This Instrument Grants a Security Interest By a Utility







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                         TEXAS-NEW MEXICO POWER COMPANY

                                       to

                           Chase Bank of Texas, N.A.,
                                   as Trustee



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



                          First Supplemental Indenture
                           Dated as of January 1, 1999



                          Supplemental to the Indenture
                           dated as of January 1, 1999



                       Establishing a series of Securities
                     designated 6 1/4% Senior Notes Due 2009


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         FIRST  SUPPLEMENTAL  INDENTURE,  dated as of  January  1, 1999  (herein
called the "First  Supplemental  Indenture"),  between  Texas-New  Mexico  Power
Company,  a corporation  duly organized and existing under the laws of the State
of Texas  (hereinafter  called the "Company") and Chase Bank of Texas,  N.A., as
Trustee under the Original Indenture  referred to below (hereinafter  called the
"Trustee").

                                   WITNESSETH:

         WHEREAS,  the Company has  heretofore  executed  and  delivered  to the
Trustee  an  indenture  dated as of  January  1, 1999  (hereinafter  called  the
"Original  Indenture"),  to provide for the issuance from time to time in one or
more series of its debentures,  notes,  bonds or other evidences of indebtedness
(herein  called  the  "Securities"),  the  form and  terms  of  which  are to be
established as set forth in Sections 2.1 and 3.1 of the Original Indenture;

         WHEREAS,  Section 9.1 of the Original Indenture  provides,  among other
things, that the Company and the Trustee may enter into indentures  supplemental
to the Original  Indenture for, among  purposes,  (1) securing the Securities in
accordance  with  Section  3.1 and (2)  establishing  the form and  terms of the
Securities  of any series as  permitted  in Sections 2.1 and 3.1 of the Original
Indenture;

         WHEREAS, the Company desires to create a series of the Securities in an
aggregate  principal  amount of $175,000,000 to be designated the "6 1/4% Senior
Notes Due 2009" (the "Senior Notes"),  and all action on the part of the Company
necessary  to  authorize  the  issuance of the Senior  Notes under the  Original
Indenture and this First Supplemental Indenture has been duly taken;

         WHEREAS, subject to the provisions hereof, the Company may issue one or
more series of Senior Note Mortgage Bonds (as  hereinafter  defined) and deliver
such series to the  Trustee to hold in trust for the  benefit of the  respective
Holders  from time to time of the  Related  Series  of  Securities  (as  defined
herein) and any payment by the Company of  principal  of,  premium,  if any, and
interest  on, the Senior  Notes  will be applied by the  Trustee to satisfy  the
Company's  obligations  with respect to the principal of,  premium,  if any, and
interest on, the Related Series of Senior Note Mortgage Bonds;  and, pursuant to
the terms and provisions  hereof, the Company may require the Trustee to deliver
to the Company for cancellation any and all of the Related Series of Senior Note
Mortgage Bonds held by the Trustee; and

         WHEREAS,  all acts and things necessary to make the Senior Notes,  when
executed  by the Company  and  completed,  authenticated  and  delivered  by the
Trustee as  provided  in the  Original  Indenture  and this  First  Supplemental
Indenture,  the valid and binding  obligations  of the Company and to constitute
these  presents  a  valid  and  binding  supplemental  indenture  and  agreement
according to its terms, have been done and performed;

         NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

         That  in  consideration  of the  premises  and of  the  acceptance  and
purchase of the Senior  Notes by the holders  thereof and of the  acceptance  of
this trust by the Trustee,  the Company  covenants  and agrees with the Trustee,
for the equal benefit of holders of the Senior Notes, as follows:


                                   ARTICLE ONE

                                   Definitions

         The use of the terms and  expressions  herein is in accordance with the
definitions,  uses and  constructions  contained in the Original  Indenture,  as
amended and supplemented hereby, and the form of Senior Notes attached hereto as
Exhibit A.


                                   ARTICLE TWO

             Terms and Issuance of the 6 1/4% Senior Notes Due 2009

         Section 2.1. Issue of Senior Notes. A series of Securities  which shall
be   designated   the  "6  1/4%  Senior  Notes  Due  2009"  shall  be  executed,
authenticated  and delivered in accordance  with the provisions of, and shall in
all respects be subject to, the terms, conditions and covenants of, the Original
Indenture, as amended, and this First Supplemental Indenture (including the form
of Senior Note set forth in Exhibit A). The  aggregate  principal  amount of the
Senior  Notes  which  may  be  authenticated  and  delivered  under  this  First
Supplemental  Indenture  shall not, except as permitted by the provisions of the
Original Indenture, exceed $175,000,000.

         Section 2.2. Form of Senior Notes;  Incorporation of Terms. The form of
the  Senior  Notes  shall be  substantially  in the form of  Exhibit A  attached
hereto. The terms of such Senior Notes are herein  incorporated by reference and
are part of this First Supplemental Indenture.

         Section 2.3.  Depositary for Global Securities.  The Depositary for any
Global  Securities  of the series of which this  Security is a part shall be The
Depository Trust Company in the City of New York.

         Section 2.4.  Place of Payment.  The Place of Payment in respect of the
Senior  Notes will be at the  principal  office or agency of the  Company in the
City of New York, State of New York or at the office or place of business of the
Trustee or its successor in trust under the Original  Indenture,  which,  at the
date hereof, is located at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201.

          Section 2.5. Related Series of Senior Note Mortgage Bonds. The Related
Series of Senior Note Mortgage Bonds for the Senior Notes shall be the Company's
Senior Note Mortgage Bonds, Series X, 6 1/4% due 2009.

         Section 2.6.  Restrictions on Liens.  The covenant  provided by Section
10.10 of the Original Indenture shall be applicable to the Senior Notes from and
after the Release Date,  provided,  that no Event of Default has occurred and at
such time is continuing under the Original Indenture.

         Section  2.7.  Restrictions  on Sale and  Leaseback  Transactions.  The
covenant provided by Section 10.11 of the Original Indenture shall be applicable
to the Senior Notes after the Release Date.



                                  ARTICLE THREE

                        Amendments to Original Indenture

         Section 3.1. Section 1.1 of the Original Indenture is hereby amended by
adding the following definitions:

                  "Expert"  means any officer of the Company  familiar  with the
         terms of the First Mortgage Indenture and this Indenture, any law firm,
         any investment banking firm, or any other Person reasonably  acceptable
         to the Trustee.

                  "First  Mortgage  Bonds" means all first mortgage bonds issued
         by the  Company and  outstanding  under the First  Mortgage  Indenture,
         other than Senior Note Mortgage Bonds.

                  "First Mortgage Indenture" means the Indenture of Mortgage and
         Deed of Trust,  dated November 1, 1944, by and between Community Public
         Service Co. (now known as the Company) and City National Bank and Trust
         Company of Chicago,  Chicago, Illinois (whose current successor is U.S.
         Bank  Trust,  N.A.)  (as  of  the  date  hereof,  the  "First  Mortgage
         Trustee"), as supplemented and modified from time to
         time
                  "First  Mortgage  Trustee" means the Person serving as trustee
         at the time under the First Mortgage Indenture.

                  "Related Series of Securities",  when used in reference to any
         series of Senior Note  Mortgage  Bonds,  means the series of Securities
         which,  in  connection  with its original  authentication  and issuance
         pursuant  to Section 3.3  hereof,  such series of Senior Note  Mortgage
         Bonds were delivered to the Trustee pursuant to Section 14.1 hereof.

                  "Related Series of Senior Note Mortgage  Bonds",  when used in
         reference to any series of Securities,  shall mean the series of Senior
         Note Mortgage Bonds  delivered to the Trustee  pursuant to Section 14.1
         hereof in connection  with the initial  authentication  and issuance of
         Securities pursuant to Section 3.3 hereof.

                  "Release  Date" means a date chosen by the Company which shall
         be not  earlier  than the  later of (i) the date as of which  all First
         Mortgage Bonds,  other than the Senior Note Mortgage  Bonds,  have been
         retired through  payment,  redemption,  or otherwise  (including  those
         First  Mortgage  Bonds  "deemed  to be paid" or as to which the  entire
         indebtedness is paid and discharged  within the meaning used in Article
         18 of the First  Mortgage  Indenture)  at, before or after the maturity
         thereof,  and (ii) the date as of which no Liens on any Property of the
         Company  or  any   Subsidiary   exists   (whether   such  Liens  secure
         Indebtedness  of the Company or any  Subsidiary  or any other  Person),
         except  that this clause (ii) shall not apply to any Lien to the extent
         described  in clauses (a) through (k) of Section  10.10 of the Original
         Indenture or in the last paragraph of such Section 10.10.

                  "Senior  Note  Mortgage  Bonds" shall mean any bonds issued by
         the Company  under the First  Mortgage  Indenture  and delivered to the
         Trustee pursuant to Section 14.1 hereof.

         Section 3.2. Prior to the Release Date,  Section 1.5(a) of the Original
Indenture  is hereby  amended  by  inserting  the  words ", the  First  Mortgage
Trustee" following the words "by any Holder".

         Section  3.3.  Prior to the Release  Date,  Section 3.1 of the Original
Indenture is hereby amended in the following manner:

                  1.  Section  3.1(l) is amended by  deleting  the ";" after the
                  word  "Securities"  and adding "and any change in the right of
                  the Trustee or the  requisite  Holders of such  Securities  to
                  declare the principal  amount thereof due and payable pursuant
                  to Section 5.2;"

                  2. Section 3.1(p) is amended by deleting the word "and" at the
                  end of the Section;

                  3. The following Section 3.1(q) is added, to follow Section 
                  3.1(p):

                  "(q) if prior to the  Release  Date,  the  designation  of the
         series of Senior Note Mortgage Bonds being  delivered to the Trustee in
         connection with such series of Securities, if any; and"

                  4. Former Section 3.1(q) is relettered as Section 3.1(r).

         Section 3.4. Prior to the Release Date, the third  paragraph of Section
3.3 of the Original  Indenture is hereby  amended by (a) adding "(i)" before the
words "a Company Order" on the third line of the  paragraph,  and (b) by adding,
after  the  words  "so  offered;"  on the  eighth  line of such  paragraph,  the
following words:

         "(ii) an Officers' Certificate stating that (x) the Company is not, and
         upon the  authentication  by the  Trustee of the series of  Securities,
         will not be in default under any of the terms or covenants contained in
         the Indenture,  (y) all  conditions  that must be met by the Company to
         issue Securities under the Indenture have been met, and (z) if prior to
         the  Release  Date,  the series of Senior  Note  Mortgage  Bonds  being
         delivered to the Trustee meets the requirements of Section 14.9 hereof,
         and  (iii) if prior to the  Release  Date,  a  series  of  Senior  Note
         Mortgage Bonds meeting the requirements of Section 14.9 hereof;"

         Section 3.5. Prior to the Release Date, the fourth paragraph of Section
3.3 of the Original Indenture is hereby amended in the following manner:

                  1. Clause (b) of the fourth paragraph is amended by deleting 
                  the word "and" at the end of the clause.

                  2. Clauses (d) and (e) are added after clause (c), as follows:

                           "(d) if prior to the  Release  Date,  that the Senior
                  Note  Mortgage  Bonds  to  be  delivered  to  the  Trustee  in
                  connection with the issuance of such series of Securities have
                  been duly  authorized,  and that  such  Senior  Note  Mortgage
                  Bonds, when  authenticated and delivered by the First Mortgage
                  Trustee and issued by the Company in accordance with the terms
                  of the First Mortgage  Indenture,  will  constitute  valid and
                  legally  binding  obligations  of the Company,  enforceable in
                  accordance  with  their  terms,  except as may be  limited  by
                  bankruptcy, insolvency, reorganization, moratorium, fraudulent
                  conveyance  or transfer or other  similar laws  relating to or
                  affecting the rights of creditors  generally and except as the
                  enforceability  thereof  is  subject  to  the  application  of
                  general principles of equity (regardless of whether considered
                  in a  proceeding  in  equity  or at law),  including,  without
                  limitation,   (i)  the  possible  unavailability  of  specific
                  performance,  injunctive  relief or any other equitable remedy
                  and (ii) concepts of materiality,  reasonableness,  good faith
                  and fair dealing,  and except as  enforcement  of remedial and
                  procedural  provisions  thereof  may be  limited by state laws
                  affecting  the  remedies for the  enforcement  of the security
                  provided for in the First  Mortgage  Indenture;  and that such
                  Senior Note Mortgage  Bonds will be entitled to the benefit of
                  the First Mortgage  Indenture,  equally and ratably,  with all
                  other First Mortgage Bonds outstanding  thereunder,  except as
                  to any sinking fund provisions; and

                           (e) if  prior to the  Release  Date,  that the  First
                  Mortgage Indenture and any required financing  statements have
                  been duly filed and  recorded in all places  where such filing
                  or recording is necessary for the  perfection or  preservation
                  of the lien of the  First  Mortgage  Indenture,  and the First
                  Mortgage  Indenture  constitutes a valid and  perfected  first
                  lien  upon  the  property  purported  to be  covered  thereby,
                  subject  only to  Permitted  Encumbrances  (as  defined in the
                  First Mortgage Indenture);"

                  3. The proviso  following  clause (e) is amended (1) by adding
                  after  the  words  "Opinion  of  Counsel"  the  words  ",  the
                  Officers'  Certificate,  the  certificate of an Expert and the
                  Senior Note Mortgage Bonds"; and (2) by replacing "clauses (b)
                  and (c)" with "clauses (b), (c), (d) and (e)".

                  4. The word "and" at the end of subclause (i) is deleted,  and
                  the  following  subclauses  (iii) and (iv) are inserted  after
                  subclause (ii):

                                    "(iii) if prior to the  Release  Date,  when
                           the terms of the Senior Note Mortgage Bonds have been
                           established  in  accordance  with the  instrument  or
                           instruments  creating the series of which such Senior
                           Note Mortgage Bonds are a part,  that the Senior Note
                           Mortgage  Bonds to be  delivered  to the  Trustee  in
                           connection  with  the  issuance  of  such  series  of
                           Securities will have been duly  authorized,  and that
                           such Senior Note Mortgage Bonds,  when  authenticated
                           and  delivered  by the  First  Mortgage  Trustee  and
                           issued by the Company in accordance with the terms of
                           the First Mortgage  Indenture,  will constitute valid
                           and  legally  binding  obligations  of  the  Company,
                           enforceable in accordance with their terms, except as
                           may   be   limited   by    bankruptcy,    insolvency,
                           reorganization,  moratorium, fraudulent conveyance or
                           transfer  or  other   similar  laws  relating  to  or
                           affecting  the  rights  of  creditors  generally  and
                           except as the  enforceability  thereof  is subject to
                           the  application  of  general  principles  of  equity
                           (regardless of whether  considered in a proceeding in
                           equity or at law), including, without limitation, (i)
                           the possible  unavailability of specific performance,
                           injunctive  relief or any other equitable  remedy and
                           (ii) concepts of  materiality,  reasonableness,  good
                           faith and fair dealing,  and except as enforcement of
                           remedial  and  procedural  provisions  thereof may be
                           limited by state laws  affecting the remedies for the
                           enforcement of the security provided for in the First
                           Mortgage   Indenture;   and  that  such  Senior  Note
                           Mortgage Bonds will be entitled to the benefit of the
                           First Mortgage Indenture,  equally and ratably,  with
                           all   other   First   Mortgage   Bonds    outstanding
                           thereunder, except as to any sinking fund provisions;
                           and

                                    (iv) if prior to the Release Date, that when
                           the  First   Mortgage   Indenture  and  any  required
                           financing   statements   have  been  duly  filed  and
                           recorded in all places where such filing or recording
                           is necessary for the  perfection or  preservation  of
                           the lien of the First Mortgage  Indenture,  the First
                           Mortgage   Indenture  will  constitute  a  valid  and
                           perfected  first lien upon the property  purported to
                           be  covered   thereby,   subject  only  to  Permitted
                           Encumbrances   (as  defined  in  the  First  Mortgage
                           Indenture);"

         Section  3.6.  Prior to the  Release  Date,  Article 3 of the  Original
Indenture is hereby amended by adding, after Section 3.12, the following Section
3.13:

                  "Section  3.13.  Payment  of  Securities.  The  Trustee  shall
         receive the Senior Note Mortgage  Bonds from the Company as provided in
         this Indenture and shall hold the Senior Note Mortgage  Bonds,  and any
         and all sums  payable  thereon  or with  respect  thereto  or  realized
         therefrom,  in trust for the benefit of the Holders of the  Securities,
         as herein provided.  Subject to Article Five hereof,  all payments made
         by the  Company  to the  Trustee  on a series of Senior  Note  Mortgage
         Bonds,  if any,  shall be  applied  by the  Trustee  to pay,  when due,
         principal of,  premium,  if any, and interest on the Related  Series of
         Securities  and, to the extent so applied,  shall satisfy the Company's
         obligations on such  Securities.  Notwithstanding  the  foregoing,  the
         Company's obligation to make payments of principal of, premium, if any,
         and interest on any series of Senior Note Mortgage Bonds shall be fully
         satisfied by making timely payments of principal of,  premium,  if any,
         and interest on the Related Series of Securities."

         Section  3.7.  Prior to the  Release  Date,  Article 4 of the  Original
Indenture is hereby amended by adding,  after Section 4.2, the following Section
4.3:

          "Section 4.3. Release of Related Series of Senior Note Mortgage Bonds.

                  (a) If the  obligations  of the Company to make  payment  with
         respect to any series of Securities  are satisfied and  discharged,  in
         whole or in part,  pursuant to this  Article 4, the  Related  Series of
         Senior Note Mortgage Bonds shall be deemed to be paid and discharged in
         a principal  amount equal to the principal amount of the Related Series
         of Securities paid and discharged pursuant hereto.

                  (b) If the  Company  shall  have paid or caused to be paid the
         principal  of and  premium,  if any,  and  interest on any Security (or
         portion  thereof),  as and when  the same  shall  have  become  due and
         payable  or  the  Company  shall  have  delivered  to the  Trustee  for
         cancellation  any  Outstanding  Security  (or  portion  thereof),  such
         Security (or portion  thereof)  shall cease to be entitled to any lien,
         benefit or security under this Indenture. Upon a Security of any series
         (or portion  thereof)  ceasing to be  entitled to any lien,  benefit or
         security  under this  Indenture,  the obligation of the Company to make
         payment with respect to principal of and premium,  if any, and interest
         on a  principal  amount of the Related  Series of Senior Note  Mortgage
         Bonds  equal to the  principal  amount  of such  Security  (or  portion
         thereof)  shall  be  satisfied  and  discharged  and such  Senior  Note
         Mortgage  Bonds  (or  portion   thereof)  shall  cease  to  secure  the
         Securities in any manner,  and the Trustee shall release and deliver to
         the Company such Senior Note Mortgage Bonds (or portion thereof).

                  (c) Upon the satisfaction and discharge of this Indenture, the
         Trustee  shall at the request of the Company  return to the Company all
         Senior Note Mortgage  Bonds and all other property and money held by it
         under this Indenture and determined by it to be in excess of the amount
         required to be held under Section 4.1 hereof."

         Section 3.8.  Prior to the Release  Date,  Sections 5.1 of the Original
Indenture is hereby  amended by replacing  the "." at the end of clause (h) with
"; or" and by adding, after such clause (h), the following clauses (i) and (j):

                           "(i) a  "default"  as defined  in the First  Mortgage
                  Indenture  has  occurred  and is  continuing,  and  the  First
                  Mortgage  Trustee,  the  Company or Holders of at least 33% in
                  aggregate  principal  amount  of the  Securities  at the  time
                  outstanding  shall have given  written  notice  thereof to the
                  Trustee; or

                           (j)  any  Event  of  Default   under  any  series  of
                  Securities  issued  pursuant to this Indenture or any event of
                  default,  as  defined  in any  other  indenture,  mortgage  or
                  instrument under which there may be issued,  or by which there
                  may be secured or evidenced,  any  Indebtedness of the Company
                  (whether such  Indebtedness  now exists or shall  hereafter be
                  created or incurred)  shall occur and shall consist of default
                  in the payment of such  Indebtedness  at the maturity  thereof
                  (after giving effect to any applicable  grace period) or shall
                  result in  Indebtedness  becoming  or being  declared  due and
                  payable prior to the date on which it would  otherwise  become
                  due and  payable,  and such default in payment is not cured or
                  such acceleration shall not be rescinded or annulled within 10
                  days after  written  notice to the Company from the Trustee or
                  to the Company and to the Trustee from the Holders of at least
                  10% in aggregate  principal  amount of the  Securities of that
                  series at the time Outstanding; provided that if, prior to the
                  declaration of  acceleration of the maturity of the Securities
                  of that  series  or the  entry  of  judgment  in  favor of the
                  Trustee in a suit  pursuant to Section 5.3, such default shall
                  be  remedied  or cured by the Company or waived by the holders
                  of such  Indebtedness,  then the Event of Default hereunder by
                  reason thereof shall be deemed likewise to have been thereupon
                  remedied,  cured or waived without  further action on the part
                  of either the Trustee or any of the Holders of the  Securities
                  of that series, and provided further, that, subject to Section
                  6.1 and 6.2, the Trustee  shall not be charged with  knowledge
                  of any such  default  unless  written  notice of such  default
                  shall have been  given to the  Trustee  by the  Company,  by a
                  holder  or an agent of a holder of any such  Indebtedness,  by
                  the  trustee  then  acting   under  any   indenture  or  other
                  instrument under which such default shall have occurred, or by
                  the Holders of at least five  percent in  aggregate  principal
                  amount  of  the   Securities   of  that  series  at  the  time
                  Outstanding."

         Section  3.9.  Prior to the Release  Date,  Section 5.2 of the Original
Indenture is hereby amended as follows:

         1. A new paragraph is added,  to follow the first paragraph of Section
         5.2, as follows:

                  "Upon the Securities  being declared to be or becoming due and
         payable,  the  Trustee  can  immediately  file with the First  Mortgage
         Trustee a written  demand for  redemption  of all Senior Note  Mortgage
         Bonds  pursuant  to  the  applicable  provisions  of  the  supplemental
         indenture to the First Mortgage Indenture."

         2. The paragraph  following the new second  paragraph of Section 5.2 is
         amended (i) by adding after the word  "provided,"  the words "and prior
         to the mailing to the Trustee by the First Mortgage  Trustee of a firm,
         valid and  unconditional  notice to the Trustee of the  acceleration of
         all of the First Mortgage Bonds issued and outstanding  under the First
         Mortgage  Indenture," and (ii) by adding after the word  "consequences"
         the words "(including if given the written demand for redemption of all
         Senior Note Mortgage Bonds)".

         3. Clause (b) of Section 5.2 is amended by deleting  the "." at the end
         of such clause (b) and replacing it with "(including any defaults under
         the First Mortgage  Indenture,  as evidenced by notice thereof from the
         First Mortgage Trustee to the Trustee).".

         Section 3.10.  Prior to the Release  Date,  Section 5.3 of the Original
Indenture is hereby amended in the following manner:

         1. By adding after the word "unpaid" in the second paragraph of Section
         5.3 the  following  words:  "(including,  prior to the Release Date, to
         exercise  any  rights to that end it may have as  holder of the  Senior
         Note Mortgage Bonds)".

         2. By adding  after the first  occurrence  of the word  "rights" in the
         third paragraph of Section 5.3 the following words: "(including,  prior
         to the Release  Date,  its rights as holder of the Senior Note Mortgage
         Bonds)".

         Section  3.11.  Prior to the Release  Date,  subclause (a) of the first
paragraph of Section 5.4 of the Original  Indenture is hereby amended by adding,
after the word  "(including"  the words ", prior to the Release Date, any claims
of the Trustee as holder of Senior Note Mortgage Bonds and including".

         Section 3.12.  Prior to the Release  Date,  Section 5.5 of the Original
Indenture  is hereby  amended  by  adding,  after the words  "Securities  of any
series" on the second line of such Section 5.5, the words "(including,  prior to
the Release Date, its rights as holder of the Senior Note Mortgage Bonds),".

         Section 3.13.  Prior to the Release  Date,  Section 7.3 of the Original
Indenture is hereby amended as follows:

         1. The word "and" at the end of Section 7.3(a)(6) is deleted.

         2. The "." at the end of Section 7.3(a)(7) is replaced with "; and".

         3. The following Section 7.3(a)(8) is added after Section 7.3(a)(7):

                           "(8) any  release,  or release and  substitution,  of
                  property  subject  to the  lien of  this  Indenture  (and  the
                  consideration  therefor,  if any) which it has not  previously
                  reported."

         Section 3.14. Prior to the Release Date, Section 8.1(a) of the Original
Indenture is hereby amended in the following manner:

         1. In Section 8.1(a), the letter "(i)" is added after the word
"assume,".

         2. The ";" at the end of Section  8.1(a) is replaced by "," followed by
         the words: "and (ii) if such consolidation, merger, conveyance, sale or
         other  transfer  occurs  prior to the  Release  Date,  by an  indenture
         supplemental to the First Mortgage Indenture, executed and delivered to
         the Trustee and the First Mortgage Trustee, in form satisfactory to the
         Trustee and the First Mortgage Trustee, the due and punctual payment of
         the  principal  of (and  premium,  if any) and  interest  on all of the
         Senior Note Mortgage Bonds and the performance of every covenant of the
         First Mortgage  Indenture on the part of the Company to be performed or
         observed;".

         Section 3.15.  Section 9.1(j) of Article 9 of the Original Indenture is
hereby amended by deleting the "." after the words "fully  registered  form" and
inserting  in its  place  the  word ";  and" and by  adding  the  following  new
paragraph (k) after paragraph (j):

                  "(k)  after the  Release  Date,  to amend  this  Indenture  to
         eliminate  any  provisions  related to the Senior Note  Mortgage  Bonds
         which are no longer applicable."

         Section 3.16. Prior to the Release Date, Section 9.2(l) of the Original
Indenture  is hereby  amended by  replacing  the ";" at the end of such  Section
9.2(l) with "," followed by the words: "or impair the interest  hereunder of the
Trustee in the Senior Note Mortgage Bonds, or prior to the Release Date,  reduce
the principal  amount of any series of Senior Note  Mortgage  Bonds to an amount
less than the principal  amount of the Related Series of Securities or alter the
payment provisions of such Senior Note Mortgage Bonds in a manner adverse to the
Holders of the Securities;".

         Section  3.17.  Prior to the Release  Date,  Article 10 of the Original
Indenture  is hereby  amended by adding,  after  Section  10.13,  the  following
Section 10.14:

                  "Section 10.14. Opinions of Counsel. The Company shall deliver
      to the Trustee:

                  (a)  promptly   after  the  execution  and  delivery  of  this
          Indenture  and of any  indenture  supplemental  to this  Indenture but
          prior to the Release Date, an Opinion of Counsel  either stating that,
          in the opinion of such counsel,  this  Indenture or such  supplemental
          indenture  and any  financing  or  continuation  statements  have been
          properly recorded and filed so as to make effective and to perfect the
          security  interest  of the  Trustee  intended  to be  created  by this
          Indenture  for the  benefit  of the  Holders  from time to time of the
          Securities in the Senior Note Mortgage Bonds, and reciting the details
          of such action,  or stating that,  in the opinion of such counsel,  no
          such action is  necessary  to perfect or make such  security  interest
          effective and stating what, if any, action of the foregoing  character
          may  reasonably  be  expected  to become  necessary  prior to the next
          succeeding  March  1 to  maintain,  perfect  and  make  such  security
          interest effective; and

                  (b) on or before March 1 of each year,  beginning in 1999, and
          prior to the Release Date, an Opinion of Counsel  either  stating that
          in the opinion of such counsel  such action has been taken,  since the
          date of the most recent Opinion of Counsel furnished  pursuant to this
          Section 10.14(b) or the first Opinion of Counsel furnished pursuant to
          Section  10.14(a)  hereof,  with  respect  to the  recording,  filing,
          rerecording,   or  refiling  of  this  Indenture,   each  supplemental
          indenture  and  any  financing  or  continuation  statements,   as  is
          necessary to maintain and perfect the security interest of the Trustee
          intended  to be  created  by this  Indenture  for the  benefit  of the
          Holders  from  time to  time  of the  Securities  in the  Senior  Note
          Mortgage  Bonds,  and reciting the details of such action,  or stating
          that in the  opinion of such  counsel no such action is  necessary  to
          maintain and perfect such security  interest and stating what, if any,
          action of the foregoing character may reasonably be expected to become
          necessary  prior to the next succeeding  March 1 to maintain,  perfect
          and make such security interest effective."

         Section 3.18.  Prior to the Release Date,  Section 13.2 of the Original
Indenture is hereby  amended by replacing the "." after the word  "Defeasance")"
in the  first  sentence  of such  Section  with the  following  words:  "and the
obligation  of the Company to make payment with respect to the  principal of and
premium,  if any,  and  interest on the Related  Series of Senior Note  Mortgage
Bonds  shall be  satisfied  and  discharged,  as  provided  in the  supplemental
indenture or indentures  to the First  Mortgage  Indenture  creating such Senior
Note Mortgage Bonds and the Senior Note Mortgage Bonds shall cease to secure the
related Securities in any manner.".

         Section 3.19. The Original Indenture is hereby amended by adding, after
Section 13.6, the following Article 14:

                                   "ARTICLE 14

                           Senior Note Mortgage Bonds

            Section 14.1. Delivery of Senior Note Mortgage Bonds to the Trustee.

                  Subject to the  provisions  of Section 4.1 and  Section  14.10
         hereof,  the Company (a) shall,  from time to time prior to the Release
         Date,  deliver  to the  Trustee,  upon  the  issuance  of a  series  of
         Securities  hereunder,  Senior Note  Mortgage  Bonds  conforming to the
         requirements  of Section 14.9 hereof,  fully  registered in the name of
         the Trustee,  in trust for the benefit of the Holders from time to time
         of the  Securities  issued under this Indenture as security for any and
         all obligations of the Company under the Securities, including, but not
         limited  to, (1) the full and prompt  payment of the  principal  of the
         Securities  when  and as the  same  shall  become  due and  payable  in
         accordance  with the  terms and  provisions  of this  Indenture  or the
         Securities, either at the stated maturity thereof, upon acceleration of
         the maturity  thereof or upon  redemption,  and (2) the full and prompt
         payment of any  interest on the  Securities  when and as the same shall
         become due and payable in accordance  with the terms and  provisions of
         this  Indenture or the  Securities  and (b) shall deliver  concurrently
         therewith  to the Trustee  the  certificate  of the Expert  required by
         Section 14.6 hereof.

                  Section 14.2. Receipt.

                  The Trustee shall accept and acknowledge receipt of the Senior
         Note Mortgage  Bonds and Expert  certificate  described in Section 14.1
         hereof upon the delivery thereof in accordance with said Section 14.1.

                  Section 14.3. Senior Note Mortgage Bonds Held by the Trustee.

                  The  Trustee,  as holder of the Senior  Note  Mortgage  Bonds,
         shall  attend  any  meeting  of  bondholders  under the First  Mortgage
         Indenture as to which it receives due notice, or, at its option,  shall
         deliver its proxy in connection  therewith.  Either at such meeting, or
         otherwise where consent of holders of First Mortgage Bonds issued under
         the First Mortgage  Indenture is sought without a meeting,  the Trustee
         shall vote all of the Senior Note  Mortgage  Bonds held by it, or shall
         consent or withhold its consent with  respect  thereto,  as directed by
         the  Holders of not less than a  majority  in the  aggregate  principal
         amount of the outstanding  Securities;  provided,  however, the Trustee
         shall not vote as such holder of any  particular  series of Senior Note
         Mortgage  Bonds in favor of, or give its consent to, any action  which,
         in the Trustee's opinion, would materially adversely affect such series
         of Senior Note Mortgage  Bonds in a manner not shared  generally by all
         other  Senior Note  Mortgage  Bonds,  except upon  notification  by the
         Trustee to the  Holders of the  Related  Series of  Securities  of such
         proposal and consent thereto of the Holders of not less than a majority
         in aggregate  principal  amount of the  outstanding  Securities of such
         series.

                  Section  14.4.  No  Transfer of Senior  Note  Mortgage  Bonds;
         Exception.

                  Except as  required  to effect an  assignment  to a  successor
         trustee  under this  Indenture  or pursuant to Section  14.5 or Section
         14.8 hereof,  the Trustee shall not sell, assign or transfer the Senior
         Note  Mortgage   Bonds  and  the  Company  shall  issue  stop  transfer
         instructions to the First Mortgage Trustee and any transfer agent under
         the First  Mortgage  Indenture to effect  compliance  with this Section
         14.4.

                  Section  14.5.  Delivery  to the  Company of All  Senior  Note
         Mortgage Bonds.

                  When  the  obligation  of the  Company  to make  payment  with
         respect to the  principal of and  premium,  if any, and interest on the
         Senior Note  Mortgage  Bonds  shall be  satisfied  or deemed  satisfied
         pursuant to Section 4.1 or Section  14.10  hereof,  the Trustee  shall,
         upon written  request of the Company and receipt of the  certificate of
         the Expert  described in Section 14.6(b) hereof (if such certificate is
         then  required  by Section  14.6(b)  hereof),  deliver  to the  Company
         without charge therefor all of the Senior Note Mortgage Bonds, together
         with such  appropriate  instruments  of  transfer  or release as may be
         reasonably  requested by the Company.  All Senior Note  Mortgage  Bonds
         delivered to the Company in accordance  with this Section 14.5 shall be
         delivered   by  the   Company  to  the  First   Mortgage   Trustee  for
         cancellation.

                  Section 14.6. Reserved.

                  Section 14.7. Further Assurances.

                  The  Company  shall  cause  this  Indenture,   any  indentures
         supplemental  to this  Indenture,  and any  financing  or  continuation
         statements to be promptly recorded and filed and rerecorded and refiled
         in such a manner and in such places, as may be required by law in order
         fully to preserve,  protect and perfect the security of the Holders and
         all  rights of the  Trustee,  and,  at its own  expense,  shall do such
         further lawful acts and things, and execute and deliver such additional
         conveyances,  assignments, assurances, agreements, financing statements
         and instruments, as may be necessary in order to better assign, assure,
         perfect and confirm to the Trustee its security  interest in the Senior
         Note Mortgage Bonds and for maintaining, protecting and preserving such
         security interest.

                  Section  14.8.  Exchange and Surrender of Senior Note Mortgage
         Bonds.

                  At any  time at the  written  direction  of the  Company,  the
         Trustee  shall  surrender to the Company all or part of the Senior Note
         Mortgage  Bonds in  exchange  for Senior Note  Mortgage  Bonds equal in
         aggregate outstanding principal amounts to, in different  denominations
         than but of the same series and with all other terms  identical to, the
         Senior Note Mortgage Bonds so surrendered to the Company.  In addition,
         at any time a Security shall cease to be entitled to any lien,  benefit
         or security  under this Indenture  pursuant to Section 4.4 hereof,  the
         Trustee shall surrender  Senior Note Mortgage Bonds as provided in this
         Section to the Company for  cancellation.  The Trustee shall,  together
         with such  Senior Note  Mortgage  Bonds,  deliver to the  Company  such
         appropriate  instruments  of  transfer  or release as the  Company  may
         reasonably request.  Prior to the surrender required by this paragraph,
         the Trustee shall receive from the Company the following,  and (subject
         to Section 6.1 hereof) shall be fully protected in relying upon, (a) an
         Officers'  Certificate stating (i) the aggregate  outstanding principal
         amount of the Senior Note Mortgage  Bonds of the series  surrendered by
         the Trustee, after giving effect to such surrender,  (ii) the aggregate
         outstanding principal amount of the Related Series of Securities, (iii)
         that the surrender of the Senior Note Mortgage Bonds will not result in
         any  default  under  this  Indenture,  and (iv)  that any  Senior  Note
         Mortgage  Bonds to be received in exchange for the Senior Note Mortgage
         Bonds being  surrendered  comply with the  provisions  of this  Section
         14.8.

                  The Company  shall not be permitted to cause the  surrender or
         exchange of all or any part of a series of Senior Note  Mortgage  Bonds
         contemplated  in  this  Section  14.8,  if,  after  such  surrender  or
         exchange,  the aggregate  outstanding  principal  amount of the Related
         Series of Securities would exceed the aggregate  outstanding  principal
         amount  of such  series  of  Senior  Note  Mortgage  Bonds  held by the
         Trustee.  Any  Senior  Note  Mortgage  Bonds  received  by the  Company
         pursuant to this Section 14.8 shall be delivered to the First  Mortgage
         Trustee for cancellation.

                  Section 14.9. Terms of Senior Note Mortgage Bonds.

                  Each series of Senior Note  Mortgage  Bonds  delivered  to the
         Trustee pursuant to Section 14.1 hereof shall have the same stated rate
         or rates of  interest  (or  interest  calculated  in the same  manner),
         Interest Payment Dates, Stated Maturity, and redemption provisions, and
         shall be in the same aggregate  principal amount, as the Related Series
         of Securities being contemporaneously issued.

                  Section  14.10.  Senior Note  Mortgage  Bonds as Security  for
         Securities.

                  Until the  Release  Date and subject to Article  Four  hereof,
         Senior Note Mortgage Bonds delivered to the Trustee, for the benefit of
         the Holders of the Securities,  shall serve as security for any and all
         obligations  of the Company under the  Securities,  including,  but not
         limited to (1) the full and prompt  payment  of the  principal  of such
         Securities  when  and as the  same  shall  become  due and  payable  in
         accordance  with the  terms and  provisions  of this  Indenture  or the
         Securities, either at the Stated Maturity thereof, upon acceleration of
         the maturity  thereof or upon  redemption,  and (2) the full and prompt
         payment of any interest on such  Securities  when and as the same shall
         become due and payable in accordance  with the terms and  provisions of
         this Indenture or the Securities.

                  Notwithstanding  anything in this  Indenture to the  contrary,
         from and after the Release Date,  the obligation of the Company to make
         payment  with  respect to the  principal  of and  premium,  if any, and
         interest on the Senior Note  Mortgage  Bonds shall be deemed  satisfied
         and discharged as provided in the supplemental  indenture or indentures
         to the First  Mortgage  Indenture  creating  such Senior Note  Mortgage
         Bonds and the Senior Note  Mortgage  Bonds shall cease to secure in any
         manner Securities  theretofore or subsequently  issued.  From and after
         the Release Date, all Securities,  whether  theretofore or subsequently
         issued,  shall be  unsecured,  and any  conditions  to the  issuance of
         Securities  that refer or relate to Senior Note  Mortgage  Bonds or the
         First  Mortgage  Indenture  shall be  inapplicable.  From and after the
         Release Date, the Company shall cause the First  Mortgage  Indenture to
         be closed and the Company shall not issue any additional First Mortgage
         Bonds or Senior Note Mortgage Bonds under the First Mortgage Indenture.
         Notice of the  occurrence  of the  Release  Date  shall be given by the
         Trustee to the  Holders of the  Securities  in the manner  provided  in
         Section  1.6 hereof not later than 30 days after the  Company  notifies
         the Trustee of the occurrence of the Release Date."


                                  ARTICLE FOUR

                                  Miscellaneous

         Section  4.1.   Execution  as   Supplemental   Indenture.   This  First
Supplemental  Indenture  is  executed  and shall be  construed  as an  indenture
supplemental  to the  Original  Indenture  and,  as  provided  in  the  Original
Indenture, this First Supplemental Indenture forms a part thereof.

         Section 4.2. Conflict with Trust Indenture Act. If any provision hereof
limits,  qualifies  or  conflicts  with  another  provision  hereof,  or  with a
provision  of the Original  Indenture,  which is required to be included in this
First Supplemental Indenture, or in the Original Indenture, respectively, by any
of the  provisions of the Trust  Indenture  Act, such required  provision  shall
control.

         Section  4.3.  Effect of  Headings.  The  Article  and Section headings
herein are for  convenience  only and shall not  affect the construction hereof.

         Section 4.4. Effect of Amendments  Effective Prior to the Release Date.
Whenever this Supplemental amends the Original Indenture during the period prior
to the Release Date,  the Original  Indenture  shall revert back to its original
form after the Release Date.

         Section 4.5.  Successors  and Assigns.  All covenants and agreements by
the Company in this First  Supplemental  Indenture shall bind its successors and
assigns, whether so expressed or not.

         Section 4.6.  Separability  Clause. In case any provision in this First
Supplemental  Indenture  or in the Senior  Notes  shall be  invalid,  illegal or
unenforceable,  the  validity,  legality  and  enforceability  of the  remaining
provisions shall not in any way be affected or impaired thereby.

         Section 4.7. Benefits of First Supplemental Indenture.  Nothing in this
First Supplemental  Indenture or in the Senior Notes, express or implied,  shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders,  any benefit or any legal or equitable  right,  remedy or claim
under this First Supplemental Indenture.

         Section  4.8.  Execution  and  Counterparts.  This  First  Supplemental
Indenture may be executed in any number of counterparts,  each of which shall be
deemed to be an original,  but all such counterparts  shall together  constitute
but one and the same instrument.



<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  this  First
Supplemental  Indenture to be duly executed and their respective corporate seals
to be  hereunto  affixed  and  attested,  all as of the day and year first above
written.

[CORPORATE SEAL]

                                                 TEXAS-NEW MEXICO POWER COMPANY

                                                 By /s/ M.S. Cheema
                                                   Name: M. S. Cheema
                                                   Title:  Senior Vice President

                                                  Attest:

                                                  By  /s/ Paul W. Talbot
                                                    Name: Paul W. Talbot
                                                    Title:  Secretary




[SEAL]                                            CHASE BANK OF TEXAS, N.A.,
                                                  As Trustee
                                                  By /s/ John G. Jones
                                                    Name:  John G. Jones
                                                    Title:  Vice President

                                                   Attest:

                                                   By  /s/ Michael Scrivner
                                                     Name:  Michael Scrivner
                                                     Title: Vice President



<PAGE>


STATE OF NEW YORK)
                                    
COUNTY OF NEW YORK)



                  On this 11th day of January,  1999,  before me personally came
M.S. Cheema,  to me known,  who, being by me duly sworn, did depose and say that
he is a Senior Vice President of Texas-New Mexico Power Company, the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation;  that the seal affixed to said instrument is such corporate
seal;  that it was so affixed by  authority  of the Board of  Directors  of said
corporation, and that he signed his name thereto by like authority.

                                                           /s/ Rafael Beaumont





STATE OF TEXAS)
                                    
COUNTY OF DALLAS)



                  On this 8th day of  January,  1999 before me  personally  came
John G. Jones, to me known, who, being by me duly sworn, did depose and say that
he is a Vice  President  of Chase Bank of Texas,  N.A.,  a national  association
described in and which executed the foregoing instrument; that he knows the seal
of  said  association;  that  the  seal  affixed  to  said  instrument  is  such
association  seal; that it was so affixed by authority of the Board of Directors
of said association, and that he signed his name thereto by like authority.

                                                          /s/ Patricia A. Blue

[Notarial Seal]



<PAGE>


                                                                     EXHIBIT A

                  [If the Security is to be a Global Security,  insert -- Unless
this certificate is presented by an authorized  representative of The Depository
Trust Company,  a New York corporation  ("DTC"),  to the issuer or its agent for
registration of transfer,  exchange or payment,  and any  certificate  issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized  representative  of DTC (and any  payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL  since the  registered  owner  hereof,  Cede & Co.,  has an interest
herein.

THIS SECURITY IS A GLOBAL  SECURITY AS REFERRED TO IN THE INDENTURE  HEREINAFTER
REFERENCED  AND IS  REGISTERED  IN THE NAME OF A  DEPOSITARY  OR A NOMINEE  OF A
DEPOSITARY.  UNLESS  AND  UNTIL  IT IS  EXCHANGED  IN  WHOLE  OR IN PART FOR THE
INDIVIDUAL  SECURITIES  REPRESENTED  HEREBY,  THIS  GLOBAL  SECURITY  MAY NOT BE
TRANSFERRED  EXCEPT AS A WHOLE BY THE  DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE  DEPOSITARY TO THE  DEPOSITARY OR ANOTHER  NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]

                         TEXAS-NEW MEXICO POWER COMPANY

                          6 1/4% SENIOR NOTES DUE 2009

                                                             $-----------------

No. --------                                            CUSIP -----------------

                  TEXAS-NEW  MEXICO POWER COMPANY,  a corporation duly organized
and existing  under the laws of the State of Texas (herein called the "Company,"
which term includes any successor under the Indenture  hereinafter referred to),
for value received, hereby promises to pay to -------------------- or registered
assigns,  the principal sum of  $----------------  on -------------,  and to pay
interest thereon from --------, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on ------------
and  -----------  in each  year,  commencing  --------,  at the rate  per  annum
provided  in the  title  hereof,  until  the  principal  hereof  is paid or made
available for payment [if applicable,  insert -- , and,  subject to the terms of
the  Indenture,  at the  rate of 6 1/4%  per  annum  (assuming  a  360-day  year
consisting of twelve 30-day months) on any overdue principal and premium and (to
the extent that the payment of such interest  shall be legally  enforceable)  on
any overdue  installment of interest,  from the dates such amounts are due until
they are paid or made available for payment,  and such interest shall be payable
on demand].  The interest so payable,  and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular  Record Date for such  interest,  which shall be the ------- or --------
(whether  or not a  Business  Day),  as the case  may be,  next  preceding  such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this  Security is  registered
at the  close of  business  on a Special  Record  Date for the  payment  of such
Defaulted Interest to be fixed by the Trustee,  notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not  inconsistent
with the requirements of any securities exchange on which the Securities of this
series may be listed,  and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.

                  Payment of the principal of (and premium, if any) and interest
on this Security will be made at the office or agency of the Company  maintained
for that purpose in --------,  in such coin or currency of the United  States of
America as at the time of payment is legal  tender for the payment of public and
private debts; [if this Security is not a Global  Security,  insert -- provided,
however,  that at the option of the Company  payment of interest  may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register].

                  Reference  is hereby  made to the further  provisions  of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

                  Unless  the  certificate  of  authentication  hereon  has been
manually  executed  by or on behalf of the  Trustee  under the  Indenture,  this
Security shall not be entitled to any benefits under the Indenture,  or be valid
or obligatory for any purpose.

                  IN WITNESS WHEREOF,  TEXAS-NEW MEXICO POWER COMPANY has caused
this Security to be duly executed.

Dated:                                    TEXAS-NEW MEXICO POWER COMPANY


                                          BY  ----------------------------------
                                              Name:
                                              Title:




<PAGE>


                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Date:                                                --------------------,
                                                          as Trustee,

                                                     by

                                                     -------------------------
                                                     Authorized Signatory



<PAGE>


                                [REVERSE OF NOTE]

                  This  Security  is  one  of  the  duly  authorized   issue  of
debentures,  notes,  bonds or other  evidences  of  indebtedness  of the Company
(hereinafter called the "Securities"),  of the series hereinafter specified, all
issued or to be issued under and pursuant to the Original  Indenture dated as of
January 1, supplemented by the First Supplemental Indenture, dated as of January
1, 1999 (as so supplemented,  the  "Indenture"),  duly executed and delivered by
the  Company  and Chase  Bank of Texas,  N.A.,  as  Trustee  (herein  called the
"Trustee",  which term includes any successor  trustee under the Indenture),  to
which  Indenture  and any other  indentures  supplemental  thereto  reference is
hereby made for a statement of the respective  rights,  obligations,  duties and
immunities  thereunder  of the Trustee and any agent of the Trustee,  any Paying
Agent, the Company and the Holders of the Securities and of the terms upon which
the  Securities  are  issued and are to be  authenticated  and  delivered.  This
Security is one of the series  designated  on the face  hereof,  which series is
limited  in  aggregate  principal  amount  to  $--------.  By the  terms  of the
Indenture,  additional Securities of other separate series, which may vary as to
date,  aggregate principal amount,  Stated Maturity,  interest rate or method of
calculating  the interest rate,  redemption  provisions and in other respects as
therein provided, may be issued in an unlimited amount.

                  Prior  to the  Release  Date  (as  hereinafter  defined),  the
Securities of this series will be secured by first  mortgage  bonds (the "Senior
Note Mortgage Bonds") delivered by the Company to the Trustee for the benefit of
the Holders of the  Securities,  issued under the Indenture of Mortgage and Deed
of Trust,  dated  November 1, 1944,  by and  between  the Company and U.S.  Bank
Trust,  N.A.  (which  is a  successor  to  First  Trust  of  Illinois,  National
Association,  which is successor trustee to Bank of America, Illinois, a banking
corporation  organized under the laws of Illinois,  which was formerly known, at
various times, as Continental  Bank, a banking  corporation  organized under the
laws of  Illinois,  Continental  Bank,  National  Association,  and  Continental
Illinois  National  Bank and Trust  Company of  Chicago)  (the  "First  Mortgage
Trustee"),  as  supplemented  and  modified  (the  "First  Mortgage  Indenture")
pursuant  to the  Twenty-Sixth  Supplemental  Indenture  dated  January 1, 1999.
Reference  is made to the  First  Mortgage  Indenture  and the  Indenture  for a
description  of property  mortgaged  and  pledged,  the nature and extent of the
security,  the rights of the holders of the first mortgage bonds under the First
Mortgage  Indenture and of the First Mortgage  Trustee in respect  thereof,  the
duties and immunities of the First Mortgage Trustee and the terms and conditions
upon which the Senior Note  Mortgage  Bonds are  secured  and the  circumstances
under which additional first mortgage bonds may be issued.

                  FROM AND AFTER THE DATE  CHOSEN  BY THE  COMPANY  WHICH IS NOT
EARLIER THAN THE LATER OF (I) SUCH TIME AS ALL FIRST  MORTGAGE BONDS (OTHER THAN
SENIOR NOTE MORTGAGE BONDS) ISSUED UNDER THE FIRST MORTGAGE  INDENTURE HAVE BEEN
RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE
BONDS  "DEEMED  TO BE PAID" OR AS TO WHICH THE ENTIRE  INDEBTEDNESS  IS PAID AND
DISCHARGED  WITHIN  THE  MEANING  USED  IN  ARTICLE  18 OF  THE  FIRST  MORTGAGE
INDENTURE)  AT,  BEFORE OR AFTER THE  MATURITY  THEREOF  AND (II) THE DATE AS OF
WHICH NO LIENS ON ANY PROPERTY OF THE COMPANY OR ANY SUBSIDIARY  EXISTS (WHETHER
SUCH LIENS SECURE  INDEBTEDNESS  OF THE COMPANY OR ANY  SUBSIDIARY  OR ANY OTHER
PERSON),  EXCEPT THAT THIS CLAUSE (II) SHALL NOT APPLY TO ANY LIEN TO THE EXTENT
DESCRIBED IN CLAUSES (A) THROUGH (K) OF SECTION 10.10 OF THE ORIGINAL  INDENTURE
OR I THE LAST PARAGRAPH OF SUCH SECTION 10.10 (THE "RELEASE  DATE"),  THE SENIOR
NOTE  MORTGAGE  BONDS SHALL,  AT THE OPTION OF THE COMPANY,  CEASE TO SECURE THE
SECURITIES  OF THIS SERIES IN ANY MANNER;  PROVIDED  THAT NO DEFAULT OR EVENT OF
DEFAULT HAS  OCCURRED AND AT SUCH TIME IS  CONTINUING  UNDER THE  INDENTURE.  IN
CERTAIN  CIRCUMSTANCES  PRIOR TO THE RELEASE DATE AS PROVIDED IN THE  INDENTURE,
THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF
SENIOR NOTE  MORTGAGE  BONDS HELD BY THE  TRUSTEE,  BUT IN NO EVENT PRIOR TO THE
RELEASE DATE TO AN AMOUNT LESS THAN THE AGGREGATE  OUTSTANDING  PRINCIPAL AMOUNT
OF THE SERIES OF SECURITIES INITIALLY ISSUED  CONTEMPORANEOUSLY WITH SUCH SENIOR
NOTE MORTGAGE BONDS.

                  These  Securities will be redeemable,  in whole or in part, at
the option of the Company, upon not less than 30 or more than 60 days' notice by
mail to the  Holders  of such  Securities  at their  addresses  in the  Security
Register  for such  series,  on any date (a  "Redemption  Date") at a redemption
price  equal  to the  greater  of (a)  100% of  their  principal  amount  of the
Securities to be redeemed and (b) the sum of the present values of the remaining
scheduled  payments of principal  and interest  thereon  (exclusive  of interest
accrued  to  such  Redemption  Date)  discounted  to such  Redemption  Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury  Rate plus [--] basis points,  plus accrued and unpaid  interest on
the principal  amount being redeemed to such Redemption  Date, all as calculated
by an Expert and delivered to the Trustee; provided,  however, that installments
of interest on Securities  that are due and payable on an Interest  Payment Date
falling  on or prior to the  relevant  Redemption  Date  shall be payable to the
holders of such  Securities,  registered as such at the close of business on the
relevant Record Date according to their terms and provisions of the Indenture.

                  "Treasury Rate" means, with respect to any Redemption Date for
the Securities, (a) the yield, under the heading that represents the average for
the  immediately  preceding  week,  appearing  in the  most  recently  published
statistical release designated  "H.15(519)" or any successor publication that is
published  weekly by the Board of  Governors of the Federal  Reserve  System and
that  establishes  yields on actively traded United States  Treasury  securities
adjusted to constant maturity under the caption "Treasury  Constant  Maturities"
for the maturity  corresponding to the Comparable Treasury Issue (if no maturity
is within three months  before or after the  Maturity  Date,  yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be  interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or (b)
if such  release (or any  successor  release) is not  published  during the week
immediately  preceding the calculation date or does not contain such yields, the
rate per annum  equal to the  semi-annual  equivalent  yield to  maturity of the
Comparable Treasury Issue,  calculated using a price for the Comparable Treasury
Issue  (expressed  as a  percentage  of  its  principal  amount)  equal  to  the
Comparable  Treasury Price for such Redemption  Date. The Treasury Rate shall be
calculated on the third Business Day immediately preceding the Redemption Date.

                  "Comparable  Treasury Issue" means, the United States Treasury
security  selected  by the  Independent  Investment  Banker as having a maturity
comparable to the remaining  term of the Securities to be redeemed that would be
utilized,  at the time of selection and in accordance  with customary  financial
practice,  in pricing new issues of  corporate  debt  securities  of  comparable
maturity to the remaining term of the Securities.

                  "Independent  Investment  Banker"  means  Donaldson,  Lufkin &
Jenrette Securities Corporation, Warburg Dillon Read LLC, Chase Securities Inc.,
First Chicago Capital Markets, Inc. or NationsBanc Montgomery Securities LLC or,
if such firms are unwilling or unable to select the Comparable  Treasury  Issue,
an independent  investment banking institution of national standing appointed by
the Company.

                  "Comparable   Treasury  Price"  means,  with  respect  to  any
Redemption  Date, (a) the average of four Reference  Treasury Dealer  Quotations
for such Redemption  Date, after excluding the highest and lowest such Reference
Treasury Dealer  Quotations,  or (b) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Quotations.

                  "Reference Treasury Dealer" means each of Donaldson,  Lufkin &
Jenrette Securities Corporation, Warburg Dillon Read LLC, Chase Securities Inc.,
First Chicago Capital Markets,  Inc.,  NationsBanc Montgomery Securities LLC and
their  respective  successors;  provided  however,  that if any of the foregoing
shall cease to be a primary U.S.  Government  securities dealer in New York City
(a "Primary  Treasury  Dealer"),  the Company will substitute  therefor  another
Primary Treasury Dealer.

                  "Reference  Treasury Dealer Quotations" means, with respect to
the  Reference  Treasury  Dealer  and  any  Redemption  Date,  the  average,  as
determined  by the  Trustee,  of the bid and  asked  prices  for the  Comparable
Treasury Issue (expressed in each case as a percentage of its principal  amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City  time,  on the  third  Business  Day  immediately  preceding  such
Redemption Date.

                  In the event of  redemption  of this  Security in part only, a
new Security or Securities  of this series and of like tenor for the  unredeemed
portion  hereof  will be  issued  in the  name of the  Holder  hereof  upon  the
cancellation hereof.

                  The Indenture  contains  provisions  for defeasance of (a) the
entire indebtedness of this Security and (b) certain restrictive  covenants upon
compliance by the Company with certain conditions set forth in the Indenture.

                  If an Event of  Default  with  respect to  Securities  of this
series shall occur and be continuing,  the unpaid principal of the Securities of
this  series may be  declared  due and payable in the manner and with the effect
provided in the Indenture and, upon such declaration, the Trustee can demand the
redemption of the Senior Note Mortgage Bonds as provided in the Indenture.

                  The  Indenture  permits,  with certain  exceptions  as therein
provided,  the  amendment  thereof  and  the  modification  of  the  rights  and
obligations  of the Company and the rights of the Holders of the  Securities  of
each series to be affected  under the  Indenture  at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the  Securities at the time  Outstanding  of all series to be affected
(voting as a class).  The Indenture  also  contains  provisions  permitting  the
Holders of specified  percentages in principal  amount of the Securities of each
series at the time  Outstanding,  on behalf of the Holders of all  Securities of
such series,  to waive compliance by the Company with certain  provisions of the
Indenture and certain past defaults under the Indenture and their  consequences.
Any such consent or waiver by the Holder of this  Security  shall be  conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any  Security  issued upon the  registration  of transfer  hereof or in exchange
herefor or in lieu hereof,  whether or not notation of such consent or waiver is
made upon this Security.

                  No reference  herein to the Indenture and no provision of this
Security  or of the  Indenture  shall  alter or  impair  the  obligation  of the
Company,  which is absolute  and  unconditional,  to pay the  principal  of (and
premium,  if any) and interest,  if any, on this Security at the time, place and
rate, and in the coin or currency, herein prescribed.

                  As   provided  in  the   Indenture   and  subject  to  certain
limitations  therein set forth,  the transfer of this Security is registrable in
the Security  Register,  upon  surrender of this  Security for  registration  of
transfer at the office or agency of the Company in any place where the principal
of (and  premium,  if any) and  interest,  if any, on this Security are payable,
duly  endorsed by, or  accompanied  by a written  instrument of transfer in form
satisfactory  to the Company and the Security  Registrar  duly  executed by, the
Holder hereof or his attorney duly  authorized in writing,  and thereupon one or
more  new   Securities  of  this  series  and  of  like  tenor,   of  authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.

                  The  Securities of this series are issuable only in registered
form  without  coupons  in  denominations  of $1,000 and any  integral  multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth,  Securities  of this  series are  exchangeable  for a like  aggregate
principal  amount of  Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.

                  No service charge shall be made for any such  registration  of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for  registration of
transfer,  the Company,  the Trustee and any agent of the Company or the Trustee
may treat the  Person in whose name this  Security  is  registered  as the owner
hereof for all purposes,  whether or not this  Security be overdue,  and neither
the  Company,  the Trustee nor any such agent shall be affected by notice to the
contrary.

                  This Security shall be governed by and construed in accordance
with the laws of the State of New York.

                  All  terms  used in this  Security  which are  defined  in the
Indenture shall have the meanings assigned to them in the Indenture.