AMENDMENT NUMBER ONE
                                     TO THE
                      PUBLIC SERVICE COMPANY OF NEW MEXICO
                     MASTER DECOMMISSIONING TRUST AGREEMENT
                                       FOR
                      PALO VERDE NUCLEAR GENERATING STATION

         This Amendment  Number One to the Public Service  Company of New Mexico
Master  Decommissioning  Trust Agreement for Palo Verde Generating  Station (the
"Agreement")  made this 27th day of January,  1997 by and between Public Service
Company of New Mexico,  a corporation  organized and existing  under the laws of
the State of New Mexico  ("the  Company")  and  Mellon  Bank,  N.A.,  a national
banking association having trust power (the "Trustee").

                                   WITNESSETH:

         WHEREAS,  the Company  entered into the  Agreement  with the Trustee on
March 15, 1996 to satisfy the Company's  obligation to accumulate  funds for the
payment of its share of Termination Costs for Palo Verde Unit 1, Palo Verde Unit
2 and Palo Verde Unit 3, in accordance  with the  requirements of Section 8A.7.2
of the ANPP Participation Agreement; and

         WHEREAS,  it is the intent of the Company to transfer certain Insurance
Policies  to the  Master  Trust  and for the  Trustee  to  hold  such  Insurance
Policies,  provide for their segregated safekeeping,  and use their proceeds all
in accordance with the terms of the Agreement; and

         WHEREAS,  Section  2.11 of the  Agreement  allows the  Trustee  and the
Company to amend the Agreement consistent with the purposes of the Agreement.

         NOW  THEREFORE,  the Company and the Trustee hereby amend the Agreement
to make provisions  necessary for the Trustee to accept such Insurance  Policies
as Trustee under the Agreement:

         1.   The  following  terms  shall be  included  under  Article  I,
              Section 1.01, and the existing terms renumbered:

              (2) "Annual Review" shall mean a review of the Insurance  Policies
              provided by the Insurance  Servicing Agent pursuant to the Service
              Agreement once each year for the purpose of determining  the gross
              insurance outstanding, the policy loans outstanding,  interest due
              on  policy  loans,  and the cash  value of  outstanding  Insurance
              Policies and addressing  certain other matters with respect to the
              Insurance  Policies  as  are  more  particularly  provided  in the
              Service Agreement.

              (9) "COMRep" shall meant the Cost of Money Reduction Plan, as more
              fully described in Exhibit C hereto.


<PAGE>

              (15)  "Insurance  Policies"  shall mean the  policies of insurance
              generally  described in Exhibits D and E hereto,  initially issued
              or to be issued by the  insurance  companies  listed in  Exhibit D
              hereto, and any additional,  supplemental or replacement  policies
              therefor  issued by such  insurance  companies or other  insurance
              companies that are transferred to the Master Trust.

              (16) "Insurance  Servicing  Agent" shall mean Financial  Marketing
              Services,  Inc., a Nebraska  corporation,  and its  successors and
              assigns  under the  Service  Agreement,  and any  successor  agent
              engaged  by the  Company  to  perform  servicing  activities  with
              respect to the Insurance Policies.

              (33) "Service  Agreement" shall meant the Service  Agreement among
              the Insurance  Servicing  Agent, the Trustee and the Company dated
              as of July 31, 1987,  with respect to management  and servicing of
              the  Insurance  Policies,  a copy of which is  attached  hereto as
              Exhibit  F,  as it may be  amended  from  time  to  time,  and any
              replacement  agreement  entered  into by the  Trustee  and/or  the
              Company with respect to management  and servicing of the Insurance
              Policies.

2.       The following shall be added after the second sentence of Section 3.05.

         "Such report also shall  include a statement of the property and funds,
         if any,  constituting part of the Master Trust in the possession of the
         Insurance  Servicing  Agent on the date of such report,  and any Annual
         Review,  actuarial  analysis and outside  evaluation  of the  Insurance
         Policies  provided  by or  through  the  Insurance  Servicing  Agent as
         contemplated  by the  Service  Agreement.  Any  such  information  with
         respect to the  Insurance  Policies may be based solely upon the latest
         information  provided by the Insurance  Service  Agent  pursuant to the
         Service Agreement,  and the Trustee is not responsible for the accuracy
         of any information received from the Insurance Service Agent."

3.       The following sentence shall be added to Section 5.04.

          "Upon receipt, the Insurance Policies shall be deposited in the Master
          Trust,  although  physical  custody  thereof  shall be released to the
          Insurance Servicing Agent pursuant to the Service Agreement."

4.       The first clause of Section 5.11 shall be restated as follows:

         "To do any and all other acts (including but not limited to,  borrowing
         or raising money from a lender,  including the Trustee or an affiliate)
         which  the  Trustee  shall  deem  proper  to   effectuate   the  powers
         specifically  conferred upon it by this Agreement,  provided,  however,
         that the Trustee may not, in its  discretionary  exercise of powers, do
         any act or knowingly engage in any transactions which would:"


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<PAGE>


5.       The  following  sentence  shall be added  after the first  sentence  of
         Article VI.

          "Notwithstanding   the  foregoing,   with  respect  to  the  Insurance
          Policies,  the Trustee shall upon the written direction of the Company
          pay the premiums on the Insurance Policies;  borrow against and pledge
          the Insurance Policies as collateral; pay interest and repay prinicpal
          on borrowings against the Insurance Policies,  surrender the Insurance
          Policies;  substitute  other  investments of equivalent  value for the
          Insurance  Policies;  and  transfer  such  Insurance  Policies  to the
          Company;  and perform such other services with respect to and incident
          to the Insurance  Policies as are specified in such written direction,
          provided that the Company may delegate some or all of such  activities
          to the Insurance Servicing Agent as more particularly described in the
          Service Agreement for ease of  administration.  The Trustee shall have
          no duty to review such Insurance  Policies,  and has no duty to review
          the directions,  acts, omissions or overall performance of the Company
          or the  Insurance  Servicing  Agent  with  respect  to  the  Insurance
          Policies."

6.        The following Section 7.12 shall be added:

          "The Trustee shall not be  responsible or liable for any losses to the
          Master   Trust   resulting   from   nationalization,    expropriation,
          devaluation, seizure, or similar action by any governmental authority,
          de  facto  or de  jure;  or  enactment,  promulgation,  imposition  or
          enforcement   by  any  such   governmental   authority   of   currency
          restrictions, exchange controls, levies or other charges affecting the
          Master Trust; or acts of war,  terrorism,  insurrection or revolution;
          or acts of God; or any other  similar  event beyond the control of the
          Trustee or its agents.  This Section shall survive the  termination of
          this Agreement".

7.       All other terms and  conditions of the  Agreement  shall remain in full
         force and effect.



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<PAGE>


         IN WITNESS  WHEREOF,  the parties hereto,  each intending to be legally
bound  hereby,  have  hereunto  set their hands and seals as of the day and year
above written.

                                       PUBLIC SERVICE COMPANY OF NEW MEXICO


                                       By:  /s/ Max H. Maerki
                                           --------------------------------
                                       Name:    Max H. Maerki
                                       Title:   Chief Financial Officer



                                       MELLON BANK, N.A.


                                       By:
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                                       Name:
                                       Title: