-2- I. BACKGROUND WHEREAS, on May 16, 2002, Grand Cany on Trust and Sierra Club (“Plaintiffs”) filed a citizen suit against Public Service Company of N ew Mexico (“PNM”) in the United States District Court for the District of New Mexico in the above cause alleging certain violations of the Clean Air Act (“CAA”) at PNM’s San Juan Generating Station (“San Juan”) near Farmington, New Mexico; and WHEREAS, Pla intiffs’ complain t alleg ed that PN M had viola ted, and was contin uing to violate, the twenty (20) percent opacity emission limit at San Juan Units 1, 3 and 4, and that PNM was operating San Juan Units 3 and 4 without a prevention of significant deter ioration (“PSD”) permit in violation of the CAA; and WHEREAS, after discovery , Plaintiffs and PNM filed at least four cross motions for summary judgme nt on both Plaintiffs’ claims for relief and PNM’s defenses; and WHEREAS, on May 1, 2003, the Court gra nted Plaintiffs’ motion for summary judg ment on standing; and WHEREAS, on August 20, 2003, the Court granted PNM’s motion for summary judgment on Plaintiffs’ PSD claim; and WHEREAS, the Court held a bench trial from November 17-19, 2003, on PNM’s gene ral defenses to Plaintiffs’ opacity claim; and WHEREAS, on February 2, 2004, the Court dismissed after trial PNM’s general defense s to Plaintiffs’ opacity claim; and WHEREAS, on April 29, 2004, Plaintiffs served a second notice of intent to sue PNM regarding additional CAA violations at San Juan; and WHEREAS, on May 26, 2004, PNM agre ed to the entry of an Order that found 42,008-3- opacity limit violations at San Juan that would be addressed in the remedy phase of the case; and WHEREAS, on September 12, 2003, the State of New Mexico, through the New Mexico Environme nt Depar tment (“D epartme nt”), issu ed a draft adminis trative c omplianc e order to PNM alleging that San Juan ha d violate d on numer ous occa sions the li mits for ni trogen oxides, sulfur dio xide, part iculate matter, a nd opacit y in its New Sou rce Review and T itle V per mits; and WHEREAS, on May 14, 2004, the Department issued a revised draft administrative compliance orde r to PNM all eging that San Jua n had viola ted on nume rous occ asions the limits for nitrogen oxides, sulfur dioxide, particulate matter, and opacity in its New Source Review and Title V pe rmits, the deviation report ing req uiremen ts in its Title V permit, and its obl igation to implement good air pollution control practices; and WHEREAS, contemporaneously with the lodging of this Consent Decree, the Department has moved to intervene in Plaintiffs’ action as a party -plaintiff and has filed a complain t pursuan t to Section 304(a) o f the CAA, 42 U.S.C. § 7 604(a), allegi ng the sa me violations contained in the draft administrative compliance orders issued on September 12, 2003 and May 14, 2004; and WHEREAS, Plaintiffs, the Department, and PNM have met on numerous occasions in an effort to resolve all of the issues and claims that are the subjec t of the complaints, draft compliance orders and second notice of intent to sue; and WHEREAS, Pla intiffs, t he Depa rtment, a nd PNM ag ree tha t the settl ement of these disputes without further litigation and through this Consent Decree is in the public interest, and is a fair, reasonable, and appropriate means of resolving the claims in the complaints, draft compliance orders and second notice of intent to sue bec ause it requires the installation and-4- operation of pollution control equipment for particulate matter, nitroge n oxides, sulfur dioxide, and mercury at the four (4) San Juan units, at an estimated expenditure of more than $200 million. Thi s relief is expecte d to corr ect all of the CAA vio lations al leged i n the comp laints, draft c omplianc e orders and sec ond notice of intent t o sue, re present s remedia l relief sufficie nt to offset Plaintiffs’ and the Department’s claims for civil penalties, and r eflects PNM’s commitmen t to reduc e substan tially the emissi on of nitr ogen oxid es, sulfu r dioxide, p articula te matter and mercury from San Juan; and WHEREAS, PNM is the operator and a co-owner of each unit at San Juan; and WHEREAS, except as otherwise stipulated to, PNM denies the allegations and does not admit liability for any claims or assertions in the complaints, draft compliance orders and sec ond notice of intent to sue; and WHEREAS, Plaintiffs, the Department and PNM consent to the entry of this Consent Decre e without f urther tr ial or ap peal; NOW THEREF ORE, it is he reby AGREED, O RDERED AN D DECREED as follow s: II. DEFINITIONS 1. Unless otherwise expressly provide d herein, the terms used in this Consent Decree that are defined in the CAA , or regulations implementing the CAA, shall have the meaning s set fort h in the CAA and its impl ementing regula tions. 2. Whenever the terms set forth below are used in this Consent Decre e, the fo ll ow in g d ef in it io ns sh al l a pp ly: “Act” or “CAA” means the Clean Air Act, 42 U.S.C.A. § 7401 et seq. “Average emission rate” me ans the total amount of a pollutant emitted from an emission unit during a given time period, expressed in pounds per million Btu (“lb./MMBtu”), de rived for-5- particu late matt er in ac cordanc e with Met hod 5, 40 C. F.R. Part 60, and f or SO 2 and NO x in accord ance wi th 40 C.F.R . Part 75. An “hour ly average” e miss ion ra te mea ns th e average emission rate of pollutants discharged from the stack during a sixty (60) minute period, beginning on the hour. A “daily average” emission rate mea ns the numerical average of the hourly aver age emission rates in an operating da y, a “seve n day ave rage” emission rate means the numerical average of the hourly aver age emission rates for the operating days that occur within a pe riod of se ven (7) c onsecuti ve cale ndar day s, and a “ 30 day average” emissi on rate means the numerical average of the hourly ave rage emission rates for the opera ting days that occur within a period of thirty (30) consecutive calendar day s. Unless explicitly specified elsewhere in this Decree, all aver age emission rates and average emission reduction efficiencies shall incl ude all pe riods of s tartup, shutdown, malfunct ion, and e merge ncy . All aver ages shall exclude inappropr iate data (e.g. , malfunction of the monitoring sys tem) as sp ecified elsewhe re in this Decree and in the applicable EPA testing re gulations at 40 C.F.R. Part 60, Appendix A, and Part 75. “Block average ” means an average emission rate for the operating day s occurring over a specified period of consecutive calenda r days. A ne w “block average” is g enerated for every specified period. “Business day ” means any day of the we ek except Saturday, Sunday and a federal or Ne w M ex ic o h ol id ay. “Calendar day ” means any twenty four (24) hour period between 12:00 midnight and the following midnight, Mountain Standard Time. “CEMS” means continuous emissions monitoring system, which consists of the total equipment used to sample, analy ze, and record on a continuous basis emissions-related-6- pa ra me te rs ot he r t ha n O pa ci ty. “COMS” means continuous opacity monitoring system, which consists of the total equipmen t used to sa mple, ana lyze , and rec ord Opac ity o n a contin uous basis

. “Consent Decree” or “Dec ree” means this Consent Decree. “Court” means the United States District Court for the District of New Mexico. “Day” means a calendar day . In computing any period of time under this Decree, except in co mp ut in g c om pl ia nc e w it h e mi ss io n l im it at io ns , w he re th e l as t d ay w ou ld fa ll on a S at ur da y, Sunda y or fed eral or Ne w Mexi co ho liday , the peri od sha ll run until the c lose o f the next bu si ne ss da y. “Department” means the New Mexico Environment Depar tment, and any succ essor departments or a gencie s. “Emerg ency ” means a ny s ituation a rising f rom sudde n and rea sonably unfores eeable events be yon d the cont rol of PNM, including acts of G od, which situation r equires immediate corrective action to restore normal opera tion of San Juan. An emergency shall not include noncompliance to the extent caused by improperly desig ned equipment, lack of preventive maintenance, or careless or improper ope ration. “EPA” means the United States Environmental Protection Agency , and any succ essor departments or a gencie s. “Excess opacity re ading” means each six (6) minute period of time during w hich the opacity of emissions from a stac k at a San Juan unit exceeds twenty (20) pe rcent. “Malfunction” means any sudden, infrequent and not reasonably preventable failure of air pollution control equipment, process equipment, or of a process to operate in a normal or usual manner. Failures that are cause d in part by poor maintena nce or careless operation are not-7- malfunctions. “NSR Permit” means PNM’s NSR Permit 63-M2, issued January 22, 1997. “NO x ” means t otal oxides o f nitrog en, except nitrous oxid e, which are expr essed as nitrogen dioxide using EPA Reference Method 7. “Opacity” means the degree to which emissions reduce the transmission of light and obscure the view of an object in the backg round. “Opera ting day ” means a calenda r day in which f uel is comb usted in a unit for a t least three (3) hours. If fuel is combusted for more than three (3) hours during a calendar day , the calcula tion of tha t day ’s emissions for the unit shall be based upon the average e mission rate of pollution d uring ho urs in whic h fuel wa s combuste d in the uni t, and sha ll not inclu de any time in which fuel was not combusted. “Operating Permit” means PNM’s Operating Permit P062, which became effective on August 7, 1998. “Partie s” means collecti vely the Plainti ffs, the Department and PN M. “Party” mea ns Plaintiffs, the Department or PNM, individually. “PM” means any airborne, finely divided solid or liquid material, other than uncombined water, with an aerody namic diameter smaller than 100 micrometers, and which is expressed as PM using EPA Reference Method 5. “Plaintiffs” means collectively The Grand Cany on Trust and Sierra Club. “PNM” means Public Service Company of New Mexico, a publicly owne d corporation doing business in the State of New Mexico. “Quarter” means a calenda r quarter consisting of three (3) f ull months, beginning on the first day of e ither January, April, July , or October.-8- “Rolling average emission rate” me ans an average emission r ate or a verag e SO 2 percentage reduction that is generated each cale ndar day ba sed on the average emission rate or averag e SO 2 percentage reduction for the operating days within a multiple-day period. A new averag e emission rate or average SO 2 percentage reduction is generated each cale ndar day. “San Juan” means the San Juan Generating Station, comprised of four (4) f ossil fuel-fired steam generating units (as that term is def ined at 40 C.F.R. § 60.41(a)) and associated equipment, located west of Farmington, New Me xico. “Shutdown ” means t he cessa tion of ope ration of a fossil f uel-fir ed steam gener ating un it at San Juan for any purpose or reason. “SO 2 ” means sulfur dioxide. “SO 2 percen tage r eduction ” means t he amount of SO 2 reduce d by SO 2 removal equipmen t determi ned by (1) mea suring t he conc entration of SO 2 in the flue gas upstream of the scrubbe r inlet (e xpressed a s A), and (2) the c ontempor aneous c oncentr ation of SO 2 measured downstream of the scrubber outlet and any scrubber by-pass return (expressed as B), and perfor ming the following calcula tion: 100 -100(B ÷ A ). An “ho urly average” SO 2 percen tage reducti on means t he numer ical ave rage o f SO 2 percen tage r eduction values r ecorde d in a sixty (60) minute period during which pollutants are discharg ed from the stack, beginning on the hour. A “daily average” SO 2 percen tage red uctio n mean s the n umeri cal ave rage of t he hou rly average SO 2 percen tage r eduction values in an opera ting day . “Annua l avera ge” SO 2 percen tage reducti on means t he numer ical ave rage o f the hour ly a verag e SO 2 percentage reduction values for a pe riod of 36 5 consec utive ca lendar d ay s. All ave rages shall exclu de inappr opriate data (e.g., malfunction of the monitoring sy stem) as specified elsewhere in this Decre e and in the applicable EPA testing regulations at 40 C.F.R Part 60, Appendix A, and Part 75.-9- “Startup” means the setting in operation of a fossil fuel-fir ed steam generating unit at San Juan for any purpose or reason. “State” means the State of New Mexico, including all of its departments, ag encies, and instrumen talities. “Unit 1”, “Unit 2”, “Unit 3”, and “Unit 4” mean ea ch of the four (4) fossil fuel-fired steam generating units and associate d equipment at San Juan. III. JURISDICTION AND VENUE 3. This Court has jurisdiction over the Parties to and the subject matter of this action under Se ction 304 o f the Act , 42 U.S.C. § 7604, the citizen sui t provision , and unde r 28 U.S.C. §§ 1331, 1345, and 1355. 4. Venue is proper in this Judicial District under Sections 304(c) and 113(b) of the Act, 42 U.S.C. §§ 7604(c) and 7413(b), and under 28 U.S.C. §§ 1391 and 1395. IV. APP LICABILITY 5. This Decree shall apply to and be binding upon Plaintiffs, the Department, and PNM, and their offi cers, a gents, s uccessors, and a ssigns. PN M shall provide a co py o f this Decre e to each contra ctor, sub contractor, laboratory , and any other en tity retaine d to condu ct, monitor or otherwis e perform any of the work requi red by or nece ssary to comply with this Decree. 6. In any action to enforce this Decree, PNM shall not assert as a defense the failure of its off icers, d irectors, employ ees, ser vants, agents, or c ontract ors to tak e action s necess ary to comply with this Decree , unless PNM establishes that such failure resulted from a force ma jeure event as defined in this Decree.-10- V. EMISSION CONTROLS AND LIMITATIONS 7. PNM shall at all times, including periods of startup, shutdown, and malfunction, maintain and operate Units 1, 2, 3, and 4 in a manner consistent with good air pollution control practices for minimizing emissions. 8. Prior to installing t he pollutio n control equipmen t describ ed below , in addition to any other ap plicable require ment, the emissions o f PM, SO 2 and NO x and opacity fr om San Juan shall be subject to Section XI (Stipulated Penalties). 9. PNM shall install the following pollution control equipment, and make any other capital and operational modifications necessary to achieve the following emission limitations and mer cur y ope rat io nal req ui rem ent s at San Ju an b y the dea dl in es s et f ort h i n S ect io n VIII (Emission L imitation Compliance Deadline s): (a) PM and Opa city (i) PNM shall op erate b aghous es and de mister te chnolog y on San Juan Uni ts 1, 2, 3, and 4 to meet the following emission limitations. (ii) The PM average emission rate for e ach of Units 1, 2, 3, and 4 shall not exceed 0. 015 lb./MMB tu as mea sured by EPA Refe rence M ethod 5 sta ck tests c onducted at least

once ea ch cale ndar qua rter at t imes and c onditions s pecifie d by the Depa rtment, a nd according to test protocols approved by the Department, but in all cases under conditions and in a manner no less stringent than described in EPA’s 2004 Clean Air Act National Stack Te sting Guidance. PNM shall submit all results and a complete description of the tests to Plaintiffs and the Department in the next quarterly report following PNM’s receipt of the results. (iii) The opacity limit for San Juan Units 1, 2, 3, and 4 shall be twenty (20) percent, average d over any six (6) minute period except for one six (6) minute average per hour-11- of up to twe nty -seven (27) perc ent opac ity. This limit sh all apply at all time s when ai r pollutan ts are bei ng discharged into the a tmospher e, unless PNM demons trates that any excess opa city reading: (a) was cause d by a startup, shutdown, malfunction, or emergency, or (b) occurred when both the bo iler and all fans t hat move f lue gas in the unit were off . Opacity shall be me asured i n the stack or, if approved by EPA, after the outlet of the baghouse and cor rected to stack exit. (iv) Load chang es, poor coal quality, a ir heater cleaning, sootblowing, and high ash hoppers shall not excuse any excess opacity rea ding. (v) PN M s ha ll re po rt an y ex ce ed an ce of th e o pa ci ty limit described ab ove in the next quarterly repor t following the exceedance. (vi) If PNM claims that an excess opacity reading was caused by a startup, shutdown, malfunction, or emergency , or occurred when both the boiler and all fans tha t move fl ue ga s i n t he un it we re of f, it sh al l n ot if y th e D ep ar tm en t ( a) by f ac si mi le no la te r t ha n t we nt yfour (24) hours after the start of the next business day, and (b) in writing no later than ten (10) calenda r days after t he start o f the first busines s day following the rea ding (or the first reading in the even t of a ser ies of exc ess rea dings). With respe ct to the w ritten not ification, PNM shal l use the appli cable excess emiss ion form p ublished by the Depar tment. To t he extent PN M claims a defense describ ed in this su bparag raph to a n excess op acity reading , it shall di sclose su ch claim in its next qua rterly report f ollowing the exces s opacity reading , attach the fac simile and excess emission f orm filed with the D epartme nt, and de scribe a ny r elevant revision s and ame ndments to the information in the facsimile and excess emission form filed with the Department, including (1) the date and time of facsimile and written notification to the Depa rtment, (2) the cause of the excess opa city reading (s), (3)actions that PNM took to corre ct the ca uses of the excess o pacity reading (s), (4)all actions that PNM w ill take to prevent the caus es of the excess opa city-12- reading(s) from recur ring. PNM’s failure to materially comply with any requirement specified above shall waive any claim that an excess opacity r eading was caused by a startup, shutdown, malfunc tion, or e merge ncy , or occu rred wh en both the boiler a nd all fa ns that mov e flue g as in the unit were off. (vii) For purposes of this Consent Decree, if Plaintiffs or the Depa rtment disagr ee with a ny c laim of de fense de scribed in this subp aragr aph reg arding any excess opa city reading, they shall inform PNM in writing within 180 days of such disag reement. However, any disagreement shall not be subject to Section XI I (Dispute Resolution) unless Plaintiffs or the Department expressly state tha t their disagreement represents a f inal determination regarding the excess opacity rea ding, or the Plaintiffs or the Department issue a demand for stipulated penalties regarding the e xcess opacity reading . Any final deter mination or demand for stipulated penalties shall be binding upon PNM within thirty (30) da ys of rec eipt unless PNM invokes Section XII (Dispute Resolution). (viii) PNM shall determine compliance with the opacity limit above on a continuous basis using data from the current COMS or an EPA-approve d COMS at an alternative location. (ix) No later than sixty (60) day s after the effective date of this Dec ree, PNM shall submit a report to Plaintiffs and the Department that identifies the technology and operational parameters that represe nt demonstrated state-of-the-art demister control for e ach unit, and that determines the extent to which the existing demister technology and operational parameters constitute demonstrated state-of-the-a rt demister control for each unit. The report shall be reviewed pursuant to Section I X (Approvals). Within ninety (90) da ys of approva l by Plaintiffs and the Department, PNM shall install such technology to the extent it has not already-13- been installed and is in operation. PNM shall operate and maintain demonstrated state-of -the-art demister technolo gy on San Juan U nits 1, 2, 3, and 4, an d implemen t operat ional par ameters to maximize the reduction of acid mist, scrubber carry -over, and any other liquid particulate matter emitted from such units. (b) NO x (i) PNM shall design, install, and operate demonstrated state-of-the- art NO x combustion control technology on San Juan Units 1, 2, 3, and 4 to minimize the formation of NO x from ea ch unit. PN M shall contract w ith one or more expe rt(s) on t he techn ologies to identify demonstrated state -of-the-art NO x combustion control equipment and operational requirements for each unit. The expert(s) shall prepa re a report describing the re commended control equipment and operational requirements for ea ch unit, including an explanation of the reasons that such equipment and requirements constitute demonstrated state of -the-art NO x combustion control technology . No later than 180 days after the effective date of this Dec ree, PNM shall submit the report to Plaintiffs and the Department. The report shall be reviewe d pursuant to Section IX (Approvals). (ii) Upon approval by Plaintiffs a nd the Department, PNM shall install and operate NO x combustion control technology to meet the following NO x emission limits. (iii) The thirty (30) da y rolling ave rage emission rate for NO x for each of San Juan Units 1, 2, 3, and 4 shall not exceed 0.3 0 lb./MMBt u. For pu rposes of calcula ting the thirty (30) day r olling average, NO x emissions f or the fir st three ( 3) hours o f a cold s tartup after co al is fed to the boiler shall be capped at 0.30 lb./MMBtu. Cold startup is defined as a startup whe n the boiler is at ambient indoor temperature measured at the time fue l is first fed to the boiler. No later than sixty (60) day s after the first twelve (12) months of operation of the new NO x-14- combustion control technology installed at each unit, PNM shall submit a report to Plaintiffs and the Department (a) identify ing the daily a verage NO x emission rate for each unit for every operating day in the period and the thirty (30) day rolling a verage emission rate for eve ry calendar day of the period, (b) describing the perf ormance of the NO x control technology at each unit, and ( c) eval uating t he extent to which the 0.30 lb./MM Btu limit c an be low ered at each un it based on the performance of ea ch unit during the first twelve (12) months of operation of the new NO x combustion control technology . The report shall be reviewed pursuant to the procedure in Section IX ( Approvals). Upon approval of Plaintiffs and the Department, the 0.30 lb./MMBtu limit shall b e adjuste d to a lowe r limit for the unit if the data gather ed during the first twelve ( 12) months of opera tion indica te that a g iven unit is capable of meetin g a lowe r limit, provided, however, that any final NO x limit for a given u nit shall a dd a ten ( 10) perc ent margin of safety to the most re presentative thirty ( 30) day ave rage emission rate achieved dur ing the first twelve (12) months of operation. (iv) PNM shall report any e xceedance of the NO x limits described above in the next quarterly repor t following the exceedance. (v) Compliance with NO x emission limits imposed by this Decree shall be determined on a unit-specific basis using data from NOx CEMS install ed and op erated in accord ance wi th 40 C.F.R . Part 75 a nd any other ap plicable require ment. (c) SO 2 (i) PNM shall ta ke those measure s necess ary to reduc e SO 2 emissions at San Juan to achieve and maintain the emission limits below. (ii) The annu al rolling average SO 2 percentage reduction for San Juan Units 1, 2, 3, and 4 shall not be less than ninety (90) percent for each unit.-15- (iii) The seve n (7) day average emission rate of SO 2 at San Juan Units 1, 2, 3, and 4 shall not exceed 0.250 lb./MMBtu for each unit, calculated as a bloc k average as measure d by SO 2 CEMS located downstream of the scrubber outlet and any scrubber by-pass return. For purposes of calc ulating the block average, SO 2 emissions f or the fir st three ( 3) hours o f a cold startup after coal is fed to the boiler shall be cappe d at 0.250 lb./MMBtu. Cold startup is defined as a startup when the boiler is at ambient indoor temperature mea sured at the time fuel is first fed to the boiler. (iv) PNM sh all r epor t any exce edance of the li mits descr ibed abov e in the next quarterly r eport following the exceedance. (v) SO 2 CEMS shall b e used to d emonstra te complia nce with t hese require ments and shall be in stalled a nd opera ted in ac cordanc e with the provision s of this Decre e, 40 C.F .R. Part 75 and any other ap plicable require ment. (d) Mercury (i) PNM shall de sign activated c arbon inj ection te chnolog y ( or compa rable mercury reduction technology ) for San Juan Units 3 and 4 for the purpose of maximizing mercury reduction, within the physical a nd operational constraints of each unit, including the pol lu ti on c ont rol equ ip men t t o be ope rat ed a t ea ch u ni t af ter th e de adl in es i n S ect io n VIII (“phy sical and operat ional con straints” ). No late r than one ye ar afte r the ef fective date of t his Decree, PNM shall submit a report to Plaintiffs and the Department descr ibing such design and the relevant phy sical and operational constraints of each unit. The re port shall be reviewed pursuant to Section IX (Approvals). (ii) Within the deadlines established under Section VII (Construction Complianc e Deadl ines), PN M shall inst all and op erate the mercu ry

control te chnolog y, i nstall-16- mercur y CEMs, and establish op erating procedu res to maxim ize mercu ry

reducti on for Un its 3 and 4 during a test period of one and one ha lf (1 1⁄2 ) yea rs from the commencement of operation of the mercury reduction technology on the first unit. No later than ninety ( 90) days af ter such test period, PNM shall submit a report to Plaintiffs and the Department presenting the re sults of PNM’s efforts to reduce mercury emissions and identifying a nd discussing the bases for operational parameters to achieve maximum mercury reduction, taking into account the physical and ope rat io nal con st rai nt s of eac h un it . Th e re por t s hal l b e re vi ewe d pu rsu ant to Sec ti on IX (Approvals). (iii) Upon approval by Plaintiffs a nd the Department, the operational parameters for Units 3 and 4 shall become enfor ceable under this Decree. PNM shall repor t compliance with the operational parameters in the quar terly repor ts required by this Dec ree. (iv) PNM shall install and operate similar mercury reduction technology and shall be subject to similar, enforceable operational par ameters at Units 1 and 2, to achieve maximum mercury reduction, taking into account the physica l and operational constraints of each un it. PNM shal l report c omplianc e with the operati onal par ameters in the qua rterly reports required by this Decree. VI. EMISSIONS MONITORING 10. PNM shall maintain, calibrate, and operate COMS to measure the opacity of emissions a t San Juan in c omplianc e with the require ments of it s Opera ting Per mit and 40 C. F.R. Part 60. 11. To the extent PNM intends to change the current location of the COMS in the stack of a unit to a location after the baghouse and before the SO 2 scrubbe r, PNM sha ll reque st approval from EPA for any such alternative COMS location pursuant to 40 C.F.R. Parts 60 and-17- 75 and any other applicable requirement. PNM shall provide copies of any requests for approval and subsequent related correspondence and documents to Plaintiffs and the Department no later than seven (7) day s after their submittal or receipt. Until EPA approves an alternative loc ation, PNM shall us e the cur rent COMS t o determ ine compl iance with the opa city limit. 12. After the effe ctive da te of this D ecree , PNM shall m aintain, calibra te, and op erate CEMS at San Juan Units 1, 2, 3, and 4 to measure accurately and continuously the emissions of SO 2 , NO x , and tota l exhaust fr om each u nit in full c omplianc e with the require ments of 4 0 C.F.R. Parts 60 a nd 75, inc luding r equirements for heat inpu t rate me asureme nts. Nothin g here in shall preclude PNM from installing, certify ing, and operating integr ated CEMS equipment to measure SO 2 , NO x , opacity, or any combination thereof. 13. PNM shall ensure that any modifica tion to a COMS or CEMS necessitated by PNM’s actions under or in furtherance of this Decr ee shall be completed prior to the operation of the SO 2 , NO x , and PM controls required by this Decree. 14. PNM shall r ecertif y a ll COMS and CE MS at San Juan as requi red by 40 C.F.R. Parts 60 and 75. 15. No lat er than seven (7) op erati ng days aft er the f irst passa ge of fl ue gas t hrough the SO 2 controls for each unit, PNM shall calculate for all hours during which pollutants are dischar ged fr om the stac k in each operati ng day : (a) the SO 2 hourl y average per centage reducti on, and ( b) the SO 2 hourly aver age emission rate. 16. No later than thirty (30) days afte r the first startup following construction of NO x controls for each unit, PNM shall begin to calculate the hourly average NO x emission rate. 17. For any hour that valid, quality-assure d CEM data for a unit is unavailable, PNM shall ca lculate t he SO 2 and NO x emissions f or the uni t in accordance with the mis sing dat a-18- substitution procedures in 40 C.F.R. Part 75. 18. Except for COMS or CEMS breakdowns, repairs, calibration checks, and zero and span adjustments as provided in 40 C.F.R. § 60.13(e), PNM shall be bound by the data from its COMS and NO x and SO 2 CEMS, and shall not ch alleng e the ac curacy or cred ibility of its COMS and NO x and SO 2 CEMS in any action under this Decr ee. VII. CONSTR UCTION COM PLIANC E DEADLINES 19. PNM shall de sign, contract, construct, and com plete all PM, SO 2 , NO x , and

mercur y c ontrols re quired by this Decr ee acc ording t o the following schedule, s ubject on ly to force ma jeure under Se ction XI II : Activity Deadline (a) San Juan Unit 4. (i) Commence physical, on-site c onstruction of PM, SO 2 , NO x , and mer cury controls 10/31/06 (ii) Complete construction and initiate startup of PM, SO 2 , NO x , and mer cury controls 10/31/07 (iii) Provide op portunity for on-s ite 10/31/07 - 12/31/07 inspection by Plaintiff s and Dep artment (b) San Juan Unit 3. (i) Commence physical, on-site c onstruction of PM, SO 2 , NO x and merc ury controls 4/30/07 (ii) Completion of construction and initiate startup o f PM, SO 2 , NO x , a nd me rc ur y controls 4/30/08 (iii) Provide op portunity for on-s ite 4/30/08 - 6/30/08 inspection by Plaintiff s and Dep artment-19- (c) San Juan Unit 1. (i) Commence physical, on-site c onstruction of PM, SO 2 , and NO x controls 10/31/07 (ii) Complete c onstruct ion and ini tiate startup o f PM, SO 2 , and NO x controls 10/31/08 (iii) Provide op portunity for on-s ite 10/31/08 - 12/31/08 inspection by Plaintiff s and Dep artment (iv) Commence construction of mer cury controls 9/30/09 (v) Complete construction and initiate mercury controls 12/31/09 (d) San Juan Unit 2. (i) Commence physical, on-site c onstruction of PM, SO 2 , and NO x controls 3/31/08 (ii) Complete construction and initiate startup o f PM, SO 2 , and NO x controls 3/31/09 (iii) Provide op portunity for on-s ite 3/31/09 - 5/31/09 inspection by Plaintiff s and Dep artment (iv) Commence construction of mer cury controls 9/30/09 (v) Complete construction and initiate mercury controls 12/31/09 (vi) Provide op portunity for on-s ite 12/31/09 - 3/31/10 inspection by Plaintiffs and Depa rtment. VIII. EMISSI ON LIMITATI ON COMP LIANCE DEA DLINES 20. PNM’s obligation to c omply with the O pacity, PM, SO 2 , and NO x emission limitations, and mercury emission reduction operational requirements described in Section V (Emission C ontrols a nd Lim itations)shall commence on the date s listed be low, subje ct only to force ma jeure under Section XII I (Force Majeure).-20- (a) Opacity, PM, NO x and SO 2 Emission L imits : (i) For Unit 4, no later than ninety (90) days a fter completion of construction of PM, NO x , and SO 2 controls, or by Dec ember 31, 2007, whichever date is earlier. (ii) For Unit 3, no later than ninety (90) days a fter completion of construction of PM, NO x , and SO 2 controls, or by June 30, 2008, whichever date is earlier. (iii) For Unit 1, no later than ninety (90) days a fter completion of construction of PM, NO x , and SO 2 controls, or by Dec ember 31, 2008, whichever date is earlier. (iv) For Unit 2, no later than ninety (90) days a fter completion of construction of PM, NO x , and SO 2 controls, or by May 31, 2009, whichever date is earlier. (b) Mercur y Re duction O perational Requir ements (i) For Units 3 and 4, no later than sixty (60) days afte r approval of operational requirements for each unit, or by June 30, 2009, whichever date is earlier. (ii) For Units 1 and 2, no later than (45) day s after completion of construction of mercury controls, or by January 30, 2010, whichever date is earlier. IX. APP ROVALS 21. After receiving any report for approval under this Decre e, Plaintiffs and the Department shall have twenty (20) business days fr om receipt of the report to provide written notice of approval or disapproval, in whole or in part. By notice from Plaintiffs or the Department to PNM, this deadline may be extended by no more than twenty (20) additional business days. I f the deadline is so extended then any compliance deadline related to such approval shall be extended for the same number of day s. If Plaintiffs and the Department do not provide timely written notice, the r eport shall be deemed to be approved. I f the Plaintiffs and/or the Department disapprove a report, in whole or in par t, the disapproving party shall state the-21- reason(s) and justification(s) for its disapproval. No later than twe nty (20) business day s after receipt of the written notice of disapproval, PNM shall either (a ) accept the disapproving party ’s position, (b) resolve the issue with the disapproving party and obtain agreement from the remaining party , or (c) initiate the procedure in Section XI I (Dispute Resolution). The resolution of a disa pproval by one of the t hree methods shal l constitut e approval for the purpose o f this Decree. Notwithstanding the above proc edure, the Parties shall make their best effort to resolve issues regarding the approva l of reports through informal consultation and without resort to the procedure in Section XII (Dispute Resolution). Plaintiffs reserve their right to seek from PNM their re asonable costs and fees in e valuatin g and ot herwise address ing PNM’ s report s under th is Section IX (Approvals). PNM rese rves its right to oppose any request for costs and fees by Plaintiffs. X. REPORTING 22. No later than forty-five (45) day s after the end of each quarter, beginning with the first quarter of 2005 and continuing until this Decree is terminate d under Section XXIV, PNM shall provide a quarterly report to the Plaintiffs and the Department containing the informa tion for the immediately pre ceding quarter that PNM is required to repor t on a quarterly basis under this Decree. 23. Each quarterly report shall begin with a cover letter, sig ned by a re presentative of PNM, that summarizes the information contained in the report. 24. Each qua rterly report shall inclu de, for e ach San Jua n unit: (a) a descr iption of c onstruct ion deadl ines ach ieved, pr ojects c ompleted , progr ess made towa rd meetin g futur e deadli nes, and any actual, expected or reas onably forese eable de lay s;-22- (b) identification of all excess opacity r eadings and any exceedances of the current SO 2 and NO x emission limits described in Section XI (Stipulated Penalties). (c) identification of each failure to meet a standar d or emission limitation or operational requirement described in Section V (Emission Controls and Limitations) or a deadline in Section VI II

(Emission Limitation Compliance Deadlines); (d) the quar terly report d escribe d in 40 C.F. R. § 60.7; (e) after installation of the PM controls, the required quarterly reports for PM and opacity ; (f) after in stallation of the SO 2 controls , PNM shall r eport on a quarter ly b asis all seven (7 ) day block ave rages that exceeded the applicable emission limitation. PNM shall a lso repor t each da y f or which the annua l rolling SO 2 percen tage reduction average emission rate a t any unit exceeded the a pplicable reduction require ment durin g the pr ior quar ter. I n addition , PNM shall r eport on a quarter ly basis a list of the hours excluded from the determination of compliance with the applicable emission limitation. (g) after installation of the NO x controls, the required quarterly reports for NO x emissions; (h) after in stallation of the me rcury control e quipment, the requ ired qua rterly reports for mercury (Hg) emissions; and (i) a descr iption of a ny s tipulated penaltie s due or pa id to the De partmen t, or into

escrow , includin g the re ason for such pay ment(s) a nd the tota l amount he ld in escrow at the end of each quar ter.-23- 25. If Pla intiffs or the Depa rtment re quest cla rificat ion of any quarter ly r eport, including a request for information not provided in such repor t, PNM promptly shall provide such cla rificat ion or inf ormation. If the informa tion is req uested in electro nic form P NM shall provide i t to the exte nt availa ble. PNM shall reta in all doc uments re lating to compliance with th is Dec ree , i ncl udi ng c ont rac ts , pl ans , an d sp eci fic ati ons , i n ac cor dan ce w it h S ect io n XV III (Record Preservation). Upon request of the De partment, PNM shall supply a copy of such document s, subject to a clai m of conf idential b usiness in formation under the New Mexico Air Quality Control Act. Upon reque st of the Plaintiffs, PNM shall provide a copy of suc h document s as long as Plaintif fs execut e a rea sonable c onfident iality agree ment that s trictly limits rel eas e of th e co nfi den ti al b usi nes s i nfo rma ti on t o P lai nt iff s an d t hei r co uns el a nd e xp ert s. If Plaintiffs do not agree with PNM’s claim of confidential business information Plaintiffs may invoke the dispute resolution procedure in Section XII (Dispute Resolution). 26. PNM’s obligation to provide quarterly reports is in addition to any other notification or report required by this Decree or by PNM’s operating permit, unless such notification or report is required on a quarterly basis. Nothing in this Decree shall be interpreted to excuse or diminish PN M’s oblig ation to pr ovide any other not ice rep ort, or ot her docu ment to the public or local , state or federa l officia ls. XI. STIPU LATED PEN ALTIES 27. PNM shall pay stipulated penalties for e ach failure by PNM to comply with a ter m o r co ndi ti on o f th is Dec ree , un les s ex cus ed b y Sec ti on X III (Fo rce Maj eur e) o r Se cti on X II (Dispute Resolution ). All stipu lated pe nalties shall be ca lculated on a per u nit, per d ay basis, unless expressly stated otherwise. Stipulated pena lties shall not be assessed for any reason other than those set forth in this Section.-24- 28. For each failure to comply with a construction commencement deadline: (a) 1st through 30th day a fter deadline - $750 (b) 31st through 60th day a fter deadline - $5,000 (c) Beyond 60th da y - $10,000 29. For each failure to comply with a construction completion deadline: (a) 1st through 30th day a fter deadline - $3,000 (b) 31st through 60th day a fter deadline - $10,000 (c) Beyond 60th da y - $20,000. 30. PNM shall ma intain a r ecord of all stipula ted pena lties that accrue pursuant to paragraph 28 for ea ch unit. If PNM meets the construction completion deadline f or a unit, PNM shall not be obligated to pay any ac crued stipulated penalties under this paragra ph for that unit. If PN M does not meet the c onstruct ion comple tion dead line for a unit, PNM shall pay all accrued penalties for that unit, including interest pursua nt to 28 U.S.C. § 1961(a). 31. For each failure to comply with a PM emission limit, $2,500, with the period of noncompli ance commencing with the f ailure o f a PM stac k test and ending when a PM s tack tes t demonstrates compliance, except for periods when the unit is not in operation. 32. For ea ch excess opacity reading from San Jua n Units 1, 3 , and 4, excluding only

excess re adings c aused by a startup or shutdow n, or that occurr ed when b oth the boi ler and a ll fans that move flue gas in the unit were off, stipulated pe nalties shall be determined on a quarterly ba sis for the period of time beginning with the quarter in which this Decree is entered until the f irst quar ter in whi ch flue g as first p asses thr ough the baghou se for th at unit: (a) Unit 1: Stipulated penalties will be due for each excess opacity reading above the following-25- quarter ly th reshold a mounts: 150 excess opa city reading s/quarte r for 200 5; 125 exce ss opacity rea dings/quarter for 2006; 100 excess opacity readings/quarter for 2007; and 75 excess opacity rea dings/quarter for 2008 and thereaf ter. (b) Units 3 and 4: Stipulated penalties will be due for each excess opacity reading above the following quarterly thre shold amounts, by unit: 14 excess opacity readings/quarter for 2005; 12 excess opacity rea dings/quarter for 2006; 10 excess opacity readings/quarter for 2007; and 8 excess opacity re adings/quarter for 2008 and therea fter. (c) The stipul ated penalty for any quarter ly e xcess opac ity r eading s at San Juan Units 1, 3 or 4 shall equal $1,000 per excess opacity reading above the values specif ied above, except tha t the stipul ated penalty for the f irst ten ( 10) perc ent of the excess opa city reading s above the quarte rly threshol ds for Un it 1 only shall be $ 750. Pay ment of a ll stipulated penalties pursuant to this paragraph shall be made, without written dema nd therefor into a commercially available escrow account, within thirty (30) days of the end of the applicable quarter. 33. For every calendar y ear, beginning on January 1, 2005 for each unit, if the average number of excess opac ity reading s per quarter for four (4) quar ters is less than the applicable quarterly threshold as set forth above, all stipulated penalties and interest that have accrued in the escrow acc ount during that ye ar shall be refunded to PNM. However, if the average number of excess opac ity reading s per quarter in that calendar y ear is greater than the applicable quarterly threshold as set forth above, all stipulated penalties and interest that have accrued in the escrow acc ount during that ye ar shall be paid to the Department. I n any ca lendar year in whic h there are less than 365 day s before flue gas first passes throug h the baghouse of any unit, the number of e xcess opacity reading s for the balance of the 365 day s shall be determined by the f ollowing formula: N = (A ÷ 90)D; where: N = Number of excess opacity readings added to complete the 365 day period; A = Number o f excess o pacity reading s from the most rece nt prece ding co mplete quarter for the applicable unit; and-26- D = Number of day s needed to complete 365 day period. 34. For each failure to comply with an opacity standar d after the applicable final compliance date until termination of this Decree, the stipulated penalty shall be $2,000 per excess reading, excluding excess emissions caused by startup, shutdown, malfunction, and emergency . 35. For ea ch failu re to com ply with a cur rent SO 2 emission limit at San Juan between the effective date of this Decree and the date specified in Paragra ph 20(a), stipulated penalties shall be $ 1,500 per violation, excluding excess em issions excu sed by the Depa rtment pur suant to Section 20 .2.7 NMAC. Such SO 2 emission li mits are: (a) For all four (4) units combined, 13,000 pounds per hour on a rolling 3-hour average, (b) For all four (4) units combined, 0.55 lb./MMBtu on a rolling 30-day average, and (c) For all four (4) units combined, 0.46 lb./MMBtu on a rolling hourly annual average. (d) For Units 1, 3 and 4, by unit, 1.2 lb./MMBtu on a r olling 3-hour average. (e) For Unit 2, seven ty- two (72) p ercent SO 2 reduction on a 30-day rolling average. 36. For ea ch failu re to com ply with any SO 2 emission limit in Section V (Emission Controls and Limitations) after the date specif ied in Section VIII (Emission Limitation Compliance Deadlines), $5,000 per violation. 37. For each failure to comply with a current NO x emission limit at San Juan between the effective date of this Decree and the date specified in Section VIII (Emission Limitation Compliance Deadlines), excluding only excess readings caused by a startup or shutdown, stipulated penalties shall be determined on a quarterly basis as provided in paragraph 38. The-27- current NO x emission limits are: (a) For all four (4) units combined, 9,000 pounds per hour on a rolling twe nty-four (24) hour period. (b) For Units 1, 3 and 4, by unit, 0.45 lb./MMBtu on a r olling three (3) hour averag e. (c) For Unit 2, 0.7 lb./MMBtu on a rolling three (3) hour ave rage. 38. The quarterly excess NO x emission th resholds , by unit, are as follow s: (a) Unit 1: Stipulated penalties will be due for each hour of excess NO x emissions above the following quarterly threshold amounts: 20 excess NO x emissions/quarter for 2005; 15 excess NO x emissions/quarter for 2006 and thereafter. (b) Units 2, 3 a nd 4: Stipulated penalties will be due for each hour of excess NO x emissions above the following quarterly threshold amounts: 2 excess NO x emission/quarter for each unit for 2005 and thereafter

. (c) The stipulated penalty for any quarte rly excess NO x emission a t San Juan sha ll equal $5,000 per each hour of excess NO x emission above the values specified above. Payment of all stipulated penalties pursua nt to this paragraph shall be made, without written demand therefor into a commercially available escrow account, within thirty (30) days of the e nd of the applicable quarter. 39. For every calendar y ear, beginning on January 1, 2005 for each unit, if the average number of hourly excess NO x emissions per quarter for four (4) quarter s is less than the applicable quarterly threshold as set forth above, all stipulated penalties and interest that have accrued in the escrow acc ount during that ye ar shall be refunded to PNM. However, if the average number of hourly excess NO x emissions per quarter in that calendar y ear is greater than the applicable quarterly threshold as set forth above, all stipulated penalties and interest that have accrued in the escrow acc ount during that ye ar shall be paid to the Department. I n any ca lendar year in whic h there are less than 365 day s before the NO x emi ss io n l im it dea dl in e in Sec ti on V III-28- (Emission L imitation Compliance Deadline s) applic able to a ny u nit, the nu mber of e xcess hour ly NO x emissions f or the ba lance of the 365 da ys shall be de termined by t he follow ing for mula: N = (A ÷ 90)D; where: N = Number of excess hourly N O x emissions added to complete the 365 day period; A = Number of excess hourly N O x emissions f rom the most recen t prece ding co mplete quarter for the applicable unit; and D = Number of day s needed to complete 365 day period. 40. For each failure to comply with the NO x emission li mit after the date specifie d in Section VIII (Emission Limitation Compliance Dea dlines), $5,000 per violation. 41. For ea ch failu re to com ply with a mer cury reducti on opera tional re quireme nt, $5,000 per violation. 42. For the failure to comply with any other mater ial requirement in the Decree, $1,000 per violation. 43. Plaintiffs and the Department will consult regarding de mands for stipulated pe na lt ie s. Pl ai nt if fs or th e D ep ar tm en t m ay d em an d s ti pu la te d p en al ti es in di vi du al ly o r j oi nt ly, and the fact that one party does not make a demand for stipulated penalties shall not be relevant to the merits of any other demand. Plaintiffs and the Department shall provide to the other a copy of any written demand for stipulated penalties at the same time that the demand is served on PNM. 44. No later than thirty (30) days afte r receipt of a written demand for stipulated penalties, PNM shall pay the stipulated pena lties to the Department. Payment shall be by check, made paya ble to the State of New Mexico, and delivered to:-29- Office of General Counsel New Mexico Environment Department Post Office Box 26110 Santa Fe, New Mexico 87502 The che ck sha ll be a ccomp anied by a trans mitt al let ter ref erenci ng thi s Decre e and at tachi ng a copy of the wr itten demand. PNM shall send a copy of the check and transmittal letter to the legal representatives for the Plaintiffs. 45. If PN M disputes the writte n demand f or stipula ted pena lties, no la ter than thirty (30) day s after r eceipt, PNM shall pa y the stipulat ed pena lties into a commerc ially availab le interest-bearing escrow a ccount (interest computed consistent with 28 U.S.C. § 1961(a)) and invoke the procedures in Section XII (Dispute Resolution). 46. PNM’s liability for stipulated penalties shall not depend on the da te that Plaintiffs or the De partmen t send or t hat PNM re ceives t he writte n demand. Stipulated penaltie s shall apply during any period of dispute resolution; provided, however, that PNM may request that the Court red uce or e liminate s tipulated penaltie s that ac crue dur ing the d ispute re solution pe riod if th e C ou rt de em s t ha t P NM pu rs ue d t he di sp ut e i n g oo d f ai th an d n ot fo r t he pu rp os e o f d el ay, without regard to whether PNM prevails in the dispute. 47. Plaintiffs and the Department reserve all rig hts to pursue any other r emedies for violations of this Decree to which they are entitled, including injunctive relief. XII. DISP UTE RESOLUTIO N 48. Any dispute identified in this Decre e to be resolved by dispute resolution shall be sub jec t t o t he p roc edu res in th is Sec ti on. The di spu te r eso lu ti on p roc edu re o f th is Sec ti on X II (Dispute Resolution) shall be the exclusive mechanism to resolve such disputes. All other disputes regarding this Decre e shall be resolved only in the context of an action by Plaintiffs or-30- the Department to enforce this Decree

. 49. The dispute resolution procedure shall be invoked upon the giving of written notice by one of the parties to all others advising of a dispute and stating the re asons therefor. The par ty r eceivin g such notice sha ll acknow ledge r eceipt o f the notic e and the Parties shall

ex pe di ti ou sl y sc he du le a m ee ti ng to be gi n i nf or ma l n eg ot ia ti on s n ot la te r t ha n f ou rt ee n ( 14 ) d ays from the receipt of such notice. Such period of informal ne gotiations shall not extend beyond thirty (30) cale ndar days f rom the date of the first meeting of the parties, unless the pa rties agree to extend this period. 50. If the partie s are una ble to re solve the dispute th rough the informa l proces s describ ed above , the dispu ting par ty waives its r ight to f urther d ispute the issue unle ss it files a petition with the Cour t describ ing the d ispute an d serves it on the other part ies. The other par ty or parties to the dispute shall have thirty (30) days a fter receipt of the petition to file and serve a written response. In judicial proc eedings under this Section, the petitioning party shall carry the burdens of proof and persuasion. This Court shall have exclusive jurisdiction over any disputes under this Section XII (Dispute Resolution). 51. The invocation of the dispute resolution procedure under this Section shall not extend, postpone, or affect any obligation of any Party under this Dec ree not directly in dispute, unless the Parties or the Court agree otherwise. Stipulated pena lties with respect to the disputed matter shall continue to accrue, but pay ment shall be stayed pe nding resolution of the dispute. 52. Plaintiffs reserve the right to seek from PNM their rea sonable costs, including attorne y a nd expert w itness fe es, expend ed in any dispute r esolution process . PNM rese rves its right to object to any such request by Plaintiffs.-31- XIII. FORCE MAJEURE 53. For the purpose of this Decree, “ force ma jeure ” is defined as any event arising from ca uses bey ond the control of PN M or any entity controlle d by PNM, or it a gents, contractors, or employ ees, that delay s, prevents, or can reasonably be anticipated to delay or prevent compliance with this Decree and that could not be ove rcome with due diligence. 54. PNM’s una nticipate d or incr eased c osts or ch anged financi al circu mstance s shall not constitute force ma jeure . The absence of an approval under this Decree, or the Department’s failure to issue a permit if one is legally required before implementing the obliga tion at issue, or the stay of a pe rmit if issued, shall not constitute force ma jeure , unless PNM demonstrates that (a) it submitted a timely and complete a pplication or other request for approval, (b) it complied with all requirements for such application or other request for approval, and (c) it diligently and timely responded to all reque sts for additional information. 55. If any event occurs which causes or may cause a delay by PNM in meeting any deadline of this Decree, whether or not a ttributable to force ma jeure , PNM shall give written notice to Plaintiffs and the Department no later than ten (10) business day s after the date on which PNM first knew or reasonably should have known that the event might cause a delay

. PNM shall be deemed t o have no tice of a ny e vent that a contra ctor or s ubcontra ctor retained to implement this Decree had or reasonably should have had, unless through the affirmative misrepresentation of such contractor or subcontrac tor PNM was not provided such notice. No later than fifteen (15) day s after service of the written notice, PNM shall submit a written report to Plaintif fs and the Department provi ding (a ) the re asons for the dela y, ( b) the an ticipate d length of the delay, ( c) a description of the obligation has been or would be delaye d, (d) a description of all actions taken a nd to be ta ken to pre vent or min imize the de lay , (e) a t imetable for those-32- actions, (f) a sc hedule f or comply ing with a ny d eadline in this Dec ree whic h has bee n or would be af fe ct ed by t he ev en t, an d ( g) th e r at io na le an d s up po rt in g d oc um en ta ti on fo r a cl ai m, if an y, that the delay wa s or would be attributable to force ma jeure

. 56. If Plaintiffs and the Depar tment agree that the delay has been or would be caused by force ma jeure , the Part ies may stipulate to an exten sion of the deadline for the le ngth of t ime necessary to accommodate the force ma jeure . In establishing a new de adline, Plaintiffs and the Department shall t ake into c onsidera tion PNM’s e vidence regar ding we ather, o utage s chedule s, and remobilization requirements. If the Parties c annot agree to the length of the extension, PNM may invoke the proc edure in Section XII (Dispute Resolution). 57. If Plaintiffs and/or the Depar tment do not agree that the delay or anticipated delay ha s b ee n o r w ou ld be ca us ed by force ma jeure , no later than twenty ( 20) days af ter receiving PNM’s wri tten rep ort, Plain tiffs and /or the De partmen t shall noti fy PNM in writi ng of thi s decision . The dec ision shall be final and bindin g on PNM u nless PNM in vokes the procedu re in Section XII (Dispute Resolution). 58. PNM shall have the burden of proving that any delay or a nticipated delay ha s be en or wo ul d b e c au se d b y force ma jeure (including proving that PNM gave timely notice), and of proving the duration and extent of any delay(s). 59. PNM’s material failure to comply with the notification and reporting requirements of this Section XII I (Force Majeure) shall constitute a waiver of any claim of force majeure for the delay or anticipated delay at issue. 60. The extension of one deadline based on a specific eve nt shall not constitute an extension o f any other de adline un less ag reed by the Partie s or dire cted by this Court.-33- 61. If PNM fails to comply with a deadline in this Decree due to force ma jeure , PNM shall be excused only from comply ing with that deadline and from pay ing stipulated penalties fo r f ai li ng to co mp ly w it h t ha t d ea dl in e, an d o nl y fo r t ha t p er io d o f t im e e xc us ed by force majeure

. XIV. MOD IFICATI ON 62. Any material modifica tion of this Decree shall be in writing, signed by the Parties, and approved by this Court. Non-material modifications of this Decree shall be made upon writt en agr eement o f the Par ties and shall be f iled with the Court. XV. NOTIC E TO PARTIES 63. Whenever this Decr ee requ ires a Pa rty to provide notice or submit a do cument to another Party, the notice or document shall be sent to the following persons in electronic ( .pdf) format unless the size or other characteristic of the notice or document require the submission of a h ar d c op y. For Plaintiffs Steven Sugarman, Esq. Belin & Sugarman 618 Paseo de Peral ta Santa Fe, NM 87501 Phone: 505-983-1700 Fax: 505-983-0036 sugarman@bs-law.com Reed Zars, Esq. Attorney at Law 910 Kear ney St. Laramie, WY 82070 Phone: 307-745-7979 Fax: 307-745-7999 rzars@lariat.org George Hay s, Esq. Attorney at Law 236 West Portal Avenue, #110 San Francisco, CA 94127 Phone: 415-566-5414 Fax: 415-731-1609 georgehay s@mindspring.com For the Department Sandra Ely, Chief Air Quality Bur eau New Mexico Environment Department 2048 Galisteo Street Santa Fe, NM 87505 Phone: 505-827-1494 Fax: 505-827-1523 sandra_ely @nmenv.state.nm.us-34- Eric Ames, Esq. Office of General Counsel New Mexico Environment Department 1190 St. Francis Dr. P.O. Box 26110 Santa Fe, NM 87502-6110 Phone: 505-827-2982 Fax: 505-827-1628 eric_ames@nmenv.state.nm.us For PNM Rick Alvidrez, Esq. Keleher & McL eod, P.A. P.O. Drawer AA Albuquerque, NM 87103 Phone: 505-346-9150 Fax: 505-346-1370 rla@keleher-law.com Randy E. Br ogdon, Esq. Tro ut man San der s LLP Bank of America Plaza, Suite 5200 600 Peachtree St. NE Atlanta, GA 30308-2216 Phone: (404) 885-3147 Fax: (404) 962-6892 Randy.Brogdon@troutmansanders.com Hugh Smit h Senior Vice President, Energy Resources Public Service Company of Ne w Mexico 2401 Aztec Rd, NE Albuquerque, NM 87107 Phone: (505) 855-6296 Fax: (505) 855-6327 HSmith1@pnm.com 64. A Party may change the name, title, address, telephone number, fax number, or email address of a contact person identified above by providing wr itten notice to the other Parties. Such change shall not constitute a modification for the purpose of Section XIV (Modification).-35- XVI. ENTRY AND INSP ECTION 65. Nothing in this Decree shall be construed to limit or impair the Department’s authority under the a pplicable laws and regulations to enter and inspec t San Juan. XVII. AVA ILABILITY OF INFORM ATION 66. Nothing in this Decree shall be construed to limit or impair the Department’s authority under the a pplicable laws and regulations to require PNM to provide informa tion regarding San Juan. XVIII. REC ORD PRE SERVATION 67. For at le ast ten (1 0) years af ter term ination of this Decr ee, PNM shall mainta in all records, documents, data, and other information rela ted to this Decree. Nothing in this Decree shall be con strue d as a wa iver o f any atto rney clien t, att orney work produ ct, or other privi lege that PNM mig ht otherw ise posse ss. XIX. COMPLIANCE WITH APPLICABLE LAWS 68. PNM shall un dertake the oblig ations re quired by this Decr ee in ac cordanc e with applica ble fede ral, stat e, and loc al laws a nd reg ulations. 69. This Decree is no t a permit . The emis sion limits a nd relat ed requi rements contained in this Decree, however, shall be incor porated into permits consistent with Section XXI II (Int egrat ion with Per mits). This Decre e does no t relieve PNM of its r esponsibi lity to comply with all feder al, state, and local laws and regulations and orde rs of this Court. 70. Notwithstanding the foregoing, if a ny curre nt or future federal, state, or local law or regulation conflicts with, or have the eff ect of relaxing, any requirement in this Decree, the more stringent requirement shall apply

.-36- XX. EFFECT OF SETTLEMENT 71. This Decree constitutes a complete and final rele ase of all civil claims for violations alleged in the complaints, draft compliance orders, a nd second notice of intent to sue through the effective date of this Dec ree. 72. Nothing in this Decree shall be construed to cre ate any r ights in or grant any cause of action to any person not a Party to this Dec ree. The preceding se ntence shall not be construed to waive or nullify any rig hts that a person not a signatory to this Decree may have under ap plicable law. Plain tiffs and the Depa rtment expr essly reserv e all rig hts, defe nses, claims, demands, and causes of action that they might have against PNM with respect to any matter, transaction, or occurrence relating to San Juan that is not addressed in this Decree. PNM expressly reserve s all rights and defenses which it may have to any c laim, demand, or cause of action r elating to San Juan that is not ad dressed in this Dec ree. Th e Partie s expressly reserv e all rights, defenses, claims, demands, and cause s of action which each Party may have a gainst any person not a Party to this Dec ree with respect to any matter, t ransaction, or oc curren ce rela ting to San Juan. Nothing in this Decree shall be construed as a waiver of any privileg e by a Party

. 73. As long as PNM remains in compliance with the requirements in this Decre e, Plaintiff s and the D epartme nt covena nt not to sue PNM, its off icers, e mploy ees, ag ents, successors, or assigns for matters alleg ed in the complaints, draft compliance orders, and second notice of intent to sue. Nothing herein shall prevent Plaintiffs or the Depa rtment from seeking any legal or equita ble reme dy t o enforc e the re quireme nts of this D ecree . This cov enant not to sue does not pertain to any matters not alleged in the complaints, draft compliance orde rs, or second notice of intent to su e. Plaintif fs and the Department expre ssly reserv e all rig hts, defenses, claims, demands, and causes of ac tion which they may have against PNM with respect-37- to any matter, tra nsaction, or occurrence that was not alleg ed in the complaints, draft compliance orders, or second notice of intent to sue. PNM represents and warrants that it has not notified Plaintiffs or the Department of any claims or alleged violations that are not included in the matters alleged in the complaint, draft compliance or ders, or second notice of intent to sue at San Juan, and Plaintiffs and the Department represent and warr ant that they are not presently awa re of any cla ims or alleged violations at San Juan that are not included in the matters alleged in the complaint, draft compliance orders, or second notice of intent to sue. 74. Nothing herein shall pre vent the D epartme nt from ta king ap propria te action to address conditions at San Juan that constitute an emergency situation or that present an immediate threat to public health or the environment. 75. This covenant not to sue shall survive the termination of this Decree as an agree ment betw een PNM, Pl aintiffs and the D epartme nt. This De cree shall not be used to establish the liability of PNM in any action, except to enforce the provisions of this Decree. 76. Plaintiffs Grand Canyon Trust a nd Sierra Club, and the Department, but not the Attorney Genera l acting to repre sent the in terests o f reside ntial and small business customers, agree not to contest, appeal or other wise challenge a request by any owner of San Juan to recover the costs to install and operate the pollution control equipment described in this Decree bef ore the New Mexico Public Regulation Commission (“NMPRC”) or any other rate-making regula tory agenc y. PN M’s oblig ations in th is Decre e shall no t be aff ected by whether any costs associated with the pollution control equipment are deemed recove rable by the N MPRC or any other rate-making reg ulatory ag ency. XXI. RETEN TION OF JU RISDICTION 77. The Court shall retain jurisdiction of this matter for the purpose of implementing-38- and enforcing the terms and conditions of the De cree and adjudicating disputes under Section XII (Dispute Resolution) until termination of the Decree. XXII. ENFORCEMENT 78. This Decree is a n enforc eable do cument. If PNM viola tes any require ment of thi s Decre e, Plaintif fs and/or the Depa rtment ma y r equest a ny l egal or equitabl e remed y f rom this Court to achieve full compliance with such requirement. PNM reser ves all rights and defenses to an enforcement action by Plaintiffs or the Department not expressly pre cluded by this Decr ee, and nothin g in this D ecree shall con stitute a waiver of such rig hts or def enses. XXIII. IN TEGRATION WITH PERM ITS 79. All requirements set forth in Section V (Emission Controls and Limitations) and Sec ti on V I (Em is si ons Mon it ori ng) , i ncl udi ng a ll app li cab le d efi ni ti ons in Sec ti on II (Definitions), shall be incorporated as applicable re quirements into San Juan’s Operating Permit. For incorporation of these applicable re quirements into PNM’s operating permit, the requirements of this Decree shall be modified such that the r ole of Plaintiffs and the Department is assumed by the Depa rtment. 80. No later than one h undred a nd eigh ty ( 180) day s after t he effe ctive da te of this Decree, PNM shall submit an application to revise its NSR permit to authorize the construction of pollution control equipment required by Section V (Emission Controls and Limitations) of this Decr ee, if le gally require d. PNM shal l consult w ith the De partmen t to ensur e that the permit application is administratively and technic ally complete. Plaintiffs may only challeng e a provision in such pe rmit to the extent it is not consiste nt with, or is not addr essed by , this Decree. 81. PNM shall incorporate all applicable requirements in the Sections describe d-39- above at such time as it is required to renew its Operating Permit for San Juan; provided, however, that PNM ma y se ek to modif y its Operati ng Permi t after t he first r enewal to incorporate any NO x limit or mer cury operati onal req uiremen ts to the exte nt they became applica ble afte r such re newal. T he Depa rtment sha ll include in the re vised ope rating permit those emis sion limits a nd other r equirements in the curren t operat ing and NSR permits ; provided, however, the Department shall not relax any limit or requirement of this Decree. PNM shall consult with the Department to ensure that the permit application is administratively and technic ally complete . Plaintiff s may only challen ge a pr ovision in s uch perm it to the exte nt it is not consistent with, or is not addressed by, this Dec ree. 82. PNM shall pr ovide a c opy of each permit ap plication to Plaintif fs at the s ame time it is filed with the Department. 83. After termination of this Decree, PNM shall not, in any subsequent application for a modified or renewed Title V permit, seek to revise a ny applicable r equirement in the Sections described above that is to be incorporated into a Title V permit to the extent any such revision would re nder suc h requir ement les s string ent. This a greement shall s urvive a s an enforceabl e obligation between PNM, and Plaintiffs and the Department. XXIV. TERM INATION OF CONSENT DEC REE 84. This Decree shall remain an enforc eable order of the Court until Plaintiffs and the Department agr ee, or the Court de termines in respon se to a pe tition by a Party, that (a ) all requirements of the Decree have been satisfied, (b) PNM has installed all controls and has been in material compliance with all emission limitations for twelve (12) consecutive months (except for the mercury operational requirements for Units 1 and 2 for which six (6) months compliance will be sufficient), (c) all applicable require ments of the Decree have been inc orporated into the-40- Operating Permit for San Juan, and (d) PNM has paid any stipulated penalties due under the Decree. Termination of this Decree shall not affect any matter expressly set forth in this Decr ee that is to survive as an agreement among or between Plaintiffs, the Department, and PNM. XXV. COSTS 85. PNM agrees that, pursuant to Section 304 of the Act, 42 U.S.C. § 7604(d), Plaintiffs are entitled to recover their reasonable costs of litigation in this action, including attorney and e xpert witness fees. The issue of the amount of such costs is reserved. If PNM and Plaintiffs are unable to reach an ag reement regarding the amount of such costs, Plaintiffs may petition the Court for a determination of such amount. Furthermore, Plaintiffs expressly reserve their right t o peti tion the Co urt fo r recov ery of addi tion al cos ts and fees i ncurre d after they sign this Decree, and PNM reserves its right to oppose a ny such petition. XXVI. SEVE RABILITY 86. If any provision or authority of this Decr ee is held by a c ourt of competent jurisdiction to be invalid, if that provision or authority is severable from the remainder of the Decree, the remainder of the Decree shall remain in force a nd shall not be affected by the court’s order and ruling. I f the application of this Decree to any Party or circ umstance is held by a c ourt of competent jurisdiction to be invalid, the application of this Decree to other Parties or ci rc um st an ce s s ha ll re ma in in fo rc e a nd sh al l n ot be af fe ct ed th er eb y. XXVII. HEA DINGS 87. Any section or pa ragraph heading in this Dec ree is provided solely as a matter of convenie nce to the reader and shall not be con strued to alter the meaning of any provision of this Decree.-41- XXVIII. N OTICE OF D ECREE 88. The Parties agree to coopera te in good faith in order to obtain the Court's review and entry of this Decree. 89. Pursuant to 42 U.S.C. § 7604(c)(3), this Decree shall be lodged w ith the Court and simulta neously present ed to the U nited State s for re view and comment f or a per iod not to

ex cee d fo rty f iv e (4 5) d ays. Aft er t he r evi ew p eri od, th e De cre e ma y be e nt ere d by t he C our t. If the Decree is not entered by the Court, the Parties shall retain all rights they had in this litigation or under state law before the lodging of the Decree. 90. The Parti es agr ee to coo perate in good f aith to obta in prompt r eview of this Decree by the United States and the Court. If the United States or the Court c omment on the Decree, and as a conseque nce the Decree is not entered, the Par ties agree to discuss such comments and attempt to make such revisions as necessary to obtain entry of the De cree. XXIX. EF FECTIVE DATE 91. This effective date of this Decree sha ll be the date on which the Court approves and enters this Decree. XXX. SIGNATORIES AND ASSIGNMENT 92. Each undersigned represe ntative of a Party to this Dec ree certifies that he or she is fully authorized to enter into the terms and c onditions of this Decree and to execute and legall y bi nd such Pa rty to this doc ument. 93. The Pa rties agree no t to o ppose entry of t his De cree by thi s Cou rt or c halle nge any provision of this Decr ee. 94. If PNM proposes to sell or transfer all or part of its ownership interest in any of San Juan, prior to such sale or transfer PNM shall advise the purchaser or transferee in writing of