EXHIBIT 4a

          =================================================================




                   AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT
             (AMENDING AND RESTATING THE TWO INSTALLMENT SALE AGREEMENTS
           DATED AS OF DECEMBER 1, 1973 AND NOVEMBER 1, 1977, RESPECTIVELY)



                                       BETWEEN



                            CITY OF FARMINGTON, NEW MEXICO
                                        VENDOR



                                         AND



                            TUCSON ELECTRIC POWER COMPANY
                                        VENDEE


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




                              DATED AS OF APRIL 1, 1997



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



                                     RELATING TO

                           POLLUTION CONTROL REVENUE BONDS,
                                    1997 SERIES A
                   (TUCSON ELECTRIC POWER COMPANY SAN JUAN PROJECT)



          =================================================================

   <PAGE> 




                                  TABLE OF CONTENTS

                                                                       Page
                                                                       ----

          AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT . . . . . . .   1

                                      ARTICLE I

                                     DEFINITIONS

          SECTION 1.01.  Definitions  . . . . . . . . . . . . . . . . .   3
          SECTION 1.02.  Incorporation of Certain 
                         Definitions by Reference  . . . . . . . . . .    7

                                     ARTICLE II

                       REPRESENTATIONS, WARRANTIES AND FINDINGS

          SECTION 2.01.  Representations and Warranties of the City.  .   7
          SECTION 2.02.  Representations and Warranties of the Company    7
          SECTION 2.03.  Findings of the City.  . . . . . . . . . . . .   8

                                     ARTICLE III

                     PRIOR CONVEYANCE TO THE CITY; THE FACILITIES

          SECTION 3.01.  Prior Conveyance to the City.  . . . . . . . .   8
          SECTION 3.02.  Revision of Plans and Specifications . . . . .   8
          SECTION 3.03.  Maintenance of Facilities; Remodeling; Notice of
                          Damages . . . . . . . . . . . . . . . . . . .   9
          SECTION 3.04.  Insurance  . . . . . . . . . . . . . . . . . .   9
          SECTION 3.05.  Condemnation; Eminent Domain.  . . . . . . . .   9

                                      ARTICLE IV

                           ISSUANCE AND SALE OF THE BONDS;
                         DISPOSITION OF PROCEEDS OF THE BONDS

          SECTION 4.01.  Issuance of the Bonds  . . . . . . . . . . . .  10
          SECTION 4.02.  Issuance of Other Obligations. . . . . . . . .  10
          SECTION 4.03.  Disposition of Bond Proceeds.  . . . . . . . .  10
          SECTION 4.04.  Investment of Moneys in Funds and Accounts.  .  10

                                      ARTICLE V

                               PURCHASE BY THE COMPANY;
                      PURCHASE PRICE PAYMENTS; OTHER OBLIGATIONS

          SECTION 5.01.  Prior Purchase by the Company. . . . . . . . .  10
          SECTION 5.02.  Purchase Price Payments. . . . . . . . . . . .  11

          -----------------
          *    This table of contents is not part of the Installment Sale
               Agreement, and is for convenience only.  The captions herein
               are of no legal effect and do not vary the meaning or legal
               effect of any part of the Installment Sale Agreement.


   <PAGE> 

          SECTION 5.03.  Payments Pledged and Assigned; Obligation
                          Absolute  . . . . . . . . . . . . . . . . . .  11
          SECTION 5.04.  Payment of Expenses  . . . . . . . . . . . . .  11
          SECTION 5.05.  Indemnification  . . . . . . . . . . . . . . .  11
          SECTION 5.06.  Payment of Taxes; Discharge of Liens . . . . .  12

                                      ARTICLE VI

                                  SPECIAL COVENANTS

          SECTION 6.01.  Maintenance of Corporate Existence . . . . . .  12
          SECTION 6.02.  Permits or Licenses  . . . . . . . . . . . . .  13
          SECTION 6.03.  City's Access to Facilities. . . . . . . . . .  13
          SECTION 6.04.  Tax-Exempt Status of Interest on Bonds.  . . .  13
          SECTION 6.05.  Use of Facilities  . . . . . . . . . . . . . .  14
          SECTION 6.06.  Financing Statements . . . . . . . . . . . . .  14
          SECTION 6.07.  No Warranties. . . . . . . . . . . . . . . . .  14
          SECTION 6.08.  Quiet Enjoyment. . . . . . . . . . . . . . . .  14
          SECTION 6.09.  Additional Payments by Company Concerning the
                          Facilities. . . . . . . . . . . . . . . . . .  15
          SECTION 6.10   Qualification in New Mexico  . . . . . . . . .  15

                                     ARTICLE VII

                           ASSIGNMENT, LEASING AND SELLING

          SECTION 7.01.  By the City. . . . . . . . . . . . . . . . . .  15
          SECTION 7.02.  By the Company . . . . . . . . . . . . . . . .  15
          SECTION 7.03.  Instrument Furnished to the City and Trustee .  17
          SECTION 7.04.  Limitation . . . . . . . . . . . . . . . . . .  17

                                     ARTICLE VIII

                            EVENTS OF DEFAULT AND REMEDIES

          SECTION 8.01.  Events of Default  . . . . . . . . . . . . . .  17
          SECTION 8.02.  Force Majeure  . . . . . . . . . . . . . . . .  17
          SECTION 8.03.  Remedies . . . . . . . . . . . . . . . . . . .  18
          SECTION 8.04.  No Remedy Exclusive  . . . . . . . . . . . . .  18
          SECTION 8.05.  Reimbursement of Attorneys' and Agents' Fees .  18
          SECTION 8.06.  Waiver of Breach . . . . . . . . . . . . . . .  18

                                      ARTICLE IX

                        PREPAYMENT OF PURCHASE PRICE PAYMENTS;
                                 REDEMPTION OF BONDS

          SECTION 9.01.  Prepayment of Purchase Price Payments; Redemption
                          of Bonds  . . . . . . . . . . . . . . . . . .  19
          SECTION 9.02.  Compliance with the Ordinance  . . . . . . . .  19

   <PAGE> 


                                      ARTICLE X

                                    MISCELLANEOUS

          SECTION 10.01.  Term of Agreement . . . . . . . . . . . . . .  19
          SECTION 10.02.  Effect of Plant Agreements  . . . . . . . . .  19
          SECTION 10.03.  Notices . . . . . . . . . . . . . . . . . . .  19
          SECTION 10.04.  Parties in Interest . . . . . . . . . . . . .  20
          SECTION 10.05.  Amendments  . . . . . . . . . . . . . . . . .  20
          SECTION 10.06.  Counterparts  . . . . . . . . . . . . . . . .  20
          SECTION 10.07.  Severability  . . . . . . . . . . . . . . . .  20
          SECTION 10.08.  Governing Law . . . . . . . . . . . . . . . .  20

          Signatures  . . . . . . . . . . . . . . . . . . . . . . . . .  21
          Exhibit A Description of Facilities . . . . . . . . . . . . . A-1


   <PAGE> 



                   AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT 

               THIS AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT, dated
          as of April 1, 1997 (this "Agreement"), between the CITY OF
          FARMINGTON, in the County of San Juan, an incorporated
          municipality, a body politic and corporate, existing under the
          Constitution and laws of the State of New Mexico (hereinafter
          called the "City"), as Vendor, and TUCSON ELECTRIC POWER COMPANY,
          a corporation organized and existing under the laws of the State
          of Arizona, formerly known as Tucson Gas & Electric Company
          (hereinafter called the "Company"), as Vendee, being an amendment
          to and a restatement in its entirety of those certain Installment
          Sale Agreements, dated as of December 1, 1973 (the "Series 1973
          Installment Sale Agreement") and November 1, 1977 (the "Series
          1977 Installment Sale Agreement"), each between the City, as
          Vendor, and the Company, as Vendee (it being understood that
          Public Service Company of New Mexico was, but no longer is, an
          additional Vendee under such Installment Sale Agreement dated as
          of December 1, 1973).

                                W I T N E S S E T H :

               WHEREAS, the City is authorized and empowered under the
          Pollution Control Revenue Bond Act, Chapter 397, Laws of 1973 of
          the State of New Mexico, 31st Legislature, 1st Session, as
          amended (the "Act"), to issue revenue bonds for and to acquire,
          whether by construction, purchase, gift or lease, one or more
          projects consisting of any land, interest in land, building,
          structure, facility, system, fixture, improvement, appurtenance,
          machinery, equipment or any combination thereof, or any interest
          in any one or more of the foregoing, whether or not presently in
          existence or under construction, used by any individual,
          partnership, firm, company, corporation (including a public
          utility), association, trust, estate, political subdivision,
          state agency or any other legal entity, or its legal
          representative, agent or assigns, substantially for the
          reduction, abatement or prevention of pollution, including, but
          not limited to, the removal of pollutants, contaminants or
          foreign substances from land, air or water, or for the removal or
          treatment of any substance in a processed material which would
          otherwise cause pollution when such material is used, provided
          that any such project shall be located within the State of New
          Mexico and within or without or partially within or without the
          City, but not more than fifteen miles outside of the corporate
          limits of the City (or that, if there is no municipality within
          fifteen miles of the project, the City is in the county in which
          the project is or may be located) and to sell or lease or
          otherwise dispose of any or all of such projects upon such terms
          and conditions as the governing body of the City (hereinafter
          called the "City Council") may deem advisable and as shall not
          conflict with the provisions of the Act; and

               WHEREAS, the San Juan Generating Station, an electric power
          generating plant, is located within fifteen miles of the
          corporate limits of the City in San Juan County, New Mexico but
          not within the corporate limits of any municipality; and

               WHEREAS, on August 28, 1973, the City Council adopted
          Resolution Number 709 ("Resolution No. 709") determining to issue
          and, subject to certain conditions, agreeing to issue revenue
          bonds under the Act to finance the costs to the Company of
          certain facilities for the reduction, abatement or prevention of
          pollution caused by the operation of the San Juan Generating
          Station, including facilities for the reduction, abatement or
          prevention of pollution caused by the operation of Units 1 and 2
          of such generating station (the "Facilities") and authorizing the
          Mayor of the City to execute and deliver preliminary agreements
          relating thereto and, subject to certain conditions, to take such
          steps and actions as required or necessary in order to issue such
          revenue bonds, and a Preliminary Agreement (the "Original
          Preliminary Agreement"), in the form contemplated by Resolution
          No. 709, was executed and delivered by the City and the Company;
          and

               WHEREAS, on November 27, 1973, the City Council adopted
          Resolution Number 721 ("Resolution No. 721") in order to
          authorize consideration of the adoption of a proposed Ordinance,
          in order to, among other matters, increase the aggregate
          principal amount of revenue bonds authorized to be issued by the
          City to finance the costs to the Company of the acquisition,
          construction and installation of the Facilities; and

               WHEREAS, on August 13, 1974, the City Council adopted
          Resolution Number 751 ("Resolution No. 751") authorizing the
          Mayor of the City to execute and deliver certain amendments to
          the Original Preliminary Agreement in order to, among other
          matters, further increase the aggregate principal amount of
          revenue bonds authorized to be issued by the City to finance the
          costs to the Company of the acquisition, construction and
          installation of the Facilities; and

               WHEREAS, a supplemental preliminary agreement (the
          "Supplemental Preliminary Agreement," and, together with the
          Original Preliminary Agreement and Resolution No. 721, the
          "Preliminary Agreement"), in the form contemplated by Resolution
          No. 751, was executed and delivered by the City and the Company
          on August 13, 1974; and

               WHEREAS, pursuant to Ordinance No. 486, adopted by the City
          Council on December 17, 1973, as supplemented by Ordinance No.
          487, adopted by the City Council on January 3, 1974 (together,
          the "Series 1973 Ordinance"), the City has heretofore issued and
          sold $55,000,000 aggregate principal amount of its Pollution
          Control Revenue Bonds, Series 1973 (Tucson Gas & Electric Company
          San Juan Project), of which $47,910,000 in principal amount
          remains outstanding (the "1973 Bonds"), the proceeds of which
          were to be used to finance a portion of the costs to the Company
          of the acquisition, construction and installation of the
          Facilities at Units 1 and 2 of the San Juan Generating Station
          described in Exhibit A to the Series 1973 Installment Sale
          Agreement; and

               WHEREAS, Public Service Company of New Mexico has redeemed
          the pollution control revenue bonds secured by revenues derived
          pursuant to the Series 1973 Installment Sale Agreement and its
          obligations and rights pursuant thereto have been discharged so
          that the Company remains the sole Vendee thereunder; and

               WHEREAS, pursuant to Ordinance No. 579, adopted by the City
          Council on November 1, 1977, as supplemented by Ordinance No.
          580, adopted by the City Council on November 8, 1977 (together,
          the "Series 1977 Ordinance"), the City has also heretofore issued
          and sold $32,500,000 aggregate principal amount of its
          Collateralized Pollution Control Revenue Bonds, 1977 Series A
          (Tucson Gas & Electric Company San Juan Project), of which
          $32,500,000 in principal amount remains outstanding (the "1977
          Bonds") (the 1973 Bonds and the 1977 Bonds being hereinafter
          called, collectively, the "Prior Bonds"), the proceeds of which
          were to be used to finance a portion of the costs to the Company
          of the acquisition, construction and installation of the
          Facilities at Units 1 and 2 of the San Juan Generating Station
          described in Exhibit A to the Series 1977 Installment Agreement;
          and

               WHEREAS, in order to refinance the Facilities through the
          refunding and redemption of the Prior Bonds, the City intends to
          issue and sell its Pollution Control Revenue Bonds, 1997 Series A
          (Tucson Electric Power Company San Juan Project) (the "Bonds")
          pursuant to Ordinance No. 97-1055, adopted by the City Council on
          April 17, 1997, and Resolution No. 97-879, adopted by the City
          Council on April 17, 1997 (together, the "Ordinance"), for the
          purpose of providing funds which, together with other funds
          available therefor, will be sufficient to refund and redeem the
          Prior Bonds; and

               WHEREAS, in connection with the issuance of the Bonds, the
          Company has requested that the Series 1973 Installment Sale
          Agreement and the Series 1977 Installment Sale Agreement (each an
          "Original Sale Agreement," and hereinafter collectively referred
          to as the "Original Sale Agreements") be amended and restated;

               NOW, THEREFORE, the parties hereto, intending to be legally
          bound hereby and in consideration of the premises, DO HEREBY
          AGREE as follows:

   <PAGE> 



                                      ARTICLE I

                                     DEFINITIONS

               SECTION 1.01.  Definitions.  The terms defined in this
          Article I shall for all purposes of this Agreement have the
          meanings herein specified, unless the context clearly requires
          otherwise: 

          Act:

               "Act" shall mean the Pollution Control Revenue Bond Act,
          Chapter 397, Laws of 1973 of the State of New Mexico, 31st
          Legislature, 1st Session, as amended by Chapter 312, Laws of 1977
          of the State of New Mexico, 33rd Legislature, 1st Session, by
          Chapter 181, Laws of 1978 of the State of New Mexico, 33rd
          Legislature, 2nd Session, and by Chapter 114, Laws of 1983 of the
          State of New Mexico, 36th Legislature, 1st Session, and all acts
          supplemental thereto or amendatory thereof.

          Administration Expenses:

               "Administration Expenses" shall mean the reasonable expenses
          incurred by the City with respect to this Agreement, the
          Ordinance and any transaction or event contemplated by this
          Agreement or the Ordinance, including the compensation and
          reimbursement of expenses and advances payable to the Trustee, to
          the paying agent, any co-paying agent and the registrar under the
          Ordinance.

          Agreement:

               "Agreement" shall mean this Amended and Restated Installment
          Sale Agreement, dated as of April 1, 1997, between the City and
          the Company, and any and all modifications, alterations,
          amendments and supplements hereto.

          Authorized Company Representative:

               "Authorized Company Representative" shall mean each person
          at the time designated to act on behalf of the Company by written
          certificate furnished to the City and the Trustee containing the
          specimen signature of such person and signed on behalf of the
          Company by its President, any Vice President or its Treasurer,
          together with its Secretary or any Assistant Secretary.

          Bond Counsel:

               "Bond Counsel" shall mean any firm or firms of nationally
          recognized bond counsel experienced in matters pertaining to the
          validity of, and exclusion from gross income for federal tax
          purposes of interest on bonds issued by states and political
          subdivisions, selected by the Company and acceptable to the City.

          Bond Fund:

               "Bond Fund" shall mean the fund created by Section 4.01 of
          the Ordinance.

          Bonds:

               "Bond" or "Bonds" shall mean the Pollution Control Revenue
          Bonds, 1997 Series A (Tucson Electric Power Company San Juan
          Project) of the City.

          City:

               "City" shall mean the City of Farmington, in the County of
          San Juan, an incorporated municipality, a body politic and
          corporate, existing under the Constitution and laws of the State
          of New Mexico, and its successors and their assigns.

          City Council:

               "City Council" shall mean the City Council of the City or
          the board or other body in which general legislative powers of
          the City subsequently may be vested.

          Code:

               "Code" shall mean the Internal Revenue Code of 1986 or any
          successor statute thereto.  Each reference to a section of the
          Code herein shall be deemed to include the United States Treasury
          Regulations proposed or in effect thereunder and applicable to
          the Bonds or the use of the proceeds thereof, unless the context
          clearly requires otherwise.  Reference to any particular Code
          section shall, in the event of a successor Code, be deemed to be
          a reference to the successor to such Code section.

          Company:

               "Company" shall mean Tucson Electric Power Company, a
          corporation organized and existing under the laws of the State of
          Arizona, its successors and their assigns, including, without
          limitation, any successor obligor under Section 6.01 and 7.02 to
          the extent of the obligations assumed thereunder.

          Company Mortgages:

               "Company Mortgages" shall mean the Indenture, dated as of
          April 1, 1941, between The Tucson Gas, Electric Light and Power
          Company (predecessor of the Company) and The Chase National Bank
          of the City of New York (now The Chase Manhattan Bank), as
          trustee, as heretofore and hereafter amended and supplemented and
          the Indenture of Mortgage and Deed of Trust, dated as of December
          1, 1992, between the Company and Bank of Montreal Trust Company,
          as trustee, as heretofore and hereafter amended and supplemented.

          Company Project:

               "Company Project" shall mean the interests in the Facilities
          previously sold by the City to the Company, pursuant to the
          Original Sale Agreements.

          Facilities:

               "Facilities" shall mean the systems and facilities for the
          reduction, abatement or prevention of pollution caused by the
          operation of the Plant which are described in Exhibit A hereto,
          as from time to time amended or modified, and related
          improvements.

          1954 Code:

               "1954 Code" shall mean the Internal Revenue Code of 1954, as
          amended.

          1977 Bonds:

               "1977 Bonds" shall mean the $32,500,000 aggregate principal
          amount of the City's Collateralized Pollution Control Revenue
          Bonds, 1977 Series A (Tucson Gas & Electric Company San Juan
          Project), all of which remain outstanding.

          1973 Bonds:

               "1973 Bonds" shall mean the $55,000,000 aggregate principal
          amount of the City's Pollution Control Revenue Bonds, Series 1973
          (Tucson Gas & Electric Company San Juan Project), of which
          $47,910,000 in principal amount remains outstanding.

          Ordinance:

               "Ordinance" shall mean Ordinance No. 97-1055 adopted by the
          City Council on April 17, 1997 creating and securing the Bonds,
          as modified, altered, amended or supplemented by any and all
          ordinances and resolutions supplemental thereto or amendatory
          thereof adopted by the City Council and effective prior to the
          initial issuance of the Bonds, including without limitation,
          Resolution No. 97-879 adopted by the City Council on April 17,
          1997 and any Supplemental Ordinances and related resolutions
          adopted thereafter by the City Council pursuant thereto.

          Original Sale Agreements:

               "Original Sale Agreements" shall mean the Series 1973
          Installment Sale Agreement and the Series 1977 Installment Sale
          Agreement.

          Outstanding:

               "Outstanding", when used in reference to the Bonds, shall
          mean, as at any particular date, the aggregate of all Bonds
          authenticated and delivered under the Ordinance except: 

                    (a)  those canceled by the Trustee at or prior to such
               date or delivered to or acquired by the Trustee at or prior
               to such date for cancellation; 

                    (b)  those deemed to be paid in accordance with Article
               VIII of the Ordinance; and

                    (c)  those in lieu of or in exchange or substitution
               for which other Bonds shall have been authenticated and
               delivered pursuant to the Ordinance, unless proof
               satisfactory to the Trustee and the Company is presented
               that such Bonds are held by a bona fide holder in due
               course.

          Permitted Encumbrances:

               "Permitted Encumbrances" shall mean and include (a) liens
          for taxes, assessments and other governmental charges not
          delinquent or which can be paid without penalty; (b) unfiled,
          inchoate mechanics' and materialmen's liens for construction work
          in progress; (c) workmen's, repairmen's warehousemen's and
          carriers' liens and other similar liens, if any, arising in the
          ordinary course of business; (d) all the following, if they do
          not individually or in the aggregate materially impair the use of
          the Facilities or materially detract from the value thereof to
          the Company, viz.: any easements, restrictions, mineral, oil, gas
          and mining rights and reservations, zoning laws and defects in
          title or other encumbrances to which the Facilities may be
          subject because of the installation thereof at the Plant; (e) any
          lien for the satisfaction and discharge of which a sum of money
          or a surety bond deemed adequate by the Trustee is on deposit
          with the Trustee; (f) the rights of the City and the Company
          under this Agreement and any prior or subsequent installment sale
          agreement or lease between the City and Company relating to all
          or any part of the Facilities and the issuance of revenue bonds
          in connection therewith; (g) the lien of the Company Mortgages
          and liens, encumbrances and defects of the character of the
          permitted encumbrances referred to therein; and (h) the Plant
          Agreements.

          Person:

               "Person" means (i) any corporation, limited liability
          company, partnership, joint venture, association, joint-stock
          company, business trust or unincorporated organization, in each
          case formed or organized under the laws of the United States of
          America, any state thereof or the District of Columbia, or (ii)
          the United States of America or any state thereof, or any
          political subdivision of either thereof, or any agency, authority
          or other instrumentality of any of the foregoing.  

          Plant:

               "Plant" shall mean Units 1 and 2 and related common
          facilities of the San Juan Generating Station, an electric power
          generating plant located northwest of and within fifteen miles of
          the corporate limits of the City in San Juan County, New Mexico,
          and not within the corporate limits of any municipality, and any
          additions or improvements thereto or replacements thereof.

          Plant Agreements:

               "Plant Agreements" shall mean all contracts relating to the
          ownership, construction and operation of the Plant, including the
          Facilities, as from time to time amended or supplemented.

          Prior Bonds:

               "Prior Bonds" shall mean the 1973 Bonds and the 1977 Bonds,
          collectively.

          Purchase Price Payments:

               "Purchase Price Payments" shall mean the payments required
          to be made by the Company pursuant to Section 5.02 hereof.

          Series 1973 Installment Sale Agreement:

               "Series 1973 Installment Sale Agreement" shall mean the
          Installment Sale Agreement, dated as of December 1, 1973, between
          the City, as Vendor, and Public Service Company of New Mexico
          (which has now been discharged therefrom) and the Company, as
          Vendees, as amended and supplemented pursuant to the terms
          thereof prior to the date hereof.

          Series 1977 Installment Sale Agreement:

               "Series 1977 Installment Sale Agreement" shall mean the
          Installment Sale Agreement, dated as of November 1, 1977, between
          the City, as Vendor, and the Company, as Vendee, as amended and
          supplemented pursuant to the terms thereof prior to the date
          hereof.

          Supplemental Ordinance:

               "Supplemental Ordinance" shall mean any ordinance or
          resolution adopted by the City Council and effective subsequent
          to the initial issuance of the Bonds modifying, altering,
          amending, supplementing or confirming the Ordinance or for any
          purpose, in accordance with the terms of the Ordinance, as such
          Supplemental Ordinance may be modified, altered, amended or
          supplemented by any and all ordinances and related resolutions of
          the City Council of the City adopted pursuant thereto.

          Tax Agreement:

               "Tax Agreement" shall mean that tax certificate and
          agreement, dated the date of the initial authentication and
          delivery of the Bonds, between the City and the Company, relating
          to the requirements of the Code and the 1954 Code, and any and
          all modifications, alterations, amendments and supplements
          thereto.

          Trustee:

               "Trustee" shall mean First Trust of New York, National
          Association, as trustee under the Ordinance, its successors in
          trust and their assigns.

               SECTION 1.02.  Incorporation of Certain Definitions by
          Reference.  Each capitalized term used herein and not otherwise
          defined herein shall have the meaning set forth in the Ordinance.


                                      ARTICLE II

                       REPRESENTATIONS, WARRANTIES AND FINDINGS

               SECTION 2.01.  Representations and Warranties of the City. 
          The City makes the following representations and warranties as
          the basis for the undertakings on the part of the Company
          contained herein:

                    (a)  The City is an incorporated municipality, a body
               politic and corporate, existing under the Constitution and
               laws of the State of New Mexico;

                    (b)   The City has the power to enter into this
               Agreement and to perform and observe the agreements and
               covenants on its part contained herein, including without
               limitation the power to issue and sell the Bonds as
               contemplated herein and in the Ordinance, and by proper
               corporate action has duly authorized the execution and
               delivery hereof;

                    (c)  The execution and delivery of this Agreement by
               the City do not, and consummation of the transactions
               contemplated hereby and fulfillment of the terms hereof by
               the City will not, result in a breach of any of the terms or
               provisions of, or constitute a default under, any ordinance,
               indenture mortgage, deed of trust or other agreement or
               instrument to which the City is now a party or by which it
               is now bound, or any order, rule or regulation applicable to
               the City of any court or of any regulatory body or
               administrative agency or other governmental body having
               jurisdiction over the City or over any of its properties, or
               the Constitution or laws of the State of New Mexico;

               SECTION 2.02.  Representations and Warranties of the
          Company.  The Company makes the following representations and
          warranties as the basis for the undertakings on the part of the
          City contained herein:

                    (a)  The Company is a corporation duly organized and
               existing in good standing under the laws of the State of
               Arizona and duly qualified as a foreign corporation in the
               State of New Mexico; 

                    (b)  The Company has power to enter into this Agreement
               and to perform and observe the agreements and covenants on
               its part contained herein and by proper corporate action has
               duly authorized the execution and delivery hereof; 

                    (c)  The execution and delivery of this Agreement by
               the Company do not, and consummation of transactions
               contemplated hereby and fulfillment of the terms hereof by
               the Company will not, result in a breach of any of the terms
               or provisions of, or constitute a default under, any
               ordinance, indenture mortgage, deed of trust or other
               agreement or instrument to which the Company is a party or
               by which it is now bound, or the Restated Articles of
               Incorporation or by-laws of the Company, or any order, rule
               or regulation applicable to the Company of any court or of
               any regulatory body or administrative agency or other
               governmental body having jurisdiction over the Company or
               over any of its properties, or any statute of any
               jurisdiction applicable to the Company; 

                    (d)  The Arizona Corporation Commission has approved
               all matters relating to the Company's participation in the
               transactions contemplated by this Agreement which require
               said approval, and no other consent, approval, authorization
               or other order of any regulatory body or administrative
               agency or other governmental body is legally required for
               the Company's participation therein, except such as may have
               been obtained or may be required under the securities laws
               of any jurisdiction;

                    (e)  The Facilities (i) are designed to meet applicable
               federal, state and local requirements for the control of
               pollution now in effect, (ii) are to be used to reduce,
               abate or prevent pollution and (iii) are located or are to
               be located in San Juan County within fifteen miles outside
               the corporate limits of the City and not within the
               corporate limits of any municipality;

                    (f)  All of the proceeds of the Bonds (exclusive of
               accrued interest, if any, to be paid by the initial
               purchasers of the Bonds upon delivery thereof) will be
               expended to refund the Prior Bonds;

                    (g)  The Company presently owns and undivided 50%
               interest in Unit 1 of the Plant and an undivided 50%
               interest in Unit 2 of the Plant.

                    (h)  With respect to the Facilities as of the date of
               execution and delivery of this Agreement, the Company has
               good and marketable title to its interest in such Facilities
               free and clear of all claims, liens and encumbrances, other
               than Permitted Encumbrances;

                    (i)  The Facilities consist of those facilities
               described in Exhibit A attached hereto, and so long as the
               Company owns an interest in the Facilities, the Company
               shall cause to be made, or consent to, no changes to the
               Facilities or to the operation thereof which would affect
               the qualification of the Facilities as pollution control
               facilities under the Act or impair the tax-exempt status of
               interest on the Bonds;

                    (j)  To the extent necessary to preserve the security
               for the Bonds, the validity of the Bonds under the Act and
               the tax-exempt status of interest on the Bonds, all material
               certificates, approvals, permits and authorizations with
               respect to the construction of the Facilities of applicable
               local, state and federal governmental agencies have been
               obtained, and the Facilities have been constructed and are
               in operation in all material respects in accordance with
               such certificates, approvals, permits and authorizations;
               and

                    (k)  The Company has used the proceeds of the Prior
               Bonds and the proceeds from the sale of any facilities
               financed with the Prior Bonds for purposes which are
               authorized by the Act and which would not adversely affect
               the exclusion from gross income for federal tax purposes of
               interest on the Prior Bonds or the exemption of interest on
               the Prior Bonds from State of New Mexico income taxation.

               SECTION 2.03.  Findings of the City.  The City hereby
          confirms its findings that its financing and refinancing of the
          Company's interest in the Facilities will serve the public
          purpose of the Act to protect and promote the health, welfare and
          safety of the citizens of the State of New Mexico and its habitat
          and wildlife, with the resultant higher level of employment and
          economic activity and stability.


                                     ARTICLE III

                     PRIOR CONVEYANCE TO THE CITY; THE FACILITIES

               SECTION 3.01.  Prior Conveyance to the City.  The Company
          and the City confirm that, pursuant to the Original Sale
          Agreements, the Company has heretofore sold and conveyed to the
          City, and the City has heretofore purchased and acquired from the
          Company, the Company's interest in the Facilities, subject only
          to Permitted Encumbrances.

               SECTION 3.02.  Revision of Plans and Specifications.  The
          Company may consent to one or more revisions to the plans and
          specifications for the Facilities (including without limitation
          any changes therein, additions thereto, substitutions therefor
          and deletions therefrom) in any respect; provided, however, that,
          if any such revision shall render inaccurate the description of
          the Facilities contained in Exhibit A hereto, the Company shall
          deliver to the City and the Trustee (a) a revised Exhibit A
          containing a description of the Facilities as revised, the
          accuracy of which shall have been certified by an Authorized
          Company Representative, and (b) an opinion of Bond Counsel to the
          effect that the Facilities as described in the revised Exhibit A
          are such that the expenditure of the proceeds of the Bonds
          pursuant to this Agreement will not, in and of itself, impair the
          validity of the Bonds under the Act or the exclusion from gross
          income for federal tax purposes of interest on the Bonds.  A
          revision of Exhibit A hereto pursuant to this Section 3.02 shall
          not constitute an amendment, change or modification of this
          Agreement within the meaning of Article XII of the Ordinance.

               SECTION 3.03.  Maintenance of Facilities; Remodeling; Notice
          of Damages.  The Company shall at all times exercise all of its
          rights, powers, elections and options under the Plant Agreements
          to cause the Facilities, and every element and unit thereof, to
          be maintained, preserved and kept in thorough repair, working
          order and condition and to cause all needful and proper repairs
          and renewals thereto to be made; provided, however, that the
          Company may exercise all of its rights, powers, elections and
          options under the Plant Agreements to cause the operation of the
          Facilities, or any element or unit thereof, to be discontinued
          if, in the judgment of the Company, it is no longer advisable to
          operate the same, or if the Company intends to sell or dispose of
          the same and within a reasonable time shall endeavor to
          effectuate such sale or disposition; provided further that prior
          to any such discontinuation, the Company shall furnish to the
          City and the Trustee a certificate executed by an Authorized
          Company Representative stating that the operation of the
          Facilities, or any element or unit thereof, is being discontinued
          and the reasons therefor.

               The Company may, subject to the provisions of Section 6.05
          hereof, at its own expense consent to the remodeling of the
          Facilities or to the making of such substitutions, modifications
          and improvements to the Facilities from time to time as it, in
          its discretion, may deem to be desirable for its uses and
          purposes, which remodeling, substitutions, modifications and
          improvements shall be included under the terms of this Agreement
          as part of the Facilities.  

               After the occurrence of any material damage or loss to the
          Facilities, if any Bonds are then Outstanding, the Company shall
          notify the City as to the nature and extent of such damages or
          loss and whether it is practicable and desirable to rebuild,
          repair, or restore such damage or loss.

               SECTION 3.04.  Insurance.  The Company shall exercise all of
          its rights, powers, elections and options under the Plant
          Agreements to keep the Facilities insured against fire, casualty,
          public liability and other risks to the extent usually insured
          against by companies owning and operating similar property, by
          reputable insurance companies or, at the Company's election, with
          respect to all or any element or unit of the Facilities, by means
          of an adequate insurance fund set aside and maintained by it out
          of its own earnings or in conjunction with other companies
          through an insurance fund, trust or other agreement or, by means
          of unfunded self-insurance as may be reasonable and customary by
          companies owning and operating similar property.  All proceeds of
          such insurance shall be for the account of the Company.  

               SECTION 3.05.  Condemnation; Eminent Domain.  (a)  In the
          event that title to or the temporary use of the Facilities, or
          any part thereof, shall be taken in condemnation or by the
          exercise of the power of eminent domain by any governmental body
          or by any person, firm or corporation acting under governmental
          authority, any proceeds received by the City from any award or
          awards in respect of the Facilities or any part thereof made in
          such condemnation or eminent domain proceedings, after payment of
          all expenses incurred in the collection thereof, shall to the
          extent of the Company's interest therein be paid for the account
          of the Company, and the City hereby assigns to the Company all of
          its right, title and interest in and to any claim for and rights
          with respect to any such condemnation award.

                    (b)  The City shall cooperate fully with the Company in
          the handling and conduct of any prospective or pending
          condemnation proceedings with respect to the Facilities or any
          part thereof.  In no event will the City voluntarily settle or
          consent to the settlement of any prospective or pending
          condemnation proceedings with respect  to the Facilities or any
          part thereof without the written consent of the Company  and the
          City will, at the request of the Company, accept a sum in payment
          therefor at any stage of the condemnation proceedings which the
          Company shall certify to the City to be fair.  Unless and until
          such a request is made by the Company, the City will take or
          cause to be taken all actions necessary to obtain the award of
          fair compensation for the taking and the collecting thereof.

                    (c)  The Company shall be entitled to the entire
          proceeds of any condemnation award or portion thereof made for
          damages to or takings of its own property other than the
          Facilities.


                                      ARTICLE IV

                           ISSUANCE AND SALE OF THE BONDS;
                         DISPOSITION OF PROCEEDS OF THE BONDS

               SECTION 4.01.  Issuance of the Bonds.  The City shall issue
          the Bonds under and in accordance with the Ordinance subject to
          the provisions of the bond purchase agreement among the City, the
          initial purchaser or purchasers of the Bonds and the Company. 
          The Company hereby approves the issuance of the Bonds and all
          terms and conditions thereof.  

               SECTION 4.02.  Issuance of Other Obligations.  The City and
          the Company expressly reserve the right to enter into, to the
          extent permitted by law, but shall not be obligated to enter
          into, an agreement or agreements other than this Agreement with
          respect to the issuance by the City, under an ordinance or
          ordinances other than the Ordinance, of obligations to provide
          additional funds to pay the cost of construction of the
          Facilities or obligations to refund all or any principal amount
          of the Bonds, or any combination thereof.  

               SECTION 4.03.  Disposition of Bond Proceeds.  The City and
          the Company shall enter into escrow arrangements with the trustee
          for each series of Prior Bonds and shall cause a portion of the
          proceeds of the Bonds in amount equal to (i) the proceeds of the
          Bonds, other than accrued interest, if any, paid by the initial
          purchaser or purchasers thereof, multiplied by the ratio
          determined by multiplying outstanding principal amount of such
          series of Prior Bonds by the aggregate outstanding principal
          amount of the Prior Bonds, to be deposited in escrow with such
          trustee to be applied to the payment of such series of Prior
          Bonds upon the redemption thereof.

               The City shall establish the Bond Fund with the Trustee in
          accordance with Section 4.01 of the Ordinance.  The accrued
          interest, if any, paid by the initial purchasers of the Bonds
          shall be deposited into the Bond Fund.

               SECTION 4.04.  Investment of Moneys in Funds and Accounts. 
          The Company and the City agree that any moneys held in any fund
          or account created by the Ordinance shall be invested as provided
          in the Ordinance.


                                      ARTICLE V

                               PURCHASE BY THE COMPANY;
                      PURCHASE PRICE PAYMENTS; OTHER OBLIGATIONS

               SECTION 5.01.  Prior Purchase by the Company.  The City and
          the Company confirm that pursuant to the Original Sale
          Agreements, the City has heretofore sold and conveyed  to the
          Company, without warranty of any kind whatsoever, and the Company
          confirms that it has purchased and acquired from the City, the
          interest in the Facilities acquired by the City as described in
          Section 3.01 hereof.  The parties hereto agree that
          notwithstanding anything to the contrary in the Original Sale
          Agreements, effective as of the date of initial issuance of the
          Bonds the respective purchase prices for the interest in the
          Facilities shall be the purchase price payments set forth in
          Section 5.02 hereof.

               SECTION 5.02. Purchase Price Payments.  As the purchase
          price to be paid by the Company for the interest in the
          Facilities which comprise the Company Project, the Company shall
          pay, or cause to be paid, to the Trustee for the account of the
          City an amount equal to the aggregate principal amount of the
          Bonds from time to time Outstanding and, as interest on such
          amount, an amount equal to premium, if any, and interest on such
          Bonds, such amounts to be paid in installments due on the dates,
          in the amounts and in the manner provided in the Ordinance for
          the City to cause amounts to be deposited in the Bond Fund for
          the timely payment of the principal of and premium, if any, and
          interest on the Bonds whether at stated maturity, upon redemption
          or acceleration or otherwise; provided, however, that the
          obligation of the Company to make any such payment hereunder
          shall be reduced by the amount of any reduction under Section
          2.12 and Section 3.05 of the Ordinance of the amount of the
          corresponding payment required to be made by the City thereunder.

               SECTION 5.03.  Payments Pledged and Assigned; Obligation
          Absolute.  It is understood and agreed that all Purchase Price
          Payments are, by the Ordinance, to be pledged by the City to the
          Trustee, and that all rights and interest of the City hereunder
          (except for the City's rights under Sections 5.04, 5.05, 6.03 and
          8.05 hereof and any rights of the City to receive notices,
          certificates, requests, requisitions and other communications
          hereunder) are to be pledged and assigned to the Trustee.  The
          Company assents to such pledge and assignment and agrees that the
          obligation of the Company to make the Purchase Price Payments and
          the other charges payable hereunder shall be absolute,
          irrevocable and unconditional and shall not be subject to
          cancellation, termination or abatement, or to any defense other
          than payment or to any right of set-off, counterclaim or
          recoupment arising out of any breach by the City or the Trustee
          or any other party under this Agreement, the Ordinance or
          otherwise, or out of any obligation or liability at any time
          owing to the Company by the City, the Trustee or any other party,
          and, further, that the Purchase Price Payments and the other
          payments due and charges payable hereunder shall continue to be
          payable at the times and in the amounts herein and therein
          specified, whether or not the Facilities, or any portion thereof,
          shall have been completed or shall have been destroyed by fire or
          other casualty, or title thereto, or the use thereof, shall have
          been taken by the exercise of the power of eminent domain, and
          that there shall be no abatement of or diminution in any such
          payments by reason thereof, whether or not the Facilities shall
          be used or useful, whether or not any applicable laws,
          regulations or standards shall prevent or prohibit the use of the
          Plant or the Facilities, or for any other reason, all of the
          foregoing being subject, however, to the provisions of Sections
          6.01 and 7.02 hereof.

               SECTION 5.04.  Payment of Expenses.  (a)  The Company shall
          pay all Administration Expenses, including, without limitation,
          Administration Expenses incurred at and subsequent to the time
          the Bonds are deemed to have been paid in accordance with Article
          VIII of the Ordinance.  The payment of the compensation and the
          reimbursement of expenses and advances of the Trustee, of the
          paying agent, any co-paying agent and the registrar under the
          Ordinance shall be made directly to such entities.

                    (b)  The City may submit to the Company periodic
          statements, not more frequently than monthly, for the reasonable
          value of services of any City employees utilized, and the full
          amount of any City expenses incurred, by the City in connection
          with the performance or attainment by the City of its obligations
          and rights under or pursuant to the Ordinance, the Bonds or this
          Agreement, and the Company shall make payment to the City of the
          full amount of each such statement within thirty (30) days after
          the Company receives such statement, provided that the Company
          within such thirty (30) day period may in writing and in good
          faith specifically protest all or any portion of the amounts
          included in such statement and in such event the Company shall
          not be obligated to make payment to the City of the amount which
          has been protested in such manner until ten (10) days after such
          protest shall have been resolved either by agreement between the
          City and the Company or by an appropriate tribunal.  The Company
          agrees that the provisions of this Section 5.04 shall survive the
          payment, redemption or defeasance of the Bonds.

               SECTION 5.05.  Indemnification.  The Company releases the
          City and the Trustee from, and covenants and agrees that neither
          the City nor the Trustee shall be liable for, and covenants and
          agrees, to indemnify and hold harmless the City and the Trustee
          and their officers (including members of the City Council),
          employees and agents from and against, any and all losses,
          claims, damages, liabilities (including, without limitation,
          those resulting from any environmental laws), taxes (including,
          without limitation, gross receipts taxes but, with respect to the
          Trustee, not including taxes owing in the ordinary course of
          business), or expenses, of every conceivable kind, character and
          nature whatsoever arising out of, resulting from or in any way
          connected with (1) the Facilities or the conditions, occupancy,
          use, possession, conduct or management of, or work done in or
          about, or from the planning, design, acquisition, installation or
          construction of the Facilities or any part thereof, except for
          those arising out of the activities described in Section 56-7-1 A
          or B, N.M.S.A. 1978, or in Section 56-7-2 A or B, N.M.S.A. 1978,
          to the extent such Sections are applicable; (2) the issuance of
          any Bonds or any certifications or representations made in
          connection therewith and the carrying out of any of the
          transactions contemplated by the Bonds, the Ordinance and this
          Agreement; (3) the Trustee's acceptance or administration of the
          trusts under the Ordinance; or (4) any untrue statement or
          alleged untrue statement of any material fact or omission or
          alleged omission to state a material fact necessary to make the
          statements made, in light of the circumstances under which they
          were made, not misleading, in any official statement or other
          offering circular utilized by the City or any underwriter or
          placement agent in connection with the sale of any Bonds;
          provided that such indemnity shall not be required for losses,
          claims, damages, liabilities or expenses that result from, in the
          case of parties other than the City, negligence or from willful
          misconduct on the part of the party seeking such indemnity.  The
          indemnity of the Trustee and the City required by this Section
          shall be only to the extent that any loss sustained by the
          Trustee or the City, as the case may be, exceeds the net proceeds
          the Trustee or the City, as the case may be, receives from any
          insurance carried with respect to the loss sustained.  The
          Company further covenants and agrees, to the extent permitted by
          law, to pay or to reimburse the City and the Trustee and their
          officers, employees and agents for any and all reasonable costs,
          attorneys fees and expenses, liabilities or expenses incurred in
          connection with investigating, defending against or otherwise in
          connection with any such losses, claims, damages, liabilities,
          expenses or actions, except to the extent that the same arise out
          of the negligence or willful misconduct of the party claiming
          such payment or reimbursement.  The provisions of this Section
          shall survive the retirement of the Bonds or resignation or
          removal of the Trustee.

               SECTION 5.06.  Payment of Taxes; Discharge of Liens.  The
          Company shall: (a) pay, or make provision for payment of, all
          lawful taxes and assessments, including income, profits, property
          or excise taxes, if any, or other municipal or governmental
          charges, levied or assessed by any federal, state or municipal
          government or political body upon the Facilities or any part
          thereof or upon the City with respect to the Purchase Price
          Payments, when the same shall become due; and (b) pay or cause to
          be satisfied and discharged or make adequate provision to satisfy
          and discharge, within sixty (60) days after the same shall
          accrue, any lien or charge upon the Purchase Price Payments, and
          all lawful claims or demands for labor, materials, supplies or
          other charges which, if unpaid, might be or become a lien upon
          such amounts, except Permitted Encumbrances; provided, that, if
          the Company shall first notify the City and the Trustee of its
          intention so to do, the Company may in good faith contest any
          such lien or charge or claims or demands in appropriate legal
          proceedings, and in such event may permit the items so contested
          and identified as such by the Company to remain undischarged and
          unsatisfied during the period of such contest and any appeal
          therefrom, unless the Trustee shall notify the Company in writing
          that, in the opinion of counsel to the Trustee, based upon
          material facts disclosed to the Trustee without any duty of
          investigation, by nonpayment of any such items the lien of the
          Ordinance as to the Purchase Price Payments will be materially
          endangered, in which event the Company shall promptly pay and
          cause to be satisfied and discharged all such unpaid items.  The
          City shall cooperate fully with the Company in any such contest.


                                      ARTICLE VI

                                  SPECIAL COVENANTS

               SECTION 6.01.  Maintenance of Corporate Existence.  Except
          as permitted in this Section 6.01, the Company shall maintain its
          corporate existence, shall not sell, transfer or otherwise
          dispose of all of its assets, as or substantially as an entirety,
          and shall not consolidate with or merge with or into another
          corporation.  The Company may consolidate with or merge into
          another corporation incorporated under the laws of the United
          States of America, any state thereof or the District of Columbia,
          or sell, transfer or otherwise dispose of all of its assets, as
          or substantially as an entirety, to any Person, if the surviving
          or resulting corporation (if other than the Company) or the
          transferee Person, as the case may be, prior to or simultaneously
          with such merger, consolidation, sale, transfer or other
          disposition, assumes, by delivery to the Trustee and the City of
          an instrument in writing satisfactory in form to the Trustee and
          the City, all the obligations of the Company under this
          Agreement, including without limitation the obligations of the
          Company under Section 5.02 hereof.  Upon such an assumption
          following any such sale, transfer or other disposition of assets,
          the Company shall be released and discharged from all liability
          in respect of all obligations under this Agreement. 
          Notwithstanding the foregoing, in the case of any such sale,
          transfer or other disposition of assets, which do not include the
          Facilities, the Company shall remain liable in respect of all
          obligations under this Agreement other than the obligations under
          Section 5.02 hereof, and the transferee shall not be required to
          assume any obligations hereunder other than the obligations under
          Section 5.02 hereof; provided, however, that the transferee shall
          be required to assume all such other obligations unless the
          Company shall have delivered to the City and the Trustee an
          opinion of Bond Counsel to the effect that the non-assumption by
          the transferee of such other obligations will not impair the
          validity under the Act of the Bonds and will not adversely affect
          the exclusion from gross income for federal tax purposes of
          interest on the Bonds.

               If consolidation, merger or sale, transfer or other
          disposition is made as permitted by this Section 6.01, the
          provisions of this Section 6.01 shall continue in full force and
          effect and no further consolidation, merger or sale or other
          transfer or other disposition shall be made except in compliance
          with the provisions of this Section 6.01.  
               Anything in this Agreement to the contrary notwithstanding,
          the sale, transfer or other disposition by the Company of all of
          its facilities (a) for the generation of electric energy, (b) for
          the transmission of electric energy or (c) for the distribution
          of electric energy, in each case considered alone, or all of its
          facilities described in clauses (a) and (b), considered together,
          or all of its facilities described in clauses (b) and (c),
          considered together, shall in no event be deemed to constitute a
          sale, transfer or other disposition of all the properties of the
          Company, as or substantially as an entirety, unless, immediately
          following such sale, transfer or other disposition, the Company
          shall own no properties in the other such categories of property
          not so sold, transferred or otherwise disposed of.  The character
          of particular facilities shall be determined by reference to the
          Uniform System of Accounts prescribed for public utilities and
          licensees subject to the Federal Power Act, as amended, to the
          extent applicable.

               SECTION 6.02.  Permits or Licenses.  In the event that it
          may be necessary for the proper performance of this Agreement on
          the part of the Company or the City that any application or
          applications for any permit or license to do or to perform
          certain things be made to any governmental or other agency by the
          Company or the City, the Company and the City each shall, upon
          the request of either, execute such application or applications. 


               SECTION 6.03.  City's Access to Facilities.  The City shall
          have the right, upon appropriate prior notice to the Company, to
          have reasonable access to the Facilities during normal business
          hours for the purpose of making examinations and inspections of
          the same.  

               SECTION 6.04.  Tax-Exempt Status of Interest on Bonds.
          (a)  It is the intention of the parties hereto that interest on
          the Bonds shall be and remain tax-exempt, and to that end the
          covenants and agreements of the City and the Company in this
          Section 6.04 and the Tax Agreement are for the benefit of the
          Owners from time to time of the Bonds.

                    (b)  The City covenants and agrees that it will not
          take or omit to take any action reasonably within its control
          that will cause the Bonds to be "arbitrage bonds" within the
          meaning of Section 148 of the Code or otherwise subject to
          federal income taxation by reason of Section 103 and Section 141
          through 150 of the Code or Section 103 of the 1954 Code and Title
          XIII of the Tax Reform Act of 1986, as applicable, and any
          applicable regulations promulgated thereunder.  To such end, the
          City covenants to the extent reasonably within its control to
          comply with all covenants set forth in the Tax Agreement, which
          is hereby incorporated by reference as though fully set forth
          herein.

                    (c)  The Company covenants and agrees for the benefit
          of the Owners from time to time of the Bonds that it will not
          directly or indirectly use or permit the use of (to the extent
          within its control) the proceeds of any of the Bonds or any other
          funds, or take or omit to take any action, if and to the extent
          such use, or the taking or omission to take such action, would
          cause any of the Bonds to be "arbitrage bonds" within the meaning
          of Section 148 of the Code or otherwise subject to federal income
          taxation by reason of Section 103 and 141 through 150 of the Code
          or Section 103 of the 1954 Code and Title XIII of the Tax Reform
          Act of 1986, as applicable, and any applicable regulations
          promulgated thereunder.  To such ends, the Company will comply
          with all requirements of such Section 148 to the extent
          applicable to the Bonds.  In the event that at any time the
          Company is of the opinion that for purposes of this Section
          6.04(c) it is necessary to restrict or limit the yield on the
          investment of any moneys held by the Trustee under the Ordinance,
          the Company shall so notify the Trustee in writing.

                    Without limiting the generality of the foregoing, the
          Company agrees that there shall be paid from time to time all
          amounts required to be rebated to the United States of America
          pursuant to Section 148(f) of the Code and any applicable
          Treasury Regulations.  This covenant shall survive payment in
          full or defeasance of the Bonds and the satisfaction and
          discharge of the Ordinance.  The Company specifically covenants
          to pay or cause to be paid the Rebate Requirement as defined and
          described in the Tax Agreement.

                    (d)  The Company certifies and represents that it has
          not taken or (to the extent within its control) permitted to be
          taken, and the Company covenants and agrees that it will not take
          or (to the extent within its control) permit to be taken any
          action which will cause the interest on the Bonds to become
          includable in gross income for federal income tax purposes;
          provided, however, that neither the Company nor the City shall be
          deemed to have violated the covenants set forth in this Section
          6.04 if the interest on any of the Bonds becomes taxable to a
          person solely because such person is a "substantial user" of the
          Project or a "related person" within the meaning of Section
          103(b)(13) of the 1954 Code and provided, further, that none of
          the covenants and agreements herein contained shall require
          either the Company or the City to enter an appearance or
          intervene in any administrative, legislative or judicial
          proceeding in connection with any changes in applicable laws,
          rules or regulations or in connection with any decisions of any
          court or administrative agency or other governmental body
          affecting the taxation of interest on the Bonds.  The Company
          acknowledges having read Section 7.08 of the Ordinance and agrees
          to perform all duties imposed on it by such Section 7.08, by this
          Section and by the Tax Agreement.  Insofar as Section 7.08 of the
          Ordinance and the Tax Agreement impose duties and
          responsibilities on the Company, they are specifically
          incorporated herein by reference.

                    (e)  Notwithstanding any provision of this Section 6.04
          and Section 7.08 of the Ordinance, if the Company shall provide
          to the City and the Trustee an opinion of Bond Counsel to the
          effect that any specified action required under this Section 6.04
          and Section 7.08 of the Ordinance is no longer required or that
          some further or different action is required to maintain the tax-
          exempt status of interest on the Bonds, the Company, the Trustee
          and the City may conclusively rely upon such opinion in complying
          with the requirements of this Section 6.04, and the covenants
          hereunder shall be deemed to be modified to that extent.

               SECTION 6.05.  Use of Facilities.  So long as any Bonds are
          Outstanding and the Facilities are operated by or for the benefit
          of the Company, the Company shall exercise all of its rights,
          powers, elections and options under the Plant Agreements to cause
          the Facilities to be used for purposes contemplated by the Act
          and in the Tax Agreement.

               SECTION 6.06.  Financing Statements.  The Company shall file
          and record, or cause to be filed and recorded, all financing
          statements and continuation statements referred to in Section
          7.07 of the Ordinance.

               SECTION 6.07.  No Warranties.  The City makes no warranty,
          either express or implied, with respect to the Facilities as a
          whole or with respect to any item or portion of the Facilities. 
          Without limiting the effect of the preceding sentence, it is
          expressly agreed that in connection with the sale or conveyance
          pursuant to Section 5.01 of this Agreement (a) the City make no
          warranty that the title conveyed shall be good or that its
          transfer is rightful or that the goods shall be delivered free
          from any security interest or other lien or encumbrance, (b) the
          City makes NO WARRANTY OF MERCHANTABILITY, and (c) THERE ARE NO
          WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE
          HEREOF.

               SECTION 6.08.  Quiet Enjoyment.  The City covenants that the
          Company, upon observing and performing the terms, conditions and
          covenants on the Company's part to be observed and performed
          under this Agreement, shall peaceably and quietly have, hold and
          enjoy the Company Project as purchaser in possession, free from
          molestation, hindrance, eviction or disturbance by the City or by
          any other person or persons claiming the same by, through or
          under the City.

               SECTION 6.09.  Additional Payments by Company Concerning the
          Facilities.  In addition to the payments provided for in Section
          5.02 and Section 5.04 hereof, the Company will pay, or will
          exercise all of its rights, powers, elections and options under
          the Plant Agreements to cause to be paid, as applicable, all of
          the expenses of operation of the Facilities, including, without
          limitation, the cost of all necessary and proper repairs,
          replacements and renewals made pursuant to Section 3.03 hereof
          and premiums for insurance pursuant to Section 3.04 hereof.

               SECTION 6.10  Qualification in New Mexico.  The Company
          agrees that throughout the term of this Agreement it, or any
          successor or assignee as permitted by Section 6.01 or Section
          7.02 hereof, will be qualified to do business in the State of New
          Mexico.


                                     ARTICLE VII

                           ASSIGNMENT, LEASING AND SELLING

               SECTION 7.01.  By the City.  Except as provided in Article V
          of this Agreement, the City will not sell, lease, assign,
          transfer, convey or otherwise dispose of its interest in the
          Facilities or any portion thereof or interest therein or in the
          revenues therefrom without the written consent of the Company,
          nor will it create or suffer to be created any debt, lien or
          charge thereon, not consented to by the Company, except Permitted
          Encumbrances.

               SECTION 7.02.  By the Company.  The Company's interest in
          this Agreement may be assigned as a whole or in part, and its
          interest in the Facilities may be leased, sold, transferred or
          otherwise disposed of by the Company as a whole or in part
          (whether an interest in a specific element or unit or an
          undivided interest), to any Person; provided, however, that no
          such assignment, lease, sale, transfer or other disposition (a)
          shall relieve the Company from its primary liability for its
          obligations under Section 5.02 hereof or (b) shall be made unless
          the assignee, lessee, purchaser or other transferee, as the case
          may be, prior to or simultaneously with such assignment, lease,
          sale, transfer or other disposition, assumes, by delivery of an
          instrument to the Trustee and the City of an instrument in
          writing satisfactory in form to the Trustee, all other
          obligations of the Company hereunder to the extent of the
          interest assigned, leased, sold, transferred or otherwise
          disposed of, and the Company shall be released of and discharged
          from such obligations to the extent so assumed.  Notwithstanding
          the foregoing, (a) if (i) the Company's interest in this
          Agreement shall be assigned as a whole or in undivided part, (ii)
          the Company's interest in the Facilities shall be leased as a
          whole or in undivided part and the term of such leasehold or the
          term of any extension or extensions thereof at the option of the
          Company shall extend beyond the maturity date of the Bonds or
          (iii) the Company's interest in the Facilities shall be sold,
          transferred or otherwise disposed of as a whole or in undivided
          part, and (b) if the assignee, lessee, purchaser or other
          transferee shall assume the obligations of the Company under
          Section 5.02 hereof for the remaining term of this Agreement, to
          the extent of such assignment, lease, sale, transfer or other
          disposition, the Company shall be released from and discharged of
          all liability in respect of such obligations to the extent so
          assumed (but only to such extent); provided, however, that the
          release and discharge of the Company pursuant to clause (b) shall
          be conditioned upon delivery by the Company to the City and the
          Trustee of a certificate of an Independent Expert (as hereinafter
          defined) describing the interests so assigned, leased, sold,
          transferred or otherwise disposed of, together with all other
          rights, interests, assets and/or properties assigned, leased,
          sold, transferred or otherwise disposed of by the Company to the
          same Person in the same or a related transaction, stating that
          such rights, interests, assets and/or properties so described
          constitute facilities for the generation, transmission  and/or
          distribution of electric energy and stating that, in the opinion
          of such Independent Expert, the Fair Value (as hereinafter
          defined) of such rights, interests, assets and/or properties to
          the Person acquiring the same is not less than an amount equal to
          10/7 of the sum of (x) the aggregate principal amount of the
          Bonds then Outstanding and (y) the outstanding principal amount
          of all other obligations of the Company representing indebtedness
          for borrowed money or for the deferred purchase price of property
          which are being assumed by such Person; and provided, further,
          that after any such assumption, release and discharge as
          aforesaid, the Company may again assume such obligations under
          Section 5.02 hereof, in whole or in part, at any time and from
          time to time, and, to the extent of any such assumption by the
          Company (but only to such extent), the aforesaid assignee,
          lessee, purchaser or other transferee shall be released from and
          discharged of all liability in respect of such obligations.

               Anything herein to the contrary notwithstanding, the Company
          shall not make any assignment, lease or sale as provided in the
          immediately preceding paragraph unless it shall have furnished to
          the City and the Trustee an opinion of Bond Counsel to the effect
          that the proposed assignment, lease or sale will not impair the
          validity under the Act of the Bonds and will not adversely affect
          the exclusion from gross income for federal tax purposes of
          interest on the Bonds.

               After any lease, sale, transfer or other disposition of any
          element or unit of the Facilities, or any interest therein, the
          Company may, at its option, cause such element or unit, or
          interest therein, to no longer be deemed to be part of the
          Facilities for the purposes of this Agreement by delivering to
          the City and the Trustee the agreements or other documents
          required pursuant to Section 7.03 hereof together with an
          instrument signed by an Authorized Company Representative stating
          that such element or unit, or interest therein, shall no longer
          be deemed to be part of the Facilities for the purposes of this
          Agreement.  

               For purposes of this Section 7.02:

                    (a)  "Independent Expert" means a Person which (i) is
          an engineer, appraiser or other expert and which, with respect to
          any certificate to be delivered pursuant to this Section, is
          qualified to pass upon the matter set forth in such certificate
          and (ii)(A) is in fact independent, (B) does not have any direct
          material financial interest in the transferee or in any obligor
          upon the Bonds or under this Agreement or in any affiliate of the
          transferee or any such obligor, (C) is not connected with the
          transferee or any such obligor as an officer, employee, promoter,
          underwriter, trustee, partner, director or any person performing
          similar functions and (D) is approved by the Trustee in the
          exercise of reasonable care; for purposes of this definition
          "engineer" means a Person engaged in the engineering profession
          or otherwise qualified to pass upon engineering matters
          (including, but not limited to, a Person licensed as a
          professional engineer, whether or not then engaged in the
          engineering profession); and for purposes of this definition
          "appraiser" means a Person engaged in the business of appraising
          property or otherwise qualified to pass upon the Fair Value or
          fair market value of property.

                    (b)  "Fair Value" means the fair value of the
          interests, rights, assets and/or properties assigned, leased,
          sold, transferred or otherwise disposed of (but, in the case of a
          lease, only to the extent of such lease) as may be determined by
          reference to (i) except in the case of a lease, the amount which
          would be likely to be obtained in an arm's-length transaction
          with respect to such interests, rights, assets and/or properties
          between an informed and willing buyer and an informed and willing
          seller, under no compulsion, respectively, to buy or sell, (ii)
          in the case of a lease, the amount (discounted to present value
          at a rate not lower than the taxable equivalent of the yield to
          maturity of the Bonds based on prevailing market prices
          immediately prior to the first public announcement of the
          proposed transaction) which would be likely to be obtained in an
          arm's-length transaction with respect to such interests, rights,
          assets and/or properties between an informed and willing lessee
          and an informed and willing lessor, neither under any compulsion
          to lease; (iii) the amount of investment with respect to such
          interests, rights, assets and/or properties which, together with
          a reasonable return thereon, would be likely to be recovered
          through ordinary business operations or otherwise, (iv) the cost,
          accumulated depreciation and replacement cost with respect to
          such interests, rights, assets and/or properties and/or (v) any
          other relevant factors; provided, however, that (x) Fair Value
          shall be determined without deduction for any mortgage, deed of
          trust, pledge, security interest, encumbrance, lease,
          reservation, restriction, servitude, charge or similar right or
          any other lien of any kind and (y) the Fair Value to the
          transferee of any property shall not reflect any reduction
          relating to the fact that such property may be of less value to a
          Person which is not the owner, lessee or operator of the property
          or any portion thereof than to a Person which is such owner,
          lessee or operator.  Fair Value may be determined, without
          physical inspection, by the use of accounting and engineering
          records and other data maintained by the Company or the
          transferee or otherwise available to the Expert certifying the
          same.

               SECTION 7.03.  Instrument Furnished to the City and Trustee. 
          The Company shall, within fifteen (15) days after the delivery
          thereof, furnish to the City and the Trustee a true and complete
          copy of the agreements or other documents effectuating any such
          assignment, lease, sale, transfer or other disposition.  

               SECTION 7.04.  Limitation.  This Agreement shall not be
          assigned nor shall the Facilities be leased, sold, transferred or
          otherwise disposed of, in whole or in part, except as provided in
          this Article VII or in Section 6.01 or 5.03 hereof.  This Article
          VII shall not apply to any sale, transfer or other disposition by
          the Company of all of its assets, as or substantially as an
          entirety, as contemplated in Section 6.01.


                                     ARTICLE VIII

                            EVENTS OF DEFAULT AND REMEDIES

               SECTION 8.01.  Events of Default.  Each of the following
          events shall constitute and is referred to in this Agreement as
          an "Event of Default": 

                    (a)  a failure by the Company to make any Purchase
               Price Payment, which failure shall have resulted in an
               "Event of Default" under clause (a) or (b) of Section 9.01
               of the Ordinance;

                    (b)  a failure by the Company to pay when due any other
               amount required to be paid under this Agreement or to
               observe and perform any covenant, condition or agreement on
               its part to be observed or performed (other than a failure
               described in clause (a) above), which failure shall continue
               for a period of sixty (60) days after written notice,
               specifying such failure and requesting that it be remedied,
               shall have been given to the Company by the City or the
               Trustee, unless the City and the Trustee shall agree in
               writing to an extension of such period prior to its
               expiration; provided, however, that the City and the Trustee
               shall be deemed to have agreed to an extension of such
               period if corrective action is initiated by the Company
               within such period and is being diligently pursued; or 

                    (c)  the dissolution or liquidation of the Company, or
               failure by the Company promptly to lift any execution,
               garnishment or attachment of such consequence as will impair
               its ability to make any payments under this Agreement, or
               the entry of an order for relief by a court of competent
               jurisdiction in any proceeding for its liquidation or
               reorganization under the provisions of any bankruptcy act or
               under any similar act which may be hereafter enacted, or an
               assignment by the Company for the benefit of its creditors,
               or the entry by the Company into an agreement of composition
               with its creditors (the term "dissolution or liquidation of
               the Company," as used in this clause, shall not be construed
               to include the cessation of the corporate existence of the
               Company resulting either from a merger or consolidation of
               the Company into or with another corporation or a
               dissolution or liquidation of the Company following a
               transfer of all or substantially all its assets, as or
               substantially as an entirety, under the conditions
               permitting such actions contained in Section 6.01 hereof).  

               SECTION 8.02.  Force Majeure.  The provisions of Section
          8.01 hereof are subject to the following limitations: if by
          reason of acts of God; strikes, lockouts or other industrial
          disturbances; acts of public enemies; orders of any kind of the
          government of the United States or of the State of New Mexico, or
          any department, agency, political subdivision, court or official
          of any of them, or any civil or military authority;
          insurrections; riots; epidemics; landslides; lightning;
          earthquakes; volcanoes; fires; hurricanes; tornadoes; storms;
          floods; washouts; droughts; arrests; restraint of government and
          people; civil disturbances; explosions; breakage or accident to
          machinery; partial or entire failure of utilities; or any cause
          or event not reasonably within the control of the Company, the
          Company is unable in whole or in part to carry out any one or
          more of its agreements or obligations contained herein, other
          than its obligations under Sections 5.02, 5.04, 5.06, and 6.01
          hereof, the Company shall not be deemed in default by reason of
          not carrying out said agreement or agreements or performing said
          obligation or obligations during the continuance of such
          inability.  The Company shall make reasonable effort to remedy
          with all reasonable dispatch the cause or causes preventing it
          from carrying out its agreements; provided, that the settlement
          of strikes, lockouts and other industrial disturbances shall be
          entirely within the discretion of the Company, and the Company
          shall not be required to make settlement of strikes, lockouts and
          other industrial disturbances by acceding to the demands of the
          opposing party or parties when such course is in the judgment of
          the Company unfavorable to the Company.  Any failure of the
          Company to perform its obligations under Sections 5.02, 5.04,
          5.06 and 6.01 hereof shall constitute an Event of Default
          hereunder regardless of the reason for such failure to perform.

               SECTION 8.03.  Remedies.  (a)  Upon the occurrence and
          continuance of any Event of Default described in clause (a) of
          Section 8.01 hereof, and further upon the condition that, in
          accordance with the terms of the Ordinance, the Bonds shall have
          been declared to be immediately due and payable pursuant to any
          provision of the Ordinance, the Purchase Price Payments shall,
          without further action, become and be immediately due and
          payable.  
                    Any waiver of any "Event of Default" under the
               Ordinance and a rescission and annulment of its consequences
               shall constitute a waiver of the corresponding Event or
               Events of Default under this Agreement and a rescission and
               annulment of the consequences thereof.  

                    (b)  Upon the occurrence and continuance of any Event
               of Default, the City, or the Trustee with respect to the
               rights of the City assigned to the Trustee by the Ordinance,
               may take any action at law or in equity to collect any
               payments then due and thereafter to become due, or to
               enforce performance and observance of any obligation,
               agreement or covenant of the Company hereunder.  

                    (c)  Any amounts collected by the Trustee from the
               Company pursuant to this Section 8.03 shall be applied in
               accordance with the Ordinance.

               SECTION 8.04.  No Remedy Exclusive.  No remedy conferred
          upon or reserved to the City hereby is intended to be exclusive
          of any other available remedy or remedies, but each and every
          such remedy shall be cumulative and shall be in addition to every
          other remedy given hereunder or now or hereafter existing at law
          or in equity or by statute.  No delay or omission to exercise any
          right or power accruing upon any default shall impair any such
          right or power or shall be construed to be a waiver thereof, but
          any such right or power may be exercised from time to time and as
          often as may be deemed expedient.  In order to entitle the City
          to exercise any remedy reserved to it in this Article VIII, it
          shall not be necessary to give any notice, other than such notice
          as may be herein expressly required.

               SECTION 8.05.  Reimbursement of Attorneys' and Agents' Fees. 
          If the Company shall default under any of the provisions hereof
          and the City or the Trustee shall employ attorneys or agents or
          incur other reasonable expenses for the collection of payments
          due hereunder or for the enforcement of performance or observance
          of any obligation or agreement on the part of the Company
          contained herein, the Company will on demand therefor reimburse
          the City or the Trustee and any predecessor Trustee, as the case
          may be, for the reasonable fees of such attorneys or agents and
          such other reasonable expenses so incurred.  

               SECTION 8.06.  Waiver of Breach.  In the event any
          obligation created hereby shall be breached by either of the
          parties and such breach shall thereafter be waived by the other
          party, such waiver shall be limited to the particular breach so
          waived and shall not be deemed to waive any other breach
          hereunder.  In view of the assignment of certain of the City's
          rights and interest hereunder to the Trustee, the City shall have
          no power to waive any breach hereunder by the Company in respect
          of such rights and interest without the consent of the Trustee,
          and the Trustee may exercise any of the rights of the City
          hereunder.  


                                      ARTICLE IX

                        PREPAYMENT OF PURCHASE PRICE PAYMENTS;
                                 REDEMPTION OF BONDS

               SECTION 9.01.  Prepayment of Purchase Price Payments;
          Redemption of Bonds.  The Company shall have, and is hereby
          granted, the option to prepay all or any portion of the Purchase
          Price Payments and in conjunction therewith to direct the
          redemption, or provision for payment or redemption, of a
          principal amount of Bonds equal to the amount of principal of the
          Purchase Price Payments to be prepaid, any such redemption to be
          in accordance with Section 3.01(a) or (b) of the Ordinance.  In
          order to exercise such option, the Company shall deliver to the
          City and the Trustee a notice designating the principal amount of
          the Bonds to be redeemed, or for the payment or redemption of
          which provision is to be made, and, in the case of redemption of
          Bonds, or provision therefor, specifying the date of redemption
          and the applicable redemption provision of the Ordinance.  Upon
          receipt of such notice, the City shall take, or cause to be
          taken, the actions required by the Ordinance to discharge the
          lien created thereby through the redemption, or provision for
          payment or redemption, of all Bonds then Outstanding, or to
          effect the redemption, or provision for payment or redemption, of
          less than all the Bonds then Outstanding.  The date of any such
          redemption shall not be less than 45 days from the date such
          notice is given (unless a shorter notice is satisfactory to the
          Trustee).  Unless otherwise stated therein, such notice shall be
          revocable by the Company at any time prior to the time at which
          the Bonds to be redeemed, or for the payment or redemption of
          which provision is to be made, are first deemed to be paid in
          accordance with Article VIII of the Ordinance.  The Company shall
          furnish any moneys or Government Obligations (as defined in the
          Ordinance) required by the Ordinance to be deposited with the
          Trustee or otherwise paid by the City in connection with any of
          the foregoing purposes.  The redemption, or provision for payment
          or redemption, of Bonds as contemplated in this Section shall,
          pro tanto, reduce and constitute a prepayment of the Purchase
          Price Payments.

               SECTION 9.02.  Compliance with the Ordinance.  Anything in
          this Agreement to the contrary notwithstanding, the City and the
          Company shall take all actions required by this Agreement and the
          Ordinance in order to comply with any provisions of the Ordinance
          requiring the mandatory redemption of Bonds, including, without
          limitation, Section 3.01(c) of the Ordinance.


                                      ARTICLE X

                                    MISCELLANEOUS

               SECTION 10.01.  Term of Agreement.  This Agreement shall
          remain in full force and effect from the date hereof until the
          right, title and interest of the Trustee in and to the Trust
          Estate (as defined in the Ordinance) shall have ceased,
          terminated and become void in accordance with Article VIII of the
          Ordinance and until all payments required under this Agreement
          shall have been made.  Notwithstanding the foregoing, the
          covenants contained in Section 5.04, 5.05, Section 6.04 and 8.05
          hereof shall survive the termination of this Agreement.

               SECTION 10.02.  Effect of Plant Agreements.  The City
          acknowledges that the Company has executed and delivered certain
          of the Plant Agreements and may execute and deliver others.  The
          Company agrees that none of the Plant Agreements heretofore or
          hereafter executed and delivered shall in any way affect or
          diminish the rights of the City or the obligations to the City of
          the Company created by this Agreement.  The City acknowledges
          that the Facilities are subject to the lien of the Company
          Mortgages and are or may be subject to other Permitted
          Encumbrances.

               SECTION 10.03.  Notices.  Except as otherwise provided in
          this Agreement, all notices, certificates, requests, requisitions
          and other communications hereunder shall be in writing and shall
          be sufficiently given and shall be deemed given when mailed by
          registered mail, postage prepaid, addressed as follows: if to the
          City, at 800 Municipal Drive, Farmington, New Mexico  87401,
          Attention: Treasurer; if to the Company, at 220 West Sixth
          Street, Tucson, Arizona  85702, Attention: Treasurer; and if to
          the Trustee, at such address as shall be designated by it in
          accordance with the provisions of the Ordinance.  A copy of each
          notice, certificate, request or other communication given
          hereunder to the City, the Company, or the Trustee shall also be
          given to the others.  The City, the Company, and the Trustee may,
          by notice given hereunder, designate any further or different
          addresses to which subsequent notices, certificates, requests or
          other communications shall be sent.  

               SECTION 10.04.  Parties in Interest.  This Agreement shall
          inure to the benefit of and shall be binding upon the City, the
          Company and their respective successors and assigns, and no other
          person, firm or corporation shall have any right, remedy or claim
          under or by reason of this Agreement; provided, however, that the
          rights and remedies granted to the City in Article VIII hereof
          shall inure to the benefit of the Trustee, on behalf of the
          Owners from time to time of the Bonds, and shall be enforceable
          by the Trustee as a third party beneficiary or as assignee of the
          City; and provided, further, that any obligation of the City
          created by or arising out of this Agreement shall not be a
          general obligation of the City within the meaning of Article 9,
          Sections 12 and 13 of the Constitution of the State of New Mexico
          and shall be payable solely out of the Receipts and Revenues of
          the City from the Sale Agreement and shall never constitute an
          indebtedness of the City within the meaning of any state
          constitutional provision or statutory limitation and shall never
          constitute or give rise to a pecuniary liability of the City or a
          charge upon the City's general credit or against its taxing
          powers.

               SECTION 10.05.  Amendments.  This Agreement may be amended
          only by written agreement of the parties hereto, subject to the
          limitations set forth herein and in the Ordinance.

               SECTION 10.06.  Counterparts.  This Agreement may be
          executed in any number of counterparts, each of which, when so
          executed and delivered, shall be an original; but such
          counterparts shall together constitute but one and the same
          Agreement.

               SECTION 10.07.  Severability.  If any clause, provision or
          section of this Agreement shall, for any reason, be held illegal
          or invalid by any court, the illegality or invalidity of such
          clause, provision or section shall not affect any of the
          remaining clauses, provisions or sections hereof, and this
          Agreement shall be construed and enforced as if such illegal or
          invalid clause, provision or section had not been contained
          herein.  In case any agreement or obligation contained in this
          Agreement be held to be in violation of law, then such agreement
          or obligation shall be deemed to be the agreement or obligation
          of the City or the Company, as the case may be, to the full
          extent permitted by law.  

               SECTION 10.08.  Governing Law.  The laws of the State of New
          Mexico shall govern the construction and enforcement of this
          Agreement.


   <PAGE> 


                                      SIGNATURES

               IN WITNESS WHEREOF, the parties hereto have caused this
          Amended and Restated Installment Sale Agreement to be duly
          executed as of the day and year first above written.



                                             CITY OF FARMINGTON,
                                              as Vendor


          ATTEST:                            By /s/ Thomas C. Taylor
						----------------------
                                                  Mayor
          /s/ Mary L. Banks
        -----------------------------     
               City Clerk

          (SEAL)                             TUCSON ELECTRIC POWER COMPANY,
                                               as Vendee

          ATTEST:                            By  /s/ Kevin Larson
						----------------------
                                                  Vice President

	  /s/ Vincent Nitido Jr.
	--------------------------
             Assistant Secretary

   <PAGE> 

                                                                  EXHIBIT A


                            DESCRIPTION OF THE FACILITIES


               The Facilities consist of various systems and facilities to
          abate or control water and atmospheric pollution from the
          generation of electricity by Units 1 and 2 of the San Juan
          Generating Station (the "Plant").  Such systems and facilities
          contain equipment to collect, remove, alter, and dispose of air
          and water pollutants so that gaseous and liquid emissions to the
          environment from Units 1 and 2 meet all applicable government air
          and water quality standards.  Both Units 1 and 2 are coal-fired,
          steam turbine electric generating units.  Combustion of
          pulverized coal in these Units is the primary cause of pollution
          at the Plant.  Ash, nitrogen oxide, and sulfur oxides are by-
          products of combustion that must be controlled in order to meet
          environmental quality standards.  Because pulverized coal is used
          as a fuel, coal dust must be suppressed when coal is loaded,
          transported, or crushed.  Also, the generation of steam requires
          large quantities of fresh water for boiler makeup and condenser
          cooling.  Cooling tower blowdown has a high concentration of
          dissolved solids and must be treated in order to prevent the
          possibility of contamination of surrounding surface water with
          inorganic salts.  In addition, wastewater from the Plant's
          sanitary system must be treated.

               Major components of the project are as follows:

                    (A)  Ash Handling System.  A pneumatic system including
               blowers, valves, pipes, storage silos, unloading facilities,
               associated structural supports and controls to transfer and
               store fly ash collected from the steam generator economizer
               and precipitator hoppers of both Units 1 and 2.  A high
               pressure water sluicing system including pumps, valves, ash
               grinder, pipes, dewatering tanks, unloading facilities,
               associated structural supports, and controls to transfer and
               store bottom ash from the steam generators of both Units 1
               and 2.

                    (B)  Nitrogen Oxides Reduction System.  Windbox
               modification to include overfire air ports to reduce NOx
               formation by off stoichiometric combustion for Unit 2. 
               Windbox modification to include overfire air ports and duct
               work, dampers, fan and motor for gas recirculation to reduce
               NOx formation by reducing flame temperatures and diluting
               combustion air for Unit 1.

                    (C)  Electrostatic Precipitators.  High efficiency
               electrostatic precipitators for both Units 1 and 2, along
               with associated structural supports and duct work, to remove
               fly ash from flue gas exiting the steam boiler.

                    (D)  Sulfur Oxide and Particulate Removal System. 
               Duplicate equipment is provided at both Units 1 and 2.

                         (1)  Venturi scrubber-A variable throat venturi to
                    provide (i) backup fly ash removal to the electrostatic
                    precipitators and (ii) incidental sulfur oxide removal.

                         (2)  Sulfur oxide absorber-Open, multi-stage,
                    spray chamber to contact a reagent solution with sulfur
                    oxide in the flue gas in order to chemically remove the
                    sulfur oxide.

                         (3)  Demisting train-Cyclone separator followed by
                    a chevron demister and a mesh pad demister (i) to
                    remove fly ash from the flue gas in case of
                    precipitator upset and (ii) to prevent particle
                    reentrainment from the scrubber system itself by
                    physical entrapment of particulate matter.

                         (4)  Reheat section-Oil burner and related duct
                    work to reheat flue gas in order to keep sulfur oxide
                    in a gaseous form to maintain operating reliability of
                    the Scrubber System and to provide additional plume
                    buoyancy.

                         (5)  Calcium sulfate stabilization system-Primary
                    and secondary dewatering tanks, a mixing and
                    conditioning tank, reagent dispensing tanks, and
                    associated piping, conveyors, pumps, and other
                    equipment to chemically fix calcium sulfate residue.

                    (E)  Dust Suppression System.  Pipes, pumps, pipe
               nozzles, tanks, and associated equipment to spray water over
               coal transfer points in order to control the escape of coal
               dust to the atmosphere.

                    (F)  Wastewater Treatment System.

                         (1)  Collecting basin-A two and one-half million
                    gallon soil cement pond to receive and settle
                    wastewater from steam boiler blowdown, cooling tower
                    blowdown, and sanitary waste treatment.

                         (2)  Evaporator-Mechanical evaporator to remove
                    inorganic salts from process wastewater.

                         (3)  Sanitary system-An extended aeration system
                    to treat sanitary wastes.

                         (4)  Sewer system-Sewers, pipes, pumps, sumps, and
                    associated equipment necessary to interconnect the
                    various components of the Wastewater Treatment System.