<PAGE>
                                                                  Exhibit 10.107
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                      AMONG

                         ARIZONA PUBLIC SERVICE COMPANY

                          DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                              NEVADA POWER COMPANY

                         SALT RIVER PROJECT AGRICULTURAL
                         IMPROVEMENT AND POWER DISTRICT

                          TUCSON GAS & ELECTRIC COMPANY

                          THE UNITED STATES OF AMERICA

                                                                   DWP No. 10498

<PAGE>

                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

SECTION                               TITLE                                   PAGE
<S>                 <C>                                                       <C>
           1.       PARTIES                                                     1
           2.       RECITALS                                                    1
           3.       AGREEMENT                                                   4
           4.       EFFECTIVE DATE                                              4
           5.       DEFINITIONS                                                 4
                     5.1     Accounting Practice                                4
                     5.2     Arizona Water Permit                               4
                     5.3     Ash Disposal Area                                  5
                     5.4     Auditing Committee                                 5
                     5.5     Capacity                                           5
                     5.6     Capital Additions                                  5
                     5.7     Capital Betterments                                5
                     5.8     Capital  Improvements                              6
                     5.9     Capital Replacements                               6
                     5.10    Coal Supply Agreement                              6
                     5.11    Component of the Transmission System               6
                     5.12    Conditional Partial Assignment                     6
                     5.13    Contracting Officer                                6
                     5.14    Contracts  for Interim Sale of United
                              States' Entitlement                               7
                     5.15    Coordinating Committee                             8
                     5.16    Co-Tenants                                         8
                     5.17    Date of Firm Operation                             8
                     5.18    Energy                                             8
                     5.19    Generation Entitlement Share                       8
                     5.20    Incremental Series Capacitors                      9
                     5.21    Indenture of Lease                                 9
                     5.22    Memorandum Transmission Agreement                  9
                     5.23    Navajo Generating Station                          9
                     5.24    Navajo Plant Site                                  9
                     5.25    Navajo Project                                    10
                     5.26    Navajo Tribe                                      10
                     5.27    Net Effective Generating Capability               10
                     5.28    Operating Agent                                   10
                     5.29    Participants                                      10
                     5.30    Participation Agreement                           10
                     5.31    Power                                             10
                     5.32    Project Agreements                                10
                     5.33    Project Series Capacitors                         11
                     5.34    Project Manager                                   11
                     5.35    Pumping Plant Site                                12
</TABLE>

                                       i

<PAGE>

Navajo Project
Co-Tenancy Agreement
Table of Contents

<TABLE>
<CAPTION>

SECTION                               TITLE                                   PAGE
<S>                  <C>                                                      <C>
                     5.36    Rail Loading Site                                 12
                     5.37    Railroad                                          12
                     5.38    Secretary                                         12
                     5.39    Section 323 Grants                                12
                     5.40    Southern Transmission System                      12
                     5.41    Station Engineering and Operating Committee       12
                     5.42    Station Work                                      12
                     5.43    Transmission System                               13
                     5.44    Transmission Engineering and Operating Committee  13
                     5.45    Transmission Work                                 13
                     5.46    Units of Property                                 13
                     5.47    Water Service Contract                            13
                     5.48    Water Service Contract Assignment                 13
                     5.49    Western Transmission System                       14
           6.       OWNERSHIPS AND TITLES                                      14
           7.       ENTITLEMENT TO NAVAJO GENERATING  STATION
                      CAPACITY AND ENERGY                                      19
           8.       USE OF THE TRANSMISSION SYSTEM                             19
           9.       ADMINISTRATION                                             23
          10.       NONPARTITIONMENT                                           28
          11.       MORTGAGE AND TRANSFER OF INTERESTS                         29
          12.       RIGHT OF FIRST REFUSAL                                     32
          13.       DESTRUCTION                                                36
          14.       SEVERANCE OF IMPROVEMENTS                                  38
          15.       CAPITAL IMPROVEMENTS                                       38
          16.       INTERESTS HELD FOR THE USE AND BENEFIT OF
                      THE UNITED STATES                                        39
          17.       REIMBURSEMENT FOR COSTS AND EXPENSES                       42
          18.       DEFAULTS AND COVENANTS REGARDING OTHER AGREEMENTS          42
          19.       ARBITRATION                                                48
          20.       ACTIONS PENDING RESOLUTION OF DISPUTES                     52
          21.       TERM AND RIGHTS OF CO-TENANTS UPON TERMINATION             53
          22.       COVENANTS RUNNING WITH THE LAND                            54
          23.       RELATIONSHIP OF PARTICIPANTS                               55
          24.       FEES                                                       56
          25.       UNCONTROLLABLE FORCES                                      56
          26.       GOVERNING LAW                                              57
          27.       BINDING OBLIGATIONS                                        57
          28.       NONDEDICATION OF FACILITIES                                58
          29.       ENVIRONMENTAL PROTECTION                                   58
          30.       ASSIGNMENT OF INTERESTS                                    62
          31.       USE OF FACILITIES OF LOS ANGELES                           62
</TABLE>

                                       ii


<PAGE>

Navajo Project
Co-Tenancy Agreement
Table of Contents

<TABLE>
<CAPTION>

SECTION                               TITLE                                      PAGE
<S>                 <C>                                                          <C>
          32.       NOTICES                                                       63
          33.       MISCELLANEOUS PROVISIONS CONCERNING THE PROJECT AGREEMENTS    64
          34.       NAVAJO PROJECT GENERAL CONTRACT PROVISIONS                    67
          35.       COMPLIANCE WITH COMPACTS                                      67
</TABLE>

EXHIBITS

     A        NAVAJO GENERATING STATION

B & B-B       TRANSMISSION SYSTEM

     C        NAVAJO PROJECT GENERAL PROVISIONS

                                      iii


<PAGE>

                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

1.    PARTIES: The parties to this Co-Tenancy Agreement are: THE UNITED STATES
      OF AMERICA, hereinafter referred to as the "United States", acting through
      the Secretary of the Interior, his duly appointed successor or his duly
      authorized representative; ARIZONA PUBLIC SERVICE COMPANY, an Arizona
      corporation, hereinafter referred to as "Arizona"; DEPARTMENT OF WATER AND
      POWER OF THE CITY OF LOS ANGELES, a department organized and existing
      under the Charter of the City of Los Angeles, a municipal corporation of
      the State of California, hereinafter referred to as "Los Angeles"; NEVADA
      POWER COMPANY, a Nevada corporation, hereinafter referred to as "Nevada";
      SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an
      agricultural improvement district organized and existing under the laws of
      the State of Arizona, hereinafter referred to as "Salt River Project"; and
      TUCSON GAS Section ELECTRIC COMPANY, an Arizona corporation, hereinafter
      referred to as "Tucson".

2.    RECITALS: This Co-Tenancy Agreement is made with refer ence to the
      following facts, among others:

            2.1 By the Colorado River Basin Project Act (82 Stat. 885) the
      Congress of the United States authorized the construction, operation and
      maintenance of the

                                       1
<PAGE>

      Central Arizona Project. Pursuant to Section 303 of said Act, the
      Secretary is authorized to enter into agreements with non-Federal
      interests proposing to construct thermal generating Power plants whereby
      the United States shall acquire the right to such portions of their
      Capacity, including the delivery of Power and Energy over the appurtenant
      transmission facilities to mutually agreed upon delivery points, as he
      determines are required in connection with the operation of the Central
      Arizona Project.

            2.2 The Secretary has determined that the acquisition of a right to
      a portion of the Capacity of the Navajo Project is the most feasible plan
      for supplying the Power requirements of the Central Arizona Project and
      augmenting the Lower Colorado River Basin Development Fund.

            2.3 As of September 30, 1969, the Participants and Southern
      California Edison Company entered into the Memorandum Transmission
      Agreement (Contract No. 14-06-300-2140), which establishes the terms and
      conditions for the interconnection of the Transmission System at Moenkopi
      Switchyard with the existing 500 kv transmission line from the Four
      Corners Generating Station to the Eldorado Substation. These terms and
      conditions are to be the basis for a more definitive agreement.

            2.4 As of September 29, 1969 the Co-Tenants and the Navajo Tribe
      entered into the Indenture of Lease



                                       2


<PAGE>

      wherein the Co-Tenants leased the Navajo Plant Site, Pumping Plant Site,
      Ash Disposal Area, Rail Loading Site, and certain related rights on
      certain real property located within the Navajo Reservation.

            2.5 By the provisions of said Indenture of Lease, approval was
      obtained from the Navajo Tribe for the grants by the Secretary of
      rights-of-way for a railroad, coal conveyor and portions of the
      Transmission System. Such approval was also obtained by way of a
      resolution from the Hopi Tribal Council.

            2.6 The Participants entered into the Participation Agreement,
      which provides the basic principles for their participation in the Navajo
      Project. These principles are intended to be the basis of more
      definitive agreements, including this Co-Tenancy Agreement.

            2.7 As of January 17, 1969, Salt River Project entered into a Water
      Service Contract with the United States (Contract No. 14-06-400-5033),
      relating to the diversion and consumptive use of specified amounts of
      water annually. In addition, the Arizona Water Permit was issued by the
      State Land Commissioner of the State of Arizona on September 4, 1969,
      granting to the Salt River Project a permit to appropriate and use a
      specified amount of water in conjunction with the operation of a thermal
      electric generating plant. By a Water Service Contract Assignment dated
      as of December 22, 1969, Salt


                                       3


<PAGE>

      River Project assigned to the Co-Tenants undivided interests in the Water
      Service Contract and the Arizona Water Permit.

            2.8 As of June 1, 1970, the Co-Tenants entered into the Coal Supply
      Agreement with Peabody Coal Company, relating to a supply of coal for the
      Navajo Generating Station.

            2.9 The Participants desire by this Co-Tenancy Agreement to
      establish terms and conditions relating to their interests in and their
      ownership of the Navajo Project and to establish certain rights and
      obligations under the Project Agreements.

3.    AGREEMENT: The Participants agree as follows:

4.    EFFECTIVE DATE: This Co-Tenancy Agreement shall become effective when it
      has been duly executed and delivered on behalf of all the Participants.

5.    DEFINITIONS: The following terms, when used herein, shall have the
      meanings specified:

            5.1 ACCOUNTING PRACTICE: Generally accepted accounting principles,
      in accordance with the Federal Power Commission's "Uniform System of
      Accounts Prescribed for Public Utilities and Licensees (Class A and Class
      B)", in effect on January 1, 1970, and as such system of accounts may be
      amended from time to time.

            5.2 ARIZONA WATER PERMIT: Permit No. A-3244 issued by the State Land
      Commissioner of the State of



                                       4


<PAGE>

      Arizona on September 4, 1969, granting to the Salt River Project a permit
      to appropriate and use water in conjunction with the operation of a
      thermal electric generating plant, which said permit has a priority date
      of December 18, 1964.

            5.3 ASH DISPOSAL AREA: The area for the disposal of ash resulting
      from the operation of the Navajo Generating Station described on Exhibit 4
      to the Indenture of Lease.

            5.4 AUDITING COMMITTEE: A committee established pursuant to and
      which will exercise the functions described in the Project Agreements.

            5.5 CAPACITY: Electrical rating expressed in megawatts (mw) or
      megavolt-amperes (mva).

            5.6 CAPITAL ADDITIONS: Any Units of Property, land or land rights
      which are added to the Navajo Project and which do not substitute for any
      existing Units of Property, land or land rights constituting a part of the
      Navajo Project, and which in accordance with Accounting Practice would be
      capitalized.

            5.7 CAPITAL BETTERMENTS: The improvement of land or land rights or
      the enlargement or improvement of any Units of Property constituting a
      part of the Navajo Project or the substitution thereof, where such
      substitution constitutes an enlargement or improvement as compared with
      that for which it is substituted, which

                                      -5-


<PAGE>

      in accordance with Accounting Practice would be capitalized.

            5.8 CAPITAL IMPROVEMENTS: All or any Capital Additions, Capital
      Betterments, or Capital Replacements.

            5.9 CAPITAL REPLACEMENTS: The substitution of any Units of Property
      for other Units of Property constituting a part of the Navajo Project,
      where such substitution does not constitute an enlargement or improvement
      of that for which it is substituted, which in accordance with Accounting
      Practice would be capitalized.

            5.10 COAL SUPPLY AGREEMENT: The Navajo Station Coal Supply Agreement
      entered into as of June 1, 1970, by and between Peabody Coal Company and
      the Co-Tenants, relating to a supply of coal for the Navajo Generating
      Station.

            5.11 COMPONENT OF THE TRANSMISSION SYSTEM: Any of the components of
      the Transmission System as described in Exhibit B hereto.

            5.12 CONDITIONAL PARTIAL ASSIGNMENT: An assignment which the
      Co-Tenants may obtain from Peabody Coal Company covering the coal areas
      dedicated under the terms and conditions of the Coal Supply Agreement.

            5.13 CONTRACTING OFFICER: The Secretary, his duly appointed
      successor or his duly authorized representative.

            5.14 CONTRACTS FOR INTERIM SALE OF UNITED STATES'

                                      -6-


<PAGE>

      ENTITLEMENT: The contracts by which the United States has contracted with
      other Participants and Southern California Edison Company for the interim
      sale of United States' entitlement of Navajo Project until required for
      other purposes of the Colorado River Basin Project Act. These contracts
      are:

                  5.14.1 Contract with Department of Water and Power of the City
            of Los Angeles for Interim Sale of United States' Entitlement of
            Navajo Project, Contract No. 14-06-300-2133, dated as of September
            30, 1969;

                  5.14.2 Contract with Nevada Power Company for Interim Sale of
            United States' Entitlement of Navajo Project, Contract No.
            14-06-300-2134, dated as of September 30, 1969;

                  5.14.3 Contract with Southern California Edison Company for
            Interim Sale of United States' Entitlement of Navajo Project,
            Contract No. 14-06-300-2135, dated as of September 30, 1969;

                  5.14.4 Contract with Salt River Project Agricultural
            Improvement and Power District for Interim Sale of United States'
            Entitlement of Navajo Project, Contract No. 14-06-300-2136, dated
            as of September 30, 1969;

                  5.14.5 Contract with Arizona Public Service Company for
            Interim Sale of United States' Entitlement

                                      -7-


<PAGE>

            of Navajo Project, Contract No. 14-06-300-2137, dated as of
            September 30, 1969; and

                  5.14.6 Contract with Tucson Gas Electric Company for Interim
            Sale of United States' Entitlement of Navajo Project, Contract No.
            14-06-300-2138, dated as of September 30, 1969.

            5.15 COORDINATING COMMITTEE: A committee established pursuant to
      and which will exercise the functions described in the Project Agreements.

            5.16 CO-TENANTS: Any one or all of the parties hereto, other than
      the United States.

            5.17 DATE OF FIRM OPERATION: The date established in accordance with
      the Project Agreements on which each unit of the Navajo Generating Station
      is determined by the Station Engineering and Operating Committee to be
      reliable as a source of generation and on which that unit can reasonably
      be expected to operate continuously at its rated Capacity.

            5.18 ENERGY: Kilowatt-hours (kwh).

            5.19 GENERATION ENTITLEMENT SHARE. The percentage entitlement of
      each Participant in each unit of the Navajo Generating Station. Each
      Participant's percentage is as follows:

            5.19.1      Arizona              = 14.0 percent.
            5.19.2      Los Angeles          = 21.2 percent.
            5.19.3      Nevada               = 11.3 percent.

                                      -8-


<PAGE>

            5.19.4      Salt River Project   = 21.7 percent.
            5.19.5      Tucson               =  7.5 percent.
            5.19.6      United States        = 24.3 percent.

            5.20 INCREMENTAL SERIES CAPACITORS: Series capacitors described in
      the Memorandum Transmission Agreement and in any subsequent Project
      Agreement(s) superseding the Memorandum Transmission Agreement which will
      serve the purposes described therein for "incremental series capacitors".

            5.21 INDENTURE OF LEASE: The Indenture of Lease dated as of the 29th
      day of September, 1969, by and between the Navajo Tribe and the
      Co-Tenants.

            5.22 MEMORANDUM TRANSMISSION AGREEMENT: The Memorandum Transmission
      Agreement dated as of the 30th day of September, 1969 (Contract No.
      14-06-300-2140), by and between Southern California Edison Company and the
      Participants.

            5.23 NAVAJO GENERATING STATION: Three coal-fired steam electric
      generating units, to be constructed at the Navajo Plant Site, each having
      a nameplate rating of 750 mw and, subject to final design, an estimated
      Net Effective Generating Capability of 770 mw, and all facilities and
      structures used therewith or related thereto, all as described in Exhibit
      A hereto.

            5.24 NAVAJO PLANT SITE: A parcel of land in Coconino County,
      Arizona, consisting of approximately

                                      -9-

<PAGE>

      1,020 acres, described in Exhibit 2 to the Indenture of Lease.

            5.25 NAVAJO PROJECT: The Navajo Generating Station and the
      Transmission System.

            5.26 NAVAJO TRIBE: The Navajo Tribe of Indians.

            5.27 NET EFFECTIVE GENERATING CAPABILITY: The maximum continuous
      ability of each unit of the Navajo Generating Station to produce Power
      which is available to the Participants at the Navajo 500 kv Switchyard 500
      kv bus.

            5.28 OPERATING AGENT: A Co-Tenant responsible for the operation and
      maintenance of the Navajo Generating Station or a Component of the
      Transmission System in accordance with the Project Agreements.

            5.29 PARTICIPANTS: Any one or more of the parties hereto, including
      the United States.

            5.30 PARTICIPATION AGREEMENT: The Navajo Project Participation
      Agreement, dated as of September 30, 1969 (Contract No. 14-06-300-2131),
      and the Amendment and Supplement #1 thereto dated as of January 16, 1970,
      which provide the basic principles for the Participants' participation in
      the Navajo Project.

            5.31 POWER: Kilowatts (kw) or megawatts (mw).

            5.32 PROJECT AGREEMENTS: This Co-Tenancy Agreement, the
      Participation Agreement, the grants from the United States for
      rights-of-way across Indian lands pursuant

                                      -10-


<PAGE>

      to 2S U.S.C. Section 323, the Navajo Project Power Coordination Agreement,
      the Southern Transmission System, Western Transmission System and Navajo
      Generating Station Construction Agreements, the Southern Transmission
      System, Western Transmission System and Navajo Generating Station
      Operating Agreements, other grants of rights-of-way and easements for
      Navajo Project facilities, the Indenture of Lease, the Arizona Water
      Permit, the Water Service Contract, the Water Service Contract Assignment,
      the Coal Supply Agreement, the Conditional Partial Assignment, the
      Multi-Party Agreement, the Memorandum Transmission Agreement, and such
      other agreements as the Participants find necessary or desirable and
      designate as Project Agreements, as such Project Agreements are originally
      executed or as they may thereafter be supplemented, amended or superseded;

            5.33 PROJECT SERIES CAPACITORS: Series capacitors described in the
      Memorandum Transmission Agreement and in any subsequent Project
      Agreement(s) superseding the Memorandum Transmission Agreement, which will
      serve the purposes described therein for "project series capacitors".

            5.34 PROJECT MANAGER: A Co-Tenant responsible for the construction
      and completion of the Navajo Generating Station or a Component of the
      Transmission System in accordance with the Project Agreements.

                                      -11-

<PAGE>

            5.35 PUMPING PLANT SITE: The site for facilities to divert and pump
      water from Lake Powell, including water intake works, pumping station,
      water lines and related facilities, as described on Exhibit 2 to the
      Indenture of Lease.

            5.36 RAIL LOADING SITE: The site for the conveyor termination and
      rail loading facilities, related facilities and equipment and coal storage
      as described on Exhibit 3 to the Indenture of Lease.

            5.37 RAILROAD: The railroad described in Exhibit A hereto.

            5.38 SECRETARY: The Secretary of the Interior.

            5.39 Section 323 GRANTS: Grants of easements and rights-of-way by
      the United States to the Co-Tenants, covering the Navajo Plant Site, the
      Ash Disposal Area, the Pumping Plant Site, the Railroad right-of-way, the
      Rail Loading Site and related rights.

            5.40 SOUTHERN TRANSMISSION SYSTEM: The Southern Transmission System
      as described in Exhibit B hereto.

            5.41 STATION ENGINEERING AND OPERATING COMMITTEE: A committee
      established pursuant to and which will exercise the functions described
      in the Project Agreements.

            5.42 STATION WORK: Engineering, design, contract preparation,
      purchasing, construction, supervision, expediting, inspection,
      accounting, testing, start-up, protection, operation, repair,
      maintenance, replacement, or

                                      -12-


<PAGE>

      reconstruction, of or for the Navajo Generating Station.

            5.43 TRANSMISSION SYSTEM: The Transmission System as generally
      described in Exhibit B hereto.

            5.44 TRANSMISSION ENGINEERING AND OPERATING COMMITTEE: A committee
      established pursuant to and which will exercise the functions described in
      the Project Agreements.

            5.45 TRANSMISSION WORK: Engineering, design, contract preparation,
      purchasing, construction, supervision, expediting, inspection,
      accounting, testing, protection, operation, repair, maintenance,
      replacement, or reconstruction, of or for the Transmission System.

            5.46 UNITS OF PROPERTY: Units of property as described in the
      Federal Power Commission's "List of Units of Property for Use in
      Connection with Uniform System of Accounts Prescribed for Public Utilities
      and Licensees," in effect on January 1, 1961, and as such list may be
      amended from time to time.

            5.47 WATER SERVICE CONTRACT: The Water Service Contract dated the
      17th day of January, 1969, between the United States and the Salt River
      Project (Contract No. 14-06-400-5033).

            5.48 WATER SERVICE CONTRACT ASSIGNMENT: The Water Service Contract
      Assignment dated as of the 22nd day of December, 1969, between the Salt
      River Project and the other Co-Tenants whereby Salt River Project

                                      -13-
<PAGE>
      assigned undivided interests in the Water Service Contract and the Arizona
      Water Permit to the Co-Tenants.

            5.49 WESTERN TRANSMISSION SYSTEM: The Western Transmission System as
      described in Exhibit B hereto.

6.    OWNERSHIPS AND TITLES:

            6.1 The Co-Tenants shall acquire and own undivided interests as
      tenants in common in the Navajo Generating Station, the Water Service
      Contract, the Arizona Water Permit, the Coal Supply Agreement, the
      Conditional Partial Assignment, and those Project Agreements relating to
      land and land rights for the Navajo Generating Station to which the United
      States is not a party in its capacity as a Participant, as follows:

            6.1.1       Arizona         = 14.0%

            6.1.2       Los Angeles     = 21.2%

            6.1.3       Nevada          = 11.3%

            6.1.4       Salt River
                             Project    = 21.7% for its own use and benefit

                                     and  24.3% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements

            6.1.5       Tucson          =  7.5%

            6.2 The Co-Tenants shall acquire and own undivided interests as
      tenants in common in the Components of the Transmission System as follows:

                                      -14-
<PAGE>

            6.2.1 Navajo 500 kv Switchyard

                  Navajo-Moenkopi 500 kv line

                  (i)   Arizona         = 14.0%

                  (ii)  Los Angeles     = 21.2%

                  (iii) Nevada          = 11.3%

                  (iv)  Salt River
                             Project    = 21.7% for its own use and benefit and

                                          24.3% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

                  (v)   Tucson          =  7.5%

            6.2.2 Navajo-Westwing 500 kv line

                  Moenkopi-Westwing 500 kv line

                  Westwing 500 kv Switchyard

                  (i)   Arizona         = 24.7%

                  (ii)  Salt River
                             Project    = 38.3% for its own use and benefit and

                                          23.7% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

                  (iii) Tucson          = 13.3%

            6.2.3 Westwing Substation 2-1332 MVA 500/230 kv transformer banks
                  and transformer leads and spare 444 MVA 500/230 kv transformer
                  and transformer leads

                  (i)   Arizona         = 28.5%

                                      -15-
<PAGE>

                  (ii)  Salt River
                             Project    = 44.2% for its  own use and benefit and

                                          27.3% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

            6.2.4 Westwing Substation 600 MVA 500/345 kv transformer bank and
                  transformer leads and spare 200 MVA 500/345 kv transformer and
                  transformer leads

                  (i)   Arizona         = 19.5%

                  (ii)  Tucson          = 80.5%

            6.2.5 Westwing 230 kv Switchyard

                  (i)   Arizona         = 39.9%

                  (ii)  Salt River
                             Project    = 44.9% for its own use and benefit and

                                          15.2% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

                  Upon completion of the United States' two 230 kv lines to the
                  reserved bay positions in the Westwing 230 kv Switchyard, (i)
                  and (ii) of this Section 6.2.5 shall be as follows:

                  (i)   Arizona         = 32.1%

                  (ii)  Salt River
                             Project    = 36.1% for its own use and benefit and

                                          31.8% for the use and

                                      -16-
<PAGE>

                                                benefit of the United States in
                                                accordance with Project
                                                Agreements.

            6.2.6 Other Associated Components of the Southern Transmission
      System, as described in paragraph F of Exhibit B hereto, shall be solely
      owned by Arizona.

            6.2.7 Navajo-McCullough 500 KV line and McCullough Line Compensation

                  (i)   Los Angeles     = 48.9%

                  (ii)  Nevada          = 26.1%

                  (iii) Salt River
                             Project    = 25.0% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

            6.2.8 McCullough 500 kv Switchyard

                  (i)   Los Angeles     = 74.8%

                  (ii)  Nevada          = 19.0%

                  (iii) Salt River
                             Project    =  6.2% for the use and benefit of the
                                                United States in accordance with
                                                Project Agreements.

            6.2.9 McCullough Substation Common Facilities, as described in
                  Exhibit B hereto.

                  (i)   Los Angeles     = 67.9%

                  (ii)  Nevada          = 23.9%

                  (iii) Salt River
                             Project    =  8.2% for the use and

                                      -17-
<PAGE>

                                                benefit of the United States in
                                                accordance with Project
                                                Agreements.

            6.3 The ownerships and titles described in this Co-Tenancy Agreement
      shall be determined to have vested simultaneously in the Co-Tenants so
      that the estate of each shall be determined to be concurrent as to right
      and priority.

            6.4 Within eighteen (18) months following the Date of Firm Operation
      of the final unit of the Navajo Generating Station placed in operation,
      the Participants shall jointly make, execute and deliver a supplement to
      this Co-Tenancy Agreement in recordable form which shall describe with
      particularity and detail the facilities and other property then
      constituting the Navajo Project not specifically described in the exhibits
      hereto, and such supplement, when recorded, shall be and become a part of
      this Co-Tenancy Agreement.

            6.5 In the event any Participant transfers or assigns any of its
      rights, title or interest in and to the Navajo Project in accordance with
      the terms and conditions of this Co-Tenancy Agreement, the Participants
      and any successor shall jointly make, execute and deliver a supplement to
      this Co-Tenancy Agreement in recordable form which shall describe with
      particularity and detail the rights, titles and interests of each
      Participant and

                                      -18-
<PAGE>

      any successor following such transfer or assignment.

7.    ENTITLEMENT TO NAVAJO GENERATING STATION CAPACITY AND ENERGY:

            7.1 The Capacity entitlement of each Participant in each unit of the
      Navajo Generating Station shall be the product of its Generation
      Entitlement Share and the Net Effective Generating Capability of such
      unit.

            7.2 Each Participant shall be entitled to schedule for its account
      Power and Energy from any generating unit up to the amount of its
      available Capacity entitlement in such unit.

8.    USE OF THE TRANSMISSION SYSTEM:

            8.1 Each Participant shall have the right to use the Transmission
      System to transmit to its designated delivery points under normal
      operating conditions Power in an amount equivalent to the sum of its
      Capacity entitlements in the Navajo Generating Station as provided in
      Section 7 hereof or to reserve the Transmission System for such
      transmission without regard to the origin, source, ownership or type of
      generation used to produce such Power.

            8.2 Any Participant may acquire firm entitlement in the Transmission
      System in addition to that provided for in Section 8.1 hereof upon the
      written agreement of all Participants having cost responsibility under the
      Project Agreements for the facilities over which such

                                      -19-
<PAGE>

      firm entitlement is sought, provided that said firm entitlement does not
      materially interfere with the right of any other Participant to utilize
      its entitlement as provided in Section 8.1 hereof. Such written agreement
      shall specify the amount of monetary compensation to be paid to and the
      allocation among the Participants for such firm entitlement.

            8.3 Any Participant may make non-firm use of transmission Capacity
      in addition to its use under Section 8.1 hereof to the extent that
      transmission Capacity is determined to be available by the Operating Agent
      for that segment of the Transmission System over which the Capacity is
      desired in accordance with criteria to be developed by the Transmission
      Engineering and Operating Committee.

            8.4 If two or more Participants concurrently desire to make non-firm
      use of transmission Capacity in the same segment of the Transmission
      System pursuant to Section 8.3 hereof and the available transmission
      Capacity in such segment is not adequate to satisfy all such requests,
      then, unless otherwise agreed, the available Capacity will be shared by
      those Participants concurrently requesting such Capacity in proportion to
      their cost responsibility in such segment as provided in the Project
      Agreements.

            8.5 The Participants' designated points of

                                      -20-
<PAGE>

      delivery shall be as follows:

                  8.5.1 Arizona      =  Navajo 500 kv Switchyard and Westwing
                                        Substation.

                  8.5.2 Los Angeles  =  Navajo 500 kv Switchyard and McCullough
                                        500 kv Switchyard.

                  8.5.3 Nevada       =  Navajo 500 kv Switchyard and McCullough
                                        500 kv Switchyard.

                  8.5.4 Salt River   =  Navajo 500 kv Switchyard and Westwing
                             Project    Substation.

                  8.5.5 Tucson       =  Navajo 500 kv Switchyard and Westwing
                                        Substation.

                  8.5.6 United       =  Navajo 500 kv Switchyard, McCullough
                             States     500 kv Switchyard, Westwing Substation,
                                        and the Moenkopi Switchyard during the
                                        period in which the United States is
                                        selling Power to Southern California
                                        Edison Company pursuant to the Contract
                                        With Southern California Edison Company
                                        for Interim Sale of United States'
                                        Entitlement of Navajo Project for
                                        delivery at Moenkopi Switchyard.

            8.6 Each Participant shall be entitled to interconnect its
      transmission system with the Transmission System at its designated points
      of delivery, and the costs of such interconnection shall be paid by such
      Participant.

            8.7 Upon agreement with all the other Partici-

                                      -21-
<PAGE>

      pants, a Participant may at its expense make interconnections to the
      Transmission System at points other than its designated points of
      delivery. Such agreement shall specify the terms and conditions under
      which such interconnections may be made, the charges, if any, to the
      interconnecting Participant, and the distribution of the proceeds
      therefrom to the other Participants.

            8.8 Unless otherwise agreed by the Transmission Engineering and
      Operating Committee, when the Capacity available to the Participants in
      any segment of the Transmission System is insufficient to accommodate all
      of the firm use of the Transmission System pursuant to Section 8.1 hereof,
      then the use of the available Capacity of that segment of the Transmission
      System will be allocated in proportion to the Participants' cost
      responsibility in such segment. It is not the intention of the
      Participants to dedicate any Capacity in the Transmission System for use
      by other parties.

            8.9 The Transmission System will be interconnected with the Four
      Corners-Eldorado 500 kv line at the Moenkopi Switchyard in accordance with
      the Memorandum Transmission Agreement, and as such agreement may hereafter
      be supplemented, amended or superseded.

            8.10 For the purpose of this Section 8, any use of any section of
      line by the United States which is in excess of the greater of (i) the
      United States' percentage

                                      -22-
<PAGE>

      cost responsibility in such line times the capability of such line, or
      (ii) the capability required to supply the Power requirements of the
      Central Arizona Project, shall be deemed to be non-firm use unless the
      right to such use shall have been acquired pursuant to Section 8.2 hereof.

            8.11 Notwithstanding the provisions of this Section 8, Los Angeles
      shall have the right to use the McCullough Substation or to interconnect
      its transmission system therewith for purposes other than those of the
      Navajo Project established pursuant to the Project Agreements; provided,
      that such use or interconnection shall not unreasonably interfere with the
      rights, titles or interests of the other Participants in the Transmission
      System as established pursuant to Project Agreements.

9.    ADMINISTRATION:

            9.1 As a means of securing effective cooperation and interchange of
      information and of providing consultation on a prompt and orderly basis
      among the Participants in connection with various administrative and
      technical problems which may arise from time to time in connection with
      the terms and conditions of the Project Agreements, the Coordinating
      Committee, Auditing Committee, Transmission Engineering and Operating
      Committee and Station Engineering and Operating Committee, established
      under the provisions of Section 8 of the Participation Agreement, shall
      continue in existence and shall have the

                                      -23-
<PAGE>
      responsibilities set forth in Sections 9.2 through 9.5 hereof.

            9.2 The Coordinating Committee shall be composed of one (1)
      representative of each Participant, who shall be the Contracting Officer
      or an officer or general manager of a Participant or the designee of any
      of the foregoing and shall:

            9.2.1 Provide liaison among the Participants at the management
                  level.

            9.2.2 Exercise general supervision over the Station Engineering and
                  Operating Committee, the Transmission Engineering and
                  Operating Committee, the Auditing Committee and other
                  permanent or ad hoc committees established pursuant to Section
                  9.11 hereof.

            9.2.3 Consider matters referred to it by another committee.

            9.2.4 Perform such other functions and duties as may be assigned to
                  it in the Project Agreements.

            9.2.5 Review, discuss and act upon disputes among the Participants
                  arising under the Project Agreements.

            9.3 The Station Engineering and Operating Committee shall consist of
      two (2) representatives desig-

                                      -24-

<PAGE>

      nated by each Participant, and each such representative shall be
      authorized by the Participant by which he is designated to act on its
      behalf with respect to those matters herein provided to be the
      responsibilities of the Station Engineering and Operating Committee. The
      Station Engineering and Operating Committee shall:

            9.3.1 Provide liaison among the Participants and between them and
                  the Project Manager and the Operating Agent for the Navajo
                  Generating Station with respect to the engineering,
                  construction, operation, maintenance, replacement and
                  reconstruction of the Navajo Generating Station.

            9.3.2 Perform such other functions and duties as may be assigned to
                  it in the Project Agreements or by the Coordinating Committee.

            9.4 The Transmission Engineering and Operating Committee shall
      consist of two (2) representatives designated by each Participant, and
      each such representative shall be authorized by the Participant by which
      he is designated to act on its behalf with respect to those matters herein
      provided to be the responsibilities of the Transmission Engineering and
      Operating Committee. The Transmission Engineering and Operating Committee
      shall:

                                      -25-
<PAGE>

            9.4.1 Provide liaison among the Participants and between them and
                  the Project Managers and the Operating Agents for the
                  Components of the Transmission System with respect to the
                  engineering, construction, operation, maintenance, re-
                  placement and reconstruction of the Transmission System.

            9.4.2 Perform such other functions and duties as may be assigned to
                  it in the Project Agreements or by the Coordinating Committee.

            9.5 The Auditing Committee shall consist of two (2) representatives
      designated by each Participant, and each such representative shall be
      authorized by the Participant by which he is designated to act on its
      behalf with respect to those matters herein provided to be the
      responsibilities of the Auditing Committee. The Auditing Committee shall:

            9.5.1 Develop procedures for proper accounting and financial liaison
                  among the Participants in connection with the engineering,
                  construction, operation, replacement, reconstruction and
                  maintenance of the Navajo Project.

            9.5.2 Review accounting and financial

                                      -26-
<PAGE>

                  aspects of the engineering, construction, operation,
                  maintenance, replacement and reconstruction of the Navajo
                  Project.

            9.5.3 Advise and make recommendations to the Coordinating Committee,
                  the Project Managers and the Operating Agents on matters
                  involving auditing and financial transactions.

            9.5.4 Perform such other functions and duties as may be
                  assigned to it in the Project Agreements or by the
                  Coordinating Committee.

          9.6 Any action or determination of a committee must be unanimous.

          9.7 All actions, agreements or determinations made by the committees
      shall be reduced to writing and any such action, agreement or
      determination shall become effective when signed by a representative of
      each Participant on the committee or an authorized alternate. The Station
      Engineering and Operating Committee, the Transmission Engineering and
      Operating Committee and the Auditing Committee shall keep written minutes
      and records of all meetings

          9.8 The committees shall have no authority to modify any of the terms,
      covenants or conditions of the

                                      -27-
<PAGE>

      Project Agreements.

            9.9 If the Station Engineering and Operating Committee, Transmission
      Engineering and Operating Committee or the Auditing Committee fail to
      reach agreement while performing the respective functions and duties
      assigned to them in this Co-Tenancy Agreement or in the other Project
      Agreements, then such disagreement shall be referred to the Coordinating
      Committee.

            9.10 Each Participant shall notify the other Participants promptly
      of any change in the designation of its representatives on the committees.
      A Participant may designate an alternate to act as its representative on
      any committee in the absence of the regular member or to act on specified
      occasions with respect to specified matters. Any alternate representative
      appearing at a committee meeting shall be deemed to have authority to act
      on behalf of the Participant he represents unless he furnishes written
      notice to the committee chairman to the contrary.

            9.11 The Participants, acting through the Coordinating Committee,
      shall have the right to establish permanent or ad hoc committees. The
      authority and duties of any such committee shall be set forth in writing
      and shall be subject to the provisions of the Project Agreements.

10.   NONPARTITIONMENT: The Co-Tenants and each of them accept title to the
      Navajo Project and their rights, titles and

                                      -28-
<PAGE>

      interests in the Project Agreements as tenants in common. Each Co-Tenant
      agrees to waive any rights which it may have to partition the Navajo
      Project, or the Project Agreements, whether by partitionment in kind or by
      sale and division of the proceeds, and further agrees that it will not
      resort to any action in law or in equity to partition the Navajo Project,
      or the Project Agreements, and it waives the benefits of all laws that may
      now or hereafter authorize such partition for a term (i) which shall be
      co-terminus with this Co-Tenancy Agreement, or (ii) which shall be for
      such lesser period as may be required under applicable law.

11.   MORTGAGE AND TRANSFER OF INTERESTS:

            11.1 Except as provided in Section 11.6 hereof, each Co-Tenant shall
      have the right at any time and from time to time to mortgage, create or
      provide for a security interest in or convey in trust all or a part of its
      ownership share in the Navajo Project, together with an equal interest in
      the Project Agreements, to a trustee or trustees under a deed of trust,
      mortgage or indenture, or to a secured party or parties under a security
      agreement, as security for its present or future bonds or other
      obligations or securities, and to any successors or assigns thereof,
      without need for the prior written consent of any other Participant and
      without such mortgagee, trustee or secured party assuming or becoming in

                                      -29-
<PAGE>

      any respect obligated to perform any of the obligations of the
      Participants.

            11.2 Except as provided in Section 11.6 hereof, any mortgagee,
      trustee or secured party under present or future deeds of trust,
      mortgages, indentures or security agreements of any of the Co-Tenants and
      any successor or assign thereof, and any receiver, referee or trustee in
      bankruptcy or reorganization of any of the Co-Tenants, and any successor
      by action of law or otherwise, and any purchaser, transferee or assignee
      of any thereof may, without need for the prior written consent of any
      other Participant, succeed to and acquire all the rights, titles and
      interests of such Co-Tenant in the Navajo Project and the Project
      Agreements and may take over possession of or foreclose upon said rights,
      titles and interests of such Co-Tenant.

            11.3 Except as provided in Section 11.6 hereof, each Co-Tenant shall
      have the right to transfer or assign all or part of its ownership share in
      the Navajo Project, together with an equal interest in the Project
      Agreements, to any of the following without the need for prior written
      consent of any other Participant:

           11.3.1 To any entity acquiring all or substantially all of the
                  property of such Co-Tenant ; or

           11.3.2 To any entity merged or consolidated

                                      -30-
<PAGE>

                  with  such Co-Tenant; or

           11.3.3 To any entity which is wholly-owned by a Co-Tenant; or

           11.3.4 To the Salt River Valley Water Users' Association, an Arizona
                  corporation, in the case of a transfer by Salt River Project.

            11.4 Except as otherwise provided in Sections 11.1, 11.2 and 11.6
      hereof, any successor to the rights, titles and interests of a Co-Tenant
      in the Navajo Project, together with an equal interest in the Project
      Agreements, shall assume and agree to fully perform and discharge all of
      the obligations hereunder of such Co-Tenant, and such successor shall
      notify each of the other Participants in writing of such transfer,
      assignment or merger, and shall furnish to each Participant evidence of
      such transfer, assignment or merger.

            11.5 No Participant shall be relieved of any of its obligations
      under the Project Agreements by an assignment under this Section 11
      without the express prior written consent of all of the remaining
      Participants.

            11.6 The rights set forth in Sections 11.1, 11.2 and 11.3 hereof
      shall not apply to such interests of Salt River Project in the Navajo
      Project or in the Project Agreements as are held for the use and benefit
      of the United States, and Salt River Project shall transfer,

                                      -31-
<PAGE>

      convey, mortgage, encumber or hypothecate any such interest only upon the
      prior written instruction of the United States.

12.   RIGHT OF FIRST REFUSAL:

            12.1 Except as provided in Section 11 hereof, should any Co-Tenant
      desire to transfer its ownership in the Navajo Project or any part thereof
      to any person, entity or another Co-Tenant, each remaining Co-Tenant shall
      have the right of first refusal to purchase such interest on the basis of
      the greater of the following amounts:

                  12.1.1 The amount of the bona fide written offer from the
                         prospective buyer, or

                  12.1.2 The fair market value.

            12.2 If more than one of the Co-Tenants desire to purchase such
      interest, unless otherwise agreed, it shall be transferred in the ratio
      that the Generation Entitlement Share of each Co-Tenant desiring to
      purchase bears to the total Generation Entitlement Shares of such Co-
      Tenants.

            12.3 At least three (3) years prior to the date on which the
      intended transfer is to be consummated, the Co-Tenant desiring to transfer
      shall serve written notice of its intention to do so upon all of the
      Participants. Such notice shall contain the proposed date of transfer and
      the terms and conditions of the transfer.

                                      -32-
<PAGE>

            12.4 Each Co-Tenant shall have the option to purchase all or any
      part of the interest to be transferred and shall exercise said option by
      serving written notice of its intention upon the Co-Tenant desiring to
      transfer and on the remaining Participants within one hundred eighty (180)
      days after service of the written notice of intention to transfer given
      pursuant to Section 12.3 hereof. Failure by a Co-Tenant to exercise said
      option as provided herein within the time period specified shall be
      conclusively deemed to be an election not to exercise said option.

            12.5 If the Co-Tenants fail to exercise their option to purchase the
      entire ownership interest to be transferred, then the Co-Tenant desiring
      to transfer shall serve written notice of this fact upon the remaining
      Participants within ten (10) days after its receipt of the last of the
      written notices given pursuant to Section 12.4 hereof, or after the
      expiration of the one hundred eighty (180) day period referred to in
      Section 12.4 hereof, whichever is earlier.

            12.6 The Co-Tenants who exercised their option to purchase less than
      the entire ownership interest to be transferred shall have the option to
      purchase the remaining ownership interest to be transferred, which such
      option shall be exercised by serving written notice of such election upon
      the Co-Tenant desiring to transfer

                                      -33-

<PAGE>

      within thirty (30) days after the receipt of the notice given pursuant to
      Section 12.5 hereof.

            12.7 When the options to purchase all or any portion of said
      ownership interest have been exercised, the Co-Tenants shall thereby incur
      the following obligations:

           12.7.1 The Co-Tenant desiring to transfer the ownership interest and
                  the Co-Tenants having exercised the option to purchase all or
                  any portion of such ownership interest shall be obligated to
                  proceed in good faith and with due diligence to obtain all
                  required authorizations and approvals for such purchase.

           12.7.2 The Co-Tenant desiring to transfer such ownership interest
                  shall be obligated to obtain the release of any lien en-
                  cumbering the ownership interest which is the subject of the
                  transfer at the earliest practicable date.

           12.7.3 The Co-Tenants having exercised the option to purchase such
                  ownership interest shall be obligated to perform all of the
                  terms and conditions required of them to complete the purchase
                  of said ownership interest.

                                      -34-
<PAGE>
`
            12.8 The purchase of the ownership interest by the Co-Tenants having
      elected to purchase the same shall be fully consummated within thirty (30)
      months following, the date upon which all notices required to be given
      under this Section 12 have been duly served, unless the Co-Tenants are
      then diligently pursuing applications for required authorizations or
      approvals to effect such transfer or are then diligently pursuing or
      defending appeals from orders entered or authorizations issued in
      connection with such applications, in which event the transfer shall be
      consummated within twelve (12) months following the date upon which the
      final order is entered or authorization issued in connection with such
      applications.

            12.9 If the Co-Tenants fail to exercise their option to purchase all
      of the ownership interest to be transferred, the Co-Tenant desiring to
      transfer such interest shall be free to transfer all, but not less than
      all, of such interest to the party that made the offer to purchase
      referred to in Section 12.1 hereof upon the terms and conditions set forth
      in said bona fide written offer. If such transfer is not consummated by
      the proposed date of transfer referred to in Section 12.3 hereof, the
      Co-Tenant desiring to transfer said ownership interest must give another
      complete new right of first refusal to the remaining Co-Tenants pursuant
      to the

                                      -35-
<PAGE>


      provisions of this Section 12 before such Co-Tenant shall be free to
      transfer said ownership interest to another party.

            12.10 The Co-Tenants who purchase the ownership interest pursuant to
      this Section 12 shall receive title to and shall own the interest as
      tenants in common, subject to the same rights, duties and obligations as
      are applied by the Project Agreements to the interest being transferred in
      the hands of the transferring Co-Tenant.

            12.11 Any Co-Tenant transferring an ownership interest pursuant to
      the provisions of this Section 12 shall remain liable and obligated for
      the performance of all of the terms and conditions of the Project
      Agreements, unless otherwise agreed to by all of the remaining
      Participants.

            12.12 Any party who may succeed to an ownership interest pursuant to
      this Section 12 shall specifically agree in writing with the remaining
      Participants at the time of such transfer that it will not transfer or
      assign all or any portion of such ownership interest without complying
      with the terms and conditions of this Section 12.

            12.13 The provisions of this Section 12 shall not apply to any
      interest held by the Salt River Project for the use and benefit of the
      United States.

13.   DESTRUCTION :

            13.1 If a generating unit of the Navajo Generat-


                                       36


<PAGE>

      ing Station should be destroyed to the extent that the cost of repairs or
      reconstruction is less than 60% of the original cost thereof, the
      Participants shall, unless otherwise agreed, repair or reconstruct such
      generating unit to substantially the same general character or use as the
      original. The Participants shall share the costs of such repair or
      reconstruction in proportion to their Generation Entitlement Shares in the
      generating unit so destroyed.

            13.2 If a generating unit of the Navajo Generating Station should be
      destroyed to the extent that the cost of repairs or reconstruction is 60%
      or more of the original costs thereof, the Participants shall, upon
      agreement, restore or reconstruct, such unit to substantially the same
      general character or use as the original; provided, however, that should
      all of the Participants not agree to restore or reconstruct such unit, but
      some of the Participants nevertheless desire so to do, then the
      Participants who do not agree to restore or reconstruct shall sell their
      interests in such unit to the remaining Participants at a price equal to
      the salvage value of such interests. The Participants agreeing to restore
      or reconstruct such unit shall share the costs of restoration or
      reconstruction in the proportion that the Generation Entitlement Share of
      each bears to the total of Generation Entitlement Shares of such
      Participants.

                                      -37-
<PAGE>

            13.3 If any facilities of the Transmission System, the Railroad or
      the pumping plant should be destroyed, the Participants shall, unless
      otherwise agreed, repair or reconstruct such facilities. The Participants
      shall share the costs of such repair or reconstruction in proportion to
      their cost responsibility for the facilities so destroyed.

14.   SEVERANCE OF IMPROVEMENTS: Except as provided in Section 12 of the
      Indenture of Lease, the Co-Tenants agree that all facilities, structures,
      improvements, equipment and property of whatever kind and nature
      constructed, placed or affixed on the rights-of-way, easements, patented
      and leased lands as part of or as a Capital Improvement to the Navajo
      Project, as against all parties and persons whomsoever (including without
      limitation any party acquiring any interest in the rights-of-way,
      easements, patented or leased lands or any interest in or lien, claim or
      encumbrance against any of such facilities, structures, improvements,
      equipment and property of whatever kind and nature), shall be deemed to be
      and remain personal property of the Co-Tenant(s), not affixed to the
      realty.

15.   CAPITAL IMPROVEMENTS:

            15.1 The Participants recognize that from time to time it may be
      necessary or desirable to make Capital Improvements or that Capital
      Improvements may be required


                                       38




<PAGE>

      by laws and regulations applicable to the Navajo Project.

            15.2 If requested by a Participant, any such Capital Improvement
      shall be described in a supplement to this Co-Tenancy Agreement executed
      in recordable form.

            15.3 The rights, titles and interests, including undivided
      percentage ownership interests, of any Participant in and to any Capital
      Improvements to the Navajo Generating Station shall be held as provided in
      Section 6.1 hereof.

            15.4 Except as specifically provided in Section 6.2.5 hereof,
      Capital Improvements made to the Transmission System shall be owned by the
      Participant(s) in percentage ownership interest(s) in proportions equal to
      their construction cost responsibility (ies) for such Capital
      Improvements; provided, that title to the interest of the United States in
      any such Capital Improvements shall be held by the Salt River Project for
      the use and benefit of the United States.

16.   INTERESTS HELD FOR THE USE AND BENEFIT OF THE UNITED STATES :

            16.1 Salt River Project shall acquire and hold the interests
      acquired for the use and benefit of the United States so that the United
      States will realize the full use and benefit of its entitlement as
      provided for in the Project Agreements.

            16.2 Salt River Project shall not execute any

                                      -39-
<PAGE>

      Project Agreement or any other agreement which purports to apply to the
      rights, titles or interests held for the use and benefit of the United
      States to which the United States is not a contracting party in its
      capacity as a Participant without the prior written consent of the United
      States. Except as otherwise provided in the Project Agreements, Salt River
      Project shall not exercise any rights, privileges or options in any such
      agreement for or on behalf of the United States without the prior written
      consent of the United States. With respect to any Project Agreement to
      which the United States is not a contracting party, except as otherwise
      provided in the Project Agreements, the United States shall have a right,
      co-equal with the rights of the Participants who are contracting parties
      to such Project Agreement, to participate in any decision or action taken
      under such Project Agreement which in any manner applies to or affects a
      right, title or interest held by Salt River Project for the use and
      benefit of the United States, to the same extent and to the same effect as
      though the United States were a contracting party to such Project
      Agreement.

            16.3 Although it is the intention of the Participants that no
      Co-Tenant should incur any additional liability or burden by reason of the
      generating and transmission Capacity dedicated for the use and benefit of
      the United States, should any such liability or burden

                                       40
<PAGE>

      be imposed upon Salt River Project solely by reason of its holding legal
      title to any portion of the Navajo Project or holding an interest in the
      Project Agreements for the use and benefit of the United States, such
      liability or burden shall be shared by the Co-Tenants and allocated among
      them in the ratio that each Co-Tenant's Generation Entitlement Share bears
      to the total of the Generation Entitlement Shares of the Co-Tenants. To
      the extent any such liability or burden is remedied by money payment,
      performance or otherwise subsequent to its allocation to the Co-Tenants,
      Salt River Project shall reimburse or recompense the Co-Tenants in the
      same ratio as such liability or burden was shared among them.

            16.4 All moneys paid to Salt River Project pursuant to the Project
      Agreements which are for the use and benefit of the United States shall be
      segregated from Salt River Project's general funds and, upon written
      request of the Contracting Officer, such funds will be invested by Salt
      River Project in the manner specified in such request. All interest earned
      and appreciation in value on such investments shall inure to the benefit
      of the United States and all losses on such investments shall be at the
      risk of the United States. If the proceeds exceed the amount of the
      obligation for which they are designated or held, then, upon written
      request of the Contracting Officer, Salt River Project shall pay such

                                      -41-
<PAGE>

      excess to the United States or its designee.

17.   REIMBURSEMENT FOR COSTS AND EXPENSES: The United States shall reimburse
      Salt River Project for all costs and expenses not otherwise specifically
      provided for which are imposed upon, measured by or associated with the
      interests held by Salt River Project for the use and benefit of the United
      States in accordance with the Project Agreements.

18.   DEFAULTS AND COVENANTS REGARDING OTHER AGREEMENTS:

            18.1 Each Participant hereby agrees that it shall pay all monies and
      carry out all other duties and obligations agreed to be paid and/or
      performed by it pursuant to all of the terms and conditions set forth and
      contained in the Project Agreements, and a default by any Participant in
      the covenants and obligations to be kept and performed pursuant to the
      terms and conditions set forth and contained in any of the Project
      Agreements shall be an act of default under this Co-Tenancy Agreement.

            18.2 In the event of a default by any Participant in any of the
      terms and conditions of the Project Agreements, then, within ten (10) days
      after written notice has been given by any non-defaulting Participant to
      all other Participants of the existence and nature of the default, the
      non-defaulting Participants shall remedy such default either by advancing
      the necessary funds

                                      -42-
<PAGE>

      and/or commencing to render the necessary performance, with each
      non-defaulting Participant contributing to such remedy in the ratio of its
      Generation Entitlement Share to the total of the Generation Entitlement
      Shares of all non-defaulting Participants.

            18.3 In the event of a default by any Participant in any of the
      terms and conditions of the Project Agreements and the giving of notice as
      provided in Section 18.2 hereof, the defaulting Participant shall take all
      steps necessary to cure such default as promptly and completely as
      possible and shall pay promptly upon demand to each non-defaulting
      Participant the total amount of money and/or the reasonable equivalent in
      money of non-monetary performance, if any, paid and/or made by such
      non-defaulting Participant in order to cure any default by the defaulting
      Participant, together with interest on such money and/or the costs of
      non-monetary performance at the rate of ten per cent (10%) per annum, or
      the maximum rate of interest legally chargeable, whichever is the lesser,
      from the date of the expenditure of such money and/or the date of
      completion of such non-monetary performance by each such non-defaulting
      Participant to the date of such reimbursement by the defaulting
      Participant, or such greater amount as may be otherwise provided in the
      Project Agreements.

            18.4 In the event that any Participant shall

                                      -43-
<PAGE>

      dispute an asserted default by it, then such Participant shall pay the
      disputed payment or perform the disputed obligation, but may do so under
      protest. The protest shall be in writing, shall accompany the disputed
      payment or precede the performance of the disputed obligation, and shall
      specify the reasons upon which the protest is based. Copies of such
      protest shall be mailed by such Participant to all other Participants.
      Payments not made under protest shall be deemed to be correct, except to
      the extent that periodic or annual audits may reveal over or under
      payments by Participants, necessitating adjustments. In the event it is
      determined by arbitration, pursuant to the provisions of this Co-Tenancy
      Agreement or otherwise, that a protesting Participant is entitled to a
      refund of all or any portion of a disputed payment or payments or is
      entitled to the reasonable equivalent in money of non-monetary performance
      of a disputed obligation theretofore made, then, upon such determination,
      the non-protesting Participants shall pay such amount to the protesting
      Participant, together with interest thereon at the rate of six per cent
      (6%) per annum from the date of payment or from the date of completion of
      performance of a disputed obligation to the date of reimbursement.
      Reimbursement of the amount so paid shall be made by the non-protesting
      Participants in the ratio of their respective Generation Entitlement
      Shares to


                                       44
<PAGE>

      the total of the Generation Entitlement Shares of all non-protesting
      Participants.

            18.5 Unless otherwise determined by a board of arbitrators, in the
      event a default by any Co-Tenant in the payment or performance of any
      obligation under the Project Agreements shall continue for a period of six
      (6) months or more without having been cured by the defaulting Co-Tenant
      or without such Co-Tenant having commenced or continued action in good
      faith to cure such default, or in the event the question of whether an act
      of default exists is the subject of arbitration and such default continues
      for a period of six (6) months following a final determination by a board
      of arbitrators or otherwise that an act of default exists and the
      defaulting Co-Tenant has failed to cure such default or to commence such
      action during said six (6) month period, then, at any time thereafter and
      while said default is continuing, all of the non-defaulting Co-Tenants
      may, by written notice to all Participants, suspend the right of the
      defaulting Co-Tenant to receive all or any part of its proportionate share
      of the Net Effective Generating Capability, in which event:

          18.5.1 During the period that such suspension is in effect, the
                 non-defaulting Participants shall bear all of the operation
                 and maintenance costs, insurance costs and other expenses

                                      -45-
<PAGE>

                 otherwise payable by the defaulting Co-Tenant under the
                 Project Agreements in the ratio of their respective Generation
                 Entitlement Shares to the total of the Generation Entitlement
                 Shares of all non-defaulting Participants.

          18.5.2 A defaulting Co-Tenant shall be liable to the non-defaulting
                 Participants (in the proportion that the Generation
                 Entitlement Share of each non-defaulting Participant bears to
                 the total of the Generation Entitlement Shares of all
                 non-defaulting Participants) for all costs incurred by such
                 non-defaulting Participants pursuant to Section 18.5.1 hereof.
                 The proceeds paid by any defaulting Co-Tenant to remedy any
                 such default shall be distributed to the non-defaulting
                 Participants in the ratio of their respective Generation
                 Entitlement Shares to the total of the Generation Entitlement
                 Shares of all non-defaulting Participants.

            18.6 In addition to the remedies provided for in Section 18.5 of
      this Co-Tenancy Agreement, the non-defaulting Participants may, in
      submitting a dispute to arbitration in accordance with the provisions of
      Section 19 hereof, request that the board of arbitrators determine what
      additional remedies may be reasonably necessary or

                                      -46-
<PAGE>

      required under the circumstances which give rise to the dispute. The board
      of arbitrators may determine what remedies are necessary or required in
      the premises, including but not limited to the conditions under which the
      Navajo Generating Station may be operated economically and efficiently
      during periods when the defaulting Co-Tenant's right to receive its
      proportionate share of the Net Effective Generating Capability is
      suspended.

            18.7 The rights and remedies of the Participants set forth in this
      Co-Tenancy Agreement shall be in addition to the rights and remedies of
      the Participants set forth in any other of the Project Agreements.

            18.8 Notwithstanding the provisions of Sections 18.3 and 18.4
      hereof, the United States shall not pay or be held liable for any interest
      charges, except as otherwise provided in Section 18.9 hereof.

            18.9 In the event a default by the United States in any of its
      obligations to advance funds in accordance with the provisions of the
      Project Agreements is remedied by the non-defaulting Participants as
      provided in Section 18.2 hereof, the United States will reimburse each
      contributing Participant for its costs of money thereby incurred if there
      is in effect at the time of such reimbursement an Act of Congress
      expressly authorizing such reimbursement to be made by the United States.
      For the purposes of this Section 18.9, "costs of money" shall


                                       47
<PAGE>

      mean the contributing Participant's average cost of borrowed capital
      during the period in which its funds are advanced to remedy a default by
      the United States.

19.   ARBITRATION:

            19.1 If a dispute between any of the Participants should arise under
      the Project Agreements which does not involve the legal rights of or which
      will not create a legal obligation upon the United States under the
      Project Agreements, or will not affect the interests or rights held for
      the use and benefit of the United States under the Project Agreements,
      any Participant(s) may call for submission of the dispute to arbitration,
      which call shall be binding upon all of the other Participants.

            19.2 The Participant(s) calling for arbitration shall give written
      notice to all other Participants, setting forth in such notice in adequate
      detail the nature of the dispute, the amount or amounts, if any, involved
      in such dispute, and the remedy sought by such arbitration proceedings,
      and, within twenty (20) days from receipt of such notice, any other
      Participant(s) involved may, by written notice to the first Participant(s)
      and all other Participants, prepare its or their own statement of the
      matter at issue and set forth in adequate detail additional related
      matters or issues to be arbitrated. Thereafter, the Participant(s) first
      submitting its or their statement of the matter at issue shall have ten
      (10)

                                      -48-
<PAGE>

      days in which to submit a rebuttal statement, copies of which shall be
      given to all other Participants.

            19.3 Within ten (10) days following the submission of the rebuttal
      statement, the Participants, acting through their representatives on the
      Coordinating Committee, shall meet for the purpose of selecting
      arbitrators. Each Participant or group of Participants representing one
      side of the dispute shall designate an arbitrator. The arbitrators so
      selected shall meet within twenty (20) days following their selection and
      shall select additional arbitrators, the number of which shall be one (1)
      less than the number of arbitrators selected by the Participants. If the
      arbitrators selected by the Participants, as herein provided, shall fail
      to select such additional arbitrator(s) within said twenty (20) day
      period, then the arbitrators shall request from the American Arbitration
      Association (or a similar organization if the American Arbitration
      Association should not at that time exist) a list of arbitrators who are
      qualified and eligible to serve as hereinafter provided. The arbitrators
      selected by the Participants shall take turns striking names from the list
      of arbitrators furnished by the American Arbitration Association, and the
      last name(s) remaining on said list shall be the additional arbitrator(s).
      All arbitrators shall be persons skilled and experienced in the field
      which gives

                                      -49-
<PAGE>

      rise to the dispute, and no person shall be eligible for appointment as an
      arbitrator who is an officer or employee of any of the parties to the
      dispute or is otherwise interested in the matter to be arbitrated.

            19.4 Except as otherwise provided in this Section 19, the
      arbitration shall be governed by the rules and practice of the American
      Arbitration Association (or the rules and practice of a similar
      organization if the American Arbitration Association should not at that
      time exist) from time to time in force, except that if such rules and
      practice, as modified herein, shall conflict with the Arizona Revised
      Statutes or any other provisions of Arizona law or Federal law, as the
      case may be, then in force which are specifically applicable to
      arbitration proceedings, such law shall govern.

            19.5 Included in the issues which may be submitted to arbitration
      pursuant to this Section 19 is the issue of whether the right to arbitrate
      a particular dispute is permitted under the Project Agreements.

            19.6 The arbitrators shall hear evidence submitted by the respective
      Participants and may call for additional information, which additional
      information shall be furnished by the Participant(s) having such
      information. The decision of a majority of the arbitrators shall be
      binding upon all the Participants.

            19.7 The award of the arbitrators shall contain


                                       50
<PAGE>

      findings relative to the materiality of the default, the period of time
      within which the defaulting party must remedy the default or commence
      remedial action, and the remedies which may be exercised by the
      non-defaulting Participants in the event the default is not remedied
      within such period of time.

            19.8 This agreement to arbitrate shall be specifically enforceable,
      and the award and findings of the arbitrators shall be final and binding
      upon the Participants to the extent permitted by applicable law. Any award
      may be filed with the clerk of any court having jurisdiction over the
      Participants, or any of them, against whom the award is rendered, and,
      upon such filing, such award, to the extent permitted by the laws of the
      jurisdiction in which said award is filed, shall be specifically
      enforceable or shall form the basis of a declaratory judgment or other
      similar relief.

            19.9 The fees and expenses of the arbitrators shall be shared by the
      Participants equally, unless the decision of the arbitrators shall specify
      some other apportionment of such fees and expenses. All other expenses and
      costs of the arbitration shall be borne by the Participant incurring the
      same.

            19.10 In the event that any Participant shall attempt to carry out
      the provisions herein set forth in regard to arbitration, and such
      Participant shall not be


                                       51
<PAGE>

      able to obtain a valid and enforceable arbitration decree, such
      Participant shall be entitled to seek legal remedies in the courts having
      jurisdiction in the premises, and the provisions of the Project Agreements
      referring to decision of a board of arbitration shall be then deemed
      applicable to final decisions of such courts.

            19.11 If a dispute arises between any of the Participants which does
      or may involve the legal rights of or which will or may create a legal
      obligation upon the United States under the Project Agreements, or which
      affects or may affect the interests or rights held for the use and benefit
      of the United States under the Project Agreements, then any Participant
      may call for submission to arbitration of any part of the dispute, which
      the United States may lawfully submit to arbitration. If the Contracting
      Officer agrees to such arbitration, or if the Contracting Officer refuses
      or fails to arbitrate and a court of competent jurisdiction thereafter
      finally decides that the United States may lawfully submit the matter in
      dispute to arbitration, it shall be conducted in the manner set forth in
      this Section 19 or in such other manner as may be provided for by Federal
      law.

20.   ACTIONS PENDING RESOLUTION OF DISPUTES: If a dispute should arise which is
      not resolved by the Coordinating Committee, then, pending the resolution
      of the dispute by arbitration or judicial proceedings, the Project
      Managers


                                       52
<PAGE>

      or Operating Agents shall proceed with Station Work and Transmission Work
      in a manner consistent with the Project Agreements and generally accepted
      practice in the electric utility industry, and the Participants shall
      advance the funds required to perform such Station Work and Transmission
      Work in accordance with the applicable provisions of the Project
      Agreements. The resolution of any dispute involving the failure of one of
      the committees to reach agreement upon matters involving future
      expenditures shall have prospective application from the date of final
      determination, and amounts advanced by the Participants pursuant to this
      Section 20 during the pendency of such dispute shall not be subject to
      refund except upon a final determination that the expenditures were not
      made in a manner consistent with the Project Agreements and generally
      accepted practice in the electric utility industry.

21.   TERM AND RIGHTS OF CO-TENANTS UPON TERMINATION:

            21.1 This Co-Tenancy Agreement shall continue in force and effect
      for the term of the Indenture of Lease and any extension thereof, unless
      otherwise agreed.

            21.2 Upon termination of this Co-Tenancy Agreement the facilities
      comprising the Navajo Project shall be disposed of in a manner to be
      mutually agreed upon by the Participants.

22.   COVENANTS RUNNING WITH THE LAND:


                                       53
<PAGE>

            22.1 All of the respective covenants and obligations of each of the
      Co-Tenants set forth and contained in the Project Agreements shall bind
      and shall be and become the respective covenants and obligations of:

                  22.1.1 Each such Co-Tenant;

                  22.1.2 All mortgagees, trustees and secured parties under all
                         present and future mortgages, indentures and deeds of
                         trust, and security agreements which are or may become
                         a lien upon any of the properties of such Co-Tenant;

                  22.1.3 All receivers, assignees for the benefit of creditors,
                         bankruptcy trustees and referees of such Co-Tenant;

                  22.1.4 All other persons, firms, partnerships or corporations
                         claiming through or under any of the foregoing; and

                  22.1.5 Any successors or assigns of any of those mentioned in
                         Sections 22.1.1 through 22.1.4 hereof

      and shall be covenants and obligations running with such Co-Tenant's
      respective rights, titles and interests in the Navajo Project and in, to
      and under the Project Agreements, and shall be for the benefit of the
      respective rights, titles and interests of the Participants and their



                                       54
<PAGE>
      respective successors and assigns, in and to the Navajo Project. It is the
      specific intention of this provision that all such covenants and
      obligations shall be binding upon any party which acquires any of the
      rights, titles and interests of any such Co-Tenant in the Navajo Project
      or in, to and under the Project Agreements and that all of the
      above-described persons and groups shall be obligated to use such
      Co-Tenant's rights, titles and interests in the Navajo Project and/or in,
      to or under the Project Agreements for the purpose of discharging its
      covenants and obligations under the Project Agreements; except that in the
      case of a partial assignment the assignee shall only be required to share
      in the cost of fulfilling the covenants and obligations of the assigning
      Co-Tenant in, to and under the Project Agreements to an extent
      proportionate to such assignment.

23.   RELATIONSHIP OF PARTICIPANTS:

            23.1 The covenants, obligations and liabilities of the Participants
      are intended to be several and not joint or collective and, except as
      expressly provided in the Project Agreements, nothing herein contained
      shall ever be construed to create an association, joint venture, trust or
      partnership, or to impose a trust or partnership covenant, obligation or
      liability on or with regard to any one or more of the Participants. Each
      Participant shall be individually responsible for its own covenants,

                                      -55-
<PAGE>

      obligations and liabilities as herein provided. No Participant or group of
      Participants shall be under the control of or shall be deemed to control
      any other Participant or the Participants as a group. No Participant shall
      be the agent of or have a right or power to bind any other Participant
      without its express written consent, except as provided in the Project
      Agreements.

            23.2 The Co-Tenants hereby elect to be excluded from the application
      of Subchapter "K" of Chapter 1 of Subtitle "A" of the Internal Revenue
      Code of 1954, or such portion or portions thereof as may be permitted or
      authorized by the Secretary of the Treasury or his delegate, insofar as
      such Subchapter, or any portion or portions thereof, may be applicable to
      the Co-Tenants under the Project Agreements.

24.   FEES: No Project Manager or Operating Agent shall receive any fee or
      profit under the Project Agreements.

25.   UNCONTROLLABLE FORCES: No Participant shall be considered to be in default
      in the performance of any of its obligations under the Project Agreements
      (other than obligations of said Participant to pay costs and expenses)
      when a failure of performance shall be due to an uncontrollable force. The
      term "uncontrollable force" shall be any cause beyond the control of the
      Participant affected, including but not restricted to failure of or threat
      of failure of facilities, flood, earthquake, storm, fire,

                                      -56-
<PAGE>

      lightning, epidemic, war, riot, civil disturbance or disobedience, labor
      dispute, labor or material shortage, sabotage, restraint by court order or
      public authority, and action or non-action by or failure to obtain the
      necessary authorizations or approvals from any governmental agency or
      authority, which by exercise of due diligence such Participant could not
      reasonably have been expected to avoid and which by exercise of due
      diligence it shall be unable to overcome. Nothing contained herein shall
      be construed so as to require a Participant to settle any strike or labor
      dispute in which it may be involved. Any Participant rendered unable to
      fulfill any of its obligations under the Project Agreements by reason of
      an uncontrollable force shall give prompt written notice of such fact to
      the other Participants and shall exercise due diligence to remove such
      inability with all reasonable dispatch. The term "Participant" as used in
      this Section 25 shall include any Project Manager or Operating Agent, in
      its capacity as such.

26.   GOVERNING LAW: This Co-Tenancy Agreement shall be governed by the laws of
      the State of Arizona, except insofar as the rights or obligations of the
      United States are concerned.

27.   BINDING OBLIGATIONS: All of the obligations set forth in the Project
      Agreements shall bind the Participants and their successors and assigns,
      and such obligations shall

                                      -57-

<PAGE>

      run with the Participants' rights, titles and interests in the Navajo
      Project and with all of the interests of each Participant in the Project
      Agreements; provided that any mortgagee, trustee or secured party shall
      not be obligated for obligations arising prior to taking of possession or
      the initiation of remedial proceedings.

28.   NONDEDICATION OF FACILITIES:

            28.1 The Project Agreements shall not be construed to grant to any
      Co-Tenant any rights of ownership in, possession of or control over the
      electric system of the United States.

            28.2 The Project Agreements shall not be construed to grant to the
      United States any rights of ownership in, possession of, or control over
      the electric system of any Co-Tenant.

            28.3 The Co-Tenants do not intend to dedicate, and nothing in the
      Project Agreements shall be construed as constituting a dedication by any
      Co-Tenant of its properties or facilities, or any part thereof, to the
      United States or to any other Co-Tenant or to the customers of the United
      States or to the customers of any other Co-Tenant.

29.   ENVIRONMENTAL PROTECTION:

            29.1 The Participants will design, construct, operate and maintain
      the Navajo Project in a manner consistent with the Participants' objective
      of attaining the greatest

                                      -58-
<PAGE>

      feasible degree of environmental protection. In addition to fulfilling all
      obligations which have been assumed under provisions relating to
      protection of the environment which are contained in existing Project
      Agreements, the Participants affirm their continuing obligation to comply
      fully with applicable Federal, state and local laws, orders, regulations,
      rules and standards relating to environmental protection. The Participants
      shall to the extent practicable anticipate and make provision for the
      future installation of any systems required to comply with changes in said
      laws, orders, regulations, rules and standards.

            29.2 The Participants shall install and diligently operate in the
      Navajo Generating Station the most effective commercially proven air
      quality control equipment available at the time of design of each unit of
      the Navajo Generating Station. Stack design, the designs of other plant
      systems related to air quality control, and plans for and design of
      systems for control and disposal of waste materials and residue from
      burned fuel shall be subject to such approval by the Secretary as required
      by Project Agreements and to review and comment by the Secretary in all
      other instances in advance of construction, installation, making a Capital
      Improvement thereto or the retirement of Units of Property thereof. The
      Secretary shall act or comment within 60 days after submission of a plan
      or design. From time to time, at the call of either the Secretary or the
      Coordinating

                                      -59-
<PAGE>

      Committee, but at least every five (5) years beginning in 1980,
      representatives of the Participants and the designated representative of
      the Secretary shall meet to review technological advances in air quality
      control equipment and shall formulate a recommendation to the Coordinating
      Committee as to the need for and feasibility of installing additional
      equipment or modifying existing equipment to improve air quality control.
      In the event agreement cannot be reached by the Coordinating Committee on
      any question regarding modification or supplementation of existing
      equipment, the matter shall be subject to arbitration as provided in
      Section 19 hereof.

                  29.2.1 In the operation of the Navajo Generating Station the
            Participants will make such tests and measurements and keep such
            records as will enable them to make reports to the Secretary
            relating to the operation and efficiency of the air quality control
            equipment at such intervals as may be mutually agreed upon, but not
            less than once annually. The tests and measurements will be made in
            conformance with the latest American Society of Mechanical Engineers
            (ASME) test procedures for determining dust concentration in a gas
            stream and in conformance with other accepted procedures agreed upon
            by the Secretary and the Participants.

                  29.2.2 The Participants during normal working

                                      -60-
<PAGE>

         hours will permit representatives of the Secretary to have access to,
         and to inspect and copy, all records relating to air quality and will
         permit such representatives to inspect the air quality control
         systems.

            29.3 The Participants shall install and diligently operate as part
      of the Navajo Generating Station such waste water, waste material, sewage
      control and disposal systems necessary to comply with and fulfill the
      objectives and obligations set forth in Section 29.1 hereof. Designs and
      plans for the water quality control systems, systems for the disposal of
      waste water, waste materials, and sewage, and any other plant systems
      related to control of water quality shall be subject to such approval by
      the Secretary as required by the Project Agreements and to review and
      comment by the Secretary in all other instances in advance of
      construction, installation, making a Capital Improvement or the retirement
      of Units of Property thereof. The Secretary shall act or comment within 60
      days after submission of a plan or design.

                 29.3.1 The Participants during normal working hours will permit
         representatives of the Secretary to have access to, and to inspect and
         copy, all records relating to water quality control and will permit
         such representatives to inspect the water quality control systems.

            29.4 The Participants shall take appropriate

                                      -61-

<PAGE>

      measures to harmonize the Navajo Project with the environment. The
      Participants shall exercise care to prevent any unnecessary destruction,
      scarring, or defacing of the natural surroundings in the vicinity of the
      Navajo Project work.

30.   ASSIGNMENT OF INTERESTS: Any Participant who acquires in its name an
      interest in any real or personal property or contract which is part of the
      Navajo Project shall transfer and assign an undivided interest therein to
      the other Participants so that the ownership and rights of the
      Participants in such property or contract shall be as provided for in
      this Co-Tenancy Agreement.

31.   USE OF FACILITIES OF LOS ANGELES:

            31.1 The United States may use, for such period or periods of time
      as it desires, the 500 kv transmission line of Los Angeles between
      McCullough Substation and Eldorado Substation and associated terminal
      facilities to the extent of the right of Los Angeles to use such terminal
      facilities. Unless otherwise agreed, the United States' right to use the
      facilities of Los Angeles shall not exceed 250 megawatts. Payment shall be
      made annually by the United States to Los Angeles as provided in the
      Project Agreements.

            31.2 The land presently held by Los Angeles under Bureau of Land
      Management Grant No. N-2763, dated January 23, 1969, which land comprises
      the site of McCullough

                                      -62-
<PAGE>

      Substation, may be utilized by Nevada, by the United States, and by the
      Salt River Project for the use and benefit of the United States, pursuant
      to the Project Agreements without charge other than as provided in the
      Project Agreements. If and when Los Angeles acquires fee title to such
      land, Nevada, the United States and the Salt River Project for the use and
      benefit of the United States shall each continue to have the right to use
      such lands pursuant to the Project Agreements, and for any period of such
      use Nevada and the United States shall pay Los Angeles as provided in the
      Project Agreements.

32.   NOTICES

            32.1 Except as set forth in Section 32.2 hereof, any notice, demand
      or request provided for in the Project Agreements shall be in writing and
      shall be deemed properly served, given or made if delivered in person or
      sent by registered or certified mail, postage prepaid, to the persons
      specified below:

                              32.1.1  Arizona Public Service Company
                                      c/o Secretary
                                      P.O. Box 21666
                                      Phoenix, Arizona 85036

                              32.1.2  Department of Water and Power of the
                                          City of Los Angeles
                                      c/o General Manager
                                      P.O. Box 111
                                      Los Angeles, California 90051

                              32.1.3  Nevada Power Company
                                      c/o Secretary
                                      P.O. Box 230
                                      Las Vegas, Nevada 89109

                                      -63-
<PAGE>

                              32.1.4  Salt River Project Agricultural
                                          Improvement and Power District
                                      c/o Secretary
                                      P.O.Box 1980
                                      Phoenix, Arizona 85001

                              32.1.5  Tucson Gas & Electric Company
                                      c/o Secretary
                                      P.O. Box 711
                                      Tucson, Arizona 85702

                              32.1.6  United States
                                      c/o Regional Director
                                      Bureau of Reclamation
                                      Boulder City, Nevada 89005

            32.2 Informal communications of a routine nature, including requests
      for funds and related matters, shall be given in such manner as the
      committees shall arrange.

            32.3 Any Participant may, at any time, by written notice to all
      other Participants, designate different or additional persons or different
      addresses for the giving of notices hereunder.

33.   MISCELLANEOUS PROVISIONS CONCERNING THE PROJECT AGREEMENTS:

            33.1 Each Participant agrees to negotiate in good faith and to
      proceed with diligence upon request by any other Participants, to
      negotiate, make, execute and deliver any and all documents between such
      Participant and any other Participant or other parties reasonably required
      to implement the Project Agreements.

            33.2 The captions and headings appearing in the Project Agreements
      are inserted merely to facilitate reference and shall have no bearing upon
      the interpretation thereof.

                                      -64-
<PAGE>

            33.3 Each term, covenant and condition of the Project Agreements is
      deemed to be an independent term, covenant and condition, and the
      obligation of any Participant to perform any or all of the terms,
      covenants and conditions to be kept and performed by it is not dependent
      on the performance by the other Participants of any or all of the terms,
      covenants and conditions to be kept and performed by them.

            33.4 In the event that any of the terms, covenants or conditions of
      any of the Project Agreements, or the application of any such term,
      covenant or condition, as to any person or circumstance shall be held
      invalid by any court of competent jurisdiction, such Project Agreement and
      the application of the remainder of its terms, covenants or conditions to
      such persons or circumstances shall not be affected thereby.

            33.5 The Project Agreements shall be subject to filing with, and to
      such changes or modifications as may from time to time be directed by
      competent regulatory authority, if any, in the exercise of its
      jurisdiction.

            33.6 Any waiver at any time by any Participant of its rights with
      respect to a default or any other matter arising in connection with any
      Project Agreement shall not be deemed a waiver with respect to any
      subsequent default or matter.

            33.7 It is acknowledged by the Participants that

                                      -65-

<PAGE>

      certain provisions of this Co-Tenancy Agreement conflict with certain
      provisions of the Participation Agreement or cover certain matters also
      covered in the Participation Agreement. The provisions of this Co-Tenancy
      Agreement shall, to the extent of such conflicts or coverage, be deemed to
      supersede such provisions of the Participation Agreement.

            33.8 Certain provisions of this Co-Tenancy Agreement pertaining to
      the Project Agreements may be reiterated in one or more subsequent Project
      Agreements solely as a convenient reference for those who will be using
      such Project Agreements. Any variations between such provisions as
      contained in this Co-Tenancy Agreement and as contained in such subsequent
      Project Agreements shall be resolved in favor of the provisions of this
      Co-Tenancy Agreement.

            33.9 Costs to be borne by the United States under the Project
      Agreements for Station Work and Transmission Work shall not include any
      part of any other Participant's costs of interest and interest during
      construction, financing charges or franchise fees, nor any part of any
      other Participant's attorneys' fees other than fees incurred as a result
      of employing the services of an attorney in private practice in connection
      with the performance of Station Work or Transmission Work; provided, that
      nothing contained in this Section 33.9 shall be construed

                                      -66-
<PAGE>

      to relieve the United States from any obligation which may arise under the
      provisions of Section 18.9 hereof.

            33.10 The Co-Tenants acknowledge that the United States has entered
      into the Project Agreements for the purpose of providing a Power supply in
      accordance with and for the purposes of the Colorado River Basin Project
      Act and that the United States has entered into Contracts for the Interim
      Sale of United States' Entitlement in reliance upon the performance of the
      obligations and duties of the Participants specified in the Project
      Agreements.

            33.11 Except as otherwise specifically provided in the Project
      Agreements, the Participants do not intend to create rights in or to grant
      remedies to any third party as a beneficiary of the Project Agreements or
      of any duty, covenant, obligation or undertaking established therein.

34.   NAVAJO PROJECT GENERAL CONTRACT PROVISIONS; the Navajo Project General
      Contract Provisions attached hereto as Exhibit C are hereby made a part of
      this Co-Tenancy Agreement.

35.   COMPLIANCE WITH COMPACTS:

            35.1 The Department of the Interior is the Federal department
      responsible for administering the terms of the Water Service Contract
      dated January 17, 1969, Contract No. 14-06-400-5033. The Department of the
      Interior also has been directed by P.L. 90-537 to comply with the terms

                                      -67-
<PAGE>

      of the Colorado River Compact dated November 24, 1922 and the Upper
      Colorado River Basin Compact dated October 11, 1948. In compliance with
      that responsibility and those directives, the Secretary of the Interior
      hereby agrees to take any and all actions within the power and authority
      of the Department of the Interior which are necessary and required to
      prevent total depletions chargeable to the State of Arizona under the
      Upper Colorado River Basin Compact resulting from consumptive use of water
      from the Upper Colorado River System in the State of Arizona as measured
      at Lee Ferry in the manner provided for in Article VI of the Upper
      Colorado River Basin Compact from exceeding the 50,000 acre feet
      apportioned to the State of Arizona by the Upper Colorado River Basin
      Compact.

            35.2 The Secretary of the Interior further agrees to make the
      reports required by Section 601 (b)(l) of P.L. 90-537 as they pertain to
      Arizona's Upper Basin uses annually rather than every five years. Within
      fifteen days following the completion of said reports, the Secretary of
      the Interior shall furnish copies of such reports to the Co-Tenants, the
      Navajo Tribe, each of the Upper Basin States, and the Upper Colorado River
      Commission .

            35.3 It is the intention of the parties to this contract that each
      of the Upper Basin States shall be a third party beneficiary of the terms
      and conditions of

                                      -68-
<PAGE>

      third party beneficiary of the terms and conditions of this Section 35.

            IN WITNESS WHEREOF, the Participants have caused this Co-Tenancy
      Agreement to be executed as of this 23rd, day of March, 1976.

                               UNITED STATES OF AMERICA

                               By /s/ Authorized Signatory
                                  ----------------------------------------------
                                  Assistant Secretary of the Interior

                               ARIZONA PUBLIC SERVICE COMPANY

                               By /s/ M.C. Titus
                                  ----------------------------------------------
                                  Executive Vice President

ATTEST:

/s/ Gerald Griffin
-------------------------------
Assistant Secretary


                               DEPARTMENT OF WATER AND POWER
                               OF THE CITY OF LOS ANGELES

                                          by


                               BOARD OF WATER AND POWER COMMISSIONERS
                               OF THE CITY OF LOS ANGELES


By: /s/ Ralph Guy Wesson       By /s/ Louis H. Winnard
    ------------------------      ----------------------------------------------
        Ralph Guy Wesson              General Manager and Chief Engineer
    Assistant City Attorney

                                                     and

                               By /s/ Mary J. Born
                                  ----------------------------------------------
                                                  Secretary

                                      -69-
<PAGE>

                               NEVADA POWER COMPANY

                               By /s/ Harry Allen
                                  ----------------------------------------------
                                                  President

ATTEST:

/s/ W.E. Littler
-------------------------------
      ASSISTANT Secretary

                               SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
                               POWER DISTRICT

                               By /s/ Floyd N. Smith
                                  ----------------------------------------------
                                                  President

ATTEST:

/s/ Francis E. Smith
-------------------------------
           Secretary

                               TUCSON GAS & ELECTRIC COMPANY

                               By /s/ Hamilton R. Catlin
                                  ----------------------------------------------

ATTEST:

/s/ R.N. Foster
-------------------------------
           Secretary

District of           )
                      )  ss
Columbia              )

      On this the 25th day of March, 1972, before me, the undersigned officer,
the Assistant Secretary of the Interior of the United States of America, known
to me to be

                                      -70-

<PAGE>

the person described in the foregoing instrument, personally appeared and
acknowledged that he executed the same in the capacity therein stated and for
the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                               /s/ Theodore M. Kilby
                               -------------------------------------------------
                               Notary Public

My commission expires:
Sept, 30, 1973

State of Arizona      )
                      ) ss
County of Maricopa    )

      On this the 2nd day of March, 1972, before me, the undersigned
officer, personally appeared M. C. TITUS, who acknowledged himself to be the
Executive Vice President of ARIZONA PUBLIC SERVICE COMPANY, an Arizona
corporation, and that he, as such Executive Vice President, being authorized so
to do, executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as Executive Vice President.

      In witness whereof I hereunto set my hand and official seal.

                               /s/ Melba J. Andrews
                               -------------------------------------------------
                               Notary  Public

My commission expires:
March 30, 1973

                                      -71-
<PAGE>

State of California     )
                        ) ss
County of Los Angeles   )

      On this the 23rd day of March, 1976, before me, the undersigned officer,
personally appeared LOUIS H. WINNARD and MARY J. BQRN, who were on March 23,
1976, the General Manager and Chief Engineer and Board Secretary, respectively,
of the DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, a department
organized and existing under the Charter of the City of Los Angeles, a municipal
corporation of the State of California, known to me to be the persons described
in the foregoing instrument, and acknowledged that they executed the same in the
capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                               /s/ Linda L. Newman
                               -------------------------------------------------
                                           Notary Public

My commission expires:                                  OFFICIAL SEAL
   May 27, 1997                                       LINDA L. NEWMAN
                                        [SEAL]     NOTARY PUBLIC CALIFORNIA
                                                     PRINCIPAL OFFICE IN
                                                     LOS ANGELES COUNTY
                                        My Commission Expires May 27, 1977

State of Nevada    )
                   ) ss
County of Clark    )

      On this the 7th day of March, 1972, before me, the undersigned officer,
personally appeared

                                      -72-
<PAGE>

Harry Allen, known to me to be the President of NEVADA POWER COMPANY, a
Nevada corporation, and that he, as such, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing
the name of the corporation by himself as _____________.

      In witness whereof, I hereunto set my hand and official seal.

                               /s/ Authorized Signatory
                               ------------------------------------------------
                                               Notary Public

My commission expires:

______________________


State of Arizona        )
                        )  ss
County of Maricopa      )

      On this the 6th day of March, 1972, before me, the undersigned officer,
personally appeared FLOYD N. SMITH and FRANCIS E. SMITH, of SALT RIVER PROJECT
AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an Arizona agricultural improvement
district, known to me to be the persons described in the foregoing instrument,
and acknowledged that they executed the same in the capacity therein stated and
for the

                                      -73-

<PAGE>

purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                               /s/ Authorized Signatory
                               -------------------------------------------------
                                               Notary Public

My commission expires:

My Commission Expires July 11, 1972



State of Arizona   )
                   )  ss
County of Pima     )

      On this the 3rd day of March, 1972, before me, the undersigned officer,
personally appeared Hamilton R. Catlin, who acknowledged himself to be
the___________________________ of TUCSON GAS ELECTRIC COMPANY, an
Arizona corporation, and that he, as such _____________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as such
____________________.

      In witness whereof, I hereunto set my hand and official seal.

                               /s/ Diane Howland
                               -------------------------------------------------
                                              Notary Public

My commission expires:
December 8, 1972
----------------------

                                      -74-
<PAGE>

                                    EXHIBIT A

                            NAVAJO GENERATING STATION

      The Navajo Generating Station shall consist of the following:

      I. Three steam electric generating units (Unit 1, Unit 2 and Unit 3), each
of which shall have a nameplate rating of 750,000 kw and shall be a
tandem-compound, four flow, single reheat, turbine-generator unit with initial
steam conditions of 3500 psig and 1000 degrees F and reheat to 1000 degrees F,
including three pulverized coal-fired, supercritical steam generator units.

      II. All auxiliary equipment associated with said units.

      III. An administration building, machine shop and warehouse to be located
adjacent to the powerplant.

      IV. A pumping station and all associated equipment to be located on the
Colorado River.

      V. 500 kv step-up transformers and all equipment associated therewith up
to the point where the leads from the said transformers terminate at the
generator isolating 500 kv disconnect switch structures in the Navajo 500 kv
Switchyard.

      VI. Standby auxiliary Power transformation equipment and related
facilities.

      VII. Plant control and communication facilities and associated buildings
or equipment.

<PAGE>

      VIII. Railroad approximately 80 miles in length extending from within the
Rail Loading Site into the Navajo Plant Site, rolling stock, related facilities
and equipment.

      IX. All improvements owned by the Co-Tenants within the Ash Disposal Area,
Pumping Plant Site and Rail Loading Site.

      X. All land and land rights acquired under the Indenture of Lease, the
Section 323 Grants and the Contract and Grant of Easement from the United States
for Water Intake and Discharge Facilities.

                                       A-2

<PAGE>

                                    Exhibit B

                              TRANSMISSION SYSTEM*

I.    The SOUTHERN TRANSMISSION SYSTEM shall consist of the following Components
      of the Transmission System:

      A. NAVAJO 500 KV SWITCHYARD

                  The Navajo 500 kv Switchyard, a basic breaker-and-a-half
                  scheme, comprising the termination facilities for the
                  transmission lines and generator step-up transformer 500 kv
                  leads including, but not limited to, the 500 kv busses, power
                  circuit breakers, disconnect switches, control building and
                  structures.

      B. McCULLOUGH LINE COMPENSATION

                  The Project Series Capacitors, Incremental Series Capacitors
                  and shunt reactors on the Navajo 500 kv Switchyard end of the
                  Navajo-McCullough 500 kv line including, but not limited to,
                  the capacitors, control equipment, reactors, lightning
                  arrestors, hazard fencing, disconnects, structures and bus
                  work from the switchyard side of the first 500 kv line
                  dead-end tower located

----------
*     For details of ownership, see Exhibit B-B which is made a part hereof.

                                       B-1

<PAGE>

                  outside the switchyard to the attachment on the main
                  switchyard structure.

      C. NAVAJO-MOENKOPI 500 KV LINE

            1.    The Navajo-Moenkopi 500 kv line, from and including the first
                  500 kv line dead-end tower outside the Navajo 500 kv
                  Switchyard to a similar tower location outside the Moenkopi
                  Switchyard and the Navajo-Moenkopi 500 kv line right-of-way.

            2.    The Project Series Capacitors on the Navajo 500 kv Switchyard
                  end of the Navajo-Moenkopi 500 kv line including, but not
                  limited to, the capacitors, control equipment, lightning
                  arrestors, hazard fencing, disconnects, structures and bus
                  work from the switchyard side of the first 500 kv line
                  dead-end tower located outside the switchyard to the
                  attachment on the main switchyard structure.

      D. NAVAJO-WESTWING 500 KV LINE

            1.    The Navajo-Westwing 500 kv line, from and including the first
                  500 kv line dead-end tower outside the Navajo 500 kv
                  Switchyard to a similar tower location outside the Westwing
                  Substation and the Navajo-Westwing 500 kv line right-of-way.

            2.    The Project Series Capacitors and shunt

                                      B-2
<PAGE>

                  reactors on the Navajo 500 kv Switchyard end of the
                  Navajo-Westwing 500 kv line including, but not limited to, the
                  capacitors, control equipment, reactors, lightning arrestors,
                  hazard fencing, disconnects, structures and bus work from the
                  switchyard side of the first 500 kv line dead-end tower
                  located outside the switchyard to the attachment on the main
                  switchyard structure.

            3.    The Project Series Capacitors and shunt reactors on the
                  Westwing 500 kv Substation end of the Navajo-Westwing 500 kv
                  line including, but not limited to, the capacitors, control
                  equipment, reactors, lightning arrestors, hazard fencing,
                  disconnects, structures and bus work from the substation side
                  of the first 500 kv line dead-end tower located outside the
                  substation to the attachment on the main substation structure.

      E. MOENKOPI-WESTWING 500 KV LINE

            1.    The Moenkopi-Westwing 500 kv line, from and including the
                  first 500 kv line dead-end tower outside the Moenkopi
                  Switchyard to a similar tower location outside the Westwing
                  Substation and the Moenkopi-Westwing 500 kv line right-of-way.

                                       B-3

<PAGE>

            2.    The Project Series Capacitors and shunt reactors on the
                  Westwing 500 kv Substation end of the Moenkopi-Westwing 500 kv
                  line including, but not limited to, the capacitors, control
                  equipment, reactors, lightning arrestors, hazard fencing,
                  disconnects, structures and bus work from the substation side
                  of the first 500 kv line dead-end tower located outside the
                  substations to the attachment on the main substation
                  structure.

      F. OTHER ASSOCIATED COMPONENTS

            1.    The additions to the Moenkopi Switchyard comprising the
                  terminal facilities for the Navajo-Moenkopi and the
                  Moenkopi-Westwing 500 kv lines and the additions to the
                  terminal facilities for the Four Corners-Moenkopi and
                  Moenkopi-Eldorado 500 kv lines including, but not limited to,
                  the additional 500 kv busses, power circuit breakers,
                  disconnect switches, and structures.

            2.    The Project Series Capacitors on the Moenkopi Switchyard end
                  of the Navajo-Moenkopi 500 kv line including, but not limited
                  to, the capacitors, control equipment, hazard fencing,
                  disconnects, structures and bus work from the switchyard side
                  of the first 500 kv line

                                      B-4
<PAGE>

                  dead-end tower located outside the switchyard to the
                  attachment on the main switchyard structure.

            3.    The Project Series Capacitors and shunt reactors on the
                  Moenkopi Switchyard end of the Moenkopi-Westwing 500 kv line
                  including, but not limited to, the capacitors, control
                  equipment, reactors, lightning arrestors, hazard fencing,
                  disconnects, structures, and bus work from the switchyard side
                  of the first 500 kv line dead-end tower located outside the
                  switchyard to the attachment on the main switchyard structure.

            4.    The Project Series Capacitors and Incremental Series
                  Capacitors on the Moenkopi Switchyard end of the
                  Moenkopi-Eldorado 500 kv line including, but not limited to,
                  the capacitors, control equipment and structures.

            5.    The Project Series Capacitors on the Moenkopi Switchyard end
                  of the Four Corners-Moenkopi 500 kv line including, but not
                  limited to, the capacitors, control equipment and structures.

            6.    The Project Series Capacitors on the Four Corners Switchyard
                  end of the Four Corners-Moenkopi 500 kv line including, but
                  not limited to, the capacitors, control equipment

                                      B-5
<PAGE>

                  and structures.

            7.    The four new series capacitor installations on both ends of
                  both of Arizona's Cholla-Pinnacle Peak 345 kv lines
                  including, but not limited to, the capacitors, control
                  equipment, hazard fencing, disconnects, structures and bus
                  work.

            8.    All the communications facilities necessary to control the
                  Southern Transmission System including such facilities located
                  at Navajo 500 kv Switchyard, Moenkopi Switchyard or Westwing
                  Substation.

      G. WESTWING SUBSTATION

            1.    The Westwing 500 kv Switchyard, a basic breaker-and-a-half
                  scheme, comprising termination facilities for the
                  Moenkopi-Westwing 500 kv line, Navajo-Westwing 500 kv line,
                  500/230 kv transformer banks, and 500/345 kv transformer bank
                  including, but not limited to, the 500 kv busses, power
                  circuit breakers, metering transformers, disconnect switches,
                  control building, structures, and related land and land
                  rights.

            2.    The Westwing Substation 2-1332 MVA 500/230 kv transformer
                  banks and spare 444 MVA 500/230 kv transformer to be located
                  within the

                                      B-6
<PAGE>

                  boundaries of the Westwing 500 kv Switchyard and the equipment
                  associated therewith including, but not limited to,
                  foundations, structures, insulators and hardware, transformer
                  leads from 500 kv bushings to points of termination on the
                  attachments to the 500 kv switchyard structure, and 230 kv
                  leads up to the point of attachment where the 230 kv lines
                  from adjacent facilities attach to the transformer dead-end
                  tower.

            3.    The Westwing Substation 600 MVA 500/345 kv transformer bank
                  and spare 200 MVA 500/345 kv transformer to be located within
                  the boundaries of the Westwing 500 kv Switchyard and the
                  equipment associated therewith including, but not limited to,
                  foundations, structures, insulators and hardware, transformer
                  leads from the 500 kv bushing to points of termination on the
                  attachments to the 500 kv switchyard structure, and 345 kv
                  leads up to the points of attachment where the 345 kv lines
                  from adjacent facilities attach to the transformer dead-end
                  towers.

            4.    The Westwing 230 kv Switchyard, a basic breaker-and-a-half
                  scheme, comprising termination facilities for the two 500/230
                  kv

                                      B-7
<PAGE>

                  transformer banks,two Arizona 230 kv lines, two Salt River 230
                  kv lines, and two United States 230 kv lines to be installed
                  at a later date (see Exhibit B-B, Sheet 2), including, but not
                  limited to, the 230 kv busses, Power circuit breakers,
                  metering transformers, disconnect switches, structures,
                  insulators and hardware, 230 kv leads between points of
                  attachment on the transformer dead-end towers to the main
                  switchyard structures, and 230 kv leads up to the points of
                  attachment where the 230 kv transmission lines attach to the
                  main switchyard structures.

II.   The WESTERN TRANSMISSION SYSTEM shall consist of the following Components
      of the Transmission System:

      A. McCULLOUGH SUBSTATION

         The McCullough Substation shall consist of the following components:

            1.    The 500 kv switchyard, a basic breaker-and-a-half scheme,
                  comprising the termination facilities for the 500/287 kv
                  transformer bank, the Navajo-McCullough 500 kv line,
                  McCullough-Eldorado 500 kv line, and the
                  McCullough-Victorville 500 kv line including, but not limited
                  to, the 500 kv busses, power circuit breakers and disconnect
                  switches and the structures therefor.

                                       B-8

<PAGE>

            2.    The common facilities including, but not limited to, control
                  building, station communications equipment, protection
                  equipment controls, batteries, auxiliary equipment, station
                  grounding grid, lighting and yard improvements, but shall not
                  include the related land and land rights.

      B. NAVAJO-McCULLOUGH 500 KV LINE

            1.    The Navajo-McCullough 500 kv line, from and including the
                  first 500 kv line dead-end tower located outside the Navajo
                  500 kv Switchyard to a similar tower location outside the
                  McCullough Switchyard, including the Navajo-McCullough 500 kv
                  line right-of-way and any midpoint Project Series Capacitors,
                  Incremental Series Capacitors, shunt reactors and associated
                  equipment as may be required.

            2.    The Project Series Capacitors and Incremental Series
                  Capacitors and shunt reactors on the McCullough 500 kv
                  Switchyard end of the Navajo-McCullough 500 kv line
                  including, but not limited to, the capacitors, control
                  equipment, reactors, lightning arrestors, hazard fencing,
                  disconnects, structures and bus work from the switchyard side
                  of the first 5.00 kv line dead-end tower located outside the
                  switchyard to the attachment on the main switchyard structure.

                                       B-9

<PAGE>

      C. WESTERN TRANSMISSION COMMUNICATIONS SYSTEM

                  All the communications facilities necessary to control the
                  Western Transmission System. The ownership of these
                  communications facilities shall be provided for in a separate
                  communications facilities agreement.

                                      B-10

<PAGE>


                               EXHIBIT B B SHEET 1
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

<PAGE>
                              EXHIBIT B-B SHEET 2

                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                           WESTWING 230 KV SWITCHYARD

                      [WESTWING 230 KV SWITCHYARD CRART]

                                    OWNERSHIP

<TABLE>
<CAPTION>
                                         Prior to
                                       utilization       After
                                        by the US     utilization
                                        of the US     by US of the
                                        Reserved       US Reserved
                                        Positions      Positions
                                       -----------    ------------
<S>                                    <C>            <C>
SRP for its own use and benefit               44.9%           36.1%

APS                                           39.9%           32.1%

SRP for use and benefit of US                 15.2%           31.8%
                                              ----            ----
                                               100%            100%
</TABLE>

United States shall have 100 percent cost responsibility for terminal facilities
to be installed in the United States' Reserved Position. Such facilities shall
be Capital Improvements and the installation thereof shall not require
Transmission Engineering & Operating Committee approval.

<PAGE>

                                    Exhibit C

                                 NAVAJO PROJECT

                           GENERAL CONTRACT PROVISIONS

1.    OFFICIALS NOT TO BENEFIT: No Member of or Delegate to Congress or Resident
      Commissioner shall be admitted to any share or part of this agreement or
      to any benefit that may arise herefrom, but this restriction shall not be
      construed to extend to this agreement if made with a corporation or
      company for its general benefit.

2.    COVENANT AGAINST CONTINGENT FEES: The non-Federal Participants warrant
      that no person or selling agency has been employed or retained to solicit
      or secure this agreement upon an agreement or understanding for a
      commission, percentage, brokerage, or contingent fee, excepting bonafide
      employees or bona fide established commercial or selling agencies
      maintained by a non-Federal Participant for the purpose of securing
      business. For breach or violation of this warranty the United States shall
      have the right to annul this agreement without liability or in its
      discretion to deduct from the payments to be made hereunder, or otherwise
      recover the full amount of such commission, percentage, brokerage or
      contingent fee.

3.    EQUAL OPPORTUNITY CLAUSE:

            3.1 Except as provided in Title 42 U.S.C. Section 2000-e-2(i) and in
      keeping with any obligation undertaken by any of the non-Federal
      Participants, in this section

                                       C-1

<PAGE>

      referred to as the Contractor, or their assigns, pursuant to the terms of
      said Title 42 U.S.C. Section 2000-e-2(i) to give preference for employment
      to qualified Indians for work on or near an Indian Reservation, during the
      performance of this agreement, the Contractor agrees as follows:

                  3.1.1 The Contractor will not discriminate against any
            employee or applicant for employment because of race, color,
            religion, sex or national origin. The Contractor will take
            affirmative action to insure that applicants are employed, and that
            employees are treated during employment, without regard to their
            race, color, religion, sex or national origin. Such action shall
            include, but not be limited to the following: Employment,
            upgrading, demotion or transfer; recruitment or recruitment
            advertising; layoff or termination; rates of pay or other forms of
            compensation; and selection for training, including apprenticeship.
            The Contractor agrees to post in conspicuous places available to
            employees and applicants for employment, notices to be provided by
            the Contracting Officer setting forth the provisions of this equal
            opportunity clause.

                  3.1.2 The Contractor will, in all solicitations or
            advertisements for employees placed by or on behalf of the
            Contractor, state that all qualified applicants will receive
            consideration for employment without regard to race, color,
            religion, sex or national origin.

                                       C-2
<PAGE>
            3.1.3 The Contractor will send to each labor union or representative
      of workers with which it has a collective bargaining agreement or other
      contract or understanding, a notice to be provided by the agency
      contracting officer advising the labor union or workers' representative of
      the Contractor's commitments under this equal opportunity clause, and
      shall post copies of the notice in conspicuous places available to
      employees and applicants for employment.

            3.1.4 The Contractor will comply with all provisions of Executive
      Order No. 11246 of September 24, 1965, and of the rules, regulations and
      relevant orders of the Secretary of Labor.

            3.1.5 The Contractor will furnish all information and reports
      required by Executive Order No. 11246 of September 24, 1965, and by the
      rules, regulations and orders of the Secretary of Labor, or pursuant
      thereto, and will permit access to its books, records and accounts by the
      contracting agency and the Secretary of Labor for purposes of
      investigation to ascertain compliance with such rules, regulations and
      orders.

            3.1.6 In the event of the Contractor's non-compliance with this
      equal opportunity clause, or with any of the said rules, regulations or
      orders, this agreement may be cancelled, terminated or suspended in whole
      or in part and the Contractor may be declared

                                      C-3
<PAGE>

      ineligible for further government contracts in accordance with procedures
      authorized in Executive Order No, 11246 of September 24, 1965, and such
      other sanctions may be imposed and remedies invoked as provided in
      Executive Order No. 11246 of September 24, 1965, or by rule, regulation or
      order of the Secretary of Labor, or as otherwise provided by law.

                  3.1.7 The Contractor will include the provisions of Sections
      3.1.1 through 3.1.7 hereof in every subcontract or purchase order unless
      exempted by rules, regulations or orders of the Secretary of Labor issued
      pursuant to Section 204 of Executive Order No. 11246 of September 24,
      1965, so that such provisions will be binding upon each subcontractor or
      vendor. The Contractor will take such action with respect to any
      subcontract or purchase order as the contracting agency may direct as a
      means of enforcing such provisions, including sanctions for
      non-compliance; provided, however, that in the event the Contractor
      becomes involved in, or is threatened with, litigation with a
      subcontractor or vendor as a result of such direction by the contracting
      agency, the Contractor may request the United States to enter into such
      litigation to protect the interests of the United States.

                                      C-4
<PAGE>

4. WORK HOURS ACT OF 1962:

                  4.1 This agreement, to the extent that it is of a character
      specified in the Contract Work Hours Standards Act (Public Law 87-581, 76
      Stat. 357) and is not covered by the Walsh-Healey Public Contracts Act (41
      U.S.C. Sections 35-45), is subject to the following provisions and to all
      other provisions and exceptions of said Contract Work Hours Standards Act:

                        4.1.1 No Contractor or subcontractor contracting for any
            part of the contract work which may require or involve the
            employment of laborers or mechanics shall require or permit any
            laborer or mechanic in any workweek in which he is employed on such
            work, to work in excess of eight (8) hours in any calendar day or in
            excess of forty (40) hours in any workweek unless such laborer or
            mechanic receives compensation at a rate not less than one and
            one-half times his basic rate of pay for all hours worked in excess
            of eight (8) hours in any calendar day or in excess of forty (40)
            hours in such workweek, whichever is the greater number of overtime
            hours.

                        4.1.2 In the event of any violation of the provisions of
            Section 4.1.1 hereof, the Contractor and any subcontractor
            responsible for such violation shall be liable to any affected
            employee for his unpaid wages. In addition, such Contractor or

                                      C-5
<PAGE>

            subcontractor shall be liable to the United States for liquidated
            damages. Such liquidated damages shall be computed, with respect to
            each individual laborer or mechanic employed in violation of the
            provisions of Section 4.1.1 hereof, in the sum of Ten Dollars
            ($10.00) for each calendar day on which such employee was required
            or permitted to work in excess of eight (8) hours or in excess of
            forty (40) hours in a workweek without payment of the required
            overtime wages

                        4.1.3 The Secretary of Labor may withhold, or cause to
            be withheld, from any monies payable on account of work performed by
            the Contractor or subcontractor, the full amount of wages required
            by this agreement, and such sums as may administratively be
            determined to be necessary to satisfy any liabilities of such
            Contractor or subcontractor for liquidated damages as provided in
            Section 4.1.2 hereof.

                        4.1.4 The Contractor shall require the foregoing
            Sections 4.1.1, 4.1.2, 4.1.3 and this 4.1.4 to be inserted in all
            subcontracts.

5.    EXAMINATION OF RECORDS: The non-Federal Participants agree that the
      Comptroller General of the United States, or any of his duly authorized
      representatives, shall, until the expiration of three (3) years after
      final payment under the Project Agreements, have access to and the right
      to examine any directly pertinent books, documents,

                                      C-6
<PAGE>

      papers and records of the non-Federal Participants involving transactions
      related to this agreement.

6.    ASSIGNMENT OF CLAIMS:

                  6.1 Pursuant to the provisions of the Assignment of Claims Act
      of 1940, as amended (31 U.S.C. Section 203, 41 U.S.C Section 15), if this
      agreement provides for payments aggregating $1,000 or more, claims for
      monies due or to become due any non-Federal Participant from the
      Government under this agreement may be assigned to a bank, trust company,
      or other financing institution, including any Federal lending agency, and
      may thereafter be further assigned and reassigned to any such institution.
      Any such assignment or reassignment shall cover all amounts payable under
      this agreement and not already paid, and shall not be made to more than
      one party, except that any such assignment or reassignment may be made to
      one party as agent or trustee for two or more parties participating in
      such financing. Unless otherwise provided in this agreement, payments to
      an assignee of any monies due or to become due under this agreement shall
      not, to the extent provided in said Act, as amended, be subject to
      reduction or setoff. (The preceding sentence applies only if this
      agreement is made in time of war or national emergency as defined in said
      Act and is with the Department of Defense, the General Services
      Administration, the Atomic Energy Commission, the National Aeronautics and
      Space Administration, the

                                      C-7
<PAGE>

      Federal Aviation Agency, or any other department or agency of the United
      States designated by the President pursuant to Clause 4 of the proviso of
      Section 1 of the Assignment of Claims Act of 1940, as amended by the Act
      of May 15, 1951, 65 Stat. 41.)

                  6.2 In no event shall copies of this agreement or of any
      plans, specifications, or other similar documents relating to work under
      this agreement, if marked "Top Secret," "Secret," or "Confidential," be
      furnished to any assignee of any claim arising under this agreement or to
      any other person not entitled to receive the same. However, a copy of any
      part or all of this agreement so marked may be furnished, or any
      information contained therein may be disclosed, to such assignee upon the
      prior written authorization of the Contracting Officer.

7.    CONVICT LABOR: In connection with the performance of work under this
      agreement, the non-Federal Participants agree not to employ any person
      undergoing sentence of imprisonment at hard labor.

8.    AGREEMENT SUBJECT TO COMPACTS, ACTS AND TREATY: This Agreement is made
      upon the express conditions and with the express understanding that all
      rights hereunder shall be subject to and controlled by the applicable
      provisions of the Colorado River Compact dated November 24, 1922, and
      proclaimed by the President of the United States June 25, 1929, the
      Boulder Canyon Project Act approved December 21,

                                      C-8
<PAGE>

      1928, the Boulder Canyon Project Adjustment Act of July 19, 1940, the
      Upper Colorado River Basin Compact dated October 11, 1948, and the Mexican
      Water Treaty of February 3, 1944.

                                      C-9
<PAGE>

                                   CERTIFICATE

      I, GERALD J. GRIFFIN, certify that I am an Assistant Secretary of ARIZONA
PUBLIC SERVICE COMPANY, the corporation named herein; that M. C. TITUS, who
signed the attached contract on behalf of said corporation was then its
Executive Vice President; that said contract was duly signed for and in behalf
of said corporation by authority of its governing body and is within the scope
of its corporate powers.

                                                 /s/ Gerald J. Griffin
                                        ----------------------------------------
                                                  Assistant Secretary


<PAGE>

                          CERTIFIED COPY OF RESOLUTION

      I, GERALD J. GRIFFIN, Assistant Secretary of ARIZONA PUBLIC SERVICE
COMPANY, an Arizona corporation, HEREBY CERTIFY that, at a meeting of the Board
of Directors of said Company, duly convened and held on August 21, 1969, at
which a quorum was present and acting throughout, the following resolution was
adopted and is now in full force and effect:

            RESOLVED, that the Board of Directors approves and ratifies the
      action of the officers in negotiating and carrying forward the proposal
      for the participation by the Company, along with others, in the so-called
      Navajo Project, involving the construction near Page, Arizona, of three
      generating units (presently estimated at 750 MW nameplate), with ownership
      being held as tenants in common in the following respective undivided
      interests:

<TABLE>
<S>                                                  <C>
Arizona Public Service Company                       14.0%
Tucson Gas & Electric Company                         7.5%
City of Los Angeles                                  21.2%
Nevada Power Company                                 11.3%
Salt River Project Agricultural Improvement
 and Power District
       (For ITSELF)                                  21.7%
       (As Agent for U.S.B.R.)                       24.3%
</TABLE>

      the said Project to include certain transmission facilities to be located
      in Arizona, with APS to be the Project Manager and Operating Agent for
      said facilities, which are to be owned by APS and others as joint tenants
      in various percentages related to projected use, these facilities
      including a 500 kv line from the switchyard of the llavajo Plant near Page
      to the Moenkopi Switching Station and from there to the Westwing
      switchyard year Phoenix, and with another 500 kv line extending directly
      from the Navajo switchyard to West-wing, together with various related
      interconnections and switching facilities; and

            FURTHER RESOLVED, that in connection with the Navajo Project, the
      appropriate officers of the Company be, and they are hereby authorized to
      negotiate and to execute and effectuate the necessary instruments and
      agreements, including among others, the following:

<PAGE>

                   (1)  Participation Agreement

                   (2)  Coordination Agreement

                   (3)  Interconnection Agreement

                   (4)  Plant Site Lease

                   (5)  Fuel Supply and Transportation Agreement

                   (6)  Co-Tenancy Agreement

                   (7)  Moenkopi Agreement

                   (8)  Amendment to Navajo Wholesale Power Agreement

                   (9)  Plant Construction Agreement

                  (10)  Plant Operating Agreement

                  (11)  Transmission Construction Agreement

                  (12)  Transmission Operating Agreement

                  (13)  Applications for Various Rights-of-Way and Easements

                  (14)  Layoff Agreement

      and

            FURTHER RESOLVED, that the appropriate officers of the Company are
      authorized to take such actions and to execute such further agreements,
      instruments, applications, certificates, contracts or other documents as
      may be necessary or appropriate in connection with the foregoing to
      complete and effectuate the Company's proposed participation in the Navajo
      Project.

      IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
corporation this 1st day of March, 1972.

                                                     /s/ Gerald J. Griffin
                                             -----------------------------------
                                                       Assistant Secretary


<PAGE>


                                  CERTIFICATION

      I, the undersigned, being the duly elected Assistant Secretary of Nevada
Power Company, certify and declare that the following is a true and correct copy
of a resolution adopted by the Executive Committee at its meeting held October
23, 1969 at which a quorum was present and acting throughout:

      RESOLVED: That the officers of the Company are hereby authorized to sign
      all contracts necessary to proceed-with the Company's proposed
      participation in the Navajo Project, to take the necessary action to
      qualify to do business in the State of Arizona and to take any other steps
      necessary or incidental thereto.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of this corporation this 7th day of March, 1972.

                                                /s/ W. E. Littler
                                                -----------------------------
                                                W. E. Littler
                                                Assistant Secretary

(SEAL)

<PAGE>

                                   CERTIFICATE

      I, W. E. Littler, certify that I am the Assistant Secretary of the Nevada
Power Company, a corporation named herein; that Harry Allen who signed the
attached contract on behalf of said corporation was then its President; that
said contract was duly signed for and in behalf of said corporation by authority
of its governing body, as per certified copy of attached resolution, and is
within the scope of its corporate powers.

                                             /s/ W. E. Littler
                                             -----------------------------------
                                             W. E. Littler
                                             Assistant Secretary

<PAGE>

                                   RESOLUTION

      WHEREAS, the SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
DISTRICT (herein called Salt River Project) has determined that it is in Salt
River Project's best interest to participate with ARIZONA PUBLIC SERVICE
COMPANY, DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, NEVADA POWER
COMPANY, the UNITED STATES OF AMERICA, and TUCSON GAS AND ELECTRIC COMPANY
(collectively herein called "Other Participants") in the Navajo Project
consisting of three 750,000 kilowatt thermal electric generating units together
with their Common and Related Facilities to be constructed near Page, Arizona,
and the Navajo Transmission System, and

      WHEREAS, Salt River Project and the Other Participants entered into the
Navajo Project Participation Agreement on September 30, 1969, which provides the
basic principles for their participation in the Navajo Project, and

      WHEREAS, for Salt River Project to effect such participation must make,
execute and deliver the Navajo Project Co-Tenancy Agreement, by and between Salt
River Project and the Other Participants, pursuant to which the rights and
interests of all the Participants in and to the Navajo Project shall be set
forth and established.

      NOW, THEREFORE, BE IT HEREBY RESOLVED that the Board of Directors of Salt
River Project has and does hereby approve the Navajo Project Co-Tenancy
Agreement and does hereby authorize, empower, and direct that the President or
Vice President and Secretary or Assistant Secretary make, execute and deliver
the Navajo Project Co-Tenancy Agreement for and on behalf of the Salt River
Project.

                                   CERTIFICATE

I, F. E. Smith, the duly appointed, qualified and acting Secretary of the Salt
River Project Agricultural Improvement and Power District, HEREBY CERTIFY that
the foregoing is a true and complete copy of a resolution adopted by the Board
of Directors of said District at a meeting thereof duly held on the 6th day of
March 1972, at which meeting a quorum was present and voted.

WITNESS my hand and seal of Salt River Project Agricultural Improvement and
Power District this 6th day of March 1972.

                                                    /s/ F. E. Smith
                                                    ----------------------------
                                                    F. E. Smith, Secretary

<PAGE>

                         TUCSON GAS & ELECTRIC COMPANY

                         Certified Copy of Resolutions
                       Adopted by the Board of Directors

      RESOLVED, that the proper officers of the Company be, and they hereby are
authorized to enter into a Participation Agreement between the United States of
America, Arizona Public Service Company, Department of Water and Power of the
City of Los Angeles, Nevada Power Company, Salt River Project Agricultural
Improvement and Power District and Tucson Gas & Electric Company for the
ownership of the Navajo Project wherein Tucson Gas & Electric Company shall own
an undivided 7-1/2% interest in the Navajo Generating Station and varying
percentage interests in the transmission system. The Agreement shall be
substantially in the form of the draft filed with the Secretary of the Company
marked "Filed September 23, 1969 with the Secretary of Tucson Gas & Electric
Company", and be it

      FURTHER RESOLVED, that the proper officers of the Company be, and they
hereby are further authorized to execute and enter into on behalf of the Company
the necessary Project Agreements contemplated by said Participation Agreement,
and such other documents reasonably required to implement said Participation
Agreement and Project Agreements.

                            * * * * * * * * * * * *

      I, W. D. BROOKS, Assistant Secretary of TUCSON GAS & ELECTRIC COMPANY
(hereinafter called the "Company"), DO HEREBY CERTIFY that the above and
foregoing is a true and complete copy of resolutions duly adopted by the Board
of Directors at the Regular Monthly Meeting held on the 23rd day of September,
1969, at which meeting a quorum was present and acted thereon; and

      I DO FURTHER CERTIFY that said resolutions are in full force and effect on
the date hereof.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 3rd day of March, 1972.

                                                       /s/ Authorized Signatory
                                                       ------------------------
<PAGE>

                                                              RESOLUTION NO. 556

      WHEREAS, Resolution No. 610 adopted by the Board on March 9, 1972,
approved the transmittal of the following agreements to the City Council for
approval by ordinance, which approval was subsequently withheld by the Council:

<TABLE>
<CAPTION>
     Agreement Title                  DWP Number
-------------------------             ----------
<S>                                   <C>
Navajo Project Co-Tenancy
   Agreement                             10498

Navajo Generating Station
   Construction Agreement                10499

Navajo Project Western
   Transmission System
   Construction Agreement                10500

Navajo Project Southern
   Transmission System
   Construction Agreement                10501
</TABLE>

      and WHEREAS, Resolution No. 978, adopted by this Board on May 31, 1973,
transmitted the above-mentioned agreements to the City Council for approval by
ordinance, which approval was adopted, and subsequently disapproved by Mayor Tom
Bradley on July 26, 1973; and

      WHEREAS, the agreements listed above involve: (1) a legal instrument,
previously executed by the other Navajo Participants, to be recorded in the
State of Arizona which sets forth the Department's ownership rights in the
Navajo Project consisting of the Navajo Generating Station, the Southern
Transmission System, and the Western Transmission System (No. 10498); (2)
technical and financial provisions, previously executed by the other Navajo
Participants, for the construction of the Navajo Generating Station (No. 10499);
(3) technical and financial documents, previously executed by the Navajo
Participants, for the construction of the Southern and Western Transmission
Systems (No. 10500 and No. 10501); and

      WHEREAS, construction has been completed on Navajo Units 1 and 2, and
these units are in commercial operation and have been carrying system load since
February 1, 1974, and

<PAGE>

December 2, 1974, respectively; and Navajo Unit 3 is scheduled to carry system
load in December, 1975 and to begin commercial operation by April, 1976; and

      WHEREAS, construction has been completed on the Southern Transmission
System and it has been carrying Navajo power since February 1, 1974, and major
construction has been completed on the Western Transmission System and it has
been carrying Navajo Power since October 27, 1974; and

      WHEREAS, the following agreement supplements the environmental protection
section of the Navajo Project Co-Tenancy Agreement and requires: (1)an annual
environmental report, to be prepared by the Department, which will include a
review of advances in technology of equipment for the protection of the
environment and an analysis of the performance of the existing air quality
control equipment at the Navajo Generating Station; (2) such environmental
report to be made available to the public for their comments and suggestions;
and (3) the Navajo Participants to meet at least every three years to review
technological advances in air quality control equipment and the annual
environmental reports prepared by the Department including comments and
suggestions received from the interested public:

<TABLE>
<CAPTION>
     Agreement Title                  DWP Number
-------------------------             ----------
<S>                                   <C>
Supplement No. 1 to the Navajo
Project Co-Tenancy Agreement            10498S
</TABLE>

      WHEREAS, this Department requested that certain practices relating to the
use and occupancy of Navajo and Hopi Indian lands for mining be incorporated as
obligations in the coal contracts, relating to compensation for displaced Navajo
families, reclamation of leased premises, water monitoring program, and the
water supply to Navajo families; and

      WHEREAS, the Navajo Participants and Peabody Coal Company have agreed and
incorporated such obligations in the Amended Navajo Coal Supply Agreement to be
presented to this Board;

      NOW, THEREFORE, BE IT RESOLVED the above agreements, approved as to form
and legality by the City Attorney, and now on file with the Secretary of this
Board, be and the same are

                                      -2-
<PAGE>

hereby approved; and that this Board requests the City Council of The City of
Los Angeles, in accordance with Section 219.4 of the Charter of The City of Los
Angeles, to approve by ordinance the agreements hereinabove referred to and
identified, and to authorize this Board, in its discretion, to execute and enter
into said agreements, all of which relate to the Navajo Project, and following
such approval, the President or the Vice President or the General Manager and
Chief Engineer and the Secretary, Assistant Secretary or the Acting Secretary of
the Board be and they are hereby authorized and directed to execute said
agreements for and on behalf of this Department.

      I HEREBY CERTIFY that the foregoing is a full, true and correct copy of a
resolution adopted by the Board of Water and Power Commissioners of The City of
Los Angeles at its meeting held FEB-5 1976

                                                      /s/ Authorized Signatory
                                                      ------------------------
                                                              Secretary

                                      -3-
<PAGE>

                              Ordinance No. 148,153

                                  CERTIFICATION

STATE OF CALIFORNIA   )
                      ) ss.
COUNTY OF LOS ANGELES,)

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 148,153

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

on file in my office, and that I have carefully compared the same with the
original.

                                      IN WITNESS WHEREOF, I have hereunto set my
                                      hand and affixed the Seal of the City of
                                      Los Angeles, this 22nd day of March, 1976

                                      /s/ Rex E. Layton
                                      ------------------------------------------
                                      City Clerk of the City of Los Angeles

                                      By  /s/ Judy Pentland
                                          --------------------------------------
                                                         Deputy
                                          Judy Pentland

Form Clerk 22-5M-2-72 (R)
<PAGE>

                                 AMENDMENT NO. 1
                                     TO THE
                       NAVAJO PROJECT CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION      TITLE                                               PAGE
-------      -----                                               ----
<S>          <C>                                                 <C>
 1.          PARTIES                                               1
 2.          RECITALS                                              1
 3.          AGREEMENT                                             2
 4.          EFFECTIVE DATE                                        2
 5.          AMENDMENT TO SECTION 6.2.4                            2
 6.          AMENDMENT TO SECTION 8.5                              3
 7.          AMENDMENT TO EXHIBIT B-B                              4
 8.          CO-TENANCY AGREEMENT GOVERNS                          6
 9.          EXECUTION                                             6
10.          SIGNATURE CLAUSE                                      7
</TABLE>

                                      -i-

<PAGE>

                                 AMENDMENT NO. 1
                                     TO THE
                      NAVAJO PROJECT CO-TENANCY AGREEMENT

1.    PARTIES:

      The Parties ("Participants") to this Amendment No. 1 to the Navajo Project
      Co-Tenancy Agreement ("Amendment No. 1") are: THE UNITED STATES OF
      AMERICA, hereinafter referred to as the "United States," acting through
      the Secretary of the Interior, his duly appointed successor or his duly
      authorized representative; ARIZONA PUBLIC SERVICE COMPANY, an Arizona
      corporation, hereinafter referred to as "Arizona"; DEPARTMENT OF WATER AND
      POWER OF THE CITY OF LOS ANGELES, a department organized and existing
      under the Charter of the City of Los Angeles, a municipal corporation of
      the State of California, hereinafter referred to as "Los Angeles"; NEVADA
      POWER COMPANY, a Nevada corporation, hereinafter referred to as "Nevada";
      SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an
      agricultural improvement district organized and existing under the laws of
      the State of Arizona, hereinafter referred to as "Salt River Project"; and
      TUCSON ELECTRIC POWER COMPANY, formerly Tucson Gas & Electric Company, an
      Arizona corporation hereinafter referred to as "Tucson."

2.    RECITALS:

      This Amendment No. 1 is made with reference to the following facts, among
      others:

      2.1   On March 23, 1976, the Parties entered into the Navajo Project
            Co-Tenancy Agreement ("Co-Tenancy Agreement"), which established
            certain terms and conditions relating to their

<PAGE>

            interest in and their ownership of the Navajo Project and which
            established certain rights and obligations under the Project
            Agreements.

      2.2   By execution of this Amendment No. 1, the Parties desire to amend
            the Co-Tenancy Agreement to reflect the establishment of the
            Moenkopi Switchyard as a point of delivery for all Participants.

      2.3   The Parties further desire to amend the Co-Tenancy Agreement to
            reflect the proposed sale of Arizona's share of its rights, title
            and ownership in the Westwing Substation 600 MVA 500/345 kV
            transformer bank to Tucson.

3.    AGREEMENT:

      In consideration of the mutual benefits to be derived from this Amendment
      No. 1, the Participants agree as follows:

4.    EFFECTIVE DATE:

      This Amendment No. 1 shall become effective when it has been duly executed
      by all Participants.

5.    AMENDMENT TO SECTION 6.2.4:

      Section 6.2.4 of the Co-Tenancy Agreement is hereby deleted in its
      entirety and a new Section 6.2.4 is hereby substituted to read as follows:

      "6.2.4 Westwing Substation 600 MVA 500/345 kV transformer bank and
             transformer leads and spare 200 MVA 500/345 kV transformer and
             leads.

             (i) Tucson                              100%"

                                      -2-

<PAGE>

6.    AMENDMENT TO SECTION 8.5:

      Section 8.5 of the Co-Tenancy Agreement is hereby deleted in its entirety
      and a new Section 8.5 is hereby substituted to read as follows:

      "8.5 The Participants' designated points of delivery shall be as follows:

           8.5.1 Arizona            =  Navajo 500 kv Switchyard, Westwing
                                       Substation and the Moenkopi Switchyard.

           8.5.2 Los Angeles        =  Navajo 500 kV Switchyard, McCullough 500
                                       kV Switchyard and the Moenkopi
                                       Switchyard.

           8.5.3 Nevada             =  Navajo 500 kV Switchyard, McCullough 500
                                       kV Switchyard and the Moenkopi
                                       Switchyard.

           8.5.4 Salt River Project =  Navajo 500 kV Switchyard, Westwing
                                       Substation and the Moenkopi Switchyard.

           8.5.5 Tucson             =  Navajo 500 kV Switchyard, Westwing
                                       Substation and the Moenkopi Switchyard.

           8.5.6 United States      =  Navajo 500 kV Switchyard, McCullough 500
                                       kV Switchyard, Westwing Substation and
                                       the Moenkopi Switchyard."

                                      -3-

<PAGE>

7.    AMENDMENT TO EXHIBIT B-B:

      Exhibit B-B Sheet 1 of the Co-Tenancy Agreement is hereby deleted in its
      entirety and a new Exhibit B-B Sheet 1 is hereby substituted to read as
      follows:

                                      -4-
<PAGE>


                               EXHIBIT B B SHEET 1
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

                                      -5-

<PAGE>

8.    CO-TENANCY AGREEMENT GOVERNS:

      Except as provided in this Amendment No. 1, the provisions of the
      Co-Tenancy Agreement shall remain in full force and effect.

9.    EXECUTION:

      This Amendment No. 1 may be executed in any number of counterparts, and
      upon execution by all Participants, each executed counterpart shall have
      the same force and effect as an original instrument and as if all
      Participants had signed the same instrument. Any signature page of this
      Amendment No. 1 may be detached from any counterpart of this Amendment
      No. 1 without impairing the legal effect of any signatures thereon, and
      may be attached to another counterpart of this Amendment No. 1 identical
      in form thereto, but having attached to it one or more signature pages.

                                      -6-

<PAGE>

10.   SIGNATURE CLAUSE:

      The signatories hereto represent that they have been appropriately
      authorized to enter into this Amendment No. 1 on behalf of the
      Participants for whom they sign. This Amendment No. 1 is hereby executed
      as of the 5th day of July, 1988.

                                     THE UNITED STATES OF AMERICA

                                     By:/s/ John D. Brown
                                        ----------------------------------------

Approved as to Form:                 ARIZONA PUBLIC SERVICE COMPANY

By /s/ T.E. Parrish                  By /s/ Russell D. Hulse
   -----------------                 ----------------------------------------
   Date 6-6-88


                                     DEPARTMENT OF WATER AND POWER 0F THE CITY
                                     OF LOS ANGELES

                                     By

                                     BOARD OF WATER AND POWER COMMISSIONERS OF
                                     THE CITY OF LOS ANGELES

[STAMP]                                    By /s/ Authorized Signatory
                                              ----------------------------------
                                              General Manager and Chief Engineer

                                     By /s/ Authorized Signatory
                                        ----------------------------------------
                                                        Secretary

                                     NEVADA  POWER COMPANY

                                     By /s/ Authorized Signatory
                                        ----------------------------------------
                                         Vice President
                                         Resource Planning and Power Dispatch

ATTEST AND                           SALT RIVER PROJECT AGRICULTURAL
COUNTERSIGN:                         IMPROVEMENT AND POWER  DISTRICT

/s/ Authorized Signatory             By /s/ Authorized Signatory
-------------------------------         ----------------------------------------
         SECRETARY                                      PRESIDENT

                                     TUCSON ELECTRIC POWER COMPANY

                                     By /s/ Authorized Signatory
                                        ----------------------------------------

                                       7
<PAGE>
                                 AMENDMENT NO. 2
                                     TO THE
                       NAVAJO PROJECT CO-TENANCY AGREEMENT

1.    PARTIES:

      The parties to this AMENDMENT NO. 2 to the NAVAJO PROJECT CO-TENANCY
      AGREEMENT ("Amendment No. 2") are: THE UNITED STATES OF AMERICA,
      hereinafter referred to as the "United States", acting through the
      Secretary of the Interior, his duly appointed successor or his duly
      authorized representative; ARIZONA PUBLIC SERVICE COMPANY, hereinafter
      referred to as "Arizona", an Arizona corporation; DEPARTMENT OF WATER AND
      POWER OF THE CITY OF LOS ANGELES, hereinafter referred to as "Los
      Angeles", a department organized and existing by virtue of and under the
      Charter of the City of Los Angeles, a municipal corporation of the State
      of California; NEVADA POWER COMPANY, hereinafter referred to as "Nevada",
      a Nevada corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
      POWER DISTRICT, hereinafter referred to as "Salt River Project",an
      agricultural improvement district organized and existing under the laws of
      the State of Arizona;, and TUCSON ELECTRIC POWER COMPANY, hereinafter
      referred to as "Tucson", formerly known as Tucson Gas & Electric Company,
      an Arizona corporation; all of the foregoing are sometimes individually
      referred to as "Participant" and collectively as "Participants".

2.    RECITALS:

      This Amendment No. 2 is made with reference to the following facts, among
      others:

<PAGE>

      delivery in the Westwing Substation based on the results of technical
      studies performed by Western Area Power Administration.

2.6   On October 30, 1990, the Coordinating Committee, pursuant to Section
      17[ILLEGIBLE] of the Southern Transmission System Operating Agreement,
      authorized the interconnection of the United States' Waddell 230kV
      transmission line at the Westwing Substation as a Capital Improvement to
      the Southern Transmission System.

2.7   In addition, the Participants have identified various sections of the
      Co-Tenancy Agreement that are either outdated or, for administrative
      convenience, should be revised.

2.8   Now, therefore, the Participants desire to further amend the Co-Tenancy
      Agreement as set forth herein to reflect: i) the interconnection of the
      United States' Waddell 230kV transmission line at the United States'
      designated point of delivery in the Westwing Substation;ii) the changes
      in transformer ratings at the Westwing Substation; iii) the
      interconnection of the United States' two (2) 230kV transmission lines to
      the bays reserved therefor in the Westwing 230kV Switchyard; iv) the
      removal of the series capacitors which were installed on Arizona's
      Cholla-Pinnacle Peak 345kV lines: and v) the deletion of certain Project
      Series Capacitors from the project description, as such capacitors were
      not installed as part of the Southern

<PAGE>


            (ii) Salt River Project  - 36.1%  for its own use and benefit; and

                                     - 31.8%  for the use and benefit of the
                                              United States in accordance with
                                              Project Agreements.

            6.2.5.2 Waddell 230kV Interconnection

            Salt River Project       - 100%   for the use and benefit of the
                                              United States in accordance with
                                              Project Agreements."

3.2   Paragraphs 5, 6 and 7 of Section F, OTHER ASSOCIATED COMPONENTS, in
      Section I. SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION
      SYSTEM, to the Co-Tenancy Agreement are hereby deleted in their entirety.

3.3   Paragraphs 2, 3, and 4 of Section G, WESTWING SUBSTATION, in Section I,
      SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the
      Co-Tenancy Agreement are hereby deleted in their entirety and new
      Paragraphs 2, 3, and 4 are hereby substituted to read in their entirety as
      follows:

      "2. The two (2) Westwing Substation 149- MVA 500/230kV
          transformer banks and spare 498 MVA 500/230kV

<PAGE>

      one future Arizona 230kV line, two Salt River Project 230kV lines, and two
      United States 230kV lines, including, but not limited to, the 230kV
      busses, power circuit breakers, metering transformers, disconnect
      switches, structures, insulators and hardware, 230kV leads between points
      of attachment on the transformer dead-end towers to the main switchyard
      structures, 230kV leads up to the points of attachment where the 230kV
      transmission lines attach to the main switchyard structures, control
      building, and related land and land rights.

4.2   The Waddell 230kV Interconnection comprising termination facilities for
      the Waddell 230kV transmission line, including, but not limited to, power
      circuit breaker, metering transformers, disconnect switches, structures,
      turning tower, take-off structure, insulators and associated hardware,
      230kV conductor from its point of attachment on the first transmission
      tower located outside the perimeter fence to the turning tower, 230kV
      leads between the turning tower and the take-off structure, and the fiber
      optic cable between its termination point at the patch

<PAGE>

      counterparts, and upon execution and delivery by each Participant, the
      executed and delivered counterparts together shall have the same force and
      effect as an original instrument as if all the Participants had signed the
      same instrument. Any signature page of this Amendment No. 2 may be
      detached from any counterpart of this Amendment No. 2 without impairing
      the legal effect of any signatures thereon, and may be attached to another
      counterpart of this Amendment No. 2 identical in form hereto, but having
      attached to it one or more signature pages.

5.2   When this Amendment No. 2 to the Co-Tenancy Agreement has been executed
      by, and delivered to, the duly authorized representative of each
      Participant, Arizona shall promptly file this Amendment No. 2 with FERC
      and, if accepted for filing by FERC without condition or modification, it
      shall be effective as of the 22nd day of November, 1991. In the event FERC
      conditions or modifies this Amendment No. 2, Arizona shall promptly notify
      all the other Participants and, upon written notice given not less than
      thirty (30) days from date of Arizona's notice to all the other
      Participants by any Participant that such condition or modification is
      objectionable, this Amendment No. 2 shall terminate and be of no further
      force or effect. If no written notice is given by any Participant that
      such condition or modification is objectionable within such thirty (30)
      day period, this Amendment No. 2 shall continue in full force and effect.

<PAGE>


6.    SIGNATURE CLAUSE:

      The signatories hereto represent that they have been appropriately
      authorized to enter into this Amendment No. 2 on behalf of the
      Participants for whom they sign. This Amendment No. 2 is hereby executed
      as of the 14th day of June, 1996.

                                    UNITED STATES OF AMERICA

                                    SIGNATURE  /s/ Robert W. Johnson
                                              __________________________________

                                    NAME  Robert W. Johnson
                                         _______________________________________

                                                Regional Director
                                                Lower Colorado Region
                                    TITLE  U.S. Bureau of Reclamation

                                    DATE SIGNED  March 3, 1996
                                                ________________________________


                                    ARIZONA PUBLIC SERVICE COMPANY

                                    SIGNATURE /s/ Jack Davis
                                              ----------------------------------

Approved As To Form                 NAME          Jack Davis
/s/ TE Parrish                      TITLE         Vice President
Date 6-13-96
                                    DATE  SIGNED  June 14, 1996

                                    DEPARTMENT OF WATER AND  POWER
                                    OF THE  CITY   OF LOS   ANGELES

                                    By

                                    BOARD OF WATER AND POWER COMMISSIONERS
By /s/ Stanton J. Snyder            OF THE CITY OF LOS ANCELES
  -----------------------
       Stanton J. Snyder            By  /s/ William R. Mc Carley
    Deputy City Attorney               _________________________________________
                                                  Gerneral Manager

                                    and  /s/ Irene N. Kiski
                                        ________________________________________
                                                    Secretary

<PAGE>


                                    NEVADA POWER COMPANY

                                    SIGNATURE  /s/ Steven V. Rigazio
                                              __________________________________

                                    NAME Steven V. Rigazio

                                    TITLE Vice President, Finance and
                                          Planning, Treasurer and CFO

                                    DATE SIGNED  November 28, 1995

                                    SALT RIVER PROJECT AGRICULTURAL
                                    IMPROVEMENT AND POWER DISTRICT

                                    SIGNATURE  /s/ Mark B. Bonsall
                                              __________________________________

                                    NAME  Mark B. Bonsall
                                         _______________________________________

                                    TITLE  Associate General Manager
                                          ______________________________________

                                    DATE SIGNED  August 22, 1995
                                                ________________________________


                                    TUCSON ELECTRIC POWER COMPANY
                                    (Formerly Tucson Gas & Electric Company)

                                    SIGNATURE /s/ Steven J. Glaser
                                              ----------------------------------

                                    NAME        Steven J. Glaser

                                    TITLE       Vice President

                                    DATE SIGNED July 31, 1995




<PAGE>

                              EXHIBIT B-B SHEET 2

                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                       WESTWING 230kV SWITCHYARD CIRCUIT

                                  [FLOW CHART]

<TABLE>
<CAPTION>
                                   OWNERSHIP
-----------------------------------------------------------------------
   ORIGINAL WESTING 230kV SWITCHYARD(1)   WADDELL 230kV INTERCONNECTION
---------------------------------------   -----------------------------
<S>                              <C>      <C>
SRP for its own use & benefit    36 1%                  0%
APS                              32 1%                  0%
SRP for use and benefit of US    31 8%                100%
</TABLE>

NOTES:
------
EXCLUDES
  Waddell Interconnection
  ANPP Interconnection
INCLUDES
  Future Addition & Common Facilities

<PAGE>

                                                          APS CONTRACT NO. 48178
                                                                   DWP No. 10498

                                 AMENDMENT NO. 3

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

By Federal Energy Regulatory Commission ("FERC") order/notice of acceptance
dated _____________ in FERC Docket No.______________, this Amendment No. 3 was
accepted for filing and the rate schedules became effective on _______, 19____.

Execution Original

<PAGE>


                                                          APS CONTRACT NO. 48178

                                 AMENDMENT NO. 3
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS

1 PARTIES -------------------------------------------------------------------1

2 RECITALS:------------------------------------------------------------------1

3 AMENDMENTS:----------------------------------------------------------------3

4 EFFECT:--------------------------------------------------------------------8

5 EXECUTION AND EFFECTIVE DATE:----------------------------------------------9

6 SIGNATURE CLAUSE:---------------------------------------------------------10

                                       i
<PAGE>


                                                          APS CONTRACT NO. 48178

                                 AMENDMENT NO. 3
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT


1     PARTIES

      1.1   The Parties to this AMENDMENT NO. 3 to the NAVAJO PROJECT CO-TENANCY
            AGREEMENT ("Amendment No. 3") are: ARIZONA PUBLIC SERVICE COMPANY,
            hereinafter referred to as "Arizona", an Arizona corporation;
            DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES,
            hereinafter referred to as "Los Angeles", a department organized and
            existing by virtue of and under the Charter of the City of Los
            Angeles, a municipal corporation of the State of California; NEVADA
            POWER COMPANY, hereinafter referred to as "Nevada", a Nevada
            corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
            DISTRICT, hereinafter referred to as "Salt River Project", an
            agricultural improvement district organized and existing under the
            laws of the State of Arizona; TUCSON ELECTRIC POWER COMPANY,
            hereinafter referred to as "Tucson", formerly known as Tucson Gas &
            Electric Company, an Arizona corporation; and THE UNITED STATES OF
            AMERICA, hereinafter referred to as the "United States", acting
            through the Secretary of the Interior, his duly appointed successor
            or his duly authorized representative; all of the foregoing are
            sometimes individually referred to as "Participant" and collectively
            as "Participants".

2     RECITALS:

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

      2.1   On March 23, 1976, the Participants entered into the NAVAJO PROJECT
            CO-TENANCY AGREEMENT ("Co-Tenancy Agreement"), which established
            certain terms and conditions relating to their interest in and
            their ownership of the Navajo Project and which established
            certain rights and obligations under the Project Agreements.

      2.2   On October 18, 1976, the Participants entered into SUPPLEMENT NO.l
            to the Co-Tenancy

                                       1
<PAGE>

                                                    APS CONTRACT NO. 48178

            Agreement to clarify their intent to preserve, protect, and
            enhance the environment as provided in Section 29,
            ENVIRONMENTAL PROTECTION, of the Co-Tenancy Agreement.

      2.3   On July 5, 1988, the Participants entered into AMENDMENT NO. 1
            to the Co-Tenancy Agreement: i) to establish the Moenkopi
            Switchyard as a point of delivery for all parties; and ii) to
            reflect the sale of Arizona's rights, title, and ownership in
            the Westwing Substation 600 MVA 500/345 kv transformer bank to
            Tucson.

      2.4   On June 14, 1996, the Participants entered into AMENDMENT NO.
            2 to the Co-Tenancy Agreement to reflect: i) the
            interconnection of the United States' Waddell 230 kv
            transmission line at the United States' designated point of
            delivery in the Westwing Substation; ii) the change in the
            transformer ratings at the Westwing Substation; iii) the
            interconnection of the United States' two 230 kv transmission
            lines in the Westwing 230 kv Switchyard; iv) the removal of
            the series capacitors installed on Arizona's Cholla-Pinnacle
            Peak 345 kv lines; and v) the deletion of certain project
            series capacitors from the project description.

      2.5   On June 28, 1994, the Transmission Engineering and Operating
            Committee ("E&O Committee") approved the technical feasibility
            of the interconnection of the Yavapai Switchyard to the Navajo
            Project Southern Transmission System ("STS") Moenkopi-
            Westwing transmission line. This approval was based on the
            results of technical studies performed and presented by
            Arizona to the E&O Committee on March 3, 1994 and in a
            subsequent letter from Arizona dated April 12, 1994.

      2.6   Now, therefore, the Participants desire to further amend the
            Co-Tenancy Agreement as set forth herein to reflect: i) the
            construction of the Yavapai Switchyard as a component of the
            STS; ii) new delivery points for Arizona, Salt River Project,
            Tucson, and the United States; and iii) the interconnection of
            Arizona's Yavapai 230 kv Substation at the applicable
            Participants' new delivery point in the Yavapai Switchyard.

                                 2
<PAGE>

                                                          APS CONTRACT NO. 48178

3     AMENDMENTS:

      3.1   Section 6.2.2 of Section 6, OWNERSHIPS AND TITLES, of the Co-Tenancy
            Agreement is hereby deleted in its entirety and a new Section 6.2.2
            is hereby substituted to read in its entirety as follows:

            "6.2.2 Navajo Westwing 500 kv line

                  Moenkopi-Yavapai 500 kv line

                  Yavapai-Westwing 500 kv line

                  Westwing 500 kv Switchyard
<TABLE>
<S>                       <C>    <C>     <C>
(i)  Arizona              =      24.7%

(ii) Salt River Project   =      38.3%   for its own use and benefit and


                                 23.7%   for the use and benefit of the United
                                         states in accordance with Project
                                         Agreements.

(iii) Tucson              =      13.3%"
</TABLE>

      3.2   A new Section 6.2.2A, Yavapai Switchyard, is hereby inserted after
            Section 6.2.2 of the Co-Tenancy Agreement and a new Section 6.2.2A
            shall read in its entirety as follows:

            "6.2.2A Yavapai Switchyard

                   Arizona = 100%"

      3.3   Section 8.5 of Section 8, USE OF THE TRANSMISSION SYSTEM, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Section 8.5 is hereby substituted to read in its entirety as
            follows:

            "8.5  The Participants' designated points of delivery shall be as
                  follows:
<TABLE>
<S>       <C>             <C>    <C>
8.5.1     Arizona         =      Navajo 500 kv Switchyard, Westwing Substation,
                                 Moenkopi Switchyard and Yavapai Switchyard.

8.5.2     Los Angeles     =      Navajo 500 kv Switchyard, McCullough 500 kv
                                 Switchyard and Moenkopi Switchyard.
</TABLE>

                                       3
<PAGE>

                                                          APS CONTRACT NO. 48178
<TABLE>
<S>       <C>                      <C>     <C>
8.5.3     Nevada                   =       Navajo 500 kv Switchyard, McCullough 500 kv Switchyard and Moenkopi Switchyard.

8.5.4     Salt River Project       =       Navajo 500 kv Switchyard, Westwing Substation, Moenkopi Switchyard and Yavapai
                                           Switchyard.

8.5.5     Tucson                   =       Navajo 500 kv Switchyard, Westwing Substation, Moenkopi Switchyard and Yavapai
                                           Switchyard.

8.5.6     United States            =       Navajo 500 kv Switchyard, McCullough 500 kv Switchyard, Westwing Substation,
                                           Moenkopi Switchyard and Yavapai Switchyard."
</TABLE>

      3.4   Section E, MOENKOPI-WESTWING 500 KV LINE, of Exhibit B, SOUTHERN
            TRANSMISSION SYSTEM, to the Co-Tenancy Agreement is hereby deleted
            in its entirety and a new Section E is hereby substituted to read in
            its entirety as follows:

            "E. MOENKOPI-YAVAPAI 500 KV LINE

                  The Moenkopi-Yavapai 500 kv line from and including the first
                  500 kv line dead-end tower outside the Moenkopi Switchyard to
                  a similar tower location outside the Yavapai Switchyard and
                  the Moenkopi-Yavapai 500 kv line right-of-way."

      3.5   Paragraph 1 of Section F, OTHER ASSOCIATED COMPONENTS, of EXHIBIT B,
            SOUTHERN TRANSMISSION SYSTEM, to the Co-Tenancy Agreement is hereby
            deleted in its entirety and a new paragraph 1 is hereby substituted
            to read in its entirety as follows:

                  "1.   The additions to the Moenkopi Switchyard comprising the
                        terminal facilities for the Navajo-Moenkopi and the
                        Moenkopi-Yavapai 500 kv lines and the additions to the
                        terminal facilities for the Four Corners-Moenkopi and
                        Moenkopi-Eldorado 500 kv lines including, but not
                        limited to, the additional 500 kv busses, power circuit
                        breakers, disconnect switches, relays, and structures."

      3.6   Paragraph 3 of Section F, OTHER ASSOCIATED COMPONENTS, of EXHIBIT B,
            SOUTHERN TRANSMISSION SYSTEM, to the Co-Tenancy Agreement is hereby
            deleted

                                       4
<PAGE>

                                                          APS CONTRACT NO. 48178

            in its entirety and a new paragraph 3 is hereby substituted to read
            in its entirety as follows:

                  "3.   The Project Series Capacitors and shunt reactors on the
                        Moenkopi Switchyard end of the Moenkopi-Yavapai 500 kv
                        line including, but not limited to, the capacitors,
                        control equipment, reactors, lightning arresters, hazard
                        fencing, disconnects, structures, and bus work from the
                        switchyard side of the first 500 kv line dead-end tower
                        located outside the switchyard to the attachment on the
                        main switchyard structure."

      3.7   Paragraph 8 of Section F, OTHER ASSOCIATED COMPONENTS, of EXHIBIT B,
            SOUTHERN TRANSMISSION SYSTEM, to the Co-Tenancy Agreement is hereby
            deleted in its entirety and a new paragraph 5 is hereby substituted
            to read in its entirety as follows:

                  "5.   All the communications facilities necessary to control
                        the Southern Transmission System including such
                        facilities located at Navajo 500 kv Switchyard, Moenkopi
                        Switchyard, Yavapai Switchyard, or Westwing Substation."

      3.8   Section G, WESTWING SUBSTATION, of Exhibit B, SOUTHERN TRANSMISSION
            SYSTEM, to the Co-Tenancy Agreement is hereby deleted in its
            entirety and a new Section G is hereby substituted to read in its
            entirety as follows:

            "G. YAVAPAI SWITCHYARD

                        The Yavapai Switchyard, a basic ring bus scheme,
                        comprising termination facilities for the
                        Moenkopi-Yavapai 500 kv line, Yavapai-Westwing 500 kv
                        line, and the 500/230 kv transformer bank including, but
                        not limited to, 500 kv dead-end structures, 500 kv
                        busses, power circuit breakers, disconnect switches,
                        relays, common facilities, and other facilities up to,
                        but excluding, the high-side bushings of the 500/230 kv
                        transformer. The Yavapai Switchyard common facilities
                        include, but are not limited to, roads, trenches and
                        conduit for system control and power cables, station
                        grounding grid, overhead static shield, fencing and
                        gates, yard lighting, maintenance and control buildings,
                        station batteries, chargers and

                                       5

<PAGE>

                                                          APS CONTRACT NO. 48178

                        distribution panels, station power transformers and
                        distribution panels, remote terminal units, digital
                        fault recorders, alarms, annunciators, public address
                        system, communications equipment, and related land or
                        land rights."

      3.9   A new Section H is hereby inserted after Section G of EXHIBIT B.
            SOUTHERN TRANSMISSION SYSTEM, to the Co-Tenancy Agreement and the
            new Section H shall read in its entirety as follows:

                  "H. YAVAPAI-WESTWING 500 KV LINE

                  1.    The Yavapai-Westwing 500 kv line; from and including the
                        first 500 kv line dead-end tower outside the Yavapai
                        Switchyard to a similar tower location outside the
                        Westwing Substation and the Yavapai-Westwing 500 kv line
                        right-of-way.

                  2.    The Project Series Capacitors and shunt reactors on the
                        Westwing 500 kv Substation end of the Yavapai-Westwing
                        500 kv line including, but not limited to, the
                        capacitors, control equipment, reactors, lightning
                        arresters, hazard fencing, disconnects, structures and
                        bus work from the substation side of the first 500 kv
                        line dead-end tower located outside the substation to
                        the attachment on the main substation structure."

      3.10  A new Section I is hereby inserted after Section H of EXHIBIT B,
            SOUTHERN TRANSMISSION SYSTEM to the Co-Tenancy Agreement and the new
            Section I shall read in its entirety as follows:

                  "I. WESTWING SUBSTATION

                  1.    The Westwing 500 kv Switchyard, a basic
                        breaker-and-a-half scheme, comprising termination
                        facilities for the Yavapai-Westwing 500 kv line,
                        Navajo-Westwing 500 kv line, 500/230 kv transformers
                        banks, and 500/345 kv transformer bank including, but
                        not limited to, the 500 kv busses, power circuit
                        breakers, metering transformers, disconnect switches,
                        control building, structures, and related land and land
                        rights.

                                       6

<PAGE>

                                                          APS CONTRACT NO. 48178

                  2.    The two (2) Westwing Substation 1494 MVA 500/230 kv
                        transformer banks and spare 498 MVA 500/230 kv
                        transformer to be located within the boundaries of the
                        Westwing 500 kv Switchyard and the equipment associated
                        therewith including, but not limited to, foundations,
                        structures, insulators and hardware, transformer leads
                        from 500 kv bushings to points of termination on the
                        attachments to the 500 kv switchyard structure, and 230
                        kv leads up to the points of attachment where the 230 kv
                        lines from adjacent facilities attach to the transformer
                        dead-end tower.

                  3.    The Westwing Substation 672 MVA 500/345 kv transformer
                        bank and spare 224 MVA 500/345 kv transformer to be
                        located within the boundaries of the Westwing 500 kv
                        Switchyard and the equipment associated therewith
                        including, but not limited to, foundations, structures,
                        insulators and hardware, transformer leads from the 500
                        kv bushings to points of termination on the attachments
                        to the 500 kv switchyard structure, and 345 kv leads up
                        to the points of attachment where the 345 kv lines from
                        adjacent facilities attach to the transformer dead end
                        towers.

                  4. Westwing 230 kv Switchyard

                        4.1   The original Westwing 230 kv Switchyard (including
                              common facilities), a basic breaker-and-a-half
                              scheme, comprising termination facilities for the
                              two 500/230 kv transformer banks, one Arizona 230
                              kv line and one future Arizona 230 kv line, two
                              Salt River Project 230 kv lines, and two United
                              States 230 kv lines, including, but not limited
                              to, the 230 kv busses, power circuit breakers,
                              metering transformers, disconnect switches,
                              structures, insulators and hardware, 230 kv leads
                              between points of attachment on the transformer
                              dead-end towers to the main switchyard structures,
                              230 kv leads up to the points of attachment where
                              the 230 kv transmission lines attach to the main
                              switchyard structures, control building, and
                              related land

                                       7

<PAGE>

                                                          APS CONTRACT NO. 48178

                              and land rights.

                        4.2   The Waddell 230 kv Interconnection comprising
                              termination facilities for the Waddell 230 kv
                              transmission line, including, but not limited to,
                              power circuit breakers, metering transformers,
                              disconnect switches, structures, turning tower,
                              take-off structure, insulators and associated
                              hardware, 230 kv conductor from its point of
                              attachment on the first tower located outside the
                              perimeter fence to the turning tower, 230 kv leads
                              between the turning tower and the take-off
                              structure, and the fiber optic cable between its
                              termination point at the patch panel on the
                              turning tower to the control house. In addition,
                              the termination facilities for the Waddell 230 kv
                              Interconnection shall be deemed to include the
                              remote terminal unit (RTU) installed pursuant to
                              Letter Agreement No. 87-BCA-10084, dated September
                              3,1987 between the United States of America,
                              acting by and through the Western Area Power
                              Administration, and the Arizona Public Service
                              Company."

      3.11  Exhibit B-B, Sheet 1, NAVAJO PROJECT CO-TENANCY AGREEMENT,
            TRANSMISSION SYSTEM OWNERSHIP, to the Co-Tenancy Agreement is hereby
            deleted in its entirety and replaced by a new Exhibit B-B, Sheet 1,
            attached hereto and by this reference is incorporated herein.

4     EFFECT:

      Except for the changes set forth in this Amendment No. 3, all provisions
      of the Co-Tenancy Agreement as amended by Amendments No. 1 and 2 shall
      remain in full force and effect to the extent that such provisions of the
      Co-Tenancy Agreement as amended by Amendments No. 1 and 2 are not in
      conflict or inconsistent with this Amendment No. 3.

                                       8

<PAGE>

                                                          APS CONTRACT NO. 48178

5     EXECUTION AND EFFECTIVE DATE:

      5.1   This Amendment No. 3 may be executed in any number of counterparts
            and, upon execution and delivery by each Participant, the executed
            and delivered counterparts together shall have the same force and
            effect as an original instrument as if all the Participants had
            signed the same instrument. Any signature page of this Amendment No.
            3 may be detached from any counterpart of this Amendment No. 3
            without impairing the legal effect of any signatures thereon, and
            may be attached to another counterpart of this Amendment No. 3
            identical in form hereto, but having attached to it one or more
            signature pages.

      5.2   When this Amendment No. 3 to the Co-Tenancy Agreement has been
            executed by, and delivered to the duly authorized representative of
            each Participant, Arizona shall promptly file this Amendment No. 3
            with FERC and, if accepted for filing by FERC without condition or
            modification, it shall be effective as of the day of such
            acceptance. In the event FERC conditions or modifies this Amendment
            No. 3, Arizona shall promptly notify all the other Participants.
            Upon written notice given not less than thirty (30) days from the
            date of Arizona's notice to all the other Participants by any
            Participant that such condition or modification is objectionable,
            this Amendment No. 3 shall terminate and be of no further force or
            effect. If no written notice is given by any Participant that such
            condition or modification is objectionable within such thirty (30)
            day period, this Amendment No. 3 shall become effective the day
            after such thirty (30) day period.

                                       9

<PAGE>

                                                          APS CONTRACT NO. 48178

6     SIGNATURE CLAUSE:

      The signatories hereto represent that they have been appropriately
      authorized to enter into this Amendment No. 3 on behalf of the
      Participants for whom they sign. This Amendment No. 3 is hereby executed
      as of the 11th day of February, 1997.

                                      UNITED STATES OF AMERICA

                                      SIGNATURE  /s/ Authorized Signatory
                                                -----------------------------

                                      NAME___________________________________

                                      TITLE Regional Director
                                            Lower Colorado Region
                                            U.S. Bureau of Reclamation

                                      DATE SIGNED____________________________

                                      ARIZONA PUBLIC SERVICE COMPANY

                                      SIGNATURE  /s/ Authorized Signatory
[STAMP]                                        ------------------------------
                                      NAME___________________________________

                                      TITLE__________________________________

                                      DATE SIGNED____________________________

                                      10
<PAGE>

                                                          APS CONTRACT NO. 48178

                                      DEPARTMENT OF WATER AND POWER
                                      OF THE CITY OF LOS ANGELES

                                      By


[STAMP]                               BOARD OF WATER AND POWER COMMISSIONERS
                                      OF THE CITY OF LOS ANGELES

                                      By  /s/ Authorized Signatory
                                          ---------------------------------
                                                    GENERAL MANAGER

                                      and /s/ Authorized Signatory
                                          ---------------------------------
                                                        Secretary

                                      NEVADA POWER COMPANY

                                      SIGNATURE   /s/ Steven W. Rigazio
                                               -----------------------------

                                      NAME Steven W. Rigazio

                                      TITLE Vice President, Finance and
                                             Planning, Treasurer and CFO

                                      DATE SIGNED June 21, 1996

[STAMP]                               SALT RIVER PROJECT AGRICULTURAL
                                      IMPROVEMENT AND POWER DISTRICT

                                      SIGNATURE /s/ Mark B. Bonsall
                                               ------------------------------

                                      NAME Mark B. Bonsall

                                      TITLE Associate General Manager

                                      DATE SIGNED July 25, 1996


                                       11

<PAGE>

                                                          APS CONTRACT NO. 48178

                                      TUCSON ELECTRIC POWER COMPANY
                                      (Formerly Tucson Gas &  Electric Company)

                                      SIGNATURE:  /s/ Steven J.  Glaser
                                                 -----------------------------

                                      NAME        Steven J. Glaser

                                      TITLE       Vice President

                                      DATE SIGNED  February 23, 1996


                                       12

<PAGE>

                              EXHIBIT B-B SHEET 1

                      NAVAJO PROJECT CO-TENANCY AGREEMENT

                         TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

<PAGE>

                                                          APS CONTRACT NO. 51763
                                                                   DWP No. 10498

                                 AMENDMENT NO. 4

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

By Federal Energy Regulatory Commission ("FERC") order/ notice of acceptance
dated _____ . in FERC Docket No. _________, this Amendment No. 4 was accepted
for filing and the rate schedules became effective on __________________,
19_____.

Execution Original
<PAGE>
                                                          APS CONTRACT NO. 51763

                                 AMENDMENT NO. 4
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                    <C>
1 PARTIES: ..........................................................  1

2 RECITALS: .........................................................  1

3 AMENDMENTS: .......................................................  3

4 EFFECT: ...........................................................  4

5 EXECUTION AND EFFECTIVE DATE: .....................................  4

6 SIGNATURE CLAUSE: .................................................  6
</TABLE>

                                        i
<PAGE>

                                                          APS CONTRACT NO. 51763

                                 AMENDMENT NO. 4
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

1.    PARTIES

      1.1   The Parties to this AMENDMENT NO. 4 to the NAVAJO PROJECT CO-TENANCY
            AGREEMENT ("Amendment No. 4") are: ARIZONA PUBLIC SERVICE COMPANY,
            hereinafter referred to as "Arizona", an Arizona corporation;
            DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES,
            hereinafter referred to as "Los Angeles", a department organized and
            existing by virtue of and under the Charter of the City of Los
            Angeles, a municipal corporation of the State of California; NEVADA
            POWER COMPANY, hereinafter referred to as "Nevada", a Nevada
            corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
            DISTRICT, hereinafter referred to as "SRP", an agricultural
            improvement district organized and existing under the laws of the
            State of Arizona; TUCSON ELECTRIC POWER COMPANY, hereinafter
            referred to as "Tucson", formerly known as Tucson Gas & Electric
            Company, an Arizona corporation; and THE UNITED STATES OF AMERICA,
            hereinafter referred to as the "United States", acting through the
            Secretary of the Interior, his duly appointed successor or his duly
            authorized representative; all of the foregoing are sometimes
            individually referred to as "Participant" and collectively as
            "Participants".

2     RECITALS

      This Amendment No. 4 is made with reference to the following facts, among
      others:

      2.1   On March 23, 1976, the Participants entered into the NAVAJO PROJECT
            CO-TENANCY AGREEMENT ("Co-Tenancy Agreement"), which established
            certain terms and conditions relating to their interest in and their
            ownership of the Navajo Project and which established certain rights
            and obligations under the Project

                                        1
<PAGE>

                                                           APS CONTRACT NO.51763

            Agreements.

      2.2   On October 18, 1976, the Participants entered into SUPPLEMENT NO. 1
            to the Co-Tenancy Agreement to clarify their intent to preserve,
            protect, and enhance the environment as provided in Section 29,
            ENVIRONMENTAL PROTECTION, of the Co-Tenancy Agreement.

      2.3   On July 5, 1988, the Participants entered into AMENDMENT NO. 1 to
            the Co-Tenancy Agreement: i) to establish the Moenkopi Switchyard
            as a point of delivery for all parties; and ii) to reflect the sale
            of Arizona's rights, title, and ownership in the Westwing Substation
            600 MVA 500/345 kv transformer bank to Tucson.

      2.4   On June 14, 1996, the Participants entered into AMENDMENT NO. 2 to
            the Co-Tenancy Agreement to reflect: i) the interconnection of the
            United States' Waddell 230 kv transmission line at the United
            States' designated point of delivery in the Westwing Substation; ii)
            the change in the transformer ratings at the Westwing Substation;
            iii) the interconnection of the United States' two 230 kv
            transmission lines in the Westwing 230 kv Switchyard; iv) the
            removal of the series capacitors installed on Arizona's
            Cholla-Pinnacle Peak 345 kv lines; and v) the deletion of certain
            project series capacitors from the project description.

      2.5   On February 11, 1997, the Participants entered into AMENDMENT NO. 3
            to the Co-Tenancy Agreement to reflect: i) the construction of the
            Yavapai Switchyard as a component of the Southern Transmission
            System; ii) new delivery points for Arizona. SRP, Tucson, and the
            United States; and iii) the interconnection of Arizona's Yavapai 230
            kv Substation at the applicable Participants new delivery point in
            the Yavapai Switchyard.

      2.6   On October 29, 1996, the Transmission Engineering and Operating
            Committee (E&O Committee) agreed that the Co-Tenancy Agreement shall
            be modified to comply with FERC's ORDER NO. 888, FINAL RULE, issued
            April 24, 1996 ("FERC 888").

                                        2
<PAGE>

                                                          APS CONTRACT NO. 51763

      2.7   In addition, the Participants desire to revise outdated language
            which limits the Participants' rights to fully utilize the
            Transmission System.

      2.8   Now, therefore, the Participants desire to further amend the
            Co-Tenancy Agreement as set forth herein to reflect: i) the revision
            or deletion of existing language in order to comply with FERC 888;
            and ii) the revision of outdated language which limits the
            Participants' rights to fully utilize the Transmission System.

3     AMENDMENTS:

      3.1   Section 8.1 of Section 8, USE OF THE TRANSMISSION SYSTEM, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Section 8.1 is hereby substituted to read in its entirety as
            follows:

            "8.1  Each Participant shall have the right to use the Transmission
            System to transmit to its designated delivery points under normal
            operating conditions Power in an amount equivalent to the product of
            its cost responsibility in each line segment of the Transmission
            System and the associated rating (WSCC approved or E&O Committee
            approved, as applicable), of such line segment or to reserve the
            Transmission System for such transmission without regard to the
            origin, source, ownership or type of generation used to produce such
            Power."

      3.2   Section 8.8 of Section 8, USE OF THE TRANSMISSION SYSTEM, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Section 8.8 is hereby substituted to read in its entirety as
            follows:

            "8.8  Unless otherwise agreed by the Transmission Engineering and
            Operating Committee, when the Capacity available to the Participants
            in any segment of the Transmission System is insufficient to
            accommodate all the firm use of the Transmission System pursuant to
            Section 8.1 hereof, then the use of the available Capacity of that
            segment of the Transmission System will be allocated in proportion
            to

                                        3

<PAGE>

                                                          APS CONTRACT NO. 51763

              the Participants' cost responsibility in such segment."

4     EFFECT:

      Except for the changes set forth in this Amendment No. 4, all provisions
      of the Co-Tenancy Agreement as amended by Amendments No. 1,2 and 3 shall
      remain in full force and effect to the extent that such provisions of the
      Co-Tenancy Agreement as amended by Amendments No. 1,2 and 3 are not in
      conflict or inconsistent with this Amendment No. 4. In the event of any
      conflict between the provisions of this Amendment No. 4 and the Co-Tenancy
      Agreement as amended, the provisions of Amendment No. 4 shall govern.

5     EXECUTION AND EFFECTIVE DATE

      5.1   This Amendment No. 4 may be executed in any number of counterparts
            and, upon execution and delivery by each Participant, the executed
            and delivered counterparts together shall have the same force and
            effect as an original instrument as if all the Participants had
            signed the same instrument. Any signature page of this Amendment No.
            4 may be detached from any counterpart of this Amendment No. 4
            without impairing the legal effect of any signatures thereon, and
            may be attached to another counterpart of this Amendment No. 4
            identical in form hereto, but having attached to it one or more
            signature pages.

      5.2   When this Amendment No. 4 to the Co-Tenancy Agreement has been
            executed by, and delivered to, the duly authorized representative of
            each Participant, Arizona shall promptly file this Amendment No. 4
            with FERC and, if accepted for filing by FERC without condition or
            modification, it shall be effective as of the day of such
            acceptance. In the event FERC conditions or modifies this Amendment
            No. 4, Arizona shall promptly notify all the other Participants.
            Upon written notice given not less than thirty (30) days from the
            date of Arizona's notice to all the other Participants by any

                                        4
<PAGE>

                                                          APS CONTRACT NO. 51763

            Participant that such condition or modification is objectionable,
            this Amendment No. 4 shall terminate and be of no further force or
            effect. If no written notice is given by any Participant that such
            condition or modification is objectionable within such thirty (30)
            day period, this Amendment No. 4 shall become effective the day
            after such thirty (30) day period.

                                        5
<PAGE>

                                                          APS CONTRACT NO. 51763
SIGNATURE CLAUSE:

      The signatories hereto represent that they have been appropriately
      authorized to enter into this Amendment No. 4 on behalf of the
      Participants for whom they sign. This Amendment No. 4 is hereby executed
      as of the 21st day of January, 1997.

                              UNITED STATES OF AMERICA

                              SIGNATURE /s/ Blaine D. Hamann
                                        ----------------------------------------
                              NAME    Blaine D. Hamann
                                      Regional Director
           ACTING FOR                 Lower Colorado Region

                              TITLE   U.S. Bureau of Reclamation

                              DATE SIGNED    [ILLEGIBLE]


                              ARIZONA PUBLIC SERVICE COMPANY

                              SIGNATURE /s/ CARY B. DEISE
[STAMP]                                 ----------------------------------------
                              NAME          CARY B. DEISE

                              TITLE  Director Transmission Operations & Planning

                              DATE SIGNED      December 17, 1996


                                       6

<PAGE>

                                                 AUTHORIZED BY RES.      97 149
                                                                    -----------
                                                                   JAN 21, 1997

                                                         APS CONTRACT NO. 51763

                                        DEPARTMENT OF WATER AND POWER
                                        OF THE CITY OF LOS ANGELES

                                        By

APPROVED AS TO FORM AND LEGALITY
  JAMES K. HAHN, CITY ATTORNEY          BOARD OF WATER AND POWER
                                        COMMISSIONERS
    JAN 02 1997                         OF THE CITY OF LOS ANGELES

By /s/ Richard M. Helgeson
   -----------------------------
       RICHARD M. HELGESON
       Assistant City Attorney
                                        By /s/ William R. McCarley
                                           ------------------------------------
                                           William R. McCarley, General  Manager

                                        and  Authorized Signatory
                                            -----------------------------------
                                                      Secretary

                                        NEVADA POWER COMPANY

                                        SIGNATURE /s/ Steven W. Rigazio
                                                  -----------------------------
                                        NAME  Steven W. Rigazio

                                        TITLE Vice President, Finance and

                                              Planning, Treasurer and CFO

                                        DATE SIGNED December 11, 1996


                                        SALT RIVER PROJECT AGRICULTURAL
                                        IMPROVEMENT AND POWER DISTRICT

                                        SIGNATURE /s/ Mark B.Bonsall
                                                  -----------------------------
                                        NAME  MARK B.BONSALL

                                        TITLE ASSOCIATE GENERAL MANAGER

                                        DATE SIGNED  DECEMBER 30, 1996


                                        7

<PAGE>

                                                          APS CONTRACT NO. 51763

                          TUCSON ELECTRIC POWER COMPANY
                         (Formerly Tucson Gas & Electric Company)

                          SIGNATURE /s/ Authorized Signatory
                                    --------------------------------
                          NAME

                          TITLE Manager, System Control

                          DATE SIGNED December 20, 1996


                                       8

<PAGE>

                                 AMENDMENT NO. 5

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

      By FERC order/notice of acceptance dated ___________________ in FERC

      Docket No. ______, this Amendment No. 5 was accepted for filing and the

      rate schedules became effective on _____________________.

EXECUTION ORIGINAL
 January 23, 1998

<PAGE>

                                 AMENDMENT NO. 5
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
         SECTION                                                PAGE
         -----------------------------------------------        ----

<S>      <C>                                                    <C>
1.       PARTIES .......................................         1

2.       RECITALS ................... ....... ... ......         1

3.       AGREEMENT ............ ..... .. .... ..........         3

4.       AGREEMENT MODIFICATIONS ................ ......         4

5.       EFFECT ........................ ...............        14

6.       EXECUTION AND EFFECTIVE DATE ..... .. . ......         15

7.       SIGNATURE CLAUSE ...................... .......        16
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS
--------
<S>             <C>
B-B             TRANSMISSION SYSTEM OWNERSHIP

 D              ORIGINAL WESTWING 230 KV SWITCHYARD OWNERSHIP PERCENTAGES

 E              McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

 F              McCULLOUGH SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
                (500 KV PORTION ONLY)
</TABLE>

                                        i

<PAGE>

                                 AMENDMENT NO. 5
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

      1.    PARTIES: The parties to this AMENDMENT NO. 5 to the NAVAJO PROJECT
            CO-TENANCY AGREEMENT ("Amendment No. 5") are: THE UNITED STATES OF
            AMERICA, hereinafter referred to as the "United States," acting
            through the Secretary of the Interior, a duly appointed successor or
            a duly authorized representative; ARIZONA PUBLIC SERVICE COMPANY,
            hereinafter referred to as "Arizona," an Arizona corporation;
            DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES,
            hereinafter referred to as "Los Angeles," a department organized and
            existing by virtue of and under the Charter of the City of Los
            Angeles, a municipal corporation of the State of California; NEVADA
            POWER COMPANY, hereinafter referred to as "Nevada," a Nevada
            corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
            DISTRICT, hereinafter referred to as "Salt River Project" or "SRP,"
            an agricultural improvement district organized and existing under
            the laws of the State of Arizona; and TUCSON ELECTRIC POWER COMPANY,
            hereinafter referred to as "Tucson," formerly known as Tucson Gas &
            Electric Company, an Arizona corporation; all of the foregoing are
            sometimes individually referred to as "Participant" and collectively
            as "Participants."

      2.    RECITALS: This Amendment No. 5 is made with reference to the
            following facts, among others:

            2.1   On March 23, 1976, the Participants entered into the NAVAJO
                  PROJECT CO-TENANCY AGREEMENT ("Co-Tenancy Agreement") which
                  established certain terms and conditions relating to their
                  interest in and their ownership of the Navajo Project and
                  which

                                       1
<PAGE>

                  established certain rights and obligations under the Project
                  Agreements.

            2.2   On October 18, 1976, the Participants entered into SUPPLEMENT
                  NO. 1 to the Co-Tenancy Agreement ("Supplement No. 1") to
                  clarify their intent to preserve, protect, and enhance the
                  environment as provided in Section 29, ENVIRONMENTAL
                  PROTECTION, of the Co-Tenancy Agreement.

            2.3   On July 5, 1988, the Participants entered into AMENDMENT NO. 1
                  to the Co-Tenancy Agreement ("Amendment No. 1") to: (i)
                  establish the Moenkopi Switchyard as a point of delivery for
                  all Participants; and (ii) reflect the sale of Arizona's
                  rights, title, and ownership in the Westwing Substation 600
                  MVA 500/345 kV transformer bank to Tucson.

            2.4   On June 14, 1996, the Participants entered into AMENDMENT NO.
                  2 to the Co-Tenancy Agreement ("Amendment No. 2") to reflect:
                  (i) the interconnection of the United States' Waddell 230 kV
                  transmission line at the United States' designated point of
                  delivery in the Westwing Substation; (ii) the change in the
                  transformer ratings at the Westwing Substation; (iii) the
                  interconnection of the United States' two 230 kV transmission
                  lines in the Westwing 230 kV Switchyard; (iv) the removal of
                  the series capacitors installed on Arizona's Cholla-Pinnacle
                  Peak 345 kV lines; and (v) the deletion of certain project
                  series capacitors from the project description.

            2.5   On February 11, 1997, the Participants entered into AMENDMENT
                  NO. 3 to the Co-Tenancy Agreement ("Amendment No. 3") to
                  reflect: (i) the construction of the Yavapai Switchyard as a
                  component of the Southern Transmission System; (ii) new
                  delivery points for

                                       2
<PAGE>
            Arizona, SRP, Tucson, and the United States; and (iii) the
            interconnection of Arizona's Yavapai 230 kV Substation at the
            applicable Participant's new delivery point in the Yavapai
            Switchyard.

      2.6   On January 21, 1997, the Participants entered into AMENDMENT NO. 4
            to the Co-Tenancy Agreement ("Amendment No. 4") to reflect: (i) the
            revision/deletion of existing language in order to comply with
            FERC's Order No, 888, Final Rule, issued April 24, 1996; and (ii)
            the revision of outdated language which limited the ability of the
            Participants to fully utilize the Transmission System.

      2.7   The Participants desire to enter into this Amendment No. 5 to
            reflect: (i) the change in the ownership interests, as tenants in
            common, for the McCullough 500 kV Switchyard and the McCullough
            Substation Common Facilities; (ii) the interconnection of the
            Marketplace 500 kV Tie-Line at the McCullough 500 kV Switchyard;
            (iii) the interconnection of the Victorville Line 2 at the
            McCullough 500 kV Switchyard; (iv) the interconnection of the
            500/230 kV transformer banks H and I at the McCullough 500 kV
            Switchyard; (v) the addition of a calculation of ownership
            percentages for the original Westwing 230 kV Switchyard, the
            McCullough 500 kV Switchyard and the McCullough Substation Common
            Facilities; and (vi) the clarification of descriptions for the
            McCullough 500 kV Switchyard, the Navajo 500 kV Switchyard, the
            Moenkopi Switchyard, the Yavapai Switchyard, the Westwing 500 kV
            Switchyard and the original Westwing 230 kV Switchyard.

3.    AGREEMENT: In consideration of the mutual covenants and benefits to be
      derived from this Amendment No. 5, the Participants agree as follows:

                                       3

<PAGE>

4.    AGREEMENT MODIFICATIONS:

      4.1   The electric utility abbreviations "kv" and "KV" as used throughout
            the Co-Tenancy Agreement are hereby deleted and the new electric
            utility abbreviation "kV" is hereby substituted for each occurrence
            thereof.

      4.2   The list of exhibits on page iii of the Table of Contents to the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            list of exhibits is hereby substituted to read in its entirety as
            follows:

            "EXHIBITS

            A     NAVAJO GENERATING STATION

            B     TRANSMISSION SYSTEM

            B-B   TRANSMISSION SYSTEM OWNERSHIP

            C     NAVAJO PROJECT GENERAL PROVISIONS

            D     ORIGINAL WESTWING 230 KV SWITCHYARD (INCLUDING COMMON
                  FACILITIES) OWNERSHIP PERCENTAGES

            E     McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

            F     McCULLOUGH SUBSTATION COMMON FACILITIES OWNERSHIP
                  PERCENTAGES (500 KV PORTION ONLY)"

      4.3   A new Subsection 5.15A is hereby inserted after Subsection 5.15 in
            Section 5, DEFINITIONS, to the Co-Tenancy Agreement and the new
            Subsection 5.15A shall read in its entirety as follows:

            "5.15A   CO-TENANCY AGREEMENT: This Navajo Project Co-Tenancy
                     Agreement."

      4.4   A new Subsection 5.21A is hereby inserted after Subsection 5.21 in
            Section 5, DEFINITIONS, to the Co-Tenancy Agreement and the new
            Subsection 5.21A shall read in its entirety as follows:

                                       4

<PAGE>

            "5.21A McCULLOUGH SUBSTATION: An electrical substation (also
                   referred to by the Operating Agent as the McCullough
                   Switching Station), located in southern Nevada, consisting of
                   the McCullough Facilities as defined in Exhibit B hereto, the
                   McCullough 230 kV switchyard, and all appurtenant facilities
                   thereto. The McCullough Substation shall not include the land
                   held by Los Angeles under Bureau of Land Management Grant No.
                   N-2763, dated January 23, 1969 and expiring on January 22,
                   2019, hereinafter referred to as the "McCullough Substation
                   Site," which land comprises the site of such station."

      4.5   Paragraph 6.2.5 of Section 6, OWNERSHIPS AND TITLES, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.5 is hereby substituted to read in its entirety as
            follows:

            "6.2.5 Westwing 230 kV Switchyard

                   6.2.5.1 Original Westwing 230 kV Switchyard (including common
                           facilities)

                           (i)  Arizona  =  32.1%

                           (ii) SRP      =  36.1% for its own use and benefit;
                                                  and

                                         =  31.8% for the use and benefit of the
                                                  United States in accordance
                                                  with Project Agreements.

                                       5

<PAGE>

                              The calculation of ownership percentages for the
                              original Westwing 230 kV Switchyard shall be as
                              set forth in Exhibit D hereto.

                   6.2.5.2 Waddell 230 kV Interconnection

                           SRP   =  100.0% for the use and benefit of the
                                      United States in accordance with Project
                                      Agreements."

      4.6   Paragraph 6.2.8 of Section 6, OWNERSHIPS AND TITLES, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.8 is hereby substituted to read in its entirety as
            follows:

            "6.2.8 McCullough 500 kV Switchyard

                   (i)   Los Angeles = 70.1%

                   (ii)   Nevada = 17.4%

                   (iii) SRP = 12.5% for the use and benefit of the United
                         States in accordance with Project Agreements.

                    The calculation of ownership percentages for the McCullough
                    500 kV Switchyard shall be as set forth in Exhibit E
                    hereto."

      4.7   Paragraph 6.2.9 of Section 6, OWNERSHIPS AND TITLES, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.9 is hereby substituted to read in its entirety as
            follows:

                                       6

<PAGE>

            "6.2.9 McCullough Substation Common Facilities (500 kV portion only)

                   (i) Los Angeles = 70.1%

                   (ii)  Nevada    = 17.4%

                   (iii) SRP       = 12.5% for the use and benefit of the United
                                           States in accordance with Project
                                           Agreements

                    The calculation of ownership percentages for the McCullough
                    Substation Common Facilities shall be as set forth in
                    Exhibit F hereto."

      4.8   Subsection 8.11 of Section 8, USE OF THE TRANSMISSION SYSTEM, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection 8.11 is hereby substituted to read in its entirety as
            follows:

            "8.11 Notwithstanding the provisions of this Section 8, Los Angeles
                  shall have the right to use the McCullough Facilities or to
                  interconnect its transmission system therewith for purposes
                  other than those of the Navajo Project established pursuant to
                  the Project Agreements; provided, that such use or
                  interconnection shall not unreasonably interfere with the
                  rights, titles or interests of the other Participants in the
                  Transmission System as established pursuant to the Project
                  Agreements."

      4.9   Subsection 15.4 of Section 15, CAPITAL IMPROVEMENTS, of the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new

                                       7

<PAGE>

            Subsection 15.4 is hereby substituted to read in its entirety as
            follows:

            "15.4 Capital Improvements made to the Transmission System shall be
                  owned by the Participants in percentage ownership interests in
                  proportions equal to their construction cost responsibilities
                  for such Capital Improvements; provided, that title to the
                  interest of the United States in any such Capital Improvements
                  shall be held by SRP for the use and benefit of the United
                  States."

      4.10  Subsection 35.3 of Section 35, COMPLIANCE WITH COMPACTS, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection 35.3 is hereby substituted to read in its entirety as
            follows:

            "35.3 It is the intention of the Participants that each of the
                  Upper Basin States shall be a third party beneficiary of
                  the terms and conditions of this Section 35."

      4.11  Subsection A, NAVAJO 500 KV SWITCHYARD, in Section I, SOUTHERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection A is hereby substituted to read in its entirety as
            follows:

            "A.   NAVAJO 500 KV SWITCHYARD

                  The Navajo 500 kV Switchyard, a basic breaker-and-a-half
                  scheme, comprising: (i) the 500 kV busses and the structures
                  therefor; (ii) the control building; (iii) the termination
                  facilities for three (3) generator step-up

                                       8

<PAGE>
                  transformers, one (1) station service transformer, the
                  Navajo-McCullough 500 kV line, the Navajo-Moenkopi 500 kV
                  line, and the Navajo-Westwing 500 kV line including, but not
                  limited to, power circuit breakers, disconnect switches, and
                  the structures therefor; and (iv) relays."

      4.12  Paragraph 1 of Subsection F, OTHER ASSOCIATED COMPONENTS, in Section
            I, SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement is hereby deleted in its entirety and a
            new Paragraph 1 is hereby substituted to read in its entirety as
            follows:

            "1.   The additions to the Moenkopi Switchyard comprising: (i) the
                  additional 500 kV busses and the structures therefor; (ii) the
                  termination facilities for the Navajo-Moenkopi 500 kV line and
                  the Moenkopi-Yavapai 500 kV line including, but not limited
                  to, power circuit breakers, disconnect switches, and the
                  structures therefor; (iii) the additions to the termination
                  facilities for the Four Corners-Moenkopi 500 kV line and the
                  Moenkopi-Eldorado 500 kV line including, but not limited to,
                  power circuit breakers, disconnect switches, and the
                  structures therefor; and (iv) relays."

      4.13  Subsection G, YAVAPAI SWITCHYARD, in Section I, SOUTHERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection G is hereby substituted to read in its entirety as
            follows:

                                       9

<PAGE>

            "G,   YAVAPAI SWITCHYARD

                  The Yavapai Switchyard, a basic ring bus scheme, comprising:
                  (i) the 500 kV busses and the structures therefor; (ii) the
                  termination facilities for a 500/230 kV transformer bank, the
                  Moenkopi-Yavapai 500 kV line, and the Yavapai-Westwing 500 kV
                  line including, but not limited to, power circuit breakers,
                  disconnect switches, and the structures therefor; (iii)
                  relays; (iv) common facilities; and (v) other facilities up to
                  and including the connection to the high-side bushings of the
                  500/230 kV transformer bank. The Yavapai Switchyard common
                  facilities include, but are not limited to, roads, trenches
                  and conduit for system control and power cables, station
                  grounding grid, overhead static shield, fencing and gates,
                  yard lighting, maintenance and control buildings, station
                  batteries, chargers and distribution panels, station power
                  transformers and distribution panels, remote terminal units,
                  digital fault recorders, alarms, annunciators, public address
                  system, communications equipment, and related land or land
                  rights."

      4.14  Paragraph 1 of Subsection I, WESTWING SUBSTATION, in Section I,
            SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to
            the Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 1 is hereby substituted to read in its entirety as
            follows:

                                       10

<PAGE>

            "1.   The Westwing 500 kV Switchyard, a basic breaker-and-a-half
                  scheme, comprising: (i) the 500 kV busses and the structures
                  therefor; (ii) the termination facilities for two (2) 500/230
                  kV transformer banks, one (l) 500/345 kV transformer bank, the
                  Yavapai-Westwing 500 kV line, and the Navajo-Westwing 500 kV
                  line including, but not limited to, power circuit breakers,
                  metering transformers, disconnect switches, and the structures
                  therefor; (iii) relays; (iv) the control building; and (v)
                  related land and land rights."

      4.15  Subparagraph 4.1 of Paragraph 4, Westwing 230 kV Switchyard, of
            Subsection I, WESTWING SUBSTATION, in Section I, SOUTHERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Subparagraph 4.1 is hereby substituted to read in its entirety as
            follows:

            "4.1  The original Westwing 230 kV Switchyard (including common
                  facilities), a basic breaker-and-a-half scheme, comprising:
                  (i) the 230 kV busses and the structures therefor; (ii) the
                  termination facilities for two (2) 500/230 kV transformer
                  banks, one Arizona 230 kV line and one future Arizona 230 kV
                  line, two SRP 230 kV lines, and two United States 230 kV lines
                  including, but not limited to, power circuit breakers,
                  metering transformers, disconnect switches, insulators and
                  hardware, the 230 kV leads between points of attachment on the
                  transformer dead-end towers to the main switchyard structures,
                  the

                                       11

<PAGE>
                  230 kv leads up to the points of attachment where the 230 kV
                  transmission lines attach to the main switchyard structures,
                  and the structures therefor; (iii) relays; (iv) the control
                  building; and (v) related land or land rights."

      4.16  Subsection A, McCULLOUGH SUBSTATION, in Section II, WESTERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the Co-
            Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection A is hereby substituted to read in its entirety as
            follows:

            "A,   McCOLLOUGH FACILITIES

                  The McCullough Facilities shall consist of the following
                  components:

                  1.    The McCullough 500 kv Switchyard, a basic breaker-and-
                        a-half scheme, comprising: (i) the 500 kV busses and the
                        structures therefor; (ii) the termination facilities for
                        the 500/230 kV transformer banks H, I and J, the
                        Navajo-McCullough 500 kv line, the McCullough-Eldorado
                        500 kV line, and the McCullough- Victorville 500 kV Line
                        1 and Line 2 including, but not limited to, power
                        circuit breakers, disconnect switches, and the
                        structures therefor; and (iii) other facilities up to
                        and including the connection to the high-side bushings
                        of the 500/230 kV transformer banks. The McCullough 500
                        kV Switchyard shall not include: (i) the McCullough
                        Substation Site; (ii) any termination facilities
                        associated with a third party
<PAGE>
                        interconnection; (iii) any McCullough Substation Common
                        Facilities; or (iv) any 500/230 kV transformer banks
                        located at the McCullough Substation.

                  2.    The McCullough Substation Common Facilities, all or part
                        of those certain structures, improvements and facilities
                        of the McCullough Substation, which include, but are not
                        limited to: dikes, roadways, control building,
                        communications building, ancillary buildings, trenches,
                        conduits, control and power cables, control equipment,
                        station communication equipment, protection equipment,
                        batteries, auxiliary equipment, station grounding grid,
                        fencing, lighting and yard improvements, and any other
                        facilities that provide support for the McCullough
                        Substation.

                        McCullough Substation Common Facilities shall not
                        include: (i) the McCullough Substation Site; (ii) any
                        termination facilities associated with any line or
                        transformer termination at the McCullough Substation; or
                        (iii) any 500/230 kV transformer banks located at the
                        McCullough Substation."

      4.17  Paragraph 1 of Subsection B, NAVAJO-McCULLOUGH 500 KV LINE, in
            Section II, WESTERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION
            SYSTEM, to the Co-Tenancy Agreement is hereby deleted in its
            entirety and a new Paragraph 1 is hereby substituted to read in its
            entirety as follows:

            "1.   The Navajo-McCullough 500 kV line, from and including the
                  first 500 kV line dead-end tower located outside the Navajo

                                      13
<PAGE>

                  500 kV Switchyard to a similar tower location outside the
                  McCullough 500 kV Switchyard, including the Patrol
                  headquarters and the Navajo-McCullough 500 kV line
                  right-of-way. "

      4.18  Exhibit B-B, TRANSMISSION SYSTEM OWNERSHIP, to the Co-Tenancy
            Agreement is hereby deleted in its entirety and replaced by a new
            Exhibit B-B attached hereto and by this reference incorporated
            herein.

      4.19  A new Exhibit D, ORIGINAL WESTWING 230 KV SWITCHYARD (INCLUDING
            COMMON FACILITIES) OWNERSHIP PERCENTAGES, attached hereto and by
            this reference incorporated herein, is hereby appended to the
            Co-Tenancy Agreement.

      4.20  A new Exhibit E, McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES,
            attached hereto and by this reference incorporated herein, is hereby
            appended to the Co-Tenancy Agreement.

      4.21  A new Exhibit F, McCULLOUGH SUBSTATION COMMON FACILITIES OWNERSHIP
            PERCENTAGES (500 KV PORTION ONLY), attached hereto and by this
            reference incorporated herein, is hereby appended to the Co-Tenancy
            Agreement.

5.    EFFECT: Except for the changes set forth in this Amendment No. 5, all
      provisions of the Co-Tenancy Agreement as supplemented by Supplement No. 1
      and as amended by Amendment Nos. 1, 2, 3 and 4 shall remain in full force
      and effect to the extent that such provisions are not in conflict or
      inconsistent with this Amendment No. 5. In the event of any conflict
      between the provisions of this Amendment No. 5 and the Co-Tenancy
      Agreement as supplemented by Supplement No. 1 and as amended by

                                      14
<PAGE>

      Amendment Nos. 1, 2, 3 and 4, the provisions of this Amendment No. 5 shall
      govern.

6.    EXECUTION AND EFFECTIVE DATE:

      6.1   This Amendment No. 5 may be executed in any number of counterparts
            and, upon execution and delivery by each Participant, the executed
            and delivered counterparts together shall have the same force and
            effect as an original instrument as if all the Participants had
            signed the same instrument. Any signature page of this Amendment No.
            5 may be detached from any counterpart of this Amendment No. 5
            without impairing the legal effect of any signatures thereon, and
            may be attached to another counterpart of this Amendment No. 5
            identical in form thereto, but having attached to it one or more
            signature pages.

      6.2   When this Amendment No. 5 to the Co-Tenancy Agreement has been
            executed by, and delivered to, the duly authorized representative of
            each Participant, Nevada shall promptly file this Amendment No. 5
            with the Federal Energy Regulatory Commission ("FERC") and, if
            accepted for filing by FERC without condition or modification, this
            Amendment No. 5 shall be effective as of the date specified by
            Nevada in the filing letter to FERC.

      6.3   In the event FERC conditions or modifies this Amendment No. 5,
            Nevada shall promptly notify all the other Participants. Upon
            written notice given within thirty (30) days from the date of
            Nevada's notice to all other Participants by any Participant that
            such condition or modification is objectionable, this Amendment No.
            5 shall terminate and be of no further force or effect. If no
            written notice is given by any Participant that such condition or

                                      15
<PAGE>

            modification is objectionable within such thirty (30) day period,
            this Amendment No. 5 shall become effective the day after such
            thirty (30) day period.

7.    SIGNATURE CLAUSE: Each Participant hereto represents and warrants that the
      person executing this Amendment No. 5 to the Navajo Project Co-Tenancy
      Agreement has been duly authorized to act on its behalf. This Amendment
      No. 5 to the Navajo Project Co-Tenancy Agreement is hereby executed as of
      the 4th day of September, 1998.

                                   UNITED STATES OF AMERICA

                                   Signature /s/ LeGrand Neilson
                                             ---------------------------------

                                   Name      LeGrand Neilson

                                             Regional Director
                                             ACTING FOR Lower Colorado Region

                                   Title     U.S. Bureau of Reclamation


                                   Date Signed     September 4, 1998


                                   ARIZONA PUBLIC SERVICE COMPANY

 [STAMP]                           Signature /s/ Jack Davis
                                             ----------------------------------
                                   Name      Jack Davis


                                   Title     Executive V. P.
                                             Commercial Operation


                                   Date Signed 3/16/98

                                      16
<PAGE>

                                                                     [ILLEGIBLE]

                                   DEPARTMENT OF WATER AND POWER
                                   OF THE CITY OF LOS ANGELES

                                   by

                                   BOARD OF WATER AND POWER COMMISSIONERS
                                   OF THE CITY OF LOS ANGELES

APPROVED AS TO FORM AND LEGALITY   By /s/ Authorized Signatory
   JAMES K. HAHN CITY ATTORNEY        -----------------------------------------
                                          S. DAVID FREEMAN, General Manager
      MAY 13 1998
                                   and /s/ Authorized Signatory
By   /s/ Kjehl T. Johansen             ----------------------------------------
  ---------------------------------               Secretary
        KJEHL T JOHANSEN
      DEPUTY CITY ATTORNEY         Date Signed    Jun 16 1998


                                   NEVADA POWER COMPANY

                                   Signature /s/ Authorized Signatory
                                             ----------------------------------

                                   Name      Authorized Signatory


                                   Title     Vice President, Finance and
                                             Planning,  Treasurer and CFO

                                   Date Signed     2/26/98


                                   SALT RIVER PROJECT AGRICULTURAL
                                   IMPROVEMENT AND POWER DISTRICT

    APPROVED AS TO FORM            Signature  /s/ Mark B. Bonsall
    [ILLEGIBLE]                               ---------------------------------

   By  /s/ Authorized Signatory    Name       Mark B. Bonsall
       ------------------------

   DATE  2.13.98                   Title      Associate General Manager


                                   Date Signed    02/20/98


                                   TUCSON ELECTRIC POWER COMPANY

                                   Signature   /s/ Authorized Signatory
                                               --------------------------------

                                   Name        T. A. Authorized Signatory

                                   Title       Vice President

                                   Date Signed       3-20-98

                                      17
<PAGE>

                              EXHIBIT B-B, SHEET 1
                      NAVAJO PROJECT CO-TENANCY AGREEMENT

                          TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

                                      BB-1
<PAGE>

                              EXHIBIT B-B, SHEET 2
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                           NAVAJO GENERATING STATION
                                      AND
                            NAVAJO 500 KV SWITCHYARD

                               [CIRCUIT DIAGRAM]

                                      BB-2
<PAGE>

                              EXHIBIT B-B, SHEET 3
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                           MOENKOPI 500 KV SWITCHYARD
                                      AND
                           YAVAPAI 500 KV SWITCHYARD

                               [CIRCUIT DIAGRAM]

                                      BB-3
<PAGE>

                              EXHIBIT B-B, SHEET 4
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                              WESTWING SUBSTATION

                               [CIRCUIT DIAGRAM]

                                      BB-4
<PAGE>

                              EXHIBIT B-B, SHEET 5
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                             McCULLOUGH SUBSTATION

                               [CIRCUIT DIAGRAM]

                                      BB-5
<PAGE>

                                   EXHIBIT D

       ORIGINAL WESTWING 230 KV SWITCHYARD (INCLUDING COMMON FACILITIES)
                             OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                      OWNERSHIP (%)
                                        ----------------------------------------
                                                                 SRP FOR
DESCRIPTION OF TERMINATION              ARIZONA        SRP    UNITED STATES(1)
---------------------------------       -------       -----   ----------------
<S>                                     <C>           <C>     <C>
500/230 kV Transformer Bank T1(2)          28.5        44.2        27.3
500/230 kV Transformer Bank T4(2)          28.5        44.2        27.3
Westwing- Pinnacle Peak                     0.0       100.0         0.0
Westwing-Agua Fria                          0.0       100.0         0.0
Westwing- Pinnacle Peak                     0.0         0.0       100.0
Westwing- Liberty                           0.0         0.0       100.0
Westwing-Surprise                         100.0         0.0         0.0
Westwing-APS (future)                     100.0         0.0         0.0
                                        -------       -----   ---------
TOTAL                                     257.0       288.4       254.6
</TABLE>

Sum of Ownership Percentages:

Arizona + SRP + SRP for United States(1) = 257.0 + 288.4 + 254.6 = 800.0

Ownership percentages for the terminations in the original Westwing 230 kV
Switchyard (including common facilities) are shown in the above table and are
used below to determine the ownership percentages for the original Westwing 230
kV Switchyard (including common facilities) infrastructure facilities such as,
but not limited to, the busses, bus protection and metering, steel switchracks
and associated concrete works, cable trenches and grounding.

Arizona                  = (257.0/800.0) x 100% = 32.1%
SRP                      = (288.4/800.0) x 100% = 36.1%
SRP for United States(1) = (254.6/800.0) x 100% = 31.8%

(1)   SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

(2)   Ownership percentages for the two Westwing 500/230 kV transformer banks
      are set forth in Paragraph 6.2.3 of Section 6, OWNERSHIPS AND TITLES, to
      the Navajo Project Co-Tenancy Agreement.

NOTE: The calculation of ownership percentages for the original Westwing 230 kV
      Switchyard (including common facilities) shall not include any third party
      terminations at such switchyard or the United States' Waddell 230 kV
      Interconnection.

                                      D-1
<PAGE>

                                   EXHIBIT E

               MCCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                 OWNERSHIP (%)
                                        -------------------------------
                                                                SRP FOR
                                          LOS                    UNITED
DESCRIPTION OF TERMINATION              ANGELES     NEVADA      STATES*
------------------------------          -------     ------      -------
<S>                                     <C>         <C>         <C>
Banks H and I 500 kV                      0.00       50.00       50.00
Navajo-McCullough                        48.90       26.10       25.00
Bank J 500 kV                            71.67       28.33        0.00
McCullough-Victorville Line 1           100.00        0.00        0.00
McCullough-Eldorado                     100.00        0.00        0.00
McCullough-Victorville Line 2           100.00        0.00        0.00
                                        -------     ------      -------
TOTAL                                   420.57      104.43       75.00
</TABLE>

Sum of Ownership Percentages:

Los Angeles + Nevada + SRP for United States* = 420.57 + 104.43 + 75.00
                                              = 600.00

Ownership percentages for the terminations in the McCullough 500 kV Switchyard
are shown in the above table and are used below to determine the ownership
percentages for the McCullough 500 kV Switchyard infrastructure facilities such
as, but not limited to, the busses, bus protection and metering, steel
switchracks and associated concrete works, cable trenches and grounding.

Los Angeles            = (420.57/600.00) x 100% = 70.1%
Nevada                 = (104.43/600.00) x 100% = 17.4%
SRP for United States* = ( 75.00/600.00) x 100% = 12.5%


*     SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

NOTE: The calculation of ownership percentages for the McCullough 500 kV
      Switchyard shall not include any third party terminations at such
      switchyard.

                                                               Dated:[ILLEGIBLE]

                                      E-1
<PAGE>

                                   EXHIBIT F

         McCULLOUGH SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
                             (500 KV PORTION ONLY)

Ownership of the McCullough Substation Common Facilities shall be split between
the McCullough 230 kV switchyard (currently 9 terminations) and the McCullough
500 kV Switchyard (currently 6 terminations) based on the ratio of the number of
terminations in said switchyard to the total number of terminations in both
switchyards (currently 15 terminations(1)).


                McCullough 230 kV switchyard: 9/15 = 0.60 or 60%

                McCullough 500 kV Switchyard: 6/15 = 0.40 or 40%

                          500 kV Ownership Percentages
                                       for
                    McCullough Substation Common Facilities

Los Angeles       (420.57(2)/600.00(2)) X 100% = 70.1%

Nevada            (104.43(2)/600.00(2)) X 100% = 17.4%

SRP for
United States(3)  ( 75.00(2)/600.00(2)) X 100% = 12.5%


(1)   The calculation of the 500 kV ownership percentages for the McCullough
      Substation Common Facilities shall not include any third party
      terminations at the McCullough 500 kV Switchyard.

(2)   Numbers used in the calculation of the 500 kV ownership percentages are
      taken from Exhibit E hereto.

(3)   SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

                                       F-1
<PAGE>

                                                                          [SEAL]

                                AMENDMENT NO. 6

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

      By FERC order/notice of acceptance dated ______________ in FERC Docket No.
      ____________, this Amendment No. 6 was accepted for filing and the rate
      schedules became effective on _______________.

EXECUTION ORIGINAL
  July 31, 1998



<PAGE>

                                AMENDMENT NO. 6

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
       SECTION                                                  PAGE
       -------                                                  ----
<S>    <C>                                                      <C>
1.     PARTIES ............................................       1

2.     RECITALS ...........................................       1

3.     AGREEMENT ..........................................       5

4.     AGREEMENT MODIFICATIONS ............................       5

5.     EFFECT .............................................      13

6.     EXECUTION AND EFFECTIVE DATE .......................      14

7.     SIGNATURE CLAUSE ...................................      15
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS
--------
<S>            <C>
B-B, SHEET 1   TRANSMISSION SYSTEM OWNERSHIP

B-B, SHEET 2   TRANSMISSION SYSTEM OWNERSHIP - NAVAJO GENERATING STATION AND
               NAVAJO 500 KV  SWITCHYARD

B-B, SHEET 4   TRANSMISSION SYSTEM OWNERSHIP - WESTWING SUBSTATION

B-B, SHEET 5   TRANSMISSION SYSTEM OWNERSHIP - McCULLOUGH SUBSTATION

B-B, SHEET 6   TRANSMISSION SYSTEM OWNERSHIP - CRYSTAL SUBSTATION

 E             McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

 G             CRYSTAL 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

 H             CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
</TABLE>

<PAGE>

                                 AMENDMENT NO. 6
                                     TO THE
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

1.    PARTIES: The parties to this AMENDMENT NO. 6 to the NAVAJO PROJECT CO-
      TENANCY AGREEMENT ("Amendment No. 6") are: THE UNITED STATES OF AMERICA,
      hereinafter referred to as the "United States," acting through the
      Secretary of the Interior, a duly appointed successor or a duly authorized
      representative; ARIZONA PUBLIC SERVICE COMPANY, hereinafter referred to as
      "Arizona," an Arizona corporation; DEPARTMENT OF WATER AND POWER OF THE
      CITY OF LOS ANGELES, hereinafter referred to as "Los Angeles," a
      department organized and existing by virtue of and under the Charter of
      the City of Los Angeles, a municipal corporation of the State of
      California; NEVADA POWER COMPANY, hereinafter referred to as "Nevada," a
      Nevada corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
      DISTRICT, hereinafter referred to as "Salt River Project" or "SRP," an
      agricultural improvement district organized and existing under the laws of
      the State of Arizona; and TUCSON ELECTRIC POWER COMPANY, hereinafter
      referred to as "Tucson," formerly known as Tucson Gas & Electric Company,
      an Arizona corporation; all of the foregoing are sometimes individually
      referred to as "Participant" and collectively as "Participants."

2.    RECITALS: This Amendment No. 6 is made with reference to the following
      facts, among others:

      2.1   On March 23, 1976, the Participants entered into the NAVAJO PROJECT
            CO-TENANCY AGREEMENT ("Co-Tenancy Agreement") which established
            certain terms and conditions relating to their interest in and their
            ownership of the Navajo Project and which established certain rights
            and obligations under the Project Agreements.

                                       1
<PAGE>

      2.2   On October 18, 1976, the Participants entered into SUPPLEMENT NO. 1
            to the Co-Tenancy Agreement ("Supplement No. 1") to clarify their
            intent to preserve, protect, and enhance the environment as provided
            in Section 29, ENVIRONMENTAL PROTECTION, of the Co-Tenancy
            Agreement.

      2.3   On July 5, 1988, the Participants entered into AMENDMENT NO. 1 to
            the Co-Tenancy Agreement ("Amendment No. 1") to: (i) establish the
            Moenkopi Switchyard as a point of delivery for all Participants; and
            (ii) reflect the sale of Arizona's rights, title, and ownership in
            the Westwing Substation 600 MVA 500/345 kV transformer bank to
            Tucson.

      2.4   On June 14, 1996, the Participants entered into AMENDMENT NO. 2 to
            the Co-Tenancy Agreement ("Amendment No. 2") to reflect: (i) the
            interconnection of the United States' Waddell 230 kV transmission
            line at the United States' designated point of delivery in the
            Westwing Substation; (ii) the change in the transformer ratings at
            the Westwing Substation; (iii) the interconnection of the United
            States' two 230 kV transmission lines in the Westwing 230 kV
            Switchyard; (iv) the removal of the series capacitors installed on
            Arizona's Cholla-Pinnacle Peak 345 kV lines; and (v) the deletion of
            certain project series capacitors from the project description.

      2.5   On February 11, 1997, the Participants entered into AMENDMENT NO. 3
            to the Co-Tenancy Agreement ("Amendment No. 3") to reflect: (i) the
            construction of the Yavapai Switchyard as a component of the
            Southern Transmission System; (ii) new delivery points for Arizona,
            SRP, Tucson, and the United States; and (iii) the interconnection of
            Arizona's Yavapai 230 kV Substation at the applicable Participant's
            new delivery point in the Yavapai Switchyard.

                                        2
<PAGE>

      2.6   On January 21, 1997, the Participants entered into AMENDMENT NO. 4
            to the Co-Tenancy Agreement ("Amendment No. 4") to reflect: (i) the
            revision/deletion of existing language in order to comply with the
            Federal Energy Regulatory Commission's (FERC) Order No. 888, Final
            Rule, issued April 24, 1996; and (ii) the revision of outdated
            language which limited the ability of the Participants to fully
            utilize the Transmission System.

      2.7   On September 4, 1998, the Participants entered into Amendment No. 5
            to the Co-Tenancy Agreement ("Amendment No. 5") to reflect: (i) the
            change in the ownership interests, as tenants in common, for the
            McCullough 500 kV Switchyard and the McCullough Substation Common
            Facilities; (ii) the interconnection of the Marketplace 500 kV
            Tie-Line at the McCullough 500 kV Switchyard; (iii) the
            interconnection of the Victorville Line 2 at the McCullough 500 kV
            Switchyard; (iv) the interconnection of the 500/230 kV transformer
            banks H and I at the McCullough 500 kV Switchyard; (v) the addition
            of a calculation of ownership percentages for the original Westwing
            230 kV Switchyard, the McCullough 500 kV Switchyard and the
            McCullough Substation Common Facilities; and (vi) the clarification
            of descriptions for the McCullough 500 kV Switchyard, the Navajo 500
            kV Switchyard, the Moenkopi Switchyard, the Yavapai Switchyard, the
            Westwing 500 kV Switchyard and the original Westwing 230 kV
            Switchyard.

      2.8   In December 1995, the Project Series Capacitors and Incremental
            Series Capacitors on the Moenkopi Switchyard end of the
            Moenkopi-Eldorado 500 kV line (as described in Paragraph 4 of
            Subsection F, OTHER ASSOCIATED COMPONENTS, in Section I, SOUTHERN
            TRANSMISSION SYSTEM, of Exhibit B to the Co-Tenancy Agreement) were
            replaced by Arizona at the request and sole expense of Southern
            California Edison Company, a non-Navajo entity.

                                       3
<PAGE>

      2.9   Nevada plans to construct the Crystal 500 kV Switchyard as a
            component of the Western Transmission System and to loop in the
            Navajo-McCullough 500 kV line at such switchyard, thereby forming
            the Navajo-Crystal 500 kV line and the Crystal-McCullough 500 kV
            line.

      2.10  Nevada plans to interconnect its Crystal 230 kV switchyard to the
            Navajo Project at its new delivery point in the Crystal 500 kV
            Switchyard.

      2.11  On April 28, 1998, the Transmission Engineering and Operating
            Committee approved the technical feasibility of the loop-in of the
            Navajo-McCullough 500 kV line at the Crystal 500 kV Switchyard. This
            approval was based on the results of technical studies performed by
            Nevada and presented by Nevada to the Transmission Engineering and
            Operating Committee on May 6, 1997 and on the results of additional
            studies performed by Nevada which were requested by Los Angeles
            subsequent to May 6, 1997.

      2.12  The Participants desire to enter into this Amendment No. 6 to
            reflect; (i) the deletion of the Project Series Capacitors and
            Incremental Series Capacitors on the Moenkopi Switchyard end of the
            Moenkopi-Eldorado 500 kV line from the description of the Navajo
            Project; (ii) the construction of the Crystal 500 kV Switchyard as a
            component of the Western Transmission System and the loop-in of the
            Navajo-McCullough 500 kV line at such switchyard, resulting in the
            formation of the Navajo-Crystal and Crystal-McCullough 500 kV line
            segments; (iii) new delivery points for Los Angeles, Nevada and the
            United States at the Crystal 500 kV Switchyard; (iv) the
            interconnection of Nevada's Crystal 230 kV switchyard at Nevada's
            new delivery point in the Crystal 500 kV Switchyard; and (v) the
            addition of a calculation of ownership

                                       4
<PAGE>

            percentages for the Crystal 500 kV Switchyard and the Crystal
            Substation Common Facilities.

3.    AGREEMENT: In consideration of the mutual covenants and benefits to be
      derived from this Amendment No. 6, the Participants agree as follows:

4.    AGREEMENT MODIFICATIONS:

      4.1   A new Subsection 5.16A is hereby inserted after Subsection 5.16 in
            Section 5, DEFINITIONS, of the Co-Tenancy Agreement and the new
            Subsection 5.16A shall read in its entirety as follows:

            "5.16A CRYSTAL SUBSTATION: An electrical substation, located
                   northeast of Las Vegas, Nevada, consisting of the Crystal
                   Facilities as defined in Subsection C of Section II to
                   Exhibit B hereto, the Crystal 230 kV switchyard, two (2)
                   500/230 kV transformer banks, and all appurtenant facilities
                   thereto."

      4.2   Paragraph 6.2.2A in Section 6, OWNERSHIPS AND TITLES, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.2A is hereby substituted to read in its entirety as
            follows:

            "6.2.2A Yavapai Switchyard

                   Arizona                    = 100.0% for the use and benefit
                                                       of the Participants in
                                                       accordance with Project
                                                       Agreements."

      4.3   Paragraph 6.2.6 in Section 6, OWNERSHIPS AND TITLES, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.6 is hereby substituted to read in its entirety as
            follows:

            "6.2.6 Other Associated Components of the Southern Transmission
                   System, as described in Subsection F of Section I of Exhibit
                   B hereto, shall be solely owned by Arizona for

                                       5
<PAGE>

                   the use and benefit of the Participants in accordance with
                   Project Agreements."

      4.4   Paragraph 6.2.7 in Section 6, OWNERSHIPS AND TITLES, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 6.2.7 is hereby substituted to read in its entirety as
            follows:

            "6.2.7 Navajo-Crystal 500 kV line
                   Crystal-McCullough 500 kV line
                   Navajo-Crystal Line Compensation (Navajo end)
                   Crystal-McCullough Line Compensation (McCullough end)
                   Western Transmission Communications System

                   (i)   Los Angeles          = 48.9%
                   (ii)  Nevada               = 26.1%
                   (iii) SRP                  = 25.0%  for the use and benefit
                                                       of the United States in
                                                       accordance with Project
                                                       Agreements."

      4.5   A new Paragraph 6.2.7A is hereby inserted after Paragraph 6.2.7 in
            Section 6, OWNERSHIPS AND TITLES, of the Co-Tenancy Agreement and
            the new Paragraph 6.2.7A shall read in its entirety as follows:

            "6.2.7A Crystal Facilities

                    Nevada                    = 100.0% for the use and benefit
                                                       of the Participants in
                                                       accordance with Project
                                                       Agreements."

      4.6   Subsection 8.5 in Section 8, USE OF THE TRANSMISSION SYSTEM, of the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection 8.5 is hereby substituted to read in its entirety as
            follows:

                                       6
<PAGE>

            "8.5  The Participants' designated points of delivery shall be as
                  follows:

                  8.5.1    Arizona       =  Navajo 500 kV Switchyard, Westwing
                                            Substation, Moenkopi Switchyard
                                            and Yavapai Switchyard.

                  8.5.2    Los Angeles   =  Navajo 500 kV Switchyard,
                                            McCullough 500 kV Switchyard,
                                            Moenkopi Switchyard and Crystal
                                            500 kV Switchyard.

                  8.5.3    Nevada        =  Navajo 500 kV Switchyard,
                                            McCullough 500 kV Switchyard,
                                            Moenkopi Switchyard and Crystal
                                            500 kV Switchyard.

                  8.5.4    SRP           =  Navajo 500 kV Switchyard, Westwing
                                            Substation, Moenkopi Switchyard
                                            and Yavapai Switchyard.

                  8.5.5    Tucson        =  Navajo 500 kV Switchyard, Westwing
                                            Substation, Moenkopi Switchyard
                                            and Yavapai Switchyard.

                  8.5.6    United States =  Navajo 500 kV Switchyard,
                                            McCullough 500 kV Switchyard,
                                            Westwing Substation, Moenkopi
                                            Switchyard, Yavapai Switchyard and
                                            Crystal 500 kV Switchyard."

      4.7   Subsection B, McCULLOUGH LINE COMPENSATION, in Section I, SOUTHERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection B is hereby substituted to read in its entirety as
            follows:

                                       7
<PAGE>

            "B.   NAVAJO-CRYSTAL LINE COMPENSATION

                  The Project Series Capacitors, Incremental Series Capacitors
                  and shunt reactors on the Navajo 500 kV Switchyard end of the
                  Navajo-Crystal 500 kV line including, but not limited to, the
                  capacitors, control equipment, reactors, lightning arrestors,
                  hazard fencing, disconnects, structures and bus work from the
                  switchyard side of the first 500 kV line dead-end tower
                  located outside the switchyard to the attachment on the main
                  switchyard structure."

      4.8   Paragraph 4 of Subsection F, OTHER ASSOCIATED COMPONENTS, in Section
            I, SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement is hereby deleted in its entirety.

      4.9   Paragraph 5 of Subsection F, OTHER ASSOCIATED COMPONENTS, in Section
            I, SOUTHERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement is hereby deleted in its entirety and a
            new Paragraph 4 is hereby substituted to read in its entirety as
            follows:

            "4.   All the communication facilities necessary to control the
                  Southern Transmission System including such facilities located
                  at the Navajo 500 kV Switchyard, the Moenkopi Switchyard, the
                  Yavapai Switchyard, or the Westwing Substation."

      4.10  Paragraph 1 of Subsection A, McCULLOUGH FACILITIES, in Section II,
            WESTERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to
            the Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Paragraph 1 is hereby substituted to read in its entirety as
            follows:

            "1.   The McCullough 500 kV Switchyard, a basic breaker-and-a-half
                  scheme, comprising: (i) the 500 kV busses and the structures

                                       8
<PAGE>

                  therefor; (ii) the termination facilities for the 500/230 kV
                  transformer banks H, I and J, the Crystal-McCullough 500 kV
                  line, the McCullough-Eldorado 500 kV line, and the
                  McCullough-Victorville 500 kV Line 1 and Line 2 including, but
                  not limited to, power circuit breakers, disconnect switches,
                  and the structures therefor; and (iii) other facilities up to
                  and including the connection to the high-side bushings of the
                  500/230 kV transformer banks. The McCullough 500 kV Switchyard
                  shall not include: (i) the McCullough Substation Site; (ii)
                  any termination facilities associated with a third party
                  interconnection; (iii) any McCullough Substation Common
                  Facilities; or (iv) any 500/230 kV transformer banks located
                  at the McCullough Substation."

      4.11  Subsection B, NAVAJO-McCULLOUGH 500 KV LINE, in Section II, WESTERN
            TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM, to the
            Co-Tenancy Agreement is hereby deleted in its entirety and a new
            Subsection B is hereby substituted to read in its entirety as
            follows:

            "B.   NAVAJO-CRYSTAL 500 KV LINE

                  The Navajo-Crystal 500 kV line, from and including the first
                  500 kV line dead-end tower located outside the Navajo 500 kV
                  Switchyard to the first 500 kV transmission line tower located
                  outside the Crystal 500 kV Switchyard, including the patrol
                  headquarters and the Navajo-Crystal 500 kV line right-of-way."

      4.12  Subsection C, WESTERN TRANSMISSION COMMUNICATIONS SYSTEM, in Section
            II, WESTERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement is hereby deleted in its entirety and a
            new Subsection C is hereby substituted to read in its entirety as
            follows:

                                       9
<PAGE>

            "C.   CRYSTAL FACILITIES

                  1.    The Crystal 500 kV Switchyard, a basic breaker-and-a-
                        half scheme to be initially installed as a basic ring
                        bus scheme, comprising: (i) the 500 kV busses and the
                        structures therefor; (ii) the termination facilities for
                        two (2) 500/230 kV transformer banks, the Navajo-
                        Crystal 500 kV line, and the Crystal-McCullough 500 kV
                        line including, but not limited to, power circuit
                        breakers, disconnect switches, and the structures
                        therefor; (iii) relays; and (iv) other facilities up to
                        and including the connection to the high-side bushings
                        of the 500/230 kV transformer banks. The Crystal 500 kV
                        Switchyard shall not include: (i) any Crystal Substation
                        Common Facilities; or (ii) any 500/230 kV transformer
                        banks located at the Crystal Substation.

                  2.    The Crystal Substation Common Facilities, all or part of
                        those certain structures, improvements and facilities of
                        the Crystal Substation, which include, but are not
                        limited to: dikes, roadways, control building,
                        communications building, ancillary buildings, trenches,
                        conduits, remote terminal unit (RTU) and SCADA interface
                        equipment, control and power cables, control equipment,
                        batteries, auxiliary equipment, station grounding grid,
                        fencing, lighting and yard improvements, and related
                        land or land rights. Crystal Substation Common
                        Facilities shall not include: (i) any termination
                        facilities associated with any line or transformer
                        termination at the

                                       10
<PAGE>

                        Crystal Substation; or (ii) any 500/230 kV transformer
                        banks located at the Crystal Substation.

                  3.    The Project Series Capacitors and shunt reactors on the
                        Crystal 500 kV Switchyard end of the Navajo-Crystal 500
                        kV line including, but not limited to, the capacitors,
                        control equipment, reactors, power circuit breaker,
                        lightning arrestors, hazard fencing, disconnects,
                        structures and bus work from the switchyard side of the
                        first 500 kV transmission line tower located outside the
                        switchyard to the attachment on the main switchyard
                        structure."

      4.13  A new Subsection D is hereby inserted after Subsection C in Section
            II, WESTERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement and the new Subsection D shall read in
            its entirety as follows:

            "D.   CRYSTAL-McCULLOUGH 500 KV LINE

                  1.    The Crystal-McCullough 500 kV line, from and including
                        the first 500 kV transmission line tower located outside
                        the Crystal 500 kV Switchyard to the first 500 kV line
                        dead-end tower located outside the McCullough 500 kV
                        Switchyard, including the Crystal-McCullough 500 kV line
                        right-of-way.

                  2.    The Project Series Capacitors, Incremental Series
                        Capacitors and shunt reactors on the McCullough 500 kV
                        Switchyard end of the Crystal-McCullough 500 kV line
                        including, but not limited to, the capacitors, control
                        equipment, reactors, power circuit breaker, lightning
                        arrestors, hazard fencing, disconnects, structures and
                        bus work from the switchyard side of the first 500 kV

                                       11
<PAGE>


                        line dead-end tower located outside the switchyard to
                        the attachment on the main switchyard structure."

      4.14  A new Subsection E is hereby inserted after Subsection D in Section
            II, WESTERN TRANSMISSION SYSTEM, of Exhibit B, TRANSMISSION SYSTEM,
            to the Co-Tenancy Agreement and the new Subsection E shall read in
            its entirety as follows:

            "E.   WESTERN TRANSMISSION COMMUNICATIONS SYSTEM

                  The microwave system from a terminal located at the Navajo 500
                  kV Switchyard carrier room to a terminal located at the Red
                  Mountain Microwave Station near Boulder City, Nevada, more
                  particularly described as follows:

                  1.    EQUIPMENT AT NAVAJO 500 KV SWITCHYARD: The Backbone
                        Radio Frequency (RF) System shall include the following:
                        (i) RF microwave equipment; (ii) the coaxial cable;
                        (iii) the antenna; and (iv) batteries and battery
                        chargers. The antenna and the coaxial cable shall be
                        located in the Navajo 500 kV Switchyard and mounted on a
                        tower structure which is part of the Navajo 500 kV
                        Switchyard. The microwave equipment shall be located in
                        the carrier room.

                  2.    EQUIPMENT AT REPEATER STATIONS: The Backbone RF System
                        shall include the following: (i) RF microwave equipment
                        (digital or analog); (ii) all baseband treatment,
                        including but not limited to amplifiers, bridges,
                        filters, pads, and power supplies; (iii) supervisory
                        alarm and control system; (iv) auxiliary power units,
                        generators, fuel tanks, batteries, battery chargers and
                        associated equipment; (v) buildings and associated
                        electrical wiring, lighting, and air conditioning
                        equipment; (vi) all tower

                                       12
<PAGE>

                        structures, antennas, coaxial cable, mounting
                        brackets, and associated equipment; (vii) microwave
                        site property including fencing and other required
                        improvements; (viii) roads required for microwave site
                        access; and (ix) any other material and/or equipment
                        which may be required to implement the Backbone RF
                        System.

                  3.    EQUIPMENT AT RED MOUNTAIN: The Backbone RF System shall
                        include the following: (i) RF microwave equipment; (ii)
                        all baseband treatment; (iii) supervisory alarm and
                        control system; (iv) the antenna; and (v) the coaxial
                        cable."

      4.15  Sheets 1, 2, 4 and 5 of Exhibit B-B, TRANSMISSION SYSTEM OWNERSHIP,
            to the Co-Tenancy Agreement are hereby deleted in their entirety and
            replaced by new Sheets 1, 2, 4, 5 and 6 attached hereto and by this
            reference incorporated herein.

      4.16  Exhibit E, McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES, to
            the Co-Tenancy Agreement is hereby deleted in its entirety and
            replaced by a new Exhibit E attached hereto and by this reference
            incorporated herein.

      4.17  A new Exhibit G, CRYSTAL 500 KV SWITCHYARD OWNERSHIP PERCENTAGES,
            attached hereto and by this reference incorporated herein, is hereby
            appended to the Co-Tenancy Agreement.

      4.18  A new Exhibit H, CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP
            PERCENTAGES (500 KV PORTION ONLY), attached hereto and by this
            reference incorporated herein, is hereby appended to the Co-Tenancy
            Agreement.

5.    EFFECT: Except for the changes set forth in this Amendment No. 6, all
      provisions of the Co-Tenancy Agreement as supplemented by Supplement No. 1
      and as amended by Amendment Nos. 1, 2, 3, 4 and 5 shall remain in full

                                       13
<PAGE>

      force and effect to the extent that such provisions are not in conflict or
      inconsistent with this Amendment No. 6. In the event of any conflict
      between the provisions of this Amendment No. 6 and the Co-Tenancy
      Agreement as supplemented by Supplement No. 1 and as amended by Amendment
      Nos. 1, 2, 3, 4 and 5, the provisions of this Amendment No. 6 shall
      govern.

6.    EXECUTION AND EFFECTIVE DATE:

      6.1   This Amendment No. 6 may be executed in any number of counterparts
            and, upon execution and delivery by each Participant, the executed
            and delivered counterparts together shall have the same force and
            effect as an original instrument as if all the Participants had
            signed the same instrument. Any signature page of this Amendment No.
            6 may be detached from any counterpart of this Amendment No. 6
            without impairing the legal effect of any signatures thereon, and
            may be attached to another counterpart of this Amendment No. 6
            identical in form thereto, but having attached to it one or more
            signature pages.

      6.2   When this Amendment No. 6 to the Co-Tenancy Agreement has been
            executed by, and delivered to, the duly authorized representative of
            each Participant, Nevada shall promptly file this Amendment No. 6
            with FERC and, if accepted for filing by FERC without condition or
            modification, this Amendment No. 6 shall be effective as of the date
            specified by Nevada in the filing letter to FERC.

      6.3   In the event FERC conditions or modifies this Amendment No. 6,
            Nevada shall promptly notify all the other Participants. Upon
            written notice given within thirty (30) days from the date of
            Nevada's notice to all other Participants by any Participant that
            such condition or modification is objectionable, this Amendment No.
            6 shall terminate and be of no further force or effect. If no
            written notice is given by any Participant that such condition or

                                       14
<PAGE>

            modification is objectionable within such thirty (30) day period,
            this Amendment No. 6 shall become effective the day after such
            thirty (30) day period.

7.    SIGNATURE CLAUSE: Each Participant hereto represents and warrants that the
      person executing this Amendment No. 6 to the Navajo Project Co-Tenancy
      Agreement has been duly authorized to act on its behalf. This Amendment
      No. 6 to the Navajo Project Co-Tenancy Agreement is hereby executed as of
      the 26th day of july, 1999.

                                    UNITED STATES OF AMERICA

                                    Signature /s/ Robert W. Johnson
                                              ----------------------------------

                                    Name Robert W. Johnson

                                          Regional Director
                                          Lower Colorado Region
                                    Title U.S. Bureau of Reclamation

                                    Date Signed Jul 26 1999


                                    ARIZONA PUBLIC  SERVICE COMPANY

                                    Signature /s/ Jack Davis
                                              ----------------------------------
[STAMP]
                                    Name Jack Davis


                                    Title Executive Vice President

                                    Date Signed September 30, 1998

                                    DEPARTMENT OF WATER AND POWER
                                    OF THE CITY OF LOS ANGELES

                                    by

APPROVED AS TO FORM AND LEGALITY    BOARD OF WATER AND POWER COMMISSIONERS
  JAMES K. HAHN CITY ATTORNEY       OF THE CITY OF LOS ANGELES
        MAY 07 1999

By /s/ Kjehl T. Johansen            By /s/ S. David Freeman
   -----------------------------       -----------------------------------------
   KJEHL T JOHANSEN                 S. DAVID FREEMAN, General Manager
   Deputy City Attorney

                                    and /s/ Authorized Signatory
                                        ----------------------------------------
                                                        Secretary

                                    Date Signed Authorized Signatory

                                       15

<PAGE>

                                    NEVADA POWER COMPANY

                                    Signature /s/ Steven W. Rigazio
                                              ----------------------------------

                                    Name Steven W. Rigazio

                                    Title Vice President, Finance and
                                          Planning, Treasurer and CFO

                                    Date Signed October 15, 1998


                                    SALT RIVER PROJECT AGRICULTURAL
                                    IMPROVEMENT AND POWER DISTRICT

                                    Signature /s/ Richard H. Silverman
                                              ----------------------------------

       APPROVED AS TO FORM          Name Richard H. Silverman
SALT RIVER PROJECT LEGAL SERVICES

 By /s/ Authorized Signatory        Title General Manager
    ------------------------------

DATE 10-29-98                       Date Signed December 18,1998


                                    TUCSON ELECTRIC POWER COMPANY

                                    Signature /s/ T.A. Delawdev
                                              ----------------------------------

                                    Name T.A. Delawdev

                                    Title Vice President

                                    Date Signed 12-22-98

                                       16


<PAGE>

                              EXHIBIT B-B, SHEET 1
                      NAVAJO PROJECT CO-TENANCY AGREEMENT

                          TRANSMISSION SYSTEM OWNERSHIP

                                  [FLOW CHART]

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

                                                                Revised: 7/31/98
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<PAGE>

                              EXHIBIT B-B, SHEET 2
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                            NAVAJO GENERATING STATION
                                       AND
                            NAVAJO 500 kV SWITCHYARD

                                [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

                                                                Revised: 7/31/98
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                                      BB-2

<PAGE>

                              EXHIBIT B-B, SHEET 4
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                               WESTWING SUBSTATION

                                [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

**Ownership percentage calculation shown in Exhibit D.

                                                                Revised: 7/31/98
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                                      BB-4

<PAGE>

                              EXHIBIT B-B, SHEET 5
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                              McCULLOUGH SUBSTATION

                               [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

**Ownership percentage calculation shown in Exhibit E.

***Ownership percentage calculation shown in Exhibit F.

                                      Note: The McCullough 230 kV switchyard and
                                      transformer banks H.I and J are shown for
                                      information purposes only.

                                                                Revised: 7/31/98
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<PAGE>

                              EXHIBIT B-B, SHEET 6
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                               CRYSTAL SUBSTATION

                                [CIRCUIT DIAGRAM]

Legend:

          Termination

___  ___  Crystal 500 kV Switchyard

                                   Note: The Crystal 230 kV switchyard, the
                                   500/230 kV transformers banks, and the 230 kV
                                   phase-shifting transformers are shown for
                                   information purposes only.

                                                                Revised: 7/31/98
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<PAGE>
                                    EXHIBIT E

               McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                      OWNERSHIP (%)
                                             ------------------------------
                                                                    SRP FOR
                                               LOS                   UNITED
DESCRIPTION OF TERMINATION                   ANGELES      NEVADA    STATES*
-----------------------------                -------     -------    -------
<S>                                          <C>         <C>        <C>
Banks H and I 500 kV                            0.00       50.00     50.00
Crystal-McCullough                             48.90       26.10     25.00
Bank J 500 kV                                  71.67       28.33      0.00
McCullough-Victorville Line 1                 100.00        0.00      0.00
McCullough-Eldorado                           100.00        0.00      0.00
McCullough-Victorville Line 2                 100.00        0.00      0.00
                                             -------     -------    ------
TOTAL                                         420.57      104.43     75.00
</TABLE>

Sum of Ownership Percentages:

Los Angeles + Nevada + SRP for United States* = 420.57 + 104.43 + 75.00
                                              = 600.00

Ownership percentages for the terminations in the McCullough 500 kV Switchyard
are shown in the above table and are used below to determine the ownership
percentages for the McCullough 500 kV Switchyard infrastructure facilities such
as, but not limited to, the busses, bus protection and metering, steel
switchracks and associated concrete works, cable trenches and grounding.

Los Angeles            = (420.57/600.00) x 100% = 70.1%
Nevada                 = (104.43/600.00) x 100% = 17.4%
SRP for United States* = ( 75.00/600.00) x 100% = 12.5%

*     SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

NOTE: The calculation of ownership percentages for the McCullough 500 kV
      Switchyard shall not include any third party terminations at such
      switchyard.

                                                            Dated: July 31, 1998

                                      E-1
<PAGE>

                                    EXHIBIT G

                 CRYSTAL 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                      OWNERSHIP (%)
                                             ------------------------------
                                                                    SRP FOR
                                               LOS                   UNITED
DESCRIPTION OF TERMINATION                   ANGELES      NEVADA    STATES*
--------------------------                   --------     ------    -------
<S>                                          <C>          <C>       <C>
Bank No, 2 - 500 kV                            0.00       100.00      0.00
Bank No. 3 - 500 kV                            0.00       100.00      0.00
Navajo-Crystal                                 0.00       100.00      0.00
Crystal-McCullough                             0.00       100.00      0.00
                                              -----       ------      ----
TOTAL                                          0.00       400.00      0.00
</TABLE>

Sum of Ownership Percentages:

Los Angeles + Nevada + SRP for United States* = 0.00 + 400.00 + 0.00 = 400.00

Ownership percentages for the terminations in the Crystal 500 kV Switchyard are
shown in the above table and are used below to determine the ownership
percentages for the Crystal 500 kV Switchyard infrastructure facilities such as,
but not limited to, the busses, bus protection and metering, steel switchracks
and associated concrete works, cable trenches and grounding.

Los Angeles            = (  0.00/400.00) x 100% =   0.0%
Nevada                 = (400.00/400.00) x 100% = 100.0%
SRP for United States* = (  0.00/400.00) x 100% =   0.0%

*     SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

                                                            Dated: July 31, 1988

                                      G-1
<PAGE>

                                    EXHIBIT H

           CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
                              (500 KV PORTION ONLY)

Ownership of the Crystal Substation Common Facilities shall be split between the
Crystal 230 kV switchyard (currently 4 terminations) and the Crystal 500 kV
Switchyard (currently 4 terminations) based on the ratio of the number of
terminations in said switchyard to the total number of terminations in both
switchyards (currently 8 terminations).

                  Crystal 230 kV switchyard: 4/8 = 0.50 or 50%

                  Crystal 500 kV Switchyard: 4/8 = 0.50 or 50%

                          500 kV Ownership Percentages
                                       for
                      Crystal Substation Common Facilities

Los Angeles              (  0.00(1)/400.00(1)) x 100% =   0.0%

Nevada                   (400.00(1)/400.00(1)) x 100% = 100.0%

SRP for United States(2) (  0.00(1)/400.00(1)) x 100% =   0 0%

(1)   Numbers used in the calculation of the 500 kV ownership percentages are
      taken from. Exhibit G hereto.

(2)   SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

                                                            Dated: July 31, 1998

                                      H-1
<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                       NAVAJO PROJECT CO-TENANCY AGREEMENT

                                     BETWEEN

                         THE NAVAJO PROJECT PARTICIPANTS

                                (DWP NO. 10498S)

DATED: FEB - 5 1976

<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                       NAVAJO PROJECT CO-TENANCY AGREEMENT

                                      AMONG

                           THE UNITED STATE OF AMERICA

                         ARIZONA PUBLIC SERVICE COMPANY

                          DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                              NEVADA POWER COMPANY

                         SALT RIVER PROJECT AGRICULTURAL
                         IMPROVEMENT AND POWER DISTRICT

                         TUCSON GAG & ELECTRIC COMPANY

                                                                  DWP No. 104985
<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                      NAVAJO PROJECT CO-TENANCY AGREEMENT

1.    PARTIES: The parties to this Supplement No. 1 to the Navajo Project
      Co-Tenancy Agreement hereinafter referred to as Supplement No. 1 are: THE
      UNITED STATES OF AMERICA, hereinafter referred to as the "United States",
      acting through the Secretary of the Interior, his duly appointed successor
      or his duly authorized representative; ARIZONA PUBLIC SERVICE COMPANY, an
      Arizona corporation, hereinafter referred to as "Arizona"; DEPARTMENT OF
      WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
      existing under the Charter Of the City of Los Angeles, a municipal
      corporation of the State of California, hereinafter referred to as "Los
      Angeles"; NEVADA POWER COMPANY, a Nevada corporation, hereinafter referred
      to as "Nevada"; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
      DISTRICT, an agricultural improvement district organized and existing
      under the laws of the State of Arizona, hereinafter referred to as "Salt
      River Project"; and TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation,
      hereinafter referred to as "Tucson".

2.    RECITALS: This Supplement No. 1 is made with reference to the following
      facts, among others:

      2.1   The Participants entered into the Participation Agreement, which
            provides the basic principles for

                                     - 1 -
<PAGE>

            their participation in the Navajo Project. These principles are
            intended to be the basis of definitive agreements, included among
            which is the Navajo Project Co-Tenancy Agreement.

      2.2   The Navajo Project Co-Tenancy Agreement, which supersedes in part
            the Navajo Project Participation Agreement, establishes terms and
            conditions relating to the Participants' interests in and ownership
            of the Navajo Project and establishes certain rights and obligations
            under the Project Agreements.

      2.3   The Participants desire by this Supplement No. 1 to clarify their
            intent to preserve, protect and enhance the environment as provided
            in Section 29 (Environmental Protection) of the Co-Tenancy
            Agreement.

3.    AGREEMENT: In consideration of the terms and conditions contained in this
      Supplement No. 1 to the Navajo Project Co-Tenancy Agreement, the
      Participants agree that Section 29 of the Co-Tenancy Agreement is hereby
      supplemented to read as follows:

29.   ENVIRONMENTAL PROTECTION:

      29.1  It is the intent of the Participants to comply with applicable
            ambient air standards in order to protect the public health and
            welfare from pollutants emitted from the Navajo Project.

      29.2  On or before September 30 of each year, a report

                                     - 2 -
<PAGE>

            shall be prepared by Los Angeles at its own expense for the fiscal
            year ending on June 30 preceding such date on environmental matters
            related to the operation and maintenance of the Navajo Generating
            Station and its associated transmission and other facilities and to
            the design and construction of such Navajo Generating Station and
            associated facilities as of such June 30.

            29.2.1 The report shall include, but not be limited to, a review of
                   any applicable or potentially applicable advances in
                   technology of equipment and devices for the protection of the
                   environment, an analysis of the performance and efficiency of
                   existing air quality control equipment and devices at the
                   Navajo Generating Station and its related facilities at the
                   site, a review of new information concerning effects to
                   health and welfare arising from the operation and maintenance
                   of the Navajo Project and should furnish conclusions as to
                   the environmental and economic desirability and feasibility
                   of upgrading the level of protection against such effects.

            29.2.2 A copy of each such report shall be transmitted by Los
                   Angeles, at its expense,

                                     - 3 -
<PAGE>

                   promptly thereafter to each person or group who notifies Los
                   Angeles in writing of a desire to receive a copy thereof. The
                   notification shall be effective from year to year until such
                   time as such person or group notifies Los Angeles in writing
                   of its revocation or fails to provide a correct address for
                   receipt of such report.

                   29.2.2.1 Such transmittal shall include, either by
                            accompanying letter or statement on the inside front
                            cover of such report, an indication that Los Angeles
                            will, for a period of 60 days from the date of such
                            report, receive and consider comments and
                            suggestions on such report and the subject matters
                            thereof. Los Angeles shall summarize the comments of
                            the public and shall present the same annually to
                            representatives of the Participants.

      29.3  The Participants will design, construct, operate and maintain the
            Navajo Project in a manner consistent with the Participants'
            objective of attaining the greatest feasible degree of
            environmental

                                     - 4 -
<PAGE>

            protection. In addition to fulfilling all obligations which have
            been assumed under provisions relating to protection of the
            environment which are contained in existing Project Agreements, the
            Participants affirm their continuing obligation to comply fully with
            applicable Federal, state and local laws, orders, regulations, rules
            and standards relating to environmental protection. The Participants
            shall to the extent practicable anticipate and make provision for
            the future installation of any systems required to comply with
            changes in said laws, orders, regulations, rules and standards.

      29.4  The Participants shall install and diligently operate in the Navajo
            Generating Station the most effective commercially proven air
            quality control equipment for particulate control available at the
            time of design of each unit of the Navajo Generating Station. Stack
            design, the designs of other plant systems related to air quality
            control, and plans for and design of systems for control and
            disposal of waste materials and residue from burned fuel shall be
            subject to such approval by the Secretary as required by Project
            Agreements and to review and comment by the Secretary in all other
            instances in advance of construction, installation, making a

                                     - 5 -
<PAGE>

            Capital Improvement thereto or the retirement of Units of Property
            thereof. The Secretary shall act or comment within 60 days after
            submission of a plan or design. From time to time, at the call of
            either the Secretary or the Coordinating Committee, but at least
            every three (3) years beginning in 1980, representatives of the
            Participants, and the designated representative of the Secretary,
            shall meet to review technological advances in air quality control
            equipment and such reports from Los Angeles set forth in Section
            29.2 hereof, and all comments and suggestions thereof and, provided
            the representatives of the Participants and the designated
            representative of the Secretary agree, shall formulate a
            recommendation to the Coordinating Committee as to the need for and
            feasibility of Installing additional equipment or modifying existing
            equipment to improve air quality control. In the event agreement
            cannot be reached and a recommendation formulated by the designated
            representatives of the Participants and the designated
            representative of the Secretary, the failure to agree shall not be
            subject to arbitration as provided in Section 19 of the co-Tenancy
            Agreement.

            29.4.1 In the operation of the Navajo Generating

                                      - 6 -
<PAGE>
                   Station, the Participants will make such tests and
                   measurements and keep such records as will enable them to
                   make reports to the Secretary relating to the operation and
                   efficiency of the air quality control equipment at such
                   intervals as may be mutually agreed upon, but not less than
                   once annually. The tests and measurements will be made in
                   conformance with the latest American Society of Mechanical
                   Engineers (ASME) test procedures for determining dust
                   concentration in a gas stream and in conformance with other
                   accepted procedures agreed upon by the Secretary and the
                   Participants.

            29.4.2 The Participants during normal working hours will permit
                   representatives of the Secretary to have access to, and to
                   inspect and copy, all records relating to air quality and
                   will permit such representatives to inspect the air quality
                   control systems.

      29.5  The Participants shall install and diligently operate as part of the
            Navajo Generating Station such wastewater, waste material, sewage
            control and disposal systems necessary to comply with and fulfill
            the objectives and obligations set forth in

                                     - 7 -
<PAGE>
            Section 29.3 hereof. Designs and plans for the water quality control
            systems, systems for the disposal of wastewater, waste materials,
            and sewage, and any other plant systems related to control of water
            quality shall be subject to such approval by the Secretary as
            required by the Project Agreements and to review and comment by the
            Secretary in all other instances in advance of construction,
            installation, making a Capital Improvement or the retirement of
            Units of Property thereof. The Secretary shall act or comment within
            60 days after submission of a plan or design.

            29.5.1 The Participants during normal working hours will permit
                   representatives of the Secretary to have access to, and to
                   inspect and copy, all records relating to water quality
                   control and will permit such representatives to inspect the
                   water quality control systems.

      29.6  The Participants shall take appropriate measures to harmonize the
            Navajo Project with the environment. The Participants shall exercise
            care to prevent any unnecessary destruction, scarring, or defacing
            of the natural surroundings in the vicinity of the Navajo Project
            work.

      29.7  In any arbitration as to a dispute arising under the

                                     - 8 -
<PAGE>

            provisions of this Section 29, the arbitrators shall consider the
            cost effectiveness of the course of action under dispute; Federal,
            state and local laws, orders, regulations, rules and standards; the
            ability to obtain appropriations from Congress for such purposes;
            and the ability of the Participants to obtain capital for such
            purposes.

4.    Except as provided herein, the Navajo Project Co-Tenancy Agreement shall
      remain in full force and effect.

            IN WITNESS WHEREOF, the parties hereto have caused this Supplement
            No. 1 to the Navajo Project Co-Tenancy Agreement to be executed as
            of the 18th day of October, 1976.

                                  THE UNITED STATES  OF AMERICA

                                  By  /s/ Manuel Lopez, Jr. Regional Director
                                      ------------------------------------------
                                        Manuel Lopez. Jr. Regional Director
                                  Lower Colorado Region, Bureau of  Reclamation
                                        for Secretary of the  Interior

                                  ARIZONA PUBLIC SERVICE COMPANY

ATTEST:                           By /s/ D.L. Broussard
/s/ Wm. T. Quinsllr                  ------------------------------------------
--------------------------------                  Vice President
  WM. T. QUINSLLR, SECRETARY

                                  NEVADA POWER COMPANY

ATTEST:                           By  /s/ A. E. Pearson
/s/ Authorized Signatory          ------------------------------------------
--------------------------------        President

                                  SALT RIVER PROJECT AGRICULTURAL

                                  IMPROVEMENT AND POWER DISTRICT

ATTEST AND COUNTERSIGN:           By  /s/ Authorized Signatory
/s/ Authorized Signatory              ------------------------------------------
--------------------------------                     President
          Secretary

                                      -9-
[STAMP]
<PAGE>

                                  TUCSON GAS & ELECTRIC COMPANY

ATTEST:                           By  /s/ Einar Creve
/s/ Authorized Signatory              ------------------------------------------
--------------------------------             EXECUTIVE VICE PRESIDENT
     ASSISTANT SECRETARY

                                  DEPARTMENT OF WATER AND POWER

                                  OF THE CITY OF LOS ANGELES

[SEAL]                                         by

                                  BOARD OF   WATER AND POWER COMMISSIONERS

                                  OF THE CITY OF LOS ANGELES

BY:                               By  /s/ Louis H. Winnand
    /s/ Authorized Signatory          ------------------------------------------
--------------------------------        General Manager and Chief Engineer

                                                and

                                  By  /s/ Mary J. Born
                                      ------------------------------------------
                                                        Secretary

                                      -10-

[SEAL]                                                               [STAMP]
<PAGE>


      On this the 18th day of October, 1976, before me, the undersigned officer,
personally appeared Manuel Lopez, Jr., Regional Director, Lower Colorado Region,
Bureau of Reclamation, of the United States of America, known to me to be the
person described in the foregoing instrument, and acknowledged that he executed
the same in the capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

State of Arizona    )                                  /s/ Authorized Signatory
                    )ss                                ------------------------
County of Maricopa  )                                         Notary Public
                                                                 [STAMP]

      On this the 19th day of July, 1976, before me, the undersigned officer,
personally appeared D. L. BROUSSARD, who acknowledged himself to be the Vice
President of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, and that
he, as such Vice President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as Vice President.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                                  Notary Public

My commission expires:
                                                                      [SEAL]
      My Commission Expires Jan. 22, 1979


<PAGE>

State of California   )
                      ) ss
County of Los Angeles )

      On this, the 5th day of February, 1976, before me, the undersigned
officer, personally appeared Louis H. Winnand and Mary J. Born, the General
Manager and Chief Engineer and Board Secretary, respectively, of the DEPARTMENT
OF WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
existing under the Charter of the City of Los Angeles, a municipal corporation
of the State of California, known to me to be the persons described in the
foregoing instrument, and acknowledged that they executed the same in the
capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                      /S/ Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:
                                                                [STAMP]
    May 27, 1977

State of Nevada  )
                 ) ss
County of Clark  )

      On this the 7th day of July, 1976, before me, the undersigned officer,
personally appeared A. E. Pearson, known to me to be the President of NEVADA
POWER COMPANY, a Nevada corporation, and that he, as such President, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained,

<PAGE>

by signing the name of the corporation by himself as President.

      In witness whereof, I hereunto set my hand and official seal.

                                      /s/ Jane Williams
                                      ------------------------------------------
                                              Notary Public

My commission expires:
                                                     [STAMP]
   July 7, 1979

State of Arizona   )
                   ) ss
County of Maricopa )

      On this the 16th day of April, 1976, before me, the undersigned officer,
personally appeared ___________ and __________, the President and
Secretary, respectively, of SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
POWER DISTRICT, an Arizona agricultural improvement district, known to me to be
the persons described in the foregoing instrument, and acknowledged that they
executed the same in the capacity therein stated and for the purposes therein
contained.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/   Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:

   MAY 3, 1979


<PAGE>

State of Arizona )
                 ) ss
County of Pima   )

      On this the 12th day of July, 1976, before me, the undersigned officer,
personally appeared EINAR CREVE, who acknowledged himself to be the EXECUTIVE
VICE PRESIDENT of TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation, and
that he, as such EXECUTIVE VICE PRESIDENT, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as EXECUTIVE VICE PRESIDENT.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:

  My Commission Expires Sept. 1, 1976


<PAGE>

                                                              RESOLUTION NO. 556

      WHEREAS, Resolution No. 610 adopted by the Board ON March 9, 1972,
approved the transmittal of the following agreements to the City Council for
approval by ordinance, which approval was subsequently withheld by the Council:

<TABLE>
<CAPTION>
                         Agreement Title                            DWP Number
------------------------------------------------------------------  ----------
<S>                                                                 <C>
Navajo Project Co-Tenancy Agreement                                   10498

Navajo Generating Station Construction Agreement                      10499

Navajo Project Western Transmission System Construction Agreement     10500

Navajo Project Southern Transmission System Construction Agreement    10501
</TABLE>

            and WHEREAS, Resolution No. 978, adopted by this Board on May 31,
1973, transmitted the above-mentioned agreements to the City Council for
approval by ordinance, which approval was adopted, and subsequently disapproved
by Mayor Tom Bradley on July 26, 1973; and

            WHEREAS, the agreements listed above involve: (1) a legal
instrument, previously executed by the other Navajo Participants, to be recorded
in the State of Arizona which sets forth the Department's ownership rights in
the Navajo Project consisting of the Navajo Generating Station, the Southern
Transmission System, and the Western Transmission System (No. 10498); (2)
technical and financial provisions, previously executed by the other Navajo
Participants, for the construction of the Navajo Generating Station (No. 10499);
(3) technical and financial documents, previously executed by the Navajo
Participants, for the construction of the Southern and Western Transmission
Systems (No. 10500 and No. 10501); and

            WHEREAS, construction has been completed on Navajo Units 1 and 2,
and these units are in commercial operation and have been carrying system load
since February 1, 1974, and

<PAGE>

December 2, 1974, respectively; and Navajo Unit 3 is scheduled to carry system
load in December, 1975 and to begin commercial operation by April, 1976; and

            WHEREAS, construction has been completed on the Southern
Transmission System and it has been carrying Navajo power since February 1,
1974, and major construction has been completed on the Western Transmission
System and it has been carrying Navajo Power since October 27, 1974; and

            WHEREAS, the following agreement supplements the environmental
protection section of the Navajo Project Co-Tenancy Agreement and requires: (1)
an annual environmental report, to be prepared by the Department, which will
include a review of advances in technology of equipment for the protection of
the environment and an analysis of the performance of the existing air quality
control equipment at the Navajo Generating Station; (2) such environmental
report to be made available to the public for their comments and suggestions;
and (3) the Navajo Participants to meet at least every three years to review
technological advances in air quality control equipment and the annual
environmental reports prepared by the Department including comments and
suggestions received from the interested public:

<TABLE>
<CAPTION>

                 Agreement Title                                 DWP Number
-----------------------------------------------------------      ----------
<S>                                                              <C>
Supplement No. 1 to the Navajo Project Co-Tenancy Agreement        10498S
</TABLE>

            WHEREAS, this Department requested that certain practices relating
to the use and occupancy of Navajo and Hopi Indian lands for mining be
incorporated as obligations in the coal contracts, relating to compensation for
displaced Navajo families, reclamation of leased premises, water monitoring
program, and the water supply to Navajo families; and

            WHEREAS, the Navajo Participants and Peabody Coal Company have
agreed and incorporated such obligations in the Amended Navajo Coal Supply
Agreement to be presented to this Board;

            NOW, THEREFORE, BE IT RESOLVED the above agreements, approved as to
form and legality by the City Attorney, and now on file with the Secretary of
this Board, be and the same are

                                       -2-
<PAGE>

hereby approved; and that this Board requests the City Council of The City of
Los Angeles, in accordance with Section 219.4 of the Charter of The City of Los
Angeles, to approve by ordinance the agreements hereinabove referred to and
identified, and to authorize this Board, in its discretion, to execute and enter
into said agreements, all of which relate to the Navajo Project, and following
such approval, the President or the Vice President or the General Manager and
Chief Engineer and the Secretary, Assistant Secretary or the Acting Secretary of
the Board be and they are hereby authorized and directed to execute said
agreements for and on behalf of this Department.

            I HEREBY CERTIFY that the foregoing is a full, true and correct
copy of a resolution adopted by the Board of Water and Power Commissioners of
The City of Los Angeles at ITS meeting held [ILLEGIBLE]

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                                                Secretary

                                       -3-
<PAGE>

                             ORDINANCE NO. 148,153

                             AN ORDINANCE APPROVING
                           AGREEMENTS RELATING TO THE
                         NAVAJO PROJECT AND [ILLEGIBLE].

                                 CERTIFICATION

STATE OF CALIFORNIA
                         }  ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 148,153

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

on file in my office, and that I have carefully compared the same with the
original.

                                IN WITNESS WHEREOF, I have hereunto set my
                                hand and affixed the Seal of the City of Los
                                Angeles, this 22nd day of March, 1976.

                                   /s/ Rex. E. Layton
                                   -----------------------------
                                       City Clerk of the City of Los Angeles

                                By /s/ Judy Pensland
                                   -----------------------------
                                              Deputy
                                           Judy Pensland
<PAGE>


                             Ordinance No. 118,153