AMENDMENT No. 2
                                     To The
                                 SAN JUAN UNIT 4
                 PURCHASE AGREEMENT AND PARTICIPATION AGREEMENT
                                     Between
                      Public Service Company of New Mexico
                                       and
                       The City of Farmington, New Mexico

1.0      PARTIES

         This  Amendment  No. 2 to the San Juan Unit 4  Purchase  Agreement  and
Participation  Agreement  ("Amendment No. 2") is made and entered into this 27th
day of October 1999, by and between PUBLIC SERVICE COMPANY OF NEW MEXICO,  a New
Mexico  corporation  ("PNM")  and  THE  CITY  OF  FARMINGTON,   NEW  MEXICO,  an
incorporated municipality, a body politic and corporate, existing as a political
subdivision  under the  constitution  and laws of the State of New  Mexico  (the
"City"),  hereinafter  sometimes  referred  to  individually  as  a  "Party"  or
collectively as the "Parties."

2.0      RECITALS

         This  Amendment No. 2 is made with  reference to the  following  facts,
among others:

         2.1 The San Juan Unit 4 Purchase Agreement and Participation  Agreement
was  entered  into by the  Parties as of  November  17,  1981 and was amended by
Amendment  No. 1 thereto  dated as of October  31, 1984  (collectively,  as thus
amended,  the  "PPA").  The PPA  governs  the  purchase  by the City of an 8.475
percent  undivided  ownership  interest in San Juan Unit 4 and associated common
facilities,  supplies  and  inventories  and  the  operation  thereof  by PNM as
Operating Agent of the San Juan Project.


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         2.2 PNM and Tucson  Electric Power Company  ("TEP") only are parties to
the San Juan Project Co-Tenancy  Agreement (the "Co-Tenancy  Agreement") and the
San Juan Project Operating Agreement (the "Operating Agreement").

         2.3 The  Co-Tenancy  Agreement  and the Operating  Agreement  have been
previously  amended by action of PNM and TEP,  through and including  Amendments
Number 10 to the Co-Tenancy Agreement and the Operating Agreement.

         2.4 The San Juan Project Construction  Agreement was terminated in 1995
by action of PNM and TEP.

         2.5 PNM, TEP, Century Power Company,  Southern  California Public Power
Authority ("SCPPA"),  the City, M-S-R Public Power Agency ("M-S-R"),  the County
of Los  Alamos,  New  Mexico  ("County")  and the  City of  Anaheim,  California
("Anaheim")  entered  into  the  San  Juan  Project  Designated   Representative
Agreement  ("DR  Agreement")  as of April 29, 1994, for the purpose of complying
with the  federal  Clean  Air Act  Amendments  of  1990;  the DR  Agreement  was
thereafter  accepted by Utah Associated  Municipal  Power Systems  ("UAMPS") and
Tri-State  Generation and Transmission  Association,  Inc.  ("Tri-State") at the
time of  their  respective  purchases  of  ownership  interests  in the San Juan
Project.

         2.6 The  owners of the San Juan  Project,  including  PNM and the City,
have negotiated a San Juan Project  Participation  Agreement among PNM, TEP, the
City, M-S-R, the County, SCPPA, Anaheim, UAMPS and Tri-State (the "Participation
Agreement")  to amend,  restate and  replace in their  entirety  the  Co-Tenancy
Agreement and the Operating  Agreement and to set out in one  instrument  all of
the matters  previously  included in the Co-Tenancy  Agreement and the Operating
Agreement.


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         2.7 The Participation  Agreement will, upon its effective date, provide
the City with all the rights,  privileges and obligations of a "Participant," as
that  term  is  defined  in the  Participation  Agreement,  and is  intended  to
supersede  the  rights,  privileges  and  obligations  of the  City  as a  "Unit
Participant," as that term is defined in the Operating Agreement.

         2.8 The Parties  desire to amend the PPA to harmonize  the PPA with the
Participation Agreement.

         NOW, THEREFORE, based on the foregoing recitals and in consideration of
the mutual  promises,  terms and covenants of this  Amendment No. 2, the Parties
hereby agree as follows:

3.0      TERM AND TERMINATION

         3.1 This Amendment No. 2 shall become effective as of the date on which
the Participation Agreement becomes effective.

         3.2   Section  33.2 of the PPA is  amended to read in its  entirety  as
               follows:

            This  Agreement  shall  continue  in full force and effect  from its
            Effective  Date until the  termination  date of the San Juan Project
            Participation   Agreement,   dated  as  of  October  27,  1999  (the
            "Participation Agreement").

4.0      CHANGES IN REFERENCES TO CO-TENANCY AGREEMENT
         AND OPERATING AGREEMENT

         4.1 Subsection (2) of Section 2.3.1 of the PPA is hereby deleted in its
entirety.

         4.2 Section 8 of the PPA is hereby  amended to read in its  entirety as
follows:

                  8.1 Participation  Agreement.  Except as otherwise provided in
               this  Agreement,  the rights and  obligations of the Parties with
               respect  to  the  San  Juan  Project  are  as  set  forth  in the
               Participation  Agreement.  Any reference in this Agreement to any
               provision of the San Juan Project  Agreements  shall be deemed to
               be a reference to the corresponding or successor provision of the
               Participation Agreement.

                  8.2 PNM-City  Relationship.  The relationship  between PNM and
               the  City  with  respect  to Unit 4  shall  be  governed  by this
               Agreement.  As  between  PNM  and  the  City,  where  a  specific
               provision of this  Agreement  is in conflict  with a provision in
               one or more of the San Juan Project Agreements, the provisions of
               this Agreement shall govern.


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         4.3 Except as otherwise  provided herein,  the Participation  Agreement
shall be applicable to all aspects of the City's ownership  interest in San Juan
Unit 4.

5.0      PNM AS PROJECT MANAGER

         5.1      Section 9 of the PPA is hereby deleted in its entirety.

6.0      PNM AS OPERATING AGENT

         6.1 Section 10 of the PPA is hereby  amended to read in its entirety as
follows:

            10.1 The City  recognizes  that PNM is the Operating  Agent, as that
            term is defined in Section 5.31 of the Participation Agreement.

            10.2  PNM's  responsibilities  as  Operating  Agent  to the City are
            described in Section 28 of the Participation Agreement.

7.0      APPLICABILITY OF CERTAIN PROVISIONS OF CO-TENANCY AGREEMENT

         7.1      Section 11 of the PPA is hereby deleted in its entirety.

8.0      ENTITLEMENT TO AND SCHEDULING OF POWER AND ENERGY

         8.1 Section 12 of the PPA is hereby deleted in its entirety.

9.0      START-UP AND AUXILIARY POWER

         9.1      Section 13 of the PPA is hereby amended to read as follows:

                        Each Party  shall be  obligated  to provide its share of
               start-up  and  auxiliary  power and energy in  proportion  to its
               Participation  Share in San Juan Unit 4 as provided in Section 17
               of the Participation  Agreement.  Any supplementary  arrangements
               which may be required to facilitate the City's supply of start-up
               and auxiliary  power and energy shall be made in accordance  with
               procedures  established by the  Coordination  Committee,  as that
               term is defined in Section 7 of the Interconnection Agreement.


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10.0     CAPITAL BETTERMENTS, ADDITIONS AND REPLACEMENTS

         10.1     Section 14 of the PPA is hereby deleted in its entirety.

11.0     PNM'S RIGHT OF FIRST REFUSAL

         11.1 Section 15 of the PPA is hereby amended to read in its entirety as
follows:

                    PNM shall have a right of first  refusal with respect to the
            sale or  disposition  of the Transfer  Interest or portion  thereof.
            Such  right  shall be  exercised  in  accordance  with the terms and
            conditions  and  the  procedures  set  out  in  Section  11  of  the
            Participation Agreement.

12.0     DEFAULTS

         12.1 The reference to "the prime lending rate established and published
by Irving Trust Company,  or if the foregoing is not legally enforceable against
the city,  then at a rate of 18 percent per annum" in Section 19.3 of the PPA is
replaced by "ten percent (10%) per annum."

         12.2 The  reference  to "(i) the prime  lending  rate  established  and
published  by Irving  Trust  Company,  (ii) twelve  percent  (12%) per annum" in
Section 19.4 of the PPA is replaced by "ten percent (10%) per annum."

         12.3  Sections  19.5 and 19.6 of the PPA are  hereby  deleted  in their
entirety.

13.0     DISPUTES; ARBITRATION

         13.1 Section 20 of the PPA is hereby amended to read in its entirety as
follows:

                    In the event that a dispute between the Parties should arise
            under this  Agreement,  such dispute shall be first submitted to the
            PNM and City members on the Engineering and Operating  Committee for
            resolution.  In the event these  members are unable to resolve  such
            dispute within ninety (90) days after submission,  the dispute shall
            be  referred  in  writing  to  the  President  or a  Vice  President
            designated by PNM and the Mayor of the City, or his or her designee.
            If such dispute has not been resolved  within thirty (30) days after
            the  referral  made by either  Party  (unless  such  thirty (30) day
            period is extended by mutual agreement of the Parties), either Party
            may thereafter call for submission of such dispute to arbitration in
            the manner set forth in Section 37 of the  Participation  Agreement,
            which  call  shall be  binding  upon the  Parties,  except  that the
            notices required under Section 37.1 of the  Participation  Agreement
            shall only be provided to the Parties to this  Agreement  unless the
            dispute between the Parties to this Agreement  affects the interests
            of other parties to the Participation Agreement.


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14.0     RELATIONSHIP OF PARTIES

         14.1  Sections  25.2 and 25.4 of the PPA are  hereby  deleted  in their
entirety.

15.0     DESTRUCTION, DAMAGE OR CONDEMNATION OF SAN JUAN UNIT 4

         15.1     Section 42 of the PPA is hereby deleted in its entirety.

16.0     AMENDMENT TO EXHIBIT A

         16.1 The  definition  of "Unit  Participant"  is  hereby  deleted  from
Exhibit A to the PPA.

17.0     CONTINUATION IN EFFECT

         17.1 Except as herein modified, all provisions of the PPA are unchanged
and continue in full force and effect.

         IN WITNESS WHEREOF,  the Parties have caused this Amendment No. 2 to be
executed  by their  duly  authorized  representatives  as of the date set  forth
above.

                                   PUBLIC SERVICE COMPANY OF NEW MEXICO

                                   By:       /s/ Patrick J. Goodman
                                       --------------------------------------
                                             Patrick J. Goodman
                                             Vice President, Power Production



                                   THE CITY OF FARMINGTON, NEW MEXICO

                                    By:
                                       --------------------------------------
                                                     Mayor
Attest:



---------------------------
City Clerk

73523



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