Operating Committee, or the Auditing Committee pursuant to the Project
Agreements.

9.2.17    In the event of an Operating Emergency, take such action as required
by Section 10 hereof.

9.2.18    Keep the Participants informed whenever maintenance is required and
whenever work on its own system external to the Transmission System will affect
Transmission System operations.

9.2.19    Assure proper coordination of Operating Work with the operations of
facilities external to the Transmission System.

9.2.20    As soon as practical after the Date of Firm Operation of the
Transmission System and quarterly thereafter on or before the first day of
March, June, September, and December furnish the E&O Committee with a budget of
total O&M expenses and costs and expenses associated with

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Capital Betterments, Capital Replacements, and Capital Additions, broken down by
major categories, for the remainder of the current calendar year (or for the
next calendar year in the case of December submissions) and a forecast of the
cash requirements of each Participant to meet such costs and expenses. Such
forecast shall set forth the cash requirements: (a) for each quarterly period
commencing on the first day of January, April, July, and October of the current
year in which such costs and expenses shall become due; and (b) for each month
of the first two quarterly periods immediately following the issuance of such
forecast.

SECTION 9A
DC TERMINAL OPERATING AGENT

9A.1    The duties and responsibilities of the DC Terminal Operating Agent shall
be assigned and coordinated through the Operating Committee established in the
Interconnection Agreement between the Participants and SPS.

SECTION 10
OPERATING EMERGENCY

10.1    In the event of an Operating Emergency:

10.1.1    The Transmission System Operating Agent will follow the procedures
established by the E&O Committee as established in Section 7.7.7 for handling an
Operating Emergency and for determining any

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reduction in the Operating Capacity of the Transmission System or DC Terminal.

10.1.2    If, for a particular Operating Emergency, no procedures have been
established by the E&O Committee, the Transmission System Operating Agent shall
take, at its sole discretion, such action as it may deem prudent or necessary,
to terminate the Operating Emergency, to preserve and maintain the safety,
integrity, and operability of the Transmission System and DC Terminal, to
maintain the maximum Operating Capability of each Component, to protect the
health and safety of the public, or to minimize any adverse environmental
effects, and such other action as required by Section 10 hereof.

10.2    As soon as practicable after the commencement of an Operating Emergency,
the Transmission System Operating Agent shall advise the Participants of the
occurrence of the Operating Emergency, its nature, and the steps taken or to be
taken to terminate the Operating Emergency.

10.3    The costs incurred and amounts expended and charged to maintenance
expenses by the Transmission System Operating Agent for repair and restoration,
of the Transmission System as a result of an Operating Emergency shall be
allocated to the Participants in proportion to their Cost Responsibility for the
Component(s) being repaired or restored and shall be billed to the appropriate
Participants in accordance with Section 15 hereof.

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10.4    Costs proposed to be incurred and amounts to be expended by the
Transmission System Operating Agent for Capital Betterments, Capital
Replacements, Capital Additions as a result of an Operating Emergency, if
unbudgeted, shall be submitted to the E&O Committee for review and approval and
allocated to the Participants in proportion to their Cost Responsibility in the
Component(s) to which such Capital Betterments, Capital Replacements, and
Capital Additions are to be made, and the Transmission System Operating Agent
shall bill the appropriate Participants therefor.

SECTION 11
CURTAILMENT OF OPERATING CAPACITY IN THE
TRANSMISSION SYSTEM OR DC TERMINAL

11.1    In the event it becomes necessary to curtail the Operating Capacity of
the Transmission System or DC Terminal either due to scheduled maintenance or
upon the occurrence of a situation deemed by either the Transmission System or
DC Terminal Operating Agent to constitute an Operating Emergency, pursuant to
the criteria established by the E&O Committee or DC Terminal Operating Agent,
the Transmission System Operating Agent shall as soon as practicable notify the
dispatchers of the other Participant.

11.2    Upon occurrence of a situation for which no E&O Committee criteria
apply, the Transmission System Operating Agent may, in its sole discretion,
declare an Operating Emergency and as soon as practicable shall notify the
dispatchers of the Participants thereof. In the event

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that an Operating Emergency is declared pursuant to this section, the
Transmission System Operation Agent shall as soon as practicable provide fully
documented reports in support of its action to the Participants and, the E&O
Committee shall at its earliest convenience review and develop criteria for
future occurrences of the same nature.

11.3    In the event an Operating Emergency is declared, whether pursuant to
Section 11.1 or 11.2, the Transmission System Operating Agent shall determine
the amount of reduction, if any, in the Operating Capacity of each Component of
the Transmission System in accordance with guidelines developed by the E&O
Committee pursuant to Section 7.7.7 hereof.

11.4    In the event that Operating Capacity in any Component is reduced
pursuant to Section 11.3, revised Entitlements shall be calculated for each
Participant, which Entitlements shall remain in effect until the Operating
Emergency is ended.

SECTION 12
TRANSMISSION SYSTEM SPARE PARTS

12.1    The Transmission System Project Manager shall purchase Transmission
System Spare Parts for the initial Transmission System Spare Parts inventory in
accordance with policies and budgets prepared or approved by the Engineering and
Operating Committee.

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12.2    The Transmission System Operating Agent shall maintain the Transmission
System Spare Parts inventory in accordance with policies approved by the E&O
Committee.

12.3    The Transmission System Operating Agent shall purchase replacement
Transmission System Spare Parts in accordance with the policies and budgets
approved by the E&O Committee.

SECTION 12A
DC TERMINAL SPARE PARTS

12A.1    The policies and procedures for the purchase of DC Terminal Spare Parts
and the DC Terminal Spare Parts inventory shall be as they are defined in the DC
Terminal Construction Agreement.

SECTION 13
TRANSMISSION SYSTEM CONSTRUCTION COSTS

13.1    Construction Costs of the Transmission System shall include all payments
made and obligations incurred by the Transmission System Project Manager for, or
in connection with, Construction Work.

13.2    All Construction Costs for each Component shall be shared by
the Participants in proportion to their respective Cost Responsibility described
in Appendix B hereto. Construction Costs shall be advanced by the Participants,
and disbursed and accounted for by the Transmission System Project Manager, in
accordance with Section 15 hereof.

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13.3    Construction Costs shall consist of payments made and obligations
incurred in accordance with the Project Agreements for, or in connection with,
Construction Work (excluding allowance for funds used during construction and,
ad valorem taxes or payments in lieu thereof) and shall consist of the
following:

13.3.1    All costs of labor, services and studies performed in connection with
Construction Work, if authorized and approved by the Transmission System Project
Manager, and within the annual budget approved by the E&O Committee.

13.3.2    Payroll and other expenses of the Transmission System Project
Manager's employees while performing the Construction Work, including applicable
allocated labor loading charges as allocated in accordance with Appendix E,
Sections El through E4.

13.3.3    Overhead costs associated with Construction Work (including
the allowance for the Transmission System Project Manager's administrative and
general expenses described in Section 13.3.14 hereof), costs of temporary
facilities, land and land rights, structures and improvements, and equipment for
the Transmission System as set forth in the Electric Plant Instructions of the
FERC System of Accounts.

13.3.4    All costs and expenses, including those of outside consultants and
attorneys, incurred by the Transmission System Project Manager or the other
Participant with respect to the securing of licenses, permits, certificates and
any other authorizations required by

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law (excluding those authorizations and approvals specified in Section 25.2),
compliance with any applicable laws, rules or regulations respecting the
environment, conservation of the public health and safety, negotiation for the
acquisition of land, land rights, and to the preparation of agreements and
permits relating to Construction Work with entities other than the Participants.
A Participant anticipating such costs and expenses shall submit an estimate
thereof to the Transmission System Project Manager for authorization and
approval. Any Participant incurring such costs and expenses after such
authorization and approval shall bill the Transmission System Project Manager
who will subsequently bill the Participants in proportion to their cost
responsibility.

13.3.5    Applicable costs of materials, supplies, tools, machines, equipment,
apparatus, and Transmission System Spare Parts in connection with Construction
Work, including rental charges, transportation, and stores' expenses applicable
to such costs.

13.3.6    All costs of Construction Insurance, other than costs of Worker's
Compensation insurance included in Section 13.3.2 hereof.

13.3.7    All costs of any loss, damage or liability arising out of or caused by
Construction Work which are not satisfied under the coverage of Construction
Insurance, and the expenses incurred in settlement of injury and damage claims,
including attorneys' fees and costs of litigation, including the costs of labor
and related supplies and expenses incurred in injury and damage activities (all
as referred to in FERC Account 925 and FERC Accounts Electric Plant Instruction
3(8), but excluding any

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costs or expenses which have already been included in Section 13.3.2 hereof),
because of any claim arising out of or attributable to the construction of the
Project, the past or future performance or nonperformance of the obligations and
duties of any Participant (including the Transmission System Project Manager) or
the past or future performance or nonperformance of Construction Work, including
but not limited to any claim resulting from death or injury to persons or
damages to property. However such costs shall not be retroactive from the
effective day of this Agreement.

13.3.8    All federal, state or local taxes of any character except corporate
income tax imposed upon Construction Work, except any tax assessed directly
against an individual Participant or against the Transmission System Project
Manager unless such tax was assessed to such individual Participant or to the
Transmission System Project Manager in behalf of either or both of the
Participants.

13.3.9    All costs and expenses of enforcing or attempting to enforce the
provisions of Construction Insurance policies, payment and performance bonds,
contracts executed as Transmission System Project Manager and warranties
extended to facilities constituting a part of the Project, except any costs or
expenses which have already been included in Section 13.3.2 hereof.

13.3.10 All costs and expenses, including those of attorneys and consultants,
incurred by the Transmission System Project Manager or a Participant with
respect to environmental matters such as lawsuits,

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hearings and environmental studies related thereto. All Participants
anticipating such costs and expenses shall submit an estimate thereof to the
Transmission System Project Manager for authorization and approval. Any
Participant incurring such costs and expenses after such authorization and
approval shall bill the Transmission System Project Manager who will
subsequently bill the Participants in proportion to their cost responsibility.

13.3.11    The expenses incurred in auditing Construction Costs of the Project
as approved by the Audit Committee.

13.3.12    Miscellaneous costs and expenses not specifically referenced in this
Section 13.4 that are incidental to and necessary for the Transmission System as
approved by the E&O Committee.

13.3.13    The Engineering and Supervision allowance (E&S) is applicable to any
Participant who incurs expenses in conjunction with the performance of
construction work. These loadings shall be applied only once to any item billed
by a Participant performing the Engineering and Supervision for the Construction
Work. The E&S rate shall be five percent (5%) and shall be applied to total
construction cost incurred and not previously billed. The total construction
cost to which this E&S rate is applied to shall not include:

13.3.13.1 Any E&S charges as provided for in Section 13.3.13.

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13.3.13.2 Any allowance for A&G expenses as provided for in Section 13.3.14.

13.3.14    The Administrative and General (A&G) allowance is applicable to any
Participant that incurs costs in conjunction with performance of Construction
Work. Said expenses shall be allocated monthly at the rate of one and five
tenths percent (1.5%) (or such other rate as may be specified by the
Administrative Committee) of Construction Costs incurred and not previously
billed, excluding from such Constructions Costs:

13.3.14.1    Any Engineering and Supervision overhead charges referred to in
Section 13.3.13.

13.3.14.2    Any allowance for administrative and general expenses provided for
in this Section 13.3.14.

13.3.14.3    Expenses described in Section 13.3.7 hereof, to the extent such
costs represent damage awards or settlements.

13.3.14.4    The expenses incurred in auditing construction costs of the
project, as approved by the Auditing Committee.

13.3.14.5    Any cost that the Participants would have incurred in the absence
of this Project.

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13.4    In cases where the allocation of a cost item is made between
Construction Work and other work, such allocation shall be made on a fair and
equitable basis.

13.5    The Transmission System Project Manager shall develop, or cause to have
developed, and shall employ a project control system which recognizes and
contains the elements of scheduling, reporting, forecasting and analysis with
the variables of time and money. The accounting classifications employed must be
converted to the FERC accounts for the Final Completion Report, and any
supplement thereto, of total cost of Construction Work.

13.6    Travel and other related expenses of employees of the Transmission
System Project Manager whose salary costs are considered administrative and
general expenses recoverable through the administrative and general expense
allowance specified in Section 13.3.14 hereof shall only charge directly to
Construction Work as Construction Costs when performing work directly related to
Construction Work.

13.7    The Project Manager or any Participant shall not be entitled to a fee,
price, percentage, or any other compensation over and above the costs of
services rendered by the Project Manager or any Participant in the performance
of Construction Work.

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SECTION 13A
DC TERMINAL CONSTRUCTION COSTS

13A.1    Construction Costs of the DC Terminal shall include all payments made
and obligations in connection with Construction Work as shall be defined in the
DC Terminal Construction Agreement between SPS and the Participants.

SECTION 14
TRANSMISSION SYSTEM OPERATION AND MAINTENANCE COSTS

14.1    Operation and maintenance costs of the Transmission System shall include
all payments made and obligations incurred in accordance with this Agreement by
the Transmission System Operating Agent for or in connection with the
performance of Operating Work, as follows:

14.1.1    Transmission System O&M expenses chargeable to FERC Accounts 560, 561,
562, 563, 564, 566, 567, 568, 569, 570, 571, 572, and 573. Payroll Expenses
shall include those applicable allocated labor loading charges as detailed in
Appendix E.

14.1.2    Payroll taxes chargeable to FERC Account 408 and expenses chargeable
to FERC Account 926 shall be added to the monthly billing in proportion to the
dollar amount of direct labor billed in accordance with Appendix E.

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14.1.3    The expenses chargeable to FERC Account 925 incurred in complying with
Worker's Compensation laws, except uninsured Worker's Compensation claims or
portions thereof, shall be allocated each month to the Participants in
proportion to the dollar amount of direct labor billed in that month in
accordance with Appendix E.

14.1.4    Expenses incurred in connection with uninsured Worker's Compensation
claims arising out of Transmission System O&M in accordance with Appendix E.

14.1.5    The expenses chargeable to FERC Accounts 924 and 925 in connection
with the Transmission System Operating Agent's performance of the provisions of
Section 22 hereof (insurance, excluding salaries of administrative employees
whose services are compensated for under Section 14.1.6) in accordance with
Appendix E, and excluding expenses incurred in connection with Workmen's
Compensation and Occupational Health and Disease covered under Section 14.1.3
and Section 14.1.4.

14.1.6    Those O&M expenses associated with the control, communication and
relaying as described in Section 38 hereof.

14.2    Cost of facilities external to the Transmission System: Each Participant
shall be responsible for all costs incurred by it to supply Power and Energy to
the Transmission System or to receive Power and Energy from the Transmission
System.

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14.3    The costs of Operating Work for each Component shall be shared by the
Participants in proportion to their respective Cost Responsibility in the
Component(s).

14.4    The costs of Operating Work shall be advanced by the Participants to the
Transmission System Operating Agent and disbursed and accounted for by the
Transmission System Operating Agent in accordance with Section 15 hereof.

SECTION l4A
DC TERMINAL OPERATION AND MAINTENANCE COSTS

14A.1    Operation and maintenance costs of the DC Terminal shall be defined and
coordinated through the Operating Committee established in the Interconnection
Agreements between the Participants and SPS.

SECTION 15
ADVANCEMENT OF FUNDS FOR THE TRANSMISSION SYSTEM

15.1    Each Participant shall advance its share of Construction Funds
and Operating Funds prior to the date when funds are required by the
Transmission System to pay for Construction Work, Operating Work, Capital
Betterments, Capital Replacements, and Capital Additions, so that the
Transmission System Operating Agent in its capacity as such will not have to
advance any funds on behalf of a Participant.

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15.2    Each Participant shall pay monthly, in advance, on or before a due date
as specified by the Transmission System Project Manager, its share (equal to its
Cost Responsibility in the Components) of all Construction Costs in accordance
with the monthly budget or revisions thereof, as estimated for Construction
Work, prepared by the Transmission System Project Manager and furnished to each
Participant pursuant to Section 8.4.12 hereof. Following completion of all
Construction Work, the Transmission System Project Manager shall compute the
total Construction Costs of the Transmission System or DC Terminal and each
Participant shall promptly settle any balance of its share of such total
Construction Costs in accordance therewith. ln the event of expenditures which
are not anticipated in the budget, the Transmission System Project Manager may
issue special requests with appropriate documentation to explain such request
for funds to cover such costs, and each Participant shall pay, upon approval of
the E&O Committee, on or before a due date specified by the Transmission System
Project Manager on the request.

15.3    Each Participant shall pay monthly, in advance, on or before the due
date specified by the Transmission System Operating Agent, its share (equal to
its Cost Responsibility) of the operating and maintenance expenses and the costs
and expenses of Capital Betterments, Capital Replacements, and Capital
Additions, in accordance with the monthly operating budget, or revisions
thereof, prepared by the Transmission System Operating Agent and furnished to
each Participant pursuant to Section 9.2.20 hereof. Following completion of all
Operating Work scheduled in a given year, the Transmission System Operating
Agent shall compute the total Operating Costs of the Transmission System,

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respectively, and each Participant, or the Transmission System Operating Agent,
shall promptly settle any balance of its share of such total Operating Costs in
accordance therewith. In the event of expenditures which are not anticipated in
the budget, the Transmission System Operating Agent may issue special requests
with appropriate documentation to explain such request for funds to cover such
costs, and each Participant shall pay such additional amounts, upon approval of
the E&O Committee, on or before a due date specified by the Transmission System
Operating Agent in the request.

15.4    The Transmission System Project Manager and the Transmission System
Operating Agent, with the approval of the Auditing Committee, shall establish
Account(s) for Construction Funds and Operating Funds and notify the
Participants in writing of the establishment of the Account(s) not later than
five (5) days following its establishment.

15.5    The Auditing Committee shall establish minimum and maximum balances for
Construction Funds and Operating Funds so that the Transmission System Project
Manager and the Transmission System Operating Agent will have funds to pay for
expenditures or obligations incurred by the Transmission System Project Manager
and the Transmission System Operating Agent pursuant to this Participation
Agreement. Such minimum and maximum balances may be revised by the Auditing
Committee at any time.

15.6    All funds required to be advanced by the Participants in accordance with
this Participation Agreement, shall be made payable to

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the Account of the Transmission System Project Manager or Transmission System
Operating Agent, or may be credited to the Account for Construction or Operating
Funds by bank transfers.

15.7    In the event any amount invoiced by the Transmission System Project
Manager or Transmission System Operating Agent, or any portion thereof, is
disputed by a Participant, the Participant shall pay to the Transmission System
Project Manager or Transmission System Operating Agent the undisputed amount on
or before the due date. On or before the tenth (10th) day after the resolution
of the dispute, the Participant shall pay the amount resolved to be due, plus
interest computed in the manner described in Section 26.3. In the event that
interest is paid, such interest shall be allocated among the Participants on a
prorata basis considering the proportion in which the Participants (including
the Transmission System Project Manager or Transmission System Operating Agent)
have contributed funds to such account(s) from the date the payment was due
until the date the payment is made.

15.8    Funds not advanced to the Transmission System Project Manager or the
Transmission System Operating Agent on or before the due date as specified in
this Section 15 shall accrue interest computed in the manner described in
Section 26.3; provided, however, that the accrual of interest shall not commence
until twenty (20)days after the due date for any advance of funds for which less
than twenty (20) days advance notice was provided to the Participants, such
advance notice to be determined by the date of mailing of the notice.

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SECTION 15A
ADVANCEMENT OF FUNDS FOR THE DC TERMINAL

15A.1    The policies, duties and responsibilities concerning the advancement of
Construction and Operating Funds for the DC Terminal shall be defined in the DC
Terminal Construction Agreement and the Interconnection Agreements between SPS
and the Participants.

SECTION 16
TAXES

16.1    The Participants shall use their best efforts to have any taxing or
other authority levying any taxes or assessments, or payments in lieu thereof,
or making any valuations for the purpose of levying any taxes or assessments or
payments in lieu thereof, on the Transmission System or DC Terminal, or any
beneficial interest or rights therein, assess and levy such taxes or assessments
or payments in lieu thereof directly against the ownership interest of each
Participant in the Transmission System and DC Terminal.

16.2    All taxes or assessments or payments in lieu thereof levied against each
Participant's ownership interest in the Transmission System or DC Terminal,
excepting those taxes or assessments or payments in lieu thereof levied against
an individual Participant on behalf of any or all of the other Participants,
shall be the sole responsibility of the Participant upon whose ownership
interest said taxes or assessments or payments in lieu thereof are levied.

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16.3    If any property taxes or payments in lieu thereof or any other taxes or
assessments are levied or assessed in a manner other than as specified in
Section 16.1 hereof, it shall be the responsibility of the Administrative
Committee to establish equitable practices and procedures for the apportionment
among the Participants of such taxes and assessments or payments in lieu
thereof.

16.4    No Participant, who is exempt from any taxes or payments in lieu thereof
assessed against any or all of the other Participants, shall be obligated to
make any contribution toward such taxes to the extent of the exemption as long
as said exemption is extended to the Project.

SECTION 17
NONPARTITIONMENT

17.1    Each Participant hereby waives any rights it may have to partition any
Component of the Transmission System or DC Terminal or the Project Agreements,
whether by partitionment in kind or by sale and division of the proceeds, and
further agrees that it shall not resort to any action in law or in equity to
partition such Component of the Transmission System or DC Terminal or the
Project Agreements, and it waives the benefits of all laws that may now or
hereafter authorize such partition for a term: (a) which shall be coterminous
with this Participation Agreement, or (b) which shall be for such lesser period
as may be required under applicable law.

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SECTION 18
MORTGAGE AND TRANSFER OF INTEREST

18.1    Each Participant shall have the right at any time, and from time to
time, to mortgage, create, or provide for a security interest in or convey in
trust all or a part of its ownership share in the Transmission System and DC
Terminal together with an equal interest in the Project Agreements to a trustee
or trustees, or mortgagee or mortgagees, under deed of trust, mortgage, or
indenture, or to a secured Participant or Participants under a security
agreement, as security for its present or future bonds or other obligations or
securities, and to any successors or assigns thereof, without need for the prior
written consent of any other Participant and without such mortgagee, trustee, or
secured Participant assuming or becoming in any respect obligated to perform any
of the obligations of the Participants.

18.2    Each Participant shall have the right, without the need for the prior
written consent of any other Participant, to assign its right, title and
interest in the Transmission System or DC Terminal and the Project Agreements to
any entity into which such Participant may be merged or consolidated and which
assumes the obligations of such Participant hereunder, but such assignment shall
not relieve the Participant from said obligations; in such event the other
Participants shall not be afforded a first right of refusal under Section 18.4.

18.3    Each Participant shall have the right at any time, and from time to
time, without the need for the prior written consent of any other

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Participant, to assign, convey, or both, its right, title and interest in the
Transmission System or DC Terminal and the Project Agreements to a trustee or
trustees for the purpose of enabling the Participant to finance its obligations
hereunder, and such trustee or trustees shall be entitled, without the prior
written consent of any other Participant, to mortgage or grant a security
interest in the said assets to accomplish such financing, provided that such
transfers will not relieve the Participant from any of its obligations
hereunder, and such trustees agree to be bound by this Agreement; provided
further that such transfer will not materially interfere with the construction
and operation of the Project, including the acquisition of necessary
right-of-way under the power of eminent domain, and the obtaining of any
necessary regulatory approvals.

18.4    Except as otherwise specifically provided in this Section 18, in case a
Participant shall wish to transfer or otherwise relinquish all or part of its
ownership in the Transmission System or DC Terminal and the Project Agreements,
the other Participant shall have a right of first refusal to purchase the
offering Participant's interest as follows:

18.4.1    The Participant desiring to transfer or relinquish shall serve written
notice of its intention upon the other Participant, containing the proposed
date, the terms and conditions of a bona fide offer received by that Participant
(or the original cost less depreciation, in case of relinquishment), and the
terms and conditions of the proposed transfer to the other Participant (which
shall be at least

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as favorable or be the same as the terms and conditions of the bona fide offer).

18.4.2    Within 90 days after receipt of such notice, the other Participant may
signify its desire to purchase the interest proposed to be transferred. The
election shall be by written notice to the other Participant.

18.4.3    When an election has been made to purchase, the Participants shall
proceed in good faith and with diligence to obtain all required authorizations
and approvals, and the transferor shall obtain the release of any liens and
encumbrances upon the interest to be transferred. The purchase shall be
consummated according to a schedule which is acceptable to both Participants.

18.4.4    If the other Participant elects not to purchase the offering
Participant's interest, thereafter, the offering Participant shall have
the right, subject to Section 5.4, to transfer or assign all or part of
its interest in the ownership of the Transmission System or DC Terminal to any
person partnership, corporation, governmental corporation, municipality, or
agency engaged in the generation, transmission or distribution of energy.

18.5    Each Participant shall have the right to have any mortgagee, trustee or
secured party named on all or any of the Construction or Operating Insurance
policies as loss payee or additional insured as its interest may appear, by
notice to the Transmission System and DC Terminal

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Project Managers or Transmission System and DC Terminal Operating Agents given
in writing no less than ninety (90) days prior to the procurement or renewal of
the policies.

SECTION 19
DESTRUCTION AND LOSS OF RIGHT-OF-WAY

19.1    In any Components of the Transmission System or DC Terminal or equipment
involved in control or communications, or relaying should be damaged or
destroyed, the Participants shall, unless otherwise agreed, repair or
reconstruct such Components. Similarly, if any Capital Betterments, Capital
Replacements, or Capital Additions to the Transmission System, DC Terminal or
equipment involved in control, communications, or relaying should be damaged or
destroyed, the Participants shall, unless otherwise agreed, repair or
reconstruct such Components. The Participants shall share the costs of such
repair or reconstruction in proportion to their Cost Responsibility for the
Components so damaged or destroyed. If a Participant elects not to participate
in the reconstruction or repair of said Components or facilities, such election
shall be deemed a decision to transfer or relinquish its ownership interest in
the Transmission System and DC Terminal and said interest may be disposed by
means pursuant to Section 18.4 hereof. If, pursuant to Section 18.4, there is no
buyer for the Participant's interest, then the Participant not choosing to
reconstruct or repair shall retain the status of Participant, but its
Entitlement in the Transmission System or DC Terminal shall be reduced in

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proportion to the fraction of the total replacement value of the System
represented by the total cost of reconstruction or repairs.

19.2    In the event of loss of right-of-way upon lands not subject to eminent
domain by the Participants, the Participants shall decide within a reasonable
time whether to relocate and reconstruct the Transmission System and DC
Terminal, pursuant to Section 19.1, or whether to terminate the Project. If a
Participant elects not to participate in relocation and reconstruction of the
System, said such election shall be deemed a decision to transfer or relinquish
its ownership interest in the Transmission System and DC Terminal and said
interest may be disposed of pursuant to Section 18.4 hereof. If, pursuant to
Section 18.4, there is no buyer for the Participant's interest, then the
Participant not choosing to relocate and reconstruct shall retain the status of
Participant, but its Entitlement in the Transmission System and DC Terminal
shall be reduced in proportion to the fraction of the total replacement value of
the Transmission System and DC Terminal represented by the total cost of
relocation and reconstruction. The term "loss of right-of-way" shall include,
but not be limited to such a determination by a legally constituted body having
jurisdiction in the matter, or a unanimous decision by the Participants that
conditions that must be met to retain said right-of-way are such that to do so
no longer is in the best interests of its customers.

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SECTION 20
SEVERANCE OF IMPROVEMENTS

20.1    The Participants agree that all facilities, structures, improvements,
equipment, and property of whatever kind and nature constructed, placed, or
affixed on the rights-of-way, easements, patented, fee and leased lands as part
of, or as a Capital Betterment or Capital Replacement or Capital Addition to the
Transmission System and DC Terminal shall be deemed to be and remain personal
property of the Participant(s), not affixed to the realty.

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SECTION 21
CAPITAL BETTERMENTS, CAPITAL REPLACEMENTS AND CAPITAL ADDITIONS

21.1    The Participants recognize that from time to time it may be necessary or
desirable to make Capital Betterments, Capital Replacements and Capital
Additions, or that Capital Betterments, Capital Replacements and Capital
Additions, may be required by laws and regulations applicable to the
Transmission System and DC Terminal. Any such Capital Betterments, Capital
Replacements and Capital Additions shall, upon request by a Participant, be
described in a supplement to this Participation Agreement executed in recordable
form.

21.2    All known Capital Betterments, Capital Replacements, and Capital
Additions shall be included in the annual capital expenditures budget. After
such budget has been approved by the Engineering and Operating Committee, each
Participant shall be obligated for the Construction Costs incurred for such
Capital Betterments, Capital Replacements and Capital Additions as specified in
Section 13 in proportion to its Cost Responsibility in the Component or control,
communication or relaying equipment to which the Capital Betterments, Capital
Replacements and Capital Additions is made, and shall advance such funds as
provided in Section 15.

21.3    At any time the Engineering and Operating Committee may authorize
Capital Betterments, Capital Replacements and Capital Additions, not included in
the annual capital expenditures budget if any such Capital Betterment, Capital
Replacement and Capital Addition is required to comply with any lawful order,
rule, or regulation of a state, federal, or local regulatory agency or

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if the cost of any such Capital Betterment, Capital Replacements and Capital
Additions is less than $100,000. All other Capital Betterments, Capital
Replacements and Capital Additions not included in the annual capital
expenditures may only be authorized by the Administrative Committee.

21.4    The Transmission System Operating Agent shall be responsible for the
design and construction of all Capital Betterments, Capital Replacements and
Capital Additions, subject to the approval of the E&O Committee for the
Transmission System.

21.5    Units of property retired from service, whether considered original
construction or Capital Betterments, Capital Replacements and Capital Additions,
shall be disposed of by the Transmission System Operating Agent after notice to
the Participants on the best available terms as soon as practicable, and the
proceeds, if any, received therefrom shall be credited or distributed to the
Participants in proportion to their Cost Responsibility in the Component of
which the units of property retired from service are a part.

SECTION 22
TRANSMISSION SYSTEM INSURANCE

22.1    The Transmission System Project Manager and the Transmission System
Operating Agent shall cause to be in effect at all times Construction and
Operating Insurance with such coverages, amounts, terms and conditions so as to
provide Project Insurance that is normal in an electric utility project of this
size and character.

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22.2    The Transmission System Project Manager and the Transmission System
Operating Agent, acting as the agent for the Participants and as principal on
its own and their behalf, shall procure and maintain in force, or cause to be
procured and maintained in force, comprehensive general liability for bodily
injury and property damage covering the Participant's ownership in the
Transmission System and also covering liability arising out of either the
Participant's (including the Transmission System Project Manager and
Transmission System Operating Agent) performance or nonperformance of the
Construction Work, Operating Work, Capital Betterments, Capital Replacements, or
Capital Additions.

22.3    The Transmission System Project Manager and the Transmission System
Operating Agent shall require general contractors to procure and maintain
comprehensive general and automobile liability insurance for bodily injury and
property damage covering all their operations, including completed operations
coverage and use of any motor vehicle in connection with the Construction Work
or Operating Work. All Participants shall be named as additional insureds and
such policies shall be primary as to any similar insurance carried by any
Participant and such policies shall contain a cross-liability clause.

22.4    The Transmission System Project Manager and the Transmission System
Operating Agent may require general contractors to procure and maintain such
other insurance as the Transmission System Project Manager or Transmission
System Operating Agent may deem necessary or desirable.

22.5    The general contractors shall provide certificates of insurance to the
Transmission System Project Manager and the Transmission System Operating

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Agent. Such certificates shall provide for not less than thirty (30) days notice
of cancellation, change, or nonrenewal.

22.6    The Transmission System Project Manager and the Transmission System
Operating Agent shall establish the insurable values, limits, deductibles,
retentions, and other special terms and conditions with respect to the Project
Insurance.

SECTION 23
PARTICIPANT'S INSURANCE

23.1    Each Participant shall maintain comprehensive automobile liability
insurance for bodily injury and property damage, covering all automotive
equipment used by it in connection with the Transmission System and DC Terminal.

23.2    If applicable, each Participant shall maintain aircraft liability
insurance for bodily injury and property damage, covering all aircraft, whether
fixed or rotary wing type, used by it in connection with the Transmission System
and DC Terminal.

23.3    Each Participant shall maintain Worker's Compensation and Employers'
Liability insurance covering its employees engaged in any work in connection
with the Transmission System and DC Terminal. Such insurance shall comply
with all statutory provisions of the state of Texas.

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23.4    In the event that any Participant shall be or elect to become
self‑insured for any or all of the insurance coverages required of a
Participant, then it shall notify the others of such self-insurance and
such self-insurance shall provide coverages equal to commercially
available policies in order to comply with this section hereof.

23.5    Each Participant shall be named an additional insured, individually and
jointly with the other Participants, on all policies of Project Insurance, and
the policies of Project Insurance shall carry cross‑liability endorsements.

23.6    At the direction of the Transmission System Project Manager or
Transmission System Operating Agent, if any Participant furnishes
services, materials, parts, or equipment in connection with the planning,
designing, engineering, procurement, construction, maintenance, operation, or
use of property of the Transmission System and DC Terminal, such Participant
shall be named as an insured as its interest may appear in any of the Project
Insurance policies, and either the Transmission System Project Manager or the
Transmission System Operating Agent may waive on behalf of each Participant its
right of recovery against any such Participant for insured loss for damage to
any property covered by Project Insurance as required in Sections 22 and 23
hereof, provided that no such waiver shall impair the right to recover any sums
otherwise payable to any Participant under the Project Insurance.

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SECTION 24
LIABILITY

24.1    Except for any judgement for liability resulting from Willful Action,
and subject to the provisions of Sections 24.3 and 24.4 hereof, no Participants,
its directors or members of its other governing body, officers, or employees,
shall be liable to any other Participant for any uninsured loss, damage, claim,
cost, charge, or expense of any kind or nature incurred by the other Participant
(including direct, indirect, or consequential loss, damage, claim, cost, charge,
or expense; and whether or not resulting from the negligence of a Participant,
its directors, or members of its other governing body, officers, employees, or
any other person or entity whose negligence would be imputed to such
Participant) as a result of (i) the Construction Work, the Operating Work, and
making, operation, or maintenance of Capital Betterments, Capital Replacements,
or Capital Additions, or the use or ownership of the Transmission System or DC
Terminal or (ii) the performance or nonperformance of the obligations of a
Participant under the Project Agreements other than the obligation to pay sums
which have become due, and each Participant releases each other Participant, its
directors or members of its other governing body, officers and employees, from
any such liability.

24.2    Except as provided in Sections 24.3 and 24.4 hereof, the costs and
expenses of discharging all work liability imposed upon one or more of the
Participants for which payment is not made by Project Insurance, shall be shared
among and paid by all Participants in proportion to their respective Cost
Responsibilities.

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24.3    Each Participant shall be responsible for any direct, indirect or
consequential damage, loss, claim, cost, charge, or expense that is not covered
by Project Insurance and results from its own Willful Action as defined in
Section 4.1.39 hereof, and shall indemnify and hold harmless the other
Participant, its directors or members of its governing body, officers and
employees, from such damage, loss, claim, cost, charge or expense.

24.4    Notwithstanding the provisions of Section 24.3 hereof, the aggregate
liability of any Participant to the other Participants for all uninsured,
indirect, or consequential damages, losses, claims, costs, charges or expenses
resulting from Willful Action shall not exceed $10,000,000 per occurrence. Each
Participant releases each other Participant, its directors or members of its
governing body, officers and employees from any such liability in excess of
$10,000,000 per occurrence.

24.5    The provisions of this Section 24 shall not be construed so as to
relieve any insurer of its obligation to pay any insurance proceeds in
accordance with the terms and conditions of valid and collectible Project
Insurance policies, nor shall they be construed to provide any third party
benefits. In the event any insurer providing insurance to a Participant refuses
to pay any judgment obtained by a second Participant against the first
Participant or any of its directors, officers, or employees, on account of
liability referred to in this Section 24, the Participant or any of its
directors, officers, or employees against whom the judgment is obtained shall
execute, at the request of the Participant

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obtaining the judgment and in consideration of the covenant given in Section
24.1 hereof, such documents as may be necessary to effect assignment of its or
their contractual rights against the nonpaying insurer.

24.6    Except for liability resulting from Willful Action, any Participant
whose electric customer shall have a claim or bring action against any other
Participant for any death, injury, loss, or damage arising out of or in
connection with interruptions to or curtailment of electric service to such
customer caused by the operation or failure of operation of the Transmission
System or DC Terminal or any portion thereof shall indemnify and hold harmless
such other Participant, its directors, officers, and employees from and against
any liability for such death, injury, loss or damage.

SECTION 25
AUTHORIZATIONS AND APPROVALS

25.1    The Transmission System Operating Agent, shall be responsible for
obtaining and continuing in effect all licenses, permits, and authorizations
required to operate and maintain the Transmission System and to construct or
install any budgeted and approved Capital Betterments, Capital Replacements,
Capital Additions, and is authorized subject to receiving approval of the E&O
Committee, on behalf of each Participant to submit and prosecute any
applications therefore, including the preparation and submission of any
supplementary or supporting documentation or other evidence and appearance at
any hearing. The

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Transmission System Operating Agent shall furnish each Participant upon request
with copies of all documents submitted and all licenses, permits, and
authorizations received, and shall otherwise keep each Participant informed of
the status of all licenses, permits, and authorizations in effect and any
pending or proposed applications therefor or for changes thereto. Each
Participant shall cooperate with the Transmission System Operating Agent in the
preparation, submission, and execution of such information, records, statements,
or other material required to obtain and continue in effect any such licenses,
permits, or authorizations and any changes thereto.

25.2    Except as provided in Section 25.1 hereof, each Participant shall be
responsible for obtaining, at its own expense, its required authorizations and
approvals, if any, relating to its participation in the ownership, the
construction or reconstruction, and the operation of the Transmission System and
to its performance of the provisions of the Project Agreements, from federal,
state, or local regulatory authorities having jurisdiction to issue such
authorizations and approvals, and each Participant shall keep the Transmission
System Project Manager and Transmission System Operating Agent informed of its
applications therefor.

SECTION 25
DEFAULTS

26.1    Each Participant hereby agrees that it shall pay all monies and carry
out all other duties and obligations agreed to be paid, or

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performed, or both, by it pursuant to all of the terms and conditions set forth
and contained in this Agreement, and a default by a Participant in the covenants
and obligations to be kept and performed pursuant to the terms and conditions
set forth and contained in the Project Agreements, shall be an act of default
under this Participation Agreement.

26.2    In the event of a default by either Participant in any of the terms and
conditions of this Agreement, then, within ten (10) days after written notice
has been given by the nondefaulting Participant to the defaulting Participant of
the existence and nature of the default, the nondefaulting Participant shall
remedy such default either by advancing the necessary funds and/or commencing to
render the necessary performance with the nondefaulting Participant contributing
to such remedy as required.

26.3    In the event of a default by any Participant in any of the terms and
conditions of the Project Agreements and the giving of notice as provided in
Section 26.2 hereof, the defaulting Participant shall take all steps necessary
to cure such default as promptly and completely as possible and shall pay
promptly upon demand to the nondefaulting Participant the total amount of money
and/or the reasonable equivalent in money of nonmonetary performance, if any,
paid and/or made by such nondefaulting Participant in order to cure any default
by the defaulting Participant, together with interest on such money and/or the
costs of nonmonetary performance accrued at the prime rate of interest as
established by the Chase Manhattan Bank on the last business date of each
applicable month, prorated by days from the original date of the

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expenditure of such money by each such nondefaulting Participant to the date of
such reimbursement by the defaulting Participant.

26.4    In the event a material default by any Participant in the payment or
performance of any obligation under this Participation Agreement shall continue
for a period of three (3) months or more without having been cured by the
defaulting Participant or without such Participant having commenced or continued
action in good faith to cure such default, then, at any time thereafter and
while said default is continuing, the nondefaulting Participant, by written
notice to the defaulting Participant, may either suspend the right of the
defaulting Participant: (a) to be represented on and participate in the actions
of any committee, and (b) to receive all or any part of its entitlement, or make
all payments due and all future payments and become sole owner of the Project.

26.4.1    A defaulting Participant shall be liable to the nondefaulting
Participant for all costs incurred by such nondefaulting Participant plus
interest as provided in Section 26.3 hereof. The proceeds paid by any defaulting
Participant to remedy any such default shall be distributed to the nondefaulting
Participant in proportion to the cost actually paid by the nondefaulting
Participant to remedy the default involved herein.

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SECTION 27
ACTIONS PENDING RESOLUTION OF DISPUTES

27.1    If a dispute should arise which is not resolved within 30 days from the
date the disputed issue is referred to the Administrative Committee, then
pending the resolution of the dispute by the procedures set forth herein, the
Transmission System Project Manager or Operating Agent shall proceed with
Construction Work, Operating Work, or Capital Betterments, Capital Replacements
and Capital Additions in a manner consistent with the Project Agreements and
consistent with generally accepted practices in the electric utility industry to
avoid capacity reductions or increased cost, and the Participants shall advance
the funds required to perform such Construction Work, Operating Work, or
Capital Betterments, Capital Replacements and Capital Additions in
accordance with the applicable provisions of the Project Agreements.

SECTION 28
REMOVAL OF TRANSMISSION SYSTEM PROJECT MANAGER OR OPERATING AGENT

28.1    The Transmission System Project Manager and the Transmission System
Operating Agent shall serve during the term of and pursuant to
this Participation Agreement unless either one resigns by giving written notice
to the Participants at least one (1) year in advance of the date resignation or
until receipt by either one of notice of its removal following a determination
that it is in default of this Participation Agreement as provided in Section
28.2.2 hereof.    Upon the effective date of such resignation or removal, the
Participants shall designate a new

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Transmission System Project Manager or a new Transmission System Operating Agent
by written agreement.

28.2    The following provisions shall apply solely in regard to violations or
allegations of violations of the Project Agreements by the Transmission System
Project Manager or the Transmission System Operating Agent of a Component or
Components of the Transmission System on the basis of which removal of either
one is sought:

28.2.1    In the event any Participant shall be of the opinion that an action
taken or not taken by the Transmission System Project Manager or
the Transmission System Operating Agent constitutes a violation of this
Participation Agreement, it may give written notice thereof to the Transmission
System Project Manager or the Transmission System Operating Agent as the case
may be and the other Participant, with a statement of the reasons for its
opinion. Thereupon, the Transmission System Project Manager or the Transmission
System Operating Agent may prepare a statement of the reasons justifying its
action or failure to take action.  If agreement in settling the dispute is not
reached between the Transmission System Project Manager or the Transmission
System Operating Agent and the Participant which gave such notice, then the
matter shall be submitted to the chief executive officers for determination. If
the chief executive officers cannot resolve the dispute, the matter shall be
submitted to arbitration in the manner provided in Section 29 hereof. During the
continuance of such arbitration proceedings, the Transmission System Project
Manager or the Transmission System Operating Agent shall proceed with the
Construction Work, Operating Work, Capital Betterments,

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Capital Additions, or Capital Replacements in a manner consistent with the
Project Agreements and generally accepted practice in the electric utility
industry, and the Participants shall advance the funds required to perform such
work in accordance with the Project Agreements.

28.2.2    If it is determined by arbitration that the Transmission System
Project Manager or the Transmission System Operating Agent is violating the
Project Agreements, then it shall act with due diligence to end such violation
and shall, within six (6) months or within such lesser time following the
determination as may be prescribed in the determination, take action or commence
action in good faith to terminate such violation.    In the event that the
Transmission System Project Manager or the Transmission System Operating Agent
has failed either to correct, or to commence action to correct, the violation
within such allowed period (which itself may be a subject of dispute for
determination as above provided) shall be deemed to be in default under
the Project Agreements and shall be subject to removal upon receipt of notice,
executed by all the other Participant, in accordance with Section 28.1 hereof.

28.2.3    The provisions of Section 28 hereof shall not apply to disputes as to
whether or not an action or non-action of the Transmission System Project
Manager or the Transmission System Operating Agent, in its capacity as such, is
a violation or a default under the Project Agreements.

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SECTION 29
ARBITRATION

29.1    If a dispute between any of the Participants should arise under the
Project Agreements and after following the procedures defined in Sections 7.10
and 7.11, the Participants' chief executive officers have not resolved the
dispute, any chief executive officer shall call for submission of the dispute to
arbitration which shall be binding upon all of the Participants.

29.2    The Participant shall give written notice to the other Participant,
setting forth in such notice in adequate detail the nature of the dispute
including the specific issues to be resolved by arbitration, the amount or
amounts, if any, involved in such dispute, and the remedy sought by such
arbitration proceedings and, within twenty (20) days from receipt of such
notice. Thereafter, the Participant first submitting its or their notice in the
matter at issue shall have ten (10) days in which to submit a written rebuttal
statement.

29.3    Within forty (40) days following delivery of the written notice by the
Participant, pursuant to Section 29.2 hereof, the Participants, acting through
their representatives on the Administrative Committee, shall meet for the
purpose of selecting arbitrators. Each Participant, shall designate an
arbitrator. The arbitrators so selected shall meet within twenty (20) days
following their selection and shall select

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additional arbitrators, the number of which shall be one (1) less than the total
number of arbitrators selected by the Participants. If the arbitrators selected
by the Participants, as herein provided, shall fail to select such additional
arbitrator(s) within said twenty (20) day period, then the arbitrators shall
request from the American Arbitration Association (or a similar organization if
the American Arbitration Association should not at the time exist) a list of
arbitrators who are qualified and eligible to serve as hereinafter provided. The
arbitrators selected by the Participants shall take turns striking names from
the list of arbitrators furnished by the American Arbitration Association,
and the last name(s) remaining on said list shall be the additional
arbitrator(s). All arbitrators shall be persons skilled and experienced in the
field which gives rise to the dispute, and no person shall be eligible for
appointment as an arbitrator who is an officer or employee of any of the parties
to the dispute or is otherwise interested in the matter to be arbitrated.

29.4    Except as otherwise provided in this Section 29, the arbitration shall
be governed by the rules and practice of the American Arbitration Association
(or the rules and practice of a similar organization if the American Arbitration
Association should not at that time exist) from time to time in force, except
that if such rules and practice, as modified herein, shall conflict with State
or Federal law, as the case may be, then in force which are specifically
applicable to such arbitration proceedings, such law shall govern.

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29.5    Included in the issues which may be submitted to arbitration pursuant to
this Section 29 is the issue of whether the right to arbitrate a particular
dispute is permitted under the Project Agreements.

29.6    The arbitrators shall hear evidence submitted by the respective
Participants and may call for additional information, which additional
information shall be furnished by the Participant(s) having such information.
The decision of a majority of the arbitrators shall be binding upon all the
Participants.

29.7    The award of the arbitrators shall contain findings with respect to the
issues involved in the dispute and relative to the materiality of the default,
the period of time within which the defaulting party must remedy the default or
commence remedial action, and the remedies which may be exercised by the
non-defaulting Participants in the event the default is not remedied within such
period of time.

29.8    This agreement to arbitrate shall be specifically enforceable, and the
award and findings of the arbitrators shall be final and binding upon the
Participants to the extent permitted by applicable law. Any award may be filed
with the clerk of any court having jurisdiction over the Participant against
whom the award is rendered and, upon such filing, such award, to the extent
permitted by the laws of the jurisdiction in which said award is filed, shall be
specifically enforceable or shall form the basis of a declaratory judgement or
other similar relief.

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29.9    The fees and expenses of the arbitrators shall be shared equally by the
Participants, unless the decision of the arbitrators shall specify some other
apportionment of such fees and expenses. All other expenses and costs of the
arbitration shall be borne by the Participant incurring same.

SECTION 30
RELATIONSHIP OF PARTICIPANTS

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

SECTION 31
UNCONTROLLABLE FORCES

31.1    No Participant shall be considered to be in default in the performance
of any of its obligations under the Project Agreements (other

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than obligations of said Participant to pay costs and expenses), when a failure
of performance shall be due to uncontrollable force. The term "uncontrollable
force" shall be any cause beyond control of the Participant affected, including,
but not restricted to, failure of or threat of failure of facilities, flood,
earthquake, tornado, storm, fire, lightning, epidemic, war, riot, civil
disturbance or disobedience, labor dispute, labor or material shortage,
sabotage, restraint by court order or public authority, and action or nonaction
by or failure to obtain the necessary authorizations or approvals from any
governmental agency or authority, which by exercise of due diligence such
Participant could not reasonably have been expected to avoid and which by
exercise of due diligence, it shall be unable to overcome. Nothing contained
herein shall be construed so as to require a Participant to settle any strike or
labor dispute in which it may be involved. Any Participant rendered unable to
fulfill any of its obligations under the Project Agreements by reason of any
uncontrollable force shall give prompt written notice of such fact to the other
Participants and shall exercise due diligence to remove such inability with all
reasonable dispatch. The term "Participant" as used in this Section 31 shall
include the Transmission System Project Manager and the Transmission System
Operating Agent in their capacities as such.

SECTION 32
GOVERNING LAW

32.1    This Agreement shall be governed by and construed and enforceable in
accordance with the laws of the State of Texas.

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SECTION 33
NONDEDICATION OF FACILITIES

33.1    The Participants do not intend to dedicate, and nothing in this
Participation Agreement shall be construed as constituting a dedication by any
Participant of its properties or facilities, or any part thereof, to any other
Participant or to the customers of any Participant.

SECTION 34
GENERAL PROVISIONS GOVERNING PROJECT AGREEMENTS

34.1    Each Participant agrees, upon request by the other Participants to make,
execute, and deliver any and all documents reasonably required to implement the
Project Agreements.

34.2    In the event that any of the terms, covenants, or conditions of this
Participation Agreement or any of the Project Agreements, or the application of
any such term, covenant, or condition, shall be held invalid as to any person or
circumstance by any court having jurisdiction in the premises, all other terms,
covenants, or conditions of such agreements and their application shall not be
affected thereby, but shall remain in force and effect.

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

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SECTION 35
TERM AND TERMINATION

35.1    This Participation Agreement shall become effective when duly executed
by all of the Participants and after the Agreement is approved by the Board of
Directors of each Participant, and shall have a term of thirty (30) years from
its effective date or until all property comprising the Transmission System has
been disposed of and all costs to end the Project have been paid.

SECTION 36
ASSIGNMENT OF INTERESTS

36.1    Any Participant who acquires in its name an interest in any real or
personal property or contract which is part of the Transmission System or DC
Terminal, shall transfer and assign an undivided interest therein to the other
Participant so that the ownership and rights of the Participants in such
property or contract shall be as provided for in this Participation Agreement.

SECTION 37
EQUAL OPPORTUNITY

37.1    During the term of this Participation Agreement, the Transmission System
Project Manager and the Transmission System Operating Agent (hereinafter in this
Section 37 referred to collectively as the "Contractor") agree as follows:

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37.1.1    The Contractor will not discriminate against any applicant for
employment because of race, color, religion, sex, national origin, age (except
on the basis of a bonafide occupational qualification, retirement plan, or
statutory requirement), mental or physical handicap (in regard to any position
for which such mentally or physically handicapped applicant or employee is
qualified) or being a disabled veteran or a veteran of the Vietnam era (in
regard to any position for which such disabled veteran or veteran of the Vietnam
era is qualified). The Contractor will take affirmative action to employ,
advance in employment, and otherwise treat qualified individuals without
discrimination based upon race, color, religion, sex, national origin, age,
mental or physical handicap, or being a disabled veteran or a veteran of the
Vietnam era. Such affirmative action shall apply to all employment practices,
including, but not limited to: employment, upgrading, demotion or transfer;
recruitment or recruitment advertising; layoff or termination; rates of pay or
other forms of compensation; and selection for training, including
apprenticeship. The Contractor agrees to post in conspicuous places, available
to employees and applicants for employment, notices setting forth the provisions
of this nondiscrimination clause.

37.1.2    The Contractor will, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that all qualified
applicants will receive consideration for employment without regard to race,
color, religion, sex, national origin, age, mental or physical handicap, or
being a disabled veteran or a veteran of the Vietnam era.

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37.1.3    The Contractor will comply with all applicable provisions of the Equal
Employment Opportunity Act of 1972 (2000e USC 42), the Age Discrimination in
Employment Act of 1967 (623 USC 29), the Rehabilitation Act of 1973 (793 USC 29)
and the Vietnam Era Veterans Readjustment Assistance Act of 1974 (2012 USC 38),
as amended, and with all the applicable rules, regulations or orders of the
Secretary of Labor pertaining thereto.

37.1.4    The Contractor will furnish all information and reports required by
the Equal Employment Opportunity Act of 1972 (2000e USC 42), the Age
Discrimination in Employment Act of 1967 (623 USC 29), the Rehabilitation Act of
1973 (793 USC 29), and the Vietnam Era Veterans Readjustment Assistance Act of
1974 (2012 USC 38), as amended, and any applicable rules, regulations or orders
of the Secretary of Labor pertaining thereto, and will permit access to its
books, records and accounts by the administering agency and the Secretary of
Labor for purposes of investigation to ascertain compliance with such rules,
regulations or orders.

37.1.5    The Contractor will send to each labor union or representative of
workers with which it has a collective bargaining agreement or other contract or
understanding, a notice advising the said labor union or workers' representative
of the Contractor's commitments under this section, and shall post copies of the
notice in conspicuous places available to employees and applicants for
employment.

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37.1.6    In the event of the Contractor's noncompliance with the requirements
of this Equal Opportunity Section, actions for noncompliance may be taken in
accordance with the applicable rules, regulations, or orders of the Secretary of
Labor issued pursuant to the Equal Employment Opportunity Act of 1971 (2000e USC
42), the Age Discrimination in Employment Act of 1967 (623 USC 29), the
Rehabilitation Act of 1973 (793 USC 29), or the Vietnam Era Veterans
Readjustment Assistance Act of 1974 (2012 USC 38), as amended.

37.1.7    The Contractor will include the provisions of Sections 37.1 through
37.1.7 in every subcontract or purchase order unless exempted by the rules,
regulations or orders of the Secretary of Labor, so that such provisions will be
binding upon each subcontractor and vendor. The Contractor will take such action
with respect to any subcontract or purchase order as any administering agency
may direct as a means of enforcing such provisions, including sanctions for
noncompliance. Provided, however, that in the event a Contractor becomes
involved in, or is threatened with, litigation with a subcontractor or vendor as
a result of such direction by an administering agency, the Contractor may
request the United States to enter into such litigation to protect the interests
of the United States.

37.2    Certification of Nonsegrated Facilities – The Contractor certifies that
it does not maintain or provide for its employees any segregated facilities at
any of its establishments, and that it does not permit its employees to perform
their services at any location, under its control, where segregated facilities
are maintained. The Contractor

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certifies further that it will not maintain or provide for its employees any
segregated facilities at any of its establishments, and that it will not permit
its employees to perform their services at any location, under its control,
where segregated facilities are maintained. The Contractor agrees that a breach
of this certification is a violation of the Equal Opportunity Clause in this
contract. As used in this certification, the term "segregated facilities" means
any waiting rooms, work areas, restrooms and washrooms, restaurants and other
eating areas, timeclocks, locker rooms and other storage or dressing areas,
parking lots, drinking fountains, recreation or entertainment areas,
transportation, and housing facilities provided for employees which are
segregated by explicit directive or are in fact segregated on the basis of race,
color, religion, or national origin, because of habit, local custom, or
otherwise. The Contractor agrees that (except where it has obtained identical
certifications from proposed subcontractors for a specific time period) it will
obtain identical certifications from proposed subcontractors prior to the award
of subcontracts exceeding $10,000 which are not exempt from the provisions of
the Equal Opportunity Clause, and that it will retain such certifications in its
files.

37.3    If Federal or Texas law changes with respect to the matters identified
in this Section 37, the Transmission System and DC Terminal Project Managers and
the Transmission System and DC Terminal Operating Agents shall comply with such
other similar applicable law which is mandatory, or in the case of elective
changes in the law, the Participants and SPS may amend this Section 37 by a
unanimous vote of the Administrative Committee.

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37.4    During the term of this Participation Agreement, similar provisions as
of those in Section 37 hereof, shall apply to the DC Terminal Project Manager
and Operating Agent as shall be defined in the Constructor's O&M Project
Agreements between SPS and the Participants.

SECTION 38
CONTROL, COMMUNICATION, AND RELAYING

38.1    Each Participant shall accept and hold title to an undivided interest as
a tenant in common in the control and relaying equipment in proportion to its
Cost Responsibility as shown in Appendix B, Section B.2.

38.1.1    The ownership of and title to the control and relaying equipment
described in Appendix C of this Agreement, and all Capital Betterments, Capital
Replacements, and Capital Additions thereto, shall vest simultaneously in the
Participants so that the estate of each of them shall be deemed to be concurrent
as to time, right, and priority.

38.1.2    The Participants shall be responsible for the Construction Costs, for
the operation and maintenance (O&M) expenses, and for Capital Betterments,
Capital Replacements, and Capital Additions of the control and relaying
equipment in accordance with their Cost Responsibilities as detailed in Appendix
B, Section B.2, except as provided in Section 38.1.3 herein.

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38.1.3    The Participants shall be responsible for only those O&M expenses and
for Capital Betterments, Capital Replacements, and Capital Additions for control
and relaying equipment located at the Amrad Switchyard ("Amrad") as are
necessary for this Project; nonproject related O&M expenses and Capital
Betterments, Capital Replacements, and Capital Additions for control and
relaying equipment at Amrad shall be borne 100% by EPE.

38.2    Each Participant shall accept and hold title to an undivided interest as
a tenant in common in the common facilities associated with a new microwave
repeater station to be constructed at Amrad ("Amrad Common Facilities") in
proportion to its Cost Responsibility as shown in Appendix B, Section B.2.

38.2.1    The ownership of and title to the Amrad Common Facilities, and all
Capital Betterments, Capital Replacements, and Capital Additions thereto, shall
vest simultaneously in the Participants so that the estate of each of them shall
be deemed to be concurrent as to time, right and priority.

38.2.2    The Participants shall be responsible for the Construction Costs, for
the O&M expenses, and for Capital Betterments, Capital Replacements, and Capital
Additions for the Amrad Common Facilities in accordance with their Cost
Responsibilities as detailed in Appendix B, Section B.2, except as provided in
Section 38.2.3 herein.

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38.2.3    The Participants shall be responsible for only those O&M expenses and
for Capital Betterments, Capital Replacements, and Capital Additions for the
Amrad Common Facilities as are necessary for this Project; nonproject O&M
expenses, and Capital Betterments, Capital Replacements, and Capital Additions
for the Amrad Common Facilities shall be borne 100% by EPE.

38.3    EPE shall accept and hold title, and shall be the sole owner of the
communication facilities located at Amrad, the communication facilities located
at Eddy County Interchange, and any communication facilities located at any
repeater site between Amrad and Eddy County Interchange.

38.3.1    The Participants shall be responsible for the Construction Costs, the
O&M expenses and for Capital Betterments, Capital Replacements, and Capital
Additions for communication facilities located at Amrad, Eddy County
Interchange, and any repeater sites, in accordance with their Cost
Responsibilities as detailed in Appendix B, Section B.2, except as provided in
Section 38.3.2 herein.

38.3.2    The Participants shall be responsible for only those O&M expenses and
for Capital Betterments, Capital Replacements, and Capital Additions for the
communication facilities located at Amrad, Eddy County Interchange, and any
repeater sites, as are necessary for this Project; nonproject O&M expenses and
Capital Betterments, Capital Replacements, and Capital Additions for the
communication facilities located at Amrad shall be borne 100% by EPE.

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38.3.3    EPE shall operate and maintain the communication facilities located at
Amrad, Eddy County Interchange, and any repeater sites between those two
switchyards.

38.4    EPE shall accept and hold title, and shall be the sole owner of, the
expansion and modifications to EPE's Newman microwave system.

38.4.1    The Participants shall be responsible for the Construction Costs for
the expansion and modifications of EPE's Newman microwave system as described in
Appendix C, the O&M expenses and for Capital Betterments, Capital Replacements,
and Capital Additions to EPE's Newman microwave system in accordance with their
Cost Responsibility as detailed in Appendix B, Section B.2, except as provided
in Section 38.4.2 herein.

38.4.2    The Participants shall be responsible for only those O&M expenses and
for Capital Betterments, Capital Replacements, and Capital Additions for EPE's
Newman microwave system as are necessary for this Project; nonproject O&M
expenses and Capital Betterments, Capital Replacements, and Capital Additions
for EPE's Newman microwave system shall be borne 100% by EPE.

34.4.3    EPE shall operate and maintain its Newman microwave system.

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SECTION 39
NOTICES

39.1    Except as set forth in Section 39.2 hereof, any notice, demand, or
request provided for in this Participation Agreement or any other Project
Agreement shall be in writing and shall be deemed properly served, given, or
made if delivered in person or sent by registered or certified mail, postage
prepaid, to the persons specified below:

El Paso Electric Company
c/o Secretary
Post Office Box 982
El Paso, Texas 79960

Texas-New Mexico Power Company
c/o Vice President Rates and Regulation
501 West Sixth Street
Fort Worth, Texas 76102

39.2    Communications of a routine nature, including requests for funds and
related matters, shall be given in such a manner as the Administrative Committee
shall arrange.

39.3    Any Participant may, at any time, by written notice to all other
Participants, designate different or additional persons or different addresses
for the giving of notices hereunder.

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SECTION 40
EXECUTION

IN WITNESS WHEREOF, the Participants have caused this Participation Agreement to
be executed as of the 8th day of December, 1981.

EL PASO ELECTRIC COMPANY

By     /s/Donald G. Isbell    

Title     Vice President    

TEXAS-NEW MEXICO POWER COMPANY

By     /s/James M. Tarpley    

Title     Vice President    

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APPENDICES

TITLE

A
Description of the Transmission System and DC Terminal

B
Participant's Responsibility for Costs (Percent of Costs)

C
Control, Communication, and Relaying

D
Construction Schedule

E
Payroll, Administrative & General, and Engineering & Supervision Additives for
EPE

F
Criteria for Determining the Operating Capacity of the Transmission System and
DC Terminal

G
Percentage Apportionment of Operating Capacity

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APPENDIX A
DESCRIPTION OF THE AMRAD T0 ARTESIA
345 KV TRANSMISSION SYSTEM
AND DC TERMINAL

A.1    The Transmission System is comprised of one 345 KV line connecting EPE's
Amrad Substation to SPS's Eddy County Interchange Substation, a distance of
approximately 125 miles, a new 345 KV AMRAD Substation, a 200 MVA 345/115 KV
transformer at Amrad, and additions to EPE's existing 115 KV Substation at
Amrad.

A.1.1    The DC Terminal is a back-to-back AC to DC to AC conversion station
located at the Eddy County Interchange Substation for the purpose of controlling
power flows across the Transmission System and isolating the Western Systems
Coordinating Council (WSCC) from the Southwest Power Pool (SWPP).

A.2    Substation Components of the Transmission System and DC Terminal are
described as follows:

A.2.1    The Amrad Substation will be expanded to provide termination for this
Project. Facilities associated with this expansion shall be as follows:

A.2.1.1 One (1) 200 MVA 345/115 KV Auto Transformer.

A-1

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A.2.1.2 Four (4) 115 KV power circuit breakers and associated disconnect
switches, bus work, any other appurtenant facilities and common facilities to be
arranged in a breaker and one-half layout, but operated as a ring bus.

A.2.1.3    Three (3) 345 KV power circuit breakers, associated disconnect
switches, bus work, any other appurtenant facilities and common facilities to be
arranged in a ring bus and operated as a ring bus.

A.2.2    The Components of the DC Terminal include but are not limited to the
following:

A.2.2.1 Thyristor Valves/Bridges, System Control facilities, converter
transformers, smoothing reactors, power capacitors, AC and DC filters, valve
cooling equipment, auxiliary power supply systems, reactive power supplies,
protective equipment, monitoring equipment, measuring equipment, and
communication equipment.

A.2.2.2 The associated buildings, fences, common facilities, and appurtenant
facilities.

A.3    Each Participant has plans for substation modifications and transmission
associated with this Project but not specifically part of this Project, and each
is hereby granted preapproved points of interconnection for these associated
lines:

A-2

--------------------------------------------------------------------------------

A.3.1    For EPE, one 345 KV transmission line connecting the new Amrad 345/115
KV Substation to EPE's proposed Caliente Substation.

A.3.2    For TNP, one 115 KV transmission line connecting the new Amrad 345/115
KV Substation to one of two proposed points.

A.3.2.1 TNP Method One of Interconnection would terminate TNP's 115 KV line at a
new substation constructed on TNP's existing line between the Holloman and
Alamogordo Substations.

A.3.2.2 TNP Method Two of Interconnection would terminate TNP's 115 KV line at
EPE's Holloman Substation.

A.3.2.3 The election for TNP to use Method One or Method Two of Interconnection
shall be made at TNP's sole discretion.

A.4    Substation modifications made in connection with each Participant's
associated transmission lines are not part of this Project, but are listed here
for reference and completeness as follows:

A.4.1    If TNP Method One of Interconnection is decided upon and used, TNP
would be the sole owner of a new substation on TNP's existing
Holloman to Alamogordo Line. Facilities associated with this new substation are:

A-3

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A.4.1.1 Three (3) 115 KV power circuit breakers and associated disconnect
switches, bus work, grounding, any other appurtenant facilities and common
facilities required for a complete substation.

A.4.2    If TNP Method Two of Interconnection is decided upon and used, EPE's
Holloman Substation would be expanded to provide a termination for the line
facilities associated with this expansion are as follows:

A.4.2.1 Two (2) 115 KV power circuit breakers and associated disconnect
switches, bus work, and any other appurtenant facilities and common facilities
required to complete a four (4) breaker ring bus to be operated as a ring bus.

A-4

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APPENDIX B

PARTICIPANT'S RESPONSIBILITY FOR COSTS (PERCENT OF COSTS)

B.l
Participant's Responsibility for Costs (Percent of Cost) for Components of the
Transmission System; DC Terminal; any Capital Additions, Capital Replacements,
or Capital Betterments to the Transmission System and DC Terminal; any
associated transmission lines.

 
 
EPE
TNP
 
 
 
 
B.1.1
Amrad 200 MVA 345/115 KV
 
 
 
Autotransformer
     50.00
        50.00
 
Associated Operation and
 
 
 
Maintenance costs
     50.00
        50.00
 
Associated Lightning Arrestors
     50.00
        50.00
 
 
 
 
B.1.2
Amrad 115 KV Switchyard Expansion
 
 
 
Four (4) 115 KV power circuit
 
 
 
breakers and the associated
 
 
 
four (4) bays
     62.50
        37.50
 
Lightning Arrestors
     62.50
        37.50
 
Disconnect switches
     62.50
        37.50
 
Potential Devices
     62.50
        37.50
 
Additional Substation Grounding
     62.50
        37.50
 
Additional Fencing
     62.50
        37.50
 
Additional Bus Work &
 
 
 
Bus Supports
     62.50
        37.50
 
Additional Station Service
 
 
 
Equipment
     62.50
        37.50
 
Additional Common Facilities
     62.50
        37.50
 
Any Appurtenant Equipment
     62.50
        37.50
 
All Operation Costs
     62.50
        37.50
 
All Maintenance Costs
     62.50
        37.50
 
Other project related modifications
 
 
 
necessary for interconnection to
 
 
 
existing Amrad facilities
     62.50
        37.50
 
The existing EPE circuit breaker
 
 
 
and its associated bay
   100.00
0.00
 
 
 
 
B.1.3
New Amrad 345 KV Substation
 
 
 
Three (3) 345 KV Power
 
 
 
Circuit Breakers
     72.22
        27.78
 
Disconnect Switches
     72.22
        27.78
 
Substation Grounding System
 
 
 
Potential Devices
     72.22
        27.78
 
Control House
     72.22
        27.78
 
Bus Work, Bus Supports,
 
 
 
Bus Fittings
     72.22
        27.78
 
Line Deadend Tower
     72.22
        27.78
 
Lighting Arrestors
     72.22
        27.78
 
Other Common Facilities
     72.22
        27.78
 
Other Appurtenant Equipment
     72.22
        27.78
 
All Operation Costs
     72.22
        27.78
 
All Maintenance Costs
     72.22
        27.78

B-1

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EPE
TNP
 
 
 
 
B.1.4
Eddy County Interchange
 
 
 
back-to-back DC Terminal
     66.67
        33.33
 
All Components
66.67
        33.33
 
All Associated Facilities
66.67
        33.33
 
All Construction Costs
66.67
        33.33
 
All Operation Costs
66.67
        33.33
 
All Maintenance Costs
66.67
        33.33
 
 
 
 
B.1.5
Amrad to Eddy County Interchange
 
 
 
345 KV Transmission Line
     66.67
        33.33
 
All Components
66.67
        33.33
 
All Construction Costs
66.67
        33.33
 
All Maintenance Costs
66.67
        33.33
 
Line Reactors, if required
66.67
        33.33
 
Circuit Switcher for Reactor
66.67
        33.33

B.2
Participant's Responsibility for Costs (Percent of Cost) for control microwave,
and relaying equipment as provided for in Section 38.

B.2.l
 Construction work and Equipment
 
 
 
 for control, microwave expansion
 
 
 
 and modification, relaying as
 
 
 
 described in Appendix C
66.7
33.3

B-2

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EPE

TNP

 
 
 
 
B.2.2
O&M expenses directly related
 
 
 
 to the Project
66.7

33.3

 
 
 
 
B.2.3
Capital Betterments, Capital
 
 
 
Replacements and Capital
 
 
 
Additions associated with
 
 
 
control microwave and relaying
66.7

33.3

B.3
Associated transmission lines and substation modifications are listed here for
reference only, they are not part of this Project.

B.3.1
EPE's Associated Transmission:
 
 
 
One (1) 345 KV transmission line
 
 
 
from Amrad to EPE's proposed
 
 
 
Caliente 345/115 KV Substation
100.00
0.00
 
 
 
 
B.3.2
TNP's Associated Transmission:
 
 
 
One (1) 115 KV transmission line
 
 
 
 from Amrad to the Holloman
 
 
 
area using either TNP Method
 
 
 
One of Interconnection or
 
 
 
TNP Method Two of Interconnection
0.00
100.00

B-3

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EPE
TNP
 
 
 
 
B.3.2.1
If TNP Method One of Interconnection
 
 
 
is decided upon and used:
 
 
 
New 3 Beaker Ring Bus
0.00
100.00
 
All Components
0.00
100.00
 
 
 
 
B.3.2.2
If TNP Method Two of Interconnection
 
 
 
is decided upon and used the
 
 
 
expansion of EPE's Holloman
 
 
 
substation would include two (2)
 
 
 
115 KV power circuit breakers
0.00
100.00
 
Lightning Arrestors
50.00
50.00
 
Disconnect Switches
50.00
50.00
 
Additional Substation Grounding
50.00
50.00
 
Additional Fencing
50.00
50.00
 
Additional Bus Work and
 
 
 
Bus Supports
50.00
50.00
 
Additional Station Service
 
 
 
Equipment
50.00
50.00
 
Additional Common Facilities
50.00
50.00
 
Any Appurtenant Equipment
50.00
50.00
 
All Operation Costs
50.00
50.00
 
All Maintenance Costs
50.00
50.00

B-4

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EPE

TNP

 
 
 
 
B.4
Participant's Cost Responsibility
 
 
 
for costs and expenses not
 
 
 
included in this Appendix B and
 
 
 
not otherwise specifically
 
 
 
allocated in any Project Agreement
66.7

33.3

B-5

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APPENDIX B (CONTINUED)

DERIVATION OF SUBSTATION COMPOSITE PERCENTAGES

f1.jpg [f1.jpg]

B-6

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APPENDIX B (CONTINUED)

DERIVATION OF SUBSTATION COMPOSITE PERCENTAGES

f2.jpg [f2.jpg]

B-7

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APPENDIX C
CONTROL, COMMUNICATION EXPANSION AND
MODIFICATION, AND RELAYING

C.l    The Transmission System will be protected by primary and back-up relaying
scheme using a hot-standby communication system. Microwave repeater stations
will be installed where required.

C.2    If required, transfer trip schemes will be provided for the DC Terminal
and for the 345/115 KV transformer associated with the line.

C.3    All AC terminations will incorporate breaker failure schemes.

C.4    Expansion and modification of EPE existing Newman microwave system
required for the Transmission System and DC Terminal will consist of the
following:

C.4.1    Establishment of a new microwave transmitter and receiver at Amrad in a
hot-standby configuration.

C.4.2    Expansion of the existing Newman microwave facilities to handle the
hot-standby system at Amrad.

C.4.3    A microwave repeater, if necessary, between the Amrad site and Newman.

C-1

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APPENDIX D
CONSTRUCTION MILESTONE DATES

D.1    It is intended that the Engineering and Operating Committee established
pursuant to Section 7.7 of this Agreement shall develop the Milestones and their
respective target dates for completion for inclusion in this Agreement from time
to time as the dates are agreed upon.

D.2
Activity
Target Date

D-1

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APPENDIX E
PAYROLL, ADMINISTRATIVE AND GENERAL,
AND ENGINEERING AND SUPERVISION ADDITIVES FOR EPE

E.1 Time-Off allowances, including vacations, holidays, sick pay, accident pay,
and jury pay will be added to the direct labor portion of Construction Costs,
costs of Operating Work, and costs of Capital Additions, Capital Betterments,
and Capital Replacements, exclusive of such time-off allowances, in the same
manner as that used internally by the Project Manager or Operating Agent.

E.2     Legally required payroll taxes, and workmen's compensation, will be
added to the direct labor portion of Construction Costs, costs of Operating
Work, and costs of Capital Additions, Capital Betterments, and Capital
Replacements on a prorata allocation of total labor charges of the Project
Manager or Operating Agent.

E.3     Employee welfare and miscellaneous, pension and insurance, costs (FERC
Account 926) will be added to the direct labor portion of Construction Costs,
costs of Operating Work and costs of Capital Additions, Capital Betterments, and
Capital Replacements on a prorata allocation of total labor charges of the
Project Manager or Operating Agent.

E-1

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E.4     Transportation expenses will be added to the direct labor portion of
Construction Costs, costs of Operating Work and costs of Capital Additions,
Capital Betterments, and Capital Replacements in the same manner as that used
internally by the Project Manager or Operating Agent.

E.5    Stores expenses will be added to the direct material portion of
Construction Costs, costs of Operating Work and costs of Capital Additions,
Capital Betterments, and Capital Replacements in the same manner as that used
internally by the Project Manager or Operating Agent.

E.6     Supervision, Engineering, and Accounting expenses will be added to the
direct labor portion of costs of Operating Work; costs of Capital Additions,
Capital Betterments, and Capital Replacements; costs of construction to install
Capital Additions, Capital Betterments, and Capital Replacements in the same
manner as that used internally by the Project Manager or Operating Agent. During
the Construction Work of the Transmission System and DC Terminal the Project
Manager shall collect the E&S allowance pursuant to Section 13.3.13.

E.7     Revisions to the methods used in calculating rates for the additives
described in Sections E.1 through E.6 will be made as needed. Any Participant
may challenge the method if such Participant deems the method to result in an
inappropriate allocation of costs to the project. In such case, the procedure
will be as follows:

E.7.1    The Participant will inform the Audit Committee in writing of its
concerns and will propose alternatives.

E-2

--------------------------------------------------------------------------------

E.7.2    In the event the Audit Committee fails to reach agreement on the
challenged method within 60 days of presentment, the challenge shall be resolved
pursuant to the provision of Section 7.10 and 7.11 of the Participation
Agreement.

E.7.3    Revisions shall become effective as determined by the Project Manager
or Operating Agent, notwithstanding any dispute under this Section E.7. Upon
final resolution of the dispute, the disputed methods shall be appropriately
adjusted retroactively.

E-3

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APPENDIX F
CRITERIA FOR DETERMINING OPERATING
CAPACITY OF THE TRANSMISSION SYSTEM
AND DC TERMINAL

F.1     The operating capacity of the Transmission System is limited to the
current carrying capacity of the DC Terminal.

F.2     The E&O Committee will direct the Operating Agent to operate the DC
Terminal at some current carrying level up to its design rating.

F.2.1    The operating capacity of the Transmission System can be raised by the
Participant's purchasing ·the appropriate additional equipment for the DC
Terminal, and amending this Participation Agreement and any other Project
Agreement as necessary.

F.2.2    The operating capacity of the Transmission System can be lowered by the
E&O Committee by unanimous vote or by the Operating Agent for Operating
Emergencies, or scheduled maintenance.

F.3     The operation of the transmission System will require a source of vars
to maintain adequate voltage at each end of the line. It is expected that within
the conditions of this Participation Agreement this var supply is completely
accounted for; therefore, the Transmission System and DC Terminal shall not
require any additional var generation from the systems it connects and shall not
be voltage limited in its operating capacity.

F-1

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APPENDIX G
PERCENTAGE APPORTIONMENT OF OPERATING CAPACITY

G.1     In all cases, except those specific cases listed below, the
apportionment of Operating Capacity of any component in the Transmission System,
DC Terminal, or associated transmission lines is made using the same percentage
as the percent of costs shown in Appendix B of this Agreement.

G.1.1    The operating capacity of the Amrad 200 MVA 345/115 KV autotransformer
shall be apportioned fifty percent (50%) to TNP and fifty percent (50%) to EPE.

G-1

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SUPPLEMENTAL AGREEMENT TO THE
AMRAD TO ARTESIA 345 KV TRANSMISSION SYSTEM
AND DC TERMINAL
PARTICIPATION AGREEMENT
BETWEEN EPE AND TNP

This Agreement supplements the AMRAD TO ARTESIA 345 KV TRANSMISSION SYSTEM AND
DC TERMINAL PARTICIPATION AGREEMENT ("Participation Agreement") between EPE and
TNP dated December 8, 1981.

WHEREAS, because of Federal Communication Commission licensing requirements,
only one party may license, own and operate microwave equipment; and

WHEREAS, pursuant to the Participation Agreement, EPE will license, own and
operate such microwave equipment relating to the Project; and

WHEREAS, TNP will contribute 1/3 of the cost and EPE will contribute 2/3 of the
cost of such microwave equipment; and

WHEREAS, the installed cost of such microwave equipment is not presently known;
and

WHEREAS, the Participant's desire to adjust the percentage ownership in the
Amrad 200 MVA 345/115 KV autotransformer to reflect TNP's contribution in the
microwave equipment and its attendant lack of ownership therein.

1

--------------------------------------------------------------------------------

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, receipt of which is hereby acknowledged, the Participants hereby
agree that:

Upon final determination of the costs associated with the microwave equipment
and the Amrad 200 MVA 345/115 KV autotransformer, the Participants will amend
Appendix B to increase TNP's ownership in the Amrad 200 MVA 345/115 KV
autotransformer in an amount equal to the TNP's share of the installed cost of
the
microwave equipment.

Executed in duplicate as of December 8, 1981.

EL PASO ELECTRIC COMPANY

By         /s/Donald G. Isbell    

TEXAS-NEW MEXICO POWER COMPANY

By         /w/James M. Tarpley    

2

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EPE - TNP
SECOND SUPPLEMENTAL AGREEMENT
TO THE
AMRAD TO ARTESIA 345 KV TRANSMISSION SYSTEM
AND
DC TERMINAL PARTICIPATION AGREEMENT

Execution Copy

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EPE - TNP
SECOND SUPPLEMENTAL AGREEMENT TO
AMRAD TO ARTESIA 345 KV TRANSMISSION
SYSTEM AND DC TERMINAL PARTICIPATION AGREEMENT

SECTION 1: PARTIES
The Parties to this Second Supplemental Agreement are El Paso Electric Company,
a Texas corporation ("EPE") and Texas-New Mexico Power Company, a Texas
corporation ("TNP"), sometimes individually called "Participant" and
collectively "Participants."
SECTION 2: RECITALS
2.1
TNP and EPE have heretofore entered into an agreement entitled "Amrad to Artesia
345 KV Transmission System and DC Terminal Participation Agreement," dated
December 8, 1981, and an agreement entitled "Supplemental Agreement to the Amrad
to Artesia 345 KV Transmission System and DC Terminal Participation Agreement
Between EPE and TNP," dated December 8, 1981, (collectively, the "Participation
Agreement").

2.2
The Parties now wish to amend and supplement the Participation Agreement to
incorporate the Parties' agreement on certain transmission facilities associated
with the Amrad to Artesia 345 KV Transmission System and DC Terminal Project.
This Agreement shall become a part

Execution Copy

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of the agreement between TNP and EPE settling FERC Docket Nos. ER86-368,
ER86-638 and ER86-709 ("Settlement Agreement").
SECTION 3: EFFECTIVE DATE
This Second Supplemental Agreement shall become effective upon execution by both
Participants and approval of the Settlement Agreement by the Federal Energy
Regulatory Commission ("FERC").
SECTION 4: AGREEMENT
In consideration of the premises and mutual covenants set forth herein, the
Participants agree that the Participation Agreement is hereby amended and
supplemented as follows:
4.1.
A new Section 5A is added to the Participation Agreement to read as follows:

"SECTION 5A: NONPROJECT FACILITIES
5A.l
Each Participant is contemplating possible substation and transmission
modifications associated with this Project but not specifically part of this
Project ("Nonproject Facilities"). No Participant is required to pursue and
construct these Nonproject Facilities. It is expressly understood that
Nonproject Facilities are described only for informational purposes and to
identify the Nonproject Facilities

-2-
Execution Copy

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for purposes of preapproval for interconnection. No Participant shall rely, for
any purpose or reason, on the performance or nonperformance of the other
Participant to pursue and construct Nonproject Facilities. Notwithstanding the
foregoing, each Participant is hereby granted the preapproved right to construct
and interconnect at Amrad Substation the following Nonproject Facilities:
5A.l.l.
For EPE, (a) one 345 KV transmission line (and associated substation
modifications) connecting the new Amrad 345/115 KV Substation and the proposed
Caliente Substation of EPE and (b) a possible new substation located at the
point TNP's 115 KV Amrad to Alamogordo Line interconnects with TNP's 115 KV
Holloman to Alamogordo Line which is located between the Holloman and
Alamogordo Substations, as further described in Section 5A.3.

5A.l.2.    For TNP, one 115 KV transmission

-3-
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line (and associated substation modifications) connecting the new Amrad 345/115
KV Substation to a point on TNP's existing 115 KV Holloman to Alamogordo Line
which is located between the Holloman and Alamogordo Substations ("TNP's 115 KV
Amrad to Alamogordo Line").
5A.2
Each Participant agrees to cooperate fully with the other Participant regarding
the construction, operation and maintenance of Nonproject Facilities to include
associated metering facilities.

5A.3
EPE may elect to construct, at the sole expense of EPE, a new substation and
associated facilities to be located at the point that TNP's 115 KV Amrad to
Alamogordo Line interconnects with TNP's existing 115 KV Holloman to Alamogordo
Line which is located between the Holloman and Alamogordo Substations (the "EPE
Mule Peak Substation"). If EPE builds the EPE Mule Peak Substation, EPE shall be
responsible for operation and maintenance of the EPE Mule Peak Substation, at
the sole expense of EPE. If,

-4-
Execution Copy

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as a direct result of the operations of the EPE Mule Peak Substation, TNP needs
to install additional equipment that would not be required but for the
construction, operation and maintenance by EPE of the EPE Mule Peak Substation,
EPE shall reimburse TNP for the reasonable cost of material and labor associated
with the purchase and installation of such required equipment.
5A.4
Section B.3 of Appendix B to this Participation Agreement contains the
Participants' respective responsibility for the costs of Nonproject Facilities."

4.2.
Appendix A to the Participation Agreement is cancelled and a new Appendix A in
the form attached to this Second Supplemental Agreement is adopted.

4.3.
Appendix B to the Participation Agreement is cancelled and a new Appendix B in
the form attached to this Second Supplemental Agreement is adopted.

4.4.
Appendix D to the Participation Agreement is cancelled and a new Appendix D in
the form attached to this Second Supplemental Agreement is adopted.

SECTION 5: FULL FORCE AND EFFECT
Except as provided herein, the Participation Agreement, as amended and
supplemented by this Second Supplemental

-5-
Execution Copy

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Agreement, shall remain in full force and effect.
SECTION 6: SIGNATURE CLAUSE
The signatories hereto represent that they have been appropriately authorized to
enter into this Second Supplemental Agreement on behalf of the Participant for
whom they sign. This Second Supplemental Agreement is hereby executed as of the
29th day of April, 1987.

 
 
 
TEXAS-NEW MEXICO POWER COMPANY
 
 
 
 
 
 
 
 
 
By
/s/James M. Tarpley
 
 
 
 
President and
 
 
 
 
Chief Operating Officer
 
 
 
 
 
 
ATTEST:
 
 
 
 
 
f3a01.jpg [f3a01.jpg]
 
 
 
 
 
 
Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By
/s/Evern R. Wall
 
 
 
 
President and
 
 
 
 
Chairman of the Board
 
 
 
 
 
 
 
 
 
 
 
 
ATTEST:
 
 
 
 
 
 
 
 
 
 
 
/s/Theta S. Fields
 
 
 
 
Secretary
 
 
 
 

-6-
Execution Copy

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APPENDIX A
DESCRIPTION OF THE AMRAD TO ARTESIA
345 KV TRANSMISSION SYSTEM
AND DC TERMINAL
A.1
The Amrad to Artesia 345 KV Transmission System (the "Transmission System") is
comprised of (a) one 345 KV line connecting the Amrad Substation of EPE to the
Eddy County Interchange Substation of Southwestern Public Service Company
("SPS"), a distance of approximately 125 miles, (b) a new 345 KV Amrad
Substation, (c) a 200 MVA 345/115 KV transformer at Amrad, and (d) additions to
the existing 115 KV Substation at Amrad.

A.2
The DC Terminal (the "DC Terminal") is a back-to-back AC to DC to AC conversion
station located at the Eddy County Interchange Substation of SPS for the purpose
of controlling power flows across the Transmission System and isolating the
Western Systems Coordinating Council ("WSCC") from the Southwest Power Pool
("SWPP").

A.3
Construction, operation and maintenance of the Transmission System, DC Terminal
and related substation components are sometimes referred to in this Appendix A
as the "Project".

A.4
Substation Components of the Transmission System and

A-1
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DC Terminal are described as follows:
A.4.1.
The Amrad Substation of EPE shall be expanded to provide termination for this
Project. Facilities associated with the expansion shall be as follows:

A.4.1.1.
One 200 MVA 345/115 KV Auto Transformer.

A.4.1.2.
Four 115 KV power circuit breakers and associated disconnect switches, bus work,
any other appurtenant facilities and common facilities to be arranged in a
breaker and one-half layout, but operated as a ring bus.

A.4.1.3.
Three 345 KV power circuit breakers, associated disconnect switches, bus work,
any other appurtenant facilities and common facilities to be arranged in a ring
bus and operated as a ring bus.

A.4.2.
The Components of the DC Terminal include, but are not limited to, the
following:

A.4.2.1.
Thyristor Valves/Bridges, System Control facilities, converter transformers,
smoothing reactors, power capacitors, AC and DC filters, valve cooling
equipment, auxiliary power supply systems, reactive power supplies, protective

A-2
Execution Copy

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equipment, monitoring equipment, measuring equipment, and communication
equipment.
A.4.3.
The associated buildings, fences, common facilities, and appurtenant facilities.

A-3
Execution Copy

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APPENDIX B
PARTICIPANTS' RESPONSIBILITY FOR
COSTS (PERCENT OF COSTS)
B.1
Participants' Responsibility for Costs (Percent of Cost) for Components of the
Transmission System; DC Terminal; any Capital Additions, Capital Replacements,
or Capital Betterments to the Transmission System and DC Terminal; and
associated Nonproject Transmission Facilities.

 
 
EPE
TNP
 
 
 
 
B.1.1
Amrad 200 MVA 345/115 KV
 
 
 
Autotransformer
50.00
50.00
 
Associated Operation and
 
 
 
Maintenance Costs
50.00
50.00
 
Associated Lightning
50.00
50.00
 
Arrestors
 
 
B.1.2
Amrad 115 KV Switchyard
 
 
 
Expansion
 
 
 
Four (4) 115 KV power circuit
 
 
 
breakers and the associated
 
 
 
four (4) bays
62.50
37.50
 
Lighting Arrestors
62.50
37.50
 
Disconnect Switches
62.50
37.50
 
Potential Devices
62.50
37.50
 
Additional Substation
 
 
 
Grounding
62.50
37.50
 
Additional Fencing
62.50
37.50
 
Additional Bus Work & Bus
 
 
 
Supports
62.50
37.50
 
Additional Station Service
 
 
 
Equipment
62.50
37.50
 
Additional Common Facilities
62.50
37.50
 
Any Appurtenant Equipment
62.50
37.50
 
All Operation Costs
62.50
37.50
 
All Maintenance Costs
62.50
37.50

B-1
Execution Copy

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EPE

TNP

 
Other project related
 
 
 
modifications necessary
 
 
 
for interconnection to
 
 
 
existing Amrad facilities
62.50

37.50

 
The existing EPE circuit
 
 
 
breaker and its associated
 
 
 
bay
100.00

100.00

 
 
 
 
B.1.3
New Amrad 345 KV Substation
 
 
 
 
 
 
 
Three (3) 345 KV Power
 
 
 
Circuit Breakers
72.22

27.78

 
Disconnect Switches
72.22

27.78

 
Substation Grounding System
72.22

27.78

 
Potential Devices
72.22

27.78

 
Control House
72.22

27.78

 
Bus Work, Bus Supports,
 
 
 
Bus Fittings
72.22

27.78

 
Line Deadend Tower
72.22

27.78

 
Lightning Arrestors
72.22

27.78

 
Other Common Facilities
72.22

27.78

 
Other Appurtenant Equipment
72.22

27.78

 
All Operation Costs
72.22

27.78

 
All Maintenance Costs
72.22

27.78

 
 
 
 
B.1.4
Eddy County Interchange
 
 
 
Back-to-Back DC Terminal
66.67

33.33

 
 
 
 
 
All Components
66.67

33.33

 
All Associated Facilities
66.67

33.33

 
All Construction Costs
66.67

33.33

 
All Operation Costs
66.67

33.33

 
All Maintenance Costs
66.67

33.33

 
 
 
 
B.1.5
Amrad to Eddy County Interchange
 
 
 
 
 
 
 
345 KV Transmission Line
66.67

33.33

 
All Components
66.67

33.33

 
All Construction Costs
66.67

33.33

 
All Maintenance Costs
66.67

33.33

 
Line Reactors, if required
66.67

33.33

 
Circuit Switcher for Reactor
66.67

33.33

B.2
Participant's Responsibility for Costs (Percent of Cost) for control microwave
and relaying equipment as provided for in Section 38.

B-2
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EPE

TNP

B.2.1
Construction work and
 
 
 
equipment for control,
 
 
 
microwave expansion and
 
 
 
modification, relaying as
 
 
 
described in Appendix C
66.70

33.30

B.2.2
O&M Expenses directly
 
 
 
related to the Project
66.70

33.30

B.2.3
Capital Betterments, Capital
 
 
 
Replacements and Capital
 
 
 
Additions associated with
 
 
 
control microwave and
 
 
 
relaying
66.70

33.30

B.3
Associated nonproject transmission lines and substation modifications are listed
below for information and reference only, as set forth in Section 5A of the
Participation Agreement. It is expressly understood that they are not part of
this Project.

B.3.1
EPE's Associated Transmission:
 
 
 
 
 
 
 
One (1) 345 KV transmission
 
 
 
line from Amrad to EPE's
 
 
 
proposed Caliente 345/115
 
 
 
KV Substation
100.00
0.00
 
 
 
 
 
One Substation located at
 
 
 
the point TNP's 115 KV
 
 
 
Amrad to Alamogordo Line
 
 
 
interconnects with TNP's
 
 
 
115 KV Holloman to
 
 
 
Alamogordo Line which is
 
 
 
located between the
 
 
 
Holloman and Alamogordo
 
 
 
Substations
100.00
0.00
 
 
 
 
B.3.2
TNP's Associated Transmission:
 
 
 
 
 
 
 
One (1) 115 KV transmission
 
 
 
line from the Amrad 345 KV
 
 
 
Substation to the point of
 
 
 
interconnection on TNP's 115
 
 
 
KV Holloman to Alamogordo Line
 
 
 
which is located between
 
 
 
the Holloman and Alamogordo
 
 
 
Substations
0.00
100.00

B-3
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EPE

TNP

B.4
Participant's Cost Responsibility
 
 
 
for costs and expenses not included
 
 
 
in this Appendix B and not otherwise
 
 
 
specifically allocated in any Project
 
 
 
Agreement.
66.7

33.3

B-4
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APPENDIX D
CONSTRUCTION MILESTONE DATES

D.1
The Engineering and Operating Committee established pursuant to Section 7.7 of
this Agreement has developed certain milestones and target dates for completion
of certain aspects of this Agreement. These dates are set forth in the minutes
of the Engineering and Operating Committee.

D.2
It is understood and agreed that the Transmission System and DC Terminal were
completed on the target date for completion.

D-1
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EPE - TNP
THIRD SUPPLEMENTAL AGREEMENT
TO THE
AMRAD TO ARTESIA 345 KV TRANSMISSION SYSTEM
AND
DC TERMINAL PARTICIPATION AGREEMENT

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EPE-TNP
THIRD SUPPLEMENTAL AGREEMENT TO
AMRAD TO ARTESIA 345 KV TRANSMISSION
SYSTEM AND DC TERMINAL PARTICIPATION AGREEMENT
Section 1: PARTIES
The Parties to this Third Supplemental Agreement are El Paso Electric Company, a
Texas corporation ("EPE") and Texas-New Mexico Power Company, a Texas
corporation ("TNP"), sometimes individually called "Participant" and
collectively "Participants."
Section 2: RECITALS
2.1
TNP and EPE have heretofore entered into an agreement for the construction and
operation of a 345 KV transmission line from Amrad to Artesia and associated DC
terminal (Project) entitled "Amrad to Artesia 345 KV Transmission System and DC
Terminal Participation Agreement," dated December 8, 1981, an agreement entitled
"Supplemental Agreement to the Amrad to Artesia 345 KV Transmission System and
DC Terminal Participation Agreement Between EPE and TNP," dated December 8,
1981, and an agreement entitled "EPE-TNP Second Supplemental Agreement to Amrad
to Artesia 345 KV Terminal System and DC Terminal Participation Agreement" dated
April 29, 1987, (collectively, the "Participation Agreement").

2.2
Upon completion of the Project microwave system, the Supplemental Agreement
provided for an adjustment of the Participants' respective percentage ownership
in the Amrad 200 MVA 345/115 KV autotransformer to reflect TNP's contribution to
the microwave equipment related to the Project and TNP's lack of ownership
therein. Such adjustment in

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ownership will have no affect on the Parties' present rights to utilize the
capability of the Amrad 200 MVA 345/115 KV autotransformer on a 50-50 basis.
2.3
The Parties now wish to amend and supplement the Participation Agreement to
reflect an adjustment of the Parties' respective percentage ownership in the
Amrad 200 MVA 345/115 KV autotransformer.

Section 3: EFFECTIVE DATE
This Third Supplemental Agreement shall become effective upon execution by both
Participants.
Section 4: AGREEMENT
In consideration of the premises and mutual covenants set forth herein, the
Participants agree that the Participation Agreement is hereby amended and
supplemented as follows:
Section B.1.1 of Appendix B is deleted in its entirety and a new Section B.1.1
is added to read as follows:
 
 
EPE

TNP

B.1.1
Amrad 200 MVA/115 KV Autotransformer
30.84

69.16

 
Associated Operation and Maintenance Costs
50.00

50.00

 
Associated Lighting Arrestors
50.00

50.00

Section 5: FULL FORCE EFFECT
Except as provided herein, the Participation Agreement, as amended and
supplemented by this Third Supplemental Agreement, shall remain in full force
and effect.
/
/

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Section 6: SIGNATURE CLAUSE
The signatories hereto represent that they have been appropriately authorized to
enter into this Third Supplemental Agreement on behalf of the Participant for
whom they sign. This Third Supplemental Agreement is hereby executed as of the
7th day of December, 1987.

EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
By
[Illegible]
 
 
Vice President
 
 
 
 
 
 
 
TEXAS-NEW MEXICO POWER COMPANY
 
 
 
 
 
 
By
/s/ J. V. Chambers
 
 
Vice President
 

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