AMENDMENT No. 3
                                     To The
                                 SAN JUAN UNIT 4
                   EARLY PURCHASE AND PARTICIPATION AGREEMENT
                                     Between
                      Public Service Company of New Mexico
                                       and
                            M-S-R Public Power Agency

1.0      PARTIES

         This  Amendment  No.  3 to the  San  Juan  Unit 4  Early  Purchase  and
Participation  Agreement  ("Amendment No. 3") is made and entered into this 27th
day of October 1999, by and between PUBLIC SERVICE COMPANY OF NEW MEXICO,  a New
Mexico  corporation  ("PNM") and M-S-R PUBLIC POWER AGENCY,  a joint exercise of
powers agency  organized  under the laws of the State of  California  ("M-S-R"),
hereinafter  sometimes  referred to individually as a "Party" or collectively as
the "Parties."

2.0      RECITALS

         This  Amendment No. 3 is made with  reference to the  following  facts,
among others:

         2.1 The San Juan Unit 4 Early Purchase and Participation  Agreement was
entered  into by the  Parties  as of  September  26,  1983,  and was  amended on
December 16, 1987, and on October 31, 1989, (collectively,  as thus amended, the
"EPPA").  The EPPA  governs the  purchase by M-S-R of a 28.8  percent  undivided
ownership interest in San Juan Unit 4 and associated common facilities, supplies
and inventories  and the operation  thereof by PNM as Operating Agent of the San
Juan Project.

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


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

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

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

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

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


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

         NOW, THEREFORE, based on the foregoing recitals and in consideration of
the mutual  promises,  terms and covenants of this  Amendment No. 3, the Parties
hereby agree as follows:

3.0      TERM AND TERMINATION

         3.1 This Amendment No. 3 shall become effective as of the date on which
the Participation Agreement becomes effective.

         3.2   Section  1.2 of the EPPA is  amended to read in its  entirety  as
               follows:

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

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

         4.1 Section 5 of the EPPA is hereby  amended to read in its entirety as
follows:

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

         4.2 Exhibit A-1 to the EPPA, Definitional  Cross-References,  is hereby
deleted in its entirety.


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         4.3 The phrase "PNM, as the Project  Manager as that term is defined in
Section 5.41 of the Operating Agreement," as used in Section 24.1.1 of the EPPA,
is hereby deleted in its entirety and replaced with the following phrase: "PNM."

         4.4 Except as otherwise  provided herein,  the Participation  Agreement
shall be  applicable  to all aspects of M-S-R's  ownership  interest in San Juan
Unit 4.

5.0      VOTING

         5.1      Section 9.4 of the EPPA is hereby deleted in its entirety.

6.0      PNM COOPERATION

         6.1      Section 11.7 of the EPPA is hereby deleted in its entirety.

7.0      PNM AS OPERATING AGENT

         7.1 Section 12 of the EPPA is hereby amended to read in its entirety as
follows:

                  12.1 M-S-R recognizes that PNM is the Operating Agent, as that
             term is defined in Section 5.31 of the Participation  Agreement, as
             of the effective date of the Participation Agreement.

                  12.2 PNM's  responsibilities  as Operating  Agent to M-S-R are
             described in Section 28 of the Participation Agreement.

8.0      APPLICABILITY OF CERTAIN PROVISIONS OF CO-TENANCY AGREEMENT

         8.1      Section 13 of the EPPA is hereby deleted in its entirety.

9.0      ENTITLEMENT TO AND SCHEDULING OF POWER AND ENERGY 9.1 Section 14 of the
         EPPA is hereby deleted in its entirety.

10.0     START-UP AND AUXILIARY POWER

         10.1 Section 15 of the EPPA, entitled "Start-up and Auxiliary Power and
Energy Requirement," is hereby amended to read as follows:


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

11.0     CAPITAL BETTERMENTS, ADDITIONS AND REPLACEMENTS

         11.1     Section 16 of the EPPA is hereby deleted in its entirety.

12.0     DEFAULTS

         12.1 All  references  to "the prime lending rate  established  and last
published  or quoted by Irving Trust  Company" in Sections  21.3 and 21.4 of the
EPPA are replaced by "ten percent (10%) per annum."

         12.2 Section  21.5 and Section  21.6 of the EPPA are hereby  deleted in
their entirety.

13.0     DISPUTES; ARBITRATION

         13.1  Section 22 of the EPPA is hereby  amended to read in its entirety
as follows:

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


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14.0     DESTRUCTION, DAMAGE OR CONDEMNATION OF SAN JUAN UNIT 4

         14.1     Section 26 of the EPPA is hereby deleted in its entirety.

15.0     ASSIGNMENT, TRANSFER, CONVEYANCE OR OTHER DISPOSITION

         15.1  Section  33 of the EPPA is hereby  amended by  deleting  Sections
33.1,  33.1.1,  33.1.2,  33.1.3,  33.1.4,  33.1.5 and  33.1.6.  In place of such
deleted sections, new Sections 33.1 and 33.1.1 are added, to read as follows:

                  33.1  In  any  assignment,   transfer,   conveyance  or  other
               disposition of their  respective  interests under this Agreement,
               or in San Juan Unit 4, PNM and  M-S-R  shall  have the  following
               rights and obligations:

                           33.1.1  Except  as  provided  in  Section  10 of  the
               Participation Agreement and subject to the provisions of Sections
               33.1.2 and 33.1.3 of this  Agreement,  should either Party desire
               to assign,  transfer,  convey or otherwise  dispose of ("Assign")
               any portion of or all of its rights,  titles and interests in San
               Juan Unit 4, or any  portion  or all of its  rights,  titles  and
               interests in, to and under this Agreement,  or any portion or all
               of its rights,  titles and interests in the fuel or water rights,
               lands or the improvements thereon or any part thereof or interest
               therein   ("Transfer   Interest"),   to  any   person,   company,
               corporation or government agency ("Outside Party"), the remaining
               Party  shall  have the right of first  refusal to  purchase  such
               Transfer Interest in accordance with the terms and conditions and
               the  procedures  set  out  in  Section  11 of  the  Participation
               Agreement.

         15.2 Section  33.1.7 of the EPPA is  renumbered  as Section  33.1.2 and
Section  33.1.8 of the EPPA is  renumbered as Section  33.1.3;  and all internal
references  within this Agreement to Sections  33.1.7 and 33.1.8 shall be deemed
to refer to renumbered Sections 33.1.2 and 33.1.3.

16.0     CONTINUATION IN EFFECT

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


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         IN WITNESS WHEREOF,  the Parties have caused this Amendment No. 3 to be
executed  by their  duly  authorized  representatives  as of the date set  forth
above.

                                   PUBLIC SERVICE COMPANY OF NEW MEXICO

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




                                    M-S-R PUBLIC POWER AGENCY

                                    By:      /s/ William C. Walbridge
                                       --------------------------------------
                                              William C. Walbridge
                                              General Manager

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