LOAN AGREEMENT



                                       Between



                   CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY

                                         And

                            SAN DIEGO GAS & ELECTRIC COMPANY



                               Dated as of June 1, 1996




                                     Relating to

                                    $129,820,000
                  California Pollution Control Financing Authority
                     Pollution Control Refunding Revenue Bonds
                        (San Diego Gas & Electric Company)
                                   1996 Series A














                                   LOAN AGREEMENT

                                  TABLE OF CONTENTS

                                                                   Page

PARTIES                                                               1
PREAMBLES                                                             1




                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.1.              DEFINITION OF TERMS                         3
SECTION 1.2.              NUMBER AND GENDER                           3
SECTION 1.3.              ARTICLES, SECTIONS,ETC.                     3

                                    ARTICLE II

                                  REPRESENTATIONS

SECTION 2.1.              REPRESENTATIONS OF THE AUTHORITY             3
SECTION 2.2.              REPRESENTATIONS OF THE BORROWER              4

                                    ARTICLE III

                   ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS

SECTION 3.1.              AGREEMENT TO ISSUE BONDS; APPLICATION 
                          OF BOND PROCEEDS                             5
SECTION 3.2.              INVESTMENT OF MONEYS IN FUNDS                6
SECTION 3.3.              AMENDMENT OF DESCRIPTION OF THE               
                          PROJECT                                      6

                                    ARTICLE IV

                        LOAN TO BORROWER; REPAYMENT PROVISIONS

SECTION 4.1.              LOAN TO BORROWER                             6
SECTION 4.2.              REPAYMENT AND PAYMENT OF OTHER 
                          AMOUNTS PAYABLE                              6
SECTION 4.3.              UNCONDITIONAL OBLIGATION                     8
SECTION 4.4.              ASSIGNMENT OF AUTHORITY'S RIGHTS             8
SECTION 4.5.              AMOUNTS REMAINING IN FUNDS                   9

                                    ARTICLE V

                          SPECIAL COVENANTS AND AGREEMENTS

SECTION 5.1.              RIGHT OF ACCESS TO THE PROJECT               9
SECTION 5.2.              THE BORROWER'S MAINTENANCE OF ITS 
                          EXISTENCE; ASSIGNMENTS                       9
SECTION 5.3.              RECORDS AND FINANCIAL STATEMENTS OF
                          BORROWER                                    11
SECTION 5.4.              MAINTENANCE AND REPAIR; TAXES; 
                          UTILITY AND OTHER CHARGES; INSURANCE        11
SECTION 5.5.              QUALIFICATION IN CALIFORNIA                 12
SECTION 5.6.              TAX EXEMPT STATUS OF BONDS                  12
SECTION 5.7.              NOTICE AND CERTIFICATES TO TRUSTEE          13
SECTION 5.8.              CONTINUING DISCLOSURE                       14
                                                   
                                   ARTICLE VI
                                                   
                         EVENTS OF DEFAULT AND REMEDIES

SECTION 6.1.              EVENTS OF DEFAULT                           14
SECTION 6.2.              REMEDIES ON DEFAULT                         15
SECTION 6.3.              AGREEMENT TO PAY ATTORNEYS' FEES AND
                          EXPENSES                                    17
SECTION 6.4.              NO REMEDY EXCLUSIVE                         17
SECTION 6.5.              NO ADDITIONAL WAIVER IMPLIED BY ONE 
                          WAIVER                                      18

                                    ARTICLE VII

                                     PREPAYMENT

SECTION 7.1.              REDEMPTION OF BONDS WITH PREPAYMENT
                          MONEYS                                      18
SECTION 7.2.              OPTIONS TO PREPAY INSTALLMENTS              18
SECTION 7.3.              MANDATORY PREPAYMENT                        18
SECTION 7.4.              AMOUNT OF PREPAYMENT                        19
SECTION 7.5.              NOTICE OF PREPAYMENT                        19

                                    ARTICLE VIII

                  NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION

SECTION 8.1.              NON-LIABILITY OF AUTHORITY                 20
SECTION 8.2.              EXPENSES                                    20
SECTION 8.3.              INDEMNIFICATION                             20

                                    ARTICLE IX

                                  MISCELLANEOUS

SECTION 9.1.              NOTICES                                     21
SECTION 9.2.              SEVERABILITY                                22
SECTION 9.3.              EXECUTION OF COUNTERPARTS                   22
SECTION 9.4.              AMENDMENTS, CHANGES AND MODIFICATIONS       22
SECTION 9.5.              GOVERNING LAW                               22
SECTION 9.6.              AUTHORIZED BORROWER REPRESENTATIVE          23
SECTION 9.7.              TERM OF THE AGREEMENT                       23
SECTION 9.8.              BINDING EFFECT                              23

TESTIMONIUM                                                           24

SIGNATURES AND SEALS                                                  24

EXHIBIT A   Description of the Project                               A-1


                               LOAN AGREEMENT


         THIS LOAN AGREEMENT, dated as of June 1, 1996, by and between 
the CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY, a public 
instrumentality and political subdivision of the State of California 
(the "Authority"), and SAN DIEGO GAS & ELECTRIC COMPANY, a corporation 
organized and existing under the laws of the State of California (the 
"Borrower"),

                             W I T N E S S E T H

         WHEREAS, the Authority is a public instrumentality and 
political subdivision of the State of California, organized and existing 
under the California Pollution Control Financing Authority Act, being 
Division 27 of the California Health and Safety Code, as amended and 
supplemented (the "Act"); and

         WHEREAS, the Act authorizes the Authority to issue its revenue 
bonds for the purpose of paying all or any part of the costs of a 
"project" as defined in the Act and for the purpose of funding or 
refunding any such bonds; and

         WHEREAS, pursuant to the Act, the Authority previously has 
issued California Pollution Control Financing Authority Pollution 
Control Revenue Bonds (San Diego Gas & Electric Company), 1977 Series A, 
issued April 27, 1977, in the original aggregate principal amount of 
$9,575,000, of which $8,855,000 principal amount are now outstanding 
(the "1977A Bonds"), pursuant to an Indenture, dated as of April 1, 1977 
(the "1977 Indenture"), between the Authority and First Trust of 
California, National Association, as successor trustee (the "Prior 
Trustee"), in order to provide financial assistance to the Borrower for 
the acquisition, construction and installation of certain air and water 
pollution control and sewage and solid waste disposal facilities (the 
"1977A Project") located at the Encina Project, South Bay Project, 
Silver Gate Project and Station "B" Project in San Diego County, 
California; and

         WHEREAS, pursuant to the Act, the Authority previously has 
issued California Pollution Control Financing Authority Pollution 
Control Revenue Bonds (San Diego Gas & Electric Company), 1979 Series A, 
issued March 21, 1979, in the original aggregate principal amount of 
$5,700,000, of which $5,480,000 principal amount are now outstanding 
(the "1979A Bonds"), pursuant to the 1977 Indenture, as supplemented by 
a First Supplemental Indenture of Trust, dated as of March 15, 1979, 
between the Authority and the Prior Trustee, in order to provide 
financial assistance to the Borrower for the acquisition, construction 
and installation of certain air and water pollution control and sewage 
and solid waste disposal facilities (the "1979A Project") located at the 
Encina Project, South Bay Project, Silver Gate Project and Station "B" 
Project in San Diego County, California; and

         WHEREAS, pursuant to the Act, the Authority previously has 
issued California Pollution Control Financing Authority Flexible Demand 
Pollution Control Revenue Bonds (San Diego Gas & Electric Company), 1984 
Series A, issued May 8, 1984, in the original aggregate principal amount 
of $53,000,000, all of which are now outstanding (the "1984A Bonds"), 
pursuant to an Indenture of Trust, dated as of May 1, 1984, between the 
Authority and the Prior Trustee, in order to provide financial 
assistance to the Borrower for the acquisition, construction and 
installation of certain air and water pollution control and sewage and 
solid waste disposal facilities (the "1984A Project") located at the San 
Onofre Nuclear Generating Station; and

         WHEREAS, pursuant to the Act, the Authority previously has 
issued California Pollution Control Financing Authority Variable Rate 
Demand Pollution Control Revenue Bonds (San Diego Gas & Electric 
Company), 1984 Series B, issued December 19, 1984, in the original 
aggregate principal amount of $27,000,000, all of which are now 
outstanding (the "1984B Bonds"), pursuant to an Indenture of Trust, 
dated as of December 1, 1984, between the Authority and the Prior 
Trustee, in order to provide financial assistance to the Borrower for 
the acquisition, construction and installation of certain air and water 
pollution control and sewage and solid waste disposal facilities (the 
"1984B Project") located at the San Onofre Nuclear Generating Station; 
and

         WHEREAS, pursuant to the Act, the Authority previously has 
issued California Pollution Control Financing Authority Pollution 
Control Revenue Bonds (San Diego Gas & Electric Company), 1985 Series A, 
issued December 10, 1985, in the original aggregate principal amount of 
$35,000,000, all of which are now outstanding (the "1985A Bonds" and, 
together with the 1977A Bonds, the 1979A Bonds, the 1984A Bonds and the 
1984B Bonds, the "Prior Bonds"), pursuant to an Indenture of Trust, 
dated as of December 1, 1985, between the Authority and the Prior 
Trustee in order to provide financial assistance to the Borrower for the 
acquisition, construction and installation of certain air and water 
pollution control and sewage and solid waste disposal facilities (the 
"1985A Project" and, together with the 1977A Project, the 1979A Project, 
the 1984A Project and the 1984B Project, the "Project") located at the 
San Onofre Nuclear Generating Station; and

         WHEREAS, the Borrower has duly requested that the Authority 
issue refunding bonds to refund the Prior Bonds; and

         WHEREAS, the Authority, after due investigation and 
deliberation has taken all necessary action approving such request and 
authorizing the issuance of its pollution control refunding revenue 
bonds as provided in the Indenture of Trust, dated as of June 1, 1996 
(the "Indenture"), between the Authority and First Trust of California, 
National Association, as trustee (the "Trustee"), in an aggregate 
principal amount not to exceed $129,820,000 (the "Bonds"), in order to 
refund the Prior Bonds and refinance the Project;

         WHEREAS, the Authority and the Borrower desire to enter into 
this Agreement in order to specify the terms and conditions of the 
lending of the proceeds of the Bonds to the Borrower for the purpose of 
refunding the Prior Bonds and refinancing the Project, as well as the 
terms and conditions of the repayment by the Borrower of such loan and 
certain other matters;

         NOW, THEREFORE, in consideration of the premises and the 
respective representations and covenants herein contained, the parties 
hereto agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.1.  DEFINITION OF TERMS.  Unless the context 
otherwise requires, the terms used in this Agreement shall have the 
meanings specified in Section 1.01 of the Indenture, as originally 
executed or as it may from time to time be supplemented or amended as 
provided therein.

         SECTION 1.2.  NUMBER AND GENDER.  The singular form of any word 
used herein, including the terms defined in Section 1.01 of the 
Indenture, shall include the plural, and vice versa.  The use herein of 
a word of any gender shall include all genders.

         SECTION 1.3.  ARTICLES, SECTIONS, ETC.  Unless otherwise 
specified, references to Articles, Sections and other subdivisions of 
this Agreement are to the designated Articles, Sections and other 
subdivisions of this Agreement as originally executed.  The words 
"hereof," "herein," "hereunder" and words of similar import refer to 
this Agreement as a whole.  The headings or titles of the several 
articles and sections, and the table of contents appended to copies 
hereof, shall be solely for convenience of reference and shall not 
affect the meaning, construction or effect of the provisions hereof.


                                   ARTICLE II

                                REPRESENTATIONS

         SECTION 2.1.  REPRESENTATIONS OF THE AUTHORITY.  The Authority 
makes the following representations as the basis for its undertakings 
herein contained:

          (a)  The Authority is a public instrumentality and political 
subdivision of the State of California.  Under the provisions of the 
Act, the Authority has the power to enter into the transactions 
contemplated by this Agreement and to carry out its obligations 
hereunder.  By proper action, the Authority has been duly authorized to 
execute, deliver and duly perform this Agreement and the Indenture.

          (b)  To refinance the cost of the Project, the Authority will 
issue the Bonds, which will mature, bear interest and be subject to 
redemption as provided in the Indenture.

          (c)  The Bonds will be issued under and secured by the 
Indenture, pursuant to which the Authority's interest in this Agreement 
(except certain rights of the Authority to give approvals and consents 
and to receive payment for expenses and indemnification and certain 
other payments) will be pledged to the Trustee as security for payment 
of the principal of, premium, if any, and interest on the Bonds.

          (d)  The Authority has not pledged and will not pledge its 
interest in this Agreement for any purpose other than to secure the 
Bonds under the Indenture.

          (e)  The Authority is not in default under any of the 
provisions of the laws of the State of California which default would 
affect its existence or its powers referred to in subsection (a) of this 
Section 2.1.

          (f)  The Authority has found and determined and hereby finds 
and determines that all requirements of the Act with respect to the 
issuance of the Bonds and the execution of this Agreement and the 
Indenture have been complied with and that refinancing the Project by 
issuing the Bonds, refunding or replacing the Prior Bonds and entering 
into this Agreement and the Indenture will be in furtherance of the 
purposes of the Act.

          (g)  On May 22, 1996, the Authority conducted a public hearing 
with respect to the Bonds and the Project in accordance with the 
provisions of Section 147(f) of the Code and adopted its resolution 
approving the issuance and sale of the Bonds.  The meeting of the 
Authority on such date was held in accordance with the applicable 
provisions of Article 9 of Chapter 1 of Division 3 of Title 2 of the 
California Government Code, as amended.

          (h)  No member, officer or other official of the Authority has 
any interest whatsoever in the Borrower or in the transactions 
contemplated by this Agreement.

          SECTION 2.2.  REPRESENTATIONS OF THE BORROWER.  The Borrower 
makes the following representations as the basis for its undertakings 
herein contained:

          (a)  The Borrower is a corporation duly formed under the laws 
of the State of California, is in good standing in the State of 
California and has the power to enter into and has duly authorized, by 
proper corporate action, the execution and delivery of this Agreement 
and all other documents contemplated hereby to be executed by the 
Borrower.

          (b)  Neither the execution and delivery of this Agreement, the 
consummation of the transactions contemplated hereby, nor the 
fulfillment of or compliance with the terms and conditions hereof and 
thereof, conflicts with or results in a breach of any of the terms, 
conditions or provisions of the Borrower's Articles of Incorporation or 
By-laws or of any corporate actions or of any agreement or instrument to 
which the Borrower is now a party or by which it is bound, or 
constitutes a default (with due notice or the passage of time or both) 
under any of the foregoing, or results in the creation or imposition of 
any prohibited lien, charge or encumbrance whatsoever upon any of the 
property or assets of the Borrower under the terms of any instrument or 
agreement to which the Borrower is now a party or by which it is bound.

          (c)  The Project consists and will consist of those facilities 
described in Exhibit A hereto, and the Borrower shall make no changes to 
such portion of the Project or to the operation thereof which would 
affect the qualification of the Project as a "project" under the Act or 
impair the Tax-Exempt status of interest on the Bonds.  In particular, 
the Borrower shall comply with all requirements of the Tax Certificate, 
which is hereby incorporated by reference herein.

          (d)  The Project consists of air and water pollution control 
and sewage and solid waste disposal facilities and the Borrower intends 
to utilize the Project as air and water pollution control and sewage and 
solid waste disposal facilities.

          (e)  The Borrower has and will have an interest in the Project 
sufficient to carry out the purposes of this Agreement.

          (f)  The economic useful life of the Project is as set forth 
in the Tax Certificate.

          (g)  To the best knowledge of the Borrower, no member, officer 
or other official of the Authority has any interest whatsoever in the 
Borrower or in the transactions contemplated by this Agreement.

          (h)  All certificates, approvals, permits and authorizations 
with respect to the construction of the Project of agencies of 
applicable local governments, the State of California and the federal 
government that are required on or before the date hereof have been 
obtained; and pursuant to such certificates, approvals, permits and 
authorizations the Project has been constructed and is in operation.


                                 ARTICLE III

                 ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS

          SECTION 3.1.  AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND 
PROCEEDS.  To provide funds to refinance the cost of the Project and 
refund the Prior Bonds, the Authority agrees that it will issue under 
the Indenture, sell and cause to be delivered to the purchasers thereof, 
the Bonds, bearing interest as provided and maturing on the date(s) set 
forth in the Indenture.  The Authority will thereupon apply the proceeds 
received from the sale of the Bonds as provided in Section 3.02 of the 
Indenture.

          SECTION 3.2.  INVESTMENT OF MONEYS IN FUNDS.  Any moneys in 
any fund held by the Trustee shall, at the written request of an 
Authorized Borrower Representative, be invested or reinvested by the 
Trustee as provided in the Indenture.  Such investments shall be held by 
the Trustee and shall be deemed at all times a part of the fund from 
which such investments were made, and the interest accruing thereon and 
any profit or loss realized therefrom shall, except as otherwise 
provided in the Indenture, be credited or charged to such fund.

          SECTION 3.3.  AMENDMENT OF DESCRIPTION OF THE PROJECT.   In 
the event that the Borrower desires to amend or supplement the Project, 
and such amendment or supplement alters the purpose and description of 
the Project in Exhibit A hereto, and the Authority approves of such 
amendment or supplement, the Authority will enter into, and will 
instruct the Trustee to consent to, such amendment or supplement upon 
receipt of:

             (i)  a certificate of an Authorized Borrower Representative 
describing in detail the proposed changes and stating that they 
will not have the effect of disqualifying the Project as a 
facility that may be financed pursuant to the Act;

             (ii)  a copy of the proposed form of amended or 
supplemented Exhibit A hereto; and

             (iii)  an Opinion of Bond Counsel that such proposed 
changes will not adversely affect the Tax-Exempt status of 
interest on the Bonds.


                                 ARTICLE IV

                         LOAN TO BORROWER; REPAYMENT PROVISIONS

         SECTION 4.1.  LOAN TO BORROWER.  The Authority and the Borrower 
agree that the application of the proceeds of sale of the Bonds to 
refund and retire the Prior Bonds and the prior first mortgage bonds of 
the Borrower relating thereto will be deemed to be and treated for all 
purposes as a loan to the Borrower of an amount equal to the principal 
amount of the Bonds.

         SECTION 4.2.  REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE.

          (a)  The Borrower covenants and agrees to pay to the Trustee 
as a Repayment Installment on the loan to the Borrower pursuant to 
Section 4.1 hereof, on each date provided in or pursuant to the 
Indenture for the payment of principal (whether at maturity or upon 
redemption or acceleration) of, premium, if any, and/or interest on the 
Bonds, until the principal of, premium, if any, and interest on the 
Bonds shall have been fully paid or provision for the payment thereof 
shall have been made in accordance with the Indenture, in immediately 
available funds, for deposit in the Bond Fund, a sum equal to the amount 
then payable as principal (whether at maturity or upon redemption or 
acceleration), premium, if any, and interest upon the Bonds as provided 
in the Indenture.

               Each payment required to be made pursuant to this Section 
4.2(a) shall at all times be sufficient to pay the total amount of 
interest and principal (whether at maturity or upon redemption or 
acceleration) and premium, if any, then payable on the Bonds; provided 
that any amount held by the Trustee in the Bond Fund on any due date for 
a Repayment Installment hereunder shall be credited against the 
installment due on such date to the extent available for such purpose; 
and provided further that, subject to the provisions of this paragraph, 
if at any time the amounts held by the Trustee in the Bond Fund are 
sufficient to pay all of the principal of and interest and premium, if 
any, on the Bonds as such payments become due, the Borrower shall be 
relieved of any obligation to make any further payments under the 
provisions of this Section.  Notwithstanding the foregoing, if on any 
date the amount held by the Trustee in the Bond Fund is insufficient to 
make any required payments of principal of (whether at maturity or upon 
redemption or acceleration) and interest and premium, if any, on the 
Bonds as such payments become due, the Borrower shall forthwith pay such 
deficiency as a Repayment Installment hereunder.

          (b)  The Borrower also agrees to pay to the Trustee until the 
principal of, premium, if any, and interest on the Bonds shall have been 
fully paid or provision for the payment thereof shall have been made as 
required by the Indenture, (i) the annual fee of the Trustee for its 
ordinary services rendered as trustee, and its ordinary expenses 
incurred under the Indenture, as and when the same become due, (ii) the 
reasonable fees, charges and expenses of the Trustee, the Registrar and 
the reasonable fees of any Paying Agent on the Bonds as provided in the 
Indenture, as and when the same become due, (iii) the reasonable fees, 
charges and expenses of the Trustee for the necessary extraordinary 
services rendered by it and extraordinary expenses incurred by it under 
the Indenture, as and when the same become due.  The Borrower shall also 
pay the cost of printing any Bonds required to be furnished by the 
Authority.

          (c)  The Borrower also agrees to pay (i) within 60 days after 
receipt of request for payment thereof, all expenses required to be paid 
by the Borrower under the terms of the bond purchase agreement (the 
"Bond Purchase Agreement") executed by it in connection with the sale of 
the Bonds, and all expenses of the Authority related to the financing of 
the Project which are not otherwise required to be paid by the Borrower 
under the terms of this Agreement; and (ii) all reasonable expenses of 
the Authority related to the Project which are not otherwise required to 
be paid by the Borrower under the terms of this Agreement; provided that 
the Authority shall have obtained the prior written approval of an 
Authorized Borrower Representative for any expenditures other than those 
provided for herein or in the Bond Purchase Agreement.

          (d)  In the event the Borrower should fail to make any of the 
payments required by subsection (b) or (c) of this Section, such 
payments shall continue as obligations of the Borrower until such 
amounts shall have been fully paid.  The Borrower agrees to pay such 
amounts, together with interest thereon until paid, to the extent 
permitted by law, at the rate of ten percent (10%) per annum.

          (e)  Upon written request of the Trustee, the Borrower shall 
pay any Repayment Installment directly to the Paying Agent.

          SECTION 4.3.  UNCONDITIONAL OBLIGATION.  The obligations of 
the Borrower to make the payments required by Section 4.2 hereof and to 
perform and observe the other agreements on its part contained herein 
shall be absolute and unconditional, irrespective of any defense or any 
rights of set-off, recoupment or counterclaim it might otherwise have 
against the Authority, and during the term of this Agreement, the 
Borrower shall pay absolutely net the payments to be made on account of 
the loan as prescribed in Section 4.2 and all other payments required 
hereunder, free of any deductions and without abatement, diminution or 
set-off.  Until such time as the principal of, premium, if any, and 
interest on the Bonds shall have been fully paid, or provision for the 
payment thereof shall have been made as required by the Indenture, the 
Borrower (i) will not suspend or discontinue any payments provided for 
in Section 4.2 hereof; (ii) will perform and observe all of its other 
covenants contained in this Agreement; and (iii) except as provided in 
Article VII hereof, will not terminate this Agreement for any cause, 
including, without limitation, the occurrence of any act or 
circumstances that may constitute failure of consideration, destruction 
of or damage to the Project, commercial frustration of purpose, any 
change in the tax or other laws of the United States of America or of 
the State of California or any political subdivision of either of these, 
or any failure of the Authority or the Trustee to perform and observe 
any covenant, whether express or implied, or any duty, liability or 
obligation arising out of or connected with this Agreement or the 
Indenture, except to the extent permitted by this Agreement.

          SECTION 4.4.  ASSIGNMENT OF AUTHORITY'S RIGHTS.  As security 
for the payment of the Bonds, the Authority will assign to the Trustee 
the Authority's rights, but not its obligations, under this Agreement, 
including the right to receive payments hereunder (except (i) the rights 
of the Authority to receive notices under this Agreement, (ii) the right 
of the Authority to receive certain payments, if any, with respect to 
fees, expenses and indemnification and certain other purposes under 
Sections 4.2(c), 4.2(d), 6.3, 8.2 and 8.3 hereof, and (iii) the right of 
the Authority to give approvals or consents pursuant to this Agreement) 
and the Authority hereby directs the Borrower to make the payments 
required hereunder (except such payments for fees, expenses and 
indemnification) directly to the Trustee.  The Borrower hereby assents 
to such assignment and agrees to make payments directly to the Trustee 
without defense or set-off by reason of any dispute between the Borrower 
and the Authority or the Trustee.

          SECTION 4.5.  AMOUNTS REMAINING IN FUNDS.  It is agreed by the 
parties hereto that after payment in full of (i) the Bonds, or after 
provision for such payment shall have been made as provided in the 
Indenture, (ii) the fees and expenses of the Authority in accordance 
with this Agreement, (iii) the fees, charges and expenses of the 
Trustee, the Registrar and Paying Agents in accordance with the 
Indenture and this Agreement and (iv) all other amounts required to be 
paid under this Agreement and the Indenture, any amounts remaining in 
any fund held by the Trustee under the Indenture shall be applied as 
provided in Section 5.06 of the Indenture.


                                ARTICLE V

                      SPECIAL COVENANTS AND AGREEMENTS

          SECTION 5.1.  RIGHT OF ACCESS TO THE PROJECT.  To the extent 
such access is within the control of the Borrower, the Borrower agrees 
that during the term of this Agreement the Authority, the Trustee and 
the duly authorized agents of either of them shall have the right at all 
reasonable times during normal business hours to enter upon the site of 
the Project to examine and inspect such Project; provided, however, that 
this right is subject to federal and State of California laws and 
regulations applicable to such site.  The rights of access hereby 
reserved to the Authority and the Trustee may be exercised only after 
such agent shall have executed release of liability (which release shall 
not limit any of the Borrower's obligations hereunder) and secrecy 
agreements if requested by the Borrower in the form then currently used 
by the Borrower, and nothing contained in this Section or in any other 
provision of this Agreement shall be construed to entitle the Authority 
or the Trustee to any information or inspection involving the 
confidential know-how of the Borrower.

          SECTION 5.2.  THE BORROWER'S MAINTENANCE OF ITS EXISTENCE; 
ASSIGNMENTS.  (a)  To the extent permitted by law and its Articles of 
Incorporation, the Borrower agrees that during the term of this 
Agreement it will maintain its existence as a corporation, will continue 
to maintain its status as a corporation in good standing in the State 
and will not dissolve or otherwise dispose of all or substantially all 
of its assets and will not combine or consolidate with or merge into 
another person or permit one or more other persons to consolidate or 
merge into it; provided, however, that if the Borrower has obtained the 
prior written consent of the Authority, the Borrower may combine, 
consolidate with, or merge into another person legally existing under 
the laws of one of the states of the United States, or permit one or 
more other persons to consolidate with or merge into it, or sell or 
otherwise transfer to another corporation all or substantially all of 
its assets as an entity and thereafter dissolve.  The consent of the 
Authority shall be given within thirty (30) days after written evidence 
acceptable to the Authority is provided by the Borrower to demonstrate 
that (i) the surviving, resulting or transferee person, as the case may 
be, (A) assumes and agrees in writing to pay and perform all of the 
obligations of the Borrower hereunder, (B) qualifies to do business in 
the State of California and (C) has a net worth (as determined in 
accordance with generally accepted accounting principles) immediately 
after such consolidation, merger, sale or transfer equal to at least 
ninety-five percent (95%) of the net worth of the Borrower at the end of 
the fiscal quarter immediately preceding the effective date of such 
consolidation, merger, sale or transfer; and (ii) the ratings on the 
Bonds, as determined by at least one Rating Agency, shall remain at the 
same rating level, or a higher rating level, as the ratings on the Bonds 
immediately prior to the effective date of such consolidation, merger, 
sale or transfer.  If the Authority does not act within thirty (30) days 
after such written evidence is received, such consent shall be deemed to 
have been given.

          Within ten (10) Business Days after the consummation of the 
consolidation, merger, sale or other transaction, the Borrower shall 
provide the Authority with counterpart copies of the consolidation, 
merger or sale instruments, or other documents constituting the 
transaction, including (X) copies of the instruments of assumption 
referred to in (i)(A) above and (Y) evidence of qualification as 
referred to in (i)(B) above.  The Borrower shall also at such time 
provide the Authority with an Opinion of Counsel satisfactory to the 
Authority that all of the provisions of this Section 5.2(a) have been 
complied with.  At least thirty (30) days but not more than ninety 
(90) days prior to any transaction described above, the Borrower shall 
provide the Authority with drafts of the documents of assumption, with 
copies of pro forma financial statements showing expected compliance 
with the requirements of (i)(C) above.  The Borrower agrees to provide 
such other information as the Authority may reasonably request in order 
to assure compliance with this Section 5.2(a).

          Notwithstanding any other provisions of this Section 5.2(a), 
the Borrower need not comply with any of the provisions of Section 
5.2(a) above if, at the time of such merger, combination, sale of 
assets, dissolution or reorganization, the Bonds will be defeased as 
provided in Article X of the Indenture.

          (b)  The rights and obligations of the Borrower under this 
Agreement may be assigned by the Borrower to any person in whole or in 
part, subject, however, to each of the following conditions:

              (i)  No assignment (other than pursuant to subsection (a) 
of this Section 5.2) shall relieve the Borrower from primary liability 
for any of its obligations hereunder, and in the event of any assignment 
not pursuant to subsection (a) of this Section 5.2, the Borrower shall 
continue to remain primarily liable for the payments specified in 
Section 4.2 hereof and for performance and observance of the other 
agreements on its part herein provided to be performed and observed by 
it.

              (ii)  Any assignment from the Borrower shall retain for 
the Borrower such rights and interests as will permit it to perform its 
obligations under this Agreement, and any assignee from the Borrower 
shall assume in writing the obligations of the Borrower hereunder to the 
extent of the interest assigned.

              (iii)  The Borrower shall give the Authority thirty (30) 
days' prior written notice of any assignment (other than pursuant to 
subsection (a) of this Section 5.2) and shall, within thirty (30) days 
after delivery of any assignment, furnish or cause to be furnished to 
the Authority and the Trustee a true and complete copy of each such 
assignment, together with an instrument of assumption and an Opinion of 
Counsel satisfactory to the Authority that the provisions of this 
Section 5.2(b) have been complied with.

          SECTION 5.3.  RECORDS AND FINANCIAL STATEMENTS OF BORROWER.  
The Borrower shall, within one hundred twenty (120) days after the close 
of each fiscal year, submit to the Authority and to the Trustee audited 
financial statements with respect to the Borrower for such fiscal year. 
 The Trustee shall be permitted at all reasonable times during the term 
of this Agreement to examine the books and records of the Borrower with 
respect to the Project, subject to the limitations expressed in Section 
5.1.

          SECTION 5.4.  MAINTENANCE AND REPAIR; TAXES; UTILITY AND OTHER 
CHARGES; INSURANCE.  The Borrower agrees to maintain, to the extent 
permitted by applicable law and regulation, the Project, or cause the 
Project to be so maintained, during the term of this Agreement (i) in as 
reasonably safe condition as its operations shall permit and (ii) in 
good repair and in good operating condition, ordinary wear and tear 
excepted, making from time to time all necessary repairs thereto and 
renewals and replacements thereof.

          The Borrower agrees to pay or cause to be paid during the term 
of this Agreement all taxes, governmental charges of any kind lawfully 
assessed or levied upon the Project or any part thereof, including any 
taxes levied against the Project which, if not paid, will become a 
charge on the receipts from the Project prior to or on a parity with the 
charge thereon and the pledge or assignment thereof to be created 
therefrom or under this Agreement, all utility and other charges 
incurred in the operation, maintenance, use, occupancy and upkeep of the 
Project and all assessments and charges lawfully made by any 
governmental body for public improvements that may be secured by a lien 
on the Project, provided that with respect to special assessments or 
other governmental charges that may lawfully be paid in installments 
over a period of years, the Borrower shall be obligated to pay only such 
installments as are required to be paid during the term of this 
Agreement.  The Borrower may, at the Borrower's expense and in the 
Borrower's name, in good faith, contest any such taxes, assessments and 
other charges and, in the event of any such contest, may permit the 
taxes, assessments or other charges so contested to remain unpaid during 
that period of such contest and any appeal therefrom unless by such 
nonpayment the Project or any part thereof will be subject to loss or 
forfeiture.

          The Borrower agrees that it will keep, or cause to be kept (i) 
the Project insured against such risks and in such amounts as similar 
types of facilities are usually insured by companies similarly situated 
(which may include self-insurance), and (ii) insurance against all 
direct or contingent loss or liability for personal injury, death or 
property damage occasioned by the operation of the Project, which 
insurance may be a part of the policy or policies of insurance 
customarily maintained by the Borrower in connection with its general 
property and liability insurance upon all of the plants and properties 
operated by it (including such deductibles as may be provided in said 
policies).

          SECTION 5.5.  QUALIFICATION IN CALIFORNIA.  The Borrower 
agrees that throughout the term of this Agreement it, or any successor 
or assignee as permitted by Section 5.2, will be qualified to do 
business in the State of California.

          SECTION 5.6.  TAX EXEMPT STATUS OF BONDS.  (a) It is the 
intention of the parties hereto that interest on the Bonds shall be and 
remain Tax-Exempt and to that end, the covenants and agreements of the 
Authority and the Borrower in this Section and in the Tax Certificate 
are for the benefit of the Trustee and each and every person who at any 
time will be a holder of the Bonds.  Without limiting the generality of 
the foregoing, the Borrower and the Authority agree that there shall be 
paid from time to time all amounts required to be rebated to the United 
States pursuant to Section 148(f) of the Code and any temporary, 
proposed or final Treasury Regulations as may be applicable to the Bonds 
from time to time.  This covenant shall survive payment in full or 
defeasance of the Bonds.  The Borrower specifically covenants to pay or 
cause to be paid for and on behalf of the Authority to the United States 
at the times and in the amounts determined under Section 6.06 of the 
Indenture the Rebate Requirement as described in the Tax Certificate.

          (b)  The Authority covenants and agrees that it has not taken 
and will not take any action which results in interest to be paid on the 
Bonds being Tax-Exempt to the holders of the Bonds, and the Borrower 
covenants and agrees that it has not taken or permitted to be taken and 
will not take or permit to be taken any action which will cause the 
interest on the Bonds not to be Tax-Exempt to the holders thereof; 
provided that neither the Borrower nor the Authority shall have violated 
these covenants if interest on any of the Bonds becomes taxable to a 
person solely because such person is a "substantial user" of the Project 
or a "related person" within the meaning of Section 103(b)(13) of the 
1954 Code; and provided further that none of the covenants and 
agreements herein contained shall require either the Borrower or the 
Authority to enter an appearance or intervene in any administrative, 
legislative or judicial proceeding in connection with any changes in 
applicable laws, rules or regulations or in connection with any 
decisions of any court or administrative agency or other governmental 
body affecting the taxation of interest on the Bonds.  The Borrower 
acknowledges having read Section 6.06 of the Indenture and agrees to 
perform all duties imposed on it by such Section, by this Section and by 
the Tax Certificate.  Insofar as Section 6.06 of the Indenture and the 
Tax Certificate impose duties and responsibilities on the Authority or 
the Borrower, they are specifically incorporated herein by reference.

          (c)  Notwithstanding any provision of this Section 5.6 or 
Section 6.06 of the Indenture, if the Borrower shall provide to the 
Authority and the Trustee an Opinion of Bond Counsel to the effect that 
any specified action required under this Section 5.6 and Section 6.06 of 
the Indenture is no longer required or that some further or different 
action is required to maintain the Tax-Exempt status of interest on the 
Bonds, the Borrower, the Trustee and the Authority may conclusively rely 
on such opinion in complying with the requirements of this Section, and 
the covenants hereunder shall be deemed to be modified to that extent.

          SECTION 5.7.  NOTICE AND CERTIFICATES TO TRUSTEE.  The 
Borrower hereby agrees to provide the Trustee with the following:

               (a)  On or before the fifth business day following 
June 30 and December 31 (commencing December 31, 1996) of each 
year in which any of the Bonds are outstanding a certificate of an 
officer of the Borrower that all payments required under this 
Agreement have been made, or explaining why not;

               (b)  Within one hundred twenty (120) days of the end of 
the fiscal year of the Borrower, (i) a certificate of an officer 
of the Borrower to the effect that all payments have been made 
under this Agreement and that, to the best of such officer's 
knowledge, there exists no event of default or potential default 
(which exists or which has previously occurred) and (ii) the 
audited annual report of the Borrower; 

               (c)  Upon knowledge of an Event of Default under this 
Agreement or the Indenture, notice of such Event of Default, such 
notice to include a description of the nature of such event and 
what steps are being taken to remedy such Event of Default; and

               (d)  On or before January 1 and July 1 of each year 
during which any of the Bonds are outstanding, a written 
disclosure of any significant change known to the Borrower that 
occurs which would adversely impact the Trustee's ability to 
perform its duties under the Indenture, or of any conflicts which 
may result because of other business dealings between the Trustee 
and the Borrower.

          SECTION 5.8.  CONTINUING DISCLOSURE.  The Borrower hereby 
covenants and agrees to comply with the continuing disclosure 
requirements for the Bonds as promulgated under Rule 15c2-12, as it may 
from time to time hereafter be amended or supplemented, and to comply 
with the terms of the Continuing Disclosure Agreement.  Notwithstanding 
any other provision of this Agreement, failure of the Borrower to comply 
with the requirements of the Continuing Disclosure Agreement shall not 
be considered an Event of Default hereunder or under the Indenture; 
however, the holders or beneficial owners of the Bonds may enforce the 
Continuing Disclosure Agreement to the extent provided therein.


                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

          SECTION 6.1.  EVENTS OF DEFAULT.  Any one of the following 
which occurs and continues shall constitute an Event of Default pursuant 
to this Agreement:

               (a)  failure by the Borrower to pay any amounts required 
to be paid under Section 4.2(a) or 4.2(d) hereof at the times 
required to avoid causing an Event of Default pursuant to the 
Indenture; or

               (b)  failure of the Borrower to observe and perform any 
covenant, condition or agreement on its part required to be 
observed or performed by this Agreement, other than making the 
payments referred to in (a) above, which continues for a period of 
thirty (30) days after written notice, which notice shall specify 
such failure and request that it be remedied, given to the 
Borrower by the Authority or the Trustee, unless the Authority and 
the Trustee shall agree in writing to an extension of such time; 
provided, however, that if the failure stated in the notice cannot 
be corrected within such period, the Authority and the Trustee 
will not unreasonably withhold their consent to an extension of 
such time if corrective action is instituted within such period 
and diligently pursued until the default is corrected; or

               (c)  an Act of Bankruptcy of the Borrower.

The provisions of subsection (b) of this Section are subject to the 
limitation that the Borrower shall not be deemed in default if and so 
long as the Borrower is unable to carry out its agreements hereunder by 
reason of strikes, lockouts or other industrial disturbances; acts of 
public enemies; orders of any kind of the government of the United 
States or of the State of California or any of their departments, 
agencies, or officials, or any civil or military authority; 
insurrections, riots, epidemics, landslides; lightning; earthquake; 
fire; hurricanes; storms; floods; washouts; droughts; arrests; restraint 
of government and people; civil disturbances; explosions; breakage or 
accident to machinery, transmission pipes or canals; partial or entire 
failure of utilities; or any other cause or event not reasonably within 
the control of the Borrower; it being agreed that the settlement of 
strikes, lockouts and other industrial disturbances shall be entirely 
within the discretion of the Borrower, and the Borrower shall not be 
required to make settlement of strikes, lockouts and other industrial 
disturbances by acceding to the demands of the opposing party or parties 
when such course is, in the judgment of the Borrower, unfavorable to the 
Borrower.  This limitation shall not apply to any default under 
subsections (a) or (c) of this Section.

          SECTION 6.2.  REMEDIES ON DEFAULT.  Whenever any Event of 
Default shall have occurred and shall continue, the following remedies 
may be pursued:

               (a)  The Trustee may, and upon the written request of the 
holders of not less than 25% in aggregate principal amount of 
Bonds then outstanding, shall, by notice in writing delivered to 
the Borrower with copies of such notice being sent to the 
Authority, declare the unpaid balance of the loan payable under 
Section 4.2(a) of this Agreement and the interest accrued thereon 
to be immediately due and payable and such principal and interest 
shall thereupon become and be immediately due and payable.  Upon 
any such acceleration, the Bonds shall be subject to mandatory 
redemption as provided in Section 4.01(b)(3) of the Indenture.

               (b)  The Trustee may have access to and may inspect, 
examine and make copies of the books and records and any and all 
accounts, data and federal income tax and other tax returns of the 
Borrower.

               (c)  The Authority or the Trustee may take whatever 
action at law or in equity as may be necessary or desirable to 
collect the payments and other amounts then due and thereafter to 
become due or to enforce performance and observance of any 
obligation, agreement or covenant of the Borrower under this 
Agreement.  Nothing in Section 4.4 of this Agreement shall be 
deemed to limit the rights of the Authority under this Section 
6.2(c); provided that, the Authority will not exercise any 
remedies, with respect to any of the Authority's rights assigned 
to the Trustee pursuant to Section 4.4 of this Agreement unless, 
in the Authority's reasonable judgment and after written request 
to the Trustee, the Trustee has failed to enforce such rights.

          The provisions of clause (a) of the preceding paragraph, 
however, are subject to the condition that if, at any time after the 
loan shall have been so declared due and payable, and before any 
judgment or decree for the payment of the moneys due shall have been 
obtained or entered as hereinafter provided, there shall have been 
deposited with the Trustee a sum sufficient (together with any amounts 
held in the Bond Fund) to pay all the principal of the Bonds matured 
prior to such declaration and all matured installments of interest (if 
any) upon all the Bonds, and the reasonable expenses of the Trustee, and 
any and all other defaults known to the Trustee (other than in the 
payment of principal of and interest on the Bonds due and payable solely 
by reason of such declaration) shall have been made good or cured to the 
satisfaction of the Trustee or provision deemed by the Trustee to be 
adequate shall have been made therefor, then, and in every such case, 
the holders of at least a majority in aggregate principal amount of the 
Bonds then outstanding, by written notice to the Authority and to the 
Trustee, may, on behalf of the holders of all the Bonds, rescind and 
annul such declaration and its consequences and waive such default; 
provided that no such rescission and annulment shall extend to or shall 
affect any subsequent default, or shall impair or exhaust any right or 
power consequent thereon.

          In case the Trustee or the Authority shall have proceeded to 
enforce its rights under this Agreement and such proceedings shall have 
been discontinued or abandoned for any reason or shall have been 
determined adversely to the Trustee or the Authority, then, and in every 
such case, the Borrower, the Trustee and the Authority shall be restored 
respectively to their several positions and rights hereunder, and all 
rights, remedies and powers of the Borrower, the Trustee and the 
Authority shall continue as though no such action had been taken 
(provided, however, that any settlement of such proceedings duly entered 
into by the Authority, the Trustee or the Borrower shall not be 
disturbed by reason of this provision).

          The Borrower covenants that, in case an Event of Default shall 
occur with respect to the payment of any Repayment Installment payable 
under Section 4.2(a) hereof, then, upon demand of the Trustee, the 
Borrower will pay to the Trustee the whole amount that then shall have 
become due and payable under said Section.

          In case the Borrower shall fail forthwith to pay such amounts 
upon such demand, the Trustee shall be entitled and empowered to 
institute any action or proceeding at law or in equity for the 
collection of the sums so due and unpaid, and may prosecute any such 
action or proceeding to judgment or final decree, and may enforce any 
such judgment or final decree against the Borrower and collect in the 
manner provided by law the moneys adjudged or decreed to be payable.

          In case proceedings shall be pending for the bankruptcy or for 
the reorganization of the Borrower under the federal bankruptcy laws or 
any other applicable law, or in case a receiver or trustee shall have 
been appointed for the property of the Borrower or in the case of any 
other similar judicial proceedings relative to the Borrower, or the 
creditors or property of the Borrower, then the Trustee shall be 
entitled and empowered, by intervention in such proceedings or 
otherwise, to file and prove a claim or claims for the whole amount 
owing and unpaid pursuant to this Agreement and, in case of any judicial 
proceedings, to file such proofs of claim and other papers or documents 
as may be necessary or advisable in order to have the claims of the 
Trustee allowed in such judicial proceedings relative to the Borrower, 
its creditors or its property, and to collect and receive any moneys or 
other property payable or deliverable on any such claims, and to 
distribute such amounts as provided in the Indenture after the deduction 
of its charges and expenses.  Any receiver, assignee or trustee in 
bankruptcy or reorganization is hereby authorized to make such payments 
to the Trustee, and to pay to the Trustee any amount due it for 
compensation and expenses, including expenses and fees of counsel 
incurred by it up to the date of such distribution.

          SECTION 6.3.  AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES.  
In the event the Borrower should default under any of the provisions of 
this Agreement and the Authority or the Trustee should employ attorneys 
or incur other expenses for the collection of the payments due under 
this Agreement or the enforcement of performance or observance of any 
obligation or agreement on the part of the Borrower herein contained, 
the Borrower agrees to pay to the Authority or the Trustee the 
reasonable fees of such attorneys and such other expenses so incurred by 
the Authority or the Trustee.

          SECTION 6.4.  NO REMEDY EXCLUSIVE.  No remedy herein conferred 
upon or reserved to the Authority or the Trustee is intended to be 
exclusive of any other available remedy or remedies, but each and every 
such remedy shall be cumulative and shall be in addition to every other 
remedy given under this Agreement or now or hereafter existing at law or 
in equity or by statute.  No delay or omission to exercise any right or 
power accruing upon any default shall impair any such right or power or 
shall be construed to be a waiver thereof, but any such right and power 
may be exercised from time to time and as often as may be deemed 
expedient.  In order to entitle the Authority or the Trustee to exercise 
any remedy reserved to it in this Article, it shall not be necessary to 
give any notice, other than such notice as may be herein expressly 
required.  Such rights and remedies as are given the Authority hereunder 
shall also extend to the Trustee, and the Trustee and the holders of the 
Bonds shall be deemed third party beneficiaries of all covenants and 
agreements herein contained.

          SECTION 6.5.  NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER.  In 
the event any agreement or covenant contained in this Agreement should 
be breached by the Borrower and thereafter waived by the Authority or 
the Trustee, such waiver shall be limited to the particular breach so 
waived and shall not be deemed to waive any other breach hereunder.


                                    ARTICLE VII

                                     PREPAYMENT

          SECTION 7.1.  REDEMPTION OF BONDS WITH PREPAYMENT MONEYS.  By 
virtue of the assignment of the rights of the Authority under this 
Agreement to the Trustee as is provided in Section 4.4 hereof, the 
Borrower agrees to and shall pay directly to the Trustee any amount 
permitted or required to be paid by it under this Article VII.  The 
Trustee shall use the moneys so paid to it by the Borrower to effect 
redemption of the Bonds in accordance with Article IV of the Indenture 
on the date specified for such redemption pursuant to Section 7.5 
hereof.

          SECTION 7.2.  OPTIONS TO PREPAY INSTALLMENTS.  The Borrower 
shall have the option to prepay the amounts payable under Section 4.2 
hereof with respect to the Bonds, in whole or in part, by paying to the 
Trustee, for deposit in the Bond Fund, the amount set forth in Section 
7.4 hereof, under the circumstances set forth in Section 4.01(a) of the 
Indenture; provided, however, that if any event specified in Section 
4.01(a)(A) through (D) of the Indenture gives rise to the Borrower's 
exercise of its option to prepay such amounts payable hereunder, the 
amount of such loan payment prepaid shall not exceed the original cost 
of the portion of the Project affected by such event.

          SECTION 7.3.  MANDATORY PREPAYMENT.  (a) The Borrower shall 
have and hereby accepts the obligation to prepay Repayment Installments 
with respect to the Bonds to the extent mandatory redemption of the 
Bonds is required pursuant to Section 4.01(b) of the Indenture.  The 
Borrower shall satisfy its obligation hereunder by prepaying such 
Repayment Installments within one hundred eighty (180) days after the 
occurrence of any event set forth in paragraphs (1) or (2) of said 
Section 4.01(b) giving rise to such required prepayment, and immediately 
upon the occurrence of any event set forth in paragraph (3) thereof 
giving rise to such required prepayment.  The amount payable by the 
Borrower in the event of a prepayment required by this Section shall be 
determined as set forth in Section 7.4 and shall be deposited in the 
Bond Fund.

          SECTION 7.4.  AMOUNT OF PREPAYMENT.  In the case of a 
prepayment of the entire amount due hereunder with respect to the Bonds 
pursuant to Section 7.2 or 7.3 hereof, the amount to be paid shall be a 
sum sufficient, together with other funds and the yield on any 
securities deposited with the Trustee and available for such purpose, to 
pay (1) the principal of all Bonds outstanding on the redemption date 
specified in the notice of redemption, plus interest accrued and to 
accrue to the payment or redemption date of the Bonds, plus premium, if 
any, required pursuant to the Indenture, (2) all reasonable and 
necessary fees and expenses of the Authority, the Trustee, the Registrar 
and any Paying Agent accrued and to accrue through final payment of the 
Bonds, and (3) all other liabilities of the Borrower accrued and to 
accrue under this Agreement.

          In the case of partial prepayment of the Repayment 
Installments, the amount payable shall be a sum sufficient, together 
with other funds deposited with the Trustee and available for such 
purpose, to pay the principal amount of and premium, if any, and accrued 
interest on the Bonds to be redeemed, as provided in the Indenture, and 
to pay expenses of redemption of such Bonds.

          SECTION 7.5.  NOTICE OF PREPAYMENT.  The Borrower shall give 
forty-five (45) days' prior written notice to the Authority and the 
Trustee (or such lesser time as may be acceptable to the Trustee), with 
a copy to the Authority, specifying the date upon which any prepayment 
pursuant to this Article VII will be made.  If, in the case of a 
mandatory prepayment pursuant to Section 7.3 hereof, the Borrower fails 
to give such notice of a prepayment required by this Section 7.5, such 
notice may be given by the Authority or by any holder or holders of ten 
percent (10%) or more in aggregate principal amount of the Bonds 
Outstanding, and shall be given by the Trustee, but solely at the times 
and under the circumstances provided in Section 4.01(b) of the 
Indenture.  The Authority and the Trustee, at the request of the 
Borrower or any such Bondholder or Bondholders, shall forthwith take all 
steps necessary under the applicable provisions of the Indenture (except 
that the Authority shall not be required to make payment of any money 
required for such redemption) to effect redemption of all or part of the 
then outstanding Bonds, as the case may be, on the earliest practicable 
date thereafter on which such redemption may be made under applicable 
provisions of the Indenture.

          Notwithstanding anything to the contrary in this Agreement, 
each notice contemplated in this Section 7.5 that is given with respect 
to an optional prepayment pursuant to Section 7.2 hereof may state that 
it is subject to and conditional upon receipt by the Trustee on or prior 
to the proposed prepayment date of amounts sufficient to effect such 
prepayment and, if a notice so states, such notice shall be of no force 
and effect and the prepayment need not be made and the Repayment 
Installments will not become due and payable on the proposed prepayment 
date unless such amounts are so received on or prior to the proposed 
prepayment date.


                                  ARTICLE VIII

             NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION

          SECTION 8.1.  NON-LIABILITY OF AUTHORITY.  The Authority shall 
not be obligated to pay the principal of, or premium, if any, or 
interest on the Bonds, or to discharge any other financial liability in 
connection herewith, except from Revenues.  The Borrower hereby 
acknowledges that the Authority's sole source of moneys to repay the 
Bonds will be provided by the payments made by the Borrower pursuant to 
this Agreement (excluding payments pursuant to Section 4.2(b), 4.2(c), 
4.2(d), 5.6, 6.3, 8.2 and 8.3 of this Agreement), together with other 
Revenues, including investment income on certain funds and accounts held 
by the Trustee under the Indenture, and hereby agrees that if the 
payments to be made hereunder shall ever prove insufficient to pay all 
principal of, and premium, if any, and interest on the Bonds as the same 
shall become due (whether by maturity, redemption, acceleration or 
otherwise), then upon notice from the Trustee, the Borrower shall pay 
such amounts as are required from time to time to prevent any deficiency 
or default in the payment of such principal, premium or interest, 
including, but not limited to, any deficiency caused by acts, omissions, 
nonfeasance or malfeasance on the part of the Trustee, the Borrower, the 
Authority or any third party.

          SECTION 8.2.  EXPENSES.  The Borrower covenants and agrees to 
pay within fifteen (15) days after billing therefor and to indemnify the 
Authority and the Trustee against all costs and charges, including fees 
and disbursements of attorneys, accountants, consultants and other 
experts incurred, in good faith in connection with this Agreement, the 
Bonds or the Indenture.

          SECTION 8.3.  INDEMNIFICATION.  The Borrower releases the 
Authority and the Trustee from, and covenants and agrees that neither 
the Authority nor the Trustee shall be liable for, and covenants and 
agrees, to the extent permitted by law, to indemnify, defend and hold 
harmless the Authority and the Trustee and their members, directors, 
officers, employees and agents from and against, any and all losses, 
claims, damages, liabilities or expenses, of every conceivable kind, 
character and nature whatsoever arising out of, resulting from or in any 
way connected with (1) the Project, or the conditions, occupancy, use, 
possession, conduct or management of, or work done in or about, or from 
the planning, design, acquisition, installation or construction of the 
Project or any part thereof; (2) the issuance of any Bonds or any 
certifications, covenants or representations made in connection 
therewith and the carrying out of any of the transactions contemplated 
by the Bonds, the Indenture and this Agreement;  (3) the Trustee's 
acceptance or administration of the trusts under the Indenture, or the 
exercise or performance of any of its powers or duties under the 
Indenture or this Agreement; or (4) any untrue statement or alleged 
untrue statement of any material fact or omission or alleged omission to 
state a material fact necessary to make the statements made, in light of 
the circumstances under which they were made, not misleading, in any 
official statement or other offering circular utilized by the Authority 
or any underwriter or placement agent in connection with the sale of any 
Bonds; provided that such indemnity shall not be required for damages 
that result from negligence or willful misconduct on the part of the 
party seeking such indemnity.  The indemnity required by this Section 
shall be only to the extent that any loss sustained by the Authority or 
the Trustee exceeds the net proceeds the Authority or the Trustee 
receives from any insurance carried with respect to the loss sustained. 
 The Borrower further covenants and agrees, to the extent permitted by 
law, to pay or to reimburse the Authority and the Trustee and their 
officers, employees and agents for any and all costs, reasonable 
attorneys fees, liabilities or expenses incurred in connection with 
investigating, defending against or otherwise in connection with any 
such losses, claims, damages, liabilities, expenses or actions, except 
to the extent that the same arise out of the negligence or willful 
misconduct of the party claiming such payment or reimbursement.  The 
provisions of this Section shall survive the retirement of the Bonds or 
resignation or removal of the Trustee.


                                   ARTICLE IX

                                 MISCELLANEOUS

        SECTION 9.1.  NOTICES.  All notices, certificates or other 
communications shall be deemed sufficiently given on the second day 
following the day on which the same have been mailed by first class 
mail, postage prepaid, addressed to the Authority, the Borrower or the 
Trustee, as the case may be, as follows:

To the Authority:   California Pollution Control Financing
                     Authority
                    915 Capitol Mall, Suite 446
                    Sacramento, California 95814
                    Attention:  Executive Director

To the Borrower:    San Diego Gas & Electric Company
                    101 Ash Street
                    P.O. Box 1831
                    San Diego, CA  92112
                    Attention:  Treasurer

To the Trustee:     First Trust of California, 
                     National Association
                    550 South Hope Street
                    Los Angeles, CA  90071
                    Attention:  Corporate Trust


A duplicate copy of each notice, certificate or other communication 
given hereunder by either the Authority or the Borrower to the other 
shall also be given to the Trustee.  The Authority, the Borrower and the 
Trustee may, by notice given hereunder, designate any different 
addresses to which subsequent notices, certificates or other 
communications shall be sent.

          SECTION 9.2.  SEVERABILITY.  If any provision of this 
Agreement shall be held or deemed to be, or shall in fact be, illegal, 
inoperative or unenforceable, the same shall not affect any other 
provision or provisions herein contained or render the same invalid, 
inoperative, or unenforceable to any extent whatever.

          SECTION 9.3.  EXECUTION OF COUNTERPARTS.  This Agreement may 
be simultaneously executed in several counterparts, each of which shall 
be an original and all of which shall constitute but one and the same 
instrument; provided, however, that for purposes of perfecting a 
security interest in this Agreement by the Trustee under Article 9 of 
the California Uniform Commercial Code, only the counterpart delivered, 
pledged, and assigned to the Trustee shall be deemed the original.

          SECTION 9.4.  AMENDMENTS, CHANGES AND MODIFICATIONS.  Except 
as otherwise provided in this Agreement or the Indenture, subsequent to 
the initial issuance of Bonds and prior to their payment in full, or 
provision for such payment having been made as provided in the 
Indenture, this Agreement may not be effectively amended, changed, 
modified, altered or terminated without the written consent of the 
Trustee.  Notice of any such amendment to this Agreement or the 
Indenture shall be promptly delivered to each Rating Agency then 
maintaining a rating on the Bonds.

          SECTION 9.5.  GOVERNING LAW.  This Agreement shall be governed 
exclusively by and construed in accordance with the applicable laws of 
the State of California.  This Agreement shall also be enforceable in 
California and any action arising out of this Agreement shall be filed 
and maintained in the Sacramento County Superior Court, Sacramento, 
California; provided that the Authority may waive the requirement of 
venue.  The parties agree that the terms and conditions of this 
Agreement supersede those of all previous agreements between the parties 
other than the documents referred to in this Agreement, and that this 
Agreement, together with the documents referred to in this Agreement, 
contains the entire agreement between the parties hereto.

          SECTION 9.6.  AUTHORIZED BORROWER REPRESENTATIVE.  Whenever 
under the provisions of this Agreement the approval of the Borrower is 
required or the Authority or the Trustee is required to take some action 
at the request of the Borrower, such approval or such request shall be 
given on behalf of the Borrower by an Authorized Borrower 
Representative, and the Authority and the Trustee shall be authorized to 
act on any such approval or request and neither party hereto shall have 
any complaint against the other or against the Trustee as a result of 
any such action taken.

          SECTION 9.7.  TERM OF THE AGREEMENT.  This Agreement shall be 
in full force and effect from the date hereof and shall continue in 
effect as long as any of the Bonds are outstanding or the Trustee holds 
any moneys under the Indenture, whichever is later; provided, however, 
that the rights of the Trustee and the Authority under Sections 8.2 and 
8.3 hereof shall survive the termination of this Agreement, the 
retirement of the Bonds and the removal or resignation of the Trustee.  
All representations and certifications by the Borrower as to all matters 
affecting the Tax-Exempt status of the Bonds shall survive the 
termination of this Agreement.

          SECTION 9.8.  BINDING EFFECT.  This Agreement shall inure to 
the benefit of and shall be binding upon the Authority, the Borrower, 
the Trustee and their respective successors and assigns; subject, 
however, to the limitations contained in Section 5.2 hereof.



          IN WITNESS WHEREOF, the California Pollution Control Financing 
Authority has caused this Agreement to be executed in its name and its 
seal to be hereunto affixed and attested by its duly authorized 
officers, and San Diego Gas & Electric Company has caused this Agreement 
to be executed in its name and its seal to be hereunto affixed by its 
duly authorized officers, all as of the date first above written.

                                   CALIFORNIA POLLUTION CONTROL 
                                   FINANCING AUTHORITY
                                   By Matt Fong, Chairman



                                   By____________________________
                                              Deputy

[SEAL]

Attest:



By____________________________
       Executive Director

                                  SAN DIEGO GAS & ELECTRIC COMPANY



                                  By_______________________________
[SEAL]                                  Senior Vice President,
                                       Chief Financial Officer
                                             and Treasurer

Attest:



By_____________________________
       Assistant Secretary