EXHIBIT 10.7.1


<PAGE>

                               MODIFICATION NO. 4
                                       TO
                      SAN JUAN PROJECT OPERATING AGREEMENT
                                     BETWEEN
                      PUBLIC SERVICE COMPANY OF NEW MEXICO
                                       AND
                          TUCSON ELECTRIC POWER COMPANY

         This  Modification  No. 4 to the San Juan Project  Operating  Agreement
between PUBLIC SERVICE  COMPANY OF NEW MEXICO ("New Mexico") and TUCSON ELECTRIC
POWER COMPANY ("Tucson"),  hereinafter referred to collectively as the "Parties"
or  "Participants,"  is hereby entered into and executed this 25 day of October,
1984.

         WITNESSETH:

         WHEREAS,  the Parties hereto entered into an agreement described as the
San Juan Project Operating  Agreement  effective January 1, 1973, as modified by
Modification No. 1 on May 16, 1979,  Modification No. 2 on December 31, 1983 and
Modification No. 3 on July 17, 1984 ("Operating  Agreement"),  which establishes
certain terms and conditions  relating to their participation and responsibility
in the operation of the San Juan Project;


                                      - 1 -

<PAGE>

         WHEREAS,  the Parties desire to clarify  operation and maintenance cost
responsibilities  associated  with  the San  Juan  Project  as a  result  of the
contemplated  October 31, 1984  conveyance of Tucson's San Juan Unit 3 ownership
interest  to Alamito  Company  ("Alamito")  pursuant to the  purchase  agreement
between  Tucson and Alamito dated October 1, 1984 ("San Juan Unit No. 3 Purchase
Agreement").

         NOW THEREFORE, the Parties agree that the Operating Agreement is hereby
amended as follows:

         1.0  Effective Date.  This Modification No. 4 shall become
effective immediately upon Tucson's conveyance of its San Juan Unit
3 ownership interest to Alamito.

         2.0  Amended Section 5.38.  Section 5.38 shall be amended to
read as follows:

                  5.38   PARTICIPATION   SHARE:  Each   Participant's  and  Unit
         Participant's percentage ownership in the San Juan Project as set forth
         in Section 6 of the Co-Tenancy Agreement.  3.0 New Section 7.3.2. A new
         Section 7.3.2 shall be added to Section 7, after Section 7.3.1, to read
         in its entirety as follows:

                  7.3.2 With respect to matters involving and not solely related
         to San Juan Unit 3, Tucson,  as a Participant  holding voting rights on
         the  Coordination  Committee,  shall  retain  such  voting  rights  for
         Alamito,  with the  obligation  to consult  with Alamito on all matters
         involving the San Juan Project with affect San Juan Unit 3 as set forth
         in the San Juan Unit No.

                                      - 2 -

<PAGE>

         3 Purchase Agreement.

         4.0 Amended  Section  7.7.  Section 7.7 shall be amended to read in its
entirety as follows:

                  7.7 In the event  the  Coordination  Committee  fails to reach
         agreement on a matter that has earlier been determined to relate solely
         to a  specific  San Juan  generating  unit,  which  such  committee  is
         authorized  to  determine,  approve,  or  otherwise  act  upon  after a
         reasonable opportunity to do so, then the Operating Agent (as said term
         is  defined  in this  Operating  Agreement)  shall  be  authorized  and
         obligated  to take  such  action  as in its  discretion  it deems to be
         necessary to the  successful  and proper  construction,  operation  and
         maintenance  of such unit,  pending the  resolution,  by arbitration or
         otherwise,  of any such  inability  or  failure to agree.  5.0  Amended
         Section  17.1.  Section  17.1 is  amended  to read in its  entirety  as
         follows:

                  17.1 The expense for the operation and  maintenance of the San
         Juan Project which are chargeable to FERC Accounts 426, 500 , 502, 505,
         506, 507 and 510 through 514;  556,  557A;  and 924 (when  appropriate)
         shall be apportioned  between the Participants and Unit Participants as
         follows:

                  17.1.1  Prior to the Transfer Date in accordance with the
         following percentages:

                   A.      Participants
                            1.      New Mexico - 50 percent

                                      - 3 -

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                            2.      Tucson - 50 percent
 
                  17.1.2  On and  after  Tucson's  conveyance  of its San Juan 3
         ownership  interest  to  Alamito,  in  accordance  with  the  following
         schedule:


                                      - 4 -

<PAGE>

         17.1.2.1  For  San  Juan  Units  1 and  2 and  for  all  equipment  and
facilities  directly  related to Units 1 and 2 in accordance  with the following
percentages:

          A.      Participants
                   1.      New Mexico - 50 percent
                   2.      Tucson - 50 percent

          B.      Unit Participants
                   1.      M-S-R - percent
                   2.      City of Farmington - 0 percent
                   3.      Alamito - 0 percent

                  17.1.2.2 For San Juan Unit 3 and all equipment and  facilities
         directly  related  only  to Unit 3 in  accordance  with  the  following
         percentages:

          A.      Participants
                   1.      New Mexico - 50 percent
                   2.      Tucson - 0 percent

          B.      Unit Participants
                   1.      M-S-R - 0 percent
                   2.      City of Farmington - 0 percent
                   3.      Alamito - 50 percent

                  17.1.2.3  For  San  Juan  Unit 4 and  for  all  equipment  and
         facilities  directly  related  only to Unit 4 in  accordance  with  the
         following percentages:

                   A.      Participants
                            1.      New Mexico - 62.725 percent
                            2.      Tucson - 0 percent

                                      - 5 -

<PAGE>

                   B.      Unit Participants
                            1.      M-S-R - 28.8 percent
                            2.      City of Farmington - 8.475 percent
                            3.      Alamito - 0 percent

                  17.1.2.4 For equipment and  facilities  common only to Units 1
         and 2 in accordance with the following percentages:

                   A.      Participants
                            1.      New Mexico - 50 percent
                            2.      Tucson -  50 percent

                   B.      Unit Participants
                            1.      M-S-R - 0 percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 0 percent

                  17.1.2.5 For equipment and  facilities  common only to Units 3
         and 4 in accordance with the following percentages:

                   A.      Participants
                            1.      New Mexico - 56.351 percent
                            2.      Tucson - 0 percent

                   B.      Unit Participants
                            1.      M-S-R - 14.4 percent
                            2.      City of Farmington - 4.249 percent
                            3.      Alamito - 25 percent

                  17.1.2.6  For the  Switchyard  Facilities  except as otherwise
         provided in Section 15 of the Co-Tenancy Agreement,  in accordance with
         the following percentages:


                                      - 6 -

<PAGE>

                   A.      Participants
                            1.      New Mexico - 65 percent
                            2.      Tucson - 35 percent

                   B.      Unit Participants
                            1.      M-S-R - percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 0 percent

                  17.1.2.7 For the SO2 chemical plant system,  except absorbers,
         and for the chemical laboratory,  including neutralizers, in accordance
         with the following percentages:

                   A.      Participants
                            1.      New Mexico - 53.741 percent
                            2.      Tucson - 19.8 percent
 
                   B.      Unit Participants
                            1.      M-S-R - 8.7 percent
                            2.      City of Farmington - 2.559 percent
                            3.      Alamito - 15.2 percent
 
                  17.1.2.8 Except as provided in Exhibit  III(g),  for equipment
         and facilities  common to all of the units and all project expenses not
         identifiable by unit and not otherwise listed above, in accordance with
         the following percentages:

                   A.      Participants
                            1.      New Mexico - 53.741 percent
                            2.      Tucson - 19.8 percent


                                      - 7 -

<PAGE>

                   B.      Unit Participants
                            1.      M-S-R - 8.7 percent
                            2.      City of Farmington - 2.559 percent
                            3.      Alamito - 15.2 percent

                  17.1.3 In the event of a shutdown  of either of Units 1 and/or
         2 of the San Juan Project, the expenses incurred in connection with the
         shutdown  (including but not limited to removal,  salvage,  cleanup and
         protection   service)   shall  be  equally   apportioned   between  the
         Participants. In the event of a shutdown of Unit 3, said expenses shall
         be allocated as set forth in paragraph  17.1.2.2 above. In the event of
         a shutdown of Unit 4, said expenses  shall be allocated as set forth in
         paragraph 17.1.2.3 above.  Expenses which are attributable to equipment
         and  facilities  common to more than one Unit shall be  apportioned  in
         accordance with paragraph 17.1.2.  6.0 Amended Exhibit III. Exhibit III
         (a-g)  shall  be  amended  to  read in its  entirety  as  shown  on the
         attached.

         7.0 Amended  Section  31.10.  Section 31.10 shall be amended to read in
its entirety as follows:

                  31.10  Except as modified by the provisions set forth in
         Modification No. 4, all of the terms and conditions of this
         Operating Agreement, effective as of December 21, 1973, as
         modified by Modification No. 1 as of May 16, 1979,
         modification No. 2 as of December 31, 1983, and Modification
         No. 3 as of July 17, 1984, shall remain in full force and
         effect.

                                      - 8 -

<PAGE>

         IN WITNESS  WHEREOF,  the Parties hereto have caused this  Modification
No. 4 to the Operating Agreement to be executed this 25 day of October , 1984.

                                        PUBLIC SERVICE COMPANY OF NEW MEXICO



Attest:                                 By:      /S/ J. L. Wilkins
                                             -------------------------------
/S/ D. E. Peckham                       Its:     Senior Vice President
-----------------------
Secretary


                                        TUCSON ELECTRIC POWER COMPANY


Attest:                                 By:      /S/
                                             -------------------------------
/S/ Jean E. Kettlewell                  Its:     Executive Vice President
-----------------------


STATE OF NEW MEXICO )
                    ) ss.
COUNTY OF BERNALILLO)



         The foregoing  instrument was  acknowledged  before me this 25th day of
October , 1984,  by J. L.  Wilkins,  Senior  Vice  President  of Public  Service
Company of New Mexico, a New Mexico corporation, on behalf of said corporation.



                                            /S/ Sherry Leeson
                                            --------------------- 
                                            Notary Public


My Commission Expires:

    July 1, 1988


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<PAGE>

STATE OF ARIZONA)
                ) ss.
COUNTY OF PIMA  )

         The foregoing  instrument was  acknowledged  before me this 22nd day of
October,  1984, by Einar Greve, of Tucson  Electric,  Power Company,  an Arizona
corporation.

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

My Commission Expires:

       4/14/87


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<PAGE>

                                 Exhibit III(a)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 1

                         Operation and Maintenance Costs

                   NewMexico - 50%; Tucson - 50%; M-S-R - 0%;
                      City of Farmington - 0%; Alamito - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler, including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Start-up, Unit Auxiliary, and SO2 Scrubber Transformers

11.      Bottom Ash System (up to but not including Dewatering Tank or
         Ash Water Pump Building and Equipment)

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System

15.      Emergency Diesel Generator

16.      Electrical and Control Systems

17.      SSR Protection System

18.      Unit Specific Pumps for all Air Systems, Chemical Feed
         Systems, and Hydrogen

                                     - 11 -

<PAGE>

                                 Exhibit III(b)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 2

                         Operation and Maintenance Costs

                   NewMexico - 50%; Tucson - 50%; M-S-R - 0%;
                      City of Farmington - 0%; Alamito - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler, including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Start-up, Unit Auxiliary, and SO2 Scrubber Transformers

11.      Bottom Ash System (up to but not including Dewatering Tank or
         Ash Water Pump Building and Equipment)

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System

15.      Emergency Diesel Generator

16.      Electrical and Control Systems

17.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen


                                     - 12 -

<PAGE>

                                 Exhibit III(c)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 3

                         Operation and Maintenance Costs

                   New Mexico - 50%; Tucson - 0%; M-S-R - 0%;
                     City of Farmington - 0%; Alamito - 50%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler, including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Unit Auxiliary 3A and 3B Transformers

11.      Bottom Ash System including:  Hopper, Dewatering Tank,
         Settling Tank, Surge Tank, and Pump House

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System

15.      Emergency Diesel Generator

16.      Electrical and Control Systems

17.      Fuel Oil Ignitor Heaters and Unit Specific Piping



                                     - 13 -

<PAGE>

                                 Exhibit III(c)
                                   (Continued)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 3

                         Operation and Maintenance Costs

                   New Mexico - 50%; Tucson - 0%; M-S-R - 0%;
                     City of Farmington - 0%; Alamito - 50%



18.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen

19.      SSR Protection System


                                     - 14 -

<PAGE>

                                 Exhibit III(d)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 4

                         Operation and Maintenance Costs

                   New Mexico - 62.725%; Tucson - 0%; M-S-R -
                   28.8%; City of Farmington - 8.475%; Alamito - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler including:  Air Heaters, Pulverizers, Bunkers and
         Feeders

 5.      Forced Draft Fans & Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Unit Auxiliary 4A and 4B Transformers

11.      Bottom Ash System including Hopper, Dewatering Tank, Settling
         Tank, Surge Tank, and Pump House

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System

15.      Emergency Diesel Generator

16.      Electrical and Control Systems



                                     - 15 -

<PAGE>

                                 Exhibit III(d)
                                   (Continued)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 4

                         Operation and Maintenance Costs

                   New Mexico - 62.725%; Tucson - 0%; M-S-R -
                   28.8%; City of Farmington - 8.475%; Alamito - 0%


17.      Fuel Oil Ignitor Heaters and Unit Specific Piping

18.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen


                                     - 16 -

<PAGE>


                                 Exhibit III(e)

                            FACILITIES AND EQUIPMENT
                       SPECIFIC TO SAN JUAN UNITS 1 AND 2

                         Operation and Maintenance Costs

                   NewMexico - 50%; Tucson - 50%; M-S-R - 0%;
                      City of Farmington - 0%; Alamito - 0%


 1.      Bearing Cooling Water System, except Unit Piping

 2.      Bottom Ash Dewatering Facility, including:  Dewatering Tank,
         Settling Tank, Surge Tank, Storage Tank, and Pump House

 3.      Demineralizer System including:  Clarifier, Storage Tanks,
         and Sump Pumps

 4.      Fuel Oil System (No. 2 Oil for Ingition and Flame
         Stabilization)

 5.      Instrument Air System, except Unit Piping

 6.      Chemical Feed System, except Unit Piping

          a.      Condensate and Feedwater System
          b.      Boiler
          c.      Bearing Coding Water System
          d.      Cooling Tower Systems
          e.      Chlorination System

 7.      Plant Air System, except Unit Piping

 8.      Sootblowing Air System, except Unit Piping

 9.      Hydrogen Storage System, except Unit Piping

10.      Coal Tripper System including Dust Collection System

11.      Turbine Lube Oil Storage and Transfer System

12.      Control Room, Equipment Rooms, and Associated HVAC System

13.      SO2 Back-up Scrubber - Absorber Transformer

14.      Turbine Crane South of Column Line 12

15.      Fuel Oil, Ash, and Water Pipe Racks

16.      Boiler Fill System

17.      SAR Multiplexer Control System


                                     - 17 -

<PAGE>

                                 Exhibit III(f)

                            FACILITIES AND EQUIPMENT
                        COMMON TO SAN JUAN UNITS 3 AND 4

                         Operation and Maintenance Costs

                    NewMexico - 56.351%; Tucson - 0%; M-S-R -
                   14.4%; City of Farmington - 4.249%; Alamito - 25%


 1.      Bearing Cooling Water System, except Unit Piping

 2.      Demineralizer System including:  Sump Pumps, Filter Beds and
         Storage Tanks

 3.      Fuel Oil System (No. 6 Oil for Ignition and Flame
         Stabilization, except Ignitor Heaters and Unit Specific
         Piping)

 4.      Instrument Air System, except Unit Piping

 5.      Chemical Feed System, except Unit Piping

          a.      Condensate & Feedwater System
          b.      Boiler
          c.      Bearing Cooling Water System
          d.      Cooling Tower System
          e.      Chlorination System

 6.      Plant Air System, except Unit Piping

 7.      Sootblowing Air System, except Unit Piping

 8.      Start-Up Transformers and Iso-Phase Bus to Units 3 and 4
         Switchgear

 9.      Hydrogen Storage System, except Unit Piping

10.      Coal Tripper System including Dust Collection Systems

11.      Turbine Lube Oil Storage and Transfer System

12.      Control Room, Equipment Rooms, and Associated HVAC System

13.      Boiler Fill System

14.      Auxiliary Cooling Systems including Auxiliary Cooling Tower
         No. 1 and Pumps, but excepting No. 4 Tower Pumps and Piping
         which is Unit Specific

                                     - 18 -

<PAGE>
                                 Exhibit III(f)
                                   (Continued)

                            FACILITIES AND EQUIPMENT
                      COMMON TO ALL SAN JUAN UNITS 3 AND 4

                         Operation and Maintenance Costs

                    NewMexico - 56.351%; Tucson - 0%; M-S-R -
                  14.4% City of Farmington - 4.249%; Alamito - 25%


15.      CO2 Storage System, except Unit Piping

16.      Start-Up Boiler Feed Pump, except Unit Piping

17.      Turbine Bay Crane North of Column Line 12

18.      Fuel Oil, Ash, and Water Pipe Racks

19.      Fire Water Booster and Jockey Pumps

20.      Halon Fire Protection System

21.      Cooling Tower Multiplex Control System


                                     - 19 -

<PAGE>

                                 Exhibit III(g)

                            FACILITIES AND EQUIPMENT
                             COMMON TO ALL SAN UNITS

                         Operation and Maintenance Costs

                  New Mexico - 53.741%; Tucson - 19.8%; M-S-R -
                   8.7% City of Farmington - 2.559; Alamito - 15.2%


 1.      River and Raw Water System including:

          a.      Diversion and intake structures, including all equipment
                  and pump building

          b.      Raw water line to reservoir

          c.      Reservoir, pump building, and all equipment

          d.      Raw water lines to plant yard

          e.      All above and underground fire protection system to each
                  vendor supplied fire protection system

 2.      Auxiliary boiler

 3.      SO2 System Chemical Plant, except Absorbers

          a.      Double effect evaporator train systems

          b.      Fly ash filter system

          c.      Absorber product and feed tanks

          d.      Condensate collection, storage, and transfer systems

          e.      Soda ash storage, mixing, and distribution systems

          f.      Sulfur plant

          g.      Sulfate purge system including:  crystallizers,
                  centrifuges, evaporators, and salt cake system

          h.      Sulfuric acid plant system including:  storage tanks and
                  load out system

          i.      Auxiliary No. 2 cooling tower, pumps, and systems

 4.      Spare Main Transformer 345/24 kV, for all Units

 5.      Maintenance, Office, and Warehousing Facilities

 6.      Chemical Laboratory



                                     - 20 -

<PAGE>

                                 Exhibit III(g)
                                   (Continued)

                            FACILITIES AND EQUIPMENT
                             COMMON TO ALL SAN UNITS

                         Operation and Maintenance Costs

                  New Mexico - 53.741%; Tucson - 19.8%; M-S-R -
                   8.7% City of Farmington - 2.559; Alamito - 15.2%


 7.      Coal and Ash Handling Control Facilities

 8.      Roads and Grounds Such as Fencing, Yard Lighting, Guard
         Facilities, Drainage, and Dikes

 9.      Potable Water System

10.      Environmental Monitoring including:  Air, Water, and Ground,
         excluding Stack Monitoring Systems

11.      Transportation such as trucks, cars, and dozers (not otherwise
         charged)

12.      Water Management System

          a.      Wastewater Recovery System - Northside

                  (1)      Neutralization system including:  premix tanks,
                           neutralization tank, clarifier/thickener, and
                           pumps.

                  (2)      Reverse osmosis system including line/soda
                           softening clarifier system

                  (3)      Brine concentrator Nos. 4 and 5

                  (4)      Centrifuge dewatering system

                  (5)      Effluent Ppond No. 3 and pump system

                  (6)      North evaporation ponds 1, 2, and 3

          b.      SO2 Waste Treatment System - Southside

                  (1)      Effluent ponds 1A, 1B, 2 and pumping system
                  (2)      Premix tank and clarifier system
                  (3)      Oxidation towers
                  (4)      Brine concentrator Nos. 1, 2, and 3
                  (5)      Centrifuge dewatering system
                  (6)      South evaporation pond Nos. 1, 2, 3, 4, and 5

          c.      Data Acquisition System

          d.      Plant Sludge Pit

                                     - 21 -

<PAGE>

                                 Exhibit III(g)

                            FACILITIES AND EQUIPMENT
                             COMMON TO ALL SAN UNITS

                         Operation and Maintenance Costs

                  New Mexico - 53.741%; Tucson - 19.8%; M-S-R -
                   8.7% City of Farmington - 2.559; Alamito - 15.2%


13.      Coal Handling Equipment - All equipment from all reclaim hoppers ending
         at the  chutes  to  the  tripper  conveyors.  This  includes:  hoppers,
         feeders, feeder belts, reclaim conveyors, plant conveyors, belt scales,
         fire protection systems, dust suppression systems, magnetic separators,
         all electrical and controls, and heating and ventilation systems.

14.      Maintenance Bay Facilities including:  Bay Bridge Crane, all
         Offices, and Support Facilities

15.      Sewage Treatment Facilities



                                     - 22 -

<PAGE>

                                 EXHIBIT 10.7.2


<PAGE>

                               MODIFICATION NO. 5
                                       TO
                      SAN JUAN PROJECT OPERATING AGREEMENT
                                     BETWEEN
                      PUBLIC SERVICE COMPANY OF NEW MEXICO
                                       AND
                          TUCSON ELECTRIC POWER COMPANY

         This  Modification  No. 5 to the San Juan Project  Operating  Agreement
between PUBLIC SERVICE  COMPANY OF NEW MEXICO ("New Mexico") and TUCSON ELECTRIC
POWER COMPANY ("Tucson"),  hereinafter referred to collectively as the "Parties"
or  "Participants,"  is hereby  entered  into and  executed as of the 1st day of
July, 1985.

         WITNESSETH:

         WHEREAS,  the Parties  entered into an  agreement  described as the San
Juan  Project  Operating  Agreement  effective  January 1, 1973,  as modified by
Modification  No. 1 on May 16,  1979,  Modification  No. 2 on December 31, 1983,
Modification  No. 3 on July 17, 1984, and Modification No. 4 on October 25, 1984
("Operating Agreement"), which establishes certain terms and conditions relating
to their  participation  and  responsibility  in the  operation  of the San Juan
Project; and



                                      - 1 -

<PAGE>

         WHEREAS,  on December 28, 1984, New Mexico and the Incorporated  County
of Los Alamos,  New Mexico  ("Los Alamos  County")  entered into the Amended and
Restated San Juan Unit 4 Purchase and  Participation  Agreement  ("County PPA"),
whereby  Los Alamos  County  agreed to purchase  from New Mexico a 7.20  percent
undivided ownership interest in Unit 4; and

         WHEREAS,  the County  provides,  among  other  things,  that Los Alamos
County,  upon closing of the  transaction  provided for in the County PPA,  will
have the voting rights and obligations of a Unit Participant on San Juan Project
Committees  as  said  rights  and  obligations  are  set  forth  in the  Project
Agreement; and

         WHEREAS,  New  Mexico  and  Tucson  desire to  clarify  the  rights and
responsibilities  of Participants and Unit  Participants in the San Juan Project
as a result of Los Alamos County's purchase of a 7.20 percent undivided interest
in Unit 4 pursuant to the County PPA.

         NOW THEREFORE, the Parties agree that the Operating Agreement is hereby
amended as follows:

         1.0 Effective  Date.  This  Modification  No. 5 shall become  effective
immediately upon the closing of Los Alamos County's purchase of the 7.20 percent
undivided interest in Unit 4 pursuant to the County PPA,  currently  anticipated
to be July 1, 1985.

                                      - 2 -

<PAGE>

         2.0 New Section  7.3.3. A new Section 7.3.3 shall be added to Section 7
to read in its entirety as follows:

                  7.3.3 With respect to matters involving and not solely related
         to Unit 4, New Mexico will in good faith  solicit the views of the City
         of Farmington  and Los Alamos County on matters  involving the San Juan
         Project which affect Unit 4.

         3.0 Amended Section 17.1.  Section 17.1 shall be amended to read in its
entirety as follows:

                  17.1 The expenses for the operation and maintenance of the San
         Juan Project which are  chargeable to FERC Accounts 426, 500, 502, 505,
         506, 507, and 510 through 514; 556,  557A;  and 924 (when  appropriate)
         shall be apportioned among the Participants and Unit  Participants,  as
         follows:

                  17.1.1  Prior to the Transfer Date in accordance with the
         following percentages:

                   A.      Participants

                            1.      New Mexico - 50 percent
                            2.      Tucson - 50 percent



                                      - 3 -

<PAGE>

                  17.1.2 On and after Los Alamos  County's  purchase of the 7.20
         percent  undivided  interest  in Unit 4 pursuant  to the County PPA, in
         accordance with the following percentages:

                  17.1.2.1  For  Units  1  and  2  and  for  all  equipment  and
         facilities  directly  related to Units 1 and 2 in  accordance  with the
         following percentages:

                   A.      Participants

                            1.      New Mexico - 50 percent
                            2.      Tucson - 50 percent

                   B.      Unit Participants

                            1.      M-S-R - 0 percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 0 percent
                            4.      Los Alamos County - 0 percent



                                      - 4 -

<PAGE>

                  17.1.2.2 For Unit 3 and all equipment and facilities  directly
         related only to Unit 3 in accordance with the following percentages:

                   A.      Participants

                            1.      New Mexico - 50 percent
                            2.      Tucson - 0 percent

                   B.      Unit Participants

                            1.      M-S-R - 0 percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 50 percent
                            4.      Los Alamos County - 0 percent

                  17.1.2.3  For  Unit 4 and for  all  equipment  and  facilities
         directly  related  only  to Unit 4 in  accordance  with  the  following
         percentages:

                   A.      Participants

                            1.      New Mexico - 55.525 percent
                            2.      Tucson - 0 percent



                                      - 5 -

<PAGE>

                   B.      Unit Participants

                            1.      M-S-R - 28.8 percent
                            2.      City of Farmington - 8.475 percent
                            3.      Alamito - 0 percent
                            4.      Los Alamos County - 7.20 percent

                  17.1.2.4 For equipment and  facilities  common only to Units 1
         and 2, in accordance with the following percentages:

                   A.      Participants

                            1.      New Mexico - 50 percent
                            2.      Tucson -  50 percent

                   B.      Unit Participants

                            1.      M-S-R - 0 percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 0 percent
                            4.      Los Alamos County - 0 percent



                                      - 6 -

<PAGE>

                  17.1.2.5 For equipment and  facilities  common only to Units 3
         and 4, in accordance with the following percentages:

                   A.      Participants

                            1.      New Mexico - 52.739 percent
                            2.      Tucson - 0 percent

                   B.      Unit Participants

                            1.      M-S-R - 14.4 percent
                            2.      City of Farmington - 4.249 percent
                            3.      Alamito - 25 percent
                            4.      Los Alamos County - 3.612 percent

                  17.1.2.6  For the  Switchyard  Facilities  except as otherwise
         provided in Section 15 of the Co-Tenancy Agreement,  in accordance with
         the following percentages:

                   A.      Participants

                            1.      New Mexico - 65 percent
                            2.      Tucson - 35 percent



                                      - 7 -

<PAGE>

                   B.      Unit Participants

                            1.      M-S-R - 0 percent
                            2.      City of Farmington - 0 percent
                            3.      Alamito - 0 percent
                            4.      Los Alamos County - 0 percent

                  17.1.2.7 For the SO2 chemical plant system,  except absorbers,
         and for the chemical laboratory,  including neutralizers, in accordance
         with the following percentages:

                   A.      Participants

                            1.      New Mexico - 51.566 percent
                            2.      Tucson - 19.8 percent

                   B.      Unit Participants
                            1.      M-S-R - 8.7 percent
                            2.      City of Farmington - 2.559 percent
                            3.      Alamito - 15.2 percent
                            4.      Los Alamos County - 2.175 percent

                  17.1.2.8 Except as provided in Exhibit  III(g),  for equipment
         and facilities common to all of the units, and all Project expenses not
         identifiable by unit and not otherwise listed above, in accordance with
         the following percentages:



                                      - 8 -

<PAGE>

                   A.      Participants

                   1.      New Mexico - 51.566 percent
                   2.      Tucson - 19.8 percent

                   B.      Unit Participants

                            1.      M-S-R - 8.7 percent
                            2.      City of Farmington - 2.559 percent
                            3.      Alamito - 15.2 percent
                            4.      Los Alamos County - 2.175 percent

                  17.1.3 In the  event of a  shutdown  of any  either of Units 1
         and/or  2, the  expenses  incurred  in  connection  with  the  shutdown
         (including but not limited to removal, salvage, cleanup, and protection
         service) shall be equally apportioned between the Participants.  In the
         event of a shutdown of Unit 3, said expenses  shall be allocated as set
         forth in Paragraph  17.1.2.2  above. In the event of a shutdown of Unit
         4, said expenses shall be allocated as set forth in Paragraph 17.1.2.3.
         Expenses which are  attributable to equipment and facilities  common to
         more than one unit shall be  apportioned  in accordance  with paragraph
         17.1.2.

         4.0 Amended Exhibit III.  Exhibit III (a-i) shall be amended to read in
its entirety as shown on the attached.



                                      - 9 -

<PAGE>

         5.0 Amended  Section  31.10.  Section 31.10 shall be amended to read in
its entirety as follows:

                  31.10  Except  as  modified  by the  provisions  set  forth in
         Modification  No. 5, all of the terms and  conditions  of the Operating
         Agreement, effective as of January 1, 1973, as modified by Modification
         No.  1 on May 16,  1979,  Modification  No.  2 on  December  31,  1983,
         Modification  No. 3 on July 17, 1984, and Modification No. 4 on October
         25, 1984, shall remain in full force and effect.

         6.0  Amended  Section  32.  Section  32 shall be amended to read in its
entirety as follows:

                  32.0  RECOGNITION OF M-S-R , THE CITY OF  FARMINGTON,  ALAMITO
         AND LOS ALAMOS COUNTY ACKNOWLEDGEMENT.

                  32.1 The Parties recognize that M-S-R, the City of Farmington,
         Alamito,  and Los  Alamos  County,  each  has  acknowledged  that it is
         familiar with the Project  Agreements as amended between New Mexico and
         Tucson  and  such  agreements  govern  the  activities  of the San Juan
         Project.  Where a specific  provision of the EPPA, the Farmington PAPA,
         or the County PPA is in conflict  with the  provision in one or more of
         the Project  Agreements,  then (a) as between New Mexico and M-S-R, the
         provisions of the EPPA shall govern,  all as provided in Section 5.2 of
         such EPPA,  and (b) as between  New Mexico and the City of  Farmington,


                                     - 10 -

<PAGE>

         the provisions of the Farmington  PAPAshall govern,  all as provided in
         Section 8.2 of the  Farmington  PAPA, and (c) as between New Mexico and
         Los Alamos County,  the provisions of the County PPA shall govern,  all
         as provided in Section 5.2 of the County PPA. "EPPA" shall mean the San
         Juan Unit 4 Early Purchase and Participation  Agreement entered into by
         New Mexico and M-S-R on  September  26, 1983.  "Farmington  PAPA" shall
         mean the San Juan Unit 4 Purchase Agreement and Participation Agreement
         entered into by New Mexico and the City of  Farmington  on November 17,
         1981.  "County PPA" shall mean the Amended and Restated San Juan Unit 4
         Purchase and Participation Agreement entered into by New Mexico and Los
         Alamos County on December 28, 1984.

         IN WITNESS  WHEREOF,  the Parties hereto have caused this  Modification
No. 5 to the Operating Agreement to be executed as of the 1st day of July, 1985.



                                     - 11 -

<PAGE>


                                      PUBLIC SERVICE COMPANY OF NEW MEXICO


Attest:                               By:      /S/ J. L. Wilkins
                                           -------------------------------
/S/ M. Mason-Plunkett                 Its:     Senior Vice President,
-------------------------                        Power Supply
Secretary                           
                         


                                      TUCSON ELECTRIC POWER COMPANY


Attest:                               By:      /S/
                                           -------------------------------
/S/                                   Its:     President
-------------------------
Assistant Secretary



STATE OF NEW MEXICO
                            ss.
COUNTY OF BERNALILLO


         The foregoing  instrument was  acknowledged  before me this 24th day of
June , 1985, by J. L. Wilkins, a Senior Vice President of Public Service Company
of New Mexico, a New Mexico corporation, on behalf of said corporation.


                                                     /S/ Sherry Leeson
                                                     --------------------
                                                     Notary Public

My Commission Expires:

    July 1, 1988



STATE OF ARIZONA)
                )       ss.
COUNTY OF PIMA  )


         The foregoing  instrument was  acknowledged  before me this 14th day of
June , 1985, by Einar Greve , an Arizona corporation.

                                                     /S/
                                                     --------------------
                                                     Notary Public

My Commission Expires:

   January 9, 1987

                                     - 12 -

<PAGE>

                                 Exhibit III(a)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 1

                         Operation and Maintenance Costs

                          New Mexico - 50% Tucson - 50%
                       M-S-R - 0% City of Farmington - 0%
                       Alamito - 0% Los Alamos County - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Start-up, Unit Auxiliary, and SO2 Scrubber Transformers

11.      Bottom Ash System (Up to but not including Dewatering Tank or
         Ash Water Pump Building and Equipment.)

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers,  Scrubbers,  Transfer Pumps,  Booster Fans, and Flue Gas
         Reheat  System   including   the   650-pound   Reheat  Steam  Line  and
         Desuperheater  from the Plant  Main Steam  Line but not  including  the
         165-pound Control Valve and Branch Line to the Chemical Plant.

15.      Emergency Diesel Generator



                                      - 1 -

<PAGE>
                                 Exhibit III(a)
                                   (continued)


16.      Electrical and Control Systems

17.      SSR Protection System

18.      Unit Specific Piping for All Air Systems, Chemical Feed
         Systems, and Hydrogen

                                      - 2 -

<PAGE>

                                 Exhibit III(b)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 2

                         Operation and Maintenance Costs

                          New Mexico - 50% Tucson - 50%
                       M-S-R - 0% City of Farmington - 0%
                       Alamito - 0% Los Alamos County - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Start-up, Unit Auxiliary, and SO2 Scrubber Transformers

11.      Bottom Ash System (Up to but not including Dewatering Tank or
         Ash Water Pump building and equipment.)

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System including the 650-pound Reheat Steam
         Line and Desuperheater from the Plant Main Steam Line but not
         including the 165-pound Control Valve and Branch Line to the
         Chemical Plant

15.      Emergency Diesel Generator



                                      - 3 -

<PAGE>
                                 Exhibit III(b)
                                   (continued)


16.      Electrical and Control Systems

17.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen


                                      - 4 -

<PAGE>

                                 Exhibit III(c)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 3

                         Operation and Maintenance Costs

                          New Mexico - 50% Tucson - 0%
                       M-S-R - 0% City of Farmington - 0%
                      Alamito - 50% Los Alamos County - 0%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Unit Auxiliary 3A and 3B Transformers

11.      Bottom Ash System including:  Hopper, Dewatering Tank,
         Settling Tank, Surge Tank, and Pump House

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System including the Reheat Steam Line from
         the Auxiliary Steam Header

15.      Emergency Diesel Generator

16.      Electrical and Control Systems



                                      - 5 -

<PAGE>
                                 Exhibit III(c)
                                   (continued)


17.      Fuel Oil Ignitor Heaters and Unit Specific Piping

18.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen

19.      SSR Protection System

20.      Auxiliary Steam Header Piping System:

          a.      Including the Unit Specific Branch Line to the Reheat
                  System

          b.      Not included is the Branch Line to the Chemical Plant


                                      - 6 -

<PAGE>

                                 Exhibit III(d)

                            FACILITIES AND EQUIPMENT
                         SPECIFIC TO SAN JUAN UNIT NO. 4

                         Operation and Maintenance Costs

                        New Mexico - 55.525% Tucson - 0%
                    M-S-R - 28.8% City of Farmington - 8.475%
                     Alamito - 0% Los Alamos County - 7.20%


 1.      Turbine Generator

 2.      Condenser

 3.      Condensate and Feedwater System

          a.      Condensate Pumps
          b.      Feedwater Heaters
          c.      Boiler Feed Pumps
          d.      Storage Tanks

 4.      Boiler including:  Air Heaters, Pulverizers, Bunkers, and
         Feeders

 5.      Forced Draft Fans and Primary Air Fans

 6.      Precipitator

 7.      Stack and Stack Monitoring System

 8.      Cooling Tower

 9.      Circulating Water Pumps

10.      Main, Unit Auxiliary 4A and 4B Transformers

11.      Bottom Ash System including:  Hopper, Dewatering Tank,
         Settling Tank, Surge Tank, and Pump House

12.      Fly Ash System

13.      Building HVAC Systems

14.      SO2 Absorbers, Scrubbers, Transfer Pumps, Booster Fans, and
         Flue Gas Reheat System including the Reheat Steam Line from
         the Auxiliary Steam Header

15.      Emergency Diesel Generator

16.      Electrical and Control Systems



                                      - 7 -

<PAGE>


                                 Exhibit III(d)
                                   (continued)


17.      Fuel Oil Ignitor Heaters and Unit Specific Piping

18.      Unit Specific Piping for all Air Systems, Chemical Feed
         Systems, and Hydrogen

19.      Auxiliary Steam Header Piping System:

          a.      Including the Unit Specific Branch Line to the Reheat
                  Steam

          b.      Not including the Branch Line to the Chemical Plant


                                      - 8 -

<PAGE>

                                 Exhibit III(e)

                            FACILITIES AND EQUIPMENT
                       SPECIFIC TO SAN JUAN UNITS 1 AND 2

                         Operation and Maintenance Costs


                          New Mexico - 50% Tucson - 50%
                       M-S-R - 0% City of Farmington - 0%
                       Alamito - 0% Los Alamos County - 0%


 1.      Bearing Cooling Water System except Unit Piping

 2.      Bottom Ash Dewatering Facility including:  Dewatering Tank,
         Settling Tank, Surge Tank, Storage Tank, and Pump House

 3.      Fuel Oil System (No. 2 Oil for Ignition and Flame
         Stabilization)

 4.      Instrument Air System, except Unit Piping

 5.      Chemical Feed System, except Unit Piping

          a.      Condensate and Feedwater System
          b.      Boiler
          c.      Bearing Cooling Water System
          d.      Cooling Tower Systems
          e.      Chlorination System

 6.      Plant Air System, except Unit Piping

 7.      Sootblowing Air System except Unit Piping

 8.      Hydrogen Storage System except Unit Piping

 9.      Coal Tripper System including Dust Collection System

10.      Turbine Lube Oil Storage and Transfer System

11.      Control Room, Equipment Rooms, and Associated HVAC System

12.      SO2 Back-up Scrubber - Absorber Transformer

13.      Turbine Crane south of column, Line 12

14.      Fuel Oil, Ash, and Water Pipe Racks

15.      Boiler Fill System

16.      SAR Multiplexer Control System



                                      - 9 -

<PAGE>



                                 Exhibit III(f)

                            FACILITIES AND EQUIPMENT
                        COMMON TO SAN JUAN UNITS 3 AND 4

                         Operation and Maintenance Costs

                        New Mexico - 52.739% Tucson - 0%
                    M-S-R - 14.4% City of Farmington - 4.249%
                    Alamito - 25% Los Alamos County - 3.612%


 1.      Bearing Cooling Water System except Unit Piping

 2.      Fuel Oil System (No. 6 Oil for Ignition and Flame
         Stabilization except Ignitor Heaters and Unit Specific Piping)

 3.      Instrument Air System except Unit Piping

 4.      Chemical Feed System except Unit Piping

          a.      Condensate and Feedwater System
          b.      Boiler
          c.      Bearing Cooling Water System
          d.      Cooling Tower Systems
          e.      Chlorination System

 5.      Plant Air System except Unit Piping

 6.      Sootblowing Air System except Unit Piping

 7.      Start-Up Transformers and Nonseg Bus to Units 3 and 4
         Switchgear

 8.      Hydrogen Storage System except Unit Piping

 9.      Coal Tripper System including Dust Collection Systems

10.      Turbine Lube Oil Storage and Transfer System

11.      Control Room, Equipment Rooms, and Associated HVAC System

12.      Boiler Fill System

13.      Auxiliary Cooling Systems including Auxiliary Cooling Tower
         No. 1 and pumps, but excepting No. 4 Tower Pumps and Piping
         which is Unit Specific


                                     - 10 -

<PAGE>
                                 Exhibit III(f)
                                   (continued)


14.      CO2 Storage System except Unit Piping

15.      Start-Up Boiler Feed Pump except Unit Piping

16.      Turbine Bay Crane north of column, Line 12

17.      Fuel Oil, Ash, and Water Pipe Racks

18.      Fire Water Booster and Jockey Pumps

19.      Halon Fire Protection System

20.      Cooling Tower Multiplex Control System


                                     - 11 -

<PAGE>

                                 Exhibit III(g)

                            FACILITIES AND EQUIPMENT
                        COMMON TO ALL FOUR SAN JUAN UNITS

                         Operation and Maintenance Costs

                       New Mexico - 51.566% Tucson - 19.8%
                    M-S-R - 8.7% City of Farmington - 2.559%
                   Alamito - 15.2% Los Alamos County - 2.175%



 1.      River and Raw Water System including:

          a.      Diversion and intake structures, including all equipment
                  and pump building.

          b.      Raw water line to reservoir.

          c.      Reservoir, pump buildings, and all equipment.

          d.      Raw water lines to plant yard.

          e.      All above and underground fire protection system to each
                  vendor supplied or unit specific fire protection system.

 2.      Auxiliary boiler

 3.      SO2 System Chemical Plant except Absorbers

          a.      Double effect evaporator train systems.

          b.      Fly ash filter system.

          c.      Absorber product and feed tanks.

          d.      Condensate collection, storage, and transfer systems.

          e.      Soda ash storage, mixing, and distribution systems.

          f.      Sulfur plant.

          g.      Sulfate purge system including:  crystallizers,
                  centrifuges, evaporators, and salt cake system.

          h.      Sulfuric acid plant system including storage tanks and
                  load out system.

          i.      Auxiliary No. 2 cooling tower, pumps, and systems.

 4.      Spare Main Transformer 345/24 kV for all units

 5.      Maintenance, Office, and Warehousing Facilities


                                     - 12 -

<PAGE>
                                 Exhibit III(g)
                                   (continued)


 6.      Chemical Laboratory
*7.      Coal and Ash Handling Control Facilities

 8.      Roads and grounds such as fencing, yard lighting, guard
         facilities, drainage, and dikes.

 9.      Potable Water System

10.      Environmental Monitoring Systems including Air, Water, and
         Ground.  Excludes Stack Monitoring Systems which are unit
         specific

11.      Transportation such as trucks, cars, and dozers (not
         otherwise charged).

12.      Water Management System

          a.      Wastewater Recovery System - Northside

                  (1)      Neutralization    system   including   premix   tank,
                           neutralization tank, clarifier/thickener, and pumps.

                  (2)      Reverse osmosis system including line/soda
                           softening clarifier system.

                  (3)      Brine concentrator Nos. 4 and 5.

                  (4)      Centrifuge dewatering system.

                  (5)      Effluent pond No. 3 and pump system.

                  (6)      North evaporation ponds 1, 2, and 3.

          b.      SO2 Waste Treatment System - Southside

                  (1)      Effluent ponds 1A, 1B, 2 and pumping system.
                  (2)      Premix tank and clarifier system.
                  (3)      Oxidation towers.
                  (4)      Brine concentrator Nos. 1, 2, and 3.
                  (5)      Centrifuge dewatering system.
                  (6)      South evaporation pond Nos. 1, 2, 3, 4, and 5.

          c.      Data Acquisition System

          d.      Solid Waste Disposal Pit

*13.     Coal Handling Equipment - all equipment from all reclaim hoppers ending
         at the  chutes  to  the  tripper  conveyors.  This  includes:  hoppers,
         feeders, feeder belts, reclaim conveyors, plant conveyors, belt scales,
         fire protection systems, dust suppression systems, magnetic separators,
         all electrical and controls, and heating and ventilation systems.

*Maintenance Only.
                                     - 13 -

<PAGE>
                                 Exhibit III(g)
                                   (continued)


         
14.      Maintenance Bay Facilities including:  Bay Bridge Crane, all
         Offices, and Support Facilities

15.      Sewage Treatment Facilities

16.      All Demineralizer Systems including:  Clarifier, Storage
         Tanks, Sump Pumps, Filter Beds, and Control Systems

17.      The Chemical Plant 165-pound Control Valve and Branch Line
         from each of Units 1 and 2 Unit Specific 650-pound Reheat
         Steam Line

18.      The Chemical Plant Branch Steam Line from (but not
         including) the Unit Specific Auxiliary Steam Header System
         on each of Units 3 and 4.


                                     - 14 -

<PAGE>

                                 Exhibit III(h)

                            FACILITIES AND EQUIPMENT
                        COMMON TO ALL FOUR SAN JUAN UNITS

                              Operation Costs Only



New Mexico
M-S-R
Tucson                       Variable split based on generation by unit.
City of Farmington
Alamito
Los Alamos County


 1.      Coal and Ash Handling Control Facilities

 2.      Coal Handling Equipment

         All  equipment  from all  reclaim  hoppers  ending at the chutes to the
         tripper  conveyors.  This  includes:  hoppers,  feeders,  feeder belts,
         reclaim  conveyors,  plant  conveyors,  belt  scales,  fire  protection
         systems, dust suppression systems, magnetic separators,  all electrical
         and control, and heating and ventilation systems.


                                     - 15 -

<PAGE>

                                 Exhibit III(i)

                       SWITCHYARD FACILITIES AND EQUIPMENT

                         Operation and Maintenance Costs


                          New Mexico - 65% Tucson - 35%
<PAGE>