Exhibit 10.105

OPERATING AGREEMENT FOR THE
CO-OWNERSHIP OF WASTEWATER EFFLUENT

     This Agreement (the “Agreement”) is made and entered into this 16th day of
November, 2000 (the “Effective Date”), by and between Arizona Public Service
Company, a corporation organized and existing under and by virtue of the laws of
the State of Arizona (“APS”) and Salt River Project Agricultural Improvement and
Power District, an agricultural improvement district organized and existing
under and by virtue of the laws of the State of Arizona (“SRP”). SRP and APS are
collectively referred to herein as the “Parties”; each is individually a “Party”
to this Agreement.

RECITALS:

     A. APS, SRP, and the City of Tolleson have executed an “Agreement for the
Sale and Purchase of Wastewater Effluent,” dated November 13, 2000 (the
“Tolleson Agreement”), and each Party to this Agreement desires to more
particularly describe its rights and responsibilities vis-a-vis the other Party
as a co-owner of Tolleson Effluent;

     B. The primary use of the Tolleson Effluent is intended to be for cooling
water at Palo Verde Nuclear Generating Station (“PVNGS”); the secondary use of
the Tolleson Effluent will be its use at “Other Electric Generating Facilities”
(as defined by the Tolleson Agreement);

     C. To the extent Tolleson Effluent is not used at PVNGS, the Tolleson
Effluent may be used at or for the benefit of Other Electric Generating
Facilities;

     D. It is appropriate to establish terms and conditions on which APS, SRP,
and their respective affiliates, including Pinnacle West Energy Corporation
(“PWE”), will make use of the Tolleson Effluent and make decisions regarding the
use of same in the future;

     E. The Parties desire to enter into this Agreement to set forth their
respective rights and obligations pertaining to the co-ownership of the Tolleson
Effluent. Accordingly, this Agreement is an ancillary document or companion
agreement in relation to the Tolleson Agreement.

     NOW, THEREFORE, in consideration of the agreements and promises set forth
below, and, other good and valuable considerations, the receipt and sufficiency
of which are acknowledged, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS AND USAGE

     1.1 Definitions. As used herein, the following capitalized terms shall have
the same meaning as they are given by definition in the Tolleson Agreement:
Delivery Point, Effluent, Effluent Pipeline, Notice of Commitment, Other
Electric Generating Facilities, Outages, Reserved Effluent, Surplus Effluent,
Tolleson, and Uncontrollable Forces. All such definitions from the Tolleson
Agreement are specifically incorporated in this

 

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Agreement by this reference. In addition, the following terms shall have the
specified meanings:

          “Claim” means any demand, claim, cause of action, lawsuit, or
proceeding of any kind or character, including investigation or audit by a
Governmental Authority.

          “Coordinating Committee” has the meaning specified in Article 4.

          “Effective Date” has the meaning specified in the introductory
paragraph.

          “Event of Default” has the meaning specified in Section 7.1.

          “Governmental Authority” means a federal, state, local or foreign
governmental authority or body politic; a state, province, commonwealth,
territory or district; a county; a city, town, township, village or other
municipality; a district or other subdivision or any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council, or other administrative body of any of the foregoing; any
court or other judicial body; a legally recognized tribal authority; and any
officer, official or other representative of any of the foregoing when acting in
their official capacity. For purposes of this Agreement, neither SRP nor APS
shall be considered a Governmental Authority.

          “Legal Requirement” means any statute, law, regulation, ordinance,
rule, judgment, order, decree, constitution, Permit, concession, grant,
franchise, agreement, directive or common law, or any requirement of, or other
governmental restriction or any similar form of decision by, or interpretation
or administration of any of the foregoing by, any Governmental Authority of
competent jurisdiction (or by an arbitrator in a forum involving binding
arbitration to which one of the parties or its business or assets is subject or
bound).

          “Palo Verde Nuclear Generating Station” or “PVNGS” means the Arizona
Nuclear Power Project, as defined in the Arizona Nuclear Power Project
Participation Agreement (including amendments 1-13) among APS, SRP, Southern
California Edison, Public Service Company of New Mexico, El Paso Electric
Company, Southern California Public Power Authority, and the Department of Water
and Power of the City of Los Angeles (collectively, the “PVNGS Participants”).

          “Party” or “Parties” has the meaning specified in the introductory
paragraph and shall include permitted successors and assigns.

          “Permit” means any permit, consent, license, rezoning, variance, use
permit, certification, notice, filing, approval, or authorization of any kind
required to be issued by a Governmental Authority and any necessary consent or
approval required to be granted by any non-Governmental Authority, other than a
Party, in order to develop, construct, own, or operate any facility that is
contemplated or required because of decisions made pursuant to this Agreement.

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          “Person” means any natural person, corporation, limited liability
company, partnership, business trust, Governmental Authority or other entity.

          “PWE” means Pinnacle West Energy Corporation, an Arizona Corporation
and an affiliate of APS.

          “Tolleson Effluent” means all Effluent purchased by APS and SRP from
the City of Tolleson pursuant to the Tolleson Agreement, whether such Effluent
is Surplus Effluent or Reserved Effluent, as those terms are defined in the
Tolleson Agreement.

     1.2 Certain Principles of Interpretation. In this Agreement, unless
otherwise indicated or the context otherwise requires:

          (i) the singular includes the plural and plural the singular when the
context requires;

          (ii) words importing any gender include the other gender;

          (iii) references to “writing” include printing, typing, lithography,
and other means of reproducing words in a tangible visible form;

          (iv) the words “including,” “includes,” and “include” shall be deemed
to be followed in each instance by the words, “without limitation”;

          (v) references to articles, sections, paragraphs, recitals, and
exhibits are to this Agreement unless otherwise stated;

          (vi) references to contracts and related instruments shall be deemed
to include all subsequent amendments, extensions, and other modifications to
such instruments (without, however, limiting any prohibition on any such
amendments, extensions and other modifications by the terms of this Agreement);

          (vii) references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Authorities, persons
succeeding to their respective functions and capacities;

          (viii) the words “hereof,” “herein,” “hereunder,” and words of similar
import shall refer to this Agreement as a whole and not to any particular
provision thereof;

          (ix) both Parties and their counsel participated extensively in the
preparation and drafting of this Agreement; no rule of construction shall apply
that would cause the interpretation of any claimed ambiguity in this Agreement
against a Party determined to be the drafting Party;

          (x) captions and headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose;

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          (xi) any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction and the provision that is prohibited or
unenforceable shall be reformed or modified to reflect the parties’ intent to
the maximum extent permitted by applicable law; and

          (xii) references to a “day,” “week,” “month,” or “year” shall be
construed as a calendar day, week, month, or year.

ARTICLE 2
PURPOSE AND SCOPE

     The purpose of this Agreement is to set forth certain agreements and
understandings between the Parties concerning the ownership and use of the
Tolleson Effluent, the allocation of costs incurred in connection with the
Tolleson Agreement and this Agreement, and the responsibilities and obligations
of each Party. This Agreement relates solely to the business, activities, and
purposes set forth herein and, except as otherwise expressly provided herein,
does not apply to any other activities, transactions, relationships, contracts,
projects, or work of the Parties. Subject to Article 4, no Party shall be
restricted in any way from engaging in any activity or business falling outside
the scope of this Agreement.

ARTICLE 3
OWNERSHIP AND USE OF TOLLESON EFFLUENT

     3.1 Co-Ownership and Use of Effluent Purchased from Tolleson. APS and SRP
agree that they are and shall be co-owners, as tenants in common, of all
Tolleson Effluent purchased pursuant to the Tolleson Agreement, each Party
possessing a 50% undivided interest in all such Tolleson Effluent. Consistent
with the Tolleson Agreement, the Parties agree that the primary use of the
Tolleson Effluent shall be for cooling water for PVNGS and that PVNGS shall have
a priority right to the use of any or all of the Tolleson Effluent to satisfy
such requirements for cooling water at PVNGS as are not fully satisfied using
effluent from non-emergency sources other than Tolleson. To the extent that
Tolleson Effluent is available for use at Other Electric Generating Facilities,
the allocation of and the benefit from any such Effluent shall be divided
between APS and SRP (or their permitted assigns) in the manner determined by the
Coordinating Committee pursuant to Article 4. Any use of Tolleson Effluent at or
for the benefit of Other Electric Generating Facilities shall be consistent with
the terms of both this Agreement and the Tolleson Agreement.

     3.2 Use of Tolleson Effluent at PVNGS. The Parties hereby agree that all
Tolleson Effluent used at PVNGS shall be transferred to the PVNGS Participants
at the Delivery Point specified in the Tolleson Agreement. All aspects of
transportation, treatment, use, disposal and payment for any Tolleson Effluent
so transferred and used at PVNGS shall be the responsibility of APS, as the
Operating Agent of PVNGS, upon discharge of that Effluent into the Effluent
Pipeline, and commencing upon such discharge, APS’s rights and obligations with
respect to such Tolleson Effluent shall be those of the

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Operating Agent under the terms of the Arizona Nuclear Power Project
Participation Agreement, including but not limited to the liability provisions
set forth in that Participation Agreement. The Parties to this Agreement shall
not receive any fee or other compensation for transfer to the PVNGS Participants
of Tolleson Effluent used at PVNGS.

     3.3 Use of Tolleson Effluent at or For the Benefit of Other Electric
Generating Facilities. Tolleson Effluent, if not required for cooling water
purposes at PVNGS, may be used at or for the benefit of Other Electric
Generating Facilities upon such terms and conditions as the Parties may
separately agree, or as determined by the Coordinating Committee pursuant to
Article 4. In this regard, the Parties contemplate that up to 6,500 acre-feet
per year of available Tolleson Effluent will be transferred to PWE for use at
the proposed electric generating facility commonly referred to as “Redhawk”
pursuant to separate terms and conditions to be negotiated by the Parties,
including, without limitation, payment of a fee by PWE to SRP and APS. Depending
upon circumstances at the time, additional quantities of Tolleson Effluent may
be approved for use at Redhawk after negotiation by the Parties and appropriate
review and approval by the Coordinating Committee of any agreement that may be
negotiated, including, without limitation, payment of a fee by PWE to SRP and
APS.

ARTICLE 4
COORDINATING COMMITTEE

     4.1 Coordinating Committee. Each Party shall designate one (1.)
representative (“Representative”) to serve on the Coordinating Committee and one
(1) alternate (“Alternate”), each having an appropriate level of technical
expertise and familiarity with the policies of its executive management. The
Parties; hereby form the Coordinating Committee, the initial Representatives and
Alternates of which are as follows:

          Party   Representative   Alternate
SRP
  David Areghini   Gary Harper
APS
  James M. Levine   Richard Gouge

     A Party may change its Representative or Alternate upon notice to the other
Party. (The term “Representative” shall include the designated Representative or
any Alternate that is actually performing the duties of the Representative.)

     4.2 Coordinating Committee Authority. The Coordinating Committee shall have
the following responsibilities and authority, subject to and consistent with the
other terms of this Agreement and any separate agreement between the Parties
that allocates any portion of Tolleson Effluent for a specific use:

          (i) monitoring, directing, coordinating, and managing the activities
of the Parties undertaken pursuant to this Agreement and, except as provided in
Section 5.1 hereof, allocating the costs and benefits thereof between the
Parties in equal shares;

          (ii) determining whether to issue a Notice of Commitment pursuant to
paragraph 8.2 of the Tolleson Agreement, and approving all proposed uses of
Tolleson Effluent, except to the extent that such issues are determined by the
terms of any separate

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agreement between the Parties that allocates any portion of Tolleson Effluent
for a specific use;

          (iii) authorizing negotiations and approving all other contracts or
commissioning such studies, investigations, or reports as the Coordinating
Committee deems desirable or necessary;

          (iv) determining the agenda, scope, participants and attendees at
meetings of, and other matters relating to, the Coordinating Committee; and

          (v) performing any other responsibility, duty, or authority granted
from time to time to the Coordinating Committee by amendment of this Agreement.

     4.3 Actions of the Coordinating Committee. No Party shall take any action
with respect to allocation of Tolleson Effluent to any Other Electric Generating
Facility except as may be specifically authorized by this Agreement or as agreed
to and approved by the Coordinating Committee. No action of the Coordinating
Committee shall be binding unless and until: (i) such action has been set forth
in a writing submitted to the Representatives; (ii) the Representatives have had
ten days after receipt of the writing to review it; and (iii) the action has
been approved in writing by the Representative of each of the Parties. Failure
to approve an action within such ten day period shall not constitute approval;
provided, however, that each Party shall make good faith efforts to review and
approve or reject each action within the ten day period. Approval of or failure
to object to the minutes of a meeting of the Coordinating Committee shall not be
deemed to constitute written approval of any action taken thereat. All actions
approved by the Coordinating Committee shall be carried out by one or more of
the Parties, as specified in the written approval of such action; any approval
which does not specify the responsible party for the action shall be carried out
by the Party having principal responsibility, as set forth in. Article 5.

     4.4 Term. The Coordinating Committee shall dissolve and have no further
authority upon (i) the due termination of this Agreement pursuant to any
provision hereof, except to the extent it is expressly agreed in writing that
the Coordinating Committee is needed to manage those matters that survive
termination; or (ii) the unanimous agreement of the Parties to dissolve the
Coordinating Committee.

     4.5 Meetings.

          A. Time and Conduct of Meetings: Quorum. The Coordinating Committee
shall meet during the term of this Agreement, on an “as needed” basis or at the
request of either Representative, at such times and at such places as the
Representatives may from time to time agree. Meetings of the Coordinating
Committee may be held in person or by telephone, video conference, or other
agreed means. Each Representative shall be given reasonable advance notice of
all Coordinating Committee meetings and all matters to be voted on by the
Coordinating Committee. A quorum for a meeting of the Coordinating Committee
shall consist of one representative of each Party. Any substantive decisions of
the Coordinating Committee shall be documented in writing and approved by both
Representatives.

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          B. Attendance. Each Party shall use reasonable efforts to cause its
Representative to be present at each meeting of the Coordinating Committee and
no Party shall withhold the presence or participation of its Representative to
forestall decisions on any matter pertaining to this Agreement. A Party may,
without notice, cause any of its employees or its legal counsel to attend any
meeting of the Coordinating Committee. In addition, a Party may, upon reasonable
notice to the Coordinating Committee, request that individuals other than its
employees and legal counsel be allowed to attend a meeting of the Coordinating
Committee. No individuals other than the Representatives shall be permitted to
vote on behalf of a Party. The Coordinating Committee may require the execution
of a confidentiality agreement by any individual other than the Representatives,
Alternates, employees, and legal counsel of the Parties as a condition to
approving such individual’s attendance at a Coordinating Committee meeting.

ARTICLE 5
PRINCIPAL RESPONSIBILITY

     5.1 Implementing Decisions of Coordinating Committee. APS shall have
principal responsibility for carrying out the actions of the Coordinating
Committee, and implementing decisions of the Coordinating Committee, unless
otherwise specified pursuant to Section 4.3 or 5.2 hereof. In addition, as set
forth in paragraph 12.5.1 of the Tolleson Agreement, APS is authorized to act
for and on behalf of SRP in all matters affecting the implementation and
performance of the Tolleson Agreement when the performance in question involves
transportation and use of Tolleson Effluent at PVNGS. The intent of said
paragraph 12.5.1 is to authorize APS to act both as the Party with principal
responsibility under this Agreement and as Operating Agent for PVNGS in managing
all Tolleson Effluent to be used at PVNGS. Notwithstanding the provisions of
this Section, either Party may take any appropriate, lawful action to cure a
breach of the Tolleson Agreement caused by the other Party.

     5.2 Responsibility for Transferred Tolleson Effluent.

          5.2.1 Transfers for Use at PVNGS. Consistent with Section 3.2 above,
APS and SRP shall request acceptance by the PVNGS Participants of responsibility
for, and risks associated with, transportation, treatment, use, disposal and
payment for all Tolleson Effluent to be used at PVNGS. Responsibility for, and
risks associated with, transportation, treatment, use, disposal and payment for
Tolleson Effluent to be used at PVNGS, shall be transferred to the PVNGS
Participants at the Delivery Point specified in the Tolleson Agreement.
Acceptance by the PVNGS Participants of the transfer of Tolleson Effluent, and
responsibility for, and risks associated with, its transportation, treatment,
use disposal and payment, shall be documented in the minutes of the
Administrative Committee established pursuant to Section 6.1.1 of the Arizona
Nuclear Power Project Participation Agreement.

          5.2.2 Transfers for Use at Other Electric Generating Facilities. As
between the Parties to this Agreement and the party or parties owning or
operating a specific Other Electric Generating Facility, responsibility for, and
risks associated with, transportation, treatment, use, disposal and payment for
Tolleson Effluent to be used at the Other Electric Generating Facility shall be
transferred to the party or parties owning an

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interest in or operating the Other Electric Generating Facility, such transfer
to occur at the Delivery Point specified in the Tolleson Agreement. Acceptance
of this transfer of responsibility for, and risks associated with, Tolleson
Effluent to be used at Other Electric Generating Facilities shall be documented
in the agreement(s) by which the Tolleson Effluent is transferred to the party
owning or operating the Other Electric Generating Facility. Notwithstanding the
transfer of responsibility and risk to the party or parties owning or operating
the Other Electric Generating Facility, ownership of the Tolleson Effluent shall
not transfer until physical delivery of the Tolleson Effluent to that party or
parties at the delivery point specified in the agreement transferring the
Tolleson Effluent.

     5.3 Permitting. APS shall have principal responsibility to ensure
compliance with any Legal Requirement applicable to the actions of the
Coordinating Committee and to ensure that any Person using Tolleson Effluent
purchased by the Parties secures any Permit and otherwise satisfies any Legal
Requirement applicable to the transportation and delivery of Tolleson Effluent
to the point of delivery agreed upon by the Parties; provided, however, that in
any case where SRP will make use of Tolleson Effluent at or for the benefit of
Other Electric Generating Facilities operated or solely owned by SRP or any
affiliated or successor entity, then from and after the delivery point agreed
upon by the Parties, SRP shall have principal responsibility to ensure
compliance with any Legal Requirement, and to secure any Permit, applicable to
its intended use of the Tolleson Effluent.

ARTICLE 6
TERM

     6.1 Term. This Agreement shall commence on the Effective Date and shall
terminate upon the expiration or termination of the Tolleson Agreement.

     6.2 Survival. All obligations and liabilities of the Parties under this
Agreement shall cease upon termination except the obligation of the Parties
under Article 9, obligations assigned pursuant to this Agreement to the
Coordinating Committee with the expressed, written intent that they survive this
Agreement, and the liabilities of any Party resulting from a default by such
Party leading to such termination.

ARTICLE 7
DEFAULT

     7.1 Events of Default. A Party shall be in default under this Agreement
upon the occurrence of the following (“Event of Default”): if it fails to render
performance required under any material provision of this Agreement when due and
such failure continues unremedied for thirty (30) days following written notice
to the Party in default given by the other Party. Neither APS nor SRP shall be
in default under this Agreement due to Uncontrollable Forces and Outages as
identified in Section 9.1 of the Tolleson Agreement. It shall also be an Event
of Default if a Party shall have commenced any insolvency, receivership,
bankruptcy, liquidation, or similar proceedings and (i) one hundred twenty
(120) days shall have expired from the commencement of any one or more of such
proceedings, and (ii) a petition commencing the proceeding has not been
dismissed or stayed within that time.

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     7.2 Actions upon Event of Default. In the event of any dispute between the
Parties concerning the rights and obligations created by this Agreement, or
concerning any Event of Default, the Parties shall first confer in an attempt to
informally resolve such dispute without need to resort to arbitration or
litigation. The Parties shall not resort to arbitration or litigation to enforce
their rights under this Agreement until they have conferred in good faith over a
period of not less than fifteen days in an attempt to informally resolve their
dispute. If the Parties are unable to resolve their dispute after conferring as
required in the preceding sentence, then during the period that any Event of
Default continues, the non-defaulting Party may, without prejudice to any other
available rights or remedies under this Agreement or at law or in equity, and
without constituting an election of an exclusive remedy for an Event of Default,
initiate either or both of the following: (i) proceedings to partition the
Tolleson Effluent and thereby terminate the co-tenancy of the Parties in the
Tolleson Effluent, or (ii) non-binding arbitration by one arbitrator who has not
previously been employed by either party (excluding employment as an
arbitrator), and does not have a direct or indirect interest in either Party or
the subject matter of the arbitration. The arbitrator shall either be as
mutually agreed by the Parties within fifteen (15) calendar days after
submission of the matter to arbitration, or failing agreement shall be selected
under the expedited rules of the American Arbitration Association (“AAA”). The
rules of AAA shall apply to the extent not inconsistent with the provisions in
this Section. Arbitration shall be conducted according to the following: (a) not
later than seven (7) days prior to the hearing date set by the arbitrator, each
party shall submit a brief with a single proposal for settlement; (b) the
hearing shall be conducted on a confidential basis without continuance or
adjournment; and (c) the Parties shall divide equally the cost of the arbitrator
and the hearing, and each Party shall be responsible for its own expenses,
including its counsel and representatives.

ARTICLE 8
NOTICES

     8.1 Notice Provision. All notices, demands, consents or other
communications required under this Agreement shall be in writing and may be
delivered personally to a Party, may be delivered by facsimile providing written
confirmation of successful transmission, or may be mailed by deposit in the
United States Certified Mail, return receipt requested, or by deposit with a
reputable overnight delivery service. Notices shall be effective:

          (i) on the date delivered by personal delivery or facsimile;

          (ii) three (3) business days following the date deposited in the
United States mail; or

          (iii) the next business day following delivery to a reputable
overnight delivery service.

Notices or communications shall be delivered and mailed to the Parties at the
addresses set forth in paragraph 12.4 of the Tolleson Agreement, or to any
address of a Party which is substituted from time to time by written notice of
such Party pursuant to paragraph 12.4 of the Tolleson Agreement.

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ARTICLE 9
LIABILITY

     9.1 Limitation of Liability. The liability of a Party to the other Party
under this Agreement shall be limited to the direct damages actually sustained
by the other Party. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
LOSS OR DAMAGE IN THE NATURE OF PARTIAL OR COMPLETE LOSS OF USE OF ANY
GENERATING FACILITY, LOSS OF ELECTRIC POWER, COST OF REPLACEMENT OF ELECTRIC
POWER, OR FOR ANY LOSS OF INTEREST, REVENUE OR ANTICIPATED PROFITS FROM
ACTIVITIES UNDER THIS AGREEMENT. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS,
ARISING OUT OF OR RELATED TO THIS AGREEMENT. (The limitations in this
Section 9.1 shall not apply to losses in tort to third parties or to Claims
against which a Party is entitled to indemnitee protection under Section 9.2.)

     9.2 Indemnity. Except as otherwise provided in any subsequent agreement
between the Parties (or between the Parties and other entities), each Party
(“Indemnifying Party”) shall defend, indemnify, and hold harmless the other
Party and its respective affiliates, directors, officers, partners, members,
employees, agents, and representatives (each an “Indemnitee”) from and against
any and all Claims, liability, cost, loss or expense of any kind incurred by the
Indemnitees arising out of the fraud or willful misconduct of the Indemnifying
Party or its agents or representatives in connection with this Agreement, or
arising out of a material breach of the Tolleson Agreement by the Indemnifying
Party. Except as limited by any separate agreement between the Parties, each
Party shall also indemnify and hold harmless the other Party against any and all
Claims, liability, cost, loss or expense of any kind resulting from the
Indemnifying Party’s control, transportation, use or disposal of Tolleson
Effluent at or for the benefit of any of the Indemnifying Party’s Other Electric
Generating Facilities In the event any such Claim, liability, cost, loss or
expense asserted by a person not a Party to this Agreement is caused by an
alleged joint or concurrent fraud, negligence or willful misconduct, the Parties
at fault shall bear liability in proportion to their own degrees of culpability.
Each Indemnitee is an intended beneficiary of this Section 9.2. The
indemnification obligation of the parties set forth in this Section shall
survive the termination or expiration of this Agreement.

ARTICLE 10
GENERAL

     10.1 Entire Agreement. This Agreement supersedes all prior and
contemporaneous conduct and communications between the Parties pertaining to
co-ownership of the Tolleson Effluent, whether written or oral. Notwithstanding
the foregoing, this Agreement shall be read together with the Tolleson
Agreement, and any agreement by which APS and SRP transfer any portion of the
Tolleson Effluent for use at or for the benefit of Other Electric Generating
Facilities, to obtain necessary definitions and to otherwise determine the
intention of the Parties. This Agreement is not intended to modify or abrogate
either the Tolleson Agreement or any subsequent agreement by which APS and SRP
transfer any portion of the Tolleson Effluent for use at or for the benefit of
Other Electric Generating

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Facilities. This Agreement may not be modified, changed or added to except in
writing signed by all Parties hereto.

     10.2 Waiver. Each Party’s failure or delay in enforcing the terms and
conditions of this Agreement or insisting upon strict performance of any of the
other Party’s obligations shall not be interpreted as a waiver thereof. Waiver
of any provision of this Agreement shall only be effective if in writing and
shall not be interpreted as a waiver of any subsequent breach or failure under
the same or any other provision of this Agreement. No conduct, statement, course
of conduct, course of dealing, oral expression or other action shall be
construed as a waiver.

     10.3. Assignment.

          10.3.1 Assignment by APS to PWE. APS may assign its rights and
delegate its duties under this Agreement at any time to PWE, provided that:
(i) APS assigns’ its entire interest in this Agreement; (ii) PWE assumes in
writing all of the APS obligations under this Agreement; (iii) APS also assigns
all of its rights and obligations under the Tolleson Agreement to PWE at the
same time as its assignment of this Agreement; and (iv) such assignment shall
not become effective until and unless PWE has become a party to the Arizona
Nuclear Power Project Participation Agreement. No assignment or delegation under
this Section 10.3.1 will release the assigning Party from its obligations under
this Agreement unless the other Party consents to a release (such consent not to
be unreasonably withheld, conditioned or delayed). Any subsequent assignee of
PWE’s rights and obligations under this Agreement shall be subject to all terms
and conditions of this Agreement, including, without limitation, the
restrictions of this Section 10.3.1.

          10.3.2 Assignment to Others. With the prior written consent of the
other Party (such consent not to be unreasonably withheld, conditioned or
delayed), a Party may assign its rights or delegate its duties under this
Agreement at any time to any other PVNGS Participant, provided that such Party
assigns its entire interest in this Agreement and that its assignee assumes in
writing all of such Party’s obligations under this Agreement. No assignment or
delegation under this Section 10.3.2 will release the assigning Party from its
obligations under this Agreement unless the other Party consents to a release
(such consent not to be unreasonably withheld, conditioned or delayed). Any
assignee to whom the rights and obligations of this Agreement are assigned
pursuant to this Section 10.3.2 shall thereafter be subject to all terms and
conditions of this Agreement, including, without limitation, the restrictions of
this Section 10.3.2.

     10.4 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.

     10.5 Attorneys’ Fees. Each Party shall bear its own attorneys’ fees, costs,
and expenses in case of a partition action or arbitration initiated under the
provisions of Section 7.2. Should any Claim be brought by a Party against
another Party arising out of this Agreement, including any action for
declaratory or injunctive relief, the prevailing Party shall be entitled to
reasonable. attorneys’ fees and costs and expenses of litigation and
investigation, all as actually incurred, including attorneys’ fees, costs and
expenses of litigation and investigation incurred in appellate proceedings or in
any action or participation

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in, or in connection with, any case or proceeding under the United States or
other bankruptcy laws, and any judgment or decree rendered in any such action or
proceedings shall include an award thereof.

     10.6 Counterparts. This Agreement may be executed by the Parties in any
number of separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall together constitute
one and the same agreement. All signatures need not be on the same counterpart.

     10.7 Relationship of the Parties. The execution of this Agreement shall not
create or constitute a partnership, joint venture, entity or any form of
business organization between the Parties.

     IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the Effective Date.

              ARIZONA PUBLIC SERVICE COMPANY, an     Arizona corporation,
 
       

  By        /s/ James M. Levine

       

           Its Exec. VP, Generation
 
            Approved as to form:
 
       

  By        /s/ Karilee S. Ramaley

       
 
            SALT RIVER PROJECT AGRICULTURAL     IMPROVEMENT AND POWER DISTRICT,
an     Arizona agricultural improvement district
 
       

  By        /s/ William P. Schrader

       

           Its President
 
            Approved as to form:
 
       

  By        /s/ Richard N. Morrison

       

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