Exhibit 10.7(a)
                         Arizona Public Service Company

                      PALO VERDE NUCLEAR GENERATING STATION
                   P.O. BOX 52034 PHOENIX, ARIZONA 85072-2034

LETTER AGREEMENT PV95-23027                                          Copy No.  2




Mr. Kenneth M. Carr
2322 Fort Scott Drive
Arlington  VA  22202

Dear Mr. Carr:

Subject: Consulting Agreement No. PV95-23027 with Arizona Public Service Company
         ("APS") Relating to Nuclear Committee  ("Committee") for the Palo Verde
         Nuclear Generating Station ("PVNGS")

This letter,  when executed by you, shall constitute our revised Agreement as to
you  providing  certain  Consulting  Services to APS,  acting in its capacity as
Operating Agent of PVNGS, on the following terms and conditions:

         I.       SCOPE OF SERVICES

         1. You will provide consulting  services as an advisor to the Committee
under the  direction  of the Chairman of such  Committee.  The  Committee  shall
advise the APS Executive Vice President,  Nuclear and the APS Board of Directors
as to  its  independent  assessment  of  PVNGS  activities,  placing  particular
emphasis on those  activities  which  affect  long term  safety at and  reliable
operation of the PVNGS facility.

         2. It is understood and agreed that as an advisor to the Committee, you
shall have no  authority or  responsibility  to direct APS to take any action of
any kind, or to supervise or direct any work or activities performed by APS, its
officers,   employees,   agents  or   contractors.   APS  shall  have  the  sole
responsibility  to accept,  implement,  reject or otherwise  act upon all or any
part of any advice,  recommendation  or opinion rendered by the Committee or any
member of the committee to APS.


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                                                        AGREEMENT NO. PV95-23027

         3. The Committee  shall meet  periodically at such times and places and
for such durations as the Chairman of the Nuclear  Committee of the APS Board of
Directors shall designate.

         4. As an independent  contractor,  you will be solely  responsible  for
determining  the methods,  manner,  and means used to perform the Services,  and
will perform the Services in a timely  manner,  exercising  the degree of skill,
care,  competence and prudence  customarily imposed upon individuals  performing
similar work.

         5. You will not accept  engagements  from or for other parties,  either
before or after termination of this Agreement,  which would in any way involve a
review or assessment  concerning PVNGS, APS, or any of the other participants of
PVNGS without the prior written consent of APS.

         6. You will not assign your rights,  interests or obligations hereunder
without  the prior  written  consent  of APS.  It is agreed  that any  purported
assignment without the consent of APS shall be null and void.

         II.      COMPENSATION

         1.  Compensation  for you as an advisor of the Committee is $150.00 for
each hour worked;  provided, that the compensation for work performed within any
one day shall not exceed  $1,200.00 per day.  Consultant will be compensated for
reasonable  travel  expenses  incurred in the performance of Services under this
Agreement,  reimbursed  at actual  cost,  and  other  reasonable  and  necessary
expenses  which  are  approved,  in  advance,  by the  Vice  President,  Nuclear
Production.  In  addition  to such  hourly  compensation,  as an  advisor to the
Committee,  you will receive a retainer in the amount of $15,000.00 annually, to
be paid quarterly in equal  installments.  Annual retainer shall be effective as
of May 21, 1996.  Compensation for air travel shall be limited to the rates then
in effect for coach  class or  equivalent  air  fares.  Total  compensation  for
services rendered, including travel, shall not exceed $40,000.00 in any calendar
year without the written authorization of APS.

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                                                        AGREEMENT NO. PV95-23027


         2. Invoices shall be submitted on a quarterly  basis, and shall specify
the number of hours and days spent on work and  travel  for the  Committee,  and
associated  expenses.  Invoices  shall  identify the  Agreement  No.,  provide a
breakdown of invoice  amount and be  accompanied  by  supporting  documentation,
including  receipts.  Accurate and detailed accounting records in support of all
billings to APS shall be  maintained  in accordance  with  generally  recognized
accounting principles and practices.  These records shall be available for audit
upon reasonable request.

         3.       Invoice(s) shall be submitted as specified below:

                  a)       The original invoice without supporting documentation
                           to:

                                    Arizona Public Service Company
                                    P. O. Box 53940
                                    Phoenix, AZ  85072-3940
                                    Attn:  Disbursement Accounting
                                    Mail Station:  9440

                  b)       Two   (2)   information   copies,   with   supporting
                           documentation to:

                                    Arizona Public Service Company
                                    P. O. Box 52034
                                    Phoenix, AZ  85072-2034
                                    Attn: Nuclear Materials Management & Budgets
                                    Mail Station:  7845-KG

         III.     CONFIDENTIALITY AND PROPRIETARY INTEREST

         You shall treat as  confidential  and not  disclose  to others,  either
before  or after  termination  of this  Agreement,  any data,  drawings,  plans,
models, studies, surveys,  reports,  analysis,  information,  proposals, and any
other  documents  required or  developed in  connection  with the Services to be
performed  hereunder,  including all copies  thereof  (hereinafter  collectively
referred to as  "documentation"),  without the prior written consent of APS, and
will maintain such  documentation  with the same degree of  confidentiality  and
care as you maintain with respect to your own confidential information. All such
documentation  not delivered to APS during the course of this Agreement shall be
delivered to APS upon termination of this Agreement.

         IV.      INDEMNIFICATION

                                      -3-
<PAGE>
                                                        AGREEMENT NO. PV95-23027

         APS agrees to indemnify  and hold you harmless from and against any and
all  liability,  losses or  damages  you may  suffer  as a result of any  suits,
actions,  claims or demand  being  asserted  against  you  arising  from acts or
omissions  within the scope of your duties as a member of the  Committee and all
costs (including attorneys fees), judgments,  awards or fines issued against you
in  connection  therewith,  provided  that APS shall  have the  opportunity  and
authority to select defense counsel (with APS being  responsible for the payment
of all attorney  fees and expenses  associated  therewith),  participate  in the
defense of the claim(s) and approve any settlement thereof.

         V.       TERM AND TERMINATION

         This Agreement  shall be effective as of the 1st day of January,  1996,
and shall continue in full force and effect until terminated as provided herein.
Either party may terminate the Agreement at any time by giving written notice of
termination  to the other  party at least  thirty  (30) days in  advance  of the
effective  date of such  termination.  Notwithstanding  the  termination of this
Agreement by either Party, the  indemnification  obligations of APS set forth in
Paragraph IV above shall continue in full force and effect.

         VI.      GOVERNING LAW AND VENUE

         This  Agreement  shall be governed by and construed in accordance  with
the laws of the State of Arizona.  Any action or judicial proceeding  instituted
in  connection  with this  Agreement  shall be  instituted  only in the state or
federal courts of the State of Arizona.

         VII.     ENTIRE AGREEMENT

         This Agreement  embodies the entire agreement between the parties,  and
shall supersede all prior agreements, proposals, representations,  negotiations,
or letters pertaining to the Services to be performed hereunder, whether written
or  oral.  No  alteration,  modification,  or  variation  of the  terms  of this
Agreement  shall be valid  unless  made in  writing  and  signed by the  parties
hereto, and no oral understanding or agreement not incorporated  herein shall be
binding on either party hereto.


         To confirm your  agreement  with the  provisions of this  Agreement No.
PV95-23027  please sign both  copies.  Copy  Number 2 may be  retained  for your
records. Please return Copy Number 1 to:

                                      -4-
<PAGE>
                                                        AGREEMENT NO. PV95-23027

                  Arizona Public Service Company
                  P. O. Box 52034
                  Phoenix, AZ  85072-2034
                  Attention: Edna L. Roberts, Mail Station 7845


KENNETH M. CARR                             ARIZONA PUBLIC SERVICE COMPANY


Signature  Kenneth M. Carr                  Signature  Carl. D. Churchman
         ---------------------------                 ---------------------------
Name   Kenneth M. Carr                      Name    Carl D. Churchman
    --------------------------------            --------------------------------
Title  VADM, USN (RET)                      Title Director, NMMB
     -------------------------------              ------------------------------
Date   19 March, 1996                       Date  3-22-96
    --------------------------------            --------------------------------

SLF/ELR

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