When Recorded, Return to: Greg R. Nielsen, Esq.
                          Snell  & Wilmer
                          3100 Valley Bank Canter
                          Phoenix, Arizona 85073

        CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENTMENT NO.1 THERETO HAVE BEEN ASSIGNED TO, AND ARE TO A SECURITY IN FAVOR OF,
CHEMICAL  BANK,  AS  INDEUTURE,  TRUSTEE UNDER A ASSIGNMENT OF RENTS DATED AS OF
DECEMBER   15,1986.   THIS  FACILITY LEASE HAS  BEEN  EXECUTED  IN  SERVERAL
COUNTERPARTS.SEE SECTION 22(e) OF THIS AMENDMENT NO.1 FOR INFORMATION CONCERNING
THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.


THIS COUNERPART IS NOT THE ORIGINAL COUNTERPART.

================================================================================
                                 FACILITY LEASE

                          Dated as of December 15, 1986

                                     between

                       THE FIRST NATIONAL BANK OF BOSTON,
                         not in its individual capacity,
                           but solely as Owner Trustee
                        under a Trust Agreement, dated as
                              of December 15, 1986,
                           with Chase Manhattan Realty
                              Leasing Corporation,

                                     Lessor

                                       and

                      PUBLIC SERVICE COMPANY OF NEW MEXICO,

                                     Lessee

================================================================================
              Sale and Leaseback of a .7933333% Undivided Interest
              in Palo Verde Nuclear Generating Station Unit 2 and
                a .2644444% Undivided Interest in Certain Common
                                   Facilities
================================================================================
6091.CHASEU2.LEASE.47:1
<PAGE>

                                TABLE OF CONTENTS

                                                                          Page

SECTION 1         Definitions............................................  1

SECTION 2         Lease of Undivided
                  Interest; Term; Personal
                  Property...............................................  1

           a      Lease of Undivided
                  Interest...............................................  1

           b      Term...................................................  1

           c      Personal Property......................................  1

           d      Description............................................  2

SECTION 3         Rent; Adjustments to
                  Rent...................................................  2

           a      Basic Rent.............................................  2

           b      Supplement Rent........................................  3

           c      Form of Payment........................................  4

           d      Adjustments to Rent....................................  4

           e      Further Adjustments....................................  5

           f      Computation of
                  Adjustments............................................  5

           g      Sufficiency of Basic
                  Rent and Supplemental
                  Rent...................................................  6

SECTION 4         Net Lease..............................................  7


                                     --i--
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<PAGE>
                         TABLE OF CONTENTS (Continued)
                                                                        Page
                                                                        ----

SECTION 5         Return of the Undivided
                  Interest............................................... 9

           a      Return of the Undivided
                  Interest............................................... 9

           b      Disposition Services................................... 11

SECTION 6         Warranty of the Lessor................................. 12

           a      Quiet Enjoyment........................................ 12

           b      Disclaimer of Other
                  Warranties............................................. 12

           c      Enforcement of Certain
                  Warranties............................................. 13

SECTION 7         Liens  ................................................ 13

SECTION 8         Operation and Maintenance;
                  Capital Improvements................................... 14

           a      Operation and
                  Maintenance............................................ 14

           b      Inspection............................................. 15

           c      Capital Improvements................................... 14

           d      Reports................................................ 16

           e      Title to Capital
                  Improvements........................................... 17

           f      Funding of the Cost of
                  Capital Improvements................................... 18


                                     --ii--

6091.CHASEU2.LEASE.47:1
<PAGE>
                         TABLE OF CONTENTS (Continued)
                                                                        Page
                                                                        ----

SECTION 9         Event of Loss; Deemed
                  Loss Event............................................. 20

           a      Damage or Loss......................................... 20

           b      Repair................................................. 21

           c      Payment of Casualty
                  Value.................................................. 21
 
           d      Payment of Special
                  Casualty Value......................................... 22 

           e      Requisition of Use..................................... 23

           f      Termination of
                  Obligation............................................. 23

           g      Application of Payments
                  on an Event of Loss.................................... 24

           h      Application of Payments
                  Not Relating to an Event
                  of Loss................................................ 24

           i      Other Dispositions..................................... 25

           j      Assumption of Notes;
                  Creation of Lien on
                  Undivided Interest .................................... 25

SECTION 10        Insurance.............................................. 25

           a      Required Insurance..................................... 25

           b      Permitted Insurance.................................... 27

SECTION 11        Rights to Assign or
                  Sublease............................................... 27

                                    --iii--
6091.CHASEU2.LEASE.47:1
<PAGE>
                         TABLE OF CONTENTS (Continued)
                                                                        Page
                                                                        ----

           a      Assignment or Sublease
                  by the Lessee.......................................... 27

           b      Assignment by Lessor as
                  Security for Lessor's
                  Obligations............................................ 28

SECTION 12        Lease Renewal.......................................... 28


SECTION 13        Notices for Renewal or
                  Purchase; Purchase
                  Options................................................ 29

           a      Notice, Determination of
                  Values, Appraisal
                  Procedure.............................................. 29

           b      Purchase Option at
                  Expiration of the Lease
                  Term................................................... 29

           c      Special Purchase Event................................. 30


SECTION 14        Termination for
                  Obsolescence........................................... 30

           a      Termination Notice..................................... 30

           b      Right of Lessor to
                  Retain Undivided
                  Interest upon
                  Termination............................................ 31

           c      Events on the
                  Termination Date....................................... 31

           d      Early Termination
                  Notice................................................. 32

                                     --iv--
6091.CHASEU2.LEASE.47:1
<PAGE>
                         TABLE OF CONTENTS (Continued)
                                                                        Page
                                                                        ----
           e      Events on the Early
                  Termination............................................ 32

SECTION 15        Events of Default...................................... 33

SECTION 16        Remedies............................................... 37

           a      Remedies............................................... 37

           b      No Release............................................. 42

           c      Remedies Cumulative.................................... 42

           d      Exercise of Other Rights
                  or Remedies............................................ 43

           e      Special Cure Right of
                  Lessee................................................. 43

SECTION 17        Notices................................................ 44

SECTION 18        Successors and Assigns................................. 45

SECTION 19        Right to Perform for
                  Lessee................................................. 46

SECTION 20        Additional Covenants................................... 46

SECTION 21        Lease of Real Property
                  Interest............................................... 46

SECTION 22        Amendments and
                  Miscellaneous.......................................... 46

           a      Amendments in Writing.................................. 46

           b      Survival............................................... 46

                                     --v--
6091.CHASEU2.LEASE.47:1
<PAGE>
                         TABLE OF CONTENTS (Continued)
                                                                        Page
                                                                        ----

           c      Severability of
                  Provisions............................................. 47

           d      True Lease............................................. 47

           e      Original Lease......................................... 47

           f      Governing Law.......................................... 48

           g      Headings............................................... 48

           h      Concerning the Owner Trustee........................... 48

           i      Disclosure............................................. 49

           j      Counterpart Execution.................................. 49

APPENDIX A Definitions

SCHEDULE 1 Casualty Values

SCHEDULE 2 Special Casualty Values

SCHEDULE 3 Termination Values

SCHEDULE 4 Real Property Interest Description

SCHEDULE 5 Undivided Interest Description

<PAGE>

                FACILITY LEASE, dated as of December 15, 1986, between THE FIRST
NATIONAL BANK OF BOSTON, a national banking  association,  not in its individual
capacity,  but  solely as Owner  Trustee  under a Trust  Agreement,  dated as of
December 15, 1986, with Chase Manhattan Realty Leasing Corporation (the Lessor),
and PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico Corporation (the Lessee).


                                   WITNESSETH:


                  WHEREAS,  the Lessor owns the Undivided  interest and the Real
Property interest;

                  WHEREAS,  the Lessee  desires to lease the Undivided  interest
and the Real Property  Interest from the Lessor on the terms and  conditions set
forth herein; and

                  WHEREAS, the Lessor is willing to lease the Undivided Interest
and the Real  Property  interest to the Lessee on the terms and  conditions  set
forth herein;

                  NOW, THEREFORE,  in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                 SECTION 1. Definitions.

                  For purposes hereof,  capitalized terms used herein shall have
the  meanings  assigned to such terms in Appendix A hereto.  References  in this
Facility Lease to sections,  paragraphs and clauses are to sections,  paragraphs
and clauses in this Facility Lease unless other-wise indicated.

                  SECTION  2.  Lease  of  Undivided  Interest;   Term:  Personal
Property.

                  (a) Lease of Undivided Interest. Upon the terms and subject to
the conditions of this Facility  Lease,  the Lessor hereby leases to the Lessee,
and the Lessee hereby leases from the Lessor, the Undivided Interest.

                  (b)  Term.  The term of this  Facility  Lease  shall  begin on
December 17, 1986, and shall end on the last day of the Lease Term.


6091.CHASEU2.LEASE.47:1


<PAGE>


                  (c)  Personal  Property.  It is the express  intention  of the
Lessor and the Lessee that title to the  Undivided  Interest  and every  portion
thereof be, and hereby is, severed, and shall be and remain severed,  tram title
to the real estate  constituting the Real Property  Interest and the PVNGS Site.
The Lessor and the Lessee intend that the Undivided  Interest  shall  constitute
personal property to the maximum extent permitted by Applicable Law.

                  (d)  Description.  The Real Property  Interest is described on
Schedule 4 hereto. The Undivided interest is described on Schedule S hereto.

                 SECTION 3. Rent; Adjustments to Rent.

                  (a) Basic Rent.  The Lessee shall pay to the Lessor,  as basic
rent (herein referred to as Basic Rent) for the Undivided  Interest and the Real
Property Interest, the following amounts:

                         (i) on January 15, 1987,  an amount equal to .02585778%
                  of the  Facility  Cost  for  each  day  from,  and  including,
                  December 17, 1986 to, but excluding, January 15, 1987;

                         (ii) on July 15,  1987 and on each Basic  Rent  Payment
                Date  thereafter  to and  including  January 15, 2016, an amount
                equal to 4.654400% of Facility Cost; and

                      (iii) if the Lessee shall elect the Renewal  Term1 on July
                  15, 2016 and on each Basic Rent Payment Date thereafter during
                  the  Renewal  Term,  an amount  equal to one-half of an amount
                  determined by dividing the aggregate amount of all payments of
                  Basic  Rent  payable  with  respect  to the Basic  Lease  Term
                  pursuant  to clause (ii) of this  Section  3(a)  (taking  into
                  account any  adjustments  pursuant to Sections 3(d) and 3(e)),
                  by 58.

It an  interest  payment  on any Note  shall be due on a date other than a Basic
Rent Payment Date, the Lessee shall pay additional Basic Rent on such date equal
to such  interest  payment and such  payment of  additional  Basic Rent shall be
credited  against  the  Basic  Rent due on the  Basic  Rent  Payment  Date  next
succeeding tie date that such additional Basic Rent shall have been paid.




6091.CHASEU2.LEASE.47:1


<PAGE>


                  (b)  Supplemental  Rent.  The Lessee  shall pay the  following
amounts (herein referred to as Supplemental Rent):

                         (i) when due or,  where  no due date is  specified,  on
                demand,  any amount  (other  than Basic  Rent,  Casualty  Value,
                Termination  Value and Special  Casualty Value) which the Lessee
                assumes  the  obligation  to pay or agrees to pay to the Lessor,
                the Owner  Participant,  the indenture  Trustee,  the Collateral
                Trust Trustee or any Indemnitee  under this Facility Lease,  any
                other  Transaction  Document or the Collateral  Trust indenture,
                any amount which is to be paid under Section  E.9,.7.E or 9.7 of
                the Indenture and any amount that the Lessee is required to pay,
                or  provide  for  the  payment  of,  under  Section  8.5  of the
                Indenture:

                         (ii) when due, any amount payable hereunder as Casualty
                Value,  Termination  Value or  Special  Casualty  Value,  and an
                amount equal to any premium or  prepayment  penalty with respect
                to the Notes;

                      (iii) on demand and in any event on the Basic Rent Payment
                Date  next  succeeding  the date such  amounts  shall be due and
                payable  hereunder,  to the extent  permitted by Applicable Law,
                interest (computed on the same basis as interest on the Notes is
                computed) at a rate per annum equal to (A) the Overdue  interest
                Rate,   on  that  portion  of  the  payment  of  Basic  Rent  or
                Supplemental  Rent  distributable  pursuant to clause first" of
                Section 5.1 or clause  "second" of Section 5.3 of the  indenture
                (determined  prior to the  computation  of  interest  on overdue
                payments  referred  to in such  clauses)  , and CS) the  Penalty
                Rate,  on the  balance  of any such  payment  of  Basic  Rent or
                Supplemental Rent (including, in the case of both clause (i) and
                clause  (ii)  above,  but  without  limitation,  to  the  extent
                permitted by Applicable Law,  interest  payable pursuant to this
                clause (iii)) not paid when due (without regard to any period of
                grace) for any period for which the same shall be overdue.



                                       -3-

6091.CHASEU2.LEASE.47:1


<PAGE>


The Lessor  shall have all  rights,  powers and  remedies  provided  tar in this
Facility  Lease,  at law, in equity or otherwise,  in the case of non-payment of
Basic Rent or Supplemental Rent.

                  (c) Form of Payment. Subject to Section 11(b), each payment of
Rent under this Facility Lease shall be made in immediately  available  funds no
later than 11:00 a.m., local time at the place of receipt, on the date each such
payment  shall be due and payable  hereunder and shall be paid either (A) in the
case of  payments  other than  Excepted  Payments,  to the Lessor at its address
determined in accordance with Section 17, or at such other address as the Lessor
may direct by notice in writing to the  Lessee,  or (B) in the case of  Excepted
Payments,  to such Person as shall be entitled to receive  such  payment at such
address as such  Person may  direct by notice in writing to the  Lessee.  If the
date on which any payment of Rent is due hereunder  shall not be a Business Day,
the  payment  otherwise  due thereon  shall be due and payable on the  preceding
Business  Day,  with the same  force and effect as if paid on the  nominal  date
provided in this Facility Lease.

                  (d)  Adjustments  to Rent.  Basic  Rent and the  schedules  of
Casualty Values,  Termination Values and Special Casualty Values attached hereto
shall be adjusted  (upward or downward) to preserve Net Economic Return if there
is any  Change  in Tax Law  other  than a Change in  respect  of a minimum  tax;
provided,  however, that the aggregate amount of such downward adjustments shall
not exceed the aggregate amount of such upward  adjustments.  Adjustments  under
this  paragraph  (d) shall be (1) made not more than once a year and (2) limited
in the aggregate to the extent necessary such that the aggregate amount of Basic
Rent  theretofore  and  thereafter  payable  throughout  the  Basic  Lease  Term
(computed for such purposes only without regard to any  adjustments  theretofore
made  pursuant to Section  3(e)) shall not exceed by more than 4% the  aggregate
amount of Basic Rent which would have been  payable  throughout  the Basic Lease
Term (calculated as aforesaid) had no such adjustments been made.

                The   provisions   of  this   Section   3(d)  to  the   contrary
notwithstanding,  if any  Change in Tax Law is, or  becomes,  applicable  to the
transaction  contemplated by this Facility Lease in consequences of the transfer



                                       -4-

6091.CHASEU2.LEASE.47:1


<PAGE>

of the Owner  Participant's  beneficial  interest  in the Trust  (whether or not
permitted by Section 15 of the Participation Agreement) or if such Change in Tax
Law would not have been  applicable  to such  transaction  had no such  transfer
occurred,  then no  adjustment  shall be, or be required to be, made pursuant to
this Section 3 (d); provided, however, that this sentence shall not apply to the
initial transfer of the Owner Participant's  beneficial interest in the Trust to
one of its Affiliates.

                (e)  Further  Adjustments.  Basic  Rent  and  the  schedules  of
Casualty Values,  Special Casualty Values and Termination Values attached hereto
shall be  appropriately  adjusted  (upward or downward) to preserve Net Economic
Return  if  there  is (i)  any  Supplemental  Financing,  (ii)  the  payment  of
Transaction Expenses in an amount which is other than 3.0% of the Purchase Price
or (iii) any other change (other than a change in items 4, 5, 9 (as to the basis
for amortization of Transaction  Expenses) , 14, 15 and 17, but without limiting
the effect of Section 3(d) hereof) in the Pricing Assumptions.

                  (f)  computation  of  Adjustments.  Upon the  occurrence of an
event  requiring an adjustment to Basic Rent payable  pursuant to clause (ii) of
Section 3(a), and the schedules of Casualty Values,  Special Casualty Values and
Termination  Values  attached  hereto,  pursuant to paragraph (d) or (e) of this
Section 3, the Owner  Participant  shall  make the  necessary  computations  and
furnish to the  Lessee,  the Loan  Participant,  the  Lessor  and the  Indenture
Trustee the revised amounts and percentages, which amounts and percentages shall
be implemented  upon delivery thereof and effective as of the date of occurrence
of the event requiring such adjustment (taking into account any payment of Basic
Rent already made) and shall remain  effective  until changed in  consequence of
any verification procedure set forth below. Such revised amounts and percentages
shall be subject to verification  (at the Lessee9s  request within 90 days after
the Owner  Participant  furnishes  the revised  amounts to the Lessee,  the Loan
Participant,  the Lessor and the Indenture  Trustee) by the Owner  Participant's
nationally  recognized  independent  public  accountants,  in  which  case  such
accountants  shall either (i) confirm to the Lessee in writing that such revised
amounts were computed on a basis consistent with the original  calculations,  or
(ii) compute and provide to the Lessee, the Lessor,  the Owner Participant,  the



                                       -5-

6091.CHASEU1.LEASE.47:1


<PAGE>

Loan Participant and the indenture Trustee revised amounts and percentages which
are on such a basis.  The revised  amounts and  percentages,  as so confirmed or
computed if  applicable,  shall be conclusive  and binding upon the Lessee,  the
Lessor, the Owner  Participant,  the Loan Participant and the Indenture Trustee.
The cost of any such  verification  shall be  borne by the  Lessee  unless  such
accountants  shall require an adjustment to the revised  amounts and percentages
originally provided by the Owner Participant which differs by more than 10% from
the adjustment so provided, in which case such cost shall be divided and paid by
the Lessee and the Owner Participant in equal amounts.  Each adjustment pursuant
to paragraph (d) or (e) of this Section 3 may, but need not, be evidenced by the
execution  and  delivery  of a  supplement  to this  Facility  Lease in form and
substance  satisfactory  to the Lessee and the Owner  Participant,  but shall be
effective as provided herein without regard to the date on which such supplement
to this Facility Lease is so executed and delivered.  Any adjustment referred to
in this  Section 3 shall  satisfy the  provisions  of Revenue  Procedure  75-21,
Revenue Procedure 75-28 and any other applicable  statute,  regulation,  revenue
procedure,  revenue  ruling or  technical  information  release  relating to the
subject matter of Revenue  Procedure 75-21 or Revenue  Procedure 75-28,  but, in
the  case of any  upward  adjustment,  shall  be no less  than  the  oadjustment
otherwise required pursuant to this Section 3.

                  (g)  sufficiency  of  Basic  Rent  arid   Supplemental   Rent.
Notwithstanding   any  other  provision  of  this  Facility  Lease,   any  other
Transaction  Document  or any  Financing  Document  (i) the amount of Basic Rent
payable on each Basic Rent Payment Date shall be at least equal to the aggregate
amount of principal,  premium, if any, and accrued interest payable on all Notes
then Outstanding and (ii) each payment of Casualty Value, special casualty Value
and  Termination  Value  shall  in no  event be less  (when  added to all  other
amounts,  other than Excepted Payments,  required to be paid by the Lessee under
this  Facility  Lease in  respect  of any Event of Loss or Deemed  Loss Event or
termination of this Facility Lease) than an amount sufficient, as of the date of
payment, to pay in full all principal of, and premium, if any, and interest then
due on all Notes  Outstanding  on and as of such date of  payment  (taking  into
account any assumption of the Notes by the Lessee).


                                       -6-

6091.CHASEU2.LEASE.47:1


<PAGE>


                 SECTION 4. Net Lease.

                  This Facility Lease (as  originally  executed and as modified,
supplemented  and  amended  from time to time) is a net  lease,  and the  Lessee
hereby  acknowledges  and agrees that the  Lessee's  obligation  to pay all Rent
hereunder,  and the rights of the Lessor in and to such Rent, shall be absolute,
unconditional  and irrevocable and shall not be affected by any circumstances of
any  character,  including,  without  limitation,  (i) any  set-off1  abatement,
counterclaim,  suspension,  recoupment,  reduction, rescission, defense or other
right or claim  which  the  Lessee  may  have  against  the  Lessor,  the  Owner
Participant,  the Indenture  Trustee,  the Collateral  Trust  Trustee,  the Loan
Participant,   the  Operating  Agent,  any  ANPP  Participant,   any  vendor  or
manufacturer of any equipment or assets included in the Undivided interest, Unit
2, any Capital Improvement,  the Real Property interest,  the PVNGS Site, PINGS,
or any part of any thereof, or any other Person for any reason whatsoever,  (ii)
any  defect in or  failure of the  title,  merchantability,  condition,  design,
compliance with specifications,  operation or fitness for use of all or any part
of the undivided Interest,  Unit 2, any Capital  Improvement,  the Real Property
Interest, the PVNGS Site or PVNGS, (iii) any damage to, or removal, abandonment,
decommissioning, shutdown, salvage, scrapping,' requisition, taking, loss, theft
or destruction of all or any part of the Undivided interest1 Unit 2, any Capital
Improvement,  the Real  Property  Interest,  the  PVNGS  Site or  PVNGS,  or any
interference,  interruption or cessation in the use or possession  thereof or of
the  Undivided  Interest by the Lessee or by any other  Person  (including,  but
without limitation,  the Operating Agent or any other ANPP  Participant) for any
reason whatsoever or of whatever duration,  (iv) any restriction,  prevention or
curtailment of or interference  with any use of all or any part of the Undivided
Interest, Unit 2, any capital Improvement, the Real Property Interest, the PVNGS
Site or  PVNGS,  (V)  any  insolvency,  bankruptcy,  reorganization  or  similar
proceeding  by or against the Lessee,  the Lessor,  the Owner  Participant,  the
Indenture  Trustee,  the Collateral  Trust Trustee,  the Loan  participant,  the
Operating  Agent,  any other  ANPP  Participant  or any other  Person,  (vi) the
invalidity,  illegality or  unenforceability  of this Facility Lease,  any other
Transaction Document, any Financing Document,  the ANPP Participation  Agreement
or any other instrument referred to herein or therein or any other infirmity


                                       -7-

6091.CHASEU2.LEASE.47:1



<PAGE>


herein or therein or any lack of right,  power or authority  of the Lessor,  the
Lessee,  the Owner  Participant,  the Indenture  Trustee,  the Collateral  Trust
Trustee,  the Loan  Participant  or any other Person to enter into this Facility
Lease,  any other  Transaction  Document  or any  Financing.  Document,.  or any
doctrine of force majeure, impossibility, frustration, failure of consideration,
or any similar legal or equitable  doctrine that the Lessee's  obligation to pay
Rent is excused  because  the Lessee has not  received  or will not  receive the
benefit  for which the  Lessee  bargained,  it being the intent of the Lessee to
assume all risks from all causes  whatsoever  that the Lessee  does not  receive
such benefit, (vii) the breach or failure of any warranty or representation made
in this  Facility  Lease or any  other  Transaction  Document  or any  Financing
Document  by the Lessor,  the Owner  Participant,  the  Indenture  Trustee,  the
Collateral Trust Trustee,  the Loan Participant or any other Person,  (viii) any
amendment or other change of, or any  assignment of rights under,  this Facility
Lease,  any other  Transaction  Document,  any   Financing  Document or any ANPP
Project Agreement, or any waiver, action or inaction under or in respect of this
Facility Lease, any other Transaction  Document,  any Financing  Document or any
ANPP Project  Agreement,  or any exercise or non-exercise of any right or remedy
under  this  Facility  Lease,  any other  Transaction  Document,  any  Financing
Documents  any  ANPP  Project  Agreement,  including,  without  limitation,  the
exercise of any foreclosure or other remedy under the Indenture,  the Collateral
Trust  indenture  or this  Facility  Lease,  or the sale of Unit 2, any  Capital
Improvement,  the undivided interest, the Real Property Interest, the PVNGS Site
or  PVNGS,  or any part  thereof  or any  interest  therein,  or (ix) any  other
circumstance  or  happening  whatsoever  whether  or not  similar  to any of the
foregoing.  The Lessee  acknowledges  that by  conveying  the  leasehold  estate
created  by this  Facility  Lease to the  Lessee  and by  putting  the Lessee in
possession of the Undivided Interest and the Real Property Interest,  the Lessor
has  performed  all of the  Lessor's  obligations  under and in  respect of this
Facility  Lease,  except the covenant  under Section 6(a) hereof that the Lessor
and Persons  acting for the Lessor will not  interfere  with the Lessee's  quiet
enjoyment of the Undivided Interest and the Real Property  Interest.  The Lessee
hereby  waives,  to the extent  permitted by Applicable  Law, any aid all rights
which it may now have or which at any time  hereafter may be conferred  upon it,



                                       -8-

6091.CHASEU2.LEASE.47:1



<PAGE>

by statute or otherwise,  to terminate,  cancel, quit or surrender this Facility
Lease or to effect or claim any  diminution  or reduction of Rent payable by the
Lessee hereunder, including without limitation the provisions of Arizona Revised
Statutes Section 33-343, except in accordance with the. express terms hereof. If
for any reason whatsoever this Facility Lease shall be terminated in whole or in
part by operation of law or otherwise,  except as specifically  provided herein,
the  Lessee  nonetheless  agrees to pay to the Lessor or other  Person  entitled
thereto an amount equal to each  installment of Basic Rent and all  Supplemental
Rent at the time such  payment  would have become due and payable in  accordance
with the terms hereof had this Facility Lease not been terminated in whole or in
part.  Each payment of Rent made by the Lessee  hereunder shall be final and the
Lessee  shall  not seek or have any  right  to  recover  all or any part of such
payment  from the  Lessor or any other  Person for any  reason  whatsoever.  All
covenants,  agreements and  undertakings of the Lessee herein shall be performed
at its cost, expense and risk unless expressly otherwise stated. Nothing in this
Section 4 shall be construed  as a guaranty by the Lessee of any residual  value
in the  Undivided  Interest or as a guaranty  of the Notes.  Any  provisions  of
Section  7(b)  (2)  or  8(c)  of the  Participation  Agreement  to the  contrary
notwithstanding,  if the Lessee  shall  fail to make any  payment or Rent to any
Person when and as due (taking  into account  applicable  grace  periods),  such
Person  shall  have  the  right  at all  times,  to the  exclusion  of the  ANPP
Participants,  to demand,  collect, sue for, enforce obligations relating to and
otherwise obtain all amounts due in respect of such Rent.

                 SECTION 5. Return of the Undivided Interest.

                  (a)     Return of the Undivided Interest. On the
Lease  Termination  Date,  the  Lessee  will  (1)  surrender  possession  of the
Undivided  Interest and the Real Property Interest to the Lessor (or to a Person
specified by the Lessor to the Lessee in writing not less than 6 months prior to
the Lease  Termination  Date) (i) with full rights as a Transferee" and the sole
"Participant"  with  respect to the  Undivided  Interest  and the Real  Property
Interest within the meaning of Section 15.10 of the ANPP Participation Agreement
and (ii) without a Price-Anderson  Event (as hereinafter defined) having arisen
prior to, or arising  upon, or  immediately  following,  such  surrender and (2)
furnish to the


                                       -9-

6091.CHASEU2.LEASE.47:1


<PAGE>


Lessor:  (i)  copies  certified  by a  senior  officer  of  the  Lessee  of  all
Governmental Action necessary to effect such surrender  (including,  but without
limitation, appropriate amendments to the License permitting the Lessor (without
the Lessor being  required to change its business) or such Person to possess the
Undivided  Interest and the Real Property interest with or without the continued
involvement of the Lessee as Agent),  which Governmental Action shall be in full
force and  effect;  and (ii) an  opinion  of  counsel  (which  may be Mudge Rose
Guthrie Alexander & Ferdon,  Snell & Wilmer or another counsel  experienced with
NRC and other nuclear matters reasonably  satisfactory to the Owner Participant)
to the effect  that (A) the  Lessee has  obtained  all  Governmental  Action and
action under the ANPP Participation Agreement necessary to effect such surrender
by the  Lessee  and  receipt  of  Possession  by the Lessor (or by the Person so
specified by the Lessor) and (B) such  Governmental  Action is in full force and
effect. At the time of such return the Lessee shall pay or have paid all amounts
due and  payable,  or to become due and  payable,  by it as an ANPP  Participant
under each and every ANPP Project Agreement  allocable or chargeable (whether or
not  payable  during or after the Lease Term) to the  Undivided  Interest or the
Real Property Interest in respect of any period or periods ending on or prior to
the Lease  Termination  Date  (including,  but without  limitation,  all amounts
payable with respect to any and all discretionary Capital Improvements to Unit 2
or the PVNGS Site approved or authorized  (without the  concurrence of the Owner
Participant)  within  the 3-year  period  preceding  the end of the Lease  Term,
whether or not  implementation  thereof  has been  completed  on or prior to the
Lease  Termination  Date),  and the  Undivided  Interest  and the Real  Property
Interest  shall be free and  clear of all  Liens  (other  than  Permitted  Liens
described in clauses (i), (V) (other than those  arising by through or under the
Lessee  alone) , (vi) , (vii) (other than as  aforesaid),  (viii) (other than as
aforesaid),  (ix) and (x) of the  definition  of such term) and in the condition
and state of repair  required by Section 8. In the event that on or prior to the
Lease  Termination  Date  there  shall  have  occurred  a  default  by any  ANPP
Participant (other than the Lessee) under the ANPP  Participation  Agreement and
such default shall not have been cured by the defaulting ANPP Participant,  then
(i) the Lessee  agrees to  indemnify  and hold the Lessor  (and each  successor,
assign and transferee  thereof)  harmless against any and all obligations  under
the ANPP


                                      -10-

6091.CHASEU2.LEASE.47:1



<PAGE>


Participation  Agreement with respect to contributions or payrnents  required to
be made  thereby  as a result  of such  default  and (ii) the  Lessor  (and each
successor, assign and transferee thereof) agrees to reimburse the Lessee for all
amounts paid by the Lessee  pursuant to the foregoing  clause (i) to the extent,
but  only  to the  extent,  that  the  Lessor  (or  such  successor,  assign  or
transferee)  shall  have  actually  received  proceeds  from  the  sale  of  the
Generation  Entitlement  Share of the defaulting ANPP Participant as a result of
the payment made by the Lessee pursuant to the foregoing clause (i), and, to the
extent the Lessor (or such successor,  assign or transferee) shall have received
such proceeds, the amount to be reimbursed to the Lessee pursuant to this clause
(ii) shall  include  interest  at the Prime Rate from the date of any payment by
the  Lessee   pursuant  to  the  foregoing   clause  (i)  through  the  date  of
reimbursement  of such amount pursuant to this clause (ii). For purposes of this
Section  5(a) a  "Price-Anderson.  Event"  shall  mean  any  change  in,  or new
interpretation by Governmental Authority having jurisdiction of, Applicable Law,
including without limitation the  Price-Anderson  Act, the Atomic Energy Act and
the  regulations  of the NRC, in each case as in effect on the Closing Date, but
only if such  change  is  specified  in  clauses  (2)  (i)  through  (iv) of the
definition  of "Deemed  Loss Event"  (other than a change  which is specified in
clause (A) of the definition of "Acceptable Change").

                  (b)  Disposition  Services.  The Lessee agrees that if it does
not  exercise its option to renew or purchase as provided in Sections 12 and 13,
respectively,  then  during the last  thirty-six  months of the Lease  Term1 the
Lessee will fully  cooperate  with the Lessor in  connection  with the  Lessor's
efforts to lease or  dispose of the  Undivided  interest  and the Real  Property
Interest, including using the Lessee's reasonable efforts to lease or dispose of
the  Undivided  Interest and the Real  Property  Interest.  The Lessor agrees to
reimburse  the Lessee for  reasonable  out-of-pocket  costs and  expenses of the
Lessee  incurred  at the  request  of the  Lessor  or the Owner  Participant  in
connection with such cooperation and such efforts.








                                      -1l-

6091.CHASEU2.LEASE.47:1



<PAGE>


                 SECTION 6. Warranty of the Lessor.

                (a) Quiet  Enjoyment.  The Lessor  warrants that until the Lease
Termination  Date,  so long as no Event of Default  shall have  occurred  and be
continuing,  the Lessee's use and  possession of Unit 2, including the Undivided
Interest,  shall not be  interrupted  by the Lessor or any Person  claiming  by,
through or under the Lessor, and their respective successors and assigns.

                  (b) Disclaimer of Other Warranties.  The warranty set forth in
Section  6(a) is in lieu of all  other  warranties  of the  Lessor  or the Owner
Participant,  whether  written,  oral or implied,  with respect to this Facility
Lease, Unit 2, any Capital Improvement,  the Undivided Interest, PVNGS, the Real
Property  Interest or the PVNGS Site. As among the Owner  Participant,  the Loan
Participant, the Indenture Trustee, the Collateral Trust Trustee, the Lessor and
the Lessee,  execution by the Lessee of this Facility  Lease shall be conclusive
proof.  of the  compliance of Unit 2 (including  any Capital  Improvement) , the
Undivided  Interest and the Real Property Interest with all requirements of this
Facility  Lease,  and the Lessee  acknowledges  and agrees  that (i) NEITHER THE
LESSOR NOR THE OWNER  PARTICIPANT IS A  MANUFACTURER  OR A DEALER IN PROPERTY OF
SUCH  KIND AND (ii) THE.  LESSOR  LEASES  AND THE  LESSEE  TAKES  THE  UNDIVIDED
INTEREST  AND  THE  REAL  PROPERTY   INTEREST,   AND  SHALL  TAKE  EACH  CAPITAL
IMPROVEMENT,  AND ANY PART  THEREOF,  AS IS AND WHERE IS, and neither the Lessor
nor the Owner  Participant  shall be deemed to have made, and THE LESSOR AND THE
OWNER  PARTICIPANT EACH HEREBY DISCLOSE,  AMY OTHER  REPRESENTATION OR WARRANTY,
EITHER  EXPRESS OR  IMPLIED,  AS TO ANY MATTER  WHATSOEVER,  INCLUDING,  WITHOUT
LIMITATION,  THE DESIGN OR  CONDITION  OF UNIT 2, ANY CAPITAL  IMPROVEMENT,  THE
UNDIVIDED INTEREST;  THE REAL PROPERTY INTEREST, THE PVNGS SITE OR PVNGS, OR ANY
PART  THEREOF,  THE  MERCHANTABILITY  THEREOF  OR THE  FITNESS  THEREOF  FOR ANY
PARTICULAR  PURPOSE,  TITLE TO UNIT 2, ANY CAPITAL  IMPROVEMENT,  THE  UNDIVIDED
INTEREST,  THE REAL  PROPERTY  INTEREST,  THE PVNGS  SITE OR PVNGS,  OR ANY PART
THEREOF,  THE  QUALITY OF THE  MATERIAL  OR  WORKMANSHIP  THEREOF OR  CONFORMITY
THEREOF TO SPECIFICATIONS,  FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR THE
ABSENCE OF ANY LATENT OR OTHER DEFECTS,  WHETHER OR NOT DISCOVERABLE,  NOR SHALL
THE LESSOR OR THE OWNER  PARTICIPANT BE LIABLE FOR  INCIDENTAL OR  CONSEQUENTIAL
DAMAGES  (INCLUDING  LIABILITY IN TORT,   STRICT OR OTHERWISE) , it being agreed


                                      -12-

6091.CHASEU2.LEASE.47:1


<PAGE>

that all such risks, as among the Owner Participant,  the Loan Participant,  the
Collateral Trust Trustee,  the Indenture Trustee, the Lessor and the Lessee, are
to be borne by the  Lessee.  The  provisions  of this  Section  6(b)  have  been
negotiated,  and, except to the extent otherwise  expressly  provided in section
6(a),  the  foregoing  provisions  are intended to be a complete  exclusion  and
negation  of  any  representations  or  warranties  by  the  Lessor,  the  Owner
Participant, the Loan Participant, the Collateral Trust Trustee or the indenture
Trustee,  express or  implied,  with  respect to Unit 2  (including  any Capital
Improvement),  the Undivided Interest,  pvngs, the Real Property Interest or the
PVNGS Site that may arise  pursuant to any law now or  hereafter  in effect,  or
otherwise.

                (a) Enforcement of Certain Warranties. The Lessor authorizes the
Lessee  (directly or through  agents,  including  the Operating  Agent),  at the
Lessee's expense, to assert for the Lessor's account, during the Lease Term, all
of the  Lessor's  rights (if any) under any  applicable  warranty  and any other
claims (under this Facility  Lease or any Purchase  Document) that the Lessee or
the Lessor may have  against any vendor or  manufacturer  with respect to Unit 2
(including any Capital  Improvement) or the Undivided  Interest,  and the Lessor
agrees to cooperate,  at the Lessee's expense, with the Lessee and the Operating
Agent in asserting such rights. Any amount received (without regard to any right
of setoff or other similar right of any Person against the Lessee) by the Lessee
as  payment  under  any such  warranty  or other  claim  against  any  vendor or
manufacturer  (or, if such warranty or claim  relates to the Undivided  Interest
and the  Retained  Assets,  the portion of such  received  amount  appropriately
allocable  to the  Undivided  Interest)  shall be  applied  in  accordance  with
Sections 9(g), (h) and (i).

                Section 7. Liens.

                The Lessee will not directly or indirectly create, incur6 assume
or permit to exist any Lien on or with respect to the  undivided  Interest,  the
Real Property Interest, the Lessor's title thereto or any interest of the Lessor
or Lessee therein (and the Lessee will promptly,  at its own expense,  take such
action as may be necessary  duly to discharge any such Lien),  except  permitted
Liens.



                                      -13-

6091.CHASEU2.LEASE.47:1


<PAGE>


                SECTION 8. Operation and Maintenance; Capital Improvements.

                  (a) Operation and Maintenance.  The Lessee agrees that it will
exercise its rights, powers,  elections and options as an ANPP Participant under
the ANPP Project Agreements to cause the Operating Agent to (A) maintain Unit 2
in such condition  that Unit 2 will have the capacity and functional  ability to
perform,  on a continuing  basis  (ordinary wear and tear  excepted),  in normal
commercial operation, the functions and substantially at the ratings at which it
is, from time to time, rated, (B) operate,  service,  maintain and repair Unit 2
and replace all  necessary  or useful parts and  components  thereof so that its
condition and operating  efficiency  will be maintained and preserved,  ordinary
wear and tear excepted,  in all material respects in accordance with (1) prudent
utility  practice  for items of  similar  size and  nature,  (2) such  operating
standards as shall be required to take  advantage  of and enforce all  available
warranties and (3) the terms and conditions of all insurance policies maintained
in  effect at any time with  respect  thereto,  (C) use,  possess,  operate  and
maintain Unit 2 in compliance with all material applicable  Governmental Actions
(including  the  License)  affecting  PVNGS  or Unit 2 or the  use,  possession,
operation and  maintenance  thereof and (D) otherwise act in accordance with the
standards set forth in the ANPP Participation  Agreement. The Lessee will comply
with all its  obligations  under  Applicable Law affecting Unit 2, the Undivided
Interest,  PVNGS,  the Real Property  Interest and the PVNGS Site,  and the use,
operation and maintenance  thereof. The Lessee agrees to (i) exercise its rights
under the AMP? Participation Agreement so that there will always be an Operating
Agent under the AN?? Participation Agreement and (ii) maintain in full force and
effect a license from the NRC adequate to possess the Undivided Interest and the
Real  Property  Interest  under  the  circumstances  contemplated  by  the  AMP?
Participation  Agreement.  The Lessee will keep and  maintain  proper  books and
records  (i)  relating  to  all   Operating   Funds  (as  defined  in  the  ANPP
Participation  Agreement) provided by it to the Operating.  Agent under the ANPP
Participation  Agreement and (ii) upon receipt of the requisite information from
the Operating Agent,  relating to the application of such Operating Funds to the
operation  and  maintenance  of Unit 2 and  the  acquisition,  construction  and
installation of Capital Improvements, all in accordance with the Uniform System


                                      -14-

6091.CHASEU2.LEASE.47:1



<PAGE>


of  Accounts.  The Lessor  shall not be obliged in any way to  maintain,  altar,
repair,  rebuild or  replace  Unit 2, any  Capital  Improvement,  the  Undivided
Interest or the Real  Property  Interest,  or any part  thereof,  or,  except as
provided  in  Section  8(f),  to  pay  the  cost  of   alteration,   rebuilding,
replacement,  repair or  maintenance  of Unit 2, any  Capital  Improvement,  the
Undivided Interest or the Real Property Interest,  or any part thereof,  and the
Lessee  expressly  waives the right to perform any such action at the expense of
the Lessor pursuant to any law at any time in effect.

                  (b) Inspection. The Lessor and the Owner Participant and their
respective  authorized  representatives  shall have the right to inspect  .PVNGS
(subject, in each event, to the ANPP  Participation  Agreement,  Applicable Law,
applicable  confidentiality  undertakings  and  procedures  established  by  the
Operating  Agent) at their  expense.  The Lessor and the Owner  Participant  and
their respective authorized  representatives shall have the right to inspect, at
their expense,  the books and records of the Lessee relating to PVNGS,  and make
copies of and  extracts  therefrom  (subject  as  aforesaid)  and may,  at their
expense,  discuss the Lessee's affairs,  finances and account with its executive
officers and its independent  public  accountants  (and by this  provision,  the
Lessee authorizes such'  accountants,  in the presence of the Lessee, to discuss
with the  Lessor  and the  Owner  Participant  and their  respective  authorized
representatives the affairs,  finances and accounts of the Lessee),  all at such
times and as often as may be reasonably requested. None of the Lessor, the Owner
Participant,  the Indenture  Trustee and the Collateral Trust Trustee shall have
any duty  whatsoever  to make any  inspection  or  inquiry  referred  to in this
Section 8(b) and shall not incur any  liability or  obligation  by reason of not
making any such inspection or inquiry.

                (C) Capital  Improvements.  If and to the extent required by the
ANPP Participation  Agreement,  the Lessee shall, at its sole expense,  promptly
participate  in the making of any  Capital  Improvement  to Unit 2 or the Common
Facilities. Of the net proceeds of (i) any sale or other disposition of property
removed from Unit 2 or the Common Facilities  receivable  (without regard to any
right of setoff or other similar right of any Person  against the Lessee) by, or
credited to the account of the Lessee in accordance with the ANPP Participation



                                      -15-

6091.CHASEU2.LEASE.47:1


<PAGE>

Agreement  and (ii) any insurance  proceeds  receivable  (without  regard to any
right of setoff or other similar right of any Person against the Lessee) for the
account of the Lessor or the Lessee in respect of the loss or destruction of, or
damage or casualty  to, any such  property,  7 777778% in the case of Unit 2, or
2.592593%  in the case of Common  Facilities,  of either  such  amount  shall be
applied  as  provided  in  Section  9(g),  (h) or (i),  as the  case  may be.  A
 .7933333%,  in the  case  of  Unit  2,  or  .2644444%,  in the  case  of  Common
Facilities,  undivided  interest in property at any time  removed from Unit 2 or
the Common  Facilities shall remain the property of the Lessor,  no matter where
located, until such time as a Capital improvement  constituting a replacement of
such property  shall have been  installed in Unit 2 or the Common  Facilities or
such removed  property has been disposed of by the Operating Agent in accordance
with the NAP Participation  Agreement.  Simultaneously  with such disposition by
the Operating Agent, title to a .7933333%,  in the case of Unit 2, or .2644444%,
in the case of Common  Facilities,  undivided  interest in the removed  property
shall vest in the Person  designated by the  Operating  Agent1 free and clear of
any and all claims or rights of the Lessor.  Unless  subparagraph (3) of Section
8(e) shall be applicable,  upon the  incorporation  of a Capital  Improvement in
Unit 2 or the Common Facilities,  without further act, (i) title to a .7933333%,
in the case of Unit 2, or .2644444%, in the case of Common Facilities, undivided
interest  in such  Capital  improvement  shall  vest in the Lessor and (ii) such
applicable  undivided interest in such Capital  Improvement shall become subject
to this Facility  Lease and be deemed to be part of the  Undivided  Interest for
all  purposes  hereof to the same  extent  that the Lessor had a like  undivided
interest in the property  originally  incorporated or installed in Unit 2 or the
Common Facilities. The Lessee warrants and agrees that the Lessor's .7933333% or
 .2644444%,  as the case may be, undivided  interest in all Capital  Improvements
shall be tree and clear of all Liens, except Permitted Liens other than the type
specified in clauses (ii), (iii) and (xii) at the definition thereof.

                (d) Reports. To the extent permissible, the Lessee shall prepare
and file in timely fashion,  or, where the Lessor shall be required to file, the
Lessee shall prepare and deliver to the Lessor within a reasonable time prior to
the date for filing,  any reports with respect to Unit 2, the Undivided Interest



                                      -16-

6091.CHASEU2.LEASE.47:1



<PAGE>

or the Real Property  Interest or the condition or operation  thereof that shall
be required to be filed with any  governmental  or regulatory  authority.  On or
before  March 1 of each  year  (commencing  on March 1,  1988)  and on the Lease
Termination  Date, the Lessee shall furnish the Lessor and the Owner Participant
with a report stating the total cost of all Capital  Improvements and describing
separately and in reasonable  detail each Capital  Improvement (or related group
of Capital Improvements) made during the period from the date hereof to December
31,  1987 in the case of the first such report or during the period from the end
of the period  covered by the last  previous  report to the December 31 prior to
such report in the case of subsequent reports. On or before March 1 in each year
(commencing  March 1, 1987) and at such  other  times as the Lessor or the Owner
Participant  shall reasonably  request in writing (which request shall provide a
reasonable period for response), the Lessee will report in writing to the Lessor
with respect to (i) the most recent annual capital  expenditure budget submitted
by the Operating Agent to the Lessee in accordance  with the ANPP  Participation
Agreement  and (ii) the then  plans (if any)  which the  Lessee may have for the
financing of the same under Section 8(f).

                (e) Title to Capital Improvements.  Title to a .7933333%, in the
case of Unit  2, or  .2644444%,  in the  case of  Common  Facilities,  undivided
interest in each Capital Improvement to Unit 2 or the Common Facilities,  as the
case may be, shall vest as follows:

                  (1) in the  case of  each  Nonseverable  Capital  Improvement,
        whether or not the Lessor shall have financed or provided  financing (in
        whole  or  in  part)  for  such  undivided   interest  in  such  Capital
        Improvement  by  an  Additional  Equity  Investment  or  a  Supplemental
        Financing, or both, effective on the date such Capital Improvement shall
        have been incorporated or installed in Unit 2 or the Common  Facilities,
        as the case may be, the Lessor shall, without further act, acquire title
        to such undivided interest in such Capital Improvement;

                  (2) in the. case of each Severable Capital improvement, if the
        Lessor shall have  financed (by an  Additional  Equity  Investment  or a
        supplemental  Financing,  or both) .7933333%,  in the case of unit 2, or
        .2644444%, in the case of Common Facilities, of the cost of such


                                      -17-

6091.CHASEU2.LEASE.47:1



<PAGE>


        Capital  Improvement,  the Lessor shall,  without  further act,  acquire
        title to such undivided interest in such Capital Improvement; and

                  (3) in the case of each Severable Capital Improvement,  if the
        Lessor shall not have financed (by an Additional  Equity Investment or a
        Supplemental  Financing,  or both) .7933333%,  in the case of Unit 2, or
        .2644444%, in the case of Common Facilities, of the cost of such Capital
        Improvement, the Lessee shall retain title to such undivided interest in
        such Capital Improvement.

                  Immediately upon title to such .7933333%,  in the case of Unit
2, or .2644444%,  in the case of Cannon  Facilities,  undivided  interest in any
Capital  Improvement  vesting in the Lessor  pursuant  to  sub-paragraph  (1) or
sub-paragraph (2) of this Section 8(e), such undivided  interest in such Capital
improvement  shall,  without  further act, become subject to this Facility Lease
and be deemed part of the Undivided Interest for all purposes hereof.

                  (f)  Funding  of the  Cast  or  Capital  Improvements.  Before
placing in service any Capital  Improvement  to Unit 2 or the Common  Facilities
the cost of which exceeds  $1OO,000,000  in respect of the interests of all ANPP
Participants,  the  Lessee  shall  give the  Lessor  and the  Owner  Participant
reasonable advance notice thereof.  The Owner Participant shall have the option,
in its sole discretion,  of financing through the Lessor .7933333%,  in the case
of Unit 2, or .2644444%,  in the case of Common  Facilities,  of the cost of any
such Capital  Improvement,  or any other  Capital  Improvement  presented to the
Owner  Participant  for  financing,  including or not including the making of an
investment by the Owner  Participant (an Additional  Equity  Investment) and the
issuance of one or more Additional  Notes, all on terms acceptable to the Lessee
and the Owner Participant. If the Owner Participant does not finance, or arrange
the financing of, .7933333%, in the case of Unit 2, or .2644444%, in the case of
Common Facilities, of the cost of such Capital Improvement, the Lessee may cause
the Lessor to issue, if and to the extent permitted by the Indenture,  to one or
more  Persons  (other  than any Person  affiliated  with the  Lessee  within the
meaning of Section 318 of the Code) one or more Additional Notes and to use the


                                      -18-
                                        I
6091.CHASEU2.LEASE.47:1



<PAGE>


proceeds  thereof to pay the  applicable  percentage of the cost of such Capital
Improvement, subject to satisfaction off the following conditions:

                      (i) there shall be no more than one Supplemental Financing
                  in any calendar year;

                      (ii) the sum of the Supplemental  Financing Amounts in any
                  calendar year shall equal or exceed .7933332% of $5,000,000;

                       (iii)  the  Lessee  may  include  in  any  request  for a
                  Supplemental   Financing   only   Capital   Improvements   not
                  previously  financed in any  Supplemental  Financing and which
                  have been  installed or affixed no earlier than three calendar
                  years before the  beginning of the calendar year in which such
                  Supplemental Financing occurs;

                      (iv)  the  total  amount  of all  Supplemental  Financings
                  during the Basic  Lease Term  shall not  exceed  7.777778%  of
                  $100,000,000;

                      (v)  unless  waived  by the Owner  Participant,  the Bonds
                  issued and  outstanding  under the Collateral  Trust Indenture
                  shall be rated no less than "investment  grade", as determined
                  by  Standard  &  Poor's   Corporation  and  Moody's  Investors
                  Service, Inc.;

                      (vi) the  Supplemental  Financing  Amount shall not exceed
                  that portion of the cost of Capital  Improvements  which, when
                  financed,   will   constitute   an   addition   to  the  Owner
                  Participant's basis under section 1012 of the Code;

                      (vii) in the  opinion of  independent  tax  counsel to the
                  Owner  Participant,  such  Supplemental  Financing  shall  not
                  result in adverse tax Consequences to the Owner Participant or
                  adversely  affect the status of this Facility Lease as a "true
                  lease  for  Federal,  New  York  State  or New  York  City tax
                  purposes,  and the Owner Participant and the Lessee shall have
                  agreed upon the amount and manner of payment of the  indemnity
                  (if  any)  payable  by the  Lessee  as a  consequence  of such
                  supplemental Financing:


                                      -19-

6091.CHASEU2.LEASE.47:1


<PAGE>


                      (viii) the  Additional  Notes shall have a final  maturity
                  date no later than January 15, 2016:

                       (ix) the  Lessee  shall  have made such  representations,
                  warranties and covenants  regarding the tax characteristics of
                  the Lessor's undivided interest in each Capital Improvement as
                  the  Owner  Participant   reasonably  requests,  and  the  Tax
                  indemnification   Agreement  shall  have  been   appropriately
                  modified;

                         (x)  appropriate  adjustments  to  Basic  Rent  and the
                schedules  of  Casualty  Values,  Special  Casualty  Values  and
                Termination  Values  shall  have  been  agreed  to by the  Owner
                Participant to support the  amortization of the Additional Notes
                issued in respect of such Supplemental Financing and to preserve
                Met Economic Return;

                         (xi) the Lessee shall pay to the Lessor an amount equal
                to all out-of-pocket  costs and expenses  reasonably incurred by
                the Lessor or the Owner  Participant  and not financed as a part
                of such  Supplemental  Financing or reflected in  adjustments to
                Basic Rent;

                      (xii) no Default or Event of Default  shall have  occurred
                  and be continuing; and

                      (xiii) the Lessee  shall  enter into such  agreements  and
                  shall have  provided  such tax  indemnities,  representations,
                  warranties1  covenants,   opinions,   certificates  and  other
                  documents as the Owner Participant shall reason-ably request.

                 SECTION 9. Event of Loss; Deemed Loss Event.

                  (a) Damage or Loss. In the event that Section 16.2 of the ANPP
Participation  Agreement  (as  in  effect  on  the  date  hereof)  shall  become
applicable,  or an Event of Loss, a Requisition of Use or a Requisition of Title
shall  occur,  or  Unit  .2  or  any  substantial4  part  thereof  shall  suffer
destruction, damage, loss, condemnation, confiscation, theft or seizure for any


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<PAGE>


reason  whatsoever,  such  fact  shall  promptly,  and in any case  within  five
Business Days following such event,  be reported by the Lessee to the Lessor and
the Owner Participant.

                (b) Repair.  The Lessee shall promptly make any and all payments
required of the Lessee under the provisions of the AMP? Participation  Agreement
relating to damage or destruction or the like to Unit 2 or any portion  thereof;
provided,  however,  that the Lessee  shall in no event be  obligated to make or
join in any agreement under Section 16.2 of the AN?? Participation Agreement (as
in effect on the date hereof) concerning repairs to or reconstruction of Unit 2.

                  (c) Payment of Casualty  Value. On the Basic Rent Payment Date
next following receipt by the Lessee of a written notice from the Lessor that an
Event of Loss has  occurred,  the Lessee  shall pay to the Lessor all Basic Rent
due on such Basic Rent Payment  Date,  plus an amount equal to the excess of (i)
Casualty  Value  determined  as of such  Basic Rent  Payment  Date over (ii) the
unpaid  principal  amount of the Notes  Outstanding  on such date  after  giving
effect to the payment,  if any, of the principal  installment due and payable on
such  date.  An Event of Loss  shall not be deemed to have  occurred  unless and
until the Lessor delivers the notice specified in the preceding  sentence.  Upon
compliance in full by the Lessee with the  foregoing  provisions of this Section
9(c) and assumption by the Lessee of all the  obligations and liabilities of the
Owner Trustee under the  Indenture and the Notes  pursuant to Section  3.9(b) of
the Indenture, the Lessor shall (so long as no Default or Event of Default shall
have  occurred and be  continuing),  and at any time after the  occurrence of an
Event of Loss, the Lessor may:

                      (1) in the case of an Event of Loss  arising  from a Final
                  Shutdown,  if the Lessee shall have declined,  but one or more
                  of  the  other  ANPP  Participants  shall  have  elected,   to
                  reconstruct  or  restore  Unit 2,  as  permitted  by the  ANPP
                  Participation  Agreement,  Transfer the Undivided Interest and
                  the Real Property Interest to such electing ANPP Participants,
                  as  required by and in the  proportions  set forth in the ANPP
                  Participation  Agreement,  in which case the  Lessee  shall be
                  entitled  to  receive  the  portion  of  the  "salvage  value"
                  purchase price allocable to the Undivided Interest; or


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<PAGE>

                      (2) if clause (1) shall not be  applicable,  Transfer  the
                  Undivided  Interest  and the  Real  Property  Interest  to the
                  Lessee.

If the Lessee shall not have assumed all the  obligations and liabilities of the
Owner  Trustee  under the  Indenture  and the Notes in  accordance  with Section
3.9(b) of the  Indenture,  but the Owner  Participant  shall have received under
Section  5.2 of the  Indenture  all  amounts  required  to be paid by the Lessee
pursuant to this Section 9(c) (including  interest,  if any, thereon pursuant to
Section 3(b) (iii) hereof),  the Lessor shall retain the Undivided  Interest and
the Real  Property  Interest  subject  to the terms of this  Facility  Lease and
Section 7(b)(4) of the Participation Agreement;  provided, however, that (i) the
obligation of the Lessee to pay further Basic Rent shall be reduced to an amount
on each Basic Rent  Payment  Date equal to the  aggregate  amount of  principal,
premium,  if  any,  and  accrued  interest  then  payable  on'  all  Notes  then
Outstanding  and (ii) this Facility Lease shall become a security  agreement for
all purposes of Applicable Law.

                  (d) Payment of special  Casualty Value. If a Deemed Loss Event
occurs,  the party hereto having  knowledge  thereof shall  promptly  notify the
other thereof  (provided that the failure by the Lessor to furnish to the Lessee
the foregoing  notification shall not impair the right of the Lessor to exercise
the option  referred to below)  and,  at the  Lessor's  option,  exercisable  by
delivery of written  notice to the Lessee,  on the day (specified in Schedule 2)
of the month next  following  the month during which such notice is delivered to
the Lessee,  the Lessee shall pay to the Lessor an amount equal to the excess of
(i) Special  Casualty  Value  determined as of the date such payment is due over
(ii) the  principal  amount of the Notes  Outstanding  on such date after giving
effect to the payment,  if any, of the principal  installment due and payable on
such day. Upon compliance in full by the Lessee with the foregoing provisions of
this  Section  9(d) and  assumption  by the Lessee of all the  obligations  and.
liabilities  of the Owner Trustee under the Indenture and the Notes  pursuant to
Section  3.9(b) of the  Indenture,  the  Lessor  shall (so long as no Default or
Event of Default  shall have occurred and be  continuing,  and at any time after



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<PAGE>

the  occurrence of a Deemed Loss Event,  the Lessor may,  Transfer the Undivided
Interest and the Real Property  Interest to the Lessee.  If the Lessee shall not
have assumed all the  liabilities and obligations of the Owner Trustee under the
Indenture and the Notes in accordance with Section 3.9(b) of the Indenture,  but
the Owner Participant shall have received under Section 5.2 of the Indenture all
amounts  required  to be paid  by the  Lessee  pursuant  to  this  Section  9(d)
(including interest1 if any, thereon pursuant to Section 3(b)(iii)),  the Lessor
shall retain the Undivided  Interest and the Real Property  Interest  subject to
the terms of this  Facility  Lease  and  Section  7(b) (4) of the  Participation
Agreement;  provided,  however,  that (i) the  obligation  of the  Lessee to pay
further Basic Rent shall be reduced to an amount on each Basic Rent Payment Date
equal to the  aggregate  amount  of  principal,  premium,  if any,  and  accrued
interest  then payable on all Notes  Outstanding  and (ii) this  Facility  Lease
shall became a security agreement for all purposes of Applicable Law.

                  (e)  Requisition  of Use. In the case of a Requisition  of Use
not constituting an Event of Loss, this Facility Lease shall continue,  and each
and every obligation of the Lessee hereunder and under each Transaction Document
shall  remain  in full  force and  effect.  So long as no.  Default  or Event of
Default shall have occurred and be  continuing,  the Lessee shall be entitled to
all sums received by reason of any such Requisition of Use for the period ending
on the Lease  Termination  Date,  and the Lessor  shall be  entitled to all sums
received by reason of any such Requisition of Use for the period after the Lease
Termination Date.

                (f) Termination of Obligation.  Until the Lessee shall have made
the  payments  specified  in Section  9(c) or 9(d),  the  Lessee  shall make all
payments of Rent when due; and the Lessee shall  thereafter  be required to make
all payments of Supplemental  Rent as and when due. In the event that the Lessee
shall assume all the  obligations and liabilities of the Owner Trustee under the
Indenture  and the Notes  pursuant  to  Section  3.9(b) of the  Indenture,  upon
receipt by the Owner  Participant  under  Section  5.2 of the  Indenture  of the
payments  specified  in  Section  9(c) or 9(d) and  payment by the Lessee of all
other Rent due and owing through and  including  the date of payment  (including
Basic Rent due on or accrued  through such date,  as the case may be), the Lease
Term  shall end and the  Lessee's  obligation  to pay  further  Basic Rent shall
cease.


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<PAGE>


                  (g)  Application of Payments on an Event of Loss. Any payments
receivable  (without regard to any right at setoff or other similar right of any
Person  against the Lessee) at any time by the Lessor or the Lessee  (other than
insurance  placed by the Owner  Trustee  or the Owner  Participant  pursuant  to
Section 10(b)) from any Governmental Authority,  insurer or other Person (except
the  Lessee,  the Owner  Trustee  or the Owner  Participant)  as a result of the
occurrence of an Event of Loss shall be applied as follows:

                         (i)  all  such  payments  received  at any  time by the
                  Lessee  shall be promptly  paid to the Lessor for  application
                  pursuant to the  following  provisions  of this Section  9(g),
                  except  that the Lessee may retain any  amounts  that would at
                  the time be payable to the Lessee as  reimbursement  under the
                  provisions of clause (ii) below;

                         (ii) so much of such  payments  as shall not exceed the
                  amount  required to be paid by the Lessee  pursuant to Section
                  9(c)  (ignoring,  for this  purpose,  clause (ii) of the first
                  Sentence  thereof)  shall  be  applied  in  reduction  of  the
                  Lessee's  obligation to pay such amount if not already paid by
                  the Lessee or, if already paid by the Lessee, shall be applied
                  to reimburse the Lessee for its payment of such amount; and

                      (iii) the  balance,  if any,  of such  payments  remaining
                thereafter shall be divided between the Lessor and the Lessee as
                their interests may appear.

                  (h)  Application of Payments Not Relating to an Event of Loss.
Payments  receivable  (without  regard to any  right of setoff or other  similar
right of any Person  against the  Lessee) at any time by the Lessor  (other than
insurance  placed by the Owner  Trustee  or the Owner  Participant  pursuant  to
Section 10(b)) or the Lessee from any Governmental  Authority,  insurer or other
Person  with   respect  to  any   destruction,   damage,   loss,   condemnation,
confiscation,  theft or seizure of or  Requisition of Title to or Requisition of
Use of the Undivided  Interest or any part thereof not  constituting an Event of
Loss shall be applied first to reimburse the Lessee for all amounts expended in



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<PAGE>

respect of the repair,  replacement or reconstruction of the Undivided  Interest
or any part thereof as provided in Section 9(b), and second the balance, if any,
of such  payments  shall be divided  between  the Lessor and the Lessee as their
interests may appear.

                  (i)  Other   Dispositions.   Notwithstanding   the   foregoing
provisions  of this  Section 9, so long as a Default  or Event of Default  shall
have occurred and be continuing,  any amount that would  otherwise be payable to
or for the  account  of, or that  would  otherwise  be  retained  by, the Lessee
pursuant to Section 10 or this Section 9 shall be paid to the Lessor as security
for the  obligations  of the Lessee under this Facility  Lease and, at such time
thereafter  as no Default or Event of Default shall be  continuing,  such amount
shall be paid  promptly  to the Lessee  unless  this  Facility  tease shall have
theretofore been declared to be in default,  in which event such amount shall be
disposed of in accordance  with the provisions  hereof,  of the Indenture and of
the Trust Agreement.

                (j) Assumption of Notes; Creation of Lien on Undivided Interest.
In connection with; an Event of Loss, a Deemed Loss Event or the exercise of the
Cure  Option,  (i) the Lessee  agrees to use its best efforts to comply with the
conditions  respecting its assumption of all the  obligations and liabilities of
the Owner Trustee under the Indenture and the Notes set forth in Section  3.9(b)
of the Indenture, and (ii) the Lessor agrees that, if the Lessee fails to assume
all the obligations and liabilities of the Owner Trustee under the Indenture and
the Notes in accordance with Section 3.9(b) of the indenture, not later than two
Business  Days  prior to the date on which the  Lessee is  required  to make the
payments  specified in Section 9(c) or 9(d), the Lessor will cause the Undivided
Interest  and the Real  Property  Interest  to be  subjected  to the Lien of the
Indenture by executing and  delivering  to the  Indenture  Trustee the Undivided
Interest Indenture Supplement.

                  SECTION 10.  Insurance.

                  (a) Required  Insurance.  The Lessee will use its best efforts
to cause the Operating Agent to carry and maintain  insurance required under the
ANPP  Participation  Agreement and will make all payments required of the Lessee
under the ANPP Participation  Agreement in respect of such insurance. The Lessee



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<PAGE>


will at all times maintain, directly or through the Operating Agent, policies of
casualty and liability  insurance with respect to the Undivided Interest and the
Real  Property  Interest  in such  amounts  and with such  coverage  as shall be
adequate in accordance with prudent utility practice.  Any policies of insurance
in  respect  of  destruction,  damage,  loss,  theft  or other  casualty  to the
Undivided Interest, the Real Property Interest, unit 2 or any part thereof shall
name the Lessor (and, to the extent  practicable,  the Owner  Participant) as an
additional  insured,  as its interest (or their  interests) may appear,  and any
policies  with  respect  to  nuclear  liability  insurance  with  respect to the
Undivided  Interest,  the Real Property  Interest,  Unit 2, or any part thereof,
shall  include all  Indemnities  as insureds  through an omnibus  definition  of
"insured"  or through  endorsement:  provided  however,  that if the  Operating
Agent as trustee,  shall  become the loss payee  under any policy of  insurance
constituting Project Insurance,  then the Lessor and the Owner Participant shall
be and be made  beneficiaries of the trust arrangement under which the Operating
Agent acts as  trustee.  The Lessee  shall,  on or before  March 1 of each year,
commencing March 1, 1987,  furnish to the Lessor and the Owner Participant (A) a
report signed by the broker or brokers for the PVNGS  insurance (or if insurance
is placed directly by the Operating Agent, a certificate signed by the Operating
Agent) (i) showing the insurance then maintained by the ANPP  Participants  with
respect to PVNGS,  (ii) stating that no premiums are then delinquent,  and (iii)
stating that the insurance  maintained by the ANPP  Participants with respect to
PVNGS is in accordance  with the terms of (1) the ANPP  Participation  Agreement
and (2) this  Section  10, (B) a report  signed by the broker or brokers for the
Lessee's  insurance  (or it  insurance  is  placed  directly  by the  Lessee,  a
certificate signed by the Lessee) showing the separate insurance,  if arty, then
maintained  by the Lessee with respect to its interest in PVNGS and stating that
no premiums under such insurance are delinquent; (C) a certificate signed by the
Lessee stating that the insurance maintained by the ANPP Participants and by the
Lessee,  identified  on the reports to be delivered  pursuant to clauses (A) and
(B), is in accordance with prudent utility practice within the nuclear industry,
the ANPP  Participation  Agreement and this Section 10: and (D) upon the request
of the Lessor or the Owner  Participant,  copies (to the extent permitted by the
issuers of such policies) of policies so maintained.  Any report by an insurance



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<PAGE>

broker  with  respect  to clause  (A) (iii) (1) may be made in  reliance  upon a
schedule provided by the Lessee (a copy of which shall be attached)  identifying
the  insurance  (by  coverage,  limits,  insureds and other  pertinent  details)
required to be maintained  under the ANPP  Participation  Agreement.  Any report
with  respect  to clause  (A) (iii) (2) may be made in  reliance  upon a similar
schedule provided by the Lessee (a copy of which shall be attached)  identifying
the  insurance  required to be  maintained  under this Section 10. All insurance
proceeds paid in respect of damage,  destruction,  loss, theft or other casualty
to the  Undivided  Interest or the Real  Property  Interest  shall be applied as
provided in Section 9(g), (h) or (i), as the case may be, subject,  however,  to
any priority  allocations of such proceeds to decontamination and debris removal
set forth in the insurance  policies or required  under  Applicable  Law. In the
event that  either the  Operating  Agent or the  Lessee  delivers a  certificate
pursuant to clause (A) or (B) of the foregoing,  the Owner  Participant shall be
entitled to receive (if it so requests and if the insurer will issue the same) a
report from any insurer listed in such certificate.

                  (b)  Permitted  Insurance.  Nothing  in this  Section 10 shall
prohibit the Lessee from placing,  at its expense,  insurance on or with respect
to the cost of purchasing replacement power, naming the Lessee as insured and/or
loss payee,  unless such insurance  would  conflict with or otherwise  limit the
availability  of  insurance  to be provided or  maintained  in  accordance  with
Section 10(a). Nothing in this Section 10 shall prohibit the Lessor or the Owner
Participant  from placing at its expense  other  insurance on or with respect to
Unit 2, the Undivided Interest or the Real Property Interest or the operation of
Unit 2, naming the Lessor or the Owner Participant as insured and/or loss payee,
unless such insurance would conflict with or otherwise limit the insurance to be
provided or maintained in accordance with Section 10(a).

                  SECTION 11.  Rights to Assign or sublease.

                  (a)  Assignment  or sublease by the Lessee.  Without the prior
written consent of the Lessor, the Lessee shall not assign,  sublease,  transfer
or encumber (except for Permitted Liens) its leasehold interest in the Undivided
Interest or the Real Property  Interest  under this Facility  Lease.  The Lessee



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<PAGE>

shall  not,  without  the prior  written  consent  of the  Lessor  and the Owner
Participant,  part with the possession of, or suffer or allow to pass out of its
possession,  the Undivided interest,  the Real Property Interest or any interest
therein,  except  to the  extent  required  pursuant  to the ANPP  Participation
Agreement or expressly permitted by the provisions of this Facility Lease or any
other Transaction Document.

                  (b) Assignment by Lessor as Security for Lessor's Obligations.
To secure the indebtedness evidenced by the Notes, the Lessor will assign to the
Indenture  Trustee its right,  title and interest to receive certain payments of
Rent (not including, in any event, Excepted Payments), to the extent provided in
the  Indenture  and may assign to the  Indenture  Trustee  its right,  title and
interest  in  the  Undivided   Interest  and  the  Real  Property   Interest  as
contemplated  by Section 9(j). The Lessee hereby (a) consents to such assignment
pursuant  to the  terms of the  Indenture,  (b)  agrees to pay  directly  to the
Indenture Trustee at the Indenture  Trustee's Office (so long as the lien of the
Indenture  has not been  satisfied  and  discharged  and the Lessor is obligated
thereunder) all amounts of Rent (other than Excepted  Payments) due or to become
due to the Lessor  that shall be required  to be paid to the  Indenture  Trustee
pursuant to the Indenture, (c) agrees that the right of the Indenture Trustee to
any such payments shall be absolute and  unconditional and shall not be affected
by  any  circumstances   whatsoever,   including,   without  limitation,   those
circumstances set forth in Section 4 and (d) agrees that, to the extent provided
in the Indenture  and until the  Indenture is discharged in accordance  with its
terms,  the Indenture  Trustee shall have all the rights of the Lessor hereunder
with respect to Assigned  Payments as if the  Indenture  Trustee had  originally
been named herein as the Lessor.

                  SECTION 12.  Lease Renewal.

                  Subject to the notice requirements set forth in Section 13(a),
at the end of the Basic Lease Term, provided that no Default,  Event of Default,
Event of Loss or Deemed Loss Event shall have occurred and be continuing and the
Notes shall have been paid in full, the Lessee shall have the right to renew the
term of this Facility Lease for a period commencing January 15, 2016, and ending
oh the later of January 15, 2018 and the end of the Maximum  Option  Period (the



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<PAGE>

renewal Term),  during which the Basic Rent payable shall be the rental provided
in Section 3(a)(iii) and one-halt of the rental provided in Section 21.

                SECTION 13.  Notices for Renewal or Purchase; Purchase Options.

                (a) Notice;  Determination of Values;  Appraisal Procedure.  Not
later than three years nor earlier than five years prior to the expiration  date
of the Basic  Lease Term,  and not later than three years nor earlier  than five
years prior to the expiration  date of the Renewal Term, as the case may be, the
Lessee shall give to the Lessor  written  notice of its  election  either to (A)
return the  Undivided  Interest  arid the Real  Property  Interest to the Lessor
pursuant to Section 5, or (B) exercise the renewal  option  permitted by Section
12 (in the case of the notice delivered in respect of the expiration date of the
Basic Lease Term) or the  purchase  option  permitted by Section  12(b).  If the
notice  specified in clause (B) of the  preceding  sentence is given three years
prior to the  expiration of the Basic Lease Term,  then not later than two years
prior to the  expiration  date of the Basic Lease Term, the Lessee will give the
Lessor  written  notice of its election  either to exercise  the renewal  option
permitted by Section 12 or the purchase option  permitted by Section 13(b).  Any
such election shall be irrevocable as to the Lessee,  but no such election shall
be binding on the Lessor if, on the effective date thereof,  an Event of Default
shall have occurred and be continuing or an Event of Loss or a Deemed Loss Event
shall have  occurred.  Promptly  after  giving  notice,  (i) in case the renewal
option has been  elected,  the Maximum  Option Period shall be determined by the
Appraisal  Procedure,  or (ii) in case the purchase option  permitted by Section
13(b) has been elected,  the Lessee and the Owner  Participant  shall agree upon
the Fair Market  Sales Value of the  undivided  Interest  and the Real  Property
Interest,  or, if within three months after the date of the Lessee's  notice the
Lessee and the Owner  Participant  shall be unable so to agree, such value shall
be determined by the Appraisal Procedure.

                (b) Purchase Option at Expiration of the lease Term.  Subject to
the notice requirements set forth in Section 13(a), unless a Default or an Event
of Default  shall have  occurred and be continuing or an Event of Loss or Deemed
Loss Event shall have occurred, on the date of the expiration of the Basic Lease



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<PAGE>

Term or the  Renewal  Term (if  elected),  the  Lessee  shall  have the right to
purchase the Undivided  Interest and the Real  Property  Interest for a purchase
price equal to the Fair Market Sales Value thereof.

                  (c) Purchase of the Undivided Interest;  Payment,  Etc. If the
Lessee shall have elected or be required to purchase the Undivided  Interest and
the Real Property Interest  pursuant to Section 13(b),  payment by the Lessee of
the purchase  price for the Undivided  Interest and the Real  Property  Interest
shall  be made in  immediately  available  funds,  whereupon  the  Lessor  shall
Transfer the Undivided Interest and the Real Property Interest to the Lessee.

                  SECTION 14.  Termination for obsolescence.

                  (a) Termination  Notice.  Notwithstanding any provision herein
contained to the  contrary,  unless a Default or an Event of Default  shall have
occurred and be continuing or an Event of Loss or a Deemed Loss Event shall have
occurred,  the Lessee shall have the option (provided that the Lessee shall have
delivered to the Lessor an Officers' Certificate to the effect that the Lessee's
Board of Directors  has adopted and there is in effect a resolution  determining
that Unit 2 is (A) uneconomic to the Lessee or (B) economically obsolete for any
reason;  and provided that the Lessee shall be disposing of all its other leased
interests in Unit 2), on at least 360 days' prior written  notice (a Termination
Notice) to the Lessor,  the Owner  Participant and the Indenture  Trustee (which
notice shall be irrevocable)) to terminate this Facility Lease on any Basic Rent
Payment  Date  after  January  15,  1999,  and prior to  January  15,  2013 (the
Termination Date). If the Lessee shall give the Lessor a Termination Notice, the
Lessee shall, as agent for the Lessor,  use its best efforts to obtain cash bids
for the  purchase of the  undivided  Interest  and the Real  Property  Interest,
together with the interest of the Lessor under the  Assignment  and  Assumption.
The Lessor shall also have the right to obtain such cash bids,  either  directly
or through agents other than the Lessee.  The Lessee shall certify to the Lessor
within ten days after the Lessee's receipt of each bid (and, in any event, prior
to the Termination  Date) the amount and terms thereof and the name and address,
of the party  (which  shall not be the  Lessee or an  Affiliate  of the  Lessee)
submitting such bid.


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<PAGE>


                  (b)  Right  of  Lessor  to  Retain  Undivided   Interest  upon
Termination.  If a  Termination  Notice has been  delivered  pursuant to Section
14(a), the Lessor may elect to retain,  rather than sell, the Undivided Interest
and the Real Property  Interest by giving notice to the Lessee and the indenture
Trustee prior to the Termination Date. It shall be a condition  precedent to the
Lessor's right to retain the Undivided  Interest and the Real Property  Interest
that on or prior to the  Termination  Date the  Lessor  shall have paid (or made
provision for payment) to the Indenture Trustee,  the unpaid principal amount of
all Notes Outstanding on such date and all premium, if any, and interest accrued
and unpaid on the date of payment.  If the Lessor elects to retain the Undivided
Interest  and the Real  Property  interest  pursuant to this Section 14 (b), the
Lessee  shall pay to the Lessor on the  Termination  Date the Basic Rent and any
other Rent due or accrued,  as the case may be, to and including the Termination
Date,  together with an amount equal to the excess,  if any, of the  Termination
Value as of the  Termination  Date over the  highest  bona fide  offer  received
pursuant to Section 14(a).

                  (c)  Events on the  Termination  Date.  If the  Lessor has not
elected to retain the  Undivided  Interest  and the Real  Property  Interest  as
provided  in Section  14(b),  on the  Termination  Date the Lessor  shall  (upon
receipt  of the sale price and all  additional  payments  specified  in the next
sentence)  Transfer the Undivided  Interest and the Real  Property  Interest for
cash to the bidder (which shall not be the Lessee or an Affiliate of the Lessee)
that shall have submitted the highest bid on or before the Termination Date: The
total sale price realized at such sale shall be retained by the Lessor (subject,
however, to the terms of the Indenture and the requirement that there shall have
been paid, or provision  for payment  made, to the Indenture  Trustee the unpaid
principal  amount  of all  Notes  Outstanding  on the  Termination  bate and all
premium, if any, and interest accrued and unpaid on the date of payment) and, in
addition,  on the  Termination  Date the Lessee  shall pay to the Lessor (A) the
excess, if any, of the Termination Value as of the Termination Date over the net
sale price of the Undivided Interest and the Real Property Interest and (B) any.
Basic Rent due or accrued,  as the case may be, to and including the Termination
Date and shall pay to the Person or Persons entitled thereto all Supplemental



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<PAGE>

Rent (other than  Termination  Value).  Upon  compliance  by the Lessee with the
applicable  provisions  of this Section 14, the  obligation of the Lessee to pay
Basic Rant due hereunder for any period after the  Termination  Date shall cease
and the Basic Lease Term shall end on the Termination Date;  provided,  however,
that,  in the event of  termination  of this  Facility  Lease  pursuant  to this
Section 14, the obligations of the Lessee under the ANPP Participation Agreement
(except as therein  expressly  provided) and the Assignment and Assumption shall
continue  in full force and effect  and shall not be  impaired  by reason of any
such termination.  If, other than as a result of the Lessor's election to retain
the  Undivided  Interest and the Real  Property  Interest as provided in Section
14(b), on or as of the  Termination  Date no such sale shall occur or the Lessee
shall not have complied in full with this Section 14, this Facility  Lease shall
continue in full force and effect in accordance with its terms without prejudice
to the Lessee's  right to exercise its rights under this Section 14  thereafter,
except  that the Lessee  shall not be entitled  to deliver  another  Termination
Notice during the 3-year  period.  following such  Termination  Date. The Lessor
shall be under no duty to  solicit  bids,  to  inquire  into the  efforts of the
Lessee to obtain bias or otherwise  take any action in connection  with any such
sale other than, if the Lessor has not elected to retain the Undivided  Interest
and the Real Property interest,  to Transfer the Undivided Interest and the Real
Property  Interest to the  purchaser  named in the highest bid  certified by the
Lessee to the Lessor or obtained by the Lessor,  against receipt of the payments
provided for herein (but only if such  purchaser  has obtained all  Governmental
Action by the NRC necessary in connection therewith).

                  (d) Early  Termination  Notice.  In the event  that the Lessee
shall fail to exercise  its renewal  option or purchase  option  within the time
limit  provided  by Section 13 (a) , the Lessor  shall have the  option,  on any
Basic Rent Payment Date  thereafter,  on at least 120 days prior written  notice
(an Early  Termination  Notice)  to the  Lessee and the  Indenture  Trustee,  to
terminate  this Facility  Lease on the Basic Rent Payment Date specified in such
notice (the Early Termination  Date). My Early Termination Notice may be revoked
by the Lessor at any time on or prior to the Early Termination Date.




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<PAGE>

                  (e)  Events  On the  Early  Termination  Date.  On  the  Early
Termination  Date the Lessor  shall,  at its option,  (i) Transfer the Undivided
Interest and the Real Property  Interest to the bidder (other than the Lessee or
an Affiliate of the Lessee)  selected by the Lessor or (ii) retain the Undivided
interest and the Real Property  Interest.  It shall be a condition  precedent to
the  Lessor's  right  to sell or  retain  the  Undivided  Interest  and the Real
Property  Interest  that on or prior to the Early  Termination  Date the  Lessor
shall have paid (or made  provision  for payment) to the  Indenture  Trustee the
unpaid principal  amount of all Notes  Outstanding on such date and all premium,
if any, and interest  accrued and unpaid on the date of payment.  The total sale
price  realized  at any such  sale  shall be  retained  by the  Lessor  and,  in
addition,  on the Early  Termination Date the Lessee shall pay to the Lessor any
Basic  Rent due or  accrued,  as the case may be,  to and  including  the  Early
Termination  Date, and shall pay to the Person or Persons  entitled  thereto all
Supplemental Rent (other than Termination Value) . Upon compliance by the Lessee
with the applicable  provisions of this Section 14, the obligation of the Lessee
to pay Basic Rent due thereunder for any period after the Early Termination Date
shall  cease  and the  Lease  Term  shall  end on the  Early  Termination  Date;
provided,  however,  that in the event of the termination of this Facility Lease
pursuant  to this  Section  14, the  obligations  of the  Lessee  under the AMP?
Participation   Agreement  (except  as  therein  expressly   provided)  and  the
Assignment and Assumption  shall continue in full force and effect and shall not
be impaired by reason of any such termination.

                 SECTION 15.  Events of Default.

                  The term Event of Default,  wherever  used herein,  shall mean
any of the following  events  (whatever the reason for such Event of Default and
whether it shall be  voluntary or  involuntary,  or come about or be effected by
operation of law, or be pursuant to or in compliance  with any Applicable Law or
Governmental Action)

                         (i) the Lessee shall rail to make, or cause to be made,
                  (x)  payment of Casualty  Value,  Termination  Value,  Special
                  Casualty Value or payment due pursuant to exercise of the Cure
                  Option  when  due,  (y) any  payment  of Basic  Rent  within S
                  Business  Days  after  the same  shall  Become  due or (z) any
                  payment of Supplemental Rent (other than Casualty Value,


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<PAGE>


                 Termination  Value,  Special  Casualty  Value  or  payment  due
                 pursuant to exercise of the Cure  Option)  Within 20 days after
                 the same shall become due or demanded, as the case may be; or

                      (ii) the Lessee  shall  fail to  perform  or  observe  any
                  covenant,  condition  or agreement to be performed or observed
                  by it under  Sect ion 10(b) (3) (i) , 10(b) (3) (ii) 10(b) (3)
                  (iii)  or  10(b)  (3) (v) of the  Participation  Agreement  or
                  Section 7, 10 (other than failure of the Lessee to cause to be
                  delivered the insurance certificates (other than a certificate
                  of the  Lessee)  described  therein)  or 11 of  this  Facility
                  Lease: or

                      (iii) the Lessee  shall  fail to  perform  or observe  any
                covenant or  agreement  to be  performed or observed by it under
                Section 10(b) (3) (viii) of the Participation Agreement and such
                failure  shall  continue  for a period  of 30 days  after  there
                shall;  have been given to the Lessee by the Lessor or the Owner
                Participant a notice specifying such failure and requiring it to
                be remedied and stating that such notice is a "Notice of Default
                hereunder: or

                      (iv) the Lessee shall fail to perform its  agreements  set
                  forth in Section 5(a) hereof; or

                      (v) the  Lessee  shall  fail to  perform  or  observe  any
                  covenant,   condition  or  agreement  (other  than  covenants,
                  conditions  or  agreements  referred to in clauses (i) through
                  (iv)  above) to be  performed  or  observed  by it under  this
                  Facility  Lease or any other  Transaction  Document,  and such
                  failure  shall  continue  for a period of 30 days after  there
                  shall have been given to the Lessee by the Lessor or the Owner
                  Participant a notice  specifying such failure and requiring it
                  to be remedied  and  stating  that such notice is a "Notice of
                  Default" hereunder: or

                


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<PAGE>

                      (vi) any representation or warranty made by the Lessee, in
                  this Facility  Lease,  any other  Transaction  Document (other
                  than  the Tax  Indemnification  Agreement)  or any  agreement,
                  document or certificate  delivered by the Lessee in connection
                  herewith or  therewith  shall prove to have been  incorrect in
                  any material respect when any such  representation or warranty
                  was made or given and shall  remain  material  and  materially
                  incorrect at the time in question; or

                      (vii) the Lessee shall  commence a voluntary case or other
                  proceeding seeking liquidation, reorganization or other relief
                  with  respect  to itself or its  debts  under any  bankruptcy,
                  insolvency  or other similar law now or hereafter in effect or
                  seeking the  appointment of a trustee,  receiver,  liquidator,
                  custodian or other similar  official of it or any  substantial
                  part of its  property,  or shall consent to any such relief or
                  to the  appointment  of or  taking of  possession  by any such
                  official in an involuntary case or other proceeding  commenced
                  against it, or shall make a general assignment for the benefit
                  of creditors,  or shall take any corporate action to authorize
                  any  of  the  foregoing;  or  an  involuntary  case  or  other
                  proceeding  shall be  commenced  against  the  Lessee  seeking
                  liquidation, reorganization or other relief with respect to it
                  or its debts under any bankruptcy, insolvency or other similar
                  law now or hereafter in effect or seeking the appointment of a
                  trustee,  receiver,  liquidator,  custodian  or other  similar
                  official of it or any  substantial  part of its property,  and
                  such   involuntary  case  or  other  proceeding  shall  remain
                  undismissed or unstayed for a period of 60  consecutive  days;
                  or

                      (viii)  final  judgment for the payment of money in excess
                  of  $l,O0O,0O0  shall be  rendered  against the Lessee and the
                  Lessee shall not have  discharged the same or provided for its
                  discharge in  accordance  with its terms or bonded the same or
                  procured a stay of execution  thereof  within 60 days from the
                  entry thereof; or

                      (ix)  (1)  a  default  by  the   Lessee   under  the  ANPP
                  Participation Agreement in consequence of


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<PAGE>


                 which the Lessee's right to receive its Generation  Entitlement
                 Share in PVNGS is suspended by the other ANPP Participants,  or
                 (2) the  giving  by any  ANPP  Participant  of a  notice  under
                 Section 23.2 (or any  comparable  successor  provision)  of the
                 ANPP Participation Agreement respecting a default thereunder by
                 the Lessee and the lapse of 20 Business Days from the giving of
                 such  notice  without  the Lessee  having  cured such  default;
                 provided,  however, that for purposes of this clause (2) if the
                 Lessee shall have,  in good faith,  disputed  the  existence or
                 nature of a default  and such  dispute  shall  have  become the
                 subject of an  arbitration  under Section 24 (or any comparable
                 successor provision) of the ANPP Participation Agreement,  such
                 20 Business Day period shall  commence on the date of the final
                 determination  of the board of  arbitrators  under such Section
                 24; or

                      (x) (1) the Lessee  shall fail to pay when due (whether by
                  scheduled maturity, required prepayment,  acceleration, demand
                  or otherwise) any Debt (which term shall mean (A) indebtedness
                  for borrowed money, (B) obligations as lessee under leases and
                  (C) obligations under direct or indirect guarantees in respect
                  of, and  obligations  (contingent or otherwise) to purchase or
                  otherwise  acquire or otherwise  to assure a creditor  against
                  loss in respect of,  indebtedness  or obligations of others of
                  the kinds referred to in clause (A) or (B) above, in each case
                  if the  principal  amount (or  equivalent)  thereof (or in the
                  case of any operating  lease,  an equivalent on the assumption
                  such  lease  were  a  lease  required  to  be  capitalized  in
                  accordance with generally accepted  accounting  principles) is
                  greater than $20,000,000  ($5,000,000 in the case of any PVNGS
                  operating  lease))  of the  Lessee,  and  such  failure  shall
                  continue after the applicable grace period, if any,  specified
                  in the agreement or instrument relating to such Debt, but only
                  it the Lessee shall have received  notice of such failure or a
                  Responsible  Officer of the Lessee shall have actual knowledge
                  of such failure;  or (2) any other default under any agreement
                  


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<PAGE>

                  or  instrument  relating to any such Debt, or any other event,
                  shall  occur and shall  continue  after the  applicable  grace
                  period, if any, specified in such agreement or instrument,  if
                  the effect of such  default or event is to  accelerate,  or to
                  permit the  acceleration  of, the  maturity of such Debt,  but
                  only if the Lessee shall have received  notice of such default
                  or event or a  Responsible  Officer of the  Lessee  shall have
                  actual knowledge of such default or event.

                  SECTION 16.  Remedies.

                  (a) Remedies. Upon the occurrence of any Event of Default and
so long as the same shall be continuing,  the Lessor may, at its option, declare
this Facility  Lease to be in default by written  notice to such effect given to
the Lessee, and may exercise one or more of the following remedies as the Lessor
in its sole discretion shall elect:

                      (i) the Lessor may,  by notice to the  Lessee,  rescind or
                  terminate this Facility Lease;

                         (ii) the Lessor may (x) demand  that the  Lessee,  and
                  thereupon the Lessee shall, return possession of the undivided
                  interest and the Real Property Interest promptly to the Lessor
                  in the manner and  condition  required  by, and  otherwise  in
                  accordance  with the  provisions of, this Facility Lease as if
                  the  Undivided  interest and the Real  Property  Interest were
                  being  returned  at the end of the Lease  Term and the  Lessor
                  shall not be liable  for the  reimbursement  of the Lessee for
                  any costs and  expenses  incurred by the Lessee in  connection
                  therewith  and (y) subject to Applicable  Law,  enter upon the
                  PVNGS Site and take immediate  possession of (to the exclusion
                  of the Lessee) the  undivided  Interest and the Real  Property
                  Interest,  by summary  proceedings  or otherwise,  all without
                  liability  to the  Lessee  for or by reason  of such  entry or
                  taking of possession, whether for the restoration of damage to
                  property caused by such taking or otherwise;

                     


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<PAGE>
                      (iii) the Lessor may sell the  Undivided  Interest and the
                  Real Property Interest, or any part thereof, together with any
                  interest of the Lessor under the Assignment and  :'assumption,
                  at public or private sale in a commercially reasonable manner,
                  as the Lessor may  determine,  free and clear of any rights of
                  the Lessee in the  Undivided  Interest  and the Real  Property
                  Interest  and  without  any duty to account to the Lessee with
                  respect  to such  action  or  inaction  or any  proceeds  with
                  respect  thereto  (except to the extent required by clause (v)
                  or (vi) below if the Lessor shall elect to exercise its rights
                  thereunder),  in which event the  Lessee's  obligation  to pay
                  Basic Rent hereunder for periods  commencing after the date of
                  such sale shall be terminated or proportionately  reduced,  as
                  the case may be (except to the extent that Basic Rent is to be
                  included in computations under clause (v) or (vi) below if the
                  Lessor shall elect to exercise its rights thereunder);

                       (iv) the  Lessor  may hold,  keep idle or lease to others
                all or any part of the Undivided  interest and the Real Property
                Interest,  as the Lessor in its sole  discretion  may determine,
                free and clear of any rights of the Lessee and  without any duty
                to account to the Lessee with respect to such action or inaction
                or for any  proceeds  with  respect to such action or  inaction,
                except  that  the  Lessee's  obligation  to pay  Basic  Rent for
                periods  commencing after the Lessee shall have been deprived of
                use of the  Undivided  Interest and the Real  Property  interest
                pursuant to this clause (iv) shall be reduced by an amount equal
                to the net proceeds, if any, received by the Lessor from leasing
                the  Undivided  Interest and the Real  Property  Interest to any
                Person other than the Lessee for the same periods or any portion
                thereof;

                       (v) except in the case of an Event of  Default  specified
                in clause (iv) of Section 15 (subject,  however, to the provisos
                to the first sentence of Section 16(c) hereof),  the Lessor may,
                whether  or  not  the  Lessor  shall  have  exercised  or  shall
                thereafter  at any time  exercise  its rights  under clause (i),
                (ii),


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<PAGE>


                 (iii) or (iv) above,  demand,  by written  notice to the Lessee
                 specifying  a payment  data which shall be a Basic Rent Payment
                 Date not  earlier  than 10 days after the date of such  notice,
                 that the Lessee pay to the Lessor,  and the Lessee shall pay to
                 the Lessor,  on the Basic Rent Payment  Date  specified in such
                 notice, as liquidated  damages for loss of a bargain and not as
                 a penalty  (in lieu of the Basic  Rent due after the Basic Rent
                 Payment  Date  specified in such  notice),  any unpaid Rent due
                 through the Basic Rent  Payment  Date  specified in such notice
                 plus whichever of the following amounts the Lessor, in its sole
                 discretion,   shall  specify  in  such  notice  (together  with
                 interest  on such  amount at the  interest  rate  specified  in
                 Section 3(b) (iii) from the Basic Rent  Payment Date  specified
                 in such notice to the date of actual payment) (and, in the case
                 of (D) below, upon receipt of such payment the Lessor shall (or
                 may  prior to the  receipt  of such  payment)  Transfer  to the
                 Lessee the Undivided Interest and the Real Property Interest):

                                (A) an amount  equal to the  excess,  if any, of
                           (1)  Casualty  Value,  computed  as of the Basic Rent
                           Payment Date  specified in such notice,  over (2) the
                           Fair Market  Rental Value of the  Undivided  Interest
                           and the Real  Property  Interest  (determined  on the
                           basis of the then actual  condition  of Unit 2) until
                           the end of the remaining useful life of Unit 2, after
                           discounting    such   Fair   Market    Rental   Value
                           semi-annually  to present  value as of the Basic Rent
                           Payment  Date  specified  in such notice at a rate of
                           10% per annum;

                                (B) an amount  equal to the  excess,  if any, of
                         (1) such Casualty  Value over (2) the Fair Market Sales
                         Value of the  Undivided  Interest and the Real Property
                         Interest  (determined  on the basis of the then  actual
                         condition  of Unit 2) as of the Basic Rent Payment Date
                         specified in such notice;



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<PAGE>


                                (C) an amount  equal to the  excess,  if any, of
                         (1) the present value as of the Basic Rent Payment Date
                         specified in such notice of all  installments  of Basic
                         Rent  until  the  end of the  Basic  Lease  Term or the
                         Renewal   Term,   as  the  case   may  be,   discounted
                         semi-annually at a rate of 10% per annum,  over (2) the
                         present value as of such Basic Rent Payment Date of the
                         Fair Market Rental Value of the Undivided  Interest and
                         the Real Property Interest  (determined on the basis of
                         the then actual  condition  of Unit 2) until the end of
                         the Basic Lease Term or the Renewal  Term,  as the case
                         may be,  discounted  semi-annually at a rate of 10% per
                         annum:
                                       or

                                (D) an  amount  equal to the  higher  of (1) the
                           Casualty  Value   (Special   Casualty  Value  if  the
                           (pound)vent  of  Default  is an  event  specified  in
                           clause (V),  (viii) or (x) (2) of Section 15 hereof),
                           computed as of the Basic Rent Payment Date  specified
                           in such notice or (2) the Fair Market  Sales Value of
                           the   Undivided   Interest  and  the  Real   Property
                           interest;

                       (vi) if the  Lessor  shall  have  sold all the  Undivided
                interest and the Real Property Interest pursuant to clause (iii)
                above, the Lessor, in lieu of exercising its rights under clause
                (v) above with  respect to the  Undivided  interest and the Real
                Property  Interest  may,  if it shall so elect,  demand that the
                Lessee pay to the Lessor and the Lessee  shall pay to the Lessor
                on the date of such sale,  as  liquidated  damages for loss of a
                bargain  and not as a  penalty  (in lieu of  Basic  Rent due for
                periods  commencing  after  the next  Basic  Rent  Payment  Date
                following  the date of such  sale),  any  unpaid  Basic Rent due
                through  such Basic Rent  Payment  Date,  plus the amount of any
                deficiency  of the  Sale  Proceeds  under  the  Casualty  Value,
                computed  as of such  Basic Rent  Payment  Date,  together  with
                interest at the interest rate  specified in Section 3(b) (iii)
                on the amount of such Rent and such  deficiency  from the date
                of such sale until the date of actual payment: or


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<PAGE>


                      (vii)  in the case of an Event  of  Default  specified  in
                clause  (iv) of Section  15, the Lessor may  demand,  by written
                notice to the Lessee  specifying  a payment  date which shall be
                not  earlier  than the date 30 days  after the last  Basic  Rent
                Payment  Date of the  Lease  Term,  that the  Lessee  pay to the
                Lessor,  and the Lessee  shall pay to the  Lessor,  on such last
                payment date,  as  liquidated  damages for loss of a bargain and
                not as a penalty,  any unpaid Rent due  through  such last Basic
                Rent  Payment  Date plus an amount (not less than zero) equal to
                the Fair Market Sales Value  (determined  without  regard to the
                obligation  of the  Lessee  under  Section  l0(b)(3)(xi)  of the
                Participation  Agreement) of the Undivided interest and the Real
                Property  Interest  (determined  on  the  basis  of  the  actual
                condition  of Unit 2)  determined  as of such  last  Basic  Rent
                Payment  Date  (together  with  interest  on such  amount at the
                interest  rate  specified  in Section  3(b)(iii)  from such last
                Basic Rent Payment Date to the date of actual  payment) and upon
                receipt of such  payment  the Lessor  shall (or may prior to the
                receipt of such  payment)  Transfer to the Lessee the  Undivided
                Interest and the Real  Property  Interest);  provided,  however,
                that the Lessor may not  exercise  the  foregoing  remedy if the
                Lessor shall have failed to Transfer the Undivided  Interest and
                the Real Property Interest to the bidder (which shall not be the
                Lessee or an Affiliate of the Lessee) that shall have  submitted
                the  highest  cash bid on or before the date on which such Event
                of Default arose excluding, however, any such cash bid which the
                Lessor or the Owner Participant  determines was not submitted in
                good  faith,  or as to which the bidder  fails to certify to the
                Lessor such  information as the Lessor or Owner  Participant may
                reasonably request in order to determine whether or not such bid
                was submitted in good faith (and the Lessor agrees that it will,
                if and to the extent so  requested by the Lessee on or after the
                


                                      -41-

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<PAGE>
                  date 90 days  preceding such last Basic Rent Payment Date, use
                  reasonable efforts (at the expense of the Lessee) for a period
                  ending on the day 90 days after  such last Basic Rent  Payment
                  Date,  to find a Person  willing  to  submit  such  cash  bid;
                  provided,  however,  that the  failure  of the Lessor to do so
                  shall not  relieve  the Lessee of its  obligations  under this
                  clause (vii)).

                    (b)  No  Release.  No  rescission  or  termination  of  this
Facility Lease,  in whole or in part, or repossession of the Undivided  Interest
or the Real Property  Interest or exercise of any remedy under  paragraph (a) of
this Section 16 shall,  except as  specifically  provided  therein,  relieve the
Lessee of any of its  liabilities and obligations  hereunder.  In addition,  the
Lessee shall be liable,  except as  otherwise  provided  above,  for any and all
unpaid Rent due  hereunder  before,  after or during the  exercise of any of the
foregoing  remedies,  including  all  reasonable  legal fees and other costs and
expenses  incurred  by the  Lessor  or the  Owner  Participant  by reason of the
occurrence of any Event of Default or the exercise of the Lessor's remedies with
respect  thereto.  At any sale of the  Undivided  Interest,  the  Real  Property
Interest or any part thereof pursuant to this Section 16, the Owner Participant,
the Lessor or the Indenture Trustee may bid for and purchase such property.

                  (c) Remedies cumulative. No remedy under paragraph (a) of this
Section 16 is  intended to be  exclusive,  but each shall be  cumulative  and in
addition to any other  remedy  provided  under such  paragraph  (a) or otherwise
available  to  the  Lessor  at  law  or  in  equity;  provided,   however,  that
notwithstanding  anything to the contrary set forth in this Facility Lease,  the
remedy set forth in section 16(a) (vii) shall be the sole and  exclusive  remedy
under this  Section 16 in the case of an Event of  Default  specified  in clause
(iv) of Section 15,  unless the Lessee is in default of its payment  obligations
under  Section  16(a)  (vii),  in which case the Lessor may  exercise  its other
remedies  under Section  16(a);  (except that the maximum  amount payable by the
Lessee  in the  event  of the  exercise  by the  Lessor  of any of the  remedies
provided  for in Section  16 (a) (v) or (vi)  shall not exceed the total  amount
payable by the Lessee  under  Section  16(a) (vii) minus the amount  provided in
subclause  (2) of  clause  (A),  (S) or (C) of such  Section  16(a) (v) , if the



                                      -42-

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<PAGE>

Lessor  elects  a  remedy  specified  in said  clause  (A) , (S) or (C) , or the
deficiency  referred to in Section  16(a)(vi),  if the Lessor  elects the remedy
specified in section 16 (a) (vi)  hereof) . No express or implied  waiver by the
Lessor of any Default or Event of Default  hereunder  shall in any way be, or be
construed  to be, a waiver  of any  future  or  subsequent  Default  or Event of
Default.  The failure or delay of the Lessor in exercising  any right granted it
hereunder upon any occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such  contingencies  or  similar  contingencies  and any  single or  partial
exercise  of any  particular  right by the Lessor  shall not exhaust the same or
constitute a waiver of any other right provided herein.  To the extent permitted
by  Applicable  Law,  the Lessee  hereby  waives  any  rights  now or  hereafter
conferred by statute or otherwise which may require the Lessor to sell, lease or
otherwise  use the  Undivided  interest or Unit 2 in  mitigation of the Lessor's
damages as set forth in paragraph  (a) of this section 16 or which may otherwise
limit or modify any of the Lessor's rights and remedies provided in this Section
16.
                  (d) Exercise of Other  Rights or Remedies.  In addition to all
other rights and remedies provided in this Section 16, the Lessor may, except to
the extent  expressly  limited by  provisions  of this Section 16,  exercise any
other  right or  remedy  that may be  available  to it under  Applicable  Law or
proceed by  appropriate  court  action to enforce the terms hereof or to recover
damages for the breach hereof.

                  (e) Special  Cure Right of Lessee.  In the event a "Notice of
Default"  is given  under  Section  15(iii),  the Lessee may, on or prior to the
occurrence of an Event of Default  resulting  therefrom,  give written notice to
the Lessor  stating that the Lessee has elected to exercise the option (the Cure
Option)  provided in this Section 16(e),  which election shall be irrevocable as
to the  Lessee.  Promptly  after the giving of such  notice,  the Lessee and the
Owner  Participant shall agree upon the Fair Market Sales Value of the Undivided
Interest and the Real Property  Interest or, if they shall be unable so to agree
within one month  after the date of the  Lessee's  notice,  such value  shall be
determined  by the  Appraisal  Procedure.  On the Basic Rent  Payment  Date next
following the date that such Fair Market sales Value shall have been determined,



                                                       -43-

6091.CHASEU2.LEASE.47:1



<PAGE>


the Lessee shall pay to the Lessor all Rent due on such Basic Rent Payment Date,
plus an amount  equal to the excess of (i) the greater of such Fair Market sales
Value and the Casualty Value  determined as of such Basic Rent Payment Date over
(ii) the unpaid  principal  amount of the Notes  Outstanding  on such date after
giving  effect to the  payment,  if any, of the  principal  installment  due and
payable on such date.  Upon  compliance in full by the Lessee with the foregoing
provisions  of  this  paragraph  (e) and  assumption  by the  Lessee  of all the
obligations  and  liabilities  of the Owner  Trustee under the Indenture and the
Notes  pursuant to Section 3.9(b) of the indenture1 the Lessor shall (so long as
no Default or Event of Default shall have occurred and be  continuing)  Transfer
the  Undivided  Interest and the Real  Property  interest to the Lessee.  If the
Lessee shall not have assumed all the  obligations  and liabilities of the Owner
Trustee under the Indenture and the Notes in accordance  with Section  3.9(b) of
the indenture,  but the Owner  Participant shall have received under Section 5.2
of the indenture all amounts  required to be paid by the Lessee pursuant to this
paragraph  (e)  (including  interest,   if  any,  thereon  pursuant  to  Section
3(b)(iii)), the Lessor shall retain the Undivided Interest and the Real Property
interest subject to the terms of this Facility Lease and Section 7(b) (4) of the
Participation Agreement; provided, however, that the obligation of the Lessee to
pay further  Basic Rent shall be reduced to an amount on each Basic Rent Payment
Date equal to the aggregate  amount of principal,  premium,  if any, and accrued
interest  then payable on all Notes then  Outstanding  and this  Facility  Lease
shall become a security agreement for all purposes of Applicable Law. The Lessee
agrees to use its best  efforts to comply  with the  conditions  respecting  its
assumption  set forth in Section  3.9(b) of the  'Indenture  and,  failing  such
assumption,  agrees to accept a transfer of the Owner Participant's right, title
and  interest  in  the  Trust  Estate  pursuant  to  Section  7(b)  (4)  of  the
Participation Agreement.

                  SECTION 17.  Notices.

                  All  communications  and notices provided for in this Facility
Lease shall be in writing and shall be given in person (with  signed  receipt of
an  officer  of the Owner  Participant  in the case of a  delivery  to the Owner
Participant)  or by means of telex,  telecopy,  or other wire  transmission,  or



                                      -44-


6091.CHASEU2.LEASE.47:1





<PAGE>

mailed by  registered  or  certified  mail,  or  delivered  by express  delivery
service,  addressed  as  provided  in  the  Participation  Agreement.  All  such
communications  and notices  given in such manner shall be effective on the date
of receipt of such communication or notice.

                  SECTION l8.  Successors and Assigns.

                  This  Facility  Lease,  including all  agreements,  covenants,
indemnities,  representations and warranties, shall be binding upon and inure to
the benefit of the Lessor and its  successors  and  permitted  assigns,  and the
Lessee and its successors and, to the extent permitted hereby, assigns.

                  SECTION 19.  Right to Perform for Lessee.

                  If the  Lessee  shall  fail to make any  payment of Rent to be
made by it, or shall fail to perform or comply with any of its other  agreements
contained  herein,  or fail to make any  payment to be made by it under any ANPP
Project  Agreement,  or shall fail to  perform  or comply  with any of its other
agreements  contained in any ANPP  Project  Agreement,  either the Lessor or the
Owner  Participant  may, but shall not be obligated to, tender such payment,  or
effect such  performance or  compliance,  and the amount of such payment and the
amount of all costs and expenses (including, without limitation,  attorneys' and
other  professionals' fees and expenses) of the Lessor or the Owned Participant,
as the case may be,  incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with interest
thereon at the Penalty Rate, shall be deemed  Supplemental  Rent, payable by the
Lessee upon demand.  In the event that the Lessor or the Owner Participant shall
cure any default by the Lessee under the ANPP Participation Agreement,  then (so
long as an Event of Default has occurred and is continuing) the Lessor, together
with each other Person contributing to such cure, shall be entitled (to the full
extent  enforceable in accordance with Applicable Law) to receive the Generation
Entitlement  Share of the Lessee  under the ANPP  Participation  Agreement  (not
limited  to Unit 2),  with each  contributor  to  receive a  percentage  of such
Generation  Entitlement  Share equal to the  percentage of  the cure contributed
thereby.





                                      -45-

6091.CHASEU2.LEASE.47:1



<PAGE>


                  SECTION 20. Additional Covenants.

                  The Lessee  agrees to comply with and to pay, as  Supplemental
Rent,  all  amounts  payable  by it under the  provisions  of  Section 13 of the
Participation  Agreement  and under the  provisions  of the Tax  Indemnification
Agreement,  which provisions are incorporated  herein by this reference as fully
as if set forth in full at this  place.  The  Lessee  agrees to comply  with its
covenants  and  agreements  set  forth  in  Sections  10(b),  14  and  16 or the
Participation  Agreement  and Articles III, IV, V and VI of the  Assignment  and
Assumption,  which  covenants and  agreements  are  incorporated  herein by this
reference as fully as if set forth in full at this place.

                 SECTION 21.  Lease of Real Property Interest.

                  Pursuant  to  the  Deed  and  the   Assignment  of  Beneficial
Interest,  the Lessee has sold to the Lessor  the Real  Property  Interest.  The
Lessor  hereby  grants to the Lessee a leasehold  interest in the Real  Property
interest,  such  leasehold  to be  coterminous  with the lease of the  Undivided
Interest  hereunder  and to be at a  rent  per  annum  equal  to the  respective
percentages of the Real Estate investment for the applicable period set forth or
derived from the  respective  percentages  of Facility Cost in clauses (i), (ii)
and (iii),  respectively,  of Section 3(a) hereof (which rent is incorporated as
part of Basic Rent payable pursuant to Section 3(a) hereof).

                  SECTION 22.  Amendments and Miscellaneous.

                  (a)  Amendments in Writing.  The terms of this Facility  Lease
may not be waived, altered, modified, amended, supplemented or terminated in any
manner  whatsoever  except by  written  instrument  signed by the Lessor and the
Lessee.

                  (b)  Survival.   (1)  All  indemnities,   representations  and
warranties contained in this Facility Lease and the other Transaction  Documents
and the  Financing  Documents  and in any  agreement,  document  or  certificate
delivered  pursuant  hereto or thereto or in  connection  herewith or  therewith
shall survive,  and continue in effect following,  the execution and delivery of
this Facility  Lease and the  expiration or other  termination  of this Facility
Lease.


                                      -46-

6091.CHASEU2.LEASE.47:1



<PAGE>


                  (2) The obligations of the Lessee to pay Supplemental Rent and
the  obligations  of the Lessee  under  Sections  5, 16, 19 and 20 hereof  shall
survive the expiration or termination of this Facility  Lease.  The extension of
any  applicable  statute of  limitations  by the Owner  Trustee,  the  Indenture
Trustee,  the  Lessee,  the  Owner  Participant,  the  Loan  Participant  or any
Indemnitee  shall not affect such survival.  The obligations of the Lessee under
Section 20 are expressly made for the benefit of, and shall be  enforceable  by,
any Indemnitee, separately or together, without declaring this Facility Lease to
be in default and  notwithstanding any assignment by the Lessor of this Facility
Lease or any of its rights  thereunder or any  disposition of all or any part of
any interest in the Undivided  Interest,  the Real Property Interest,  Unit 2 or
any other property  referred to in this Facility Lease or in this Facility Lease
or any other Transaction  Document or Financing Document.  All payments required
to be made  pursuant to Section 20 shall be made  directly  to, or as  otherwise
requested  by, the  Indemnitee  entitled  thereto upon  writ-ten  demand by such
Indemnitee.

                  (c) Severability of Provisions. Any provision of this Facility
Lease  which may be  determined  by  competent  authority  to be  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining   provisions   hereof  or  thereof,   and  any  such   prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by  Applicable  Law, the Lessee hereby waives any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.

                  (d) True  lease.  This  Facility  Lease  shall  constitute  an
agreement  of lease  and  nothing  herein or  elsewhere  shall be  construed  as
conveying  to the Lessee any right,  title or  interest  in or to the  Undivided
Interest or the Real Property Interest, except as lessee only.

                  (e)  Original  Lease.  The single  executed  original  of this
Facility  Lease  marked  "THIS  COUNTERPART  IS THE  ORIGINAL  COUNTERPART"  and
containing the receipt of the Indenture  Trustee thereon shall be the "Original"



                                      -47-

6091.CHASEU2.LEASE.47:1



<PAGE>

of this  Facility  Lease.  To the extent that this  Facility  Lease  constitutes
chattel  paper,  as such term is defined in the  Uniform  Commercial  Code as in
effect in any  applicable  jurisdiction,  no security  interest in this Facility
Lease may be created through the transfer or possession of any counterpart other
than the "Original".

                  (f) Governing  raw.  This Facility  Lease shall be governed by
and  construed in accordance  with the law of the State of New York.,  except to
the extent that pursuant to the law of the State of Arizona the law of the State
of Arizona is mandatorily applicable hereto.

                  (g)  Headings.  The  division  of  this  Facility  Lease  into
sections, the provision of a table of contents and the insertion of headings are
for  convenience  of  reference  only and shall not affect the  construction  or
interpretation of this Facility Lease..

                  (h) Concerning  the Owner  Trustee.  FNB is entering into this
Facility Lease solely as Owner Trustee under the Trust  Agreement and not in its
individual capacity.  Anything herein to the contrary  notwithstanding,  all and
each of the representations, warranties, undertakings and agreements herein made
on the  part  of the  Owner  Trustee  are  made  and  intended  not as  personal
representations,  warranties,  undertakings and agreements by or for the purpose
or with the  intention of binding FNB  personally  but are made and intended for
the  purpose  of  binding  only the Trust  Estate,  and this  Facility  Lease is
executed and delivered by the Owner Trustee solely in the exercise of the powers
expressly  conferred  upon it as  trustee  under  the  Trust  Agreement;  and no
personal  liability or  responsibility  is assumed  hereunder by or shall at any
time  be  enforceable  against  r~8 or  any  successor  in  trust  or the  Owner
Participant on account of any representation, warranty, undertaking or agreement
hereunder of the Owner Trustee,  either expressed or implied,  all such personal
liability,  if any, being expressly waived by the Lessee, except that the Lessee
or any Person claiming by, through or under it, making claim hereunder, may look
to the Trust Estate for  satisfaction  of the same and the Owner  Trustee or its
successor in trust, as applicable,  shall be personally liable for its own gross
negligence or willful  misconduct.  If a successor owner trustee is appointed in
accordance with the terms of the Trust  Agreement,  such successor owner trustee
shall,  without any further act, succeed to all the rights,  duties,  immunities



                                      -48-

6091.CHASEU2.LEASE.47:1



<PAGE>


and obligations of the Owner Trustee hereunder and the predecessor owner trustee
shall be released from all further duties and obligations hereunder.

                  (i) Disclosure.  Pursuant to Arizona Revised  Statutes Section
33-401, the beneficiary of the Trust Agreement is Chase Manhattan Realty Leasing
Corporation,  a New York corporation  whose address is One Chase Manhattan Plaza
(20th Floor), flew York, New York 10081, Attention of Leasing Administrator. The
address  of the  beneficiary  is also  therein  described.  A copy of the  Trust
Agreement is available for inspection at the offices of the Owner Trustee at 100
Federal  Street,  Boston,  Massachusetts  02110,  Attention of  Corporate  Trust
Division.

                  (j) Counterpart Execution. This Facility Lease may be executed
in any number of  counterparts  and by each of the parties  hereto or thereto on
separate  counterparts,  all such counterparts together constituting but one and
the same instrument.























                                      -49-
6091.CHASEU2.LEASE.47:1


<PAGE>


                  IN WITNESS WHEREOF, each of the parties hereto has caused this
Facility Lease to be duly executed in New York, New York by an officer thereunto
duly authorized.

                                         THE FIRST NATIONAL RANK OF BOSTON,  not
                                       in its individual capacity, but solely as
                                       Owner  Trustee  under a Trust  Agreement,
                                       dated as of December 15, 1986, with Chase
                                       Manhattan Realty Leasing Corporation

                                       By
                                           ---------------------------------
                                               Assistant Vice President




                                       PUBLIC SERVICE COMPANY OF NEW MEXICO


                                       By
                                           ---------------------------------
                                             Senior Vice President and 
                                              Chief Financial Officer





















6091.CHASEU2.LEASE.47:1


<PAGE>


State of New York    )
                     ) ss.
County of New York   )
                                       
                  The foregoing  instrument was acknowledged before me this 15th
day of  December,  1986,  by A.J.  Robison,  Senior  Vice  President  and  Chief
Financial  Officer  of  Public  Service  Company  of New  Mexico,  a New  Mexico
corporation, on behalf of the corporation.


                                            /s/ Delia T. Santiago
                                           -----------------------
                                               Notary Public
                                               Delia T. Santago
                                       Notary Public State of New York
                                               No 41-3451160
                                         Qualified In Queens County
                                      Commission Expires March 30, 1987


State of New York    )
                     ) ss.
County of New York   )



                  The foregoing  instrument was acknowledged before me this 15th
day of December, 1986, by Martin P. Henry, Assistant Vice President of The First
National  Bank of  Boston,  a  national  banking  association,  on behalf of the
banking association as owner Trustee under that certain Trust Agreement dated as
of December 15, 1986.



                                             /s/ David A. Spivak
                                            ------------------------
                                                 Notary Public

                                                David A. Spivak
                                         Notary Public, State of New York
                                                 No. 31-4693488
                                          Qualified in New York County
                                        Commission Expires March 10, 1987





6091.CHASEU2.LEASE.47:1

<PAGE>



                                                                   SCHEDULE 1
                                                                   TO FACILITY
                                                                   LEASE
                           SCHEDULE OF CASUALTY VALUES

 BASIC RENT                                             PERCENTAGE OF
PAYMENT DATE                                            FACILITY COST
------------                                            -------------

15JAN87                                                     106.53611
15JUL87                                                     105.53335

15JAN88                                                     107.07918
15JUL88                                                     106.17858

15JAN89                                                     109.42323
15JUL89                                                     108.43402

15JAN90                                                     111.01369
15JUL90                                                     109.97758

15JAN91                                                     112.00086
15JUL91                                                     110.94964

15JAN92                                                     112.38274
15JUL92                                                     111.28104

15JAN93                                                     112.14605
15JUL93                                                     110.95717

15JAN94                                                     111.21117
15JUL94                                                     109.88662

15JAN95                                                     109.49132
15JUL95                                                     108.10138

15JAN96                                                     107.43704
15JUL96                                                     106.11823

15JAN97                                                     105.42555
15JUL97                                                     104.04483

15JAN98                                                     103.23626
15JUL98                                                     101.76861

15JAN99                                                     100.82360
15JUL99                                                     99.25609

15JAN100                                                    98.15967
15JUL100                                                    96.47795

15JAN101                                                    95.22783
15JUL101                                                    93.45710

<PAGE>
                           SCHEDULE OF CASUALTY VALUES

 BASIC RENT                                             PERCENTAGE OF
PAYMENT DATE                                            FACILITY COST
------------                                            -------------

15JAN102                                                    92.07347
15JUL102                                                    90.21857

15JAN103                                                    88.71529
15JUL103                                                    86.77283

15JAN104                                                    85.15757
15JUL104                                                    83.11902

15JAN105                                                    81.38095
15JUL105                                                    79.23904

15JAN106                                                    77.36934
15JUL106                                                    75.11630

15JAN107                                                    73.10563
15JUL107                                                    70.73318

15JAN108                                                    68.57156
15JUL108                                                    66.07099

15JAN109                                                    63.74791
15JUL109                                                    61.10991

15JAN110                                                    58.61418
15JUL110                                                    55.82895

15JAN111                                                    53.14878
15JUL111                                                    50.20591

15JAN112                                                    47.32863
15JUL112                                                    44.21696

15JAN113                                                    41.12929
15JUL113                                                    37.83716

15JAN114                                                    34.52492
15JUL114                                                    31.83716

15JAN115                                                    27.48785
15JUL115                                                    23.79647

15JAN116                                                    20.00000


<PAGE>


                                                                      SCHEDULE 2
                                                                              TO
                                                                  FACILITY LEASE

                      SCHEDULE OF SPECIAL CASUALTY VALUES

BASIC RENT         PERCENTAGE OF            BASIC RENT          PERCENTAGE OF
PAYMENT DATE       FACILITY COST           PAYMENT DATE         FACILITY COST
------------       -------------           ------------         -------------

15JAN87             106.53255                15JUN90              109.50229
15FEB87             107.01607                15JUL90              109.59771
15MAR87             107.50825                15AUG90              109.69058
15APR87             106.50559                15SEP90              109.19018
15MAY87             106.87841                15OCT90              109.27162
15JUN87             105.15431                15NOV90              109.35606
15JUL87             105.50694                15DEC90              109.32859
15AUG87             105.84743
15SEP87             105.06266                15JAN91              111.52602
15OCT87             105.38322                15FEB91              111.59608
15NOV87             105.71011                15MAR91              111.66906
15DEC87             105.77597                15APR91              111.24112
                                             15MAY91              111.29506
15JAN88             107.02636                15JUN91              110.31900
15FEB88             107.28351                15JUL91              110.36054
15MAR88             107.54606                15AUG91              110.39851
15APR88             106.86252                15SEP91              109.92992
15MAY88             107.10110                15OCT91              109.95564
15JUN88             105.85414                15NOV91              109.98371
15JUL88             106.08006                15DEC91              109.92689
15AUG88             106.29372
15SEP88             105.72306                15JAN92              111.67582
15OCT88             105.92405                15FEB92              111.68749
15NOV88             106.12965                15MAR92              111.70138
15DEC88             106.16281                15APR92              111.34764
                                             15MAY92              111.34349
15JAN89             109.27545                15JUN92              110.45252
15FEB89             109.45576                15JUL92              110.43700
15MAR89             109.64037                15AUG92              110.41618
15APR89             109.04760                15SEP92              109.97484
15MAY89             109.21337                15OCT92              109.94272
15JUN89             108.06254                15NOV92              109.91229
15JUL89             108.21768                15DEC92              109.82333
15AUG89             108.35955
15SEP89             107.82054                15JAN93              111.16133
15OCT89             107.95166                15FEB93              111.11368
15NOV89             108.08639                15MAR93              111.06757
15DEC89             108.08146                15APR93              110.77365
                                             15MAY93              110.70939
15JAN90             110.72523                15JUN93              109.88905
15FEB90             110.84723                15JUL93              109.81248
15MAR90             110.97275                15AUG93              109.72935
15APR90             110.46123                15SEP93              109.30353
15MAY90             110.56836                15OCT93              109.20803


<PAGE>


                      SCHEDULE OF SPECIAL CASUALTY VALUES

BASIC RENT         PERCENTAGE OF            BASIC RENT          PERCENTAGE OF
PAYMENT DATE       FACILITY COST           PAYMENT DATE         FACILITY COST
------------       -------------           ------------         -------------

15NOV93             109.11348                15MAR97              102.43914
15DEC93             108.98371                15APR97              102.22241
                                             15MAY97              102.00569
15JAN94             109.90295                15JUN97              101.45723
15FEB94             109.78866                15JUL97              101.24050
15MAR94             109.67514                15AUG97              101.01314
15APR94             109.43114                15SEP97              100.69041
15MAY94             109.29832                15OCT97              100.46305
15JUN94             108.54183                15NOV97              100.23570
15JUL94             108.39558                15DEC97              100.00834
15AUG94             108.24139
15SEP94             107.82253                15JAN98              100.17698
15OCT94             107.65470                15FEB98               99.93844
15NOV94             107.48698                15MAR98               99.69990
15DEC94             107.30680                15APR98               99.46136
                                             15MAY98               99.22283
15JAN95             107.81390                15JUN98               98.67364
15FEB95             107.63082                15JUL98               98.43510
15MAR95             107.44774                15AUG98               98.18483
15APR95             107.25645                15SEP98               97.84920
15MAY95             107.07337                15OCT98               97.59892
15JUN95             106.40136                15NOV98               97.34865
15JUL95             106.21828                15DEC98               97.09838
15AUG95             106.02733
15SEP95             105.65088                15JAN99               97.21230
15OCT95             105.45994                15FEB99               96.94969
15NOV95             105.26899                15MAR99               96.68708
15DEC95             105.07804                15APR99               96.42447
                                             15MAY99               96.16186
15JAN96             105.34471                15JUN99               95.61030
15FEB96             105.14554                15JUL99               95.34769
15MAR96             104.94637                15AUG99               95.07212
15APR96             104.74719                15SEP99               94.72130
15MAY96             104.54802                15OCT99               94.44573
15JUN96             103.99654                15NOV99               94.17016
15JUL96             103.79737                15DEC99               93.89459
15AUG96             103.58961
15SEP96             103.27654                15JAN100              93.95063
15OCT96             102.06878                15FEB100              93.66145
15NOV96             102.86102                15MAR100              93.37227
15DEC96             102.65326                15APR100              93.08309
                                             15MAY100              92.79391
15JAN97             102.87260                15JUN100              92.23815
15FEB97             102.65587                15JUL100              91.94897


<PAGE>


                      SCHEDULE OF SPECIAL CASUALTY VALUES

BASIC RENT         PERCENTAGE OF            BASIC RENT          PERCENTAGE OF
PAYMENT DATE       FACILITY COST           PAYMENT DATE         FACILITY COST
------------       -------------           ------------         -------------

15AUG100            91.64572                 15JAN104             78.10052
15SEP100            91.27744                 15FEB104             77.72275
15OCT100            90.97585                 15MAR104             77.34498
15NOV100            90.67428                 15APR104             76.96722
15DEC100            90.37273                 15MAY104             76.58945
                                             15JUN104             76.02017
15JAN101            90.37535                 15JUL104             75.65062
15FEB101            90.06210                 15AUG104             75.26080
15MAR101            89.74885                 15SEP104             74.83520
15APR101            89.43560                 15OCT104             74.44539
15MAY101            89.12343                 15NOV104             74.05557
15JUN101            88.56778                 15DEC104             73.66576
15JUL101            88.26182
15AUG101            87.93741                 15JAN105             73.49763
15SEP101            87.55829                 15FEB105             73.09685
15OCT101            87.23403                 15MAR105             72.69607
15NOV101            86.90977                 15APR105             72.29529
15DEC101            86.58552                 15MAY105             71.89451
                                             15JUN105             71.31376
15JAN102            86.53183                 15JUL105             70.92151
15FEB102            86.19716                 15AUG105             70.50794
15MAR102            85.86248                 15SEP105             70.06087
15APR102            85.52780                 15OCT105             69.64729
15MAY102            85.19313                 15NOV105             69.23372
15JUN102            84.63866                 15DEC105             68.82015
15JUL102            84.31128
15AUG102            83.96535                 15JAN106             68.61405
15SEP102            83.57514                 15FEB106             68.18884
15OCT102            83.22921                 15MAR106             67.76363
15NOV102            82.88328                 15APR106             67.33842
15DEC102            82.53735                 15MAY106             66.91321
                                             15JUN106             66.32021
15JAN103            82.43880                 15JUL106             65.90395
15FEB103            82.08273                 15AUG106             65.46515
15MAR103            81.72665                 15SEP106             64.99524
15APR103            81.37057                 15OCT106             64.55645
15MAY103            81.01449                 15NOV106             64.11765
15JUN103            80.45596                 15DEC106             63.67885
15JUL103            80.10784
15AUG103            79.74041                 15JAN107             63.43265
15SEP103            79.33501                 15FEB107             62.98150
15OCT103            78.96758                 15MAR107             62.53034
15NOV103            78.60015                 15APR107             62.07918
15DEC103            78.23272                 15MAY107             61.62802


<PAGE>


                      SCHEDULE OF SPECIAL CASUALTY VALUES

BASIC RENT         PERCENTAGE OF            BASIC RENT          PERCENTAGE OF
PAYMENT DATE       FACILITY COST           PAYMENT DATE         FACILITY COST
------------       -------------           ------------         -------------

15JUN107            61.02195                 15NOV110             40.33502
15JUL107            60.58029                 15DEC110             39.77883
15AUG107            60.11471
15SEP107            59.62051                 15JAN111             39.34802
15OCT107            59.15492                 15FEB111             38.77615
15NOV107            58.68934                 15MAR111             38.20428
15DEC107            58.22375                 15APR111             37.63242
                                             15MAY111             37.06055
15JAN108            57.93519                 15JUN111             36.39286
15FEB108            57.45650                 15JUL111             35.83382
15MAR108            56.97781                 15AUG111             35.24363
15APR108            56.49912                 15SEP111             34.63599
15MAY108            56.02043                 15OCT111             34.04579
15JUN108            55.40040                 15NOV111             33.45560
15JUL108            54.93186                 15DEC111             32.86541
15AUG108            54.43786
15SEP108            53.91784                 15JAN112             32.38166
15OCT108            53.42383                 15FEB112             31.77483
15NOV108            52.92982                 15MAR112             31.16799
15DEC108            52.43581                 15APR112             30.56116
                                             15MAY112             29.95433
15JAN109            52.10246                 15JUN112             29.26861
15FEB109            51.59453                 15JUL112             28.67581
15MAR109            51.08660                 15AUG112             28.04955
15APR109            50.57867                 15SEP112             27.40897
15MAY109            50.07074                 15OCT112             26.78271
15JUN109            49.43582                 15NOV112             26.15644
15JUL109            48.93884                 15DEC112             25.53018
15AUG109            48.41465
15SEP109            47.86718                 15JAN113             24.99040
15OCT109            47.34299                 15FEB113             24.34648
15NOV109            46.81881                 15MAR113             23.70257
15DEC109            46.29462                 15APR113             23.05866
                                             15MAY113             22.41475
15JAN110            45.91393                 15JUN113             21.70984
15FEB110            45.37498                 15JUL113             21.08124
15MAR110            44.83603                 15AUG113             20.41669
15APR110            44.29708                 15SEP113             19.74111
15MAY110            43.75813                 15OCT113             19.07657
15JUN110            43.10734                 15NOV113             18.41202
15JUL10             42.58022                 15DEC113             17.74748
15AUG110            42.02403
15SEP110            41.44741                 15JAN114             17.14841
15OCT110            40.89121                 15FEB114             16.46511


<PAGE>


                      SCHEDULE OF SPECIAL CASUALTY VALUES

BASIC RENT         PERCENTAGE OF            BASIC RENT          PERCENTAGE OF
PAYMENT DATE       FACILITY COST           PAYMENT DATE         FACILITY COST
------------       -------------           ------------         -------------

15MAR114             15.78181
15APR114             15.09851
15MAY114             14.41521
15JUN114             13.68984
15JUL114             13.02337
15AUG114             12.31816
15SEP114             11.60536
15OCT114             10.90016
15NOV114             10.19495
15DEC114              9.48974

15JAN115              8.82800
15FEB115              8.10291
15MAR115              7.37781
15APR115              6.65272
15MAY115              5.92763
15JUN115              5.18048
15JUL115              4.47388
15AUG115              3.72551
15SEP115              2.97317
15OCT115              2.22480
15NOV115              1.47643
15DEC115              0.72805

15JAN116              0.00000




<PAGE>


                                                                      Schedule 3
                                                                              to
                                                                  Facility Lease

                         SCHEDULE OF TERMINATION VALUES

BASIC RENT                                               PERCENTAGE OF
PAYMENT DATE                                             FACILITY COST
------------                                             -------------

15JAN87                                                     106.53611
15JUL87                                                     105.53335

15JAN88                                                     107.07918
15JUL88                                                     106.17858

15JAN89                                                     109.42323
15JUL89                                                     108.43402

15JAN90                                                     111.01369
15JUL90                                                     109.97758

15JAN91                                                     112.00086
15JUL91                                                     110.94964

15JAN92                                                     112.38274
15JUL92                                                     111.28104

15JAN93                                                     112.14605
15JUL93                                                     110.95717

15JAN94                                                     111.21117
15JUL94                                                     109.88662

15JAN95                                                     109.49132
15JUL95                                                     108.10138

15JAN96                                                     107.43704
15JUL96                                                     106.11823

15JAN97                                                     105.42555
15JUL97                                                     104.04483

15JAN98                                                     103.23626
15JUL98                                                     101.76861

15JAN99                                                     100.82360
15JUL99                                                      99.25609

15JAN100                                                     98.15967
15JUL100                                                     96.47795

15JAN101                                                     95.22783
15JUL101                                                     93.45710



<PAGE>


                         SCHEDULE OF TERMINATION VALUES

BASIC RENT                                               PERCENTAGE OF
PAYMENT DATE                                             FACILITY COST
------------                                             -------------

15JAN102                                                    92.07347
15JUL102                                                    90.21857

15JAN103                                                    88.71529
15JUL103                                                    86.77283

15JAN104                                                    85.15757
15JUL104                                                    83.11902

15JAN105                                                    81.38095
15JUL105                                                    79.23904

15JAN106                                                    77.36934
15JUL106                                                    75.11630

15JAN107                                                    73.10563
15JUL107                                                    70.73318

15JAN108                                                    68.57156
15JUL108                                                    66.07099

15JAN109                                                    63.74791
15JUL109                                                    61.10991

15JAN110                                                    58.61418
15JUL110                                                    55.82895 

15JAN111                                                    53.14878
15JUL111                                                    50.20591

15JAN112                                                    47.32863
15JUL112                                                    44.21696

15JAN113                                                    41.12929
15JUL113                                                    37.83716

15JAN114                                                    34.52492
15JUL114                                                    31.03977

15JAN115                                                    27.48785
15JUL115                                                    23.79647

15JAN116                                                    20.00000

<PAGE>


                                   SCHEDULE 4
                                       to
                                 FACILITY LEASE


                       REAL PROPERTY INTEREST DESCRIPTION

                  The  Real  Property  interest  is a  (i)  .2333334%  undivided
interest in the land described in r below, a (ii) .2644444%  undivided  interest
in the rights  and  interests  described  in III  below,  and (iii) a  .2644444%
undivided interest in the rights and interests described in III below.


I.      PVNGS PLANT SITE

PARCEL NO. 1: Lot Four (4); the Southwest quarter of the Northwest quarter;  and
the West half of the Southwest quarter, all in Section Two (2), Township One (1)
South, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.

PARCEL NO. 2: All of Section  Three (3),  Township One (1) South,  Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.

PARCEL NO. 3: The East half of Section Four (4),  Township One (1) South,  Range
Six (6) West of the Gila and Salt  River  Base and  Meridian,  Maricopa  County,
Arizona.

PARCEL NO. 4: The West half of Section Twenty-six (26),  Township One (1) North,
Range  Six (6)  West of the  Gila and Salt  River  Base and  Meridian,  Maricopa
County, Arizona.

PARCEL NO. 5: Section  Twenty-seven (27),  Township One (1) North, Range Six (6)
West of the Gila and Salt River Base and  Meridian,  Maricopa  County,  Arizona;
EXCEPT the Northwest quarter of Section 27.

PARCEL NO. 6: The Southeast quarter of Section  Twenty-eight (28),  Township One
(1)  North,  Range Six (6) West of the Gila and Salt  River  Base and  Meridian,
Maricopa County,  Arizona; EXCEPT 50% of all oil, gas and other mineral deposits
and  geothermal  resources  recovered  from or  developed  on the  property,  as
reserved in instrument recorded May 10, 1974 in Docket 10647, page 136.


6091.CHASEU2.LEASE.47:1



<PAGE>


PARCEL  NO. 7: The East half of  Section  Thirty-three  (33),  Township  One (1)
North, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.

PARCEL NO. 8: All of Section Thirty-four. (34) Township One (1) Worth, Range Six
(6) West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.

PARCEL NO. 9: The West half of Section Thirty-five (35), Township One (1) North,
Range  Six (6)  West of the  Gila and Salt  River  Base and  Meridian,  Maricopa
County, Arizona.

PARCEL NO. 10: The  Southeast  quarter  of Section  Nine (9),  Township  One (1)
South, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona; EXCEPT the Northwest quarter thereof.

PARCEL NO. 11: All of Section Ten (10),  Township  One (1) South,  Range Six (6)
West of the Gila and Salt River Base and  Meridian,  Maricopa  County,  Arizona;
EXCEPT the East half of the Southeast quarter thereof; and EXCEPT the North half
of the South half of the Northwest quarter of the Northwest quarter thereof.

PARCEL NO. 12:  That part of the East half of the  Southwest  quarter of Section
Twenty-three  (23),  Township One (1) Worth,  Range Six (6) West of the Gila and
Salt  River Base and  Meridian,  Maricopa  County,  Arizona,  more  particularly
described as follows:

                  BEGINNING at the Southeast corner of the said East half of the
        Southwest  quarter of Section 23; thence West, an assumed  bearing along
        the South line of the said East half of the Southwest quarter of Section
        23, for a distance of 762.04 feet;  thence North 0 degrees 03 minutes 39
        seconds  West;  parallel  to the East  line of the said East half of the
        Southwest  quarter of Section  23, for a distance  of i946.46  feet to a
        point  on  the   South   right-of-way   line  of  the  200   foot   wide
        HASSAYAMPA-SALOME HIGHWAY, as recorded in Book 12 of Road Maps, Page 82,
        Maricopa County Recorder,  Maricopa County,  Arizona;  thence continuing
        North 0 degrees 03 minutes 39 seconds West for a distance of 234.15 feet
        to a point on the North right-of-way line of said highway;  thence South
        


                                       -2-

6091.CHASEU2.LEASE.47:1


<PAGE>

        58 degrees 43 minutes  35 seconds  East,  along said North  right-of-way
        line for a distance  of 892.17  tact to a point on the said East line of
        the East half of the  Southwest  quarter of Section 23;  thence  South 0
        degrees On minutes 39 seconds East,  along said East line for a distance
        of 234.15 feet to a point on the said South  right-of-way  line;  thence
        continuing  South 0 degrees On minutes 39 seconds East for a distance of
        1483.31 feet to the true point of beginning;
                  EXCEPT the East 305 feet of the South 305 feet thereof; and
                  EXCEPT one-half of the minerals and mineral rights and mineral
        estates  of every  kind and  nature,  as set forth in Deed  recorded  in
        Docket 11652, page 52, Maricopa County Records.

PARCEL NO. 13: The North half of the South half of the Northwest  quarter of the
Northwest  quarter of Section Ten (10),  Township  One (1) South,  Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.


II.        HASSAYAMPA PUMPING STATION AND EFFLUENT PIPELINE

                  All real property, leases, licenses, easements,  rights-of-way
and  other  property  held by  Title  USA  Company  of  Arizona  Trust  No.  530
established by that certain Trust  Agreement dated October 15, 1975, as amended,
but excluding therefrom all improvements.


III.       MISCELLANOUS REAL PROPERTY INTERESTS

                  Those  ANPP  Project   Agreements  (as  defined  in  the  AMP?
Participation  Agreement),  in  addition  to the Trust  Agreement  for Title USA
Company of Arizona Trust 530,  consisting of leases,  licenses,  easements,  and
permits, which provide land and land rights for (a) the pipeline to supply waste
water effluent to PVNGS from the 91st Avenue sewage  treatment plant serving the
Phoenix  Metropolitan area and (b) railroad access to the Nuclear Plant Site (as
defined in the ANPP Participation Agreement).







                                       -3-
6091.CHASEU2.LEASE.47:1


<PAGE>


                                   SCHEDULE 5
                                       to
                                 FACILITY LEASE


                      UNDIVIDED INTEREST DESCRIPTION


                  The Undivided  Interest is a (i) .7933333%  undivided interest
in and to the property  described  under A below and (ii) a .2644444%  undivided
interest in and to the property described in B below.

                A. Unit 2 cc the Palo Verde Nuclear  Generating Station (PVNGS),
located in Maricopa County, Arizona,  approximately 55 miles west of the City of
Phoenix,  Arizona,  and  approximately  16 miles  west of the  City of  Buckeye,
Arizona, consisting of:

        I.      Unit 2 Combustion  Engineering  "System 80"  pressurized  water 
                reactor  nuclear  steam supply  system (the NSSS).  The NSSS is
                comprised of a reactor  vessel  containing  241 fuel  assemblies
                with   approximately   100  torn  of  enriched   uranium   (fuel
                assemblies, however, are not part of Unit 2 and are not included
                in the Undivided  Interest  being sold)  two steam  generators,
                four reactor  coolant pumps and various  additional  systems and
                subsystems. The licensed thermal rating of the NSSS
                is 3800 MW.

        II.     Unit 2 GE TC6F-43, 1800 RPM tandem-compound,  six flow, reheat 
                turbine-generator   including   turbine,   generator,   moisture
                separator-reheater, exciter, controls, and auxiliary subsystems.
                The turbine-generator is conductor cooled and rated at 1,554 MVA
                at 24,000 V, 3 phase,  60 Hz, 1.5 in Hg ABS back  pressure,  and
                approximately 1,363 MW maximum gross electric output.

        III.    Unit 2 146 ft. inside diameter,steel-lined, prestressed concrete
                cylindrical  containment  building  with  a  hemispherical  dome
                designed  for 60  psig.  The  containment  building  houses  the
                reactor system.


   6091.CHASEU1.LEASE.47:1


<PAGE>


        IV.     Unit 2 auxiliary systems and equipment including engineered
                safeguards    systems,    reactor    auxiliary    systems    and
                turbine-generator auxiliary systems associated with items r, II,
                and III above,  extending to and  including  the unit 2 start-up
                transformer.

        V.      Unit 2 cooling  tower system  consisting of three (3) mechanical
                draft cooling towers, including a closed cycle circulating water
                system, make-up water systems and essential spray ponds.

        VI.     Unit 2 radioactive waste treatment system,  including liquid, 
                gaseous, and solid waste subsystems, controls,  instrumentation,
                storage, handling and shipment facilities.

        VII.    Unit  2  emergency  diesel-generator  system,  including  a  
                diesel-generator  building which contains two diesel generators1
                fuel oil. systems,  storage tanks,  control and  instrumentation
                systems and other equipment.

        VIII.   Unit 2 internal  communication  systems,  including  associated
                interconnections and computer data links.

BUT EXCLUDING:

        I.      Nuclear fuel for Unit 2, including spare fuel assemblies.

        II.     Spare Parts (Unit 2).

        III.    Transmission  facilities (including any and all facilities
                and  equipment  providing  interconnection  between  the  Unit 2
                turbine   generator  and  the  ANPP  High  Voltage   Switchyard,
                including   step-up   transformers  and  standby  equipment  and
                systems).



                                       -2-

6091.CHASEU2.LEASE.47:1


<PAGE>


        IV.     Oil and diesel fuel inventories (Unit2).

             B. All PVNGS common facilities, INCLUDING BUT NOT LIMITED TO:

        I.      Surveillance Systems, including associated radioactive 
                monitoring systems and equipment.

        II.     Water  treatment  facilities  and  transport  Systems  for 
                supply of waste water effluent.

        III.    Warehouse  and related storage facilities and equipment.

BUT EXCLUDING:

        I.      Nuclear fuel, including spare fuel assemblies.

        II.     All transmission and ANPP High Voltage Switchyard facilities.

        III.    Administration Building.

        IV.     Administration Annex Building.

        V.      Technical Support Center.

        VI.     Visitor Center.

        VII.    External communication Systems and equipment, including 
                associated interconnections and computer data links.

        VIII.   Parking lot improvements, road improvements, fencing and dikes.

        IX.     Spare parts (common facilities)

        X.      Simulator.

        XI.     Oil and diesel fuel inventories.

        XII.    Real property, beneficial interest in Title USA Company of 
                Arizona Trust No. 530, and Project Agreement interests described
                in Schedule 4.


                                       -3-
6091.CHASEU2.LEASE.47:1

<PAGE>

When Recorded, Return to: Greg R. Nielsen, Esq.
                          Snell  & Wilmer
                          3100 Valley Bank Canter
                          Phoenix, Arizona 85073

        CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENTMENT NO.1 THERETO HAVE BEEN ASSIGNED TO, AND ARE TO A SECURITY IN FAVOR OF,
CHEMICAL  BANK,  AS  INDEUTURE,  TRUSTEE UNDER A ASSIGNMENT OF RENTS DATED AS OF
DECEMBER   15,1986.   THIS  AMENDMENT  NO.  1  HAS  BEEN  EXECUTED  IN  SERVERAL
COUNTERPARTS. SEE SECTION 3(e) OF THIS AMENDMENT NO.1 FOR INFORMATION CONCERNING
THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.


THIS COUNERPART IS NOT THE ORIGINAL COUNTERPART.

================================================================================
                                 AMENDMENT NO.1
                            Dated am of April 8, 1987
                                       to
                             FACILITY LEASE (Unit 2)
                          Dated as of December 15, 1986

                                     between
                       THE FIRST NATIONAL BANK OF BOSTON,
                         not in its individual capacity,
                           but solely as Owner Trustee
                        under a Trust Agreement, dated as
                              of December 15, 1986,
                           with Chase Manhattan Realty
                              Leasing Corporation,

                                     Lessor

                                       and

                      PUBLIC SERVICE COMPANY OF NEW MEXICO,

                                     Lessee

================================================================================
Original  Facility  Lease  Recorded on December  17,  1986,  as  Instrument  No.
86-695936, in Maricopa County Recorder's Office.

================================================================================
6091.CHASEU2.LEASE.203:1.
<PAGE>


                  AMENDMENT NO. 1, dated as of April 8, 1987  (Amendment No. 1),
to the Facility Lease dated as of December 15, 1986,  between THE FIRST NATIONAL
BANK OF BOSTON, a national banking association,  not in its individual capacity1
but solely as Owner  Trustee under a Trust  Agreement,  dated as of December 15,
1986, with Chase  Manhattan  Realty Leasing  Corporation a New York  corporation
(the lessor),  and PUBUC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(the Lessee).


                                   WITNESSETH


                  WHEREAS,  the Lessee and the Lessor  have  heretofore  entered
into a Facility  Lease  dated as of  December  15,  1986 (the  Facility  Lease),
providing  for the lease by the Lessor to the Lessee of the  Undivided  Interest
and the Real Property Interest;

                  WHEREAS,  the  Lessee  and the  Lessor  desire  to  amend  the
Facility Lease as set forth in Section 2 hereof; and

                  WHEREAS, the Indenture Trustee has consented to this Amendment
No. 1 pursuant to the  Request,  Instruction  and Consent  effective on April 8,
1987;

                  NOW, THEREFORE,  in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                  SECTION 1. Definitions.

                  For  purposes  hereof,  capitalized  terms used herein and not
otherwise  defined herein or in the recitals shall have the meanings assigned to
such term in Appendix A to the Facility Lease.


6091.CHASEU2.LEASE.203:1


<PAGE>


                 SECTION 2. Amendments.

                  (a) A new  Section  8(g) of the  Facility  Lease  is  inserted
therein, to read in its entirety as follows:

                "(g)  Useful  Life.  If the Lessee  shall not  theretofore  have
        exercised its option under section 13 to purchase the Undivided Interest
        and the  Real  Property  interest,  then  (i) if the  Lessee  shall  not
        theretofore  have  exercised  its option to renew the Lease  pursuant to
        Section 12, on January 15, 2015, the Lessee shall initiate the Appraisal
        Procedure to determine the remaining  Economic  Useful Life of Unit 2 as
        of July 15, 2015 and (ii) on the Rent  Payment Date  occurring  one year
        prior to the end of the Renewal Term, if any, the Lessee shall  initiate
        the Appraisal  Procedure to determine the remaining Economic Useful Life
        of Unit 2 as of the date  six  months  prior  to the end of the  Renewal
        Term.  The  Lessee and the  Lessor  agree to use their  beet  efforts to
        ensure that such determination of remaining economic useful life is made
        no  later   than  July  15,   2015  (in  the  case  of  the  first  such
        determination)  and six months  prior to the end of the Renewal Term (in
        the case of the second such determination) "

                  (b) Section  l5(iv) of the Facility Lease is hereby amended to
read in its entirety as follows:

                (iv) (1) the Lessee  shall fail to perform  its  agreements  sat
        forth in section 5(a) hereof or (2) the remaining  Economic  Useful Life
        of Unit 2, as determined under Section 8(g) if required thereby to be so
        determined,  shall be (x) as of the date six months  prior to the end of
        the Basic Lease Term, less than five and one-half years or (y) as of the
        date six months prior to the end of the Renewal Term, three and one-half
        years or"

                                       -2-

6091.CHASEU2.LEASE.203:1




<PAGE>


                  (c)  Section  16(a)  (vii) of the  Facility  Lease  is  hereby
amended to read in its entirety as follows:

                  "(vii) in the case of an Event of Default  specified in clause
        (iv) of Section  15, the Lessor  may  demand,  by written  notice to the
        Lessee  specifying  a payment  date which shall be (A) in the case of an
        Event of Default  specified  in subclause  (1) of said clause (iv),  not
        earlier  than the date 30 days after the last Basic Rent Payment Date of
        the Lease Term, and (B), in the case of an Event of Default specified in
        subclause  (2) of said clause (iv),  the last Basic Rent payment Date of
        the Lease Term, that the Lessee pay to the Lessor,  and the Lessee shall
        pay to the Lessor, on such payment date, as liquidated  damages for loss
        of a bargain and not as a penalty, any unpaid Rent due through such last
        Basic Rent Payment Date plus an amount (not less than zero) equal to the
        Fair Market Sales Value (determined  without regard to the obligation of
        the Lessee under Section l0 (b) (3) (xi) of the Participation Agreement)
        of the Undivided Interest and the Real Property Interest  (determined on
        the basis of the actual  condition of Unit 2) determined as of such last
        Basic Rent Payment Date  (together  with  interest on such amount at the
        interest rate specified in Section 3 (b) (iii) from such last Basic Rent
        Payment  Date to the date of actual  payment)  and upon  receipt of such
        payment the Lessor  shall (or may prior to the receipt of such  payment)
        Transfer  to the Lessee the  Undivided  interest  and the Real  Property
        Interest);  provided,  however,  that the  Lessor may not  exercise  the
        foregoing  remedy  if the  Lessor  shall  have  failed to  Transfer  the
        Undivided  interest and the Real Property  interest to the bidder (which
        shall not be the Lessee or an  Affiliate  of the Lessee) that shall have
        submitted the highest cash bid on or before the date on which such Event
        of Default arose excluding,  however, any such cash bid which the Lessor
        or the owner Participant  determines was not submitted in good faith, or
        



                                                        -3-

6091.CHASEU2.LEASE.203:l


<PAGE>

        as to which the bidder  fails to certify to the Lessor such  information
        as the Lessor or owner  Participant  may reasonably  request in order to
        determine  whether or not such bid was  submitted in good faith (and the
        Lessor  agrees that it will,  if and to the extent so  requested  by the
        Lessee  on or after the date 90 days  preceding  such  last  Basic  Rent
        Payment Date, use reasonable  efforts (at the expense of the Lessee) for
        a period  ending on the day 90 days after  such last Basic Rent  Payment
        Date,  to find a Person  willing  to submit  such  cash  bid;  provided,
        however,  that the  failure of the Lessor to do so shall not relieve the
        Lessee of its obligations under this clause (vii))."

                  (d) A new  definition  is hereby  added to  Appendix  A to the
Facility Lease, to read in its entirety as follows:

                  "Decommissioning shall mean the decommissioning and retirement
        from  service of Unit 2, and the  related  possession,  maintenance  and
        disposal of  radioactive  material  used in or produced  incident to the
        possession and operation of Unit 2, including,  without limitation,  (i)
        placement and  maintenance  of Unit 2 in a state of protective  storage,
        (ii) in-place  entombment and maintenance of Unit 2, (iii) dismantlement
        of Unit 2, (iv) any other form of  decommis5ioning  and retirement  from
        service  required  by or  acceptable  to the NRC and (V) all  activities
        undertaken incident to the implementation  thereof and to the obtain-in;
        of NRC authority therefor,  including, without limitation,  maintenance,
        storage,   custody,   removal,   decontamination,   and  disposition  of
        materials,  equipment  and  fixtures,  razing  of  Unit 3,  removal  and
        disposition of debris from the PVNGS Site, and  restoration of the PVNGS
        site related to Unit 2 for unrestricted use."

                  (e) A new  definition  is hereby  added to  Appendix  A to the
Facility Lease, to read in its entirety as follows:




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<PAGE>


                  Decommissioning  Costs shall mean all costs,  liabilities  and
        expenses  relating or allocable to, or incurred in connection  with, the
        Decommissioning of Unit 2, including,  without  limitation,  (i) any and
        all costs of activities  undertaken to terminate NRC licensing authority
        and  requirements  to own,  operate  and  possess  Unit 2 and to possess
        radioactive  material used in or produced incident to the possession and
        operation  of  Unit  2r  and  (ii)  any  and  all  costs  of  activities
        undertaken,  prior to  termination  of all NRS  licensing  authority and
        requirements with respect to Unit 2 and the radioactive material used in
        or  produced  incident to the  possession  and  operation  of Unit 2, to
        possess,  maintain,  and  dispose  of  radioactive  material  used in or
        produced incident to the possession and operation of Unit 2."

                  (f) A new  definition  is hereby  added to  Appendix  A to the
Facility Lease, to read in its entirety as follows:

                  Economic Useful Life shall mean that period (commencing on the
        date as of which the determination of Economic Useful Life is to be made
        as provided in Section 8(g) of the Facility Lease and ending on the date
        upon which either of the states of affairs  described in clauses (i) and
        (ii) below ceases to apply,  or can  reasonably  be expected to cease to
        apply,  to Unit 2) during which (i) Unit 2 will be useful to, and usable
        by,  any owner or lessee  thereof as a facility  for the  generation  of
        electric power and (ii) Unit 2 is an economic and commercially practical
        facility  for the  generation  of electric  power  capable of  producing
        (after  taking  into  account  costs of capital) a  reasonable  economic
        return to the owner thereof.  For the purposes of  determinations  under
        clauses (i) and (ii) above, the following factors,  among others,  shall
        be  taken  into  account  (as  such  factors   obtain  on  the  date  of
        determination  and as such factors are reasonably  expected to obtain in
        



                                       -5-


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<PAGE>

        the future):  (a) provisions of the ANPP Project Agreements  (including,
        without  limitation,  the ANPP Participation  Agreement and the Material
        Project  Agreements (or substitutes for such Material Project Agreements
        in effect on the date of  determination));  (b) the actual condition and
        performance of Unit 2; (c) the actual  condition and performance of such
        other facilities constituting PVNGS (including,  without limitation, the
        Common  Facilities)  as are integral to the operation of Unit 2; (4) the
        actual  condition of, and access of the ANPP  Participants  to, the ANPP
        Switchyard and such other  transmission  facilities 15 are available and
        necessary  to permit the  transmission  of the  maximum  amount of power
        generated by PVNGS;  (e) the cost of  obtaining,  handling,  storing and
        disposing of nuclear fuel for Unit 2; (f) the projected coat (including,
        without  limitation,  costs  attributable  to  obligations  to fund  any
        reserve fund maintained (or funded) by licensed owners and/or lessees of
        Unit  2 to  the  extent  dedicated  to (or  attributable  to and  freely
        available   with   respect  to)  Unit  2  (the  Unit  2  Fund))  or  the
        Decommissioning or retirement from service of Unit 2 including,  without
        limitation, Decommissioning Costs (taking into account the balance (plus
        projected investment earnings thereon) of the Unit 2 Fund); (g) the cost
        of Capital Improvements to Unit 2 then planned to be made, or reasonably
        expected  to be made;  (h) the cost of  acquiring  or leasing the Unit 2
        Retained Assets; (i) the current status of all Governmental  Action with
        respect to Unit 2 (including,  without limitation, the License) required
        to permit  licensed owners and/or lessees to possess and (in the case of
        the  Operating  Agent)  to  operate  Unit 2 and  such  other  facilities
        constituting   PVNGS   (including,   without   limitation,   the  Common
        Facilities)  as are  integral  to the  operation  of Unit 2; and (j) the
        relative  cost of  producing  an amount  of  electric  power and  energy
        equivalent to the  generating  capacity of Unit 2 from other  facilities
        then  available in the region  serviced,  or  reasonably  expected to be
        serviced, by PVNGS."



                                       -6-
6091.CHASEU2.LEASE.203:1



<PAGE>

                  (e) Paragraph (B) (a) of the definition of "Acceptable Change"
set forth in Appendix A to the Facility  Lease is hereby  amended to read in its
entirety as follows:

                "(c) the amount  payable by all  licensees  of a single  nuclear
        facility in respect of such facility in any one year and with respect to
        any one "nuclear  incident"  under any deferred  premium or similar plan
        required  by  Applicable  Law shall not exceed $36  million  (subject to
        adjustment as provided in subclause (y) of the preceding clause (b))."

                 SECTION 3. Miscellaneous.

                  (a) Effective Date of Amendments.  The amendments set forth in
section 2 hereof shall be and become  effective upon the execution hereof by the
parties hereto.

                  (b)  Counterpart  Execution.  This  Amendment  No.  1  may  be
executed  in any  number of  counterpart  and by each of the  parties  hereto on
separate  counterparts;  all such counterparts shall together constitute but one
and the same instrument.

                  (c) Governing  Law. This  Amendment No. 1 has been  negotiated
and  delivered  in the  State of New  York and  shall  be  governed  by,  and be
construed in accordance  with, the laws of the State of New York,  except to the
extent that pursuant to the law of the State of Arizona such law is  mandatorily
applicable hereto.

                  (d) Disclosure.  Pursuant to Arizona Revised  Statutes Section
33-401, the beneficiary of the Trust Agreement is Chase Manhattan Realty Leasing
Corporation, a New York corporation. The address of the beneficiary is One Chase
Manhattan  Plaza,  New York,  New York 10081.  A copy of the Trust  Agreement is
available  for  inspection  at the  offices of the Owner  Trustee at 100 Federal
Street, Boston, Massachusetts 02110, Attention of Corporate Trust Division.




                                       -7-

6091.CHASEU2.LEASE.203:1


<PAGE>


                  (e)  Amendment  No. 1. The single  executed  original  of this
Amendment  No.  1 marked  THIS  COUNTERPART  IS THE  ORIGINAL  COUNTERPART"  and
containing the receipt of the Indenture  Trustee thereon shall be the "Original"
of this  Amendment  No. 1. To the extent that this  Amendment  No. 1 constitutes
chattel  paper,  as such term is defined in the  Uniform  Commercial  Code as in
effect in any applicable  jurisdiction,  no security  interest in this Amendment
No. 1 may be created or  continued  through the  transfer or  possession  of any
counterpart other than the "Original".

                                       -8-

6091.CHASEU2.LEASE.203:1




<PAGE>


                IN WITNESS  WHEREOF,  each of the parties hereto has caused this
Amendment No. 1 to Facility  raise to be duly  executed by an officer  thereunto
duly authorized.

                                       THE FIRST NATIONAL BANK OF BOSTON, not in
                                         its individual capacity,  but solely as
                                         Owner Trustee under a Trust  Agreement,
                                         dated as of  December  15,  1986,  with
                                         Chase    Manhattan    Realty    Leasing
                                         Corporation


                                       By
                                           -------------------------------
                                                 Assistant Cashier


                                       PUBLIC SERVICE COMPANY OF
                                          NEW MEXICO

                                       By
                                            ------------------------------
                                               Vice President and 
                                              Corporate Controller






















                                       -9-

6091.CHASEU2.LEASE.203:l


<PAGE>


State of New Mexico   )
                      )  ss:
County of Bernalillo  )

                  The foregoing  instrument was acknowledged  before me this 8th
day of April, 1987, by B. D. Lackey the Vice President and Corporate  Controller
of PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation,  on behalf of
the corporation.


                                                 -------------------
                                                   Notary Public


Commonwealth of Massachusetts    )
                                 )  ss:
County of Suffolk                )


                  The foregoing  instrument was acknowledged  before me this 8th
day of April,  1987,  by James E.  Mogavero,  an Assistant  Cashier of THE FIRST
NATIONAL  BANK OF  BOSTON,  a  national  banking  association,  on behalf of the
banking  association  as Owner  Trustee  under the Trust  Agreement  dated as of
December 15, 1985 with Chase Manhattan Realty Leasing Corporation.


                                                  /s/ Carol Malley
                                                 -------------------
                                                   Notary Public



                                                    CAROL MALLEY
                                                    Notary Public
                                         My commission Expires January 28,1994







609l.CHASEU2.LEASE.203:l