EXHIBIT 10.09

(Docket No. Ero5- 427-001
[ILLEGIBLE] El Paso, Elec. Co
[ILLEGIBLE] 78
[ILLEGIBLE] 4-4-05
[ILLEGIBLE] 4-29-77

EL PASO ELECTRIC COMPANY

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT PARTICIPATION
AGREEMENT AND AMENDMENT NOS. 1 THROUGH 6 THERETO AMONG
EL PASO ELECTRIC COMPANY, PUBLIC SERVICE COMPANY OF NEW
MEXICO AND TEXAS-NEW MEXICO POWER COMPANY

RATE SCHEDULE FERC NO. 78

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El Paso Electric Company
Original Sheet No. 1
Rate Schedule FERC No. 78
 

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT

PARTICIPATION AGREEMENT

April 11, 1977

AMONG

PUBLIC SERVICE COMPANY OF NEW MEXICO,

COMMUNITY PUBLIC SERVICE COMPANY

AND

EL PASO ELECTRIC COMPANY

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 2

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT
PARTICIPATION AGREEMENT

TABLE OF CONTENTS

 
 
 
 
 
Section
 
Page
 
1.0
Parties   
1
 
 
2.0
Recitals   
1
 
 
2.1
Background of this Agreement   
1
 
 
2.2
Summary Description of SWNMT   
1
 
 
2.3
Factual Recitals   
5
 
 
3.0
Agreement   
6
 
 
4.0
Effective Date   
6
 
 
5.0
Definitions   
6
 
 
5.1
Accounting Practice   
6
 
 
5.2
Arizona Nuclear Power Project   
6
 
 
5.3
Auditing Committee   
6
 
 
5.4
Capital Additions   
6
 
 
5.5
Capacity Entitlements   
6
 
 
5.6
Capital Betterments   
6
 
 
5.7
Capital Replacements   
7
 
 
5.8
Cost Responsibility and Ownership   
7
 
 
5.9
Construction Account   
7
 
 
5.10
Coordinating Committee   
7
 
 
5.11
Engineering and Operating Committee   
7
 
 
5.12
In-Service Date   
7
 
 
5.13
Final Completion Reports   
8
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

i

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 3

 
5.14
PPC Account   
8
 
 
5.15
Operating Agent(s)    
8
 
 
5.16
Operating and Construction Insurance   
8
 
 
5.17
Operating Memoranda   
8
 
 
5.18
Operating Work   
8
 
 
5.19
Participant   
9
 
 
5.20
Phase   
9
 
 
5.21
Project Compensation   
9
 
 
5.22
Project Facilities   
9
 
 
5.23
Project Manager   
9
 
 
5.24
Project Work   
9
 
 
5.25
Rights-of-Way   
9
 
 
5.26
Station   
10
 
 
5.27
Substation   
10
 
 
5.28
Switching Station   
10
 
 
6.0
Description of SWNMT   
10
 
 
7.0
Primary Purposes of SWNMT   
12
 
 
8.0
Secondary Purposes of SWNMT   
13
 
 
9.0
SWNMT Design Criteria   
13
 
 
10.0
Interconnection and Additions to SWNMT   
13
 
 
11.0
Capacity Entitlements, Ownership and Cost Responsibility for SWNMT   
14
 
 
12.0
Additional SWNMT Participation Rights   
16
 
 
13.0
Cost Components   
16
 
 
14.0
Cost Responsibility for Operation and Maintenance Expense   
18
 
 
15.0
Capital Betterments or Improvements   
20
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

ii

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El Paso Electric Company
Original Sheet No. 4
Rate Schedule FERC No. 78
 

16.0
Construction of SWNMT
20
17.0
Operation and Maintenance
24
18.0
Curtailment of Deliveries
26
19.0
Power Flows Exceeding Entitlement Rights
26
20.0
Payment of Construction Expenses by the Participants
26
21.0
Committees
27
21.1
Coordinating Committee
27
21.2
Engineering and Operating Committee
28
21.3
Auditing Committee
29
22.0
Disagreements
31
23.0
Operating SWNMT
31
23.1
Communication and Control Facilities
31
23.2
Voltage Control
32
23.3
Control Area Definition
32
23.4
Outage Schedules
33
23.5
Electrical Disturbances
33
23.6
Metering Information
33
23.7
Operating Data
33
24.0
Metering
34
24.1
Metering Facilities
34
24.2
Testing and Reading of Meters
34
24.3
Adjusting Metering Accurately
35
25.0
Relationship of Parties
35
26.0
Construction Insurance
35
27.0
Operating Insurance
36

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

iii

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El Paso Electric Company
Original Sheet No. 5
Rate Schedule FERC No. 78
 

 
28.0
Indemnity   
38
 
 
29.0
Waiver of Right to Partition   
40
 
 
30.0
Mortgage and Transfer of Participants’ Interests   
41
 
 
31.0
Regulatory Authorities   
42
 
 
32.0
Term   
43
 
 
33.0
Miscellaneous Provisions   
43
 
 
34.0
Notices   
45
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

iv

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El Paso Electric Company
Original Sheet No. 6
Rate Schedule FERC No. 78
 

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT
PARTICIPATION AGREEMENT AMONG
PUBLIC SERVICE COMPANY OF NEW MEXICO,
COMMUNITY PUBLIC SERVICE COMPANY and
EL PASO ELECTRIC COMPANY

1.0 PARTIES: The parties to this Agreement are: PUBLIC SERVICE COMPANY OF NEW
MEXICO, a New Mexico corporation, hereinafter referred to as “PNM”; COMMUNITY
PUBLIC SERVICE COMPANY, a Texas corporation, hereinafter referred to as “CPS”;
and EL PASO ELECTRIC COMPANY, a Texas corporation, hereinafter referred to as
“EPE”. PNM, CPS and EPE are jointly herein referred to as the “Parties” or
“Participants”.

2.0 RECITALS:

2.1 Background of this Agreement:

2.1.1 The Parties, on the 16th day of December, 1974, entered into a letter
agreement designated Principles of Agreement for the Southwest New Mexico
Transmission Project, and which letter is attached hereto as Exhibit A and
superseded hereby.

2.1.2 The transmission system to be constructed shall be known as the Southwest
New Mexico Transmission Project, hereinafter designated “SWNMT”. This
designation is to distinguish it from the attachments and appurtenances which
shall or may be connected to or served from the SWNMT facilities, but which
shall be owned or operated by the Participants or others apart from this
Agreement.

2.2 Summary Description of SWNMT:

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Original Sheet No. 7
Rate Schedule FERC No. 78
 

2.2.1 Pursuant to this agreement, the SWNMT system to be built consists of two
345 KV transmission lines and related facilities, as described more fully in
Section 6.0 hereof.

2.2.2 The first line, designated as Line A, will commence from the “Greenlee”
Substation, owned by Tucson Gas & Electric Company and PNM, and located near the
Greenlee County Airport north of Duncan, Arizona, then running to a 345 kV
station, to be known as “Hidalgo” Switching Station, and located at or near
Lordsburg, New Mexico. This Greenlee to Hidalgo line will be known as Line A,
Segment 1. The transmission line will continue on in an easterly direction to a
345 kV station, known as “Luna” Switching Station, which will be located at or
near Deming, New Mexico. This Hidalgo to Luna line will be known as Line A,
Segment 2. Then Line A will pass on to and terminate at the “Newman” Switching
Station, which is located north of El Paso, Texas. This line is designated Line
A, Segment 3.

2.2.3 The second line, designated Line B, will run along approximately the same
corridor as the first except that, after passing through Hidalgo and Luna
Switching Stations and continuing easterly to a point at or near Aden Hills, New
Mexico, the second line will separate from the first and will run in a
southeasterly direction terminating at the “Rio Grande” Switching Station, which
station is at or near El Paso, Texas.

2.2.4 SWNMT will be designed and constructed so that upon completion of Phase #5
the Primary Purposes of SWNMT as set forth in Section 7 can be met with any one
line segment out of service.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Original Sheet No. 8
Rate Schedule FERC No. 78
 

2.2.5 PNM will provide for Line A position at Greenlee Substation through its
Agreement with Tucson Gas & Electric Company, and EPE will provide for Line B
position at Greenlee Substation through its future agreement with Tucson Gas &
Electric Company.

2.2.6 Hidalgo, Luna, Newman and Rio Grande Substations are not SWNMT facilities.

2.2.7 The SWNMT will be built and owned by different combinations of
Participants and constructed in Phases as follows:

Line A – PNM, CPS, and EPE will build Segment 2 of Line A from Greenlee
Substation to the Hidalgo Switching Station, as tenants in common with an
undivided ownership in the percentages set out hereafter in Section 11, the
segment to be constructed and in-service in March 1977. Line A, Segment 1 is a
part of Phase #1 of SWNMT construction. PNM, CPS and EPE will build the second
segment from Hidalgo to the Luna Switching Station, as tenants in common with an
undivided ownership interest in the percentages set out hereafter in Section 11,
and which segment will be completed and in-service by may 1978. Line A, Segment
2, is a part of Phase #2 of SWNMT construction. EPE will build the third segment
of Line A from Luna to Newman Switching Station, to be completed and in-service
by May 1978. Line A, Segment 3, is a part of Phase #3 of SWNMT construction.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 9

Line B - EPE will build Line B from Greenlee Substation through Hidalgo and Luna
Switching Stations on to Rio Grande Switching Station. Line B is scheduled to be
completed and in-service coincident with the commercial service date of the
Arizona Nuclear Power Project Palo Verde Unit No. 2. or such later date as
provided in Section 6. Line B is a part of Phase #4 of SWNMT construction.

CPS or PNM may elect to participate in construction of Line B as provided in
Section 12.

2.2.8 EPE agrees to construct its portion of Phase #3 of SWNMT to be in-service
coincident with Phase #2. In return, PNM agrees to provide five (5) 345 kV
breakers at Luna Switching Station and PNM and CPS will provide five (5) 345 kV
breakers at Hidalgo Switching Station. Such breakers are to be provided
coincident with Phase In- Service Dates as follows:

For Phase #1 - no breakers required at Hidalgo or Luna.

For Phase #2 - no breakers required at Hidalgo or Luna.

For Phase #3 - Three (3) 345 kV breakers at Hidalgo in a ring bus configuration
for connecting Line A at Hidalgo Switching Station, and three (3) 345 kV
breakers at Luna, also in a ring bus configuration, for connecting Line A at
Luna Switching Station.

For Phase #4 - Two (2) 345 kV breakers at Luna, for connecting Line B at Luna
Switching Station.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 10

For Phase #5 - Two (2) 345 kV breakers at Hidalgo Switching Station, for
connecting Line B, to be in-service coincident with the commercial service date
of Palo Verde Unit No. 3, or such other date as provided in Section 6.

2.2.9 This Agreement is entered into to set out and embody the entire
understanding and agreement between the Participants to SWNMT and replaces and
supercedes the December 16, 1974 letter of Principles of Agreement and all
supplemental understandings or amendments thereto. In addition, this agreement
supercedes the May 26, 1976 PNM/CPS SWNMT Participation Agreement.

2.3 Factual Recitals:

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

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

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

2.3.4 PNM and CPS have, in keeping with the understandings and purposes
hereinabove set out, represented to the New Mexico Public Service Commission
that they will participate with EPE in the SWNMT system set out above.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 11

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

4.0 EFFECTIVE DATE: This Agreement shall be deemed effective the date it is duly
executed by the Parties.

5.0 DEFINITIONS: The following terms, when used herein, whether in singular or
in the plural, shall have the meanings specified:

5.1 Accounting Practice: Generally accepted accounting principles in accordance
with the FPC accounts as defined in Section 5.14, unless otherwise agreed to by
the Auditing Committee.

5.2 Arizona Nuclear Power Project: The Palo Verde Units No. 1, No. 2, and No. 3,
to be constructed under the Arizona Nuclear Power Project Agreement dated August
23, 1973.

5.3 Auditing Committee: The Committee established pursuant to Section 21.3
hereof.

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

5.5 Capacity Entitlements: A Participant’s allocated transmission capacity in
Phases #1, #2, #3 or #4, pursuant to Sections 7 and 8.1. Unless otherwise
agreed, all capacity entitlements are bi-directional.

5.6 Capital Betterments: Enlargement or improvement of any structures,
facilities or equipment constituting a part of SWNMT or the

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 12

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.

5.7 Capital Replacements: The substitution of any units or property constituting
a part of the SWNMT or 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.

5.8 Cost Responsibility and Ownership: Each Participant will share in the cost
and ownership of each portion of SWNMT in the percentages shown in Section 11.

5.9 Construction Account: Any bank account or accounts selected and established
by the Project Manager to receive and disburse construction funds pursuant to
Section 16 hereof.

5.10 Coordinating Committee: The Committee established pursuant to this
Agreement which shall exercise the functions described in Section 21.1 hereof.

5.11 Engineering and Operating Committee: The Committee established pursuant to
this Agreement which shall exercise the functions described in Section 21.2
hereof.

5.12 In-Service Dates: The dates pursuant to this Agreement on which each Phase
of the SWNMT is placed into service, as determined by the Engineering and
Operating Committee.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-7-

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El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 13

5.13 Final Completion Reports: Complete summary of construction costs incurred
up to six (6) months after the In-Service Date of each Phase, description of the
complete facilities, summary of the Parties contributions to construction costs
and estimated further expenditures for completion of the Phase construction.
Costs incurred after the said six (6) month period shall be included in a
supplement to the Final Completion Report.
5.14 FPC Account: The Federal Power Commission’s “Uniform System of Accounts
Prescribed for Public Utilities and Licenses (Class A and Class B)” in effect as
of the date of this Participation Agreement, and as such system of accounts may
be in effect from time to time. References in this Agreement to any specific FPC
account number shall mean the FPC account number in effect as of the effective
date of this Agreement or any successor FPC account number.
5.15 Operating Agent(s): The Participant(s) responsible for the performance of a
specific or ongoing operation and maintenance requirement of SWNMT pursuant to
this Agreement.
5.16 Operating and Construction Insurance: Policies of insurance to be secured
and maintained in accordance with Section 26 and 27 hereof.
5.17 Operating Memoranda: Written operating procedures determined to be required
by the Engineering and Operating Committee for the reliable operation of SWNMT.
5.18 Operating Work: Engineering, contract preparation, purchasing, repair,
supervision, recruitment, expediting, inspection,

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

 

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El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 14

accounting, testing, protection, operation, use, management, retirement,
reconstruction and maintenance associated with SWNMT, including any work
undertaken by Operating Agent pursuant to Section 17 hereof and any work
necessitated by an operating emergency, and including all work undertaken to
make any capital improvements.
5.19 Participant: Any Party hereto and any successor or assignee of such Party
under Section 30 hereof.
5.20 Phase: SWNMT line segments, related Project Compensation, and other Project
Facilities that are associated with a particular In-Service Date.
5.21 Project Compensation: Those shunt reactors and series and/or shunt
capacitors used to compensate SWNMT lines.
5.22 Project Facilities: Those electrical system components that are SWNMT
facilities, though not necessarily owned by more than one Participant.
5.23 Project Manager: The Participant responsible for the construction and
completion of any portion of SWNMT in accordance with this Agreement.
5.24 Project Work: Engineering, design, acquisition of rights-of-way,
construction, contract preparation, purchasing, accounting, supervision,
expediting, inspection, testing, protection and placing in service of SWNMT.
5.25 Rights-of-Way: The rights-of-way and land including fee ownership,
easements, licenses and permits which have been or will be

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05–427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 15

acquired by the Project Manager(s), to accommodate up to two transmission lines
and related facilities from the Greenlee Substations to the Newman and Rio
Grande Stations.

5.26    Station: Those locations where equipment for terminating, tapping,
transforming, compensating, switching, protecting, metering, and monitoring
SWNMT lines is placed.

5.27    Substation: The 345/115 kV transformer, its 345 kV disconnecting switch,
the 115 kV equipment and the site of a Station. (Exception: Greenlee Substation
has been defined by TG&E as in Section 5.26 above.)

5.28    Switching Station: The 345 kV equipment within Hidalgo, Luna, Rio Grande
and Newman Stations, up to but excluding the 345/115 kV transformer and its
associated equipment.

6.0    DESCRIPTION OF SWNMT: The SWNMT shall consist of two 345 kV transmission
lines and related facilities constructed in five Phases described briefly as
follows and shown in detail on Exhibit B:

6.1    Phase #1: A 345 kV transmission line and related facilities to be built
from Greenlee Substation to Hidalgo Switching Station, a distance of
approximately 60 miles; a reactor and associated equipment at Hidalgo Switching
Station; non-project facilities including a substation at Hidalgo and a 345 kV
breaker and associated equipment at Greenlee. The planned In-Service Date of
Phase #1 is March 1977.

6.2    Phase #2: A 345 kV transmission line and related facilities to be built
from Hidalgo Switching Station to the Luna Switching Station, a distance of
approximately 50 miles; non-project facilities

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 16

including a Substation at Luna. The planned In-Service Date of Phase #2 is May
1, 1976.

6.3    Phase #3: A 345 kV transmission line and related facilities to be built
from the Luna Switching Station to the Newman Switching Station, a distance of
approximately 90 miles; three 345 kV breakers and associated equipment at each
of Hidalgo and Luna Switching Stations; and a 345 kV breaker and associated
equipment at Newman Switching Station and reactors and associated equipment
located where required. The planned In-Service Date of Phase #3 is May 1, 1978.

6.4    Phase #4: A 345 kV transmission line and related facilities to be built
from the Greenlee Substation through the Hidalgo Switching Station, on to and
terminating at the Luna Switching Station and then onto and terminating at Rio
Grande Switching Station, a distance of approximately 200 miles; two 345 kV
breakers and associated equipment to be installed at Luna Switching Station; one
345 kV breaker and associated equipment at Rio Grande Switching Station;
reactor(s) located where required; non-project facilities including a 345 kV
breaker and associated equipment to be installed at Greenlee. The planned
In-Service Date of Phase #4 is to coincide with the commercial service date of
Arizona Nuclear Power Project, Palo Verde Unit #2 unless such date is changed by
the Coordinating Committee.

6.5     Phase #5: Those facilities necessary for terminating Line B at Hidalgo
Switching Station, including two 345 kV circuit breakers and associated
equipment, to be in-service coincident with the commercial service date of Palo
Verde Unit #3, unless otherwise agreed

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Original Sheet No. 17
Rate Schedule FERC No. 78
 

by the Coordinating Committee. CPS, at its sole option, may accelerate Phase #5
by reimbursing under a separate agreement the other Parties for their fixed
charges on Phase #5 for the period from CPS’ desired in-service date until June,
1986.

6.6 Each SWNMT line segment shall include those facilities generally necessary
for operation of a 345 kV transmission line, including, but not limited to,
right-of-way, transmission structures, conductors and associated equipment. Each
SWNMT Switching Station shall include those facilities generally necessary for
terminating the transmission lines at a ring bus, including necessary common
facilities, 345 kV breakers, protective relaying, communications equipment,
lightning arrestors and line disconnect switches.

6.7 Series and/or shunt capacitors and related equipment used to compensate
SWNMT.

6.8 Substation: Shall include those facilities defined by Section 5.27. The
Participant owning a Substation shall grant an easement by separate instrument
to the SWNMT Participants for the Project Facilities to be placed within a
Station site.

7.0 PRIMARY PURPOSES OF SWNMT: Upon completion of all Phases of SWNMT
construction, the following Primary Purposes of SWNMT shall be attainable even
with any one SWNMT line segment out of service.

7.1 For CPS to deliver 150 MW from Greenlee Substation to Hidalgo Switching
Station.

7.2 For PNM to deliver 150 MW from Greenlee Substation to Luna Switching
Station.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Original Sheet No. 18
Rate Schedule FERC No. 78
 

7.3 For EPE to deliver 600 MW from Greenlee Substation to Luna Switching Station
and on to Newman and Rio Grande Switching Stations.

8.0 SECONDARY PURPOSES OF SWNMT: The Secondary Purposes of SWNMT are as follows:

8.1 To enable the Participants to utilize the remaining portion of their
respective Capacity Entitlements.

8.2 To enable the Participants, pursuant to Section 15, to utilize any
additional capacity resulting from Capital Betterments or Improvements, on a
permanent basis.

9.0 SWNMT DESIGN CRITERIA:

9.1 The design of SWNMT shall be such that, with the completion of Phase #5,
SWNMT shall be capable of being operated to allow for the transmission of all
power and energy pursuant to the Primary Purposes of SWNMT as set forth in
Section 7, with any one segment of SWNMT out of service.

10.0 INTERCONNECTIONS AND ADDITIONS TO SWNMT:

10.1 The Participants may interconnect with SWNMT through their own Hidalgo,
Luna, Newman or Rio Grande Substations with their own or other systems, provided
that SWNMT shall not be terminated, except as shown in Exhibit B, without prior
approval of the Coordinating Committee.

10.2 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 Primary Purposes of SWNMT.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29,1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 19
Rate Schedule FERC No. 78
 

11.0 CAPACITY ENTITLEMENTS, OWNERSHIP AND COST RESPONSIBILITY FOR SWNMT:

11.1 Unless otherwise provided herein, the SWNMT will be constructed and owned
by the Participants as tenants in common with each Participant having an
undivided interest in each Phase as set forth below; however, upon start of
construction of Line B of Phase #4, certain rights to participate, more fully as
set forth in Section 12, may be exercised, thereby changing the ownership
interest of the Participants therein.

11.2 The transmission lines will be initially constructed, owned and expenses
paid as follows:

11.2.1 Line A of Phase #1: Constructed jointly by PNM, CPS and EPE with Capacity
Entitlements of CPS - 150 MW (30%), PNM - 150 MW (30%), EPE - 200 MW (40%).

11.2.2 Line A of Phase #2: Constructed jointly by PNM, CPS and EPE with Capacity
Entitlements of CPS - 25 MW (5.00%), PNM - 189 MW (37.80%), EPE - 286 MW
(57.20%).

11.2.3 Line A of Phase #3: Constructed solely by EPE, with Capacity Entitlement
of EPE - 500 MW (100%) and with ownership and cost responsibility solely in EPE,
except that PNM shall have a unidirectional Capacity-Entitlement from Newman to
Luna of 130 MW until December 1, 1981.

11.2. 4 Line B of Phase #4: Constructed solely by EPE, with Capacity Entitlement
of EPE - 500 MW (100%) and with ownership and cost responsibility solely in EPE
unless CPS and/or PNM exercise their option pursuant to Section 12.0.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Original Sheet No. 20
Rate Schedule FERC No. 78
 

11.3 The Project Compensation required for SWNMT will be constructed and owned
on the basis of Weighted Line Ownership, calculated pursuant to Exhibit C.
11.4 The various Switching Stations of SWNMT include, but are not limited to,
those Project Facilities defined in Exhibit B, and will be owned pursuant to
Exhibit B. The SWNMT Switching Stations are described as follows:
11.4.1 Hidalgo 345 KV Switching Station: Constructed jointly by PNM, CPS, and
EPE; each Participant is entitled to transmit, under normal and emergency
conditions, its total Capacity Entitlement through Hidalgo without any payment
to any other Participant.
11.4.2 Luna 345 KV Switching Station: Constructed jointly by PNM, CPS and EPE;
each Participant is entitled to transmit, under normal and emergency conditions,
its total Capacity Entitlement through Luna without any payment to any other
Participant.
11.4.3 Newman 345 KV Switching Station: Constructed solely by EPE and operated
and maintained solely by EPE, with ownership and cost responsibility solely in
EPE; each Participant is entitled to transmit, under emergency conditions, its
total Capacity Entitlement through Newman without any payment to any other
Participant.
11.4.4 Rio Grande 345 KV Switching Station: Constructed solely by EPE and
operated and maintained solely by EPE, with ownership and cost responsibility
solely in EPE; each Participant is entitled to transmit, under emergency
conditions, its total Capacity Entitlement through Rio Grande without any
payment to any other Participant.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
Original Sheet No. 21
Rate Schedule FERC No. 78
 

12.0 ADDITIONAL SWNMT PARTICIPATION RIGHTS: CPS may, at its sole option, no
later than start of construction of Line B of Phase #4, participate with EPE in
construction of all or part of 100 MW Capacity of Line B of Phase #4, between
Greenlee Substation and Hidalgo Switching Station. If CPS elects not to
participate in Line B, or if CPS participates less than the full 100 MW, PNM
may, at its sole option, participate with EPE in construction of all or part of
the remaining part of the 100 MW of Line B, from the Greenlee Substation to the
Hidalgo Switching Station. Further, PNM may, at its sole option, elect to
participate with EPE in construction of Line B from the Hidalgo Switching
Station to the Luna Switching Station in an amount equal to or less than the
total of PNM’s and CPS’ combined participation in Line B from Greenlee to
Hidalgo. The Greenlee to Hidalgo and/or Luna line allocation of cost to CPS
and/or PNM for this capacity shall be determined by the same procedure that was
applied to Line A.

13.0 COST COMPONENTS:

13.1 The Parties shall be responsible for the construction cost of SWNMT Phases
#1, #2, #3, #4 and #5 facilities in accordance with the percentages shown in
Section 11. The Parties shall be responsible for the construction cost of
Hidalgo, Luna, Newman and Rio Grande Stations according to their ownership
therein, as set out in Exhibit B. Such cost shall include, but not be limited
to, the following components:

13.2 Right-of-way costs and site acquisition costs for roadways, towers, and
equipment location.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to company with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 22

13.3 Cost of environmental studies, analyses and reports.

13.4 Engineering, consulting, legal and accounting fees.

13.5 Costs of all materials, supplies and equipment, including related storage
and transportation costs.

13.6 Cost of line contractors and substation contractors where appropriate.

13.7 Right-of-way clearing costs.

13.8 All special costs incurred by compliance with environmental requirements or
regulations.

13.9 Costs incurred to expedite construction.

13.10 Expenses of any Participant incurred in the performance of Project Work
which do not involve direct engineering and supervision, if authorized and
approved by the Project Manager. Included in this category are expenses incurred
during the engineering design period and the construction period. Such
authorized expenses shall include customary loading charges applicable thereto,
such as Material Handling Expense, Pension and Insurance, and Illness, Injuries
and Vacations. Such authorized expenses shall not include loading charges for
engineering and supervision.

13.11 Expenses of any Participant incurred in the performance of Project Work
which do involve direct engineering and supervision, if authorized and approved
by the Project Manager. In all such work, customary and normal loadings shall
apply as in Section 13.10, plus loading charges for engineering and supervision.
Such engineering and supervision loading shall be 7.0%, and may be changed by
the Auditing

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Original Sheet No. 23
Rate Schedule FERC No. 78
 

Committee from time to time during the performance of the Project Work. These
loadings shall be applied only by the Participant performing the direct
engineering and supervision for the Project Work.

13.12    All taxes associated with construction of the line and associated
facilities.

13.13    In addition to the above, the Project Manager(s) shall be entitled to
an A&G expense allowance for its performance of Project Work and excluding work
performed by the other Participants. These expenses shall be allocated monthly
at the rate of one percent (1%) of the total cost incurred in Sections 13.1 -
13.12 during the preceding month, excluding from such costs:

(a)    All engineering and supervision overhead charges referred to in Section
13.11.

(b)    Any allowance for A&G expenses provided for in this Section 13.13.

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

14.0    COST RESPONSIBILITY FOR OPERATION AND MAINTENANCE EXPENSE:

14.1    The Operation and Maintenance (O&M) expense for each SWNMT line shall be
borne by the Participants according to their respective ownership interest in
each line of SWNMT as set out in Section 11. The O&M expense shall be adjusted
accordingly in each line should ownership change pursuant to Section 12 or
Section 15.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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El Paso Electric Company
Original Sheet No. 24
Rate Schedule FERC No. 78
 

14.2 O&M expenses for the Hidalgo, Luna, Newman and Rio Grande Substations will
be borne solely by those Stations’ respective owners; O&M expenses of any
Project Facilities within any Switching Station will be borne by the
Participants according to their ownership in those Project Facilities.
Participants’ ownership in Project Facilities are set out in Exhibit B.

14.3 CPS shall provide at no charge to other Participants all power and energy
required for operation of Project Facilities within Hidalgo Station. PNM shall
provide at no charge to other Participants all power and energy required for
operation of Project Facilities within Luna Station. EPE shall provide at no
charge to other Participants all power and energy required for operation of
Project Facilities within Newman Switching Station and Rio Grande Switching
Station. PNM and EPE, pursuant to their respective agreements with TG&Z, shall
provide for all power and energy required for operation of Project Facilities
within Greenlee Substation.

14.4 The O&M expenses are those incurred by any Participant as follows:

14.4.1 SWNMT O&M expenses chargeable to FPC Accounts 560, 561, 562, 563, 566,
567, 568, 569, 570, 571, 573.

14.4.2 Payroll taxes chargeable to FPC Account 408 and expenses chargeable to
FPC Account 926 shall be added to the monthly billing in proportion to the
dollar amount of direct labor billed.

14.4.3 The expenses chargeable to FPC Account 925 incurred in complying with
workmen’s compensation laws, except uninsured workmen’s

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 25
Rate Schedule FERC No. 78
 

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.

14. 4 .4 Expenses incurred in connection with uninsured workmen’s compensation
claims arising out of SWNMT O&M.

14.4. 5 The expenses chargeable to FPC Account 924 and 925 in connection with
Operating Agent’s performance of the provisions of Section 27 hereof (excluding
salaries of administrative employees whose services are compensated for under
Section 14.4.6.)

14.4.6 Administrative and general expenses included in FPC Accounts 920, 921,
923 and 932 which have been incurred by any Participant in the performance of
SWNMT O&M shall be applied as approved by the Auditing Committee.

14.5 Cost of facilities external to SWNMT: the Participants shall be responsible
for all costs incurred by them to supply power and energy to SWNMT or to receive
power and energy from SWNMT.

15.0 CAPITAL BETTEREMENTS OR IMPROVEMENTS: Capital betterments or improvements
requested by a Participant are subject to mutual agreement of all Participants.

16.0 CONSTRUCTION OF SWNMT: PNM shall be the Project Manager for Line-A from
Greenlee to Luna and for Hidalgo and Luna Switching Stations. EPE shall be
Project Manager for Line A from Luna to Newman, for Line B from Greenlee to Rio
Grande, and for Newman and Rio Grande Switching Stations. CPS and EPE do hereby
appoint PNM as their agent, and PNM shall undertake as CPS’ and EPE’s agent and
as principal on its

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 26

own behalf the responsibilities for the performance of all activities of the
Project Manager for the above portions of SWNMT. CPS and PNM do hereby appoint
EPE as their agent, and EPE shall undertake as CPS’ and PNM’s agent and as
principal on its own behalf, the responsibilities for the performance of all
activities of the Project Manager for the above portions of SWNMT.

16.1 Subject to the provisions, conditions, limitations and restrictions of this
Agreement, including those specifically set out in Section 21.2.2 through
21.2.6, PNM and EPE, each as Project Manager for its respective portions of
SWNMT, shall:

16.1.1 Perform Project Work in accordance with generally accepted practices in
the electric utility industry, as such practices may be affected by special
operational design characteristics of the SWNMT.

16.1.2 Contract for furnishing and obtaining from any sources it may select,
including Participants, engineering services and studies necessary for the
performance of Project Work.

16.1.3 Arrange for the placement and maintenance of Construction Insurance in
accordance with the provision of Section 26.

16.1.4 Execute all contracts for construction in connection with the performance
of Project Work.

16.1.5 Provide for all necessary personnel for the performance of Project Work.

16.1.6 Enforce and comply with all contracts entered into for the performance of
Project Work.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 27

16.1.7 Comply with any and all laws and regulations applicable to the
performance of Project work.

16.1.8 Expand the monies required to build the facilities in accordance with
this Agreement.

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

16.1.10 Not suffer any liens, other than liens permitted by Section 30 hereof,
to remain in effect unsatisfied against the SWNMT provided that the Project
Manager shall not be required to pay or discharge any such lien as long as a
proceeding shall be pending in which the lawfulness or validity of such liens
shall be contested in good faith.

16.1.11 Keep the Participants fully and promptly advised of material changes and
conditions or other material developments affecting the performance of Project
Work pursuant to this Agreement.

16.1.12 Investigate, settle or defend and pay any judgments pertaining to
uninsured third-party claims arising out of the construction of SWNMT. Said
claims will be reported as soon as possible to the Coordinating Committee when
any one or a combination exceeds $20,000 per occurrence.

16.1.13 Purchase and procure, through and from any sources it may select, the
equipment, apparatus, machinery, materials, tools and

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 28

supplies necessary for the performance of project Work, pursuant to the
guidelines established by the Engineering and Operating Committee.

16.1.14 Obtain or cause to be obtained necessary construction permits, operating
permits, temporary access rights and other licenses and approvals requisite to
the performance of the Project Work.

16.1.15 After completion of the construction of each Phase of the SWNMT, provide
the other Participants with a Final Completion Report and supplemental report in
a form agreed to by the Auditing Committee and which will allow the Participants
to classify the construction costs in accordance with the appropriate FPC
Accounts.

16.1.16 Furnish the other Participants any information reasonably available
pertaining to the construction of the SWNMT that will assist that Participant in
responding to a request for such information by any Federal, State or Local
Regulatory or Taxing Authority.

16.1.17 Enforce any and all warranties on equipment, facilities, materials sold
or furnished for the SWNMT project.

16.1.18 Each Participant shall provide to the extent possible all assistance
required by the Project Manager in its performance of its obligations as Project
Manager, and in so doing shall comply with all applicable laws and regulations.
Each Participant shall, as soon as possible after execution of this Agreement,
submit to the Auditing Committee any special requirements that it may have
regarding accounting, records, or information in order that all required records
may be maintained in the same manner throughout the construction of SWNMT.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 29

17.0 OPERATION AND MAINTENANCE: PNM shall be the Operating Agent for all SWNMT
Project Facilities starting with the line dead end structures at the Greenlee
Substation and extending eastward through the Luna Switching Station to the line
dead end structures at Luna related to EPE’s line connections from Newman and
Rio Grande, and all the 345 kV circuit breakers, 345 kV lines, relaying and
communications equipment and related facilities therein.

17.1 CPS and EPE do hereby appoint PNM as the Operating Agent for the Project
Facilities between Greenlee and Luna as described in 17.0 above.

17.2 PNM and CPS do hereby appoint EPE as the Operating Agent for the Project
Facilities between Luna and Newman for Line A, and between Luna and Rio Grande
for Line B.

17.3 PNM and EPE each hereby accept the responsibility for the performance of
all activities of Operating Agent for their respective areas as described in
17.1 and 17.2 above.

17. 4 Subject to the provisions and conditions of this Agreement, PNM and EPE
each as an Operating Agent of SWNMT facilities will:

17.4.1 Operate the respective portions of the SWNMT project and maintain Project
Facilities in accordance with good utility practice.

17.4.2 Perform or contract for the performance of necessary maintenance or
engineering service as necessary to assure project integrity and reliability.

17.4.3 Arrange for Operating Insurance in accordance with the provisions of
Section 27.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

E1 Paso Electric Company
Original Sheet No. 30
Rate Schedule FERC No. 78
 

17.4.4 Execute all contracts as necessary, coincident with the performance of
sound operating practice.

17.4.5 Provide for all necessary personnel for the performance of all Operating
Work.

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

17.4.7 Comply with any and all laws and regulations applicable to the
performance of SWNMT operations.

17.4.8 Expend the monies required to operate and maintain the SWNMT. PNM
expenditures as Operating Agent shall be made pursuant to Sections 17.7 and
17.8.

17.4.9 Keep the Participants informed whenever SWNMT maintenance is required and
whenever non-project work will affect project operations. Assure proper
coordination of non-project facilities, which have some bearing on the SWNMT
Project Facilities so as not to impair SWNMT Project Facilities.

17.5 Maintenance costs shall be shared by the Parties in accordance with their
ownership percentages established in Section 14. These costs will be billed as
incurred.

17.6 Operation cost shall be reimbursed in accordance with Section 14
guidelines.

17.7 PNM, in its capacity as Operating Agent, will submit a proposed annual
Operation and Maintenance Budget to the Engineering and Operating Committee no
later than October 1 of each year for the subsequent calendar year. The
Engineering and Operating Committee will approve or modify the proposed budgets
within 60 days after submission

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

E1 Paso Electric Company
Original Sheet No. 31
Rate Schedule FERC No. 78
 

to the Committee. Failure by the Engineering and Operating Committee to act on
the proposed budget shall be deemed to be approval.

17.8 PNM, in its capacity as Operating Agent, is authorized to contract for or
to make unbudgeted expenditures of less than $10,000.00, which are deemed by the
Operating Agent to be for emergencies, without prior Engineering and Operating
Committee approval. PNM shall obtain the consent of the members of the members
of the Engineering and Operating Committee prior to contracting for unbudgeted
expenditure sums of $10,000.00 or more.

18.0 CURTAILMENT OF DELIVERIES:

18.1 The Engineering and Operating Committee shall establish rules and
procedures to be applicable in the event scheduled or actual deliveries of
energy over any portion of the SWNMT must be curtailed for any reason.

18.2 To the extent excess emergency transmission capacity exists in the system
of any Party, such Party agrees that such excess capacity may be used as
emergency backup by the other Parties for a reasonable period at no charge.

19.0 POWER FLOWS EXCEEDING ENTITLEMENT RIGHTS: In the event that scheduled flows
of a Participant exceed its Capacity Entitlement, each other Participant may
require payment for the use of its facilities at a rate determined by it,
subject to any requisite regulatory action.

20.0 PAYMENT OF CONSTRUCTION EXPENSES BY THE PARTICIPANTS:

20.1 Each Project Manager shall be responsible for the collection of funds from
the Participants for its respective Construction Account, the depositing of such
funds in the Construction Account and

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 32
Rate Schedule FERC No. 78
 

the making of payments to carry out the general provisions of this Agreement.

20.2 The Coordinating Committee shall establish and adopt rules and procedures
for each Construction Account relating to the following:

20.2.1 The date of the month by which payment is to be made.

20.2.2 The rate of interest to be paid on delinquent payments.

20.2.3 The place payment is to be made.

20.2.4 The method in which disputed bills will be will handled.

21.0 COMMITTEES: As a means of securing effective cooperation and of dealing on
a prompt and orderly basis for the various technical, accounting, and operating
problems which may arise in connection with the SWNMT construction or operation,
the Participants will establish a “Coordinating Committee”, “Engineering and
Operating Committee” and “Auditing Committee”, each charged with certain
responsibilities. The responsibility and authority of each said committee shall
be limited to matters in connection with the carrying out of the provisions of
this Agreement.

21.1 Coordinating Committee: The Coordinating Committee shall be established and
will be composed of an officer of each Participant. All actions taken by such
committee shall require unanimous approval. Each Party shall notify the other
Parties promptly of the designation of its representative on the Coordinating
Committee and of any subsequent changes in such designations.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 33
Rate Schedule FERC No. 78
 

21.1.1 The functions and responsibilities of the Coordinating Committee shall be
as follows:

21.1.2 To establish and determine the policies to be followed and have authority
to require action by the Engineering and Operating Committee and the Auditing
Committee.

21.1.3 To review periodically the prospective transmission capacity of the
transmission systems of the Participants, as affected by their joint ownership
in the SWNMT, and to present recommendations to the Participants. To consider
and act upon matters referred to the Coordinating Committee by the other
committees.

21.1.4 To do such other things as are specified herein; provided that the
Coordinating Committee shall have no authority to modify any of the provisions
of this Agreement, except as to items where modification is specified herein to
be within the scope of the Coordinating Committee’s responsibilities.

21.2 Engineering and Operating Committee:

21.2.1 An Engineering and Operating Committee, reporting and responsible to the
Coordinating Committee, shall be established and consist of two representatives
from each Participant. All actions taken by such Committee shall require
unanimous approval of all members. Each Participant will notify the others
promptly of the designation of its representatives and of any subsequent changes
in such designations. The functions and responsibilities of the Engineering and
Operating Committee shall be:

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 34
Rate Schedule FERC No. 78
 

21.2.2 To review and approve SWNMT project design prior to final engineering and
procurement except that Engineering and Operating approval shall not be required
on design of facilities where EPE is Project Manager and sole owner.

21.2.3 To establish rules and standard practices consistent with the provisions
hereof for the guidance of system operators and other operating employees as to
matters affecting interconnection operation, determination and allocation of
losses, utilization of available transmission capacity, reciprocal assistance
and other similar operating matters.

21.2.4 To recommend to the Coordinating Committee installation of additional
facilities or procedures to effect an improved coordinated system operation.

21.2.5 To bring to the attention of the Coordinating Committee matters requiring
its attention.

21.2.6 To do such other things as are specified herein; provided that the
Engineering and Operating Committee shall have no authority to modify any of the
provisions listed herein, except as to items where modification is specified
herein to be within the scope of the Engineering and Operating Committee’s
responsibility.

21.3 Auditing Committee:     The Auditing Committee shall consist of two
representatives from each Participant. All actions taken by such Committee shall
require unanimous approval of all members. The Auditing Committee shall report
to and be responsible to the Coordinating Committee. Each Participant will
notify the other Participants

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 35
Rate Schedule FERC No. 78
 

promptly of the designation of its representatives on the Auditing Committee and
of any subsequent changes in such designation.

21.3.1 The functions and responsibilities of the Auditing Committee shall be as
follows:

21.3.2 To review internal control and make periodic audits of the records
maintained by the Project Manager and/or the Operating Agent in the performance
of Project Work and/or Operating Work and any other company records maintained
by the Project Manager and/or the Operating Agent in support of its billings to
the Participants.

21.3.3 Review and approve the format and contents of the Project Manager and/or
Operating Agent’s accounting records and reports for Project Work and/or
Operating work.

21.3.4 Certify to the Participants that the Project Manager’s and/or Operating
Agent’s billings to Participants resulting from construction, operation and
maintenance of SWNMT, including any allocations for Project Work and Operating
Work, are in accordance with this Agreement and with sound accounting practices.

21.3.5 Review and approve the Participant’s administrative and general expense
allowance and other normal loadings when such Participant acts as construction
agent for Capital Additions, Capital Betterments, or Capital Replacements.

21.3.6 Perform such functions and responsibilities as may be assigned to it from
time to time by the Coordinating Committee.

21.3.7 The Auditing Committee shall have no authority to modify any of the
provisions of this Agreement.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 36
Rate Schedule FERC No. 78
 

21.4 The Coordinating Committee, Engineering and Operating Committee and the
Auditing Committee shall keep written minutes and records of all meetings, and
any action or determination by such committees shall be reduced to writing and
shall become effective when signed by all representatives of each Participant on
that committee.

22.0 DISAGREEMENTS: In case either the Engineering and Operating Committee or
Auditing Committee should disagree as to any actions to be taken or decision to
be made, or as to the need for taking any action, or as to whether any matter is
within the scope of their responsibilities hereunder, the question or questions
at issue shall be referred to the Coordinating Committee for action or
instructions.

22.1 When a disputed matter cannot be resolved by the Coordinating Committee,
the Chief Executive Officers of the Participants shall endeavor to agree to a
resolution.

23.0 OPERATING SWNMT: It shall be the responsibility of the Operating Agent as
assigned in Section 17 to coordinate all load dispatching and provide tie line
load control at interchange points with other systems. When SWNMT project
operations or non-project operations of the Participant(s) can be determined to
cause detrimental effects in other systems, the Operating Agent shall have the
authority to request corrective action from the Participant(s). This may include
the startup of off-line generation facilities or increase in generation output.

23.1 Communication and Control Facilities: Facilities required to perform area
regulation and control shall include the establishment of communication
facilities between all project Switching Stations and

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

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

El Paso Electric Company
Original Sheet No. 37
Rate Schedule FERC No. 78
 

the respective Operating Agent’s dispatching office. Additionally, supervisory
control, telemetry and metering necessary for the performance of system
regulation and load dispatching shall be installed as a part of Project
Facilities. Where desired other Participants may install passive supervisory
monitor and telemetry equipment and request the Operating Agent to accommodate
the installation thereof. In no event shall dual supervisory control of
equipment be installed. The Operating Agent shall maintain control of all
equipment. Costs associated with installation of secondary monitor and telemetry
equipment shall be borne by the requesting Participant and maintenance of the
equipment may be assigned to the Operating Agent on a reimbursable basis.

23.2 Voltage Control: It shall be the responsibility of the Operating Agent to
regulate voltage levels and VAR flows in project lines and equipment. It shall
be the responsibility of all Parties connecting to Project Facilities to insure
zero non-beneficial reactive VAR interchange at interconnection points.

23.3 Control Area Definition: Coincident with the completion of Phase #3 of
SWNMT wherein the Newman to Luna line is constructed, the present New Mexico-E1
Paso control area shall be separated into two separate and distinct control
areas. The control area separation points shall be at Luna Switching Station and
as otherwise agreed upon. Additionally, it is agreed that all Participants shall
modify scheduling and interchange methods to conform with area redefinition. The
operation of Participants' systems remaining within the New Mexico Control

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-32-

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 38

Area may be similarly separated from the Operating Agent’s control area by
request of either Party. All Parties recognize the need for load and tie
regulation and assume responsibility for regulation and scheduling their system
requirements or arranging for others to insure that regulation obligations are
met.

23.4 Outage Schedules: The Participants will cooperate in scheduling the times
and durations of removal from service of SWNMT lines, or circuits which affect
them, for inspection, maintenance or repair. The coordination of schedules shall
be the responsibility of the Operating Agent(s).

23.5 Electrical Disturbances: Each Participant will, insofar as practical,
construct, operate and maintain its system and facilities so as to avoid the
likelihood of a disturbance originating from its system which might cause an
impairment of service in the system of another Participant or in any other
interconnected system.

23.6 Metering Information: All meter reading information required to adequately
account for end-of-month transactions to and among Participants and others shall
be submitted in a timely manner by the responsible Parties to the Operating
Agent. This Information should be submitted no later than the end of the third
working day after month’s end.

23.7 Operating Data: Each Participant will make available to each other
Participant operating data to the extent that such data is

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-33-

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 39

needed by the Coordinating Committee, Auditing Committee or the Engineering and
Operating Committee, in the discharge of their respective responsibilties
hereunder or as needed in connection with load dispatching and energy
accounting.

24.0 METERING

24.1 Metering Facilities: Arrangements with the respect to location and type of
metering facilities required for purposes of control and determining losses
shall be the responsibility of the Engineering and Operating Committee.
Ownership of metering shall be pursuant to Exhibit B . Upon the request of a
Participant, the other Participants will make available suitable space and
facilities for installation of check metering.

24.2 Testing and Reading of Meters : Metering equipment shall be inspected and
tested by the owner at annual intervals or at such shorter intervals as may be
directed by the Engineering and Operating Committee, and any inaccuracy
disclosed by such tests shall be promptly corrected by the owner. Additional
inspections and tests at particular installations shall be made by the owner
upon request of a Participant. Representatives of the other Participants shall
be afforded opportunity to be present at all such inspections and tests. If, at
any test, a meter shall be found to be inaccurate by more than one percent (1%),
fast or slow, an adjustment shall be made and settlements hereunder among the
Participants, to compensate for the effect of such inaccuracy in excess of one
percent (1%) over a preceding period extending to the second preceding meter
reading, or over such shorter periods as the inaccuracy may be determined to
have existed.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-34-

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

E1 Paso Electric Company
Original Sheet No. 40
Rate Schedule FERC No. 78
 

24.3 Adjusting Metering Accuracy: The percentage registration of meters,
including instrument transformers, shall be adjusted as closely as practicable
to the condition of zero error in accordance with the American National Standard
Code for electricity metering (C-12).

25.0 RELATIONSHIP OF PARTIES: Nothing herein contained shall be construed as 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 of the
Participants. Each Participant shall be individually responsible for its own
covenants, obligations and liabilities as herein provided.

26.0 CONSTRUCTION INSURANCE: Unless otherwise specified by the Coordinating
Committee, the Project Manager shall procure and maintain in force, or cause to
be procured and maintained in force, policies of insurance as specified herein.

26.1 The Project Manager shall to be required of itself or from the General
Contractor(s), if any, 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
automobile in connection with the Project Work. All Parties shall be named as
Additional Named Insureds and such policy shall be primary as to any similar
insurance carried by any Party and such policy shall contain a cross liability
clause.

26.2 The Project Manager may purchase or require the General Contractor(s), if
any, to purchase other insurance as it may deem necessary or desirable.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-35-

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

E1 Paso Electric Company
Original Sheet No. 41
Rate Schedule FERC No. 78
 

26.3 The General Contractor, if any, shall provide Certificates of Insurance to
the Project Manager. Such certificates shall provide for not less than thirty
(30) days notice of cancellation, material change or non-renewal.

26.4 The Project Manager shall have the authority to make such changes in the
insurance program as it may deem to be in the best interests of all Parties upon
thirty (30) days’ notice to the other Participants. Such changes may be subject
to the review of the Coordinating Committee.

26.5 Subject to approval of the Coordinating Committee, the Project Manager
shall establish the insurable values, limits, deductibles, retentions and other
special terms and conditions with respect to the insurance during construction
and operation.

26.6 Such insurance as is called for “During Operation” in Section 27 shall be
maintained by each Party in connection with construction operations, if
applicable.

27.0 OPERATING INSURANCE: Unless otherwise specified by the Coordinating
Committee, PNM, EPE, and CPS shall procure and maintain in force, or cause to be
procured and maintained in force, policies of insurance as specified herein for
each Party.

27.1 The Participants shall maintain Comprehensive General Liability for Bodily
Injury and Property Damage, covering their ownership in and/or existence of the
SWNMT, and also covering liability arising out of either their performance or
non-performance of Operation or Maintenance Work as required or called for in
this Agreement. All

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-36-

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

El Paso Electric Company
Original Sheet No. 42
Rate Schedule FERC No. 78
 

Participants shall be an Additional Named Insured on all other Participant’s
policies with respect to liability in connection with the SWNMT and the
respective policies shall each contain a cross liability clause. Policies
providing coverage for ownership and/or existence of the SWNMT shall be primary
for all Insureds or Additional Named Insureds with respect to that portion of
the SWNMT for which the Party insured has been designated responsible under this
Agreement. Operational liability for any Party shall also be primary for all
Insureds or Additional Named Insureds with respect to operations of the Party
responsible for that portion of the SWNMT out of which the claim arises.

27.2 Each Party shall maintain Comprehensive Automobile Liability Insurance for
Bodily Injury and Property Damage, covering all automotive equipment used by it
in connection with the SWNMT.

27.3 If applicable, each Party 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 SWNMT.

27.4 Each Party shall maintain Workmen’s Compensation and Employers’ Liability
Insurance covering its employees engaged in any work in connection with the
SWNMT. Such insurance shall comply with all statutory provisions of the States
of Arizona and/or New Mexico and/or Texas.

27.5 In the event that any Party shall be or elect to become self-insured for
any or all of the insurance coverages required of a Party, then it shall notify
the others of such self-insurance and such self-insurance shall be deemed in
compliance with this Section 27.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-37-

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

El Paso Electric Company
Original Sheet No. 43
Rate Schedule FERC No. 78
 

27.6 At the request of any Party, Certificates of Insurance or other sufficient
evidence of insurance or self-insurance shall be provided. Such evidence of
insurance shall provide for no less than thirty (30) days’ notice of any
cancellation or material change.

28.0 INDENTITY:

28.1 The Participants mutually agree that liabilities, if any, to third parties
shall be borne by the Participants in accordance with their respective ownership
interests in SWNMT, and each Participant agrees to indemnify and hold harmless
the other Participants from and against liability for such Participant’s
proportionate share of such liabilities.

28.2 No Participant shall be liable to any of the other Participants for any
damage to SWNMT from whatever cause, except willful action of such Participant,
and the Participants mutually agree to look solely to the insurance coverage
carried on SWNMT, if any, for recovery of such damages. The cost of any
non-insured damage shall be shared by the Participants in accordance with their
respective ownership interests in SWNMT.

28.3 Notwithstanding Section 28.1, it is mutually agreed as follows:

(a) PNM shall indemnify and hold harmless CPS and EPE from and against any
liability for death, injury, loss or damage to PNM’s customers arising out of
electric service to such customers caused by the operation or failure of
operation of SWNMT.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-38-

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

El Paso Electric Company
Original Sheet No. 44
Rate Schedule FERC No. 78
 

(b) CPS shall indemnify and hold harmless PNM and EPE from and against any
liability for death, injury, loss or damage to CPS’s customers arising out of
electric service to such customer caused by the operation or failure of
operation of SWNMT.

(c) EPE shall indemnify and hold harmless PNM and CPS from and against any
liability for death, injury, loss or damage to EPE’s customers arising out of
electric service to such customer caused by the operation or failure of
operation of SWNMT.

(d) Provided, however, that the agreement to indemnify shall not extend to
liability, claims, damages, losses or expenses, including attorney fees, arising
out of:

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

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

The word “indemnify” as used in this section includes, without limitation, as
agreement to remedy damage or loss caused in whole or in part by the negligence,

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-39-

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

El Paso Electric Company
Original Sheet No. 45
Rate Schedule FERC No. 78
 

act, or omission of the indemnitee, the agents or employees of the indemnitee,
or any legal entity for whose negligence, acts or omissions any of the foregoing
may be liable.

26.4 No Participant shall be liable to any of the other Participants for damage
or injury to any property owned by such Participants not the subject of this
Agreement resulting from the operation or failure of operation of SWMNT,
regardless of which of the Participants may have caused such injury or damage.

26.5 The provisions of this Section 28 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 the applicable insurance policies.

29.0 WAIVER OF RIGHT TO PARTITION: Upon completion of each Phase of SWNMT the
Participants will accept title thereto as tenants in common, with each
Participant having an undivided interest in the percentage which is set out. The
Participants agree that their interests shall be held in such tenancy in common
for the duration of this Agreement, including any extensions thereof. For the
term of this Agreement, the Participants hereby waive the right to partition the
SWNMT (whether by partition in kind or by sale and division of the proceeds
thereof), agree that no Participant will resort to any action at law or at
equity to partition the SWNMT, and waive the benefits of all laws that may now
or hereafter authorize such partition.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-40-

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

El Paso Electric Company
Original Sheet No. 46
Rate Schedule FERC No. 78
 

30.0 MORTGAGE AND TRANSFER OF PARTICIPANTS INTERESTS:

30.1 The Participants shall have the right at any time and from time to time to
mortgage, create or provide for a security interest in, or convey in trust their
respective rights, titles and interest in the SWNMT to a trustee or trustees
under Deeds of Trust, Mortgages or Indentures, or to secure parties under a
Security Agreement, as security for their present or future bonds or other
obligations or securities, and to any successors or assigns thereof, without
need for the prior written consent of the other Parties, and without such
mortgages, trustee or secured party assuming or becoming in any respect
obligated to perform any of the obligations of the Participant.

30.2 Any mortgagee, trustee, or secured party under present or future Deeds of
Trust, Mortgages, or Indentures, or security agreements of any of the
Participants and any successor or assign thereof, and any receiver referee or
trustee in bankruptcy or reorganization of any of the Participants, and any
successor by action of law or otherwise, and any purchaser, transferee or
assignee of any thereof may, without need for prior written consent of the
Participants, succeed to and acquire all the rights, title and interests of such
Participant in the SWMNT and may take over possession of or foreclose upon said
property rights, title and interests of such Participant.

30.3 Any Participant shall have the right to transfer or assign its respective
rights, titles and interests in the SWMNT without the need for prior written
consent of the other Participants at any time to any corporation or to other
entity acquiring all or substantially all

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-41-

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

El Paso Electric Company
Original Sheet No. 47
Rate Schedule FERC No. 78
 

of the property of such Participant, or to any corporation or entity into which
or with such Participant may be merged or consolidated, or to any corporation or
entity the stock or ownership of which is wholly owned by a Participant.

30.4 In case a Participant shall wish to transfer or otherwise relinquish all or
part of its ownership in the SWNMT, the right to purchase such ownership and
associated cost responsibility and obligation shall be first offered to the
other Participants, according to their existing interest except as provided
elsewhere in Section 30. If both of those Participants elect not to purchase the
offering Participant’s interest, thereafter the offering Participant may enter
into an agreement with any other party to transfer, relinquish or otherwise
reduce all or part of its ownership and capacity entitlement in the SWNMT.
However, notwithstanding anything to the contrary contained herein, the
third-party must assume all the obligations prorata of the selling Participant.
Provided, that if any Participant should transfer or otherwise relinquish an
operating district or division of its company which includes or is dependent in
whole or in part upon that Participant’s interest is the SWNMT for its energy
supply, such right of refusal shall not apply.

31.0 REGULATORY AUTHORITIES:

31.1 This Agreement is not a rate schedule as defined pursuant to 18 C.F.R.
35.2(b) of the F.P.C. regulations and is not to be so construed.

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-42-

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

El Paso Electric Company
Original Sheet No. 48
Rate Schedule FERC No. 78
 

31.2 This Agreement is subject to all valid and applicable laws, and to all
valid and applicable orders, rules and regulations of duly constituted
regulatory authorities having jurisdiction, and its becoming effective is
subject to any requisite regulatory approvals or other requisite action by any
regulatory agency having jurisdiction. It is, however, not the intent of the
Agreement that by virtue of its execution any jurisdiction or control in any
form over a Party hereto will be extended to any local, state or federal agency
not otherwise having jurisdiction or control over such Party.

31.3 During the course of the proceedings in Cases 1176 and 1177, before the New
Mexico Public Service Commission, PNM and CPS represented to that Commission
that an agreement with EPE, for the SWNMT, would be entered into to provide for
EPE’s requirements. It is the intention of the Participants that this Agreement
shall constitute a full and complete expression of the Participants of the
arrangements governing the capacity to be made available to EPE and that it
represents the fulfillment of all commitments made by PNM and CPS.

32.0 TERM: This Agreement shall continue in full force and effect for a period
of thirty (30) years from the date of execution of this Agreement, or for so
long as the SWNMT remains in commercial operation, whichever is longer.

33.0 MISCELLANEOUS PROVISIONS:

33.1 This Agreement is therefore entered into to set out and embody the entire
understanding and agreement between the Participants to SWNMT and replaces and
supersedes the December 16, 1974 letter of

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-43-

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

El Paso Electric Company
Original Sheet No. 49
Rate Schedule FERC No. 78
 

Principles of Agreement and all supplemental understandings or amendments
thereto. In addition, this Agreement supersedes the May 26, 1976 PNM/CPS SWNMT
Participation Agreement.

33.2 All Participants agree, upon request of another Participant, to make,
execute and deliver any and all documents reasonably required to implement this
Agreement.

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

33.4 This Agreement is executed in and shall be governed by the laws of the
State of New Mexico.

33.5 Each term, covenant and condition of this Agreement is deemed to be an
independent term, covenant and condition and the obligation of any Participant
to perform all of the terms, covenants and conditions, to be kept and performed
by it, is not dependent on the performance by the other Participant of any term,
covenant or condition.

33.6 Subject to this Agreement becoming effective pursuant to Section 31.2,
thereafter in the event any of the provisions, terms, covenants or conditions of
this Agreement, or the application of any such provisions shall be held invalid
to any person or circumstance by any court or agency having jurisdiction in the
premises, the reminder of this Agreement, and the application of its terms,
covenants or conditions to such person or circumstance shall not be affected
thereby.

33.7 All costs or expenses, including all taxes or fees that the Project Manager
is required to pay which are incurred by the Project

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-44-

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 50

Manger in connection with the performance of its obligations as Project Manager
under this Agreement, and which are not specifically allocated to the
Participants in accordance herewith, shall be equitably allocated between the
Participants in a manner to be mutually agreed upon by the Coordinating
Committee.

34.0 NOTICES:

34.1 Any formal notice, demand or request provided for in this Agreement or
given or made in connection with this Agreement, shall be deemed to be properly
given or made if delivered or sent by registered or certified mail or telegram
to the persons specified below:

To or upon PNM
Secretary
Public Service Company of New Mexico
P. O. Box 2267
Albuquerque, New Mexico 87103
 
 
To or upon CPS
Secretary
Community Public Service Company
501 West Sixth Street
Fort Worth, Texas 76102
 
 
To or upon EPE
Secretary
El Paso Electric Electric Company
P. O. Box 982
El Paso, Texas 79999

34.2 A Party may at any time by written notice change the designation or address
of the person so specified.

34.3 Notices and requests of a routine character in connection with the delivery
or receipt of power or energy to or from SWNMT or in connection with the
operation of facilities of SWNMT shall be given in such manner as the Project
Manager from time to time shall arrange.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-45-

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 51

IN WITNESS WHEREOF, the Parties have hereunto caused this Agreement to be
executed in Albuquerque, New Mexico this 29th day of April, 1977.
 
 
 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
 
 
 
 
 
ATTEST: faa01.jpg [faa01.jpg]
 
 
fb.jpg [fb.jpg]
 
 
By
 
Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
COMMUNITY PUBLIC SERVICE COMPANY
 
 
 
 
 
 
ATTEST: fc.jpg [fc.jpg]
 
 
fd.jpg [fd.jpg]
 
 
By
 
ASST. Secretary
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
ATTEST: fe.jpg [fe.jpg]
 
 
ff.jpg [ff.jpg]
 
 
By
 
Asst. Secretary
 
 
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

-46-

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

El Paso Electric Company
Original Sheet No. 52
Rate Schedule FERC No. 78
 

SWNMT EXHIBIT A

12/16/74 LETTER OF AGREEMENT

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 53
Rate Schedule FERC No. 78
 

[SEAL]
Public Service Company of New Mexico
P. O. Box 2267
Albuquerque, N. M. 87103
December 16, 1974

Mr. C. L. Cooke, President
Community Public Service Company
501 West Sixth Street
Fort Worth, Texas 76102

Mr. D. H. Lane, President
El Paso Electric Company
P. O. Box 982
El Paso, Texas 79999

Gentlemen:

Subject:
Principles of Agreement for the
Southwest New Mexico Transmission Project.

This letter of Principles of Agreement between El Paso Electric Company (EPE),
Community Public Service Company (CPS), and Public Service Company of New Mexico
(PNM) is entered into and incorporates the agreement between the parties to date
relating to the participation in the two 345 KV transmission lines and related
facilities known as the Southwest New Mexico Transmission Project (SWNMT).

The parties will proceed with due diligence to have completed, not later than
six months from the date hereof, the final Participation Agreement and such
other necessary agreements between the parties as required hereby.

The execution of this letter will enable El Paso Electric Company to withdraw
its intervention in cases 1176 and 1177 before the New Mexico Public Service
Commission and further will eliminate any cross examination by any party of
another party’s witnesses in said

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 54
Rate Schedule FERC No. 78
 

Public Service Company of New Mexico
Mr. C. L. Cooke, President
-2-
December 16, 1974
Mr. D. H. Lane, President
 
 

action. Further, PNM and CPS will proceed before the New Mexico Public Service
Commission to obtain their Certificates of Public Convenience and Necessity and
Location Permits as filed so that the future planning of SWNMT and purchases of
right-of-way may proceed as soon as possible hereafter.

The Principles of Agreement are as follows:

GENERAL

1.
The proposed lines Greenlee-Hidalgo-Luna-Blythe (Line A) and
Greenlee-Hidalgo-Luna-Rio Grande (Line B) will each be built for 400 MW minimum
nominal capacity suitable for emergency thermal loading of 1000 MVA.

2.
CPS will own Hidalgo Substation, PNM will own Luna Substation, EPE will own
Blythe Substation. PNM will provide for Line A position at Greenlee by agreement
with Tucson Gas & Electric as will EPE for Line B.

a.
The parties stipulate there will be no substations added to the system without
mutual agreement.

3.
Should the parties not agree on a just and reasonable selling price of capacity
in various segments mentioned below, they shall submit the case to arbitration
for decision with PNM and CPS selecting one arbitrator and EPE selecting one
arbitrator and the two arbitrators so selected shall select the third; any party
aggrieved by the arbitrators’ award shall have the right to litigate the matter
de novo in the Santa Fe District Court.

4.
To the extent excess emergency transmission capacity exists in the system of any
party, such party agrees that such excess

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 55
Rate Schedule FERC No. 78
 

Public Service Company of New Mexico

Mr. C. L. Cooke, President
 
December 16, 1974
Mr. D. H. Lane, President
- 3 -
 

capacity may be used as emergency backup by the other parties at no charge for a
reasonable period.

FOR LINE A:

5.
PNM-CPS will build Greenlee-Hidalgo by June 1976.

6.
PNM-CPS will build Hidalgo-Luna by May 1976 unless a later date is agreed to by
PNM and CPS.

7.
EPE will build Luna-Blythe by May 1978 unless a later date is agreed to by CPS
and PNM. EPE will not be obligated to an earlier in-service date for this
section than the in-service date of the Hidalgo-Luna section set forth in #6
above.

8.
PNM – CPS will pay EPE, until December 1980, just and reasonable carrying
charges for 60 miles of the 85 mile Luna-Blythe Line.

9.
EPE will purchase, in 1980, 200 MW (nominal) In Line A from Greenlee through
Luna. 200 MW is not necessarily intended to be one-half of Line A’s capacity.

10.
EPE will sell, in 1980, 20 miles from Luna to Luna–Dona Ana County line,
retaining 200MW through capacity (nominal) in this segment, should PNM – CPS
desire.

FOR LINE B:

11.
EPE will build Line B for completion to coincide with commercial service data of
Palo Verde #2.

12.
EPE will sell CPS 100 MW (nominal) in Line B from Greenlee to Hidalgo if CPS
desires.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 56
Rate Schedule FERC No. 78
 

Public Service Company of New Mexico

Mr. C. L. Cooke, President
-4-
December 16, 1974
Mr. D. H. Lane, President
 
 

If this letter properly reflects your understanding of the Principles of
Agreement, please sign the acceptance and have available for signing by the
other participants by Thursday December 19, 1974.

 
Very truly yours,
 
 
 
 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
 
a.jpg [a.jpg]
 
By
 
 
C. D. Bedford, Vice President

ACCEPTED:
 
 
 
COMMUNITY PUBLIC SERVICE COMPANY
 
 
b.jpg [b.jpg]
 
By
 
 
 
 
Date
12-10-74
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
By
 
 
 
 
 
Date:
12-18-74
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 57
Rate Schedule FERC No. 78
 

SWNMT EXHIBIT B

Cost Responsibility and Ownership
of Facilities at Stations

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 58
Rate Schedule FERC No. 78
 

SWNMT Construction Phases:

The SWNMT is to be constructed in five Phases. The SWNMT Phases are as outlined
pursuant to the following tables and drawings.

Legend:

Symbol
Description
exhibit1009rs78swnmt_image10.gif [exhibit1009rs78swnmt_image10.gif]
345 KV shunt reactor
exhibit1009rs78swnmt_image11.gif [exhibit1009rs78swnmt_image11.gif]
345 KV line or transformer disconnect switch
exhibit1009rs78swnmt_image12.gif [exhibit1009rs78swnmt_image12.gif]
345 KV circuit breaker
exhibit1009rs78swnmt_image13.gif [exhibit1009rs78swnmt_image13.gif]
transformer with LTC
exhibit1009rs78swnmt_image14.gif [exhibit1009rs78swnmt_image14.gif]
series capacitor installation
exhibit1009rs78swnmt_image15.gif [exhibit1009rs78swnmt_image15.gif]
345 KV circuit switcher
exhibit1009rs78swnmt_image16.gif [exhibit1009rs78swnmt_image16.gif]
345 KV PCM
exhibit1009rs78swnmt_image17.gif [exhibit1009rs78swnmt_image17.gif]
345 KV line trap
exhibit1009rs78swnmt_image18.gif [exhibit1009rs78swnmt_image18.gif]
345 KV lightning arrestor

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-1

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

El Paso Electric Company
Original Sheet No. 59
Rate Schedule FERC No. 78
 

exhibit1009rs78swnmt_image19.gif [exhibit1009rs78swnmt_image19.gif]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-2

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

E1 Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 60

SWNMT FACILITIES

I.
PHASE #1
 
 
 
 
 
 
 
 
 
 
A.
Greenlee Substation
 
 
 
 
 
 
 
 
 
 
 
Project Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Quantity
Description
 
Ownership
 
 
 
 
 
 
 
 
 
 
 
 
Lot
Line Relaying, Carrier
 
Per
Section
11.2.1
 
 
 
3
345 kV PCM’s w/stands, one w/CXR
 
“
“
“
 
 
 
1
345 kV Line Trap
 
“
“
“
 
 
 
Lot
Metering
 
“
“
“
 
 
 
 
 
 
 
 
 
 
 
Non-Project :
 
 
 
1
345 kV Circuit Breaker
 
Per
PNM/TGE
Agreement
 
 
 
1
Line Deadend Tower
 
“
“
“
 
 
 
3
345 kV Lightning Arrestor
 
“
“
“
 
 
 
1
Line Disconnect Switch
 
“
“
“
 
 
 
Lot
Supervisory, Telemetry, Microwave
 
“
“
“
 
 
 
Lot
Breaker Failure Relaying
 
“
“
“
 
 
 
 
 
 
 
 
 
 
B.
Hidalgo Station
 
 
 
 
 
 
 
 
 
 
 
Project Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Quantity
Description
 
Ownership
 
 
 
 
 
 
 
 
 
 
 
 
1
Line Deadend Tower
 
Per
Section
11.2.1
 
 
 
3
345 kV Lightning Arrestor
 
“
“
“
 
 
 
3
345 kV PCM’s w/stands, one w/CXR
 
“
“
“
 
 
 
1
345 kV Line Trap
 
“
“
“
 
 
 
Lot
Line Relaying, Carrier (to Greenlee)
 
“
“
“
 
 
 
Lot
Metering
 
“
“
“
 
 
 
1
65 MVAR Reactor w/Relaying
 
Per
Section
11.3
 
 
 
1
Reactor Motor Operated Circuit Switcher w/stand
 
“
“
“
 
 
 
Lot
Switching Station Grading, Fencing, Grounding
 
60%
CPS,
40%
PNM
 
 
 
1
Control House
 
“
“
“
“
 
 
 
Lot
Batteries & Charger
 
“
“
“
“
 
 
 
Lot
Bus and Fittings
 
100%
CPS
 
 
 
 
Lot
Bus Support Structures
 
“
“
 
 
 
 
Lot
Cable Troughs, Equipment Controls
 
“
“
 
 
 
 
Lot
Supervisory, Telemetry
 
100%
PNM
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

B-3

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

E1 Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 61

 
 
Non-Project:
 
 
 
 
 
 
 
 
 
 
 
 
1
345-115 kV Transformer w/LTC
 
 
100%
CPS
 
 
 
1
345 kV Transformer Motor Operated Circuit Switcher w/stand
 
 
“
“
 
 
 
Lot
Station Service Equipment
 
 
“
“
 
 
 
1*
345 kV PCM
 
 
“
“

II.
PHASES #2 & #3
 
 
 
 
 
 
 
 
 
 
A.
Hidalgo Station (See Dwg. B-II-A)
 
 
 
 
 
 
 
 
 
 
 
Project Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Quantity
Description
 
Ownership
 
 
 
 
 
 
 
 
 
 
 
 
1
Line Deadend Tower
 
Per
Section
11.2.2
 
 
 
3
345 kV lightning Arrestors
 
“
“
“
 
 
 
3
345 kV PCM’ s w/stands, one w/CXR
 
“
“
“
 
 
 
1*
345 kV Line Trap
 
“
“
“
 
 
 
Lot
Line Relaying, Communications (to Luna)
 
“
“
“
 
 
 
Lot
Metering
 
“
“
“
 
 
 
Lot
Breaker Failure Relaying
 
 
100%
CPS
 
 
 
3
345 kV Circuit Breakers
 
 
“
“
 
 
 
6
345 kV Disconnect Switches
 
 
“
“
 
 
 
Lot
Bus Support Structures
 
 
“
“
 
 
 
Lot
Bus and Fittings
 
 
“
“
 
 
 
Lot
Equipment Controls
 
 
“
“
 
 
 
Lot
Supervisory, Telemetry, Communications
 
 
100%
PNM
 
 
 
 
 
 
 
 
 
 
B.
Luna Station (See Dwg. B-II-B)
 
 
 
 
 
 
 
 
 
 
 
Project Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Quantity
Description
 
Ownership
 
 
 
 
 
 
 
 
 
 
 
 
1
Line Deadend Tower
 
Per
Section
11.2.2
 
 
 
3
345 kV PCM’ s w/stands, one w/CXR
 
“
“
“
 
 
 
3
345 kV Lighting Arrestors
 
“
“
“
 
 
 
1*
345 kV Line Trap
 
“
“
“
 
 
 
Lot
Line Relaying, Communications (to Hidalgo)
 
“
“
“
 
 
 
Lot
Metering
 
“
“
“

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

B-4

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

 
Original Sheet No. 62
El Paso Electric Company
 
Rate Schedule FERC NO. 78
 

1
Line Deadend Tower
Per
Section
11.2.3
3
345 kv PCM’s w/stands, one w/CXR
“
“
“
3
345 kv Lightning Arresters
“
“
“
1*
345 kv Line Trap
“
“
“
Lot
Line Relaying, Communications (to Newman)
“
“
“
Lot
Metering
“
“
“
Lot*
Reactor w/circuit Switcher and Relaying
Per
Section
11.3
Lot
Switching Station Grading, Fencing, Grounding
100%
PNM
1
Control House
“
“
Lot
Batteries and Charger
“
“
Lot
Bus Fittings
“
“
Lot
Bus Support Structures
“
“
Lot
Cable Troughs, Equipment Controls
“
“
Lot
Supervisory, Telemetry, Communications
“
“
3
345 kV Circuit Breakers
“
“
6
345 kV Disconnect Switches
“
“
Lot
Breaker Failure Relaying
“
“

Non-Project :

1
345-115 kV Autotransformer w/LTC
100%
PNM
Lot
Station Service Equipment
“
“
1*
345 kV PCM
“
“

C.
Newman Station

Project Facilities:

Quantity
Description
Ownership
 
 
 
1
Line Deadend Tower
Per
Section
11.2.3
3
345 kV PCM’s w/stands
“
“
“
3
345 kV Lightning Arrestors
“
“
“
1*
345 kV Line Trap
“
“
“
Lot
Line Relaying, Communication (to Luna)
“
“
“
Lot
Metering
“
“
“
Lot*
Reactor w/Circuit Switcher and Relaying
Per
Section
11.3
Lot
Switching Station Grading, Fencing, Grounding
100%
EPE
1
Control House
“
“
Lot
Batteries and Charger
“
“

 
Effective: April 29, 1977
Issued by: John A. Whitacre, Vice President, Transmission and Distribution
 
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-5

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

El Paso Electric Company
Original Sheet No. 63
Rate Schedule FERC No. 78
 

 
 
 
Lot
Bus Support Structures
 
 
100%
EPE
 
 
 
Lot
Bus and Fittings
 
 
“
“
 
 
 
Lot
Cable Troughs, Equipment Controls
 
 
“
“
 
 
 
Lot
Supervisory, Telemetry, Communications
 
 
“
“
 
 
 
1
345 kV Circuit Breaker
 
 
“
“
 
 
 
2
345 kV Disconnect Switches
 
 
“
“
 
 
 
1
345 kV line Disconnect Switch w/stand
 
 
“
“
 
 
 
Lot
Breaker Failure Relaying
 
 
“
“
 
 
 
 
 
 
 
 
 
 
 
Non-Project:
 
 
 
 
 
 
 
 
 
 
 
 
Lot
Station Service Equipment
 
 
100%
EPE
 
 
 
 
 
 
 
 
 
III.
PHASE 4 – no DONE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A.
Greenlee Substation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Project Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Quantity
Description
 
Ownership
 
 
 
 
 
 
 
 
 
 
 
 
Lot
Line Relaying, Communications
 
Per
Section
11.2.4
 
 
 
3
345 kV PCM’s w/stands, one w/CXR
 
“
“
“
 
 
 
1*
345 kV Line Trap
 
“
“
“
 
 
 
Lot
Metering
 
“
“
“
 
 
 
Lot*
Reactor w/Circuit Switches and Relaying
 
Per
Section
11.3
 
 
 
 
 
 
 
 
 
 
 
Non-Project:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
Line Deadend Tower
 
Per
EPE/TGLE
Future
Agreement
 
 
 
1
Line Disconnect Switch
 
“
“
“
“
 
 
 
Lot*
Supervisory, Telemetry, Communications
 
“
“
“
“
 
 
 
3
345 kV Lightning Arrestors
 
“
“
“
“
 
 
 
Lot
Breaker Failure Relaying
 
“
“
“
“
 
 
 
2
345 kV Circuit Breaker
 
“
“
“
“
 
 
 
 
 
 
 
 
 
 
B.
Hidalgo Station - No equipment at Hidalgo required coincident with Phase #4

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-6

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

El Paso Electric Company
Original Sheet No. 64
Rate Schedule FERC No. 78
 

c.    Luna Station (See Dwg. B-III-C)

Project Facilities:

Quantity
Description
Ownership
 
 
 
 
 
2
Line Deadend Towers
Per
Section
11.2.4
6
345 kV PCM’s w/stands, two w/CXR
“
“
“
6
345 kV Lightning Arrestors
“
“
“
2*
345 kV Line Traps
“
“
“
Lot
Line Relaying Communications
“
“
“
Lot
Metering
“
“
“
4
345 kV Line Motor Operated Disconnects w/stands
Per
Section
11.2.2-11.2.4
Lot*
Reactor w/Circuit Switcher and Relaying
Per
Section
11.3
Lot
Breaker Failure Relaying
 
100%
PNM
2
345 kV Circuit Breakers
 
“
“
4
345 kV Disconnect Switches
 
“
“
Lot
Bus Support Structures
 
“
“
Lot
Bus Fittings
 
“
“
Lot
Equipment controls
 
“
“
Lot
Supervisory, Telemetry.
 
“
“

Non-Project:

1
345 kV Motor Operated Transformer Disconnect
 
100%
PNM

D.     Rio Grande station

Project Facilities:

Quantity
Description
Ownership
 
 
 
 
 
1
Line Deadend Tower
Per
Section
11.2.4
3
345 kV PCM’s w/stand
“
“
“
3
345 kV Lightning Arrestors
“
“
“
1*
345 kV Line Trap
“
“
“
Lot
Line Relaying, Communications (to Luna)
“
“
“
Lot
Metering
“
“
“
Lot
Reactor w/Circuit Switcher and Relaying
Per
Section
11.3
Lot
Switching Station Grading, Fencing, Grounding
 
100%
EPE
1
Control House
 
“
“

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-7

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

El Paso Electric Company
Original Sheet No. 65
Rate Schedule FERC No. 78
 

Lot
Batteries and Charger
 
“
“
Lot
Bus and Fittings
 
“
“
Lot
Bus Support Structures
 
“
“
Lot
Cable Troughs, Equipment Controls
 
“
“
Lot
Supervisory, Telemetry, Communications
 
“
“
1
345 kV Circuit Breaker
 
“
“
2
345 kV Disconnect Switches
 
“
“
1*
345 kV Line Disconnect Switch
 
“
“
Lot
Breaker Failure Relaying
 
“
“

Non-Project:

Lot
Station Service Equipment
 
100%
EPE

IV.    PHASE #5

A.    Hidalgo Station (See Dwg. B-IV-A)

Project Facilities:

Quantity
Description
Ownership
2
Line Deadend Towers
Par
Section
11.2.4
6
345 kV PCM’s w/stands, two w/CXR
“
“
“
6
345 kV Lightning Arrestors
“
“
“
2*
345 kV Line Traps
“
“
“
Lot
Line Relaying, Communications
“
“
“
Lot
Metering
“
“
“
4
345 kV Line Motor Operated Disconnects w/stands
Per
Section
11.2.1,11.2.2, 11.2.4
Lot*
345 kV Reactor w/Circuit Switcher and Relaying
Per
Section
11.3
Lot
Breaker Failure Relaying
 
100%
PNM
2
345 kV Circuit Breaker
 
“
“
4
345 kV Disconnect Switches
 
“
“
Lot
Bus Support Structures
 
“
“
Lot
Bus and Fittings
 
“
“
Lot
Equipment Controls
 
“
“
Lot
Supervisory, Telemetry
 
“
“

B.    Luna Station - No additional Project Facilities added at Luna.

C.    Newman Station - No additional Project Facilities added at Newman.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-8

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

El Paso Electric Company
Original Sheet No. 66
Rate Schedule FERC No. 78
 

D.    Rio Grande Station - No additional Project Facilities added at Rio Grande.

NOTES:

1.    *As required
2.    All facilities include any associated equipment necessary for operation of
SWNMT.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-9

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

El Paso Electric Company
Original Sheet No. 67
Rate Schedule FERC No. 78
 

exhibit1009rs78swnmt_image20.gif [exhibit1009rs78swnmt_image20.gif]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-10

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

El Paso Electric Company
Original Sheet No. 68
Rate Schedule FERC No. 78
 

exhibit1009rs78swnmt_image21.gif [exhibit1009rs78swnmt_image21.gif]
Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-11

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

El Paso Electric Company
Original Sheet No. 69
Rate Schedule FERC No. 78
 

exhibit1009rs78swnmt_image22.gif [exhibit1009rs78swnmt_image22.gif]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-12

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

El Paso Electric Company
Original Sheet No. 70
Rate Schedule FERC No. 78
 

exhibit1009rs78swnmt_image23.gif [exhibit1009rs78swnmt_image23.gif]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1977
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

B-13

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 71

EXHIBIT C

SWNMT PROJECT COMPENSATION COST AND OWNERSHIP ALLOCATION METHOD

I.
The shunt reactors are allocated pursuant to the entire line length from
Greenlee Station to Newman Station for Line A and from Greenlee to Rio Grande
Station for Line B.

For Line A:

exhibit1009rs78swnmt_image24.gif [exhibit1009rs78swnmt_image24.gif]

Level of shunt reactive compensation needed is X %.
Level of shunt capacitive reactance of the 345 kV line is Y [ILLEGIBLE].
X % x Y [ILLEGIBLE]/100% = Z [ILLEGIBLE] = G + J + K [ILLEGIBLE]
Cost responsibility for Z [ILLEGIBLE] is allocated based on Weighted Average
Line Ownership (WALO). For Line A WALO is calculated as follows:

PNM Weighted Average Line Ownership:
(60/200 x 30%) + (50/200 x 37.80%) + (90/200 x 0%) = 18.45%

CPS Weighted Average Line Ownership:
(60/200 x 30%) + (50/200 x 5.00%) + (90/200 x 0%) = 10.25%

Issued by: John A. Whitacre, Vice President, Transmission and Distribution 
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

C-1

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 72

EPE Weighted Average Line Ownership:
(60/200 X 40%) + (50/200 x 57.20%) + (90/200 x 100%) = 71.30%

[ILLEGIBLE] responsibility for SWNMT Line A is allocated as follows:

PNM [ILLEGIBLE] Responsibility (18.45%/100%) x [ILLEGIBLE] [ILLEGIBLE] = P
[ILLEGIBLE]
CPS [ILLEGIBLE] Responsibility (10.25%/100%) x [ILLEGIBLE] [ILLEGIBLE] = C
[ILLEGIBLE]
EPE [ILLEGIBLE] Responsibility = (71.30%/100%) x [ILLEGIBLE] [ILLEGIBLE] = E
[ILLEGIBLE]

For Line B:

exhibit1009rs78swnmt_image25.gif [exhibit1009rs78swnmt_image25.gif]

Level of shunt inductive compensation is U%.
Level of shunt capacitive reactance of line is V [ILLEGIBLE].
Total shunt inductive [ILLEGIBLE] = W, calculated as follows:
(U% x V [ILLEGIBLE])/100% = W [ILLEGIBLE]

Cost responsibility for W [ILLEGIBLE] is calculated based on Weighted Average
Line Ownership. For Line B EPE owns 100% initially:

PNM WALO (Line B) = 0%
CPS WALO (Line B) = 0%
EPE WALO (Line B) = 100%

Issued by: John A. Whitacre, Vice President, Transmission and Distribution 
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

C-2

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 73

Therefore EPE is responsible for 100% of W [ILLEGIBLE]. If PNM and/or CPS
exercise their option to participate in either Line B Greenlee to Hidalgo or
Greenlee to Luna, a portion of W [ILLEGIBLE] will be allocated according to
ownership therein.

Example of Reactor Ownership and Allocation Method:

Assume level of shunt inductive compensation desired is 100%; the level shunt
capacitive     reactance of Line A is approximately 170 Mvar.
100% x 170/100% = 170 Mvar = total inductive (reactor) Mvar = G + J + K Mvar,
where G is Hidalgo reactor.
Weighted Average Line Ownership for Line A is:

Line A PNM WALO = 18.45%
Line A CPS WALO = 10.25%
Line A EPE WALO = 71.30%

Line A PNM Mvar Responsibility = .1845 x 170 Mvar = 31.4 Mvar
Line A CPS Mvar Responsibility = .1025 x 170 Mvar = 17.4 Mvar
Line A EPE Mvar Responsibility = .7130 x 170 Mvar = 121.2 Mvar

Assuming PNM and CPS with their Mvar responsibility to be solely in Reactor G
and G = 65 Mvar (@ 362 kV), then
PNM owns 31.4/65 or 48.31% of Reactor G
CPS owns 17.4/65 or 26.77% of Reactor G
EPE owns 16.2/65 or 24.92% of Reactor G
EPE owns 100% of Reactors J + K = 110 Mvar

Issued by: John A. Whitacre, Vice President, Transmission and Distribution 
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

C-3

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 74

II.
The series and/or shunt capacitors of SWNMT are allocated based on the percent
ownership of Participants in the SWNMT lines.

Example of Series Capacitor Ownership and Allocation Method

Assume level of series capacitive compensation desired is equivalent to 200
Mvar's.

Weighted Average Line Ownership of the SWNMT System in percent is:

WALO (Line A) + WALO (Line B)
 
2
 

For PNM:

WALO =
18.45%+ 0%
= 9.23%
2

For CPS:
WALO =
10.25%+ 0%
= 5.12%
2

For EPE:
WALO =
71.30%+ 100%
= 85.65%
2

Therefore, series capacitor ownership and cost responsibility would be, for 200
Mvar of series capacitors, would be as follows:

PNM Mvar Responsibility = 200 x .0923 = 18.46 Mvar's
CPS Mvar Responsibility = 200 x .0512 = 10.24 Mvar's
EPE Mvar Responsibility = 200 x .8565 = 171.30 Mvar's

Issued by: John A. Whitacre, Vice President, Transmission and Distribution 
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: April 29, 1977

C-4

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 75

exhibit1009rs78swnmt_image26.gif [exhibit1009rs78swnmt_image26.gif]
PUBLIC SERVICE COMPANY OF NEW MEXICO
ALVARADO SQUARE ALBUQUERQUE, NEW MEXICO 87156

 
March 18, 1983
 
 
Mr. D. G. Isbell
Mr. Owen Ringness
Vice President
Vice President
EI Paso Electric Company
Texas-New Mexico Power Company
P. O. Box 982
501 West Sixth Street
EI Paso, TX 79960
Fort Worth, TX 76102

Gentlemen:

Subject: SWNMT LETTER AGREEMENT

The purpose of this SWNMT Letter Agreement is to outline the terms and
conditions under which Public Service Company of New Mexico (PNM), Texas-New
Mexico Power Company ([ILLEGIBLE]), formerly Community Public Service Company,
and El Paso Electric Company (EPE) agree to amend and supplement the Southwest
New Mexico Transmission Project (SWNMT) Participation Agreement.

The SWNMT Participation Agreement anticipates that Line B, Phase 4 would be
in-service coincident with the commercial service date of the Arizona Nuclear
Power Project (ANPP) Unit 2, and that Phase 5 would be in-service coincident
with the ANPP Unit 3.

EPE has entered into an agreement with Tucson Electric Power Company (TEP) that,
among other things, obligates EPE to construct a 345 kV transmission line from
TEP’s Springerville 345 kV Switching Station (Springerville) to Luna 345 kV
Switching Station (Luna), to be in service by June 1, 1987. In conjunction with
the Springerville to Luna transmission line, EPE is planning to build a 345 kV
transmission line from Luna into the El Paso area. These two line segments plus
associated facilities comprise the Springerville-Luna-El Paso Transmission
Project.

Now, therefore, in consideration of the promises and mutual covenants herein set
forth, the Parties agree that the SWNMT Participation Agreement is hereby
amended and supplemented as follows:

1.
This SWNMT Letter Agreement shall become effective on the date it is executed by
all the Parties hereto and shall remain in effect concurrently with the SWNMT
Participation Agreement; provided that upon the in-service date of Line B
(Phases 4 and 5), Items 4 and 5 herein shall no longer be in effect.

2.
EPE agrees to construct the Springerville-Luna-El Paso Transmission Project to
be in service no later than June 1, 1987.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution 
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: July 22, 1984

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

El Paso Electric Company
Rate Schedule FERC No. 78

Public Service Company of New Mexico
Original Sheet No. 76

Mr. D. G. Isbell
Mr. Owen Ringness
-2-
March 18, 1983

3.
From the commercial operation date of ANPP Unit 2 to the in-service date of
EPE’s Springerville-Luna-El Paso Transmission Project, EPE shall provide
emergency backup transmission service to PNM’s and TNP’s southwest New Mexico
loads under a Greenlee Substation (Greenlee) to Hidalgo 345 kV Switching Station
(Hidalgo) or Hidalgo to Luna transmission line outage pursuant to the provisions
of Section 18.2 of the SWNMT Participation Agreement and the provisions of EPE’s
respective Interconnection Agreements with PNM and TNP.

4.
For the period after EPE’s Springerville-Luna-El Paso Transmission Project is in
service but prior to Line B, Phase 4 and Phase 5, in-service dates, EPE shall
provide firming transmission service, without charge to PNM or TNP, via EPE’s
transmission system, including the Springerville-Luna-El Paso Transmission
Project, and EPE’s agreement with TEP dated April 19, 1982, such that, with any
one SWNMT line segment out of service, EPE shall provides: (a) for TNP, such
service as may be agreed to between TNP and EPE, if any; provided that any such
agreement shall be incorporated as a supplement hereto; and (b) for PNM, firming
transmission service between Greenlee, Hidalgo, and Luna in an aggregate amount
not to exceed the lesser of 150 MW or the sum of PNM’s actual transmission
requirements between Greenlee, Hidalgo, and Luna to transfer (1) power PNM is
delivering to SWNMT via transmission owned by PNM and (2) power PNM is receiving
into SWNMT from EPE, TNP or third parties via purchases or wheeling. In the
event EPE’s firming transmission service for PNM and TNP hereunder requires it,
PNM and TNP agree to first use their respective transmission rights in the
Springerville to Greenlee or SWNMT transmission lines. The Emergency
Transmission Service provisions of EPE’s contract with TEP shall not be changed
or eliminated without PNM’s consent.

5.
The in-service dates for Line B, Phase 4 and Phase 5, shall be deferred until
such date as may be later agreed upon by the SWNMT Coordinating Committee.

6.
Approval is hereby granted for EPE to interconnect the Springerville-Luna-El
Paso Transmission Project into Luna. EPE shall submit its interconnection design
plans for facilities to be constructed within Luna to the SWNMT Engineering and
Operating (E&O) Committee for review and approval prior to initiation of any
interconnection construction at Luna, and such approval shall not be
unreasonably withheld.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: July 22, 1984

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

El Paso Electric Company
Rate Schedule FERC No. 78

Public Service Company of New Mexico
Original Sheet No. 77

Mr. D. G. Isbell
Mr. Owen Ringness
-3-
March 18, 1983

7.
EPE shall be responsible for all costs of interconnecting the
Springerville-Luna-El Paso Transmission project into Luna with the exception
that PNM shall purchase one (1) 345 kV circuit breaker and any equipment related
directly to said 345 kV circuit breaker. When Line B is constructed, EPE shall
purchase one (1) 345 kV circuit breaker and any equipment related directly to
said 345 kV circuit breaker at that time for installation at Luna. The purchase
by EPE shall correspondingly reduce PNM's obligation to purchase such equipment
for Line B at Luna.

8.
EPE shall replace PNM as Operating Agent for all SWNMT Project Facilities for
which PNM is currently Operating Agent, beginning with the in-service date of
the Springerville-Luna-El Paso Transmission Project, unless the SWNMT
Coordinating Committee agrees to an earlier date for such change of Operating
Agent. Cost responsibilities for the operation and maintenance of SWNMT shall
not be affected by the change in Operating Agent described hereunder. To the
extent PNM has no use for such equipment, EPE shall have the right to use
communication and control equipment that is in place as a result of PNM’s tenure
as Operating Agent. EPE shall notify TEP that EPE is replacing PNM as SWNMT
Operating Agent, and as such EPE will assume control of the SWNMT
interconnection with TEP at Greenlee Substation. EPE, as Operating Agent, shall
comply with all the duties and responsibilities applicable to the Operating
Agent as set forth in the SWNMT Participation Agreement.

9.
Prior to the in-service date of the Springerville-Luna-El Paso Transmission
Project, the SWNMT E&O Committee shall establish rules and procedures required
by Section 18.1 of the SWNMT Participation Agreement. Additionally, the SWNMT
E&O Committee shall determine any changes that will be required pursuant to
Section 23 of the SWNMT Participation Agreement as a result of the Operating
Agent change.

10.
No Party shall be considered to be in default in respect of any obligation under
this Letter Agreement if prevented from fulfilling such obligation by reason of
“uncontrollable forces.” The term “uncontrollable forces” shall be deemed to
mean any cause which is beyond the control of the Party affected, including, but
not limited to, injunction, fire, strike, riot, explosion, flood, accident,
breakdown, Acts of God or a public enemy, or other acts or conditions beyond a
Party’s control, or as a result of the voluntary cooperation by the Party in any
method of operating, or in any program recommended or requested by civil or
military authorities during a national, state or

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: July 22, 1984

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

El Paso Electric Company
Rate Schedule FERC No. 78

Public Service Company of New Mexico
Original Sheet No. 78

Mr. D. G. Isbell
Mr. Owen Ringness
-4-
March 18, 1983

local emergency, the Party shall not be liable to the other Party hereunder.
Furthermore, each Party shall not be liable for damage occasioned by
interruption of service when such interruptions are necessary to make repairs or
changes in the Party’s equipment and facilities. Each party hereby expressly
waives its right to assert claims against the other Party for damages caused by
any interruption, irregularity, defect or failure described in this paragraph.
Nothing contained herein shall be construed to obligate a Party to forestall or
settle a strike against its will.

If the foregoing terms and conditions are acceptable to you, please so indicate
by signing and dating all three originals of this Letter Agreement and returning
all originals to PNM. I will return one original to each of you after they have
been executed by all Parties.

 
Sincerely,

/s/ C. D. Bedford
C. D. Bedford
Sector Vice President

Accepted and agreed to this 22nd day of July, 1984.

TEXAS-NEW MEXICO POWER COMPANY

By
exhibit1009rs78swnmt_image27.gif [exhibit1009rs78swnmt_image27.gif]
 

Its
Vice President
 

Accepted and agreed to this 18th day of March, 1983.

EL PASO ELECTRIC COMPANY

By
exhibit1009rs78swnmt_image28.gif [exhibit1009rs78swnmt_image28.gif]
 

Its
Vice President
 

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
lssued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: July 22, 1984

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 79

exhibit1009rs78swnmt_image29.gif [exhibit1009rs78swnmt_image29.gif]
El Paso Electric Company
P.O. Box 982
El Paso, Texas 79960
(915) 543-5711

June 11, 1984

Mr. J. M. Tarpley
Vice President
Texas-New Mexico Power Company
501 West Sixth Street
Fort Worth, Texas 76102
Mr. C. D. Bedford
Senior Vice President
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158

Gentlemen:

SWNMT LETTER AGREEMENT––SUPPLEMENT

The purpose of this SWNMT Letter Agreement––Supplement is to outline the terms
and conditions under which Public Service Company of New Mexico (PNM), Texas-New
Mexico Power Company (TNP), formerly Community Public Service Company, and El
Paso Electric Company agree to amend and supplement the SWNMT Letter Agreement
dated March 18, 1983, as requested by TNP.

Now, therefore, in consideration of the premises and mutual covenants herein set
forth and in the SWNMT Letter Agreement, the Parties agree that the SWNMT Letter
Agreement is hereby amended and supplemented as follows:

1.
Paragraph 4 of the SWNMT Letter Agreement is deleted in its entirety and a new
Paragraph 4 is added to read as follows:

“For the period after EPE’s Springerville-Luna-El Paso Transmission Project is
in service but prior to Line B, Phase 4 and Phase 5, in-service dates, EPE shall
provide firming transmission service without charge to PNM or TNP via EPE’s
transmission system, including the Springerville-Luna-El Paso Transmission
Project and EPE’s agreement with TEP dated April 19, 1982, such that, with any
one SWNMT line segment out of service, EPE shall provide: (a) for TNP, firming
transmission service between Greenlee, Hidalgo and Luna in an aggregate amount
not to exceed the lesser of TNP’s respective SWNMT rights between Greenlee and
Hidalgo and between Hidalgo and Luna or the sum of TNP’s respective actual
transmission requirements between Greenlee and Hidalgo and between Hidalgo and
Luna to transfer (1) power TNP is delivering into SWNMT via transmission owned
by TNP and (2) power TNP is receiving into SWNMT from EPE, PNM or third parties
via purchases or wheeling; and (b) for PNM, firming transmission service between
Greenlee, Hidalgo and Luna in an aggregate amount not to exceed the lesser of
150 MW or the sum of PNM’s actual transmission requirements between Greenlee,
Hidalgo, and

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: July 5, 1984
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
EL PASO ELECTRIC COMPANY
Original Sheet No. 80
Rate Schedule FERC No. 78
 
 

Page 2

Mr. J. M. Tarpley
Mr. C. D. Bedford

June 11, 1984

Luna to transfer (1) power PNM is delivering to SWNMT via transmission owned by
PNM and (2) power PNM is receiving into SWNMT from EPE, TNP or third parties via
purchases or wheeling. In the event EPE’s firming transmission service for PNM
and TNP hereunder requires it, PNM and TNP agree to first use their respective
transmission rights in the Springerville to Greenlee, SWNMT and Luna to Central
to Hidalgo transmission lines as well as other applicable transmission
facilities. The Emergency Transmission Service provisions of EPE’s contract with
TEP shall not be changed or eliminated without PNM’s consent.”

2.
Paragraph 8 of the SWNMT Letter Agreement shall be supplemented by the addition
of the following sentence:

“Any direct one-time cost to be incurred as a result of EPE’s replacement of PNM
as Operating Agent for all SWNMT Project Facilities which would not have
occurred had PNM continued as Operating Agent shall be the sole responsibility
of EPE.”

3.
Paragraph 10 of the SWNMT Letter of Agreement is deleted in its entirety and a
new Paragraph 10 is added to read as follows:

“No Party shall be considered to be in default, and as such shall not be liable
to any other Party, with respect to any obligation under this Letter Agreement
if prevented from fulfilling such obligation by reason of “uncontrollable
forces.” The term “uncontrollable forces” shall be deemed to mean any cause
which is beyond the control of the Party affected, including, but not limited
to, injunction, fire, strike, riot, explosion, flood, accident, breakdown, acts
of God or a public enemy restraint by court order, or other acts or conditions
beyond a Party’s control. Furthermore, a Party shall not be liable for damage
occasioned by interruption of service when such interruptions are necessary to
make repairs or changes in the Party’s equipment and facilities. Each Party
hereby expressly waives its right to assert claims against the other Party for
damages caused by any interruption, irregularity, defect or failure described in
this paragraph. Nothing contained herein shall be construed to obligate a Party
to forestall or settle a strike against its will.”

4.
The SWNMT Letter Agreement shall be supplemented by the addition of Paragraph 11
which shall read as follows:

“In the event EPE becomes unable to furnish TNP the firming transmission service
described in Paragraph 4 of this SWNMT Letter Agreement when all portions of the
interconnected transmission system (with the exception of the one SWNMT line
segment which is out of service) are

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: July 5, 1984
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
EL PASO ELECTRIC COMPANY
Original Sheet No. 81
Rate Schedule FERC No. 78
 
 

Page 3

Mr. J. M. Tarpley
Mr. C. D. Bedford

June 11, 1984

operational, EPE shall construct and pay for a 115 KV transmission line from
Luna to Hidalgo having sufficient capacity to provide TNP the firming service or
such other alternative arrangement agreeable to both TNP and EPE. Nothing in
this SWNMT Letter Agreement––Supplement shall preclude EPE from including, as a
part of EPE’s transmission account booked expense and investment, that expenses
and investment associated with the 115 KV transmission line referenced herein
for ratemaking purposes. Upon completion of the 115 KV transmission line (or the
alternative arrangement, as appropriate), EPE’s firming transmission service
obligations to TNP under Paragraph 4 of this SWNMT Letter Agreement shall be
terminated.

The SWNMT Letter Agreement as amended and supplemented by this SWNMT Letter
Agreement Supplement shall remain in full force and effect.

If the foregoing terms and conditions are acceptable to you, please so indicate
by signing and dating all three originals of this SWNMT Letter
Agreement––Supplement and returning all originals to EPE. I will return one
original to each of you after they have been executed by all Parties.

Sincerely,

/s/ R. E. York
R. E. York
Senior Vice President

Accepted and agreed to this 5th day of July, 1984.

 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
By
d.jpg [d.jpg]
 
 
 
 
Its     Senior Vice President

Accepted and agreed to this 11th day of June, 1984.

 
TEXAS-NEW MEXICO POWER COMPANY
 
By
J
 
Its      Vice President

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: July 5, 1984
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 82
Rate Schedule FERC No. 78
 

EPE-TNP-PNM

AMENDMENT NUMBER THREE

TO THE

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT

PARTICIPATION AGREEMENT

Execution Copy

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1987
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 83
Rate Schedule FERC No. 78
 

EPE-TNP-PNM

AMENDMENT NUMBER THREE

TO THE

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT

PARTICIPATION AGREEMENT

1.
PARTIES:

The Parties to this Amendment Number Three are: Public Service Company of New
Mexico, a New Mexico corporation, (“PNM”), Texas-New Mexico Power Company,
formerly Community Public Service Company, a Texas corporation, (“TNP”) and El
Paso Electric Company, a Texas corporation, (“EPE”). PNM, TNP and EPE are also
sometimes referred to individually as “Participant” and collectively as
“Participants.”

2.
RECITALS:

2.1.
The Participants have previously entered into an agreement entitled “Southwest
New Mexico Transmission Project Participation Agreement dated April 11, 1977,
(the “SWNMT Participation Agreement”).” The SWNMT Participation Agreement was
amended and supplemented by a letter agreement entitled “SWNMT Letter Agreement”
dated March 18, 1983, on the letterhead of PNM, the terms and conditions of
which were accepted

Execution Copy

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1987
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 84
Rate Schedule FERC No. 78
 

and agreed to on March 18, 1983, by EPE and on July 22, 1984 by TNP. The SWNMT
Participation Agreement and the SWNMT Letter Agreement were amended and
supplemented by a letter agreement entitled “SWNMT Letter Agreement--Supplement”
dated June 11, 1984 on the letterhead of EPE, which was accepted and agreed to
by PNM on July 5, 1984 and on June 11, 1984 by TNP. The SWNMT Letter Agreement
and the SWNMT Letter Agreement--Supplement respectively, represent the first and
second amendments to the SWNMT Participation Agreement.

2.2.
By this Amendment Number Three to the SWNMT Participation Agreement, PNM, TNP
and EPE want to formally readopt the terms and conditions of the SWNMT Letter
Agreement and the SWNMT Letter Agreement--Supplement and to amend and supplement
the SWNMT Letter Agreement and the SWNMT Letter Agreement--Supplement as
hereinafter provided.

3.
EFFECTIVE DATE:

This Amendment Number Three shall become effective when executed by all
Participants.

4.
AGREEMENT:

In consideration of the premises and mutual covenants

Execution Copy

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1987
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-2-

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

El Paso Electric Company
Original Sheet No. 85
Rate Schedule FERC No. 78
 

set forth herein, the Participants agree as follows:

4.1.
The SWNMT Letter Agreement and the SWNMT Letter Agreement--Supplement, as
supplemented and amended herein, are formally readopted by PNM, TNP and EPE.

4.2.
Paragraph 2 of the SWNMT Letter Agreement is deleted and the following Paragraph
2 is inserted instead:

“2.    EPE shall construct the Springerville-Luna-El Paso Transmission Project
to be in service no later than December 31, 1990.”

5.
GOVERNING LAW:

The SWNMT Participation Agreement, SWNMT Letter Agreement, the SWNMT Letter
Agreement-Supplement and this Agreement shall be interpreted, governed by and
construed under the laws of the State of New Mexico or the laws of the United
States, as applicable, as if executed and to be performed wholly within the
State of New Mexico.

6.
FULL FORCE AND EFFECT:

Except as provided herein, the Southwest New Mexico Transmission Project
Participation Agreement, the SWNMT Letter Agreement and the SWNMT Letter
Agreement--Supplement, as amended and supplemented by

Execution Copy

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29,1987
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-3-

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

El Paso Electric Company
Original Sheet No. 86
Rate Schedule FERC No. 78
 

this Amendment Number Three, shall remain in full force and effect.

7.
SIGNATURE CLAUSE:

The signatories hereto represent that they have been appropriately authorized to
enter into this Amendment Number Three on behalf of the Participant for whom
they sign. This Amendment Number Three is hereby executed as of the 29th day of
April, 1987.
 
 
 
 
 
 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
 
 
 
 
 
By
 
 
 
 
President
ATTEST:
 
 
 
 
 
 
 
Secretary
 
 
 

 
 
 
 
 
 
TEXAS-NEW MEXICO POWER COMPANY
 
 
 
 
 
 
By
 
 
 
 
President and
Chief Operating Officer
 
 
 
 
ATTEST:e.jpg [e.jpg]
 
 
 
 
 
 
Secretary
 
 
 
 
 
 
 

 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
f.jpg [f.jpg]
 
 
BY
 
 
 
President and
Chairman of the Board
ATTEST:g.jpg [g.jpg]
 
 
 
 
 
 
Secretary
 
 
 

 
Execution Copy
 
April 6, 1987

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: April 29, 1987
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

-4-

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

El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 87

AMENDMENT NUMBER 4

TO THE

SOUTHWEST NEW MEXICO TRANSMISSION PROJECT

PARTICIPATION AGREEMENT

DATED APRIL 11, 1977

AMONG

EL PASO ELECTRIC COMPANY,

TEXAS-NEW MEXICO POWER COMPANY

AND

PUBLIC SERVICE COMPANY OF NEW MEXICO

This Amendment Number 4 is made this 18th day of May, 1988, among El Paso
Electric Company, a Texas corporation, hereinafter referred to as “EPE”;
Texas-New Mexico Power Company, a Texas corporation, hereinafter referred to as
“TNP”; and Public Service Company of New Mexico, a New Mexico corporation,
hereinafter referred to as “PNM”. EPE, TNP, and PNM are jointly herein referred
to as the “Parties” or “Participants”.

WITNESSETH:

WHEREAS, the Parties have heretofore entered into the Southwest New Mexico
Transmission Project Participation Agreement (SWNMT Agreement) dated April 11,
1977; and

WHEREAS, the SWNMT Agreement has been amended and supplemented by (i) the SWNMT
Letter Agreement, dated March 18, 1983, and agreed to by TNP on July 22, 1984;
(ii) the SWNMT Letter Agreement--Supplement, dated

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: May 18, 1988

-1-

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

El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 88

June 11, 1984, and agreed to by PNM on July 5, 1984; (iii) the EPE-TNP-PNM
Amendment Number 3 to the SWNMT Agreement, dated April 29, 1987; hereinafter
collectively referred to as the Agreement; and

WHEREAS, Southwest New Mexico Transmission Project (SWNMT) Audit Report 84-38
(May 1, 1981, through August 31, 1983) has caused the Parties to conclude that
certain changes are appropriate in Section 17 (“Operation and Maintenance”), and
Section 27 (“Operating Insurance”) of the Agreement.

NOW, THEREFORE, in consideration of the provisions and mutual covenants set
forth herein, the Parties agree that the Agreement is hereby amended and
supplemented as follows:

1.
New Paragraph 17. 4.10. A new Section 17.4.10 shall be added to Section 17 after
paragraph 17.4.9 to read as follows:

“17.4.10 Investigate, adjust, defend, and settle any and all claims made by any
Participant or any third party, arising out of Operating Work; provided that the
Operating Agent shall give the other Participants prompt notice of any claims
that may exceed $100,000.00, as such claims are known.”

2.
Amended Section 27. Sections 27.1 through 27.6 of Section 27 are deleted in
their entirety and new Sections 27.1 through 27.6 are added to read as follows:

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: May 18, 1988

-2-

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

El Paso Electric Company
 
Rate Schedule FERC No. 78
Original Sheet No. 89

“27.1 The Participants shall individually maintain Comprehensive General
Liability Insurance for Bodily Injury and Property Damage, covering their
ownership in and/or existence of the SWNMT, including liability which may arise
out of either their performance or their nonperformance of Operating Work as
required by or called for in this Agreement. The above required liability
coverage may be provided by each Participant either by a separate and individual
policy issued for this specific purpose or by inclusion in each Participant’s
corporate liability coverage.

27.2 Each Party shall maintain Comprehensive Automobile Liability Insurance for
Bodily Injury and Property Damage, covering all automotive equipment used by it
in connection with the SWNMT. This coverage may be provided either by a separate
and individual policy issued for this specific purpose or by inclusion in each
Participant’s Corporate Comprehensive Automobile Liability Insurance coverage.

27.3 If applicable, each Party 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 SWNMT. This coverage may be
provided either by a separate and individual policy issued for this specific
purpose or by inclusion in each Participant’s Corporate Aircraft Liability
Insurance coverage.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: May 18, 1988

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

El Paso Electric Company
Original Sheet No. 90
Rate Schedule FERC No. 78
 

27.4 Each Party shall maintain Workers’ Compensation and Employers’ Liability
Insurance covering its employees engaged in any work in connection with the
SWNMT. Such insurance shall comply with all applicable statutory provisions of
the States of Arizona and/or New Mexico and/or Texas. This coverage may be
provided either by a separate and individual policy issued for this specific
purpose or by inclusion in each Participant’s Workers’ Compensation and
Employers’ Liability Insurance Coverage.

27.5 In the event that any Party shall be or elect to become self-insured for
any or all of the insurance coverages required of a Party, said Party may do so
without obligation to notify the other Parties of such self-insurance and such
self-insurance shall be deemed in compliance with this Section 27.

27.6 At the request of any Party, Certificates of Insurance or other sufficient
evidence of insurance or self-insurance shall be promptly provided. Such
evidence of insurance shall provide for no less than thirty (30) days’ notice of
any cancellation or material change.”

Except as amended by the provisions set forth in this Amendment Number 4, all of
the terms and conditions of the Agreement shall remain in full force and effect.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: May 18, 1988
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 91
Rate Schedule FERC No. 78
 

IN WITNESS WHEREOF, the Parties have caused this Amendment Number 4 to be
executed as of the day and year first set forth herein.

 
EL PASO ELECTRIC COMPANY
 
 
 
 
By
 
 
 
Vice President
 
 
 
 
TEXAS-NEW MEXICO POWER COMPANY
 
 
 
 
By
 
 
 
Vice President
 
 
 
 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
 
 
 
By
 
 
 
Vice President, Revenue Management
Electric Operations

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: May 18, 1988
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

E1 Paso Electric Company
Original Sheet No. 92
Rate Schedule FERC No. 78
 

AMENDMENT NO. 5 TO THE
SWNMT PARTICIPATION AGREEMENT

This Amendment No. 5 to the SWNMT Participation Agreement is entered into by and
among. Public Service Company of New Mexico, a New Mexico Corporation (“PNM”),
Texas-New Mexico Power Company, formerly Community Public Service Company, a
Texas corporation (“TNP”) and El Paso Electric Company, a Texas corporation
(“EPE”), herein individually the “Party” and collectively the “Parties” (herein,
“Amendment No. 5.”).

RECITALS

A.    The Parties have previously entered into an agreement entitled “Southwest
New Mexico Transmission Project Participation Agreement” dated April 11, 1977
(the “SWNMT Participation Agreement”).

B.    The SWNMT Participation Agreement has been amended and supplemented by (i)
the “SWNMT Letter Agreement” dated March 18, 1983, the terms and conditions of
which were accepted and agreed to on March 18, 1983 by EPE and on July 22, 1984
by TNP, (ii) the “SWNMT Letter Agreement-Supplement” dated June 11, 1984 which
was accepted and agreed by PNM on July 5, 1984 and by TNP on June 11, 1984,
(iii) Amendment No. 3 dated April 27, 1987, and (iv) Amendment No. 4 dated May
18, 1988 (collectively, together with the SWNMT Participation Agreement, the
“SWNMT Agreement, as amended”). Unless otherwise defined herein, the terms
defined in the SWNMT Agreement, as amended, are used herein as therein defined.

C.    It is the intention of the Parties that the terms and conditions of the
SWNMT Agreement, as amended, be affirmed and that certain additional terms and
conditions as set forth herein be expressed. Specifically, the Parties’
intention is that the terms and conditions of the SWNMT Agreement, as amended,
with respect to the Primary Purposes and the Secondary Purposes of SWNMT, and
the Capacity Entitlement and ownership rights of the Parties in and to SWNMT are
affirmed as expressed in the SWNMT Agreement, as amended, except as expressly
modified by Amendment No. 5.

D.    At the time that the SWNMT Participation Agreement was entered into by the
Parties, the Parties anticipated that the New Mexico Transmission System (NMTS
or “System”) and the Arizona transmission system would be developed by EPE, PNM
and third parties in a manner that would have resulted in greater NMTS
transmission capability. However, neither the NMTS nor the Arizona transmission
system developed in such a manner. The result of this changed development was

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

E1 Paso Electric Company
Original Sheet No. 93
Rate Schedule FERC No. 78
 

that EPE and PNM had a dispute over the capability of the southern New Mexico
transmission system (SNMTS) in relation to total System capability.

E.    To reach a settlement of the EPE-PNM dispute referenced above, EPE has
proposed to install a phase shifting transformer (PST) on its 345 KV
transmission line between the West Mesa and Arroyo substations. PNM has agreed
with EPE in the Phase Shifter Support Principles dated February 22, 1994,
(attached hereto as Exhibit A) and EPE and PNM have presented evidence to TNP
that such an installation will result in Southern New Mexico Import Capability
of up to approximately 890 MW under N-l Conditions with a PST base setting of
149 MW.

F.    The Parties recognize an 890 MW value for deriving allocations for SWNMT
Line A for the purpose of reaching the settlements set forth in this Amendment
No. 5.

G.    The purpose of this Amendment No. 5 is to (i) implement the negotiated
allocation of a portion of the 890 MW to SWNMT Line A as Firm Transfer
Capability, (ii) implement terms and conditions whereby each Party may utilize
its rights up to its Capacity Entitlements on a non-firm basis when Usable SNMIC
is available and (iii) implement terms and conditions whereby each Party may
ultimately realize the ownership rights, Capacity Entitlement, and other rights
each Party anticipated to be available pursuant to the SWNMT Participation
Agreement.

H.    This Amendment No. 5 is pursuant to and subject to the terms and
conditions of the SWNMT Agreement, as amended. In consideration of the mutual
agreements herein contained, and of the mutual benefits to be derived from this
Amendment No. 5, PNM, TNP and EPE hereby covenant and agree to amend the SWNMT
Agreement, as amended, as follows. It is expressly agreed that this Amendment
No. 5 is part of a negotiated settlement among the Parties and has unique
characteristics involving mutual considerations and compromises made in order to
reach such settlement. As such, this Amendment No. 5 shall not constitute
precedent, nor be cited by any Party for interpretation of any right or
procedure in any other matter, except as may be expressly set forth herein.

I.    The terms and conditions of this Amendment No. 5 are based on negotiations
resulting from certain studies and analyses made by EPE and PNM as the operating
agents for the WNMTS and SNMTS, and such studies have been shared with TNP. In
particular, it is understood that the Parties are relying on the results of
these studies for purposes of the compromises and settlement as set forth
herein.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 94

J.    EPE is the Applicant in NMPUC Case No. 2527, in Which PNM and TNP are
intervenors. Concurrent with the execution of this Amendment No. 5, the Parties
shall enter and file a stipulation in NMPUC Case No. 2527 which shall support
the installation of EPE’s phase shifting transformer in that case.

K.    Concurrent with the execution of this Amendment No. 5, TNP and PNM shall
enter into a separate agreement whereby TNP and PNM amend Service Schedule G, as
previously amended, of the Interconnection Agreement dated February 28, 1974
between TNP and PNM.

L.    Concurrent with the execution of this Amendment No. 5, TNP and EPE shall
enter into a separate agreement whereby TNP and EPE amend Service Schedule C of
the Interchange Agreement dated April 29, 1987 between TNP and EPE.

M.    Concurrent with the execution of this Amendment No. 5, TNP, EPE and PNM
shall enter into a separate agreement whereby TNP, EPE, and PNM agree to EPE’s
Airport Substation design plans and operation.

N.    Concurrent with the execution of this Amendment No. 5, EPE and PNM shall
enter into a separate agreement whereby EPE and PNM amend Service Schedule A to
the Interconnection Agreement dated July 16, 1966 between EPE and PNM.

AGREEMENTS

NOW, THEREFORE, in consideration of the premises, the agreements,
representations and undertakings of the Parties set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as set forth above and as follows:

ARTICLE I
EFFECTIVENESS AND TERM

Section l.l Effective Date. This Amendment No. 5 shall become effective on the
date it is signed by the Parties. The terms and conditions that affect system
operations shall be implemented on the first day of the month following the
filing of this Amendment No. 5 with the Federal Energy Regulatory Commission
(FERC).

Section 1.2 Term. The term of this Amendment No. 5 shall continue in full force
and effect for so long as the SWNMT Agreement, as amended, shall remain in
affect. Provided, however, if the phase shifting transformer EPE is proposing to
install pursuant to NMPUC Case No. 2527 is not in operation by May 1, 1996, or
if any required Bankruptcy Court or regulatory approval, including approval of
EPE’s CCN in NMPUC Case No. 2527 or acceptance for filing of this Amendment

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 3 -

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 95

No. 5 by FERC, is not obtained, or if such approval requires modifications to
this Amendment No. 5 that are unacceptable to the Parties, this Amendment No. 5
shall terminate and thereafter be of no further force or effect. Within thirty
(30) days of the execution of this Amendment No. 5, EPE agrees to either (i)
seek Bankruptcy Court approval or (ii) issue a written notification to PNM and
TNP that such approval is not required for EPE’s performance under this
Amendment No. 5.

ARTICLE II
DEFINITION OF TERMS

Firm Transfer Capability means that share of the Southern New Mexico Import
Capability that is attributable to the presence of Line A in the NMTS under N-l
Conditions.

Firming Transmission Service means transmission service that is provided by EPE
for a period of time coincident with the outage of any segment of Line A in
order to replace the transmission capability lost by TNP and PNM as the result
of such outage.

N-1 Conditions means an operating state of the System in which all System
transmission components are operable and in their normal configuration and power
and associated energy flows on the System are constrained by the ability of the
System to continue to operate in a stable and reliable manner in the event of
the failure of the single most critical System transmission component.

N-2 Conditions means an operating state of the System in which, except for a
single System transmission component, all System transmission components are
operable and configured as necessary to respond to the failure of the next
single most critical System transmission component. During N-2 Conditions, power
and associated energy flows on the System are constrained by the capability of
the System to continue to operate in a stable and reliable manner in the event
of the failure of the next single most critical System transmission component
then operable.

Southern New Mexico Import Capability or “SNMIC” means the firm capability of
the SNMTS to accommodate the arithmetic sum of the amounts of power and
associated energy, measured in MWs, (a) from Greenlee to Hidalgo across Line A
of the SWNMT (measured at Greenlee), (b) from Springerville to Luna across the
Arizona Interconnection Project (measured at Springerville), (c) from West Mesa
to Arroyo across EPE’s West Mesa to Arroyo 343 kV transmission line (measured at
West Mesa), (d) from West Mesa to Belen across Plains Generation & Transmission
Cooperative’s West Mesa to Belen 115 kV transmission line (measured at West
Mesa)

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 4 -

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

El Paso Electric Company
Rate Schedule FERC No. 78
Original Sheet No. 96

and (e) other future interconnection points. Southern New Mexico Import
Capability is determined from power system studies that are used to develop
monograms which are graphical representations of the safe and reliable operating
limits of the System while maintaining acceptable levels of voltages and line
loadings.

Transmission Improvements means the installation of facilities which increase
the SNMIC without decreasing the transmission capability of another Party’s
system or the ability of that Party to use its transmission capability, as
measured in accordance with the applicable WSCC criteria, guidelines or
policies.

Usable SNMIC means the difference between actual import levels and limits in
place under N-1 Conditions and N-2 Conditions, as appropriate, which is
available to the Parties on a non-firm basis.

ARTICLE III
FIRM TRANSFER CAPABILITY OF LINE A

Section 3.1    Prior to the in-service date of EPE’s PST, the Parties agree that
PNM shall limit its use of the Firm Transfer Capability of Line A to 50 MW and
TNP shall limit its use of the Firm Transfer Capability of Line A to 80 MW.
These limits, along with limits in place on total SNMIC which are applicable to
EPE, are based on a negotiated allocation of SNMIC that will enable the Parties
to meet their respective needs in the pre-PST period, within the current
constraints on the NMTS and based on a pre-PST SNMIC of up to 842 MW under N-l
Conditions, which is derived from current agreements between PNM and EPE.

Section 3.2    EPE and PNM have performed certain engineering studies of the
System. Based on an allocation negotiated from these studies, the Parties agree
that the Firm Transfer Capability of Line A shall be 267 MW in the post-PST
period. Upon the in-service date of EPE’s PST, the Parties agree that the Firm
Transfer Capability of Line A shall be 267 MW, unless increased as provided in
this Amendment No. 5, and such Firm Transfer Capability of Line A shall be
allocated among the Parties as follows:
(a)    to EPE, 107 MW;
(b)    to PNM, 80 MW; and
(c)    to TNP, 80 MW.

Section 3.3    Of its 80 MW of Firm Transfer Capability in the post-PST period,
PNM hereby permanently and irrevocably assigns, transfers and conveys to EPE for
all intents and purposes 30 MW of the Firm Transfer Capability. PNM retains 50
MW of Firm Transfer Capability.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 5 -

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

El Paso Electric Company
Original Sheet No. 97
Rate Schedule FERC No. 78
 

Section 3.4    Of its 107 MW of Firm Transfer Capability in the post-PST period,
EPE hereby permanently and irrevocably assigns, transfers and conveys to TNP for
all intents and purposes 30 MW of the Firm Transfer Capability. This assignment,
transfer and conveyance by EPE to TNP is not conditioned or restricted in any
manner upon the ownership by EPE of the Firm Transfer Capability assigned by PNM
to EPE in Section 3.3.

Section 3.5    As the result of the allocation of the Firm Transfer Capability
in Section 3.2 and the assignment, transfer and conveyance of 30 MW of Firm
Transfer Capability in Section 3.3 and 3.4, the Firm Transfer Capability of each
Party in the post-PST period shall be as follows:

(a)
to EPE, 107 MW;

(b)
to PNM, 50 MW; and

(c)
to TNP, 110 MW.

Section 3.6    PNM and EPE agree to construct and operate their respective
separate transmission systems so that TNP’s Firm Transfer Capability or rights
to such Firm Transfer Capability are not affected. TNP agrees to construct and
operate its separate transmission system so that PNM’s and EPE’s Firm Transfer
Capability or rights to such Firm Transfer Capability are not affected.

Section 3.7    The Parties acknowledge that certain modifications to the
non-NMTS system by third parties external to the system may increase or
decrease, either temporarily or permanently, the SNMIC. The Parties agree that
increases in SNMIC resulting in these particular instances will be shared among
Line A and the other 345 kv SNMTS import lines and allocated among the Parties
in the same proportion as SNMIC is being shared in this Amendment No. 5 pursuant
to Section 3.2 for a period of time consistent with the duration of such
increase or until such increase is offset by a similarly-caused decrease in
SNMIC.

Section 3.8

3.8.1    The Parties acknowledge that Transmission Improvements may also
increase SNMIC. The Party or Parties making such Transmission Improvement shall
retain the additional SNMIC thus created, unless any other Party participates in
the cost of such Transmission Improvement in a mutually agreeable manner.

3.8.2    The Parties agree that if the studies outlined in paragraph 4 of the
Phase Shifter Support Principles result in a maximum SNMIC of greater than 890
MW with a PST Base Setting of 149 MW, TNP shall receive a one-time allocation of
ten percent (10%) of such increase (to the nearest whole megawatt) to its Firm
Transfer Capability. Once these studies are completed and this allocation, if
any, made to TNP, Section 3.5 shall be modified accordingly and this Section
3.8.2 shall no longer be in effect.

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: November 21, 1994

- 6 -

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

EI Paso Electric Company
Original Sheet No. 98
Rate Schedule FERC No. 78
 

Section 3.9

3.9.1     The Parties acknowledge that the PST Base Setting of 149 MW as set
forth in the Phase Shifter Support Principles is the basis for a SNMIC of 890
MW. The Parties further recognize that settings above the PST Base Setting are
subject to the agreement of PNM, EPE and the party requesting service, and that
such increased capability shall be usable by the party or parties paying for
such increased import capability. The first such instance is expected to be
EPE’s and PNM’s agreement to provide up to 50 MW of firm transmission service to
Plains Electric Generation and Transmission Cooperative, Inc., which service
will increase the PST Base Setting above 149 MW on a MW-for-MW basis. To the
extent that SNMIC is greater than 890 MW for reasons other than permanent or
temporary changes or adjustments to the PST Base Setting, this higher amount of
SNMIC shall be used to determine the amount of Usable SNMIC, one third of which
shall be allocated to the Parties pursuant to (a), (b) and (c) of Section 3.9.3.

3.9.2    The Parties acknowledge that under some System conditions the actual
imports on the SNMTS are at a level less than 890 MW or the maximum SNMIC
available under the operating nomogram then in effect. The extent to which
actual imports on the SNMTS are at a level less than 890 MW or the maximum SNMIC
available under the operating nomogram then in effect, and this results in
non-firm transfer capability being available in addition to the Firm Transfer
Capability of the Parties set forth in Section 3.5, one third of such additional
non-firm transfer capability (herein, “Usable SNMIC”) shall be allocated to the
Parties pursuant to (a), (b) and (c) of Section 3.9.3.

3.9.3     To the extent that Usable SNMIC is available under the operating
nomogram in affect in any hour, one third of the Usable SNMIC shall be allocated
to Line A and shall be allocated on a non-firm basis among the Parties, up to an
amount equal to the difference between that Party’s Firm Transfer Capability (as
set forth in Section 3.5) and its Capacity Entitlement (for TNP 150 MW, for EPE
200 MW, for PNM 150 MW), as follows:

(a)
to EPE, 40 percent (40%),

(b)
to PNM, 30 percent (30%), and

(c)
to TNP, 30 percent (30%).

3.9.4    In the event that Usable SNMIC needs to be apportioned due to
simultaneous scheduling of a Party’s allocated share of non-firm capability, as
set forth in Section 3.9.3, such apportionment shall be made according to each
Party’s respective allocations as set forth in Section 3.9.3. Notwithstanding
any provision of this Amendment No. 5 regarding Usable SNMIC, however, the
Parties agree that all SNMIC beyond that allocated to SWNMT Line A pursuant to
Section 3.5 represents the firm transfer capability available to the owners (or
contracted users) of the remainder of the SNMTS. In this regard, a Party’s right

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: November 21, 1994

- 7 -

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

El Paso Electric Company
Original Sheet No. 99
Rate Schedule FERC No. 78
 

to schedule Usable SNMIC is subject to the continuing right of the firm transfer
capability of the non-SWNMT SNMIC to have precedence over Usable SNMIC.

3.9.5    Nothing in this subsection shall prohibit any Party from installing an
automatic transfer trip load shedding arrangement on its transmission facilities
in conformance with “WSCC Criteria for Transmission System Planning” and thereby
operating at import levels in excess of the SNMIC by means of an adjustment
mechanism that incorporates the effect of the automatic load shedding equipment
into the operating nomograms on a non-firm basis. The Party proposing to install
such an arrangement shall be solely responsible for seeking and obtaining
concurrence of all affected parties and for all costs associated with third
party approvals for the arrangement and installation of the arrangement. No
Party shall unreasonably withhold its concurrence of such arrangement provided
that the requesting Party is not seeking for its own use an amount of non-firm
capability greater than the difference between that Party’s Capacity Entitlement
and its Firm Transfer Capability.

Section 3.10    PNM and EPE agree not to impose or seek to impose upon TNP and
TNP agrees not to impose or seek to impose upon PNM or EPE any charges, monetary
or otherwise, related to (i) the use by each Party of its share of the Firm
Transfer Capability of Line A, (ii) the use by each Party of its share of Usable
SNMIC made available under Section 3.9 or Section 3.11, or (iii) Firming
Transmission Service.

Section 3.11    Section 19 of the SWNMT Agreement, as amended, is hereby deleted
in its entirety and replaced with the following:

“To the extent that a Party is not utilizing its share of Firm Transfer
Capability or portion of Usable SNMIC under the then prevailing operating status
of the System, another Party may use such share; provided, however, (a) the
Party seeking to utilize such share shall provide prior notice to the Party
whose share is sought to be utilized, (b) such use shall be subject to the
continuing right of such Party whose share is sought to reasonably deny such use
and (c) that use of Firm Transfer Capability is withdrawable by the permitting
Party immediately for any reason whatever. The Party permitting such use shall
not charge the Party utilizing such share; provided, however, the Party
utilizing such share shall compensate the Party whose share is utilized for any
transmission losses incurred.”

Section 3.12    Unless precluded by law, and prior to any Party making available
for sale or for lease any portion of its Firm Transfer Capability to a third
party, that Party shall first provide the other Parties the opportunity

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: November 2l, 1994

- 8 -

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

El Paso Electric Company
Original Sheet No. 100
Rate Schedule FERC No. 78
 

to purchase, lease or contract for such rights at the same prices and on the
same terms and conditions as offered to the third party. The opportunity
afforded the other Parties shall include reasonable prior notice of not less
than thirty (30) calendar days. In the event that the other Parties both desire
to purchase, lease or contract for such rights, each shall be entitled to
purchase, lease or contract for an equal share of such rights.

ARTICLE IV
FIRMING TRANSMISSION SERVICE

Section 4.1    EPE is obligated to provide to PNM and TNP Firming Transmission
Service as set forth in the Letter Amendment and the Letter
Amendment-Supplement. The Parties desire to clarify the nature and meaning of
the Firming Transmission Service and EPE’s obligation to provide such Firming
Transmission Service. Paragraph 4 of the Letter Agreement, as amended by
paragraph 1 of the Letter Agreement-Supplement, is hereby deleted and replaced
by Sections 4.2 through 4.5 of this Amendment No. 5.

Section 4.2    EPE shall provide Firming Transmission Service without charge to
TNP and PNM such that, with any one SWNMT line segment out of service, EPE shall
provide (a) for TNP, Firming Transmission Service in an aggregate amount not to
exceed the lesser of TNP’s share of Firm Transfer Capability (110 MW as set
forth in Section 3.5 and as may be modified in Section 3.8) or the sum of TNP’s
respective actual transmission requirement between Greenlee and Hidalgo and
between Hidalgo and Luna to transfer (1) power TNP is delivering into SWNMT via
transmission owned by TNP and (2) power TNP is receiving into SWNMT from EPE,
PNM or third parties via purchases or wheeling; and (b) for PNM, Firming
Transmission Service between Greenlee, Hidalgo, and Luna in an aggregate amount
not to exceed the lesser of PNM’s share of Firm Transfer Capability (50 MW) or
the sum of PNM’s actual transmission requirements between Greenlee, Hidalgo and
Luna to transfer (1) power PNM is delivering to SWNMT via transmission owned by
PNM or (2) power PNM is receiving into SWNMT from EPE, TNP or third parties via
purchases or wheeling.

Section 4.3    In the event EPE’s Firming Transmission Service for PNM and TNP
hereunder requires it, PNM and TNP agree first to use their respective
transmission rights in the Springerville to Greenlee, Line A, and Luna to
Central to Hidalgo transmission lines as well as other applicable transmission
facilities.

Section 4.4    The Emergency transmission service provisions of Section 8 of the
Tucson-El Paso Power Exchange and Transmission Agreement dated April 19, 1982
between Tucson Electric Power Company (TEP) and EPE shall not be amended or

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Issued on: April 1, 2005
Filed to comply with order of the Federal Energy Regulatory Commission,
Docket No. ER05-427-000, issued March 4, 2005.
Effective: November 2l, 1994

- 9 -

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

El Paso Electric Company
Original Sheet No. 101
Rate Schedule FERC No. 78
 

terminated by EPE without the consent of TNP and PNM. Such consent shall not be
unreasonably withhold.

Section 4.5     EPE’s Firming Transmission Service shall commence simultaneously
with the occurrence of each outage and continue until the earlier of (i) the
time that each outage ceases to be present or (ii) the Operating Agent has
determined that the SWNMT line segment will be out of service for such a period
of time so as to require that the System be operated under N-2 Conditions.

Section 4.6     Under such N-2 Conditions, the Parties shall curtail scheduled
SWNMT deliveries as necessary so that each Party’s scheduled deliveries of power
and associated energy during such N-2 Conditions shall not exceed the product of
(i) the ratio of the SNMIC during such N-2 Conditions to the SNMIC during N-l
Conditions present prior to the outage times (ii) each Party’s respective Firm
Transfer Capability as set forth in Section 3.5 or as modified for TNP in
Section 3.8. In no event shall the magnitude of the curtailment necessary by any
Party under a given System condition be greater (as a percentage of that Party’s
share of the SNMIC) than the curtailment necessary by any other Party (as a
percentage of such other Party’s share of the SNMIC) for the same System
condition.

Section 4.7     Paragraph 11 of the Letter Agreement, created pursuant to
paragraph 4 of the Letter Agreement-Supplement, is hereby deleted in its
entirety.

ARTICLE V
DEFERRAL OF LINE B

Section 5.1    Paragraph 5 of the Letter Agreement is hereby deleted in its
entirety and replaced with the following:

“5. The in-service dates for Line B, Phase 4 and Phase 5, shall be deferred
until such date as may be later agreed upon by the SWNMT Coordinating Committee.
The Parties agree that Line B, Phase 4 and Phase 5, shall be one of the
alternatives included in future transmission planning studies by any Party that
are conducted to determine the most efficient and cost effective transmission
enhancements for the System.”

Section 5.2     Section 12.0 of the SWNMT Agreement, as amended, is hereby
deleted in its entirety and replaced with the following:

“12.0 ADDITIONAL SWNMT PARTICIPATION RIGHTS: TNP may, at its sole option, prior
to the start of construction of Line B, Phase 4, elect

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 10 -

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

El Paso Electric Company
Original Sheet No. 102
Rate Schedule FERC No. 78
 

to participate with EPE in the construction and ownership of up to twenty
percent (20%), or such higher amount as mutually agreed between EPE and TNP, of
Line B between Greenlee Substation and Hidalgo Switching Station. The ownership
percentage elected by TNP shall entitle TNP to a like percentage of the share of
Southern New Mexico Import Capability, including both firm and non-firm transfer
capability (i.e., in the same manner as for Line A pursuant to this Amendment
No. 5), attributable to Line B between Greenlee and Hidalgo. The share of
Southern New Mexico Import Capability attributable to Line B between Greenlee
and Hidalgo shall be determined in accordance with applicable WSCC criteria,
guidelines or policies. If TNP elects not to participate in Line B between
Greenlee and Hidalgo, or if TNP participates at a level less than 20%, PNM may,
at its sole option, participate with EPE in construction of all or part of the
remaining part of the 20% of Line B between Greenlee and Hidalgo. Further, PNM
may, at its sole option; elect to participate with EPE in the construction of
Line B, between Hidalgo and the Luna Switching Station, in an amount equal to or
less than the total of PNM’s and TNP’s combined participation in Line B.”

Section 5.3    Nothing in this Article V shall be construed to limit any Party
from constructing and operating a transmission line, separate and apart from the
SWNMT Project, that originates at the Greenlee Substation and terminates at the
Hidalgo Switching Station, provided that the capability of that line is
determined pursuant to applicable WSCC criteria, guidelines or procedures, and
Interconnection agreements are agreed to by the affected parties.

ARTICLE VI
SWNMT OPERATING AGENT

Section 6.1     The first sentence of paragraph 8 of the Letter Agreement is
hereby deleted in its entirety and replaced with the following:

“8. EPE shall replace PNM as Operating Agent (including transfer of control
area) for all SWNMT Project Facilities for which PNM is currently Operating
Agent as contemplated in the Phase Shifter Support Principles between EPE and
PNM, dated February 22, 1994; provided, however, that to the extent, if any,
that the operating procedures resulting from the Phase Shifter Support
Principles conflict with this Amendment No. 5, this Amendment No. 5 shall
govern.”

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 11 -

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

El Paso Electric Company
Original Sheet No. 103
Rate Schedule FERC No. 78
 

Section 6.2     Paragraph 9 of the Letter Agreement is hereby deleted in its
entirety and replaced with the following:

“9. Prior to the in-service date of EPE’s phase shifting transformer, the SWMNT
E&O committee shall establish rules and procedures required by Section 18.1 of
the SMNMT Agreement. Such rules and procedures shall be established in
connection with the operating procedures contemplated in paragraph 8 of the
Letter Agreement, as amended by Amendment No. 5, and shall not require the SWNMT
Operating Agent to act in conflict with such paragraph 8 procedures.
Additionally, the SWNMT E&O Committees shall determine any changes that will be
required pursuant to Section 23 of the SWNMT Agreement, provided, however, such
changes shall be consistent with Amendment No. 5.”

Section 6.3     As Operating Agent for the Parties, EPE shall maintain in force
contractual arrangements with TEP adequate to provide for the interconnection of
Line A at the Greenlee Substation.

Section 6.4     Once EPE becomes Operating Agent for SWNMT, including the
transfer of all SWNMT Project Facilities into EPE’s control area, PNM and TNP
shall provide their respective schedules of firm and non-firm power transfers
over SWNMT Line A and any other facility for which EPE is, or becomes, operating
agent.

ARTICLE VII
MISCELLANEOUS

Section 7.1        Survival of Agreement. In the event of any inconsistency
between the provisions of this Amendment No. 5 and the execution or delivery of
any documents required hereunder, this Amendment No. 5 shall govern.

Section 7.2        No Dedication of Facilities. Any undertaking by one Party to
the other Party under my provision of this Amendment No. 5 shall not constitute
the dedication of the system or any portion thereof of the Party to the public
or to the other Party, which shall not include the transfer and conveyance set
forth in Section 3.3 and 3.4, and it is understood and agreed that any such
undertaking under any provision of this Amendment No. 5 by a party shall cease
upon the termination of its obligations hereunder.

Section 7.3       No Third Party Rights. The Parties do not intend to create
rights in or to grant remedies to any third party as a beneficiary of this
Amendment No. 5 or of any duty, covenant, obligation or undertaking established
hereunder.

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 12 -

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

El Paso Electric Company
Original Sheet No. 104
Rate Schedule FERC No. 78
 

Section 7.4

A.    No approvals, consents, orders, or other action by any third parties,
including any governmental, judicial (including the Federal Bankruptcy Court) or
regulatory agencies, are required to authorize the execution of such Party of
this Amendment No. 5 and the related matters described in Recitals J, K, L, M,
and N.

B.    The Parties agree that all issues they have or may have had relating to
the allocation of transmission capacity to SWNMT Line A to TNP are contained
within this Amendment No. 5.

C.    PNM and EPE shall not (i) take any action that is adverse to TNP’s Firm
Transfer Capability or the use of such Firm Transfer Capability, (ii) take any
position in any legal proceeding adverse to TNP’s Firm Transfer Capability, or
to the use of such Firm Transfer Capability, or, (iii) seek any judicial,
arbitral or administrative remedy or relief that would adversely affect TMN’s
Firm Transfer Capability or the use of such Firm Transfer Capability Likewise,
TNP shall not (i) take any action that is adverse to PNM’s or EPE’s Firm
Transfer Capability, or the use of such Firm Transfer Capability, (ii) take any
position in any legal proceeding adverse to PNM’s or EPE’s Firm Transfer
Capability, or to the use of such Firm Transfer Capability, or, (iii) seek any
judicial, arbitral or administrative remedy or relief that would adversely
affect PNM’s or EPE’s Firm Transfer Capability or the use of such Firm Transfer
Capability.

Section 7.5     Counterparts. This Amendment No. 5 may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall together constitute one and the same agreement.

Section 7.6     Recitals. Each and all of the recitals set forth at the
beginning of this instrument are hereby incorporated herein by this reference.

(This space left intentionally blank)

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 13 -

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

El Paso Electric Company
Original Sheet No. 105
Rate Schedule FERC No. 78
 

Section 7.7    Signature Clause. The signatories hereto represent that they have
been appropriately authorized to enter into this Amendment No. 5 on behalf of
the Party for whom they sign. This Amendment No. 5 is hereby executed as of the
21st day of November, 1994.

TEXAS-NEW MEXICO POWER COMPANY

By
 
 
 
Its: Assistant Vice President
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
By
 
 
 
Its: Vice President
 
 
 
 
PUBLIC SERVICE COMPANY OF NEW MEXICO
 
 
 
 
By
 
 
 
Its: Senior Vice President
 

Issued by: John A. Whitacre, Vice president, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

- 14 -

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

El Paso Electric Company
Original Sheet No. 106
Rate Schedule FERC No. 78
 

EXHIBIT A

CONFIDENTIAL

FOR SETTLEMENT DISCUSSIONS ONLY
FEBRUARY 22, 1994

PHASE SHIFTER SUPPORT PRINCIPLES

DEFINITIONS:

EPE SS “A” Rights: Wheeling provided by PNM to EPE Pursuant to Service Schedule
A (SS “A”) to the PNM/EPE Interconnection Agreement (currently 104 MW).

PNM SS “A” Rights: Wheeling provided by EPE to PNM pursuant to SS “A” (currently
25 MW).

PNM SNM RIGHTS: The sum of PNM SWNMT Line A Rights (currently 50 MW) plus PNM SS
“A” Rights.

PST Base Setting: The sum of (1) EPE’s scheduled use of EPE SS “A” Rights, plus
(2) PNM’s scheduled use of PNM SS “A” Rights, plus (3) an additional amount of
20 MW.

Real Time Check Points: The operating status of certain generating units and
shunt reactors, as defined in the Interim Southern New Mexico Transmission
Operating Procedure attached as Exhibit “A” to the Interim Transmission
Capability Agreement and Agreement to Arbitrate between EPE and PNM dated March
30, 1990 (Interim Agreement).

SNM Limit: The SNM Import capability in MW at the knee of the NNM vs. SNM
operating nomogram in effect from time to time, with the PST in-service and
operating at the PST Base Setting. The maximum SNM Limit from the attached
preliminary nomogram is expected to be 890 MW when the PST Base Setting is fully
scheduled by EPE and PNM.

PRINCIPLES OF AGREEMENT: PNM and EPE (Parties) agree to enter into a stipulation
in NMPUC Case No. 2527 based on the following principles of agreement:

PNM will support the construction and operation by EPE of a PST on EPE’s West
Mesa to Arroyo 345kV line, and EPE will allow PNM to operate EPE’s 345kV reactor
switch located at West Mesa pursuant to the West Mesa Reactor Switch Agreement,
in conjunction with the following principles:

1. Under normal operating conditions with the PST in-service and operating at
the PST Base Setting, the SNM Limit will be in effect under the following
conditions:

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 107
Rate Schedule FERC No. 78
 

a. EPE shall pay PNM (1) for 20 MW of reserved transmission capacity at PNM’s
embedded transmission service rate, and, (2) for up to a 20 MW portion of PNM’s
incremental energy cost of local gas-fired generation and/or purchased energy
when such energy is actually used due to PNM’s need to increase use of NNM
Import capability. (In this paragraph, the term “incremental energy cost” shall
mean the difference between the energy cost of PNM’s locally generated or
purchased energy and the energy cost of PNM’s foregone remotely generated or
purchased energy. Additionally, the Parties agree that running PNM local
generation increases NNM Import Capability on a basis higher than 1 to 1.) The
Parties agree to enter into an operating procedure to implement the provisions
of this item (2). Prior to committing such energy for this purpose, PNM shall
notify EPE verbally of its intent to use local generation and/or purchased
energy, and EPE shall either (1) lower its SNM Imports to accomodate NNM Import
needs, or (2) pay PNM its incremental cost of such energy. Neither Party waives
its right to have other SNM entities participate in these payments to PNM.

b. PNM shall ensure that its share of SNM Imports are at all times within PNM
SNM Rights. EPE shall ensure that the SNM Limit in effect is not exceeded. With
respect to curtailments: (1) EPE shall effect all curtailments of SNM Imports
when (1) decreases in the SNM Limit are caused by failure to achieve or maintain
Real Time Check Points, and (ii) limits are placed on flows into SNM from TEP’s
System; and, (2) PNM shall effect all curtailments of NNM Imports when decreases
in NNM Import capability are caused by failure to achieve or maintain the
necessary status of NMM capacitors and/or shunt reactors. Neither Party waives
its right to have third party entities participate in these curtailments.

c. Due to the impact on NNM Import capability of PST settings higher than PST
Base Setting and PNM’s need to assess whether NNM Import capability is
available, EPE and/or EPE with any third party shall enter into written
agreements with PNM before implementing and/or agreeing with third parties to
implement firm schedules of SNM Imports (and verbal agreement is required for
non-firm schedules) through the PST that are above schedules related to the PST
Base Setting. EPE agrees that such agreements, to the extent that PNM determines
necessary, may involve additional service and hence additional compensation to
PNM by EPE and/or the third party, unless PNM agrees in advance to the contrary.
The Parties agree that compensation to PNM for such additional service will be
based on the cost of the type of wheeling (i.e., firm or interruptible) or other
services involved.

2.    When the PST is out-of-service, EPE shall curtail its SNM Imports as
required to ensure that the PST out-of-service nomogram limits are not exceeded.

3.    For the period prior to the earlier of the termination of Service Schedule

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 108
Rate Schedule FERC No. 78
 

G to the PNM/EPE Interconnection Agreement (SS “G”) or the in-service date of
the PST, the Parties agree to implement in written agreement the modifications
to the Interim Agreement that were contemplated in Sections 6.3 and 6.4 of the
Transition Agreement between EPE and PNM dated September 2, 1993. If SS “G”
expires or terminates prior to the in-service date of the PST, the Parties agree
to negotiate in good faith the terms and conditions under which the Interim
Agreement could be extended.

4.     Operating procedure to implement the post-PST principles set forth above
and to address related operating parameters (including new operating monograms)
shall be executed prior to the in-service date of the PST. The Parties agree to
use best efforts to agree to both pre- and post-PST operating procedure and to
implement such operating procedures in conjunction with the enabling agreements
that will result from these principles. Once both pre- and post-PST operating
procedures are executed by the Parties, EPE shall become operating Agent for the
SNM transmission system.

5.     No later than 60 days following the conclusion of EPE’s NMPUC CCN case
for the PST, PNM and EPE shall begin joint planning studies to determine a least
cost system capital addition distinct from PNM’s OLE Project (or its
replacement) that, when in-service, would permit EPE and PNM and participating
third parties to realize the entirety of the incremental transmission capability
needed in NNM and SNM by PNM, EPE and such third parties. Until such system
addition is in service, PNM and EPE shall work together to encourage third
parties to accept entitlements to SNM Import capability that are within the NNM
Import capability and SNM Limit as each is established hereunder. PNM and EPE
shall not contract with third parties to recognize NNM or SNM entitlements or
facilitate NNM or SNM Imports that cause SNM Imports to exceed the SNM Limit
under the operating nomograms resulting from these principles.

6.     The agreements and operating procedures that result from these principles
shall be in effect until the earlier of May 1, 1998, or the in-service date of
the least cost system addition distinct from PNM’s OLE Project as contemplated
in paragraph 5, and shall continue in effect from year to year thereafter until
terminated by either EPE or PNM giving one year’s prior written notice to the
other.

7.     EPE agrees to support PNM’s FERC filings for acceptance of the enabling
service agreements that will result from these principles.

(this space intentionally blank)

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 109
Rate Schedule FERC No. 78
 

………, ted and agreed to this 22nd day of February, 1994.

 
Public Service Company of New Mexico
 
El Paso Electric Company
 
 
 
 
 
BY:
 
 
BY:
 
 
 
 
 
 
ITS:
Senior Vice President
 
ITS:
President

[ILLEGIBLE]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: November 21, 1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.
 

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

El Paso Electric Company
Original Sheet No. 110
Rate Schedule FERC No. 78
 

image1a.jpg [image1a.jpg]

Issued by: John A. Whitacre, Vice President, Transmission and Distribution
Effective: February 22,1994
Issued on: April 1, 2005
 
Filed to comply with order of the Federal Energy Regulatory Commission,
 
Docket No. ER05-427-000, issued March 4, 2005.