Document:

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                                                                   Exhibit 10(I)

                                                                [EXECUTION COPY]

________________________________________________________________________________

                             ASSET SALE AGREEMENT

                                    BETWEEN

                             NEVADA POWER COMPANY

                                      AND

                       PINNACLE WEST ENERGY CORPORATION

                                      FOR

                         THE HARRY ALLEN ASSET BUNDLE

                               December 1, 2000

________________________________________________________________________________
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                             ASSET SALE AGREEMENT

          ASSET SALE AGREEMENT, dated as of December 1, 2000 (the "Agreement"),
between Nevada Power Company, a Nevada corporation (the "Seller"), and Pinnacle
West Energy Corporation, an Arizona corporation (the "Buyer").

          WHEREAS, the Seller owns and operates the "Purchased Assets" (as
defined herein); and

          WHEREAS, the Buyer desires to purchase and assume from the Seller, and
the Seller desires to sell to the Buyer, the Purchased Assets and certain
associated liabilities upon the terms and conditions hereinafter set forth in
this Agreement;

          NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I
                                   ---------
                                  DEFINITIONS
                                  -----------

          1.1  Definitions. As used in this Agreement, the following terms have
               -----------
the meanings specified or referred to in this Section 1.1:

          (1)  "Adjustment Amount" shall have the meaning set forth in Section
3.2(a) hereof.

          (2)  "Adjustment Statement" shall have the meaning set forth in
Section 3.2(a) hereof.

          (3)  "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.

          (4)  "Agreement" means the Asset Sale Agreement, dated December 1,
2000, together with the Schedules and Exhibits thereto.

          (5)  "Ancillary Agreements" means the Interconnection Agreement, the
Transition Power Purchase Agreement, the Operating Easement Agreements and the
Water Supply Agreement.
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          (6)  "Assignment of Leases" means the Assignment of Leases in the form
of Exhibit A hereto.

          (7)  "Assumed Liabilities" shall have the meaning set forth in Section
2.3 hereof.

          (8)  "Benefit Plans" shall have the meaning set forth in Section
2.4(i) hereof.

          (9)  "Benefit Plans of Buyer" shall have the meaning set forth in
Section 7.11(d) hereof.

          (10) "Bill of Sale" means the Bill of Sale to be delivered at the
Closing with respect to the Purchased Assets which constitute personal property
and which are to be transferred at the Closing, substantially in the form of
Exhibit B hereto.

          (11) "Business Day" means any day other than Saturday, Sunday and any
day which is a legal holiday or a day on which banking institutions in the State
of New York are authorized by law or other governmental action to close.

          (12) "Buyer" shall have the meaning set forth in the preface hereto.

          (13) "Buyer Representatives" means the Buyer's accountants, counsel,
environmental consultants, financial advisors and other authorized
representatives.

          (14) "Buyer Required Regulatory Approvals" shall have the meaning set
forth in Section 6.3(b) hereof.

          (15) "Buyer's Easements" shall have the meaning set forth in Section
4.3(f) hereof.

          (16) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. (S)9601, et seq., as amended.
                                                           -------

          (17) "Closing" shall have the meaning set forth in Section 4.1 hereof.

          (18) "Closing Date" shall have the meaning set forth in Section 4.1
hereof.

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          (19) "COBRA" means the Consolidated Omnibus Reconciliation Act of
1985, as amended.

          (20) "Code" means the Internal Revenue Code of 1986, as amended.

          (21) "Collective Bargaining Agreements" shall have the meaning set
forth in Section 7.11(a) hereof.

          (22) "Confidentiality Agreement" means the Confidentiality and Auction
Protocols Agreement, dated March 1, 2000, between the Seller and the Buyer.

          (23) "CPUC" means the California Public Utility Commission or any
successor thereto.

          (24) "CSFB" shall have the meaning set forth in Section 7.7 hereof.

          (25) "Direct Claim" shall have the meaning set forth in Section 9.2(c)
hereof.

          (26) "Dispute" shall have the meaning set forth in Section 11.6
hereof.

          (27) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, conservation easements, deed restrictions, encumbrances and charges
of any kind.

          (28) "Environmental Laws" means all federal, state and local laws,
regulations, rules, ordinances, codes, decrees, judgments, directives, or
judicial or administrative orders relating to pollution or protection of the
environment, natural resources or human health and safety, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, laws relating to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances, and laws relating to the management and use of natural resources.

          (29) "Environmental Permits" shall have the meaning set forth in
Section 5.12(a) hereof.

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          (30) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

          (31) "ERISA Affiliate" shall have the meaning set forth in Section
2.4(i) hereof.

          (32) "ERISA Affiliate Plans" shall have the meaning set forth in
Section 2.4(i) hereof.

          (33) "Estimated Adjustment Amount" means (i) the Estimated Maintenance
and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment
Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount.

          (34) "Estimated Inventory Adjustment Amount" means the book value, as
determined by an independent evaluator designated by the Seller and approved by
the Buyer, which approval shall not be unreasonably withheld, of the fuel
inventory priced as the Seller's weighted average fuel costs used at or in
connection with the Purchased Assets as of the date that is ten (10) days before
the Closing Date, which valuation shall be provided to the Buyer by the Seller
no later than five (5) days before the Closing Date.

          (35) "Estimated Maintenance and Capital Expenditures Amount" means the
Seller's estimate of the Maintenance and Capital Expenditures Amount, which
estimate shall be the Seller's good faith reasonable estimate of the Maintenance
and Capital Expenditures Amount actually incurred, as set forth in Schedule
1.1(35) attached hereto as of the date set forth in such Schedule 1.1(35).

          (36) "Estimated Materials and Supplies Adjustment Amount" means the
Seller's good faith reasonable estimate of the book value of materials and
supplies used at or in connection with the Purchased Assets on the Materials and
Supplies Valuation Date.

          (37) "Estimated Purchase Price" shall have the meaning set forth in
Section 4.2 hereof.

          (38) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          (39) "Excluded Assets" shall have the meaning set forth in Section 2.2
hereof.

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          (40) "Excluded Liabilities" shall have the meaning set forth in
Section 2.4 hereof.

          (41) "Federal Power Act" means the Federal Power Act of 1935, as
amended.

          (42) "FERC" means the Federal Energy Regulatory Commission or any
successor thereto.

          (43) "Final Order" shall have the meaning set forth in Section 8.1(c)
hereof.

          (44) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission, department,
board, court, tribunal, arbitrating body or authority of the United States or
any foreign country, or any state, local or other governmental subdivision
thereof.

          (45) "Harry Allen Station" means the Harry Allen generating station
located in Clark County, Nevada.

          (46) "Hazardous Substances" means (i) any petrochemical or petroleum
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "restricted hazardous materials," "extremely
hazardous substances," "toxic substances," "contaminants" or "pollutants" or
words of similar meaning and regulatory effect; or (iii) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any applicable Environmental Law.

          (47) "Holding Company Act" means the Public Utility Holding Company
Act of 1935, as amended.

          (48) "Hourly Employees" shall have the meaning set forth in Section
7.11(a) hereof.

          (49) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

          (50) "Income Tax" means any federal, state, local or foreign Tax (i)
based upon, measured by or calculated with respect to net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (ii) based

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upon, measured by or calculated with respect to multiple bases (including,
without limitation, corporate franchise taxes) if one or more of the bases on
which such Tax may be based, measured by or calculated with respect to, is
described in clause (i), in each case together with any interest, penalties, or
additions to such Tax.

          (51) "Indemnifiable Losses" shall have the meaning set forth in
Section 9.1(a) hereof.

          (52) "Indemnifying Party" shall have the meaning set forth in Section
9.1(c) hereof.

          (53) "Indemnitee" shall have the meaning set forth in Section 9.1(c)
hereof.

          (54) "Indenture" means Indenture of Mortgage and Deed of Trust dated
as of October 1, 1953, as amended from time to time, between the Seller and the
Bankers Trust Company, as successor trustee.

          (55) "Independent Accounting Firm" means Deloitte & Touche LLP or such
other independent accounting firm of national reputation mutually appointed by
the Seller and the Buyer.

          (56) "Independent Appraiser" shall have the meaning set forth in
Section 3.3 hereof.

          (57) "Instrument of Assumption" means the Instrument of Assumption in
the form of Exhibit C attached hereto.

          (58) "Interconnection Agreement" means the Interconnection Agreement,
dated as of December 1, 2000, between the Seller and the Buyer.

          (59) "Inventory Adjustment Amount" shall have the meaning set forth in
Section 3.2(a) hereof.

          (60) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with the responsibility for the particular function as of
the date of the Agreement, or with respect to any certificate delivered pursuant
to the Agreement, the date of delivery of such certificate.  In the case of
Seller, "executive officer" includes any person listed on Schedule 1.1(60).

          (61) "Leased Assets" shall have the meaning set forth in Section 7.4
hereof.

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          (62) "Leases" shall have the meaning set forth in Section 5.9 hereof.

          (63) "Local 396 LOA" shall have the meaning set forth in Section
7.11(a) hereof.

          (64) "Maintenance and Capital Expenditures Adjustment Amount" shall
have the meaning set forth in Section 3.2(a) hereof.

          (65) "Maintenance and Capital Expenditures Amount" means the aggregate
amount of all funds actually expended on, or for which liabilities were accrued
in accordance with generally accepted accounting principles applied on a
consistent basis with respect to any maintenance expenditures and capital
expenditures beginning on the date of this Agreement and ending on the Closing
Date,  excluding any unscheduled maintenance expenditures or capital
expenditures which are made by the Seller with the Buyer's consent, which shall
not be unreasonably withheld, but including (i) any Scheduled Maintenance
Expenditures or Scheduled Capital Expenditures, made with respect to the
Purchased Assets by the Seller, and (ii) any maintenance expenditures and
capital expenditures which were made by the Seller at the Buyer's request,
beginning on the date of this Agreement and ending on the Closing Date.

          (66) "Management Employee" shall have the meaning set forth in Section
7.11(b) hereof.

          (67) "Intentionally Left Blank"

          (68) "Material Adverse Effect" means any change or changes in or
effect on the Purchased Assets that is materially adverse to the business,
results of operations, financial condition or physical condition of the
Purchased Assets, individually or in the aggregate, except for (i) any change or
effect resulting from changes in the international, national, regional or local
wholesale or retail markets for electric power, (ii) any change or effect
resulting from changes in the international, national, regional or local markets
for any fuel used at the Purchased Assets, (iii) any change or effect resulting
from changes in the North American, national, regional or local electric
transmission systems, (iv) any change in applicable laws, judgments, orders or
decrees, (v) any conditions imposed by a Governmental Authority in connection
with the consents or approvals required for the transactions contemplated
hereby, and (vi) any materially adverse change in or effect on the Purchased
Assets which is cured (including by the payment of money) by the Seller before
the Termination Date.

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          (69) "Materials and Supplies Adjustment Amount" shall have the meaning
set forth in Section 3.2(a) hereof.

          (70) "Materials and Supplies Valuation Date" means the date that is
ten (10) days prior to the Closing Date.

          (71) "Necessary Capital Expenditures" shall have the meaning set forth
in Section 7.1(c) hereof.

          (72) "Necessary Maintenance Expenditures" shall have the meaning set
forth in Section 7.1(e) hereof.

          (73) "Off-Site Location" means any real property other than the Real
Property.

          (74) "Operating Easement Agreements" means the operating easements
providing the right to continue operating and maintaining certain generation and
transmission facilities at the Purchased Assets, each in substantially the form
of Exhibit D or Exhibit E attached hereto.  The parties recognize that the form
and substance of the Operating Easement Agreements will be controlled by BLM
procedures, however the parties acknowledge their intent that the definitive
Operating Easement Agreements, and such other documents as may be reasonably
necessary, shall substantially accomplish the objective and intent of the
Operating Easement Agreements attached hereto as Exhibit D and Exhibit E.

          (75) "Operating Easements" means the Seller's Easements and/or Buyer's
Easements granted pursuant to the Operating Easement Agreements.

          (76) "OPUC" means the Oregon Public Utility Commission or any
successor thereto.

          (77) "Permits" shall have the meaning set forth in Section 5.19
hereof.

          (78) "Permitted Encumbrances" means (i) those exceptions to title to
the Purchased Assets contained in the documents listed on Schedule 5.8; (ii) all
exceptions, restrictions, easements, covenants, charges, rights of way and
monetary and non-monetary Encumbrances of record or that are set forth in an
applicable FERC project license, except for such Encumbrances which secure
indebtedness; (iii) any state of facts that a current survey of the Real
Property would disclose, except for such facts which would have a Material
Adverse Effect; (iv) with respect to any date before the Closing Date,
Encumbrances under the Indenture; (v) mortgages, liens, pledges, charges,
Encumbrances and restrictions incurred in

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connection with the Seller's purchase of properties and assets after the date of
the Seller Balance Sheet securing all or a portion of the purchase price
therefor; (vi) the Buyer's Easements and the Seller's Easements (in accordance
with the Operating Easement Agreements applicable to such easements and the
Interconnection Agreement); (vii) statutory liens for current Taxes, assessments
or other governmental charges not yet due or delinquent or the validity of which
is being contested in good faith by appropriate proceedings; (viii) mechanics',
carriers', workers', repairers' and other similar liens arising or incurred in
the ordinary course of business relating to obligations which are not yet due
and payable or the validity of which are being contested in good faith by
appropriate proceedings; (ix) zoning, entitlement, conservation restriction and
other land use and environmental regulations by Governmental Authorities; and
(x) such other liens, imperfections in or failure of title, charges, easements,
restrictions and Encumbrances which do not materially detract from the value of
or materially interfere with the present use of the Purchased Assets and do not,
in the aggregate, have a Material Adverse Effect.

          (79) "Person" means any individual, partnership, joint venture,
corporation, limited liability company, limited liability partnership, trust,
unincorporated organization or Governmental Authority or any department or
agency thereof.

          (80) "Plan" shall have the meaning set forth in Section 7.11(d).

          (81) "PUCN" means the Public Utilities Commission of Nevada or any
successor thereto.

          (82) "Purchase Price" shall have the meaning set forth in Section 3.1
hereof.

          (83) "Purchased Assets" means, subject to the Permitted Encumbrances,
all of the right, title and interest in, to and under the real and personal
property, tangible or intangible, of the Seller constituting the Harry Allen
Station or used principally for generation purposes in connection with such
sites including, without limitation, the following assets owned by the Seller:
(i) the Real Property described on Schedule 1.1(83)(i) as associated with the
Harry Allen Station (the "Harry Allen Real Property"); (ii) all inventories of
fuels, supplies, materials and critical spares located on or in transit to the
Harry Allen Real Property on the Closing Date; (iii) the machinery, equipment,
vehicles, furniture and other personal property located on the Harry Allen Real
Property on the Closing Date, including, without limitation, the items of
personal property included in Schedule 1.1(83)(iii) as being associated with
Harry Allen Station, and all warranties against manufacturers or vendors
relating thereto, to the extent that such warranties are freely transferable;
(iv) the contracts, agreements and personal property leases listed on Schedules
1.1(83)(iv) as being associated with Harry Allen Station and which are
assignable;

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(v) the Permits listed on Schedule 1.1(83)(v) as being associated with Harry
Allen Station, to the extent transferable; (vi) all books, operating records,
operating, safety and maintenance manuals, engineering design plans, blueprints
and as-built plans, specifications, procedures and similar items of the Seller
relating specifically to the aforementioned assets other than books of account
associated with Harry Allen Station; (vii) the SO2 Allowances identified on
Schedule 1.1(83)(vii) associated with Harry Allen Station; (viii) any assets
purchased or to be purchased by the Seller pursuant to Section 7.4 associated
with Harry Allen Station; and (ix) any applications or permits, to the extent
transferrable with or without consent, to appropriate public waters,
certificates of appropriation, adjudicated or unadjudicated water rights,
applications to change the place of diversion, manner of use, or place of use,
decreed water rights, and any other claims to water associated with the Harry
Allen Station and the Real Property or personal property associated with the
Harry Allen Station, including without limitation, the applications or permits
listed on Schedule 1.1(83)(ix).

          (84) "Qualifying Offer of Employment" shall have the meaning set forth
in Section 7.11(b) hereof.

          (85) "Real Property" means each parcel of real property associated
with the Harry Allen Station owned by the Seller (or to which the Seller holds
an interest therein), including, but not limited to, buildings, structures and
improvements located thereon, fixtures contained therein and appurtenances
thereto and easements and other rights relating thereto and as more fully
described on Schedule 5.8.

          (86) "Release" means release, spill, leak, discharge, dispose of,
pump, pour, emit, empty, inject, leach, dump or allow to escape into or through
the environment.

          (87) "Remediation" means an action of any kind to address a Release of
Hazardous Substance or the presence of Hazardous Substances at the Purchased
Assets or an Off-Site Location, including any or all of the following activities
to the extent they relate to or arise from the presence of a Hazardous Substance
at the Purchased Assets or an Off-Site Location:  (i) monitoring, investigation,
assessment, treatment, cleanup, containment, removal, mitigation, response or
restoration work; (ii) obtaining any permits, consents, approvals or
authorizations of any Governmental Authority necessary to conduct any such
activity; (iii) preparing and implementing any plans or studies for any such
activity; (iv) obtaining a written notice from a Governmental Authority with
jurisdiction over the Purchased Assets or an Off-Site Location under
Environmental Laws that no material additional work is required by such
Governmental Authority; (v) the use, implementation, application, installation,
operation or maintenance of removal actions on the Purchased Assets or

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an Off-Site Location, remedial technologies applied to the surface or subsurface
soils, excavation and treatment or disposal of soils at an Off-Site Location,
systems for long-term treatment of surface water or ground water, engineering
controls or institutional controls; and (vi) any other activities reasonably
determined by a party to be necessary or appropriate or required under
Environmental Laws to address the presence or Release of Hazardous Substances at
the Purchased Assets or an Off-Site Location.

          (88) "Rules" shall have the meaning set forth in Section 11.6 hereof.

          (89) "Scheduled Capital Expenditures" means those capital expenditures
included on Schedule 1.1(89).

          (90) "Scheduled Maintenance Expenditures" means those maintenance
expenditures included on Schedule 1.1(90).

          (91) "SEC" means the Securities and Exchange Commission or any
successor thereto.

          (92) "Securities Act" means the Securities Act of 1933, as amended.

          (93) "Seller" shall have the meaning set forth in the preface hereto.

          (94) "Seller Agreements" means those agreements listed on Schedule
5.17(a).

          (95) "Seller Balance Sheet" shall have the meaning set forth in
Section 5.5 hereof.

          (96) "Seller Required Regulatory Approvals" shall have the meaning set
forth in Section 5.3(b) hereof.

          (97) "Seller's Easements" shall have the meaning set forth in Section
4.4(d) hereof.

          (98) "Separation Schedule" means the schedule to be delivered to the
Buyer by the Seller by the earliest of March 29, 2001 or thirty (30) days prior
to the Closing Date, which shall delineate the Purchased Assets from the
Seller's other assets and which shall be consistent with the separation schedule
summary attached hereto as Exhibit F.

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          (99)   "SO2 Allowance" means an authorization by the Administrator of
the USEPA under the Clean Air Act, 42 U.S.C. (S)7401, et seq., to emit one ton
                                                      -------
of sulfur dioxide during or after a specified calendar year.

          (100)  "Subsidiary," when used in reference to any other person means
any corporation of which outstanding securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation are owned
directly or indirectly by such other person.

          (101)  "Tax" means any tax, charge, fee, levy, penalty or other
assessment (other than any Income Tax) imposed by any U.S. federal, state, local
or foreign taxing authority, including, but not limited to, any excise,
property, sales, transfer, franchise, payroll, withholding, social security or
other tax, including any interest, penalties or additions attributable thereto.

          (102)  "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any related or
supporting information) supplied or required to be supplied to any authority
with respect to Taxes and including any supplement or amendment thereof.

          (103)  "Termination Date" shall have the meaning set forth in Section
10.1(b) hereof.

          (104)  "Third Party Claim" shall have the meaning set forth in Section
9.2(a) hereof.

          (105)  "Transition Power Purchase Agreement" means the Transition
Power Purchase Agreement, dated as of December 1, 2000, between the Buyer and
the Seller.

          (106)  "TPPA Amount" shall have the meaning set forth in Section 3.1
hereof.

          (107)  "USEPA" means the United States Environmental Protection
Agency, or any successor agency thereto.

          (108)  "WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.

          (109)  "Water Supply Agreement"  means a Water Supply Agreement to be
negotiated and executed by and among the Seller, the Buyer and the buyer of the
Clark Bundle located in Clark County, Nevada, pursuant to Section 7.14.

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                                  ARTICLE II
                                  ----------
                               PURCHASE AND SALE
                               -----------------

          2.1  The Sale. Upon the terms and subject to the satisfaction of the
               --------
conditions contained in this Agreement, at the Closing, the Seller shall sell,
assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase
and acquire from the Seller, free and clear of all Encumbrances (except for
Permitted Encumbrances and the operating easement(s) granted in accordance with
the Operating Easement Agreements and the Interconnection Agreement), all of the
Seller's right, title and interest in, to and under the real and personal
property, tangible or intangible, owned by the Seller and constituting the
Purchased Assets.

          2.2  Excluded Assets. Notwithstanding any provision herein to the
               ---------------
contrary, the Purchased Assets shall not include the following (collectively,
the "Excluded Assets"):

          (a)  all cash, cash equivalents, bank deposits, accounts receivable,
and any income, sales, payroll or other tax receivables;

          (b)  the names "Sierra Pacific Resources," "Sierra Pacific Power
Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any
related or similar trade names, trademarks, service marks or logos;

          (c)  transmission, substation and communication facilities and related
support equipment described in Schedule 2.2(c);

          (d)  any refund, credit penalty payment, adjustment or reconciliation
(i) related to Real Property, personal property or other Taxes paid prior to the
Closing Date in respect of the Purchased Assets, whether such refund, adjustment
or reconciliation is received as a payment or as a credit against future Taxes
payable, or (ii) arising under the Seller Agreements and relating to a period
before the Closing Date;

          (e)  except to the extent specifically required by law, the personnel
records relating to any employees of the Seller;

          (f)  the rights and assets described in the Separation Schedule as not
part of the Purchased Assets; and

          (g)  the SO2 Allowances identified on Schedule 2.2(g).

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          2.3  Assumed Liabilities.  On the Closing Date, the Buyer shall
               -------------------
deliver to the Seller the Instrument of Assumption pursuant to which the Buyer
shall assume and agree to discharge to the maximum extent permitted by law, all
of the liabilities and obligations of the Seller, direct or indirect, known or
unknown, absolute or contingent, which relate to the Purchased Assets, other
than Excluded Liabilities, in accordance with the respective terms and subject
to the respective conditions thereof, including, without limitation, the
following liabilities and obligations:

          (a)  all liabilities and obligations of the Seller to be paid or
performed after the Closing Date arising under (i) the Seller Agreements, the
Environmental Permits, the Permits, the Leases, contracts and any other
agreements assigned to the Buyer pursuant to this Agreement in accordance with
the terms thereof, and (ii) the leases, contracts and other agreements entered
into by the Seller with respect to the Purchased Assets after the date hereof
consistent with the terms of this Agreement (including in the case of (i) and
(ii), without limitation, agreements with respect to liabilities for real or
personal property taxes or other Taxes on any of the Purchased Assets); except,
in each case, to the extent such liabilities and obligations, but for a breach
or default by the Seller, would have been paid, performed or otherwise
discharged on or prior to the Closing Date or to the extent the same arise out
of any such breach or default;

          (b)  all liabilities and obligations associated with the Purchased
Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9
hereof;

          (c)  any liabilities and obligations for which the Buyer has
indemnified the Seller pursuant to Section 9.1 hereof;

          (d)  all liabilities to employees for which the Buyer is liable
pursuant to Section 7.11 hereof;

          (e)  any liability, obligation or responsibility under or related to
former, current or future Environmental Laws or the common law, whether such
liability or obligation or responsibility is known or unknown, contingent or
accrued, arising as a result of or in connection with (i) any violation or
alleged violation of Environmental Law, prior to the Closing Date, with respect
to the ownership or operation of the Purchased Assets, including, without
limitation, any fines or penalties that arise in connection with the ownership
or operation of the Purchased Assets prior to the Closing Date or the costs
associated with correcting any such violations; (ii) loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
becomes manifest after the Closing Date),

                                      14
<PAGE>

caused (or allegedly caused) by the presence or Release of Hazardous Substances
at, on, in, under, adjacent to, discharged from, emitted from or migrating from
the Purchased Assets prior to the Closing Date, including, without limitation,
Hazardous Substances contained in building materials at the Purchased Assets or
in the soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or adjacent to the Purchased Assets; and (iii) the
investigation and/or Remediation (whether or not such investigation or
Remediation commenced before the Closing Date or commences after the Closing
Date) of Hazardous Substances that are present or have been Released prior to
the Closing Date at, on, in, under, adjacent to, discharged from, emitted from
or migrating from the Purchased Assets, including, without limitation, Hazardous
Substances contained in building materials at the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or adjacent to the Purchased Assets; provided, as to all
of the above, that nothing set forth in this Section 2.3(e) shall require the
Buyer to assume any liabilities that are expressly excluded in Section 2.4
hereof;

          (f)  any liability, obligation or responsibility under or related to
former, current or future Environmental Laws or the common law, whether such
liability or obligation or responsibility is known or unknown, contingent or
accrued, arising as a result of or in connection with (i) any violation or
alleged violation of Environmental Law, on or after the Closing Date, with
respect to the ownership or operation of the Purchased Assets; (ii) compliance
with applicable Environmental Laws on or after the Closing Date with respect to
the ownership or operation of the Purchased Assets; (iii) loss of life, injury
to persons or property or damage to natural resources caused (or allegedly
caused) by the presence or Release of Hazardous Substances at, on, in, under,
adjacent to, discharged from, emitted from or migrating from the Purchased
Assets on or after the Closing Date, including, without limitation, Hazardous
Substances contained in building materials at the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or adjacent to the Purchased Assets; (iv) loss of life,
injury to persons or property or damage to natural resources caused (or
allegedly caused) by the off-site disposal, storage, transportation, discharge,
Release, recycling, or the arrangement for such activities, of Hazardous
Substances, on or after the Closing Date, in connection with the ownership or
operation of the Purchased Assets; (v) the investigation and/or Remediation of
Hazardous Substances that are present or have been released on or after the
Closing Date at, on, in, under, adjacent to, discharged from, emitted from or
migrating from the Purchased Assets, including, without limitation, Hazardous
Substances contained in building materials at the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or adjacent to the Purchased Assets; and (vi) the
investigation and/or Remediation of Hazardous Substances that are disposed,
stored, transported, discharged, Released, recycled, or the arrangement of such
activities, on or

                                      15
<PAGE>

after the Closing Date, in connection with the ownership or operation of the
Purchased Assets, at any Off-Site Location; provided, that nothing set forth in
this Section 2.3(f) shall require the Buyer to assume any liabilities that are
expressly excluded in Section 2.4 hereof;

          (g)  all liabilities and obligations of the Seller with respect to the
Purchased Assets under the agreements or consent orders set forth on Schedule
5.12;

          (h)  all liabilities incurred by the Seller with respect to the
Maintenance and Capital Expenditures Amount made with respect to the Purchased
Assets by the Seller;

          (i)  all liabilities or obligations relating to leases for the
Purchased Assets; and

          (j)  all other liabilities or obligations exclusively relating to the
Purchased Assets no matter when the events or occurrences giving rise to such
liabilities or obligations took place.

All of the foregoing liabilities and obligations to be assumed by the Buyer
hereunder (excluding any Excluded Liabilities) are collectively referred to
herein as the "Assumed Liabilities."  It is understood and agreed that nothing
in this Section 2.3 shall constitute a waiver or release of any claims arising
out of the contractual relationships between the Seller and the Buyer.

          2.4  Excluded Liabilities. The Buyer shall not assume or be
               --------------------
obligated to pay, perform or otherwise discharge the following liabilities
(collectively, the "Excluded Liabilities"):

          (a)  any liabilities or obligations of the Seller in respect of any
Excluded Assets or other assets of the Seller which are not Purchased Assets;

          (b)  any liabilities or obligations in respect of Taxes attributable
to the Purchased Assets for taxable periods ending on or prior to the Closing
Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a)
hereof;

          (c)  any liabilities, obligations or responsibilities relating to the
disposal, storage, transportation, discharge, Release, recycling, or the
arrangement for such activities, by the Seller, of Hazardous Substances that
were generated at the Purchased Assets, at any Off-Site Location, where the
disposal, storage, transportation, discharge, Release, recycling or the
arrangement for such activities at such Off-Site Location occurred prior to the
Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site
Location" does not include any location to which

                                      16
<PAGE>

Hazardous Substances disposed of, discharged from, emitted from or Released at
the Purchased Assets have migrated including, but not limited to, surface waters
that have received waste water discharges from the Purchased Assets;

          (d)  any liabilities, obligations or responsibilities relating to (i)
the transmission facilities delineated in the Interconnection Agreement or
Operating Easement Agreements or (ii) any Seller's operations on, or usage of,
the operating easements, including, without limitation, liabilities, obligations
or responsibilities arising as a result of or in connection with (A) any
violation or alleged violation of Environmental Laws and (B) loss of life,
injury to persons or property or damage to natural resources, except to the
extent caused by the Buyer;

          (e)  any liabilities or obligations required to be accrued by the
Seller in accordance with generally accepted accounting principles and the FERC
Uniform System of Accounts on or before the Closing Date with respect to
liabilities related to the Purchased Assets other than any liability assumed by
the Buyer under Section 2.3(a), (e) or (f) hereof;

          (f)  any liabilities or obligations relating to any personal injury
(including, without limitation, workers' compensation claims), discrimination,
wrongful discharge, or unfair labor practice filed with or pending before any
court or administrative agency on the Closing Date, with respect to liabilities
principally relating to the Purchased Assets, other than any liabilities or
obligations assumed by the Buyer under Section 2.3(e) hereof;

          (g)  any payment obligations of the Seller for goods delivered or
services rendered prior to the Closing;

          (h)  any liabilities or obligations imposed upon, assumed or retained
by the Seller pursuant to the Interconnection Agreement, Operating Easement
Agreements or any other Ancillary Agreement; and

          (i)  any liabilities, obligations or responsibilities relating to any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained
by the Seller and any trade or business (whether or not incorporated) which are
or have ever been under common control, or which are or have ever been treated
as a single employer, with the Seller under Section 414(b), (c), (m) or (o) of
the Code (an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate
contributed thereunder (the "ERISA Affiliate Plans"), including any
multiemployer plan, maintained by, contributed to, or obligated to contribute
to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to
as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (ii) with respect to non-compliance with
the notice and benefit continuation require-

                                      17
<PAGE>

ments of COBRA; (iii) with respect to any non-compliance with ERISA or any other
applicable laws; or (iv) with respect to any suit, proceeding or claim which is
brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former
fiduciary of any such Benefit Plan or ERISA Affiliate Plan.

                                  ARTICLE III
                                  -----------
                                PURCHASE PRICE
                                --------------

          3.1  Purchase Price. The purchase price for the Purchased Assets shall
               --------------
be an amount equal to the sum of (i) Sixty-Nine Million Eight Hundred and Ten
Thousand Dollars ($69,810,000), (ii) the Estimated Adjustment Amount, (iii) the
Adjustment Amount, and (iv) any amounts paid by the Seller with respect to
Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). The amount
to be paid by Seller to Buyer for the Transition Power Purchase Agreement being
entered into by Buyer and Seller hereunder shall be Four Million Six Hundred and
Ten Thousand Dollars ($4,610,000) (the "TPPA Amount").

          3.2  Purchase Price Adjustment.  (a)  Within sixty (60) days after
               -------------------------
the Closing, the Seller shall prepare and deliver to the Buyer a statement (the
"Adjustment Statement") which reflects (i) the difference between (A) the book
value, as determined by an independent evaluator designated by the Seller and
approved by the Buyer as of the Closing Date, of all fuel inventory used at or
in connection with the Purchased Assets and (B) the Estimated Inventory
Adjustment Amount (such difference is referred to as the "Inventory Adjustment
Amount"), (ii) the difference between (A) the book value, as determined by an
independent evaluator designated by the Seller and approved by the Buyer as of
the Closing Date, of the materials and supplies used at or in connection with
the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment
Amount (such difference is referred to as the "Materials and Supplies Adjustment
Amount") and (iii) the difference between (A) the Maintenance and Capital
Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures
Amount (such difference is referred to as the "Maintenance and Capital
Expenditures Adjustment Amount").  The Inventory Adjustment Amount, the
Materials and Supplies Adjustment Amount and the Maintenance and Capital
Expenditures Adjustment Amount are referred to collectively as the "Adjustment
Amount."  The Adjustment Statement shall be prepared using the same generally
accepted accounting principles, policies and methods as the Seller has
historically used in connection with the calculation of the items reflected on
the Adjustment Statement.  The Buyer agrees to cooperate with the Seller in
connection with the preparation of the Adjustment Statement and related
information, and shall provide to the Seller such books, records and information
as may be reasonably requested from time to time.

                                      18
<PAGE>

          (b)  The Buyer may dispute the Inventory Adjustment Amount, the
Materials and Supplies Adjustment Amount or the Maintenance and Capital
Expenditures Amount; provided, however, that the Buyer shall notify the Seller
                     --------  -------
in writing of the disputed amount, and the basis of such dispute, within ten
(10) Business Days of the Buyer's receipt of the Adjustment Statement. In the
event of a dispute with respect to the Inventory Adjustment Amount, the
Materials and Supplies Adjustment Amount or the Maintenance and Capital
Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties. If the Buyer and the Seller are
unable to reach a resolution of such differences within thirty (30) days of
receipt of the Buyer's written notice of dispute to the Seller, the Buyer and
the Seller shall submit the amounts remaining in dispute for determination and
resolution to the Independent Accounting Firm, which shall be instructed to
determine and report to the parties, within thirty (30) days after such
submission, upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the parties hereto with respect to the amounts
disputed. The fees and disbursements of the Independent Accounting Firm shall be
allocated between the Buyer and the Seller so that the Buyer's share of such
fees and disbursements shall be in the same proportion that the aggregate amount
of such remaining disputed amounts so submitted by the Buyer to the Independent
Accounting Firm that is unsuccessfully disputed by the Buyer (as finally
determined by the Independent Accounting Firm) bears to the total amount of such
remaining disputed amounts so submitted by the Buyer to the Independent
Accounting Firm.

          (c)  Within ten (10) Business Days after the Buyer's receipt of the
Adjustment Statement, the Buyer shall pay all undisputed portions of the
Adjustment Amount.  If there is a dispute with respect to any amount on the
Adjustment Statement, within five (5) Business Days after the final
determination of such disputed amounts on the Adjustment Statement, the Buyer
shall pay to the Seller an amount equal to the disputed portion of the
Adjustment Amount as finally determined to be payable with respect to the
Adjustment Statement; provided, however, that if such amount shall be less than
                      --------  -------
zero, then the Seller shall pay to the Buyer the amount by which such amount is
less than zero.  All payments made pursuant to this Section 3.2(c) shall be paid
together, with interest thereon for the period commencing on the Closing Date
through the date of payment, calculated at the prime rate of The Chase Manhattan
Bank in effect on the Closing Date, in cash by federal or other wire transfer of
immediately available funds.

          3.3  Allocation of Purchase Price.  The Buyer and the Seller shall
               ----------------------------
use their good faith best efforts to agree upon an allocation among the
Purchased Assets of the sum of the Purchase Price consistent with Section 1060
of the Code and the Treasury Regulations thereunder within one-hundred twenty
(120) days of the date of this Agreement but in no event less than thirty (30)
days prior to the Closing.

                                      19
<PAGE>

The Buyer and the Seller may jointly agree to obtain the services of an
independent appraiser (the "Independent Appraiser") to assist the parties in
determining fair value of the Purchased Assets for purposes of such allocation.
If such an appraisal is made, both the Buyer and the Seller agree to accept the
Independent Appraiser's determination of the fair value of the Purchased Assets.
The parties shall jointly select the Independent Appraiser. The cost of the
appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer
and the Seller agrees to file Internal Revenue Service Form 8594, and all
federal, state, local and foreign Tax Returns, in accordance with such agreed
allocation. Each of the Buyer and the Seller shall report the transactions
contemplated by this Agreement for federal Income Tax and all other tax purposes
in a manner consistent with the allocation determined pursuant to this Section
3.3. Each of the Buyer and the Seller agrees to provide the other promptly with
any other information required to complete Form 8594. Each of the Buyer and the
Seller shall notify and provide the other with reasonable assistance in the
event of an examination, audit or other proceeding regarding the agreed upon
allocation of the Purchase Price.

          3.4  Proration. (a) The Buyer and the Seller agree that all of the
               ---------
items normally prorated, including those listed below, relating to the business
and operation of the Purchased Assets shall be prorated as of the Closing Date,
with the Seller liable to the extent such items relate to any time period
through the Closing Date, and the Buyer liable to the extent such items relate
to periods subsequent to the Closing Date:

               (i)   personal property, real estate, occupancy and any other
     Taxes, assessments and other charges, if any, on or with respect to the
     business and operation of the Purchased Assets.  In addition, in the event
     that the Seller is subject to Taxes, assessments and other charges on
     property of which the Purchased Assets comprises only a portion, the
     portion of such Taxes, assessments and other charges allocated to the
     Purchased Assets and subject to proration by this Section 3.4 shall be
     determined by reference to the relative value of the Purchased Assets, as
     determined by the Purchase Price paid by the Buyer, compared with the value
     of the Seller's property subject to such Taxes, assessments and other
     charges, as assessed by the relevant taxing authority;

               (ii)  rent, Taxes and other items payable by or to the Seller
     under any of the Seller Agreements to be assigned to and assumed by the
     Buyer hereunder;

               (iii) any permit, license or registration fees with respect to
     any Environmental Permit or other Permit; and

                                      20
<PAGE>

               (iv) sewer rents and charges for water, telephone, electricity
     and other utilities.

          (b)  In connection with such proration, in the event that actual
figures are not available at the Closing Date, the proration shall be based upon
the actual amount of such Taxes or fees for the preceding year (or appropriate
period) for which actual Taxes or fees are available and such Taxes or fees
shall be reprorated upon request of either the Seller or the Buyer made within
sixty (60) days of the date that the actual amounts become available. The Seller
and the Buyer agree to furnish each other with such documents and other records
as may be reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 3.4.

                                  ARTICLE IV
                                  ----------
                                  THE CLOSING
                                  -----------

          4.1  Time and Place of Closing. Upon the terms and subject to the
               -------------------------
satisfaction of the conditions contained in this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New
York, New York, at 10:00 a.m., local time, on the first Business Day following
the date on which all of the conditions to each party's obligations hereunder
have been satisfied or waived, or at such other place or time as the parties may
agree. The date and time at which the Closing actually occurs is hereinafter
referred to as the "Closing Date."

          4.2  Payment of Purchase Price.  Upon the terms and subject to the
               -------------------------
satisfaction of the conditions contained in this Agreement, in consideration of
the aforesaid sale, assignment, conveyance, transfer and delivery of the
Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the
Purchase Price.  The Purchase Price shall be paid as follows: (i) an amount at
Closing equal to the sum of $69,810,000, plus (ii) any amounts with respect to
Leased Assets to be paid pursuant to Section 7.4 hereof, plus (iii) the
Estimated Adjustment Amount for the Closing pursuant to Section 3.2 hereof, and
less (iv) the TPPA Amount (the "Estimated Purchase Price"), by wire transfer of
immediately available funds or by such other means as are agreed to by the
Seller and the Buyer.

          4.3  Deliveries by Seller. At the Closing, the Seller shall deliver to
               --------------------
the Buyer the following:

          (a)  The Bill of Sale, duly executed by the Seller for the personal
property included in the Purchased Assets;

                                      21
<PAGE>

          (b)  The executed consents to transfer the Seller Agreements, the
Environmental Permits and the Permits, to the extent specifically required
hereunder;

          (c)  Each Ancillary Agreement required to be delivered under this
Agreement, duly executed by the Seller;

          (d)  The certificate and opinion of counsel as contemplated by Section
8.2 hereof;

          (e)  One or more deeds of conveyance transferring the Seller's
interest in the Real Property to the Buyer, without covenant or warranty of
title, duly executed and acknowledged by the Seller and in recordable form
subject to Permitted Encumbrances and retaining to the extent necessary or any
existing easements in favor of the Seller with respect to Real Property conveyed
to the Buyer, each substantially in the form of Exhibit G attached hereto;

          (f)  One or more easements to the extent necessary to evidence the
right of the Buyer to use the Real Property of the Seller (the "Buyer's
Easements") associated with the Purchased Assets, duly executed and acknowledged
by the Seller and in recordable form, each substantially in the form of Exhibit
D attached hereto;

          (g)  The Assignment of Leases, in the form of Exhibit A attached
hereto, assigning to the Buyer all of the Seller's right, title and interest as
lessor (or lessee, as the case may be) under the Leases;

          (h)  Copies of the resolutions adopted by the board of directors of
the Seller, certified by the secretary of the Seller, as having been duly and
validly adopted and as being in full force and effect, authorizing the execution
and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill
of Sale and other closing documents described in this Agreement to which the
Seller is a party, and the performance by the Seller of its obligations
hereunder and thereunder;

          (i)  All such other instruments of assignment or conveyance as shall,
in the reasonable opinion of the Buyer and its counsel, be necessary to transfer
to the Buyer the Purchased Assets in accordance with this Agreement, the
Ancillary Agreements and where necessary or desirable, in recordable form; and

          (j)  Such other agreements, documents, instruments and writings as are
required to be delivered by the Seller at or prior to the Closing Date pursuant
to this Agreement, the Ancillary Agreements or otherwise required in connection
herewith or therewith.

                                      22
<PAGE>

          4.4  Deliveries by Buyer.  At the Closing, the Buyer shall deliver
               -------------------
to the Seller the following:

          (a)  The Estimated Purchase Price by wire transfer of immediately
available funds or by such other means as are agreed to by the Seller and the
Buyer;

          (b)  Each Ancillary Agreement required to be delivered under this
Agreement, duly executed by the Buyer;

          (c)  The certificate and opinion of counsel as contemplated by Section
8.3 hereof;

          (d)  One or more easements, to the extent necessary for the Seller to
use the Real Property of the Buyer (the "Seller's Easements") to the extent
necessary for the Seller to continue and maintain its transmission and
distribution business, in favor of the Seller with respect to Real Property
conveyed to the Buyer, duly executed and acknowledged by the Buyer, each
substantially in the form of Exhibit E attached hereto, and the Buyer shall bear
any transfer or similar tax incurred in connection herewith as set forth in
Section 7.9 hereof;

          (e)  The Instrument of Assumption, duly executed by the Buyer
providing for the assumption of all of the Seller's right, title and interest as
lessor (or lessee as the case may be) under the Leases;

          (f)  All such other instruments of assumption as shall, in the
reasonable opinion of the Seller and its counsel, be necessary for the Buyer to
assume the Assumed Liabilities in accordance with this Agreement;

          (g)  Copies of the resolutions adopted by the board of directors of
the Buyer, certified by the secretary of the Buyer, as having been duly and
validly adopted and as being in full force and effect, authorizing the execution
and delivery by the Buyer of this Agreement, the Ancillary Agreements and other
closing documents described in this Agreement to which the Buyer is a party, and
the performance by the Buyer of its obligations hereunder and thereunder; and

          (h)  Such other agreements, documents, instruments and writings as are
required to be delivered by the Buyer at or prior to the Closing Date pursuant
to this Agreement, the Ancillary Agreements or otherwise required in connection
herewith or therewith.

                                      23
<PAGE>

                                   ARTICLE V
                                   ---------
                   REPRESENTATIONS AND WARRANTIES OF SELLER
                   ----------------------------------------

          The Seller represents and warrants to the Buyer as follows (all such
representations and warranties, except those regarding the Seller, being made to
the best Knowledge of the Seller):

          5.1  Organization; Qualification. The Seller is a corporation duly
               ---------------------------
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and authority to own, lease, and
operate its properties and to carry on its business as is now being conducted.
The Seller is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect. The
Seller has heretofore delivered to the Buyer complete and correct copies of its
Certificate of Incorporation and Bylaws as currently in effect.

          5.2  Authority Relative to this Agreement.  The Seller has full
               ------------------------------------
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the board of directors of the
Seller and no other corporate proceedings on the part of the Seller are
necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby and thereby.  This Agreement and
the Ancillary Agreements have been duly and validly executed and delivered by
the Seller, and assuming that this Agreement and the Ancillary Agreements
constitute valid and binding agreements of the Buyer, subject to the receipt of
the Seller Required Regulatory Approvals and the Buyer Required Regulatory
Approvals, constitute valid and binding agreements of the Seller, enforceable
against the Seller in accordance with their terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of creditors' rights
generally or general principles of equity.

          5.3  Consents and Approvals; No Violation. (a) Except as set forth in
               ------------------------------------
Schedule 5.3(a), and other than obtaining the Seller Required Regulatory
Approvals and the Buyer Required Regulatory Approvals, neither the execution and
delivery of this Agreement or the Ancillary Agreements by the Seller nor the
sale by the Seller of the Purchased Assets pursuant to this Agreement or the
Ancillary Agreements shall (i) conflict with or result in any breach of any
provision of the

                                      24
<PAGE>

Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority or regulatory authority, except (x) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not have a Material Adverse Effect or (y) for those
requirements which become applicable to the Seller as a result of the specific
regulatory status of the Buyer (or any of its Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which the
Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which the
Seller is a party or by which the Seller, or any of the Purchased Assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Seller, or any of its assets, which violation would have a
Material Adverse Effect.

          (b)  Except as set forth in Schedule 5.3(b) and except for (i) any
required approvals under the Federal Power Act, (ii) approvals or other actions
by the PUCN, the CPUC and/or the OPUC (iii) the approval, if required, of the
SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and
the Buyer required by the HSR Act and the expiration or earlier termination of
all waiting periods under the HSR Act (the filings and approvals referred to in
clauses (i) through (iv) above are collectively referred to as the "Seller
Required Regulatory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of any Governmental Authority
or regulatory authority is necessary for the consummation by the Seller of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
obtained or made, shall not, in the aggregate, have a Material Adverse Effect
and other than the Permits and Environmental Permits.

          5.4  Reports. Since January 1, 1996, the Seller, pursuant to the
               -------
Securities Act, the Exchange Act, the applicable state public utility laws, the
Federal Power Act and the Holding Company Act, has filed or caused to be filed
with the SEC, the applicable state or local utility commissions or regulatory
bodies, or the FERC, as the case may be, all material forms, statements, reports
and documents (including all exhibits, amendments and supplements thereto)
required to be filed by them with respect to the business and operations of the
Seller as it relates to the Purchased Assets under each of the Securities Act,
the Exchange Act, the applicable state public utility laws, the Federal Power
Act and the Holding Company Act and the respective rules and regulations
thereunder, all of which complied in all material

                                      25
<PAGE>

respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder in effect on the date each such report was filed.

          5.5  Financial Statements.  The Seller has previously furnished to
               --------------------
the Buyer (i) balance sheets of the Seller as of September 30, 2000, and (ii)
the related statements of income and retained earnings and changes in financial
position of the Seller for the fiscal year then ended.  The balance sheet of the
Seller as of September 30, 2000 is referred to herein as the "Seller Balance
Sheet."  Each of the balance sheets included in the financial statements
referred to in this Section 5.5 (including the related notes thereto) presents
fairly the financial position of the Seller as of their respective dates, and
the other related statements included therein (including the related notes
thereto) present fairly the results of operations and changes in financial
position for the periods then ended, all in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise noted
therein.

          5.6  Undisclosed Liabilities. Except as set forth in Schedule 5.6, the
               -----------------------
Seller has no liability or obligation relating to the business or operations of
the Purchased Assets, secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), of a nature required
by generally accepted accounting principles to be reflected in a corporate
balance sheet or disclosed in the notes thereto, which are not accrued or
reserved against in the Seller Balance Sheet or disclosed in the notes thereto
in accordance with generally accepted accounting principles, except those which
either were incurred in the ordinary course of business, whether before or after
the date of the Seller Balance Sheet, or those which in the aggregate are not
material to the Purchased Assets.

          5.7  Absence of Certain Changes or Events.  Except as set forth in
               ------------------------------------
Schedule 5.7, or in the reports, schedules, registration statements and
definitive proxy statements filed by the Seller with the SEC, and except as
otherwise contemplated by this Agreement, since the date of the Seller Balance
Sheet there has not been:  (i) any Material Adverse Effect; (ii) any damage,
destruction or casualty loss, whether covered by insurance or not, which had a
Material Adverse Effect; (iii) any entry into any agreement, commitment or
transaction (including, without limitation, any borrowing, capital expenditure
or capital financing) by the Seller, which is material to the business or
operations of the Purchased Assets, except agreements, commitments or
transactions in the ordinary course of business or as contemplated herein; or
(iv) any change by the Seller, with respect to the Purchased Assets, in
accounting methods, principles or practices except as required or permitted by
generally accepted accounting principles.

          5.8  Title to Real Property. Set forth in Schedule 5.8 is a true and
               ----------------------
complete list of the Real Property of the Seller which is part of the Purchased
Assets.

                                      26
<PAGE>

The Seller has insurable title to all of the Real Property, subject only to
Permitted Encumbrances.

          5.9  Leasehold Interests. Schedule 5.9 lists, as of the date of this
               -------------------
Agreement, all Real Property leases (the "Leases") relating to the Purchased
Assets under which the Seller is a lessee, lessor or under which Seller
otherwise has any interest and which are to be assigned to, and assumed by, the
Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's
Knowledge, all such Leases are valid, binding and enforceable in accordance with
their terms, and are in full force and effect; there are no existing material
defaults by the Seller thereunder; and no event has occurred which (whether with
or without notice, lapse of time or both) would constitute a material default
thereunder.

          5.10 Improvements. Except as set forth in Schedule 5.10, the Seller
               ------------
has not received any written notices from any Governmental Authority stating or
alle ging that any improvements with respect to the Purchased Assets have not
been constructed in compliance with applicable law. Except as set forth in
Schedule 5.10, no written notice has been received by the Seller from any
Governmental Authority requiring or advising as to the need for any repair,
alteration, restoration or improvement in connection with the Purchased Assets.

          5.11 Insurance. Except as set forth in Schedule 5.11, all material
               ---------
policies of fire, liability, workers' compensation and other forms of insurance
purchased or held by and insuring the Purchased Assets are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date as of which this representation is being made have been paid,
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as described in Schedule 5.11, as of the
date of this Agreement, the Seller has not been refused any insurance with
respect to the Purchased Assets nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last twelve (12) months.

          5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12,
               ---------------------
in any public filing by the Seller pursuant to the Securities Act or the
Exchange Act, or in any environmental site assessment prepared by or for the
Seller and made available to the Buyer, the Seller holds, and is in substantial
compliance with, all material permits, licenses and governmental authorizations
(the "Environmental Permits") required for the Seller to operate the Purchased
Assets under applicable Environmental Laws, and to the Knowledge of the Seller,
the Seller is otherwise in compliance with applicable Environmental Laws with
respect to the Purchased Assets except for such failures to hold or comply with
required Environmental Permits, or such failures to be in compliance with
applicable Environmental Laws,

                                      27
<PAGE>

which, in the aggregate, are not reasonably likely to have a Material Adverse
Effect. The Seller's Environmental Permits are set forth on Schedule 5.12.

          (b)  Except as set forth in Schedule 5.12, the Seller has not received
any written request for information, or been notified in writing that it is a
potentially responsible party, under CERCLA or any similar state law with
respect to any of the Purchased Assets, except for such liability under such
laws as would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.

          (c)  Except as set forth in Schedule 5.12, with respect to the
Purchased Assets, the Seller has not entered into or agreed to any consent
decree or order, and is not subject to any judgment, decree, or judicial order
relating to compliance with any Environmental Law or to investigation or cleanup
of Hazardous Substances under any Environmental Law, except such consent decrees
or orders, judgments, decrees or judicial orders that would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect.

          (d)  The representations and warranties made in this Section 5.12 are
the Seller's exclusive representations and warranties relating to environmental
matters.

          5.13 Labor Matters. The Seller has previously delivered to the Buyer
               -------------
copies of all labor union and Collective Bargaining Agreements relating to the
Purchased Assets to which the Seller is a party or is subject, if any. With
respect to its employees at the Purchased Assets, except to the extent set forth
in Schedule 5.13 and except for such matters as shall not have a Material
Adverse Effect, to the Seller's Knowledge: (i) the Seller is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours; (ii) the Seller has not received
written notice of any unfair labor practice complaint against the Seller pending
before the National Labor Relations Board; (iii) there is no labor strike,
slowdown or stoppage actually pending or threatened against or affecting the
Seller; (iv) the Seller has not received notice that any representation petition
respecting the employees of the Seller has been filed with the National Labor
Relations Board; (v) no arbitration proceeding arising out of or under
collective bargaining agreements is pending against the Seller; and (vi) the
Seller has not experienced any primary work stoppage since at least December 31,
1995. There are no employees of Seller who work full time at the Harry Allen
Station.

          5.14 ERISA; Benefit Plans. (a) Except as set forth in Schedule
               --------------------
5.14(a)(i), with respect to its employees, if any, at the Purchased Assets, the
Seller has fulfilled its obligations under the minimum funding requirements of
Section 302

                                      28
<PAGE>

of ERISA, and Section 412 of the Code, with respect to each "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code. The Seller has not incurred any liability under Section
4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with
any employee pension benefit plan relating to employees, if any, at the
Purchased Assets which is subject to Title IV of ERISA. Except as set forth in
Schedule 5.14(a)(ii), the Internal Revenue Service has issued a letter for each
employee pension benefit plan determining that such plan is exempt from United
States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and
there has been no occurrence since the date of any such determination letter
which has adversely affected such qualification, and no withdrawal liability has
been incurred by or asserted against the Seller with respect to any employee
pension benefit plan which is a "multiemployer plan" (as defined in Section
3(37) of ERISA).

          (b)  Schedule 5.14(b) lists, as of the date of this Agreement, all
deferred compensation, pension, profit-sharing and retirement plans, including
multiemployer plans, and all material bonus and other employee benefit or fringe
benefit plans maintained or with respect to which contributions are made by the
Seller in respect of employees who are the employees of the Seller who work at
the Purchased Assets. Accurate and complete copies of all such plans, other than
multiemployer plans, have been made available to the Buyer.

          5.15 Real Property Encumbrances. Schedule 5.15 describes any
               --------------------------
Permitted Encumbrances on the Real Property.  Copies of any surveys in the
Seller's possession or any policies of title insurance currently in force and in
the possession of the Seller with respect to such Real Property have been
delivered by the Seller to the Buyer.

          5.16 Condemnation. Neither the whole nor any part of the Real Property
               ------------
or any other real property or rights leased, used or occupied by the Seller in
connection with the ownership or operation of the Purchased Assets is subject to
any pending suit for condemnation or other taking by any public authority, and,
to the Knowledge of the Seller, no such condemnation or other taking is
threatened or contemplated.

          5.17 Certain Contracts and Arrangements. (a) Except (i) the Seller
               ----------------------------------
Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) for
contracts, agreements, personal property leases, commitments, understandings or
instruments which shall expire prior to the Closing Date, (iii) for agreements
with suppliers, distributors and sales representatives entered into in the
ordinary course of business, and (iv) for contracts, agreements, personal
property leases, commitments, understandings or instruments with a value less
than $250,000 or with annual

                                      29
<PAGE>

payments less than $50,000 the Seller is not a party to any written contract,
agreement, personal property lease, commitment, understanding or instrument
which is material to the business or operations of the Purchased Assets.

          (b)  Except as disclosed in Schedule 5.17(b), each material Seller
Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation
of the parties thereto and is in full force and effect and may be transferred to
the Buyer pursuant to this Agreement and shall continue in full force and effect
thereafter, in each case without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder.

          (c)  Except as set forth in Schedule 5.17(c), there is not, under any
of the Seller Agreements listed on Schedule 5.17(a), any default or event which,
with notice or lapse of time or both, would constitute a default on the part of
the Seller, except, with respect to the Seller Agreements only, such events of
default and other events as to which requisite waivers or consents have been
obtained or which would not, in the aggregate, have a Material Adverse Effect.

          5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18
               -----------------------
or in any filing made by the Seller pursuant to the Securities Act or the
Exchange Act, there are no claims, actions, or proceedings pending or
investigation pending or threatened against the Seller relating to the Purchased
Assets before any court, Governmental Authority or regulatory authority or body
acting in an adjudicative capacity, which, if adversely determined, would have a
Material Adverse Effect.  Except as set forth in Schedule 5.18, the Seller is
not subject to any outstanding judgment, rule, order, writ, injunction or decree
of any court, Governmental Authority or regulatory authority relating to the
Purchased Assets which has a Material Adverse Effect.

          5.19 Permits. The Seller has all material permits, licenses,
               -------
franchises and other governmental authorizations, consents and approvals, other
than with respect to Environmental Laws (collectively, "Permits"), as set forth
in Schedule 5.19(a), necessary to operate the Purchased Assets as presently
operated, except where the failure to have such Permits does not have a Material
Adverse Effect.  Except as set forth in Schedule 5.19(b), with respect to the
Purchased Assets, the Seller has not received any written notification that it
is in violation of any of such Permits, or any law, statute, order, rule,
regulation, ordinance or judgment of any Governmental Authority or regulatory
body or authority applicable to the Purchased Assets, except for notifications
of violations which would not, in the aggregate, have a Material Adverse Effect.
The Seller is in compliance with all Permits, laws, statutes, orders, rules,
regulations, ordinances, or judgments of any Governmental Authority or
regulatory body or authority applicable to the Purchased Assets, except for
violations which, in the aggregate, do not have a Material Adverse Effect.

                                      30
<PAGE>

          5.20 Regulation as a Utility. The Seller and certain of its affiliates
               -----------------------
are regulated as public utilities in the States of Nevada and California. Except
as set forth on Schedule 5.20, the Seller is not subject to regulation as a
public utility or public service company (or similar designation) by the United
States, any state of the United States, any foreign country or any municipality
or any political subdivision of the foregoing.

          5.21 Taxes. The Seller has, in respect of the Purchased Assets, (i)
               -----
filed all Tax Returns required to be filed other than those Tax Returns the
failure of which to file would not have a Material Adverse Effect, and (ii) paid
in full or all material Taxes shown to be due on such Tax Returns.  Except as
set forth in Schedule 5.21, the Seller has not received any notice of deficiency
or assessment from any taxing authority with respect to liabilities for Taxes of
the Seller in respect of the Purchased Assets, which have not been fully paid or
finally settled, and any such deficiency shown in such Schedule 5.21 is being
contested in good faith through appropriate proceedings.  Except as set forth in
Schedule 5.21, there are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for Taxes associated with the
Purchased Assets for any period.

                                  ARTICLE VI
                                  ----------
                    REPRESENTATIONS AND WARRANTIES OF BUYER
                    ---------------------------------------

          The Buyer represents and warrants to the Seller as follows:

          6.1  Organization. The Buyer is a corporation duly organized, validly
               ------------
existing and in good standing under the laws of the State of Arizona and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as is now being conducted. The Buyer is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a Material Adverse Effect. The Buyer has heretofore
delivered to the Seller complete and correct copies of its Certificate of
Incorporation and Bylaws (or other similar governing documents), as currently in
effect.

          6.2  Authority Relative to this Agreement.  The Buyer has full
               ------------------------------------
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby

                                      31
<PAGE>

have been duly and validly authorized by the board of directors of the Buyer and
no other corporate proceedings on the part of the Buyer are necessary to
authorize this Agreement or the Ancillary Agreements or to consummate the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements have been duly and validly executed and delivered by the Buyer, and
assuming that this Agreement and the Ancillary Agreements constitute valid and
binding agreements of the Seller, subject to the receipt of the Buyer Required
Regulatory Approvals and the Seller Required Regulatory Approvals, constitute
valid and binding agreements of the Buyer, enforceable against the Buyer in
accordance with their terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally or general principles of
equity.

          6.3  Consents and Approvals; No Violation. (a) Except as set forth in
               ------------------------------------
Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory
Approvals and the Seller Required Regulatory Approvals, neither the execution
and delivery of this Agreement or the Ancillary Agreements by the Buyer nor the
purchase by the Buyer of the Purchased Assets pursuant to this Agreement or the
Ancillary Agreements shall (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws (or other similar
governing documents) of the Buyer, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority or regulatory authority, except (x) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect or (y) for those
requirements which become applicable to the Buyer as a result of the specific
regulatory status of the Seller (or any of its Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which the
Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, agreement, lease or other instrument or obligation to
which the Buyer or any of its Subsidiaries is a party or by which any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained.

          (b)  Except as set forth in (i) Schedule 6.3(b) and (ii) the filings
by the Buyer and the Seller required by the HSR Act and the expirations or
earlier termination of all waiting periods under the HSR Act (the filings and
approvals referred to in clauses (i) and (ii) are collectively referred to as
the "Buyer Required Regulatory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of any
Governmental Authority or regulatory body or authority is necessary for the
consummation by the Buyer of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices,

                                      32
<PAGE>

authorizations, consents or approvals which if not obtained or made, shall not
in the aggregate, have a Material Adverse Effect.

          6.4  Regulation as a Utility. Except as set forth in Schedule 6.4, the
               -----------------------
Buyer is not subject to regulation as a public utility or public service company
(or similar designation) by the United States, any state of the United States,
any foreign country or any municipality or any political subdivision of the
foregoing.

          6.5  Availability of Funds. The Buyer has sufficient funds available
               ---------------------
to it or has received binding written commitments from responsible financial
institutions to provide sufficient funds on the Closing Date to pay the Purchase
Price.

                                  ARTICLE VII
                                  -----------
                           COVENANTS OF THE PARTIES
                           ------------------------

          7.1  Conduct of Business of the Seller. Except as described in
               ---------------------------------
Schedule 7.1, during the period from the date of this Agreement to the Closing
Date, the Seller shall operate and maintain the Purchased Assets according to
its ordinary and usual course of business consistent with good industry
practice. Without limiting the generality of the foregoing, and, except as
contemplated in this Agreement or as described in Schedule 7.1, prior to the
Closing Date, without the prior written consent of the Buyer (unless such
consent would be prohibited by law), the Seller shall not with respect to the
Purchased Assets:

          (a)  (i) create, incur or assume any material amount of indebtedness
for money borrowed, other than in the ordinary course of business, including
obligations in respect of capital leases but excluding purchase money mortgages
granted in connection with the acquisition of property in the ordinary course of
business; or (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person except in the ordinary course of business;

          (b)  make any material change in the operations of the Purchased
Assets including, without limitation, the levels of fuel inventory and materials
and supplies customarily maintained by the Seller;

          (c)  except as set forth in Schedule 1.1(89), make any capital
expenditures with respect to the Purchased Assets or enter into any contract or
commitment therefor, except that the Seller shall make any capital expenditures
(i) requested by the Buyer, provided that the Buyer shall reimburse the Seller
for such capital expenditures as part of the Adjustment Amount and (ii) deemed
necessary by

                                      33
<PAGE>

the Seller and consented to by the Buyer, whose consent shall not be
unreasonably withheld ("Necessary Capital Expenditures"); provided, however,
                                                          --------  -------
that if the Buyer requests that the Seller make enhancements with a cost in
excess of the cost of any Necessary Capital Expenditure, the Buyer shall
reimburse the Seller for the cost of such enhancement to the extent that the
cost of such enhancement exceeds the cost of the Necessary Capital Expenditures
as part of the Adjustment Amount;

          (d)  sell, lease (as lessor), transfer or otherwise dispose of, any of
the Purchased Assets, other than assets used, consumed or replaced in the
ordinary course of business consistent with good industry practice and not
mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of
the Purchased Assets other than Permitted Encumbrances;

          (e)  except as set forth in Schedule 1.1(90), make any maintenance
expenditures, except that the Seller shall make any maintenance expenditures (i)
requested by the Buyer, provided that the Buyer shall reimburse the Seller for
such maintenance expenditures as part of the Adjustment Amount and (ii) deemed
necessary by the Seller and consented to by the Buyer, whose consent shall not
be unreasonably withheld ("Necessary Maintenance Expenditures"); provided,
                                                                 --------
however, that if the Buyer requests that the Seller make enhancements/upgrades
-------
with a cost in excess of the cost of any Necessary Maintenance Expenditure, the
Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to
the extent the cost of such enhancements/upgrades exceeds the cost of the
Necessary Maintenance Expenditure as part of the Adjustment Amount;

          (f)  amend any of the Seller Agreements;

          (g)  enter into or amend any real or personal property Tax agreement,
treaty or settlement;

          (h)  execute, enter into or amend any agreement, order, decree or
judgment relating to any Permit;

          (i)  enter into any commitment for the purchase or sale of fuel
(whether commodity or transportation) that Seller intends to assign to Buyer
having a term of greater than ninety (90) days that extends beyond December 31,
2001 if the aggregate payment under such commitment is expected to exceed
$500,000 or if the aggregate payments under such commitment and all other then
outstanding commitments not previously consented to by the Buyer would be
expected to exceed $1,000,000;

                                      34
<PAGE>

          (j)  except for the Transition Power Purchase Agreement, enter into
any wholesale sale agreements having a term extending beyond the Closing Date
where the sale of energy is expected to be supplied via the Purchased Assets;

          (k)  sell, lease or otherwise dispose of SO2 Allowances, except those
listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased
Assets in accordance with this Section 7.1; or

          (l)  enter into any contract, agreement, commitment or arrangement,
whether written or oral, with respect to any of the transactions set forth in
the foregoing paragraphs (a) through (k).

          7.2  Access to Information. (a) Between the date of this Agreement and
               ---------------------
the Closing Date, the Seller shall, during ordinary business hours and upon
reasonable notice (i) give the Buyer and the Buyer Representatives reasonable
access to all books, records, plants, offices and other facilities and
properties constituting the Purchased Assets to which the Buyer is permitted
access by law, (ii) permit the Buyer to make such reasonable inspections thereof
as the Buyer may reasonably request; (iii) cause its officers and advisors to
furnish the Buyer with such financial and operating data and other information
with respect to the Purchased Assets as the Buyer may from time to time
reasonably request; (iv) cause its officers and advisors to furnish the Buyer a
copy of each report, schedule or other document filed or received by them with
the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; provided,
                                                                  --------
however, that (A) any such investigation shall be conducted in such a manner as
-------
not to interfere unreasonably with the operation of the Purchased Assets, (B)
the Seller shall not be required to take any action which would constitute a
waiver of the attorney-client privilege and (C) the Seller need not supply the
Buyer with any information which the Seller is under a legal obligation not to
supply.  Notwithstanding anything in this Section 7.2 to the contrary, (i) the
Seller shall only furnish or provide such access to medical records as is
required by law and (ii) except as provided in Section 7.2(d), the Buyer shall
not have the right to perform or conduct any environmental sampling or testing
at, in, on or underneath the Purchased Assets.

          (b)  All information furnished to or obtained by the Buyer and the
Buyer Representatives pursuant to this Section 7.2 shall be subject to the
provisions of the Confidentiality Agreement and shall be treated as "Evaluation
Material" (as defined in the Confidentiality Agreement).

          (c)  For a period of ten (10) years after the Closing Date, the Seller
and its representatives shall have reasonable access to all of the books and
records of the Purchased Assets, as the case may be, transferred to the Buyer
hereunder to the extent that such access may reasonably be required by the
Seller in connection with

                                      35
<PAGE>

matters relating to or affected by the operation of the Purchased Assets prior
to the Closing Date. Such access shall be afforded by the Buyer upon receipt of
reasonable advance notice and during normal business hours. The Seller shall be
solely responsible for any costs or expenses incurred by them pursuant to this
Section 7.2(c). If the Buyer shall desire to dispose of any such books and
records prior to the expiration of such ten-year period, the Buyer shall, prior
to such disposition, give the Seller a reasonable opportunity at the Seller's
expense, to segregate and remove such books and records as the Seller may
select.

          (d)  Buyer shall, upon 48 hour notice to Seller, have reasonable
access at reasonable times to the Harry Allen Station and other property
associated with the Purchased Assets, as may be reasonably necessary, to perform
(i) a geotechnical investigation to determine the subsurface conditions in
connection with the development of additional generating facilities and (ii)
hydrologic studies, pump testing, water analysis and well inspections associated
with or necessary to obtain cooling water, permits and engineering review
associated with securing permits and rights to water for development of
additional generating facilities, provided, that neither the access nor any of
the activities described in this Section 7.2(d) shall interfere with the use or
operation of the Purchased Assets, and provided, further, that Buyer shall
provide copies to Seller of all data, studies, tests, analyses, and reports
generated in connection with such access and activities. Buyer hereby agrees to
indemnify and hold Seller harmless from and against, any and all claims or
liabilities incurred as a result of or in any way associated with any action by
Buyer in connection with the access or activities described in the preceding
sentence.

          7.3  Expenses. Except to the extent specifically provided herein,
               --------
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such costs and
expenses.

          7.4  Further Assurances. Subject to the terms and conditions of
               ------------------
this Agreement, each of the parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the sale of the Purchased Assets
pursuant to this Agreement including, without limitation, the use of the
Seller's and the Buyer's commercially reasonable efforts to obtain all Permits
and Environmental Permits necessary for the Buyer to operate the Purchased
Assets.  From time to time after the date hereof, without further consideration,
the Seller shall, at its own expense, execute and deliver such documents to the
Buyer as the Buyer may reasonably request in order more effectively to vest in
the Buyer good title to the Purchased Assets.  From time to time after the date
hereof, the Buyer shall, at its own expense, execute and deliver such documents
to the Seller as the Seller may reasonably

                                      36
<PAGE>

request in order to more effectively consummate the sale of the Purchased Assets
pursuant to this Agreement. To the extent that any personal property lease,
relating to any assets (the "Leased Assets") which are principally used by the
Seller for generation purposes at the Purchased Assets, cannot be assigned to
the Buyer, the Seller shall use its commercially reasonable efforts to acquire
title to such Leased Assets and to include them in the Purchased Assets before
the Closing Date. The Seller's costs associated with acquiring title to such
Leased Assets shall be paid by the Buyer as part of the Purchase Price. During
the period from the date of this Agreement to the Closing Date, the Seller
agrees to take no action which would materially limit or impair Buyer's efforts
to commence permitting activities related to the expansion at the Harry Allen
Station. In addition, Seller shall consult with Buyer on matters relating to
Seller's pending permit applications, permit assignments and permit consents
related to site expansion and shall work with Buyer in good faith to manage and
control such pending permit applications, permit assignments and permit
consents.

          7.5  Public Statements. The parties shall consult with each other
               -----------------
prior to issuing any public announcement, statement or other disclosure with
respect to this Agreement or the transactions contemplated hereby and the Buyer
shall not issue any such public announcement, statement or other disclosure
without having first received the written consent of the Seller, except as may
be required by law and except that the parties may make public announcements,
statements or other disclosures with respect to this Agreement and the
transactions contemplated hereby to the extent and under the circumstances in
which the parties are expressly permitted by the Confidentiality Agreement to
make disclosures of "Evaluation Material" (as defined in the Confidentiality
Agreement).

          7.6  Consents and Approvals. (a) The Seller and the Buyer shall each
               ----------------------
file or cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed under the
HSR Act and the rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby.  The parties shall consult with each other as
to the appropriate time of filing such notifications and shall use their best
efforts to make such filings at the agreed upon time, to respond promptly to any
requests for additional information made by either of such agencies, and to
cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing.

          (b)  The Seller and the Buyer shall cooperate with each other and (i)
promptly prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use all commercially reasonable efforts to obtain the transfer
or reissuance to the Buyer of all necessary Environmental Permits, Permits,
consents, approvals and authorizations of all governmental bodies and (iv) use
all commercially reasonable

                                      37
<PAGE>

efforts to obtain all necessary consents, approvals and authorizations of all
other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and
(iv), necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Seller Required Regulatory
Approvals, the Buyer Required Regulatory Approvals and assignment of the Seller
Agreements) or required by the terms of any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument to which the Seller or the Buyer is a party or by which either of
them is bound. The Seller shall have the right to review and approve in advance
all characterizations of the information relating to Purchased Assets; and each
of the Seller and the Buyer shall have the right to review and approve in
advance all characterizations of the information relating to the transactions
contemplated by this Agreement which appear in any filing made in connection
with the transactions contemplated hereby. The parties hereto agree that they
shall consult with each other with respect to the transferring to the Buyer or
the obtaining by the Buyer of all such necessary Environmental Permits, Permits,
consents, approvals and authorizations of all third parties and governmental
bodies. The Seller and the Buyer shall designate separate counsel with respect
to all applications, notices, petitions and filings (joint or otherwise)
relating to this Agreement and the transactions contemplated hereby on behalf of
the Seller, on the one hand and the Buyer on the other hand, with all
governmental bodies. To the extent that a consent to an assignment of any
material Seller Agreement cannot be obtained before the Closing Date, the Seller
shall enter into all such agreements with the Buyer as are necessary to give the
Buyer the rights, obligations and burdens of such Seller Agreements.

          (c)  The parties hereto shall consult with each other prior to
proposing or entering into any stipulation or agreement with any federal, state
or local Governmental Authority or agency or any third party in connection with
any federal, state or local governmental consents and approvals legally required
for the consummation of the transactions contemplated hereby and shall not
propose or enter into any such stipulation or agreement without the other
party's prior written consent, which consent shall not be unreasonably withheld.

          7.7  Fees and Commissions. The Seller and the Buyer each represent and
               --------------------
warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which
is acting for and at the expense of the Seller, no broker, finder or other
Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transaction contemplated hereby by reason of any action
taken by the party making such representation. The Seller and the Buyer shall
pay to the other or otherwise discharge, and shall indemnify and hold the other
harmless from and against, any and all claims or liabilities for all brokerage
fees, commissions and finder's fees (other than as described above) incurred by
reason of any action taken by such party.

                                      38
<PAGE>

          7.8  Intentionally Left Blank.
               ------------------------

          7.9  Tax Matters. (a) Notwithstanding any other provision of this
               -----------
Agreement, all transfer, sales and similar Taxes incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne by
the Buyer, and the Buyer shall, at its own expense, file, to the extent required
by law, all necessary Tax Returns and other documentation with respect to all
such Taxes, and, if required by applicable law, the Seller shall join in the
execution of any such Tax Returns or other documentation, provided, however,
Seller shall work with Buyer in good faith to minimize all transfer, sales and
similar taxes and Buyer shall indemnify Seller for any reasonable out-of-pocket
expenses incurred by Seller in minimizing such taxes.

          (b)  With respect to Taxes to be prorated in accordance with Section
3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns
required to be filed with respect to the Purchased Assets, if any, and shall
duly and timely pay all such Taxes shown to be due on such Tax Returns. The
Buyer's preparation of any such Tax Returns shall be subject to the Seller's
approval, which approval shall not be unreasonably withheld. The Buyer shall
make such Tax Returns available for the Seller's review and approval no later
than twenty (20) days prior to the due date for filing such Tax Return. Within
ten (10) days after receipt of such Tax Return, the Seller shall pay to the
Buyer its proportionate share of the amount shown as due on such Tax Return
determined in accordance with Section 3.4 hereof. In addition to any amount of
reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse
Seller for any Nevada property taxes incurred by Seller which relate to the
Purchased Assets and have a lien date after the Closing Date. The amount of such
reimbursement shall be determined based upon the proportion of (i) the
"historical cost less depreciation" of the Purchased Assets to (ii) the total
historical cost less depreciation of all the assets reported on Seller's Nevada
Operating Property Appraisal Report.

          (c)  Each of the Buyer and the Seller shall provide the other with
such assistance as may reasonably be requested by the other party in connection
with the preparation of any Tax Return, any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each shall retain and provide the requesting party with
any records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 7.9 or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the parties hereto.

                                      39
<PAGE>

          7.10 Supplements to Schedules.  Prior to the Closing Date, the
               ------------------------
Seller shall supplement or amend the Schedules required by Article V with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
such Schedules.  No supplement or amendment of any Schedule made pursuant to
this Section 7.10 shall be deemed to cure any breach of any representation or
warranty made in this Agreement unless the parties agree thereto in writing.

          7.11 Employees. (a) Schedule 7.11(a) sets forth all collective
               ---------
bargaining agreements to which the Seller is a party in connection with Seller's
employees assigned on a full-time basis to the Purchased Assets, if any (the
"Collective Bargaining Agreements"), as well as any Letters of Agreement between
Seller and IBEW Local 396 ("Local 396 LOA"), letters of intent, or other such
agreements or understandings related to the sale and transfer of certain plants.
The Buyer shall offer employment to begin as of the Closing Date to the Seller's
employees, if any, who work full time at the Purchased Assets and who are
included in the bargaining units covered by the Collective Bargaining Agreements
("Hourly Employees").

          (b)  Continued Employment. The Buyer shall, as of the Closing Date,
               --------------------
make a Qualifying Offer of Employment (as defined herein) to each employee of
Seller who (i) worked full-time at the Purchased Assets and (ii) was an employee
of the Seller immediately prior to the Closing Date, other than (x) Hourly
Employees and (y) Directors (each such employee who accepts a Qualifying Offer
of Employment, a "Management Employee"). An offer of employment shall be deemed
a "Qualifying Offer of Employment" if (A) the proposed base salary and level of
incentive compensation is at least 90% of the employee's base salary and level
of incentive compensation immediately prior to the Closing Date and (B) the
proposed principal place of employment is within one hundred (100) miles of the
employee's principal place of employment immediately prior to the Closing Date.

          (c)  Benefit Continuation.  Subject to applicable law, the Buyer shall
               --------------------
maintain for a period of at least one year after the Closing Date, without
interruption, such employee compensation, welfare and benefit plans, programs,
policies and fringe benefits covering Management Employees that will be as
economically similar, in the aggregate, as those provided pursuant to those
employee compensation, welfare and benefit plans, programs, policies and fringe
benefits of the Seller and their Subsidiaries as in effect immediately prior to
the Closing Date.  To the extent permissible under the terms of the Benefit
Plans of Buyer and required by applicable law, the Buyer shall waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Management
Employees under any Benefit Plans of Buyer that are welfare benefit plans that
such employees may be eligible to participate in after the Closing Date, other
than limitations or waiting periods that are already in

                                      40
<PAGE>

effect with respect to such employees and that have not been satisfied as of the
Closing Date under any welfare benefit plan maintained for the Management
Employees immediately prior to the Closing Date.

          (d)  Service Credit. The Management Employees shall be given credit
               --------------
for all service with the Seller or its Subsidiaries (and service credited by
Seller or such Subsidiary), to the same extent as such service was credited for
such purpose by Seller or such Subsidiary, under all employee benefit plans,
programs and policies of the Buyer in which they become participants (the
"Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual
and determination of level of benefits. Notwithstanding the foregoing, such
service with the Seller shall be recognized for purposes of benefit accrual
under a defined benefit pension plan or a retiree medical plan (a "Plan")
sponsored by the Buyer only if assets and liabilities are transferred to the
Buyer's plan and trust from the Seller's plan and trust.

          (e)  Assumptions.  The Buyer shall assume only those obligations that
               -----------
are required to be assumed by the Buyer under the Collective Bargaining
Agreement or obligations for which there was a transfer of assets and
liabilities to the Buyer's plan and trust from the Seller's plan and trust.
Absent such transfer of plan assets and liabilities, benefits accrued under such
Benefits Plans of Seller and all benefits currently payable as of the Closing
Date shall be and shall remain the obligation of the Seller. Any individual
covered under any such Benefit Plan of Seller that is a Group Health Plan (as
defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who
is eligible for continued coverage under such Group Health Plan as of the
Closing Date, shall continue to be covered under such Group Health Plan after
Closing pursuant to the provisions of COBRA.

          (f)  Neutrality Regarding Future Employees.  Subject to federal labor
               -------------------------------------
law requirements, if Buyer hires employees whose duties are significantly the
same duties covered under the Generation Collective Bargaining Agreement between
Nevada Power Company and Local Union 396 of the IBEW (the "Union") that was
effective June 25, 1999, then the Buyer shall notify the Union of this
circumstance and, upon written request by the Union:

               (1)  Allow representatives of the Union reasonable access to the
business of the Buyer for the purpose of informing such employees of their
rights to form and join organizations of their own choosing for the purpose of
representation with their employer with respect to wages, hours, and other terms
and conditions of employment and to explain the benefits of membership in and
representation for such purposes by the Union.  "Reasonable access" shall
include the right to meet with employees on at least three (3) occasions at the
business of the Buyer on non-work time (e.g., lunch hour) during normal business
hours.

                                      41
<PAGE>

               (2)  Buyer shall supply the Union with a list of such employees.
Such list shall contain the names, home addresses and home phone numbers of such
employees. The Union shall at all times maintain the confidentiality of any such
list.

               (3)  Buyer shall submit to a card check election to determine the
desires of such employees to be represented for the purpose of collective
bargaining by the Union.  If a majority of such employees have signed cards
authorizing the Union to act as their collective bargaining representative, and
such authorization card majority is verified by the Federal Mediation and
Conciliation Service, then the Buyer shall recognize the Union as the exclusive
bargaining representative of such employees.

               (4)  If the Union is selected by a majority of such employees as
their collective bargaining representative, then the Buyer shall, immediately
upon the request by the Union, bargain in good faith with the Union for the
purpose of concluding a collective bargaining agreement.

               (5)  At all times Buyer shall remain neutral with regard to any
question concerning the representation of such employees by the Union.
"Neutral" shall mean that the Buyer or its affiliate(s) shall take no official
position, nor shall it direct or condone any of its agents or representatives,
including any attorneys or consultants, to take any position against the
exercise by its employees of their right to select the Union as their collective
bargaining representative or to oppose the selection of the Union as the
employees' collective bargaining representative.

          (g)  WARN Act.  The Seller shall perform timely and discharge all
               --------
requirements, if any, under the WARN Act and under applicable state and local
laws and regulations for the notification of its employees arising from the sale
of the Purchased Assets to the Buyer up to and including the Closing Date.  The
Buyer shall cooperate with the Seller to provide the Seller with such
information as may be needed from the Buyer for inclusion in such notices,
including providing the Seller at least 90 days prior to the date on which the
Closing is anticipated to occur (or such date to which the Buyer and the Seller
mutually agree) with a list of all of the Seller's employees to whom the Buyer
shall make offers of employment.  After the Closing Date, the Buyer shall be
responsible for performing and discharging all requirements under the WARN Act
and under applicable state and local laws and regulations for the notification
of its employees with respect to the Purchased Assets.

          7.12 Risk of Loss. (a) From the date hereof through the Closing Date,
               ------------
all risk of loss or damage to the property included in the Purchased Assets
shall be borne by the Seller.

                                      42
<PAGE>

          (b)  If, before the Closing Date all or any portion of the Purchased
Assets are taken by eminent domain, or is the subject of a pending or (to the
knowledge of the Seller) contemplated taking which has not been consummated, the
Seller shall notify the Buyer promptly in writing of such fact. If such taking
would have a Material Adverse Effect, the Buyer and the Seller shall negotiate
in good faith to settle the loss resulting from such taking (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transaction contemplated by this
Agreement pursuant to the terms of this Agreement. If no such settlement is
reached within sixty (60) days after the Seller has notified the Buyer of such
taking, then the Buyer or the Seller may, if such taking relates to the
Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof.

          (c)  If, before the Closing Date all or any material portion of the
Purchased Assets are damaged or destroyed by fire or other casualty, the Seller
shall notify the Buyer promptly in writing of such fact.  If such damage or
destruction would have a Material Adverse Effect and the Seller has not notified
the Buyer of its intention to cure such damage or destruction within fifteen
(15) days after its occurrence, the Buyer and the Seller shall negotiate in good
faith to settle the loss resulting from such casualty (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transactions contemplated by this
Agreement pursuant to the terms of this Agreement.  If no such settlement is
reached within sixty (60) days after the Seller has notified the Buyer of such
casualty, then the Buyer or the Seller may terminate this Agreement pursuant to
Section 10.1(f) hereof.

          7.13 Additional Covenants of the Buyer. Notwithstanding any other
               ---------------------------------
provision hereof, Buyer covenants and agrees that, for a period of five (5)
years commencing on the Closing Date, Buyer shall not transfer the Purchased
Assets, or any material portion of the Purchased Assets, to any entity or
Affiliate of such entity who at that time is the owner of any bundle of
generation assets previously owned by Seller within the southern regions of
Nevada, as such regions are described in the Offering Memorandum dated as of
March 2000, as supplemented from time to time.  Buyer further covenants and
agrees that, in the event that Buyer transfers the Purchased Assets or any
material portion of the Purchased Assets during such five (5) year period, Buyer
shall obtain from its transferee a covenant and agreement which restricts such
transferee's ability to transfer the Purchased Assets that is substantially
similar to Buyer's covenant and agreement in the first sentence of this Section
7.13 and an additional covenant and agreement that is substantially similar to
that of this sentence, and each such covenant and agreement shall survive and
remain in effect until five (5) years from the Closing Date as defined in this
Agreement.  The covenants and agreements contained in this Section 7.13 shall
survive Closing and

                                      43
<PAGE>

shall continue in effect for a period of five (5) years commencing on the
Closing Date.

          7.14 Additional Covenants of the Parties. (a) Within fifteen (15)
               -----------------------------------
Business Days of the date of this Agreement, Buyer agrees to cooperate with
Seller in the development of a form of water supply agreement which
substantially reflects the provisions set forth in Exhibit H hereto. Seller
shall use its commercially reasonable best efforts to present such form of
agreement to the buyer of the Clark Bundle as soon as practicable thereafter.
Seller and Buyer shall execute such definitive agreement, which will also be
executed by the buyer of the Clark Bundle, within thirty (30) Business Days of
the date of this Agreement.

          (b)  Seller shall conduct a performance test of the Harry Allen
turbogenerator system (the "Test") within 45 days of completion of the
combustion turbine overhaul scheduled for February, 2001 to confirm the unit is
able to perform at rated summer and winter capacity output levels presented in
Exhibit A to the Transitional Power Purchase Agreement.  Seller shall give Buyer
reasonable notice, but not less than thirty (30) days, of the scheduled date of
such Test and protocols to be utilized therein.  Buyer shall be entitled to
review and comment on such Test and protocols, and Seller shall consider the
incorporation of such comments in good faith.  Buyer shall be entitled to
observe the conduct of such Test.  Seller shall provide copies of the reports
prepared following such Test.  The Test shall correct observed (measured) data
site conditions to International Standards Organization (ISO) standard
conditions, accounting for non-standard ambient temperature, relative humidity
and atmospheric pressure, utilizing the original General Electric turbine
correction curves for the turbine.  The Test shall be conducted utilizing
natural gas fuel and shall measure output utilizing the evaporative cooler, if
meteorological conditions permit and consistent with good utility practice.  The
correction curves will be utilized as the basis to extrapolate to typical summer
and winter conditions at the site of 90 degrees F (with the evaporative cooler
on) and 72 degrees F (with the evaporative cooler off) respectively.

          (c)  The parties agree to negotiate in good faith to reach an
agreement which will permit Buyer to store certain of Buyer's spare parts at the
Harry Allen Station prior to Closing.

                                 ARTICLE VIII
                                 ------------
                              CLOSING CONDITIONS
                              ------------------

          8.1  Conditions to Each Party's Obligations to Effect the Transactions
               -----------------------------------------------------------------
Contemplated Hereby. The respective obligations of each party to effect the
-------------------

                                      44
<PAGE>

transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:

          (a)  The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;

          (b)  No preliminary or permanent injunction or other order or decree
by any federal or state court which prevents the consummation of the
transactions contemplated hereby or by the Ancillary Agreements shall have been
issued and remain in effect (each party agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted by any state or federal government or
Governmental Authority in the United States which prohibits the consummation of
the transactions contemplated hereby or by the Ancillary Agreements.

          (c)  All federal, state and local government consents and approvals
required for the consummation of the transactions contemplated hereby or by the
Ancillary Agreements, including, without limitation, the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have
become Final Orders (a "Final Order" for purposes of this Agreement means a
final order after all opportunities for rehearing are exhausted (whether or not
any appeal thereof is pending) that has not been revised, stayed, enjoined, set
aside, annulled or suspended, with respect to which any required waiting period
has expired; and as to which all conditions to effectiveness prescribed therein
or otherwise by law, regulation or order have been satisfied) with such terms
and conditions as shall have been imposed by the Governmental Authority issuing
such Final Order and such Final Orders shall not have imposed terms and
conditions which would have a material adverse effect on the Purchased Assets;
and

          (d)  All consents and approvals required under the terms of any note,
bond, mortgage, indenture, contract or other agreement to which the Seller or
the Buyer, or any of their Subsidiaries, is a party for the consummation of the
transactions shall have been obtained, other than those (i) which if not
obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii)
for which an agreement which is described in the last sentence of Section 7.6(b)
hereof has been entered into.

          8.2  Conditions to Obligations of Buyer. The obligation of the
               ----------------------------------
Buyer to effect the transactions contemplated by this Agreement shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:

                                      45
<PAGE>

          (a)  There shall not have occurred and be continuing, a Material
Adverse Effect;

          (b)  The Seller shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement required to be
performed and complied with by it on or prior to the Closing Date, and the
representations and warranties of the Seller set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made at and as of the Closing Date, and the
Buyer shall have received a certificate to that effect signed by an authorized
officer of the Seller;

          (c)  The Buyer shall have received a certificate from an authorized
officer of the Seller, dated the Closing Date, to the effect that to the best of
such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b)
hereof have been satisfied;

          (d)  The Buyer shall have received an opinion from Woodburn & Wedge,
P.C., dated the Closing Date and satisfactory in form and substance to the Buyer
and its counsel, substantially to the effect that:

               (1)  The Seller is a corporation organized, existing and in good
standing under the laws of the State of Nevada and has the corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby; and the
execution and delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by requisite corporate action taken on the part of the Seller;

               (2)  This Agreement and the Ancillary Agreements have been
executed and delivered by the Seller and (assuming that the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained)
are valid and binding obligations of the Seller, enforceable against the Seller
in accordance with their terms, except that such enforcement thereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, and (B) general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and except to the extent that the right to indemnification and
contribution contained therein may be limited by state or federal securities
laws or the public policy underlying such laws;

               (3)  The execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Seller shall not constitute a violation of
the Certificate of Incorporation or Bylaws of the Seller; and

                                      46
<PAGE>

               (4)  No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is necessary
for the consummation by the Seller of the Closing other than (i) the Seller
Required Regulatory Approvals, (ii) such declarations, filings or registrations
with, or notices to, or authorizations, consents or approvals relating to
Permits and Environmental Permits and (iii) such declarations, filings or
registrations with, or notices to, or authorizations, consents or approvals
which, if not obtained or made, would not, in the aggregate have a Material
Adverse Effect.

          As to any matter contained in such opinion which involves the laws of
any jurisdiction other than the Federal laws of the United States or the laws of
the State of Nevada, such counsel may rely upon opinions of counsel admitted in
such other jurisdictions.  Any opinions relied upon by such counsel as aforesaid
shall be delivered together with the opinion of such counsel.  Such opinion may
expressly rely as to matters of fact upon certificates furnished by the Seller
and appropriate officers and directors of the Seller and by public officials;
and

          (e)  The Seller shall have executed and delivered, as of the Closing,
each of the Ancillary Agreements to be executed by the Seller and all required
approvals and conditions relating to the Ancillary Agreements shall have been
obtained or satisfied.

          8.3  Conditions to Obligations of Seller. The obligation of the
               -----------------------------------
Seller to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

          (a)  The Buyer shall have performed in all material respects its
covenants and agreements contained in this Agreement required to be performed on
or prior to the Closing Date;

          (b)  The representations and warranties of the Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made at and as of the
Closing Date;

          (c)  The Seller shall have received a certificate from an authorized
officer of the Buyer, dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b)
hereof have been satisfied; and

          (d)  The Seller shall have received an opinion from Snell & Wilmer
L.L.P., counsel for the Buyer, dated the Closing Date and satisfactory in form
and substance to the Seller and its counsel, substantially to the effect that:

                                      47
<PAGE>

               (1)  The Buyer is a corporation organized, existing and in good
standing under the laws of the State of Arizona and has the corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby; and the
execution and delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action taken on the part of the Buyer;

               (2)  This Agreement and the Ancillary Agreements have been
executed and delivered by the Buyer and (assuming that the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained)
are valid and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their terms, except that such enforcement thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought;

               (3)  The execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Buyer shall not constitute a violation of
the Certificate of Incorporation or Bylaws (or other similar governing
documents), as currently in effect, of the Buyer; and

               (4)  No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is necessary
for the consummation by the Buyer of the Closing other than (i) the Buyer
Required Regulatory Approvals, (ii) such declarations, filings or registrations
with, or notices to, or authorizations, consents or approvals relating to
Permits and Environmental Permits and (iii) such declarations, filings or
registrations with, or notices to, or authorizations, consents or approvals
which, if not obtained or made, would not, in the aggregate have a Material
Adverse Effect.

          As to any matter contained in such opinion which involves the laws of
any jurisdiction other than the federal laws of the United States and the State
of Arizona, such counsel may rely upon opinions of counsel admitted to practices
in such other jurisdictions.  Any opinions relied upon by such counsel as
aforesaid shall be delivered together with the opinion of such counsel.  Such
opinion may expressly rely as to matters of facts upon certificates furnished by
appropriate officers and directors of the Buyer and its Subsidiaries and by
public officials; and

                                      48
<PAGE>

          (e)  The Buyer shall have executed and delivered, as of the Closing,
each of the Ancillary Agreements to be executed by the Buyer and all required
approvals and conditions relating to the Ancillary Agreements have been obtained
or satisfied.

                                  ARTICLE IX
                                  ----------
                                INDEMNIFICATION
                                ---------------

          9.1  Indemnification. (a) The Seller shall indemnify, defend and hold
               ---------------
harmless the Buyer from and against any and all claims, demands or suits (by any
Person), losses, liabilities, damages (including consequential or special
damages), obligations, payments, costs, Taxes and expenses (including, without
limitation, the costs and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements and compromises relating thereto and
reasonable attorneys' fees and reasonable disbursements in connection therewith)
to the extent the foregoing are not covered by insurance, (collectively,
"Indemnifiable Losses"), asserted against or suffered by the Buyer relating to,
resulting from or arising out of (i) any breach by the Seller of any covenant or
agreement of the Seller contained in this Agreement or the Ancillary Agreements
or (ii) the Excluded Liabilities.

          (b)  The Buyer shall indemnify, defend and hold harmless the Seller
from and against any and all Indemnifiable Losses asserted against or suffered
by the Seller relating to, resulting from or arising out of (i) any breach by
the Buyer of any covenant or agreement of the Buyer contained in this Agreement
or the Ancillary Agreements or (ii) the Assumed Liabilities.

          (c)  Either the person required to provide indemnification under this
Agreement (the "Indemnifying Party") or the person entitled to receive
indemnification under this Agreement (the "Indemnitee") may assert any offset or
similar right in respect of its obligations under this Section 9.1 based upon
any actual or alleged breach of any covenant or agreement contained in this
Agreement or the Ancillary Agreements or the Ancillary Agreements .

          (d)  Any Indemnitee having a claim under these indemnification
provisions shall make a good faith effort to recover all losses, damages, costs
and expenses from insurers of such Indemnitee under applicable insurance
policies so as to reduce the amount of any Indemnifiable Loss hereunder. The
amount of any Indemnifiable Loss shall be reduced (i) to the extent that the
Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss
and (ii) to take into account any Tax or Income Tax benefit recognized by the
Indemnitee arising from the recognition of the Indemnifiable Loss, net of any
Tax or Income Tax detriment, and any payment actually received with respect to
an Indemnifiable Loss.

                                      49
<PAGE>

          (e)  The expiration, termination or extinguishment of any covenant,
agreement, representation or warranty shall not affect the parties' obligations
under this Section 9.1 if the Indemnitee provided the Indemnifying Party with
proper notice of the claim or event for which indemnification is sought prior to
such expiration, termination or extinguishment.

          (f)  The rights and remedies of the Seller and the Buyer under this
Article IX are exclusive and in lieu of any and all other rights and remedies
which the Seller and the Buyer may have under this Agreement or otherwise for
monetary relief with respect to (i) any breach or failure to perform any
covenant or agreement set forth in this Agreement or (ii) the Assumed
Liabilities or the Excluded Liabilities, as the case may be. Without limiting
the foregoing, with respect to the Purchased Assets, the Buyer, for itself and
its Affiliates, does hereby irrevocably release, hold harmless and forever
discharge the Seller from any and all claims of any kind or character, whether
known or unknown, hidden or concealed, resulting from or arising out of or in
connection with Hazardous Substances or any Environmental Law, other than those
liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance
of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby
irrevocably waives any and all rights and benefits with respect to such claims
that it now has, or in the future may have conferred upon it by virtue of any
statute, regulation or common law principle which provides that a general
release does not extend to claims which a party does not know or suspect to
exist in its favor at the time of executing the release, if knowledge of such
claims would have materially affected such party's settlement with the obligor.
In this connection, the Buyer hereby acknowledges that it is aware that factual
matters now unknown to it may have given, or hereafter may give, rise to claims
that are presently unknown, unanticipated and unsuspected, and it further agrees
that this release has been negotiated and agreed upon in light of that
awareness, and the Buyer, for itself and on behalf of its Affiliates,
nevertheless hereby intends irrevocably to release the Seller from the claims
described in this Section 9.1(f).

          9.2  Defense of Claims. (a) If any Indemnitee receives notice of the
               -----------------
assertion of any claim or of the commencement of any claim, action, or
proceeding made or brought by any Person who is not a party to this Agreement or
any Affiliate of a party to this Agreement (a "Third Party Claim") with respect
to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee shall give such Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than ten (10) calendar days after the
Indemnitee's receipt of notice of such Third Party Claim.  Such notice shall
describe the nature of the Third Party Claim in reasonable detail and shall
indicate the estimated amount, if practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee.  The Indemnifying Party shall
have the right to participate in or, by giving written notice

                                      50
<PAGE>

to the Indemnitee, to elect to assume the defense of any Third Party Claim at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, and the Indemnitee shall cooperate in good faith in such defense at
such Indemnitee's own expense.

          (b)  If within ten (10) calendar days after an Indemnitee provides
written notice to the Indemnifying Party of any Third Party Claim the Indemnitee
receives written notice from the Indemnifying Party that such Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be
liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
                                     --------  -------
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense, and the Indemnifying
Party shall be liable for all reasonable expenses thereof.  Without the prior
written consent of the Indemnitee, the Indemnifying Party shall not enter into
any settlement of any Third Party Claim which would lead to liability or create
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder.  If a firm offer is
made to settle a Third Party Claim without leading to liability or the creation
of a financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall
give written notice to the Indemnitee to that effect.  If the Indemnitee fails
to consent to such firm offer within ten (10) calendar days after its receipt of
such notice, the Indemnitee may continue to contest or defend such Third Party
Claim and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim shall be the amount of such settlement offer, plus
reasonable costs and expenses paid or incurred by the Indemnitee up to the date
of such notice.

          (c)  Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event not later than ten (10)
calendar days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party shall have a period of thirty (30) calendar days within which
to respond to such Direct Claim. If the Indemnifying Party does not respond
within such thirty (30) calendar day period, the Indemnifying Party shall be
deemed to have accepted such claim. If the Indemnifying Party rejects such
claim, the Indemnitee shall be free to seek enforcement of its rights to
indemnification under this Agreement.

                                      51
<PAGE>

          (d)  If the amount of any Indemnifiable Loss, at any time subsequent
to the making of an indemnity payment in respect thereof, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance coverage,
or pursuant to any claim, recovery, settlement or payment by or against any
other entity, the amount of such reduction, less any costs, expenses or premiums
incurred in connection therewith (together with interest thereon from the date
of payment thereof at the prime rate then in effect of The Chase Manhattan
Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party.
Upon making any indemnity payment, the Indemnifying Party shall, to the extent
of such indemnity payment, be subrogated to all rights of the Indemnitee against
any third party in respect of the Indemnifiable Loss to which the indemnity
payment relates; provided, however, that (i) the Indemnifying Party shall then
                 --------  -------
be in compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of such indemnity payment are hereby made expressly
subordinated and subjected in right of payment to the Indemnitee's rights
against such third party. Without limiting the generality or effect of any other
provision hereof, each such Indemnitee and Indemnifying Party shall duly execute
upon request all instruments reasonably necessary to evidence and perfect the
foregoing subrogation and subordination rights. Nothing in this Section 9.2(d)
shall be construed to require any party hereto to obtain or maintain any
insurance coverage.

          (e)  A failure to give timely notice as provided in this Section 9.2
shall not affect the rights or obligations of any party hereunder except if, and
only to the extent that, as a result of such failure, the party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.

                                   ARTICLE X
                                   ---------
                          TERMINATION AND ABANDONMENT
                          ---------------------------

          10.1 Termination. (a)  This Agreement may be terminated at any time
               -----------
prior to the Closing Date, by mutual written consent of the Buyer and the
Seller.

          (b)  This Agreement may be terminated by the Seller or the Buyer if
(i) the transactions contemplated hereby shall not have been consummated on or
before eighteen (18) months from the date of this Agreement (the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
        --------  -------
Section 10.1(b) shall not be available to either Seller or Buyer if its failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such date;
provided, further, that if on the Termination Date the conditions to the Closing
-----------------
set forth in Section 8.1(c) shall not

                                      52
<PAGE>

have been fulfilled but all other conditions to the Closing shall be fulfilled
or shall be capable of being fulfilled, then the Termination Date shall be the
date which is twenty-four (24) months from the date of this Agreement or the
Ancillary Agreements.

          (c)  This Agreement may be terminated by either the Seller or the
Buyer if (i) any Governmental Authority or regulatory body, the consent of which
is a condition to the obligations of the Seller and the Buyer to consummate the
transactions contemplated hereby, shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful, or (ii) any court of competent jurisdiction in the United States
or any state shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable.

          (d)  This Agreement may be terminated by the Buyer, if there has been
a material violation or breach by the Seller of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of the Buyer impossible and such violation or
breach has not been waived by the Buyer.

          (e)  This Agreement may be terminated by the Seller, if there has been
a material violation or breach by the Buyer of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of the Seller impossible and such violation or
breach has not been waived by the Seller.

          (f)  This Agreement may be terminated by either the Seller or the
Buyer in accordance with the provisions of Section 7.12(b) or (c) hereof.

          10.2 Procedure and Effect of Termination. In the event of termination
               -----------------------------------
of this Agreement and abandonment of the transactions contemplated hereby by
either or both of the parties pursuant to Section 10.1 hereof, written notice
thereof shall forthwith be given by the terminating party to the other party and
this Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:

          (a)  such termination shall be the sole remedy of the parties hereto
with respect to breaches of any agreement, representation or warranty contained
in this Agreement and none of the parties hereto nor any of their respective
trustees, directors, officers or Affiliates, as the case may be, shall have any
liability or further obligation to the other party or any of their respective
trustees, directors, officers or

                                      53
<PAGE>

Affiliates, as the case may be, pursuant to this Agreement, except in each case
as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and

          (b)  all filings, applications and other submissions made pursuant to
this Agreement, to the extent practicable, shall be withdrawn from the agency or
other person to which they were made.

                                  ARTICLE XI
                                  ----------
                           MISCELLANEOUS PROVISIONS
                           ------------------------

          11.1 Amendment and Modification. Subject to applicable law, this
               --------------------------
Agreement may be amended, modified or supplemented only by written agreement of
the Seller and the Buyer.

          11.2 Waiver of Compliance; Consents. Except as otherwise provided in
               ------------------------------
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.

          11.3 No Survival of Representations and Warranties. Each and every
               ---------------------------------------------
representation and warranty contained in this Agreement and each and every
covenant contained in this Agreement (other than the covenants in Section 3.2,
3.3, 3.4, 7.2(b), 7.2(c), 7.2(d), 7.3, 7.7, 7.11(f), 7.13, 9.1 and 9.2 hereof
(which covenants shall survive in accordance with their terms)) shall expire
with, and be terminated and extinguished by, (i) the consummation of the sale of
the Purchased Assets and the transfer of the Assumed Liabilities pursuant to
this Agreement and shall not survive the Closing Date, or (ii) the termination
of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the
Seller, the Buyer or any officer, director, trustee or Affiliate of either of
them shall be under any liability whatsoever with respect to any such
representation, warranty or covenant.

          11.4 Notices. All notices and other communications hereunder shall be
               -------
in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by overnight courier or registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, provided that notices of a change of address shall be effective
only upon receipt thereof):

                                      54
<PAGE>

          (a)  If to the Seller, to:

               Sierra Pacific Resources
               6100 Neil Road
               Reno, Nevada 89511
               Attention: William E. Peterson, Esq.
               Telecopy:  (775) 834-5959

               with copies to:

               Skadden, Arps, Slate, Meagher & Flom LLP
               Four Times Square
               New York, New York 10036-6522
               Attention:  Sheldon S. Adler, Esq.
               Telecopy:  (212) 735-2000

          (b)  if to the Buyer, to:

               Pinnacle West Energy Corporation
               400 North 5/th/ Street
               Phoenix, Arizona 85004
               Attention:   Ajoy K. Banerjee
                            Vice President
               Telecopy:    (602) 250-2175

               with copies to:

               Pinnacle West Capital Corporation
               400 North 5/th/ Street
               Phoenix, Arizona  85004
               Attention:   Nancy L. Loftin, Esq.
                            Vice President and General Counsel
               Telecopy:    (602) 250-3701

          11.5 Assignment. This Agreement and all of the provisions hereof shall
               ----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto, including by operation of law without the prior written consent of the
other party, nor is this Agreement intended to confer upon any other Person
except the parties hereto any rights or remedies hereunder. Notwithstanding the
foregoing, the Buyer may assign the rights, but not the obligations, under this
Agreement to a wholly-owned Subsidiary or limited liability company prior to or
at Closing.

                                      55
<PAGE>

          11.6  Arbitration. Any dispute, controversy or claim arising out of or
                -----------
relating to this agreement, or the breach, termination or validity hereof (a
"Dispute"), shall be finally settled by arbitration in accordance with the
then-prevailing Commercial Arbitration Rules of the American Arbitration
Association, as modified herein (the "Rules").  The place of arbitration shall
be Nevada.  There shall be three arbitrators, of whom the Seller shall appoint
one and of whom the Buyer shall appoint one.  The two arbitrators so appointed
shall select a third arbitrator who shall act as the chairman of the tribunal.
If any arbitrator is not appointed within the time limits provided herein or in
the Rules, such arbitrator shall be appointed by the American Arbitration
Association.  The arbitral tribunal is not empowered to award damages in excess
of compensatory damages, and each party hereby irrevocably waives any right to
recover punitive, exemplary or similar damages with respect to any dispute.  Any
arbitration proceedings, decision or award rendered hereunder and the validity,
effect and interpretation of this arbitration provision shall be governed by the
Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may
be entered in any court of competent jurisdiction.

          11.7  Governing Law. This Agreement shall be governed by and construed
                -------------
in accordance with the laws of the State of Nevada (regardless of the laws that
might otherwise govern under applicable Nevada principles of conflicts of law)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.

          11.8  Counterparts. This Agreement may be executed in counterparts,
                ------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

          11.9  Interpretation. The article and section headings contained in
                --------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.

          11.10 Entire Agreement.     This Agreement, including the documents,
                ----------------
exhibits, schedules, certificates and instruments referred to herein, and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
therein.  It is expressly acknowledged and agreed that there are no
restrictions, promises, representations, warranties, covenants or undertakings
of the Seller contained in any material made available to the Buyer pursuant to
the terms of the Confidentiality Agreement (including the Offering Memorandum,
dated March 2000) as supplemented, or the

                                      56
<PAGE>

correspondence relating to the divestiture of Seller's generation assets
previously made available to the Buyer by the Seller and CSFB. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such transactions other than the Confidentiality Agreement.

          11.11  Bulk Sales or Transfer Laws. The Buyer acknowledges that the
                 ---------------------------
Seller shall not comply with the provision of any bulk sales or transfer laws of
any jurisdiction in connection with the transactions contemplated by this
Agreement. The Buyer hereby waives compliance by the Seller with the provisions
of the bulk sales or transfer laws of all applicable jurisdictions.

                                      57
<PAGE>

          IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.

                                        NEVADA POWER COMPANY

                                        By:____________________________________
                                        Name:   William E. Peterson
                                        Title:  Sr. Vice President, General
                                                Counsel and Corporate Secretary

                                        PINNACLE WEST ENERGY CORPORATION

                                        By:____________________________________
                                        Name:   William L. Stewart
                                        Title:  President

                                      58
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
ARTICLE I
DEFINITIONS......................................................        1
               1.1  Definitions..................................        1

ARTICLE II
PURCHASE AND SALE................................................       13
               2.1  The Sale.....................................       13
               2.2  Excluded Assets..............................       13
               2.3  Assumed Liabilities..........................       14
               2.4  Excluded Liabilities.........................       16

ARTICLE III
PURCHASE PRICE...................................................       18
               3.1      Purchase Price...........................       18
               3.2      Purchase Price Adjustment................       18
               3.3      Allocation of Purchase Price.............       19
               3.4      Proration................................       20

ARTICLE IV
THE CLOSING......................................................       21
               4.1      Time and Place of Closing................       21
               4.2      Payment of Purchase Price................       21
               4.3      Deliveries by Seller.....................       21
               4.4      Deliveries by Buyer......................       23

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER.........................       24
               5.1    Organization; Qualification................       24
               5.2    Authority Relative to this Agreement.......       24
               5.3    Consents and Approvals; No Violation.......       24
               5.4    Reports....................................       25
               5.5    Financial Statements.......................       26
               5.6    Undisclosed Liabilities....................       26
               5.7    Absence of Certain Changes or Events.......       26
               5.8    Title to Real Property.....................       26
               5.9    Leasehold Interests........................       27
               5.10   Improvements...............................       27
               5.11   Insurance..................................       27
               5.12   Environmental Matters......................       27
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
               5.13   Labor Matters.....................................     28
               5.14   ERISA; Benefit Plans..............................     28
               5.15   Real Property Encumbrances........................     29
               5.16   Condemnation......................................     29
               5.17   Certain Contracts and Arrangements................     29
               5.18   Legal Proceedings, etc............................     30
               5.19   Permits...........................................     30
               5.20   Regulation as a Utility...........................     31
               5.21   Taxes.............................................     31

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER.................................     31
               6.1    Organization......................................     31
               6.2    Authority Relative to this Agreement..............     31
               6.3    Consents and Approvals; No Violation..............     32
               6.4    Regulation as a Utility...........................     33
               6.5    Availability of Funds.............................     33

ARTICLE VII
COVENANTS OF THE PARTIES................................................     33
               7.1    Conduct of Business of the Seller.................     33
               7.2    Access to Information.............................     35
               7.3    Expenses..........................................     36
               7.4    Further Assurances................................     36
               7.5    Public Statements.................................     37
               7.6    Consents and Approvals............................     37
               7.7    Fees and Commissions..............................     38
               7.8    Intentionally Left Blank..........................     39
               7.9    Tax Matters.......................................     39
               7.10   Supplements to Schedules..........................     40
               7.11   Employees.........................................     40
               7.12   Risk of Loss......................................     42
               7.13   Additional Covenants of the Buyer.................     43
               7.14   Additional Covenants of the Parties...............     44

ARTICLE VIII
CLOSING CONDITIONS......................................................     44
               8.1    Conditions to Each Party's Obligations to
                      Effect the Transactions Contemplated Hereby.......     44
               8.2    Conditions to Obligations of Buyer................     45
               8.3    Conditions to Obligations of Seller...............     47
</TABLE>

                                      ii
<PAGE>

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
ARTICLE IX
INDEMNIFICATION..........................................................     49
               9.1     Indemnification...................................     49
               9.2     Defense of Claims.................................     50

ARTICLE X
TERMINATION AND ABANDONMENT..............................................     52
               10.1    Termination.......................................     52
               10.2    Procedure and Effect of Termination...............     53

ARTICLE XI
MISCELLANEOUS PROVISIONS.................................................     54
               11.1    Amendment and Modification........................     54
               11.2    Waiver of Compliance; Consents....................     54
               11.3    No Survival of Representations and Warranties.....     54
               11.4    Notices...........................................     54
               11.5    Assignment........................................     55
               11.6    Arbitration.......................................     56
               11.7    Governing Law.....................................     56
               11.8    Counterparts......................................     56
               11.9    Interpretation....................................     56
               11.10   Entire Agreement..................................     56
               11.11   Bulk Sales or Transfer Laws.......................     57
</TABLE>

                                      iii<PAGE>

                                                                   Exhibit 10(J)

                     TRANSITIONAL POWER PURCHASE AGREEMENT

                                BY AND BETWEEN

                             NEVADA POWER COMPANY

                                      AND

                       PINNACLE WEST ENERGY CORPORATION

                      __________________________________

ASSET BUNDLE:  HARRY ALLEN
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                    Page
-------                                                                    ----
<S>                                                                        <C>
1.   DEFINITIONS........................................................      1
2.   TERM...............................................................      8
3.   SECURITY...........................................................      9
4.   SUPPLY SERVICE.....................................................     10
5.   NOTIFICATION.......................................................     14
6.   PRICING OF ENERGY AND ANCILLARY SERVICES...........................     15
7.   INVOICING AND PAYMENTS.............................................     16
8.   REGULATORY APPROVALS...............................................     19
9.   COMPLIANCE.........................................................     20
10.  INDEMNIFICATION....................................................     20
11.  LIMITATION OF LIABILITY............................................     22
12.  FORCE MAJEURE......................................................     22
13.  DISPUTES...........................................................     24
14.  NATURE OF OBLIGATIONS..............................................     27
15.  SUCCESSORS AND ASSIGNS.............................................     27
16.  REPRESENTATIONS....................................................     28
17.  DEFAULT AND REMEDIES...............................................     29
18   FACILITY ADDITIONS AND MODIFICATIONS...............................     30
19.  COORDINATION.......................................................     30
20.  EMERGENCY AND NONEMERGENCY CONDITION RESPONSE......................     30
21.  OUTAGE SCHEDULING..................................................     31
22.  REPORTS............................................................     32
23.  COMMUNICATIONS.....................................................     32
24.  NOTICES............................................................     33
25.  MERGER.............................................................     33
26.  HEADINGS...........................................................     34
27.  COUNTERPARTS AND INTERPRETATION....................................     34
28.  SEVERABILITY.......................................................     34
29.  WAIVERS............................................................     34
30.  AMENDMENTS.........................................................     35
31.  TIME IS OF THE ESSENCE.............................................     35
32.  APPROVALS..........................................................     35
33.  PLR SERVICE........................................................     36
34.  CONFIDENTIALITY....................................................     36
35.  CHOICE OF LAW......................................................     37
</TABLE>

<TABLE>
<CAPTION>
Exhibits                                                                   Page
--------                                                                   ----
<S>                                                                        <C>
EXHIBIT A   ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS.............   A-1
EXHIBIT B   PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE
              OF ANCILLARY SERVICES......................................   B-1
EXHIBIT C   SUPPLIER'S MONTHLY INVOICE...................................   C-1
EXHIBIT D   BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS..................   D-1
EXHIBIT E   YEAR END TRUE-UP INVOICE.....................................   E-1
EXHIBIT F   NOTICES, BILLING AND PAYMENT INSTRUCTIONS....................   F-1
EXHIBIT G   FORM OF AVAILABILITY NOTICE..................................   G-1
EXHIBIT H   FORM OF GUARANTEE............................................   H-1
EXHIBIT I   COMPANY OBSERVED HOLIDAYS....................................   I-1
EXHIBIT J   ADJUSTMENTS TO TPPA AMOUNT...................................   J-1
EXHIBIT K   ADJUSTMENTS TO MINIMUM ANNUAL TAKE...........................   K-1
EXHIBIT L   ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE.....................   L-1
EXHIBIT M   ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS.........   M-1
</TABLE>

                                       i
<PAGE>

                     TRANSITIONAL POWER PURCHASE AGREEMENT

This Agreement is made and entered into as of December 1, 2000 by and between
Nevada Power Company, a Nevada corporation ("Buyer"), and Pinnacle West Energy
Corporation, an Arizona  corporation (the "Supplier").  Buyer and Supplier are
referred to individually as a "Party" and collectively as the "Parties."

                                  WITNESSETH:

WHEREAS, Buyer is selling its Harry Allen generating station and other assets
associated therewith to Supplier or an affiliate thereof (the "Asset Sale");

WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been
designated as the Provider of Last Resort ("PLR") for its Nevada retail electric
customers who are unable to obtain electric service from an alternative seller
or who fail to select an alternative seller.  The load required to serve such
customers, plus the customers under those wholesale sales agreements existing at
the Effective Date, is referred to herein as Buyer's Transitional Resource
Requirement; and

WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest
in the Harry Allen generating station as a source of supply for its Transitional
Resource Requirement; and

WHEREAS, Supplier has or is willing to secure the necessary resources to provide
a portion of Buyer's Transitional Resource Requirement; and

WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell
Energy and Ancillary Services under contract to Buyer; and

NOW, THEREFORE, in consideration of the mutual covenants, representations and
agreements hereinafter set forth, and intending to be legally bound hereby, the
Parties agree as follows:

1.   DEFINITIONS

     1.1  Format.

          1.1.1  References to Articles and Sections herein are cross-references
                 to Articles and Sections, respectively, in this Agreement,
                 unless otherwise stated.

          1.1.2  Any parts of this Agreement which are incorporated by reference
                 shall have the same meaning as if set forth in full text
                 herein.

                                       2
<PAGE>

     1.2  Definitions.  As used in this Agreement, the following terms shall
          -----------
          have the meanings set forth below:

          1.2.1  "Agreement" means this Agreement together with the Exhibits
                  ---------
                 attached hereto, as such may be amended from time to time.

          1.2.2  "Adjusted Replacement Cost of Energy" means the Replacement
                  -----------------------------------
                 Cost of Energy that will be due from Supplier after true-up in
                 accordance with the provisions of Section 7.5. Example
                 determinations of the Adjusted Replacement Cost of Energy are
                 shown on Exhibit E.

          1.2.3  "Ancillary Services" means those capacity-related services as
                  -------------------
                 listed in Exhibit B as well as the Energy component of such
                 services.  These services are defined in Buyer's OATT.

          1.2.4  "Asset Bundle" means the Harry Allen generating station and
                  ------------
                 other assets associated therewith pursuant to the terms of the
                 Asset Sale Agreement.

          1.2.5  "Asset Bundle Capacity" means, with respect to each unit listed
                  ---------------------
                 in Exhibit A, the net generating capacity (in megawatts ("MW"))
                 of such unit, as may be adjusted therein and as modified from
                 time to time in accordance with Section 5.2, Section 20, and
                 Section 21, and not to exceed at any time the net capacity for
                 each unit listed in Exhibit A. Asset Bundle Capacity shall also
                 mean, as the context requires, the Energy (in megawatt-hours
                 ("MWh")) and the Ancillary Services which the units would be
                 capable of producing if they operated at the capacity level
                 described in the first sentence of this Section 1.2.6.

          1.2.6  "Asset Sale" has the meaning set forth in the Recitals.
                  ----------

          1.2.7  "Asset Sale Agreement" means the Asset Sale Agreement between
                  --------------------
                 Buyer and Supplier or Supplier's affiliate dated as of
                 December 1, 2000, to purchase Buyer's Asset Bundle.

          1.2.8  "Asset Sale Closing" means the transfer of Buyer's ownership of
                  ------------------
                 the Asset Bundle through the consummation of the Asset Sale
                 pursuant to the terms of the Asset Sale Agreement.

          1.2.9  "Average Cost of Delivered Energy" means the total cost of
                  --------------------------------
                 Delivered Energy for the Contract Year after the application of
                 the annual true-up mechanism from Section

                                       3
<PAGE>

                  7.5 divided by the total Delivered Energy for the Contract
                  Year. Example determinations of Average Cost of Delivered
                  Energy are shown on Exhibit E.

          1.2.10  "Availability Notice" means a notice delivered from time to
                   -------------------
                  time by Supplier to Buyer pursuant to Section 5.2 notifying
                  Buyer of changes in the availability of the Asset Bundle.

          1.2.11  "Business Day" means any day other than Saturday, Sunday, and
                   ------------
                  any day that is an observed holiday by Buyer as shown on
                  Exhibit I.

          1.2.12  "CALPX" means the California Power Exchange and any successor
                   -----
                  entity thereto.

          1.2.13  "Confidential Information" has the meaning set forth in
                   ------------------------
                  Section 34.

          1.2.14  "Contract Year" means, with respect to the first Contract
                   -------------
                  Year, to each subsequent Contract Year, the period immediately
                  following the end of the preceding Contract Year, and in each
                  case ending on the earlier of the date which is twelve (12)
                  months thereafter or the termination date of this Agreement.

          1.2.15  "Control Area" has the meaning set forth in the OATT.
                   ------------

          1.2.16  "Control Area Operator" means an entity and its agents which
                   ---------------------
                  are responsible for the operation of the Transmission System
                  and for maintaining the reliability of the electrical
                  transmission system(s), including the Transmission System,
                  within the Control Area.

          1.2.17  "Credit Amount" shall mean an amount equal to the TPPA Amount,
                   -------------
                  plus an additional amount equal to $40/MWh multiplied by 76
                  megawatts, multiplied by the number of hours remaining in this
                  Agreement until March 1, 2003.

          1.2.18  "Delivered Amount" means, with respect to any Dispatch Hour,
                   ----------------
                  the Energy delivered by Supplier to Buyer at the designated
                  Point(s) of Delivery during such Dispatch Hour, whether or not
                  such Energy was generated by the Asset Bundle, plus any
                  additional amounts pursuant to Section 4.1.2, Section 4.1.3
                  and the Ancillary Services provided by Supplier for Buyer
                  during any Dispatch Hour pursuant to the terms of this
                  Agreement.

                                       4
<PAGE>

          1.2.19  "Derating" means a reduction to the Asset Bundle Capacity.
                   --------

          1.2.20  "Dispatch Hour" means the prescribed hour(s) when Energy is
                   -------------
                  to be delivered by Supplier to Buyer at the designated
                  Point(s) of Delivery and the prescribed hour(s) when Ancillary
                  Services are to be provided to the ISA by Supplier on behalf
                  of Buyer.

          1.2.21  "EDU" means electric distribution utility, the organization
                   ---
                  with the responsibility for the distribution of energy over
                  Buyer's distribution system to retail end-users.

          1.2.22  "Effective Date" means the date that this Agreement becomes
                   --------------
                  effective which shall be the date on which the Closing Date,
                  as defined in the Asset Sale Agreement, actually occurs.

          1.2.23  "Emergency Condition" shall mean a public declaration by the
                   -------------------
                  ISA or Control Area Operator that the Control Area is in
                  danger of imminent voltage collapse or uncontrollable
                  cascading outages.

          1.2.24  "Energy" means electricity (measured in MWh) and associated
                   ------
                  power-producing capacity to be provided by Supplier to Buyer
                  pursuant to this Agreement. Also known as "firm energy and
                  associated firm capacity".

          1.2.25  "Event of Default" has the meaning set forth in Section 17
                   ----------------
                  hereof.

          1.2.26  "FERC" means the Federal Energy Regulatory Commission and any
                   ----
                  successor agency thereto.

          1.2.27  "Force Majeure" has the meaning set forth in Section 12
                   -------------
                  hereof.

          1.2.28  "GAAP" means Generally Accepted Accounting Principles for the
                   ----
                  United States.

          1.2.29  "Good Utility Practice" means the applicable practices,
                   ---------------------
                  methods, and act:

                  (i)   required by applicable Laws, permits and reliability
                        criteria, whether or not the Party whose conduct at
                        issue is a member thereof, and

                  (ii)  otherwise engaged in or approved by a significant
                        portion of the United States electric utility industry
                        during the relevant time period, which, in the exercise

                                       5
<PAGE>

                        of reasonable judgement in light of the facts known at
                        the time the decision was made, could have been expected
                        to accomplish the desired result at a reasonable cost
                        consistent with good business practices, safety,
                        environmental protection, economy and expediency. Good
                        Utility Practice is not intended to be limited to the
                        optimum practice, method or act to the exclusion of all
                        others, but rather to practices, methods or acts
                        generally accepted in the United States electric utility
                        industry.

          1.2.30  "Governmental Authority" means any foreign, federal, state,
                   ----------------------
                  local, tribal or other governmental, regulatory or
                  administrative agency, court, commission, department, board,
                  or other governmental subdivision, legislature, rulemaking
                  board, tribunal, arbitrating body, or other governmental
                  authority.

          1.2.31  "Gross Replacement Costs of Energy" means Buyer's Replacement
                   ---------------------------------
                  Cost of Energy prior to adjustment for the amount that Buyer
                  would have paid for the Energy if Supplier had delivered the
                  Energy to Buyer. Example determinations of Gross Replacement
                  Costs of Energy are shown on Exhibit D.

          1.2.32  "Guarantee" has the meaning set forth in Section 3.1.2 hereof.
                   ---------

          1.2.33  "Guarantor" has the meaning set forth in Section 3.1.2 hereof.
                   ---------

          1.2.34  "Invoiced Replacement Costs" means the Replacement Costs which
                   --------------------------
                  have been billed to Supplier or subtracted from payments to
                  Supplier in accordance with the provisions of Section 4.2 and
                  Section 7.4.

          1.2.35  "ISA" means the Mountain West Independent System
                   ---
                  Administrator, or the regional transmission organization
                  authorized with the responsibility for the scheduling and
                  administration of Energy and Ancillary Services over, through
                  and within the Transmission System in coordination with other
                  interconnected entities to provide transmission services. The
                  ISA is also referred to herein as transmission administrator.

          1.2.36  "Law" means any law, treaty, code, rule, regulation, order,
                   ---
                  determination, permit, certificate, authorization, or approval
                  of an arbitrator, court or other Governmental Authority which
                  is binding on a Party or any of its property.

                                       6
<PAGE>

          1.2.37   "Limit on Excused Energy" means the amount of energy that
                    -----------------------
                   can be excused under the provisions of Section 12.4 as shown
                   on Exhibit A.

          1.2.38   "Market Price of Energy" has the meaning set forth in Section
                    ----------------------
                   6.2.1.

          1.2.39   "Minimum Annual Energy Take" has the meaning set forth in
                    --------------------------
                    Section 4.1.2.

          1.2.40   "Minimum Investment Grade Rating" of a Person means that such
                    -------------------------------
                   Person has a minimum credit rating on its senior unsecured
                   debt securities of at least two of the following ratings: (i)
                   BBB as determined by Standard & Poor's Corporation, (ii) Baa2
                   as determined by Moody's Investors Service, Inc., or (iii) a
                   comparable rating by another nationally recognized rating
                   service reasonably acceptable to Buyer.

          1.2.41   "Minimum Tangible Net Worth" means the total book value of
                    --------------------------
                   shareholder's equity less the balance of goodwill, as
                   reported on the latest quarterly balance sheet prepared in
                   accordance with Generally Accepted Accounting Principles
                   (GAAP).

          1.2.42   "NERC" means the North American Electric Reliability Council
                    ----
                   and any successor entity thereto.

          1.2.43   "Nonemergency Condition" shall mean the determination,
                    ----------------------
                   direction or order by the ISA, or Control Area Operator to
                   Supplier and/or Buyer to change the Supply Amount which is
                   not a result of or due to an Emergency Condition. A
                   Nonemergency Condition includes an insufficiency of Ancillary
                   Services to securely operate the Control Area.

          1.2.44   "OATT" means Buyer's, or the Control Area Operator's as its
                    ----
                   successor hereto, as applicable, then-effective Open Access
                   Transmission Tariff, or such entities' successor tariff,
                   which has been accepted for filing by the FERC.

          1.2.45   "Operating Representatives" means the persons designated to
                    -------------------------
                   transmit and receive routine operating and emergency
                   communications required under this Agreement.

          1.2.46   "Party" has the meaning set forth in the preamble of this
                    -----
                   Agreement.

                                       7
<PAGE>

          1.2.47   "Permitted Deratings" means those reductions to the Asset
                    -------------------
                   Bundle Capacity of which Supplier may notify Buyer from time
                   to time in an Availability Notice pursuant to Section 5.2.

          1.2.48   "Person" means any natural person, partnership, limited
                    ------
                   liability company, joint venture, corporation, trust,
                   unincorporated organization, or governmental entity or any
                   department or agency thereof.

          1.2.49   "Point of Delivery" means the point (s) which has (have) been
                    -----------------
                   specified as the Interconnection Point(s) in the
                   Interconnection Agreement between Nevada Power Company and
                   Pinnacle West Energy Corporation dated as of December 1,
                   2000, as it may be amended from time to time, as well as any
                   alternative locations agreed upon pursuant to Section 4.1.6.

          1.2.50   "Price Ceiling of Energy" means the ceiling price of Energy
                    -----------------------
                   as stated in Exhibit B.

          1.2.51   "Price Floor of Energy" means the floor price of Energy as
                    ---------------------
                   stated in Exhibit B.

          1.2.52   "Provider of Last Resort (PLR)" has the meaning set forth in
                    -----------------------------
                   the Recitals.

          1.2.53   "PUCN" means the Public Utilities Commission of Nevada and
                    ----
                   any successor entity thereto.

          1.2.54   "Replacement Costs" means with respect to a period of time,
                    -----------------
                   the difference between (a) the actual costs, including
                   without limitation related penalties and transmission costs,
                   incurred by Buyer to replace any shortfall between (1) the
                   Supply Amount and (2) the Delivered Amounts of Energy, (or in
                   the case of Ancillary Services the Supplier's schedule of
                   Ancillary Services) during such period and (b) the payments
                   the Supplier would have been entitled to in respect of such
                   shortfall in delivery; provided that Replacement Costs shall
                   also be subject to the annual true-up mechanism set forth in
                   Section 7.5.

          1.2.55   "Supply Amount" means, with respect to each Dispatch Hour,
                    -------------
                   the amount of Energy and Ancillary Services, not to exceed
                   the Asset Bundle Capacity for such Dispatch Hour, requested
                   by Buyer to be delivered by Supplier during any Dispatch
                   Hour. The Supply Amount for any Dispatch Hour shall be
                   determined pursuant to Section 5.1.

                                       8
<PAGE>

          1.2.56   "Total Amount of Energy Replaced" means the summation of
                    -------------------------------
                   Replacement Energy as shown on Exhibit E.

          1.2.57   "TPPA Amount" means the amount paid by Buyer to Supplier in
                    -----------
                   consideration of this Agreement.

          1.2.58   "Transitional Resource Requirement" or "TRR" means the
                    ---------------------------------
                   Energy and loss compensation necessary for Buyer to meet its
                   obligations as a Provider of Last Resort (PLR) for Nevada and
                   under those wholesale sales agreements existing at the
                   Effective Date.

          1.2.59   "Transmission System" means the facilities owned, controlled,
                    -------------------
                   or operated by Buyer, or its successors and assigns, that are
                   used to provide transmission service under the OATT.

          1.2.60   "WSCC" means the Western Systems Coordinating Council and any
                    ----
                   successor entity thereto.

2.   TERM

     2.1  Term. Unless terminated earlier pursuant to the terms of this
          ----
          Agreement, the term of this Agreement shall commence on the Effective
          Date and continue until the earlier of the effective date of an order
          by a Governmental Authority terminating Buyer's PLR responsibility, or
          March 1, 2003. Supplier shall provide service under this Agreement
          commencing on the first hour on the day after the Effective Date.

     2.2  Termination.
          -----------

          2.2.1    Except pursuant to Sections 2.2.2 or 17.4, this Agreement may
                   not be terminated without the explicit prior written approval
                   of Buyer.

          2.2.2    If, prior to the Asset Sale Closing, the FERC or any other
                   Governmental Authority places conditions on or requires
                   revisions of this Agreement which have a material adverse
                   effect on Supplier or Buyer, the Parties agree to negotiate
                   in good faith amendments to the Agreement to preserve the
                   bargain between the Parties. If the Parties fail to negotiate
                   mutually acceptable amendments to this Agreement within sixty
                   (60) days of such action by the FERC or other Governmental
                   Authority, either Party may terminate the Agreement after
                   first notifying the other Party in writing at least ten (10)
                   Business Days prior to the termination date; provided that
                   neither Party may exercise a right of termination pursuant to
                   this Section 2.2.2 after the Asset Sale Closing.

                                       9
<PAGE>

          2.2.3    This Agreement may be terminated with the mutual agreement of
                   the Parties.

          2.2.4    Any termination of this Agreement pursuant to this Section 2
                   shall not take effect until FERC either authorizes the
                   termination or accepts a written notice of termination.

     2.3  Effect of Termination.
          ----------------------

          2.3.1    Adjustment of TPPA Amount.  If the Effective Date of this
                   -------------------------
                   Agreement is before June 1, 2001, the TPPA Amount shall be
                   adjusted to equal (1) the TPPA Amount multiplied by (2) 100%
                   plus the sum of the monthly adjustments from Exhibit J for
                   each month or portion thereof between the Effective Date and
                   June 1, 2001. An example calculation is shown on Exhibit J.

                   If the Effective Date of this Agreement is after June 1,
                   2001, the TPPA Amount shall be adjusted to equal (1) the TPPA
                   Amount multiplied by (2) 100% minus the sum of the monthly
                   adjustments from Exhibit J for each month or portion thereof
                   between June 1, 2001 and the Effective Date. An example
                   calculation is shown on Exhibit J.

                   If this Agreement is terminated before March 1, 2003,
                   Supplier shall pay to Buyer an amount, in accordance with the
                   provisions of Section 7, equal to the TPPA Amount which
                   existed before any adjustment in accordance with the first or
                   second paragraph of this Section 2.3.1, multiplied by the sum
                   of the monthly adjustments for each month or portion thereof
                   between the date on which this Agreement is terminated and
                   March 1, 2003. An example calculation is shown on Exhibit J.

          2.3.2    Any default or termination of this Agreement shall not
                   release either Party from any applicable provisions of this
                   Agreement with respect to:

                   2.3.2.1   The payment of liquidated damages pursuant to
                             Sections 4.2, 12, 17, 18, or 21.

                   2.3.2.2   Indemnity obligations contained in Section 10, to
                             the extent of the statute of limitations period
                             applicable to any third party claim.

                                       10
<PAGE>

                   2.3.2.3    Limitation of liability provisions contained in
                              Section 11.

                   2.3.2.4    Payment of any unpaid amounts in respect of
                              obligations arising prior to or resulting from
                              termination.

                   2.3.2.5    For a period of one (1) year after the termination
                              date, the right to raise a payment dispute and the
                              resolution thereof pursuant to Section 13.

                   2.3.2.6    The resolution of any dispute submitted pursuant
                              to Section 13 prior to, or resulting from,
                              termination.

3.   SECURITY

     3.1  Supplier Certification; Guarantee. As a condition of Buyer's execution
          of, and continuing compliance with, this Agreement, Supplier shall at
          ---------------------------------
          Supplier's option comply with the provisions of either Section 3.1.1
          or Section 3.1.2.

          3.1.1    Supplier Certification.  Supplier shall (a) provide a
                   ----------------------
                   certificate from a duly authorized corporate officer of
                   Supplier certifying that, as of the Effective Date, Supplier
                   has a credit rating equal to or higher than the Minimum
                   Investment Grade Rating; or (b) post a letter of credit in a
                   form reasonably acceptable to Buyer in the amount of the
                   Credit Amount from a financial institution with each of: (i)
                   a credit rating of A2 or better from Moody's Investors
                   Service, Inc., (ii) a credit rating of A or better from
                   Standard & Poor's Corporation, and (iii) a Minimum Tangible
                   Net Worth ("MTNW") of one (1) billion dollars.

          3.1.2    Guarantee.  In the alternative to the provisions of Section
                   ---------
                   3.1.1, the Supplier may provide a corporate guarantee, in
                   form and substance as set forth in Exhibit H, made by an
                   entity (the "Guarantor") that:

                   3.1.2.1    has a credit rating equal to or higher than the
                              Minimum Investment Grade Rating, together with a
                              certificate from a duly authorized corporate
                              officer of such Guarantor certifying that, as of
                              the Effective Date, such Guarantor has a credit
                              rating equal to or higher than the Minimum
                              Investment Grade Rating; or

                                       11
<PAGE>

                   3.1.2.2    has a MTNW of no less than one (1) billion
                              dollars, together with a certificate from a duly
                              authorized corporate officer of such Guarantor
                              certifying that, as of the Effective Date, such
                              Guarantor has a MTNW of no less than one (1)
                              billion dollars; or

                   3.1.2.3    posts a letter of credit in a form reasonably
                              acceptable to Buyer in the amount of the Credit
                              Amount from a financial institution with each of:
                              (i) a credit rating of A2 or better from Moody's
                              Investors Service, Inc., (ii) a credit rating of A
                              or better from Standard & Poor's Corporation, and
                              (iii) a Minimum Tangible Net Worth ("MTNW") of one
                              (1) billion dollars.

     3.2  Compliance.
          ----------

          3.2.1    Reporting.  If at any time during the term of this Agreement,
                   ---------
                   Standard & Poor's Corporation, Moody's Investors Service,
                   Inc. or another nationally recognized firm downgrades the
                   credit rating of Supplier, the Guarantor, or the financial
                   institution that issued the letter of credit, as applicable,
                   then Supplier shall provide Buyer with written notice of such
                   change of circumstance within two (2) Business Days of any
                   such change. In the event such a downgrade also constitutes
                   an Event of Default pursuant to Section 17, the requirements
                   of this Section 3.2.1 are in addition to, and not in lieu of,
                   the requirements of Section 17.

4.   SUPPLY SERVICE

     4.1  Obligations of the Parties.
          --------------------------

          4.1.1    Supply Amount.  Supplier shall be required to provide the
                   -------------
                   Supply Amount in any Dispatch Hour. As provided in Section
                   5.1, Buyer shall make reasonable efforts to ensure that the
                   Supply Amount is no greater than necessary to satisfy Buyer's
                   TRR.

                   4.1.1.1    With the Buyer's prior consent, not to be
                              unreasonably withheld or delayed, Supplier shall
                              be entitled to generate or otherwise procure the
                              Supply Amount from sources other than the Asset
                              Bundle.

                   4.1.1.2    Supplier shall deliver the Supply Amount to Buyer
                              during the Dispatch Hour on a continuous

                                       12
<PAGE>

                              basis at the Point(s) of Delivery and shall
                              schedule the Supply Amount in accordance with the
                              applicable OATT.

                   4.1.1.3    The Buyer at its sole discretion shall designate
                              the allocation of the Supply Amount between Energy
                              and Ancillary Services in accordance with the
                              notification provisions of Section 5.

                              4.1.1.3.1  The Parties recognize that the Asset
                                         Bundle also is subject to the
                                         contractual and operating constraints
                                         set forth in Exhibit M.

          4.1.2    Minimum Annual Energy Take.  The Buyer shall accept a minimum
                   --------------------------
                   annual energy take during each Contract Year. The Minimum
                   Annual Energy Take shall be set forth on Exhibit A.

                   4.1.2.1    Buyer's Obligation to Take.  If Buyer is unwilling
                              --------------------------
                              to accept the Minimum Annual Energy Take for any
                              Contract Year, as may be adjusted pursuant to
                              Section 4.1.2.2, the difference (in MWh) between
                              the Supply Amount of Energy (including
                              consideration for Energy that would have been
                              taken but was unavailable due to Permitted
                              Deratings or Force Majeure, as well as the Total
                              Amount of Energy Replaced) and the Minimum Annual
                              Energy Take shall be billed at the Price Ceiling
                              of Energy less the Price Floor of Energy. An
                              example of the monthly determination of the amount
                              of Energy to be credited against the Minimum
                              Annual Energy Take is shown on Exhibit L.

                   4.1.2.2    Adjustments to Minimum Annual Energy Take.  Buyer
                              -----------------------------------------
                              shall have the right to reduce the Minimum Annual
                              Energy Take if the number of customers taking
                              electric service from Buyer falls below the number
                              of customers on December 31, 2000./1/1/
                              Adjustments will be applicable, on a pro rata
                              basis, on the first (1/st/) day of the month
                              immediately following Supplier's

__________________
/1/ If the retail markets are opened to competition prior to December 31, 2000,
the date immediately preceding the date on which the markets are opened will be
substituted for December 31, 2000.

                                       13
<PAGE>

                              receipt of Buyer's notice of adjustment. Buyer
                              shall provide supporting data in reasonable detail
                              to support its calculations. An example of the
                              calculation of a revised Minimum Annual Energy
                              Take is shown on Exhibit K.

          4.1.3    Supplier Rights to Output.  Supplier may sell to others any
                   -------------------------
                   portion of the Asset Bundle Capacity in excess of the Supply
                   Amount.

          4.1.4    Point(s) of Delivery.  Supplier shall deliver, and Buyer
                   --------------------
                   shall take delivery of, the Supply Amount of Energy at the
                   Point(s) of Delivery. Subject to Section 4.1.5.2, Supplier
                   shall be responsible for all costs associated with delivery
                   of the Supply Amount of Energy to the Point(s) of Delivery.

          4.1.5    Alternative Points of Delivery.  For any Dispatch Hour,
                   ------------------------------
                   either Party may designate one or more alternative Points of
                   Delivery, subject to the other Party's prior approval and
                   consistent with the OATT, such approval not to be
                   unreasonably withheld or delayed.

                   4.1.5.1    If Supplier has designated an alternative Point of
                              Delivery, Supplier shall be responsible for all
                              costs of delivery to such alternative Point of
                              Delivery.

                   4.1.5.2    If Buyer has designated an alternative Point of
                              Delivery, Buyer shall be responsible for all costs
                              of delivery to such alternative Point of Delivery.

          4.1.6    Fuel.  Buyer shall have no responsibility for any fuel
                   ----
                   procurement or fuel transportation costs or activities
                   associated with the Asset Bundle during the term of this
                   Agreement.

          4.1.7    Resale.  Except as provided in the next sentence, the Supply
                   ------
                   Amount may be resold by Buyer only as necessary to satisfy
                   Buyer's TRR. If, after submitting the request of the Supply
                   Amount pursuant to Section 5.1, the Buyer determines that the
                   scheduled Supply Amount, together with purchases scheduled
                   under Buyer's other Transitional Power Purchase Agreements,
                   exceeds Buyer's most-current projected TRR, then the Buyer
                   also shall resell at wholesale that amount of Energy in
                   excess of Buyer's actual TRR as necessary to balance its load
                   and resources.

          4.1.8    Right to Review.  Buyer and Supplier each shall have the
                   ---------------
                   right to review during normal business hours the relevant

                                       14
<PAGE>

                   books and records of the other Party to confirm the accuracy
                   of such as it pertains to transactions under this Agreement.
                   The review shall be consistent with standard business
                   practices and shall follow reasonable notice to the other
                   Party. Reasonable notice for a review of the previous month's
                   records shall be at least a twenty-four (24) hour period from
                   a Business Day to a subsequent Business Day. If a review is
                   requested of other than the previous month's records, then
                   notice of that request shall be provided with a minimum of
                   seven (7) calendar days written notice by the requesting
                   Party. The notice shall specify the period to be covered by
                   the review. The Party providing records can make reasonable
                   requests that the receiving Party keep the records
                   confidential, and the receiving Party shall take reasonable
                   steps to accommodate such requests.

     4.2  Liquidated Damages.
          ------------------

          4.2.1    If the Delivered Amount of Energy is less than the Supply
                   Amount of Energy in any Dispatch Hour during a month, and
                   Replacement Costs computed in respect of such month are
                   greater than zero, then Supplier shall reimburse Buyer for
                   such Replacement Costs. If Supplier's schedule of Ancillary
                   Services is less than the Supply Amount of Ancillary Services
                   in any Dispatch Hour during a month, Supplier shall reimburse
                   Buyer for such Replacement Costs for the difference between
                   Supplier's schedule and the Supply Amount of Ancillary
                   Services. An example of the methodology used to calculate
                   Replacement Costs is provided in Exhibit D.

          4.2.2    Supplier also shall be responsible for any costs incurred by
                   Buyer associated with Supplier's violation of reliability
                   criteria (including but not limited to imbalance costs or
                   penalties), due to a deviation between the Supply Amount and
                   Delivered Amount.

          4.2.3    The Parties recognize and agree that the payment of such
                   amounts by Supplier pursuant to this Section 4.2 is an
                   appropriate remedy in the event of such a failure and that
                   any such payment does not constitute a forfeiture or penalty
                   of any kind, but rather constitutes actual costs to Buyer
                   under the terms of this Agreement.

     4.3  Supplier Operating Representative.  Supplier shall provide and
          ---------------------------------
          maintain a twenty-four (24) hour seven (7) day per week communication
          link with Buyer's control center and with Buyer's schedulers.
          Supplier's Operating Representatives shall be available to address and

                                       15
<PAGE>

          make decisions on all operational matters under this Agreement on a
          twenty-four (24) hour seven (7) day per week basis.

5.   NOTIFICATION

     5.1  Scheduling Notification. Buyer shall provide Supplier with a request
          -----------------------
          of the Supply Amount no later than twenty-four (24) hours before day-
          ahead bids must be submitted to the CALPX. Buyer shall make reasonable
          efforts to ensure that the day-ahead request of the Supply Amount is
          no greater than that amount then projected to be necessary to satisfy
          Buyer's TRR. In addition, for each supply amount request, the change
          in the Supply Amount from one (1) hour to the next hour shall be no
          greater than the ramping capability of the units within the Asset
          Bundle as shown in Exhibit A and the minimum load and the number of
          daily start-ups shall not exceed the amount shown in Exhibit M.

     5.2  Availability Notification.
          -------------------------

          5.2.1   No later than 5:00 a.m. (Pacific Time) of each day, Supplier
                  shall deliver to Buyer an Availability Notice in the form set
                  forth in Exhibit G.

          5.2.2   Availability Notices shall provide, for the ninety-six (96)
                  hour period starting at 6:00 a.m. (Pacific Time) that day,
                  Supplier's hourly projection of the unavailability or derating
                  ("Derating") of the Asset Bundle compared to the Asset Bundle
                  Capacity figures stated for each unit in Exhibit A. Each
                  Availability Notice also shall contain, as applicable:

                  (a)   the units which are subject to a Derating;
                  (b)   the magnitude of the Derating;
                  (c)   the hours during which the Derating is expected to
                        apply;
                  (d)   the cause of the Derating;
                  (e)   the extent, if any, to which the Derating is
                        attributable to
                        a Permitted Derating;
                  (f)   the projected Asset Bundle Capacity for each unit during
                        the period covered by the Availability Notice, pursuant
                        to Section 5.2.4 below; and
                  (g)   in the first Availability Notice to be provided for each
                        calendar month, the current amount of water stored in
                        the Asset Bundle treated water storage tank.

          5.2.3   If and to the extent a Derating is the result of one or more
                  of the following causes, it shall be a Permitted Derating:

                  (a)   approved planned outages pursuant to Section 21;

                                       16
<PAGE>

                  (b)   response to an Emergency Condition as described in
                        Section 20;
                  (c)   subject to the limitations expressed in Section 12.5, a
                        Force Majeure event; or
                  (d)   unavailability of water supply to Supplier for use at
                        the Asset Bundle for the operation of the combustion
                        turbine evaporator cooler and, in the event Asset Bundle
                        must be operated using distillate oil for reasons only
                        involving the physical inability to have natural gas
                        delivered to the Asset Bundle, also for use in the
                        operation of the Asset Bundle's combustion turbine
                        emissions control water injectors;
                        (i)   provided that, a Permitted Derating due to such
                              unavailability of water supply shall (A) only be
                              allowed to the extent that inoperation of such
                              evaporator cooler, and if applicable in the
                              operation of such emissions control water
                              injectors, would actually reduce Asset Bundle
                              Capacity during the affected time period and (B)
                              not be due to Supplier's (x) failure to maintain a
                              permit to treat and use 30 acre feet of water,
                              treated water or effluent per year, or (y) sales
                              to parties other than Buyer, provided that (1)
                              Supplier has received its necessary water
                              entitlements pursuant to the Water Supply
                              Agreement (as defined in the Asset Sale
                              Agreement), or deliveries pursuant to Section
                              5.2.3(d)(ii)(B), (2) Supplier has not terminated
                              such Water Supply Agreement and is not in, or
                              alleged to be in, breach or default of such Water
                              Supply Agreement, and (3) Supplier has not
                              otherwise arranged to procure other water
                              resources for this facility.

                        (ii)  provided further that,
                              (A)  Supplier shall maintain the amount of water
                                   in the Asset Bundle treated water storage
                                   tank consistent with Good Utility Practice,
                              (B)  Buyer, in its sole discretion, shall have the
                                   option to augment such water supply with
                                   quality and price no less favorable to
                                   Supplier than that provided for in the Water
                                   Supply Agreement between Supplier and the
                                   owner of the Clark Asset Bundle (as defined
                                   in the Asset Sale Agreement) to allow for the
                                   operation of such

                                       17
<PAGE>

                                   evaporative cooler, and if applicable the
                                   operation of such emmissions contol water
                                   injectors, to increase the otherwise then-
                                   available Asset Bundle Capacity, and
                              (C)  notwithstanding subsection 5.2.3(d)(ii)(B)
                                   above, Supplier shall pay for the costs of
                                   augmenting such water supply to the extent
                                   that the lack of water supply is caused by
                                   Supplier's (x) sales to parties other than
                                   Buyer or (y) failure to maintain either the
                                   amount of water in the Asset Bundle treated
                                   water storage tank or the failure to maintain
                                   a permit to receive and use water, treated
                                   water or effluent, each in accordance with
                                   this section.

          5.2.4  In respect of any Dispatch Hour, the Asset Bundle Capacity of
                 each unit shall be the Asset Bundle Capacity figure stated in
                 Exhibit A minus any Permitted Derating applicable during such
                 hour.

          5.2.5  Neither the Asset Bundle Capacity nor the Supply Amount shall
                 be reduced by Deratings which are not Permitted Deratings.
                 Supplier shall be responsible for all Replacement Costs,
                 pursuant to Section 4.2.1, caused by Deratings that are not
                 Permitted Deratings.

6.   PRICING OF ENERGY AND ANCILLARY SERVICES

     6.1  Overview.  The price of Energy paid by Buyer to Supplier shall be
          --------
          based upon a designated hourly market price, subject to monthly floor,
          monthly ceiling, and annual true-up provisions.  The Price Floor of
          Energy will ensure that Supplier will receive an average price for
          Energy for each month which is not less than the price stated in
          Exhibit B.  The Price Ceiling of Energy provision provides that the
          average price of Energy paid to Supplier each month and for each year
          shall not exceed the price stated in Exhibit B.

     6.2  Price of Energy.
          ---------------

          6.2.1  Market Price of Energy.  In respect of any Dispatch Hour, the
                 ----------------------
                 designated Market Price of Energy shall be the South of Path
                 15 ("SP 15") hourly market-clearing price in the day-ahead
                 market from the CALPX as published at the following Web Site
                 (or its successor web site)
                 http://www.calpx.com/prices/index_prices_dayahead_trading.html.
                 ---------------------------------------------------------------
                 Should this hourly market in the day-
                 ahead

                                       18
<PAGE>

                  market not exist for the entire term, the Parties shall agree
                  upon a similar market price index.

          6.2.2   Price Floor of Energy.  The Price Floor of Energy is stated in
                  ---------------------
                  Exhibit B and shall not change during the term of this
                  Agreement.

          6.2.3   Price Ceiling of Energy.  The Price Ceiling of Energy is
                  -----------------------
                  stated in Exhibit B and shall not change during the term of
                  this Agreement.

     6.3  Pricing of Ancillary Services. The price of the capacity component of
          ------------------------------
          Ancillary Services is stated in Exhibit B. The price of Ancillary
          Services shall not change during the term of the Agreement. Supplier
          shall make available to Buyer and Buyer shall offer to pass through
          the Energy portion of Ancillary Services with respect to the Supply
          Amount to the ISA, or Control Area Operator, at the Price Ceiling of
          Energy (plus expected direct transaction costs). The net proceeds
          shall be credited to the Supplier pursuant to Section 7.

     6.4  Price Revisions. The Parties waive any and all rights to seek to
          ---------------
          revise the provisions of this Agreement, including the prices stated,
          pursuant to Sections 205 and/or 206 of the Federal Power Act.

7.   INVOICING AND PAYMENTS

     7.1  Invoicing and Payment. On or before the tenth (10/th/) day of each
          ---------------------
          month, Supplier shall send to Buyer an invoice setting forth the
          Supply Amount, Delivered Amount, the Market Price of Energy pursuant
          to Section 6.2.1 for each Dispatch Hour in the previous month, any
          amount due in accordance with Section 7.13 and the total due from
          Buyer. The invoice shall be calculated based upon data available to
          Supplier and shall be in accordance with this Section 7 and Exhibit C.
          Buyer shall promptly notify Supplier if Buyer in good faith disputes
          any portion of the invoice, stating in reasonable detail the reason
          for the dispute.

     7.2  Monthly Invoice Calculation. On each monthly invoice, Supplier shall
          ---------------------------
          calculate the following amounts:

          7.2.1   The Delivered Amount in respect of each Dispatch Hour
                  multiplied by the corresponding Market Price of Energy
                  pursuant to Section 6.2.1, summed over the billing period;

          7.2.2   Sum of the Delivered Amounts in respect of all Dispatch Hours
                  of the billing period multiplied by the Price Ceiling of
                  Energy;

                                       19
<PAGE>

          7.2.3   Sum of the Delivered Amounts in respect of all Dispatch Hours
                  of the billing period multiplied by the Price Floor of Energy;

          7.2.4   For each Dispatch Hour of the billing period, the shortfall,
                  if any, between the Supply Amount and the Delivered Amount
                  (and in the case of Ancillary Services the shortfall between
                  the Supply Amount of Ancillary Services and Supplier's
                  schedule of Ancillary Services);

          7.2.5   The Supply Amount of Ancillary Services for each dispatch hour
                  multiplied by the price of Ancillary Services as stated in
                  Exhibit B; and

          7.2.6   The Delivered Amount of Energy related to Ancillary Services
                  for each dispatch hour multiplied by the Price Ceiling of
                  Energy as stated in Exhibit B.

          7.2.7   If applicable, any amount to be calculated in accordance with
                  Section 7.13.

     7.3  Supplier's Invoice. Supplier will invoice the lesser of the amounts
          ------------------
          calculated in Sections 7.2.1 and 7.2.2, provided that if the amount
          calculated in Section 7.2.1 is less than the amount calculated in
          Section 7.2.3, Supplier shall invoice Buyer the amount calculated in
          Section 7.2.3. Supplier shall also include in its invoice the amounts
          calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount
          exceeds the Supply Amount, Buyer shall not be obligated to pay for the
          excess amount. Buyer shall pay Supplier for the amounts invoiced
          pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or
          Control Area Operator. Examples of this monthly invoice calculation
          (and annual true-up process) are contained in Exhibit C.

     7.4  Buyer's Invoice. In the event any shortfall occurs pursuant to Section
          ---------------
          7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall
          within ten (10) Business Days of receipt of Supplier's invoice deliver
          to Supplier a Buyer's invoice detailing any Replacement Costs or other
          payment due. Buyer shall provide supporting data in reasonable detail
          to support its calculations of Replacement Costs. Supplier shall
          promptly notify Buyer if Supplier in good faith disputes any portion
          of the invoice, stating in reasonable detail the reason for the
          dispute. If the Buyer's invoice results in an amount due from Supplier
          to Buyer, Buyer may offset such amount from its payment of Supplier's
          corresponding invoice.

          Buyer shall have the right to adjust the invoices issued in accordance
          with this Section 7.4 if Buyer incurs Replacement Costs that were not

                                       20
<PAGE>

          known when earlier invoices were issued.  Adjusted invoices shall be
          issued within thirty (30) days of the date on which the additional
          Replacement Costs become known.  Buyer shall provide supporting data
          in reasonable detail to support its calculations of Replacement Costs.
          Supplier shall promptly notify Buyer if Supplier in good faith
          disputes any portion of the invoice, stating in reasonable detail the
          reason for the dispute.  If the Buyer's adjusted invoice results in an
          amount due from Supplier to Buyer, Buyer may offset such amount from
          its payment of Supplier's corresponding invoice.

     7.5  Annual True-Up Mechanism for Energy.
          -----------------------------------

          7.5.1   The annual true-up mechanism will provide adjustments among
                  the Parties with respect to each Contract Year in the
                  following scenarios:

                  (a)  If (i) the Price Ceiling of Energy multiplied by the
                       hourly Delivered Amount of Energy summed over the
                       Contract Year is less than or equal to (ii) the Market
                       Price of Energy for each hour pursuant to Section 6.2.1
                       multiplied by the Delivered Amount of Energy for each
                       hour during the Contract Year, Supplier shall subtract
                       (x) the amount invoiced by Supplier for Energy pursuant
                       to Section 7.3 summed of over the Contract Year from (y)
                       the Price Ceiling of Energy multiplied by the hourly
                       Delivered Amount of Energy summed over the Contract Year.
                       If the difference calculated in accordance with the
                       preceding sentence is greater than or equal to zero,
                       Buyer shall pay the difference to Supplier. If the
                       difference is less than zero, Supplier shall refund the
                       difference to Buyer.

                  (b)  If (i) the Price Ceiling of Energy multiplied by the
                       hourly Delivered Amount of Energy summed over the
                       Contract Year is greater than or equal to (ii) the Market
                       Price of Energy for each hour pursuant to Section 6.2.1
                       multiplied by the Delivered Amount of Energy for each
                       hour during the Contract Year, Supplier shall subtract
                       (x) the amount invoiced by Supplier for Energy pursuant
                       to Section 7.3 summed of over the Contract Year from (y)
                       the Market Price of Energy multiplied by the hourly
                       Delivered Amount of Energy summed over the Contract Year.
                       If the difference calculated in accordance with the
                       preceding sentence is greater than or equal to zero,
                       Buyer shall pay the difference to Supplier. If the
                       difference is less than zero, Supplier shall refund the
                       difference to Buyer.

                                       21
<PAGE>

                  (c)  If Buyer incurred Replacement Costs for energy during the
                       Contract Year, Supplier shall multiply the Total Amount
                       of Energy Replaced during the Contract Year by the
                       Average Cost of Delivered Energy after true-up as
                       determined in accordance with Section 7.5.1 (a) or 7.5.1
                       (b). If the amount so obtained is greater than the sum of
                       the monthly Gross Replacement Costs of Energy from
                       Buyer's Invoices for the Contract Year, the Adjusted
                       Replacement Cost of Energy for the Contract Year shall be
                       zero. If the amount so obtained is less than the sum of
                       the monthly Gross Replacement Costs of Energy from
                       Buyer's Invoices for the Contract Year, the Adjusted
                       Replacement Cost of Energy for the Contract Year shall be
                       the sum of the monthly Gross Replacement Costs of Energy
                       less the amount obtained in accordance with the first
                       sentence of this Section 7.5.1(c).

                       If the Adjusted Replacement Cost of Energy is greater
                       than the sum of the monthly Invoiced Replacement Costs of
                       Energy from Buyer's Invoices for the Contract Year,
                       Supplier shall pay the difference to Buyer. If the sum of
                       the monthly Invoiced Replacement costs of Energy is
                       greater than the Adjusted Replacement Cost of Energy,
                       Buyer shall pay the difference to Seller.

          7.5.2   True-up adjustments will be calculated by Supplier within
                  twenty (20) days after each Contract Year. Examples of the
                  true-up calculations and invoice form are set forth in Exhibit
                  E. Interest shall be calculated pursuant to 18 CFR Section
                  35.19a and shall be included in the true-up invoice. Invoices
                  for true-up adjustments shall be submitted by Supplier within
                  thirty (30) days after the end of the Contract Year. Payments
                  for such invoices shall be due from Buyer thirty (30) days
                  from receipt of the true-up invoice.

     7.6  Invoice Disagreements. Should there be a good faith dispute over any
          ---------------------
          invoice, the Parties shall promptly seek resolution pursuant to
          Section 13. Pending resolution of the invoice dispute, payment shall
          be made or offsets or credits taken, as applicable, based upon the
          undisputed portion of the invoice.

     7.7  Adjustments. Upon resolution of the dispute, the prevailing Party
          -----------
          shall be entitled to receive the disputed amount, as finally
          determined to be payable along with interest (calculated pursuant to
          18 C.F.R. (S) 35.19a through the date of payment. No invoice (or
          payment covered thereby) shall be subject to adjustment unless notice
          or

                                       22
<PAGE>

          request for adjustment is given within one (1) year of the date
          payment thereunder was due.

     7.8  Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer shall
          -----------------
          remit all amounts due by wire or electronic fund transfer, pursuant to
          Supplier's invoice instructions, no later than thirty (30) days after
          receipt of the invoice.

     7.9  Overdue Payments.  Overdue payments shall bear interest from and
          ----------------
          including, the due date to the date of payment on the unpaid portion
          calculated pursuant to 18 C.F.R. (S) 35.19a.

     7.10 Buyer Right to Offset.  Buyer shall have the right to offset any
          ---------------------
          amounts Supplier owes to Buyer, including Replacement Costs (except
          for such amounts disputed in good faith by Supplier), against the
          amounts owed by Buyer to Supplier.

     7.11 Taxes. Each Party shall pay ad valorem and other taxes attributed to
          -----
          its facilities and services provided. Supplier shall not include any
          taxes of any kind in its invoices to Buyer. The prices of Energy and
          Ancillary Services shall not change during the term of this Agreement
          as a result of any changes in local, state or federal taxes, fees or
          levies.

     7.12 Late Invoices. If either Party submits an invoice outside of the time
          -------------
          deadlines set forth herein, that Party shall not forfeit its rights to
          collect the amounts due thereunder, provided that such invoice is no
          more than six (6) months late, and provided that changes to invoices
          remain subject to the deadline in Section 7.7

     7.13 Termination Prior to March 1, 2003. Notwithstanding any other
          ----------------------------------
          provision herein, in the event that this Agreement is terminated
          before March 1, 2003 and as a result of such termination Buyer is
          entitled to a payment in accordance with Section 2.3.1, Supplier shall
          include an amount calculated in accordance with Section 2.3.1 and
          Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice
          submitted to Buyer following such termination.

8.   REGULATORY APPROVALS

     8.1  This Agreement will be filed with the FERC and any other appropriate
          regulatory agencies by the appropriate Party as may be required.

9.   COMPLIANCE

                                       23
<PAGE>

     9.1  Each Party shall comply with all relevant Laws and shall, at its sole
          expense, maintain in full force and effect all relevant permits,
          authorizations, licenses, and other authorizations material to the
          maintenance of facilities and the performance of obligations under
          this Agreement.

     9.2  Each Party and its representatives shall comply with all relevant
          requirements of any authorized Control Area Operator, ISA, and/or EDU
          to ensure the safety of its employees and the public, and to ensure
          electric system reliability and integrity, material to the performance
          of this Agreement.

     9.3  Buyer and Supplier shall perform or cause to be performed, their
          obligations under this Agreement in all material respects in
          accordance with Good Utility Practices.

10.  INDEMNIFICATION

     10.1 To the fullest extent permitted by law, a Party to this Agreement
          ("the Indemnifying Party") shall indemnify, defend and hold harmless
          the other Party, its parent, affiliates, and successors and agents
          (each an "Indemnified Party") from and against any and all claims,
          demands, suits, obligations, payments, liabilities, costs, judgments,
          damages, losses or expenses asserted by third parties against an
          Indemnified Party and arising out of, relating to, or resulting from
          the Indemnifying Party's breach of, or the negligent performance of
          its obligations under this Agreement.

          10.1.1  Such indemnity shall also extend to actual courts costs,
                  attorneys' fees, expenses and other liabilities incurred in
                  the defense of any claim, action or proceeding, including
                  negotiation, settlement, defense and appeals, to which this
                  indemnification obligation applies. In furtherance of the
                  foregoing indemnification and not by way of limitation
                  thereof, the Indemnifying Party hereby waives any defense it
                  otherwise might have against the Indemnified Party under
                  applicable workers' compensation laws.

          10.1.2  In claims against any Indemnified Party by an agent of the
                  Indemnifying Party, or anyone directly or indirectly employed
                  by them or anyone for whose acts they may be liable, the
                  indemnification obligation under this Section 10 shall not be
                  limited by a limitation on amount or type of damages,
                  compensation or benefits payable by or for the Indemnifying
                  Party or a subcontractor under workers' or workmen's
                  compensation acts, disability benefit acts or other employee
                  benefit acts.

                                       24
<PAGE>

          10.1.3  Such indemnity shall also extend to all costs and expenses
                  incurred by the Indemnified Party in any action or proceeding
                  to enforce the provisions of this Agreement, but only if and
                  to the extent the Indemnified Party prevails in such action or
                  proceeding.

     10.2 No Negation of Existing Indemnities; Survival. Each Party's indemnity
          ---------------------------------------------
          obligations hereunder shall not be construed to negate, abridge or
          reduce other rights or obligations or indemnity which would otherwise
          exist at law or equity. The obligations contained herein shall survive
          any termination, cancellation, or suspension of this Agreement to the
          extent that any third party claim is commenced during the applicable
          statute of limitations period.

     10.3 Indemnification Procedures.
          --------------------------

          10.3.1  Any Party seeking indemnification under this Agreement shall
                  give the other Party notice of such claim promptly but in any
                  event on or before thirty (30) days after the Party's actual
                  knowledge of such claim or action. Such notice shall describe
                  the claim in reasonable detail, and shall indicate the amount
                  (estimated if necessary) of the claim that has been, or may be
                  sustained by, said Party. To the extent that the other Party
                  will have been actually and materially prejudiced as a result
                  of the failure to provide such notice, such notice will be a
                  condition precedent to any liability of the other Party under
                  the provisions for indemnification contained in this
                  Agreement.

          10.3.2  In any action or proceeding brought against an Indemnified
                  Party by reason of any claim indemnifiable hereunder, the
                  Indemnifying Party may, at its sole option, elect to assume
                  the defense at the Indemnifying Party's expense, and shall
                  have the right to control the defense thereof and to determine
                  the settlement or compromise of any such action or proceeding.
                  Notwithstanding the foregoing, an Indemnified Party shall in
                  all cases be entitled to control its defense in any action if
                  it:

                  (i)    may result in injunctions or other equitable remedies
                         in respect of the Indemnified Party which would affect
                         its business or operations in any materially adverse
                         manner;

                  (ii)   may result in material liabilities which may not be
                         fully indemnified hereunder; or

                                       25
<PAGE>

                  (iii)  may have a significant adverse impact on the business
                         or the financial condition of the Indemnified Party
                         (including a material adverse effect on the tax
                         liabilities, earnings or ongoing business relationships
                         of the Indemnified Party) even if the Indemnifying
                         Party pays all indemnification amounts in full.

          10.3.3  Subject to Section 10.3.2, neither Party may settle or
                  compromise any claim for which indemnification is sought under
                  this Agreement without the prior consent of the other Party;
                  provided, however, said consent shall not be unreasonably
                  withheld or delayed.

11.  LIMITATION OF LIABILITY

     11.1 Responsibility for Damages: Except as otherwise provided herein or to
          --------------------------
          the extent of the other Party's negligence or willful misconduct, each
          Party shall be responsible for all physical damage to or destruction
          of the property, equipment and/or facilities owned by it and its
          affiliates and any physical injury or death to natural Persons
          resulting therefrom, regardless of who brings the claim and regardless
          of who caused the damage, and shall not seek recovery or reimbursement
          from the other Party for such damage; provided, that in any such case
          the Parties will exercise Due Diligence to remove the cause of any
          disability at the earliest practicable time.

     11.2 No Consequential Damages: To the fullest extent permitted by law and
          ------------------------
          notwithstanding other provisions of this Agreement, in no event shall
          a Party, or any of its Agents, be liable to the other Party, whether
          in contract, warranty, tort, negligence, strict liability, or
          otherwise, for special, indirect, incidental, multiple, consequential
          (including but not limited to lost profits or revenues and lost
          business opportunities), or punitive damages related to or resulting
          from performance or nonperformance of this Agreement or any activity
          associated with or arising out of this Agreement. For purposes of
          clarification, Replacement Costs shall not be considered consequential
          or incidental damages under this Section 11.2. In addition, this
          limitation on liability shall not apply with respect to claims
          pursuant to Section 10 hereof.

     11.3 Survival: The provisions of this Section 11 shall survive any
          --------
          termination, cancellation, or suspension of this Agreement.

12.  FORCE MAJEURE

     12.1 An event of "Force Majeure" shall be defined as any interruption or
          failure of service or deficiency in the quality or quantity of service
          or any other failure to perform any of its obligations hereunder to
          the extent such failure occurs without fault or negligence on the part
          of

                                       26
<PAGE>

          that Party and is caused by factors beyond that Party's reasonable
          control, which by the exercise of reasonable diligence that Party is
          unable to prevent, avoid, mitigate or overcome, including:

          (i)    acts of God or the public enemy, such as storms, flood,
                 lightning, and earthquakes,

          (ii)   failure, threat of failure, or unscheduled withdrawal of
                 facilities from operation for maintenance or repair, and
                 including unscheduled transmission and distribution outages,

          (iii)  sabotage of facilities and equipment,

          (iv)   civil disturbance,

          (v)    strike or labor dispute,

          (vi)   action or inaction of a court or public authority, or

          (vii)  any other cause of similar nature beyond the reasonable control
                 of that Party.

     12.2 Economic hardship of either Party shall not constitute Force Majeure
          under this Agreement. Notwithstanding this, if Buyer suffers an event
          of Force Majeure it shall be relieved of its obligation to take
          delivery of, or otherwise pay for, Energy and Ancillary Services under
          this Agreement for the duration of the event of Force Majeure. In
          addition, if Buyer is unable to have Energy and Ancillary Services
          delivered from the Point(s) of Delivery to its service territory due
          to transmission outages, that shall be considered a Force Majeure
          event and shall relieve Buyer of performance for the extent of the
          event.

     12.3 In the event of a Force Majeure, neither Party shall be considered in
          default under this Agreement or responsible to the other Party in
          tort, strict liability, contract or other legal theory for damages of
          any description, and affected performance obligations shall be
          extended by a period equal to the term of the resultant delay, but in
          no event shall exceed the term of the Agreement, provided that the
          Party relying on a claim of Force Majeure:

          (i)    provides prompt written notice of such Force Majeure event to
                 the other Party, giving an estimate of its expected duration
                 and the probable impact on the performance of its obligations
                 hereunder;

          (ii)   exercises all reasonable efforts to continue to perform its
                 obligations under this Agreement;

                                       27
<PAGE>

          (iii)  expeditiously takes action to correct or cure the event or
                 condition excusing performance so that the suspension of
                 performance is no greater in scope and no longer in duration
                 than is dictated by the problem; provided, however, that
                 settlement of strikes or other labor disputes will be
                 completely within the sole discretion of the Party affected by
                 such strike or labor dispute;

          (iv)   exercises all reasonable efforts to mitigate or limit damages
                 to the other Party; and

          (v)    provides prompt notice to the other Party of the cessation of
                 the event or condition giving rise to its excuse from
                 performance.

     12.4 Notwithstanding the above provisions, a Force Majeure event shall
          excuse Supplier from its obligation to deliver the Supply Amount
          pursuant to Section 4 of this Agreement only for the first twenty-four
          (24) hours of the Force Majeure event, provided that the total amount
          of energy excused in accordance with this Section 12.4 during any
          Contract Year shall not exceed the Limit on Excused Energy set forth
          in Exhibit A. After such twenty-four (24) hour period, Supplier must
          either deliver the Supply Amount at the Point(s) of Delivery or pay
          liquidated damages pursuant to Section 4.2 of this Agreement.

     12.5 If Supplier has notified Buyer of an event of Force Majeure, and if
          Supplier so requests, Buyer will attempt to replace the Supply Amount
          that is not excused in accordance with Section 12.4 with Energy or
          Ancillary Services from another Asset Bundle. However, Buyer's
          inability to acquire such replacement Energy or Ancillary Services
          shall not excuse Supplier from Supplier's obligation to deliver the
          Supply Amount not otherwise excused in accordance with Section 12.4

13.  DISPUTES

     13.1 Any action, claim or dispute which either Party may have against the
          other arising out of or relating to this Agreement or the transactions
          contemplated hereunder, or the breach, termination or validity thereof
          (any such claim or dispute, a "Dispute") shall be submitted in writing
          to the other Party. The written submission of any Dispute shall
          include a concise statement of the question or issue in dispute
          together with a statement listing the relevant facts and documentation
          that support the claim.

     13.2 The Parties agree to cooperate in good faith to expedite the
          resolution of any Dispute. Pending resolution of a Dispute, the
          Parties shall

                                       28
<PAGE>

          proceed diligently with the performance of their obligations under
          this Agreement.

     13.3 The Parties shall first attempt in good faith to resolve any Dispute
          through informal negotiations by the Contract Representatives. In the
          event that the Contract Representatives are unable to satisfactorily
          resolve the Dispute within thirty (30) days from the receipt of notice
          of the Dispute, either Party may by written notice to the other Party
          refer the Dispute to its respective senior management for resolution
          as promptly as practicable. If the Parties' senior management are
          unable to resolve the Dispute within forty-five (45) days from the
          date of such referral, thereafter the Parties may agree in writing to
          extend the time period of such senior management negotiations. In the
          event the Parties' senior management do not resolve the dispute within
          the prescribed or extended time period, either Party may initiate
          arbitration through the serving and filing of a demand for arbitration
          and the Parties expressly agree that arbitration in accordance with
          this Section 13 shall be the exclusive means to further resolve any
          Dispute and hereby irrevocably waive their right to a jury trial with
          respect to any Dispute, provided that at any time:

          13.3.1    A request made by a Party for provisional remedies
                    requesting preservation of the Parties' respective rights
                    and obligations under the Agreement may be resolved by a
                    court of law located in the County of the principal place of
                    business of Buyer.

          13.3.2    Nothing in this Agreement shall preclude, or be construed to
                    preclude, any Party from filing a petition or complaint with
                    the FERC or PUCN with respect to any arbitrable Dispute over
                    which said agency has jurisdiction. In such case, the other
                    Party may request the FERC or PUCN, as applicable, to reject
                    or to waive jurisdiction. If jurisdiction is rejected or
                    waived with respect to all or a portion of the Dispute, the
                    portion of the Dispute not so accepted by the FERC or PUCN,
                    as applicable, shall be resolved through arbitration in
                    accordance with this Agreement. To the extent that the FERC
                    or PUCN, as applicable, asserts or accepts jurisdiction over
                    the Dispute, the decision, finding of fact or order of FERC
                    shall be final and binding, subject to judicial review under
                    the Federal Power Act or Nevada Revised Statutes and subject
                    to the provisions of Section 2.2.2. Any arbitration
                    proceedings that may have commenced with respect to the
                    Dispute prior to the assertion or acceptance of jurisdiction
                    by the FERC or PUCN, as applicable, shall be terminated to
                    the extent the FERC or PUCN accepts or asserts jurisdiction
                    over such Dispute.

                                       29
<PAGE>

     13.4 Unless otherwise agreed by the Parties, any arbitration initiated
          under this Agreement shall be conducted in accordance with the
          following:

          13.4.1    Arbitrations shall be held within the County of the
                    principal place of business of Buyer.

          13.4.2    Except as otherwise modified herein, the arbitration shall
                    be conducted in accordance with the "Commercial Arbitration
                    Rules" of the American Arbitration Association ("AAA") then
                    in effect.

          13.4.3    Arbitration shall be conducted by one neutral arbitrator who
                    shall be selected pursuant to the AAA rules and the
                    following:

                    13.4.3.1  The Parties agree that the list of potential
                              arbitrators provided by the AAA shall, if
                              available, contain twenty (20) candidates, and at
                              least fifty percent (50%) of the candidates shall
                              be members of the AAA National Energy Panel.

                    13.4.3.2  The Parties also agree that each shall be allowed
                              to strike the names of five candidates before
                              ranking the remaining candidates and returning the
                              list to the AAA in accordance with the Commercial
                              Arbitration Rules. If the Parties are unable to
                              agree on an arbitrator, such arbitrator shall be
                              appointed by the AAA.

                    13.4.3.3  The arbitrator shall not have any current or past
                              substantial business, financial, or personal
                              relationships with either Party (or their
                              Affiliates) and shall not be a vendor, supplier,
                              customer, employee, consultant, or competitor to
                              either of the Parties or their Affiliates.

                    13.4.3.4  The arbitrator shall be authorized only to
                              interpret and apply the provisions of this
                              Agreement or any related agreements entered into
                              under this Agreement and shall have no power to
                              modify or change any provision of this Agreement.
                              The arbitrator shall have no authority to award
                              punitive or multiple damages or any damages
                              inconsistent with this Agreement. The arbitrator
                              shall within thirty (30) days of the conclusion of
                              the hearing, unless such time is extended by
                              agreement of the Parties, notify the Parties in
                              writing of his or her decision, stating his or her

                                       30
<PAGE>

                              reasons for such decision and separately listing
                              his or her findings of fact and conclusions of
                              law. Judgment on the award may be entered in any
                              court having jurisdiction.

     13.5 The Parties shall proceed with the arbitration expeditiously, and the
          arbitration shall be concluded within five (5) months of the filing of
          the demand for arbitration pursuant to this Section 13 in order that
          the decision may be rendered within six (6) months of such filing,
          unless the arbitrator extends such time at the request of a Party upon
          a showing of good cause or upon agreement of the Parties.

     13.6 Any arbitration proceedings, decision or award rendered hereunder and
          the validity, effect and interpretation of any arbitration agreement
          shall be governed by the Federal Arbitration Act of the United States,
          9 U.S.C. (S)(S) 1 et seq.

     13.7 The decision of the arbitrator shall be final and binding on both
          Parties and may be enforced in any court having jurisdiction over the
          Party against which enforcement is sought.

     13.8 The fees and expenses of the arbitrator shall be shared by the Parties
          equally, unless the decision of the arbitrator shall specify some
          other apportionment of such fees and expenses. All other expenses and
          costs of the arbitration shall be borne by the Party incurring the
          same.

14.  NATURE OF OBLIGATIONS

     14.1 Except where specifically stated in this Agreement to be otherwise,
          the duties, obligations, and liabilities of the Parties shall be
          several, not joint or collective. The provisions of this Agreement
          shall not be construed to create an association, trust, partnership,
          or joint venture; to impose a trust or partnership duty, obligation,
          or liability or agency relationship on or with regard to either Party.

     14.2 Nothing in this Agreement nor any action taken hereunder shall be
          construed to create any duty, liability, or standard of care to any
          person not a Party to this Agreement. Each Party shall be individually
          and severally liable for its own obligations under this Agreement.

     14.3 By this Agreement, neither Party dedicates any part of its facilities
          or the service provided under this Agreement to the public.

15.  SUCCESSORS AND ASSIGNS

     15.1 This Agreement may be assigned, without express written consent of the
          other Party, as follows:

                                       31
<PAGE>

          15.1.1    Buyer may assign this Agreement or assign or delegate its
                    rights and obligations under this Agreement, in whole or in
                    part, if such assignment is made to an affiliate, parent,
                    subsidiary, successor or any party, provided that such
                    assignee operates all or a portion of the PLR or if such
                    assignment is required by Law or applicable regulations.

     15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge
          or otherwise dispose of its rights and interests hereunder to a
          trustee, lending institution, or any Person for the purposes of
          financing or refinancing the Asset Bundle, including upon or pursuant
          to the exercise of remedies under such financing or refinancing, or by
          way of assignments, transfers, conveyances of dispositions in lieu
          thereof; provided, however, that no such assignment or disposition
          shall relieve or in any way discharge Supplier or such permitted
          assignee from the performance of its duties and obligations under this
          Agreement. Buyer agrees to execute and deliver such documents as may
          be reasonably necessary to accomplish any such assignment, transfer,
          conveyance, pledge or disposition of rights hereunder for purposes of
          the financing or refinancing of the Asset Bundle, so long as Buyer's
          rights under this Agreement are not thereby materially altered,
          amended, diminished or otherwise impaired.

     15.3 Either Party may, without the consent of the other Party, assign this
          Agreement to a successor to all or substantially all of the assets of
          such Party by way of merger, consolidation, sale or otherwise,
          provided such successor assumes and becomes liable for all of such
          Party's duties and obligations hereunder including Section 3 hereof.

     15.4 Except as stated above, neither this Agreement nor any of the rights,
          interests, or obligations hereunder shall be assigned by either Party,
          including by operation of law, without the prior written consent of
          the other Party, said consent not to be unreasonably withheld. Any
          assignment of this Agreement in violation of the foregoing shall be,
          at the option of the non-assigning Party, void.

     15.5 Except as set forth above, no assignment or transfer of rights or
          obligations under this Agreement by a Party shall relieve said Party
          from full liability and financial responsibility for the performance
          thereof after any such transfer or assignment unless and until the
          transferee or assignee shall agree in writing to assume the
          obligations and duties of said Party under this Agreement and the
          other Party has consented in writing to such assumption; said consent
          not to be unreasonably withheld.

                                       32
<PAGE>

     15.6 This Agreement and all of the provisions hereof are binding upon, and
          inure to the benefit of, the Parties and their respective successors
          and permitted assigns.

16.  REPRESENTATIONS

     16.1 Representations of the Parties. The Parties represent and warrant each
          ------------------------------
          to the other as follows:

          16.1.1    Incorporation.  Buyer is a corporation duly incorporated,
                    -------------
                    validly existing and in good standing under the laws of the
                    State of Nevada. Supplier is a corporation duly organized,
                    validly existing and in good standing under the laws of the
                    State of Arizona. Both Buyer and Supplier have all requisite
                    corporate power and authority to own, lease and operate
                    their material assets and properties and to carry on their
                    business as now being conducted.

          16.1.2    Authority. The Party has full corporate power and authority
                    ---------
                    to execute and deliver this Agreement and, subject to the
                    procurement of applicable regulatory approvals, to carry out
                    the actions required of it by this Agreement.  The execution
                    and delivery of this Agreement and the transactions
                    contemplated hereby have been duly and validly authorized by
                    all necessary corporate action required on the part of the
                    Party.  The Agreement has been duly and validly executed and
                    delivered by the Party and, assuming that it is duly and
                    validly executed and delivered by the other Party,
                    constitutes a legal, valid and binding agreement of the
                    Party.

          16.1.3    Compliance With Law.  The Party represents and warrants
                    -------------------
                    that it is not in violation of any applicable Law, or
                    applicable regulation, which violation could reasonably be
                    expected to materially adversely affect the other Party's
                    performance of its obligations under this Agreement. The
                    Party represents and warrants that it will comply with all
                    Laws, and regulations applicable to its compliance with this
                    Agreement, non-compliance with which would reasonably be
                    expected to materially adversely affect either Party's
                    performance of its obligations under this Agreement.

          16.1.4    Representations of Both Parties.  The representations in
                    -------------------------------
                    this Section 16 shall continue in full force and effect for
                    the term of this Agreement.

17.  DEFAULT AND REMEDIES

                                       33
<PAGE>

     17.1 An Event of Default hereunder shall be deemed to have occurred upon a
          Party's (Defaulting Party) failure to comply with any material
          obligation imposed upon it by this Agreement. Examples of an Event of
          Default include, but are not limited to the following:

          (i)    Failure to make any payments due under this Agreement;

          (ii)   Failure to deliver the Supply Amount for a period of five (5)
                 consecutive days;

          (iii)  Failure to follow the directions of a Control Area Operator,
                 ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto
                 where following such directions is required hereunder;

          (iv)   Supplier not being in compliance with Section 3; and

          (v)    Failure of the Guarantor to be in compliance with the terms of
                 the Guarantee delivered under Section 3.1.2.

     17.2 An Event of Default shall be excused:

          17.2.1    In the event such Event of Default was caused by Force
                    Majeure provided that the Party claiming a Force Majeure
                    complies with the requirements of Section 12; and

          17.2.2    In the event such Event of Default was caused by
                    transmission and distribution outages or disruptions.

     17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall
          be entitled to provide written notice (or verbal notice in case of
          emergency followed by written notice) of the Event of Default to the
          Defaulting Party and to specify a cure period, which cure period shall
          be a minimum of thirty (30) days.

     17.4 If an Event of Default is not cured by the Defaulting Party during the
          cure period specified by the Non-Defaulting Party, the Non-Defaulting
          Party shall be entitled to those remedies which are not inconsistent
          with the terms of this Agreement, including termination and the
          payment of liquidated damages. A Defaulting Party shall not be liable
          to the Non-Defaulting Party for any punitive, consequential or
          incidental damages. For purposes of clarification, Replacement Costs
          shall not be considered consequential or incidental damages under this
          Section 17.4.

     17.5 Notwithstanding this Section 17, liquidated damages shall be paid to
          Buyer pursuant to Sections 4.2, 12, 18, and 21.

                                       34
<PAGE>

18.  FACILITY ADDITIONS AND MODIFICATIONS

     18.1 Supplier shall be entitled to make additions and modifications to the
          Asset Bundle subject to the following:

          18.1.1    To the extent additions and modifications interfere with the
                    operation of the Asset Bundle in providing the Supply Amount
                    to Buyer beyond the limits for planned outages set forth in
                    Section 21, liquidated damages shall be paid to Buyer
                    pursuant to Section 4.2.

          18.1.2    Supplier shall use reasonable efforts to minimize any
                    adverse impact on Buyer during the course of making such
                    additions and modifications.

          18.1.3    Such additions and modifications shall be conducted in
                    accordance with Good Utility Practice, and all applicable
                    Laws, regulations, reliability criteria and the
                    Interconnection Agreement between Nevada Power Company and
                    Pinnacle West Energy Corporation dated as of December 1,
                    2000, as it may be amended from time to time.

     18.2 Supplier shall seek Buyer's prior written approval, which shall not be
          unreasonably withheld, for all Supplier's additions or modifications
          to the Asset Bundle which might reasonably be expected to have an
          adverse effect upon Buyer with respect to operations or performance
          under this Agreement.

19.  COORDINATION

     19.1 Upon knowledge thereof, each Party shall promptly give notice to the
          other Party of any labor dispute which is delaying or threatens to
          delay the timely performance of this Agreement, which shall include a
          description of the general nature of the dispute.

20.  EMERGENCY AND NONEMERGENCY CONDITION RESPONSE

     20.1 Buyer and Supplier shall comply with any applicable requirement of any
          Governmental Authority, NERC, WSCC, ISA, Control Area Operator,
          transmission operator, EDU or any successor of any of them, regarding
          the reduced or increased generation of the Asset Bundle in the event
          of an Emergency Condition or Nonemergency Condition.

     20.2 Supplier shall not be obligated to deliver the Supply Amount and no
          liquidated damages shall become due, if the Supply Amount is reduced
          in the event of an Emergency Condition or a Nonemergency Condition.

                                       35
<PAGE>

     20.3 Each Party shall provide prompt verbal notice to the other Party of
          any Emergency Condition or Nonemergency Condition.

     20.4 Either Party may take reasonable and necessary action to prevent,
          avoid or mitigate injury, danger, damage or loss to its own equipment
          and facilities, or to expedite restoration of service; provided,
          however, that the Party taking such action shall give the other Party
          prior notice if at all possible before taking any action. However,
          this Section 20.4 shall not be construed to supersede Sections 20.2
          and 20.3.

21.  OUTAGE SCHEDULING

     21.1 Supplier shall request Buyer's approval, which shall not be
          unreasonably withheld, prior to any inspections, proposed planned
          outages or other non-forced outages (all hereinafter referred to as
          "planned outages") of the Asset Bundle so as to minimize the impact on
          the availability of the Asset Bundle. Under no circumstances shall
          Supplier conduct a planned outage without the express prior consent of
          Buyer pursuant to this Section 21.

     21.2 Planned Outages.
          ---------------

          21.2.1    Within sixty (60) days following the Effective Date of this
                    Agreement and on or before October 1 of each Contract Year,
                    Supplier shall provide Buyer with a schedule of proposed
                    planned outages for the period beginning on the date of such
                    proposed schedule for the following twelve (12) months. The
                    proposed planned outage schedule will designate days for
                    each unit in which the Asset Bundle Capacity will be reduced
                    in part or total for each such unit. Each proposed schedule
                    shall include all applicable information, including but not
                    limited to the following:  Month, day and time of requested
                    outage; facilities impacted (such as Unit and description);
                    duration of outage; purpose of outage; amount of capacity
                    (in MWs) which is derated; other conditions and remarks; and
                    name of contact and phone number.

          21.2.2    Buyer shall promptly review Supplier's proposed schedule and
                    shall either require modifications or approve the proposed
                    schedule, which approval shall not be unreasonably withheld.
                    Supplier shall use its best efforts to accomplish all
                    planned outages in accordance with the approved schedule.
                    Supplier shall be responsible to Buyer for Replacement Costs
                    (i) if any outage period exceeds its approved schedule,
                    provided that changes to the approved schedule may be
                    requested by either Party and each Party shall make reason-

                                       36
<PAGE>

                    able efforts to accommodate such changes, provided further
                    the Buyer shall have no obligation to agree to Supplier's
                    revisions to the approved planned outage schedule; and (ii)
                    if Supplier conducts a planned outage without the consent of
                    Buyer as provided herein.

22.  REPORTS

     22.1 Supplier shall promptly provide Buyer with copies of any orders,
          decrees, letters or other written communications to or from any
          Governmental Authority asserting or indicating that Supplier and/or
          its Asset Bundle is in violation of Laws which relate to Supplier, or
          operations or maintenance of the Asset Bundle and which may have an
          adverse effect on Buyer. Supplier shall use reasonable efforts to keep
          Buyer appraised of the status of any such matters.

23.  COMMUNICATIONS

     23.1 Supplier's Operating Representatives shall be available twenty-four
          (24) hours per day for communications with the Control Area Operator
          and/or the ISA and Buyer to facilitate the operations contained in
          this Agreement.

     23.2 Supplier shall, at its expense, maintain and install real-time
          communications equipment at the Asset Bundle to maintain
          communications between personnel on site at the Asset Bundle, Buyer
          and the Control Area Operator at all times. Supplier shall provide at
          its expense:

          (i)       Ringdown voice telephone lines, and

          (ii)      Equipment to transmit to and receive telecopies from Buyer
                    and the Control Area Operator.

     23.3 Supplier shall immediately report to Buyer any "Abnormal Condition"
          that has or may occur, and provide all pertinent information,
          including but not limited to the following:

          (i)       A description of the "Abnormal Condition" and the actions to
                    be taken to alleviate the "Abnormal Condition";

          (ii)      The expected duration including the beginning and ending
                    time of the "Abnormal Condition"; and

          (iii)     The amount of any adjustment to the current (real time)
                    level of Energy and Ancillary Services.

     23.4 Cause of the Condition.
          -----------------------

                                       37
<PAGE>

          23.4.1    An "Abnormal Condition" shall include without limitation any
                    conditions that, to Supplier's knowledge, have or are
                    reasonably likely to:

                    (i)   Adversely affect Supplier's ability to provide Energy
                          and Ancillary Services to Buyer;

                    (ii)  Cause an unplanned reduction in the amount of delivery
                          of Energy and Ancillary Services to Buyer; or

                    (iii) Cause an unplanned isolation of the Asset Bundle from
                          the transmission system.

     23.5 Supplier shall immediately notify Buyer after such "Abnormal
          Condition" has been alleviated.

24.  NOTICES

     24.1 All notices hereunder shall, unless specified otherwise, be in writing
          and shall be addressed, except as otherwise stated herein, to the
          Parties as set forth in Exhibit F.

     24.2 All written notices or submittals required by this Agreement shall be
          sent either by hand-delivery, regular first class U.S. mail,
          registered or certified U.S. mail postage paid return receipt
          requested, overnight courier delivery, electronic mail or facsimile
          transmission and will be effective and deemed to have been received on
          the date of receipt personally, on the date and time as documented by
          method of delivery if during normal business hours or on the next
          succeeding Business Day, or on the third (3/rd/) Business Day
          following deposit with the U.S. mail if sent regular first class U.S.
          mail.

     24.3 Notices of an Event of Default pursuant to Section 17 and or Force
          Majeure pursuant to Section 12 may not be sent by regular first class
          U.S. mail.

     24.4 Any payments required to be made under this Agreement shall be made to
          the Party as set forth in Exhibit F.

     24.5 Each Party shall have the right to change, at any time upon written
          notice to the other Party, the name, address and telephone numbers of
          its representatives under this Agreement for purposes of notices and
          payments.

25.  MERGER

     25.1 The Agreement contains the entire agreement and understanding between
          the Parties with respect to all of the subject matter contained

                                       38
<PAGE>

          herein, thereby merging and superseding all prior agreements and
          representations by the Parties with respect to such subject matter.

     25.2 In the event of any conflict between this Agreement and the Asset Sale
          Agreement, the terms of the Asset Sale Agreement shall govern.

26.  HEADINGS

     26.1 The headings or section titles contained in this Agreement are
          inserted solely for convenience and do not constitute a part of this
          Agreement between the Parties, nor should they be used to aid in any
          manner in the construction of this Agreement.

27.  COUNTERPARTS AND INTERPRETATION

     27.1 This Agreement may be executed in any number of counterparts, each of
          which shall be deemed an original.

     27.2 In the event an ambiguity or question of intent or interpretation
          arises, this Agreement shall be construed as if drafted jointly by the
          Parties and no presumption or burden of proof shall arise favoring or
          disfavoring any Party by virtue of authorship of any of the provisions
          of this Agreement.

     27.3 Any reference to any federal, state, local, or foreign statute or law
          shall be deemed also to refer to all rules and regulations promulgated
          thereunder, unless the context requires otherwise.

     27.4 The word "including" in this Agreement shall mean "including without
          limitation".

28.  SEVERABILITY

     28.1 If any term, provision or condition of this Agreement is held to be
          invalid, void or unenforceable by a court or Governmental Authority of
          competent jurisdiction and such holding is subject to no further
          appeal or judicial review, then such invalid, void, or unenforceable
          term, provision or condition shall be deemed severed from this
          Agreement and all remaining terms, provisions and conditions of this
          Agreement shall continue in full force and effect, unless, however,
          the effect of the severance would vitiate the intent of the Parties
          hereto, as determined by either Party in its reasonable discretion.

     28.2 The Parties shall endeavor in good faith to replace such invalid,
          void, or unenforceable provisions with a valid and enforceable
          provision which achieves the purposes intended by the Parties to the
          greatest extent permitted by law.

                                       39
<PAGE>

29.  WAIVERS

     29.1 No failure or delay on the part of a Party in exercising any of its
          rights under this Agreement or in insisting upon strict performance of
          provisions of this Agreement, no partial exercise by either Party of
          any of its rights under this Agreement, and no course of dealing
          between the Parties shall constitute a waiver of the rights of either
          Party under this Agreement. Any waiver shall be effective only by a
          written instrument signed by the Party granting such waiver, and such
          shall not operate as a waiver of, or estoppel with respect to, any
          subsequent failure to comply therewith.

30.  AMENDMENTS

     30.1 The Parties shall negotiate in good faith to determine necessary
          amendments, if any, to this Agreement, provided that in negotiating
          such amendments the Parties shall attempt, in good faith, to
          reasonably preserve the bargain initially struck in this Agreement if
          any Governmental Authority, FERC, any state or the PUCN, implements a
          change in any Law or applicable regulation that materially affects or
          is reasonably expected to materially affect Buyer's PLR service under
          this Agreement.

     30.2 The Parties shall meet to discuss the impact of any changes in Buyer's
          OATT, or any rule or practice of NERC, WSCC, or any other Governmental
          Authority on the terms of this Agreement upon request by either Party
          during the term of this Agreement.

     30.3 In the event that it is deemed necessary to amend this Agreement, the
          Parties will attempt to agree upon such amendment and will submit such
          mutually agreed upon amendment(s) to the FERC for filing and
          acceptance.

     30.4 Amendments to this Agreement shall be in writing and shall be executed
          by an authorized representative of each Party.

31.  TIME IS OF THE ESSENCE

     31.1 Time is of the essence of this Agreement and in the performance of all
          of the covenants and conditions hereof.

32.  APPROVALS

     32.1 Each Party's performance under this Agreement is subject to the
          condition that all requisite governmental and regulatory approvals for
          such performance are obtained in form and substance satisfactory to
          the other Party in its reasonable discretion. Each Party shall use
          best efforts to obtain all required approvals and shall exercise due
          diligence and shall act in good faith to cooperate and assist each
          other in

                                       40
<PAGE>

          acquiring any regulatory approval necessary to effectuate this
          Agreement. Further, the Parties agree to reasonably support the other
          Party in any associated regulatory proceedings, including by being a
          witness on behalf of the other Party.

     32.2 This Agreement is made subject to present or future state or federal
          laws, regulations, or orders properly issued by state or federal
          bodies having jurisdiction.

     32.3 The Parties hereto agree to execute and deliver promptly, at the
          expense of the Party requesting such action, any and all other and
          further instruments, documents and information which may reasonably be
          necessary or appropriate to give full force and effect to the terms
          and intent of this Agreement.

33.  PLR SERVICE

     33.1 The Agreement is premised on Buyer providing PLR service.
          Notwithstanding anything to the contrary contained herein, if Nevada
          retail electricity restructuring (including implementation of retail
          customer choice of electricity suppliers) is delayed beyond the
          Effective Date of this Agreement, the Parties shall continue to
          perform this Agreement in all respects pursuant to the terms and
          conditions hereof as if Buyer was the PLR and Buyer's retail and
          wholesale customers shall be considered as the TRR.

34.  CONFIDENTIALITY

     34.1 Confidential Information. Certain information provided by a Party (the
          ------------------------
          "Disclosing Party") to the other Party (the "Receiving Party") in
          connection with the negotiation or performance of this Agreement may
          be considered confidential and/or proprietary (hereinafter referred to
          as "Confidential Information") by the Disclosing Party. To be
          considered Confidential Information hereunder, such information must
          be clearly labeled or designated by the Disclosing Party as
          "confidential" or "proprietary" or with words of like meaning. If
          disclosed orally, such information shall be clearly identified as
          confidential and such status shall be confirmed promptly thereafter in
          writing.

     34.2 Treatment of Confidential Information. The Receiving Party shall treat
          -------------------------------------
          any Confidential Information with at least the same degree of care
          regarding its secrecy and confidentiality as the Receiving Party's
          similar information is treated within the Receiving Party's
          organization. The Receiving Party shall not disclose the Confidential
          Information of the Disclosing Party to third parties (except as stated
          hereinafter) nor use it for any purpose other than the negotiation or
          performance of this Agreement, without the express prior written
          consent of

                                       41
<PAGE>

          the Disclosing Party. The Receiving Party further agrees that it shall
          restrict disclosure of Confidential Information as follows:

          34.2.1    Disclosure shall be restricted solely to its agents as may
                    be necessary to enforce the terms of this Agreement after
                    advising those agents of their obligations under this
                    Section 34.2.

          34.2.2    In the event that the Receiving Party is requested, pursuant
                    to or as required by applicable Law or by legal process, to
                    disclose any Confidential Information, the Receiving Party
                    shall provide the Disclosing Party with prompt notice of
                    such request or requirement in order to enable Disclosing
                    Party to seek an appropriate protective order or other
                    remedy and to consult with Disclosing Party with respect to
                    Disclosing Party taking steps to resist or narrow the scope
                    of such request or legal process. The Receiving Party agrees
                    not to oppose any action by the Disclosing Party to obtain a
                    protective order or other appropriate remedy. In the absence
                    of such protective order, and provided that the Receiving
                    Party is advised by its counsel that it is compelled to
                    disclose the Confidential Information, the Receiving Party
                    shall:

                    (i)   furnish only that portion of the Confidential
                          Information which the Receiving Party is advised by
                          counsel is legally required; and

                    (ii)  use its commercially reasonable best efforts, at the
                          expense of the Disclosing Party, to ensure that all
                          Confidential Information so disclosed will be accorded
                          confidential treatment.

     34.3 Excluded Information. Confidential Information shall not be deemed to
          --------------------
          include the following:

          34.3.1    information which is or becomes generally available to the
                    public other than as a result of a disclosure by the
                    Receiving Party;

          34.3.2    information which was available to the Receiving Party on a
                    non-confidential basis prior to its disclosures by the
                    Disclosing Party; and

          34.3.3    information which becomes available to the Receiving Party
                    on a non-confidential basis from a person other than the
                    Disclosing Party or its representative who is not otherwise
                    bound by a confidentiality agreement with Disclosing

                                       42
<PAGE>

                    Party or its agent or is otherwise not under any obligation
                    to Disclosing party or its agent not to disclose the
                    information to the Receiving Party.

     34.4 Injunctive Relief Due to Breach. The Parties agree that remedies at
          -------------------------------
          law may be inadequate to protect each other in the event of a breach
          of this Section 34, and the Receiving Party hereby in advance agrees
          that the Disclosing Party shall be entitled to seek and obtain,
          without proof of actual damages, temporary, preliminary and permanent
          injunctive relief from any court or Governmental Authority of
          competent jurisdiction restraining the Receiving Party from committing
          or continuing any breach of this Section 34.

35.  CHOICE OF LAW

     35.1 This Agreement and the rights and obligations of the Parties shall be
          construed and governed by the Laws of: (i) the State of Nevada as if
          executed and performed wholly within that state; and (ii) the Federal
          Power Act, to the extent the rights and obligations of the Parties are
          covered by such act.

                       [SIGNATURES APPEAR ON NEXT PAGE]

                                       43
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date and year first above written.

NEVADA POWER COMPANY, as Buyer

________________________________________
By:     William E. Peterson
Title:  Sr. Vice President, General
         Counsel and Corporate Secretary

PINNACLE WEST ENERGY CORPORATION, as Supplier

________________________________________
By:     William L. Stewart
Title:  President
<PAGE>

                                   EXHIBIT A
               ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS
================================================================================
 UNIT        NET SUMMER       NET WINTER       RAMP RATE       MINIMUM HOURLY
             CAPABILITY       CAPABILITY       (MW)/HOUR        ENERGY TAKE
                (MW)             (MW)                               (MW)
-------------------------------------------------------------------------------
 HA 3           72*              76*              76*               N/A
================================================================================
                    Minimum Annual Energy Take:  40,000 MWh
                    Limit on Excused Energy:      4,000 MWh

For purposes of this Exhibit A, summer months shall consist of the months of
June through September and winter months shall consist of the months of January
through May and the months of October through December.

*Subject to confirmation in accordance with Section 7.14(b) of the Asset Sale
Agreement.

                                      A-1
<PAGE>

                                   EXHIBIT B
                      ENERGY AND ANCILLARY SERVICE PRICES

Energy Prices*
-------------

     Price Floor of Energy:        $  21.06 per MWh
     Price Ceiling of Energy:      $ 135.76 per MWh

Ancillary Service Prices*
------------------------

Regulation and Frequency Response:
     Summer On-Peak:     $ 40.82 per MW-reserved per hour
     Summer Off-Peak:    $ 23.33 per MW-reserved per hour
     Winter On-Peak:     $ 22.07 per MW-reserved per hour
     Winter Off-Peak:    $ 12.61 per MW-reserved per hour

Operating Reserve - Supplemental Reserve:
     Summer On-Peak:     $ 40.82 per MW-reserved per hour
     Summer Off-Peak:    $ 23.33 per MW-reserved per hour
     Winter On-Peak:     $ 22.07 per MW-reserved per hour
     Winter Off-Peak:    $ 12.61 per MW-reserved per hour

For purposes of this Exhibit B, summer months shall consist of the months of
June through September and winter months shall consist of the months of January
through May and October through December.

For purposes of this Exhibit B, On-Peak periods shall consist of Hour Ending
(HE) 0700 through HE 2200 PPT, Monday through Saturday.  Off-Peak periods shall
consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through
Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days
(holidays) as designated annually by WSCC.

                                                       *SUBJECT TO FERC APPROVAL
                                                        ------------------------

                                      B-1
<PAGE>

                                   EXHIBIT C

                          SUPPLIER'S MONTHLY INVOICE

     A    Price Ceiling       $ 135.76 /MWh of Energy

     B    Price Floor         $ 21.06  /Mwh of Energy

<TABLE>
<CAPTION>
MONTH 1 - ENERGY
----------------

                     C                D                E                   F                    G                     H
  Dispatch      Asset Bundle      Delivered         Supplier          Market Price        Market Price x        Market Price x
    Hour       Capacity (MWh)    Energy (MWh)    Shortfall (MWh)    of Energy ($/MWh)    Delivered Energy    Asset Bundle Capacity
    ----       --------------    ------------    ---------------    -----------------    ----------------    ---------------------
                                                     (C - D)                                   (D x F)              (C x F)
<S>            <C>               <C>             <C>                <C>                   <C>                <C>
     1               72               72                  0               60.00              $ 4,320.00            $ 4,320.00
     2               72               72                  0               60.00                4,320.00              4,320.00
     3               72               12                 60               60.00                  720.00              4,320.00
     4               72               12                 60               60.00                  720.00              4,320.00
     5               42               32                 10               50.00                1,600.00              2,100.00
     6               42               42                  0               50.00                2,100.00              2,100.00
     7               62               42                 20               40.00                1,680.00              2,480.00
     8               72               72                  0               40.00                2,880.00              2,880.00
     9               72               72                  0               40.00                2,880.00              2,880.00
     10              72               72                  0               45.00                3,240.00              3,240.00
----------------------------------------------------------------------------------------------------------------------------------
                    650              500                150                                  $24,460.00            $32,960.00

I.  Sum of (Delivered Energy times corresponding hourly Market Price)      Sec 7.2.1         $24,460.00
     IT.  Sum of (Asset Bundle Capacity times corresponding hourly
            Market Price)                                                                                          $32,960.00

J.  Sum of hourly Delivered Energy multiplied by the Price Ceiling
     of Energy                                                             Sec 7.2.2         $67,880.00
     JT.  Sum of hourly Asset Bundle Capacity multiplied by the Price
            Ceiling of Energy                                                                                      $88,244.00

K.  Sum of hourly Delivered Energy multiplied by the Price Floor
     of Energy                                                             Sec 7.2.3         $10,530.00
     KT.  Sum of hourly Asset Bundle Capacity multiplied by the Price
            Floor of Energy                                                                                        $13,689.00

L.  Invoiced Amount - Energy                          Sec 7.3             (K * I * J)        $24,460.00

M.  Theoretical Amount for Expected Performance                          (KT * IT * JT)                            $32,960.00
</TABLE>

* LESS THAN

<TABLE>
<CAPTION>
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
------------------------------------------------------------------------

                     N                    O                 P                 Q                 R                    S
 Dispatch  Schedule of Ancillary  Ancillary Capacity     Supplier     Capacity Price of  Price x Ancillary     Price x Schedule
   Hour        Capacity (MW)         Supplied (MW)    Shortfall (MW)   Services ($/MW)   Capacity Supplied   of Ancillary Services
   ----        -------------         -------------    --------------   ---------------   -----------------   ---------------------
                                                          (N - O)                             (O x Q)               (N x Q)
<S>        <C>                    <C>                 <C>             <C>                <C>                 <C>
    1                0                     0                 0                23.33          $     0.00            $     0.00
    2                0                     0                 0                23.33                0.00                  0.00
    3                0                     0                 0                40.82                0.00                  0.00
    4                0                     0                 0                40.82                0.00                  0.00
    5               10                    10                 0                40.82              408.20                408.20
    6               20                    10                10                40.82              408.20                816.40
    7                0                     0                 0                40.82                0.00                  0.00
    8                0                     0                 0                40.82                0.00                  0.00
    9                0                     0                 0                40.82                0.00                  0.00
    10               0                     0                 0                40.82                0.00                  0.00
----------------------------------------------------------------------------------------------------------------------------------
                    30                    20                10                               $   816.40            $ 1,224.60

T.  Invoiced Amount - Ancillary Service Capacity - Regulation
     and Frequency Response                                                Sec 7.2.5         $   816.40
</TABLE>

                                      C-1
<PAGE>

                                   EXHIBIT C
                          SUPPLIER'S MONTHLY INVOICE

<TABLE>
<S>                                                                                                                 <C>
U.    Theoretical Amount for Expected Performance                                                                   $  1,224.60
</TABLE>

<TABLE>
<CAPTION>
MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE
-----------------------------------------------------------

                        V                     W                X                 Y                  Z                  AA
  Dispatch   Schedule of Ancillary   Ancillary Capacity     Supplier     Capacity Price of  Price x Ancillary    Price x Schedule
    Hour          Capacity (MW)         Supplied (MW)    Shortfall (MW)   Services ($/MW)   Capacity Supplied  of Ancillary Services
    ----          -------------         -------------    --------------   ---------------   -----------------  ---------------------
<S>          <C>                     <C>                 <C>             <C>                <C>                <C>
                                                             (V - W)                             (W x Y)             (V x Y)

      1                 0                     0                 0              23.33            $     0.00          $      0.00
      2                 0                     0                 0              23.33                  0.00                 0.00
      3                 0                     0                 0              40.82                  0.00                 0.00
      4                 0                     0                 0              40.82                  0.00                 0.00
      5                10                    10                 0              40.82                408.20               408.20
      6                10                    10                 0              40.82                408.20               408.20
      7                10                    10                 0              40.82                408.20               408.20
      8                 0                     0                 0              40.82                  0.00                 0.00
      9                 0                     0                 0              40.82                  0.00                 0.00
     10                 0                     0                 0              40.82                  0.00                 0.00
------------------------------------------------------------------------------------------------------------------------------------
                       30                    30                 0                               $ 1,224.60          $  1,224.60

AB.    Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve       Sec 7.2.5      $ 1,224.60

AC.    Theoretical Amount for Expected Performance                                                                  $  1,224.60

<CAPTION>
MONTH 1 - ANCILLARY SERVICE ENERGY
----------------------------------

                      AD                    AE              AF                AG                AH                     AI

   Dispatch  Schedule of Ancillary  Ancillary Energy      Supplier     Price Ceiling of   Price x Ancillary      Price x Schedule
     Hour        Energy (MWh)        Supplied (MWh)   Shortfall (MWh)   Energy ($/MWh)     Energy Supplied     of Ancillary Energy
     ----        ------------        --------------   ---------------   --------------     ---------------     -------------------
<S>          <C>                    <C>               <C>              <C>                <C>                  <C>
                                                         (AD - AE)                             (AE x AG)              (AD x AG)

       1              0                     0                0                135.76         $     0.00              $     0.00
       2              0                     0                0                135.76               0.00                    0.00
       3              0                     0                0                135.76               0.00                    0.00
       4              0                     0                0                135.76               0.00                    0.00
       5              0                     0                0                135.76               0.00                    0.00
       6             20                    10               10                135.76           1,357.60                2,715.20
       7             10                    10                0                135.76           1,357.60                1,357.60
       8              0                     0                0                135.76               0.00                    0.00
       9              0                     0                0                135.76               0.00                    0.00
      10              0                     0                0                135.76               0.00                    0.00
------------------------------------------------------------------------------------------------------------------------------------
                     30                    20               10            $ 1,357.60         $ 2,715.20              $ 4,072.80

AJ.    Invoiced Amount - Ancillary Services Energy        Sec 7.2.6                          $ 2,715.20

AK.    Theoretical Amount for Expected Performance                                                                   $ 4,072.80

<CAPTION>
MONTH 1 - TOTAL INVOICE AMOUNT                            Sec 7.3      (L + T + AB + AJ)     $29,216.20
====================================================================================================================================

MONTH 2 - ENERGY
----------------
                        C           D               E               F               G                H
</TABLE>

                                      C-2
<PAGE>

                                   EXHIBIT C
                          SUPPLIER'S MONTHLY INVOICE

<TABLE>
<CAPTION>
     Dispatch        Asset Bundle      Delivered      Supplier          Market Price           Market Price x    Market Price x
       Hour         Capacity (MWh)   Energy (MWh)  Shortfall (MWh)    of Energy ($/MWh)      Delivered Energy   Asset Bundle Cap.
       ----         --------------   ------------  ---------------    -----------------      ----------------   -----------------
                                                       (C - D)                                     (D x F)             (C x F)
<S>                 <C>              <C>           <C>                <C>                    <C>                <C>
         1                72             72               0                 140.00               $ 10,080.00        $  10,080.00
         2                72             72               0                 140.00                 10,080.00           10,080.00
         3                72             12              60                 140.00                  1,680.00           10,080.00
         4                72             12              60                 150.00                  1,800.00           10,800.00
         5                42             32              10                 150.00                  4,800.00            6,300.00
         6                42             42               0                 150.00                  6,300.00            6,300.00
         7                62             42              20                 130.00                  5,460.00            8,060.00
         8                72             72               0                 130.00                  9,360.00            9,360.00
         9                72             72               0                 130.00                  9,360.00            9,360.00
        10                72             72               0                 135.00                  9,720.00            9,720.00
-----------------------------------------------------------------------------------------------------------------------------------
                         650            500             150                                      $ 68,640.00        $  90,140.00

I.   Sum of (Delivered Energy times corresponding hourly Market Price)           Sec 7.2.1       $ 68,640.00
       IT.   Sum of (Asset Bundle Capacity times corresponding hourly Market Price)                                 $  90,140.00

J.   Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy    Sec 7.2.2       $ 67,880.00
       JT.   Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy                          $  88,244.00

K.   Sum of hourly Delivered Energy multiplied by the Price Floor of Energy      Sec 7.2.3       $ 10,530.00
       KT.   Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy                            $  13,689.00

L.   Invoiced Amount - Energy                              Sec 7.3                     (I > J)   $ 67,880.00

M.   Theoretical Amount for Expected Performance                                      (IT > JT)                     $  88,244.00

<CAPTION>
MONTH 3 - ENERGY
----------------
                          C                D              E                  F                      G                     H

     Dispatch       Asset  Bundle      Delivered       Supplier          Market Price         Market Price x       Market Price x
       Hour         Capacity (MWh)   Energy (MWh)   Shortfall (MWh)    of Energy ($/MWh)     Delivered Energy     Asset Bundle Cap.
       ----         --------------   ------------   ---------------    -----------------     ----------------     -----------------
                                                        (C - D)                                  (D x F)               (C x F)
     <C>            <C>              <C>            <C>                <C>                   <C>                  <C>
         1                72              72               0                 30.00               $  2,160.00          $  2,160.00
         2                72              72               0                 20.00                  1,440.00             1,440.00
         3                72              12              60                 20.00                    240.00             1,440.00
         4                72              12              60                 20.00                    240.00             1,440.00
         5                42              32              10                 15.00                    480.00               630.00
         6                42              42               0                 15.00                    630.00               630.00
         7                62              42              20                 15.00                    630.00               930.00
         8                72              72               0                 15.00                  1,080.00             1,080.00
         9                72              72               0                 15.00                  1,080.00             1,080.00
        10                72              72               0                 15.00                  1,080.00             1,080.00
----------------------------------------------------------------------------------------------------------------------------------
                         650             500             150                                     $  9,060.00          $ 11,910.00

I.   Sum of (Delivered Energy times corresponding hourly Market Price)    Sec 7.2.1              $  9,060.00
       IT.   Sum of (Asset Bundle Capacity times corresponding hourly Market Price)                                   $ 11,910.00

J.   Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy     Sec 7.2.2      $ 67,880.00
</TABLE>

                                      C-3
<PAGE>

                                   EXHIBIT C
                          SUPPLIER'S MONTHLY INVOICE

<TABLE>
<S>                                                                                              <C>                 <C>
       JT.  Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy                            $ 88,244.00

K.  Sum of hourly Delivered Energy multiplied by the Price Floor of Energy     Sec 7.2.3         $  10,530.00
       KT.  Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy                              $ 13,689.00

L.  Invoiced Amount - Energy                                   Sec 7.3             (I ** K)      $  10,530.00

M.  Theoretical Amount for Expected Performance                                   (IT ** KT)                         $ 13,689.00
</TABLE>

**  Less than
*** Greater than

For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.

                                      C-4
<PAGE>

                                   EXHIBIT D
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

MONTH 1 - ENERGY
----------------

<TABLE>
<CAPTION>
                              A                B *                     C *                    D

         Dispatch        Replacement     Replacement Cost       Replacement Cost      Gross Replacement
           Hour          Energy (MWh)    of Energy ($/MWh)          of Energy           Cost of Energy
           ----          ------------    -----------------          ---------           --------------
                                                                                         (A x B) + C
<S>                      <C>             <C>                    <C>                   <C>
             1                 0                    na              $    0.00            $     0.00
             2                 0                    na                   0.00                  0.00
             3                60                 35.00                 100.00              2,200.00
             4                60                 30.00                  50.00              1,850.00
             5                10                 30.00                  50.00                350.00
             6                 0                    na                   0.00                  0.00
             7                20                 25.00                   0.00                500.00
             8                 0                    na                   0.00                  0.00
             9                 0                    na                   0.00                  0.00
            10                 0                    na                   0.00                  0.00
-----------------------------------------------------------------------------------------------------------
                             150                                                         $ 4,900.00

E.  Gross Replacement Cost of Energy                                                     $ 4,900.00

F.  Theoretical Supplier's Invoice Amount for Expected Performance                       $32,960.00
G.  Actual Supplier's Invoice Amount                                                      24,460.00
                                                                                         ----------
H.  Avoided Payment to Supplier                                 (F - G)                  $ 8,500.00

I.  Invoiced Replacement Cost - Energy                          (E ** H)                 $     0.00

<CAPTION>
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
------------------------------------------------------------------------
                             J                     K *                    L *                    M

         Dispatch       Replacement        Replacement Cost       Replacement Cost       Gross Replacement
           Hour        Capacity (MW)      of Capacity ($/MW)         of Capacity          Cost of Capacity
           ----        -------------      ------------------         -----------          ----------------
                                                                                             (J x K) + L
<S>                    <C>                <C>                     <C>                    <C>
            1               0                      na                $    0.00               $     0.00
            2               0                      na                     0.00                     0.00
            3               0                      na                     0.00                     0.00
            4               0                      na                     0.00                     0.00
            5               0                      na                     0.00                     0.00
            6              10                   40.00                   100.00                   500.00
            7               0                      na                     0.00                     0.00
            8               0                      na                     0.00                     0.00
            9               0                      na                     0.00                     0.00
            10              0                      na                     0.00                     0.00
---------------------------------------------------------------------------------------------------------
                           10                                                                $   500.00

N.  Gross Replacement Cost of Ancillary Capacity - Regulation and Frequency Response         $   500.00

O.  Theoretical Supplier's Invoice Amount for Expected Performance                           $ 1,224.60
P.  Actual Supplier's Invoice Amount                                                             816.40
                                                                                             ------------
Q.  Avoided Payment to Supplier                                 (O - P)                      $   408.20

R.  Invoiced Replacement Cost - Ancillary Capacity              (N *** Q)                    $    91.80
</TABLE>

**  Less than
*** Greater than

                                      D-1
<PAGE>

                                   EXHIBIT D
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE
---------------------------------------------------

<TABLE>
<CAPTION>
                            S                 T *                 U *                  V
      Dispatch         Replacement     Replacement Cost     Replacement Cost   Gross Replacement
        Hour          Capacity (MW)   of Capacity ($/MW)      of Capacity       Cost of Capacity
        ----          -------------   ------------------      -----------       ----------------
                                                                                  (S x T) + U
<S>                   <C>             <C>                   <C>                <C>
         1                  0                  na               $ 0.00          $     0.00
         2                  0                  na                 0.00                0.00
         3                  0                  na                 0.00                0.00
         4                  0                  na                 0.00                0.00
         5                  0                  na                 0.00                0.00
         6                  0                  na                 0.00                0.00
         7                  0                  na                 0.00                0.00
         8                  0                  na                 0.00                0.00
         9                  0                  na                 0.00                0.00
         10                 0                  na                 0.00                0.00
-------------------------------------------------------------------------------------------
                            0                                                   $     0.00

W.  Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve         $     0.00

X.  Theoretical Supplier's Invoice Amount for Expected Performance              $ 1,224.60
Y.  Actual Supplier's Invoice Amount                                              1,224.60
                                                                                -----------
Z.  Avoided Payment to Supplier                                 (X - Y)         $     0.00

AA. Invoiced Replacement Cost - Ancillary Capacity              (W = Z)         $     0.00

<CAPTION>
MONTH 1 - ANCILLARY SERVICE ENERGY
----------------------------------
                           AB                AC *                 AD *                 AE
      Dispatch         Replacement     Replacement Cost     Replacement Cost   Gross Replacement
        Hour          Energy (MWh)     of Energy ($/MWh)      of Energy **       Cost of Energy
        ----          ------------     -----------------      ------------       --------------
                                                                                 (AB x AC) + AD
<S>                   <C>              <C>                  <C>                <C>
         1                  0                    na            $    0.00                 0.00
         2                  0                    na                 0.00                 0.00
         3                  0                    na                 0.00                 0.00
         4                  0                    na                 0.00                 0.00
         5                  0                    na                 0.00                 0.00
         6                 10                150.00               100.00             1,600.00
         7                  0                    na                 0.00                 0.00
         8                  0                    na                 0.00                 0.00
         9                  0                    na                 0.00                 0.00
         10                 0                    na                 0.00                 0.00
----------------------------------------------------------------------------------------------
                           10                                                      $ 1,600.00

AF.  Gross Replacement Cost of Ancillary Energy                                    $ 1,600.00

AG.  Theoretical Supplier's Invoice Amount for Expected Performance                $ 4,072.80
AH.  Actual Supplier's Invoice Amount                                                2,715.20
                                                                             -----------------
AI.  Avoided Payment to Supplier                               (AG - AH)           $ 1,357.60

AJ.  Invoiced Replacement Cost - Ancillary Energy              (AF > AI)           $   242.40
==============================================================================================
</TABLE>

                                      D-2
<PAGE>

                                   EXHIBIT D
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

                                              (I + R + AA + AJ)  $       334.20

MONTH 1 - TOTAL INVOICE AMOUNT

===============================================================================

<TABLE>
<CAPTION>
MONTH 2 - ENERGY
----------------
                            A                 B *                 C *                  D
      Dispatch         Replacement     Replacement Cost     Replacement Cost   Gross Replacement
        Hour          Energy (MWh)     of Energy ($/MWh)       of Energy         Cost of Energy
        ----          ------------     -----------------       ---------         --------------
                                                                                  (A x B) + C
<S>                   <C>              <C>                  <C>                <C>
         1                  0                           na  $      0.00                 0.00
         2                  0                           na         0.00                 0.00
         3                 60               190.00               200.00            11,600.00
         4                 60               175.00               100.00            10,600.00
         5                 10                88.00               200.00             1,080.00
         6                  0                           na         0.00                 0.00
         7                 20               105.00               300.00             2,400.00
         8                  0                           na         0.00                 0.00
         9                  0                           na         0.00                 0.00
         10                 0                           na         0.00                 0.00
---------------------------------------------------------------------------------------------------
                          150                                                 $    25,680.00

E.     Gross Replacement Cost of Energy                                       $    25,680.00

F.     Theoretical Supplier's Invoice Amount for Expected Performance         $    88,244.00

G.     Actual Supplier's Invoice Amount                                            67,880.00
                                                                              ---------------------
H.     Avoided Payment to Supplier                              (F - G)       $    20,364.00

I.     Invoiced Replacement Cost - Energy                       (E *** H)     $     5,316.00

<CAPTION>

MONTH 3 - ENERGY
----------------
                            A                 B *                 C *                  D
      Dispatch         Replacement     Replacement Cost     Replacement Cost   Gross Replacement
        Hour          Energy (MWh)     of Energy ($/MWh)       of Energy         Cost of Energy
        ----          ------------     -----------------       ---------         --------------
                                                                                   A x B) + C
<S>                   <C>              <C>                  <C>                <C>
         1                  0                           na   $     0.00                 0.00
         2                  0                           na         0.00                 0.00
         3                 60                32.00               100.00             2,020.00
         4                 60                28.00                50.00             1,730.00
         5                 10                28.00                 0.00               280.00
         6                  0                           na         0.00                 0.00
         7                 20                24.00                50.00               530.00
         8                  0                           na         0.00                 0.00
         9                  0                           na         0.00                 0.00
         10                 0                           na         0.00                 0.00
---------------------------------------------------------------------------------------------------
                          150                                                    $  4,560.00

E.     Gross Replacement Cost of Energy                                          $  4,560.00

F.     Theoretical Supplier's Invoice Amount for Expected Performance            $ 13,689.00
G.     Actual Supplier's Invoice Amount                                            10,530.00
                                                                              ---------------------
H.     Avoided Payment to Supplier                              (F - G)          $  3,159.00
</TABLE>

**  Less than
*** Greater than
                                      D-3
<PAGE>

                                   EXHIBIT D
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

<TABLE>
<S>                                                         <C>                     <C>
I.      Invoiced Replacement Cost - Energy                   (E > H)                 $   1,401.00
</TABLE>

For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.

                                   EXHIBIT E
                           YEAR END TRUE-UP INVOICE

     A       Price Ceiling of Energy       $  135.76  /MWh
     B       Price Floor of Energy         $   21.06  /MWh

EXAMPLE 1
---------

<TABLE>
<CAPTION>
                     C                D                    E                   F                     G

                 Delivered      Market Price x      Price Ceiling x      Price Floor x      Supplier's Invoiced
      Month     Energy (MWh)   Delivered Energy    Delivered Energy    Delivered Energy       Amount - Energy
      -----     ------------   ----------------    ----------------    ----------------       ---------------
                                                       (A x C)              (B x C)
<S>             <C>            <C>                 <C>                 <C>                  <C>
       1            500          $  24,460.00       $  67,880.00         $  10,530.00          $   24,460.00
       2            500             68,640.00          67,880.00            10,530.00              67,880.00
       3            500              9,060.00          67,880.00            10,530.00              10,530.00
       4            720            116,640.00          97,747.20            15,163.20              97,747.20
       5            720            113,760.00          97,747.20            15,163.20              97,747.20
       6            520             82,160.00          70,595.20            10,951.20              70,595.20
       7            720            115,200.00          97,747.20            15,163.20              97,747.20
       8            720            113,760.00          97,747.20            15,163.20              97,747.20
       9            350             55,650.00          47,516.00             7,371.00              47,516.00
       10           720            112,320.00          97,747.20            15,163.20              97,747.20
       11           720            118,800.00          97,747.20            15,163.20              97,747.20
       12           420             67,200.00          57,019.20             8,845.20              57,019.20
-------------------------------------------------------------------------------------------------------------
     Total        7,110          $ 997,650.00       $ 965,253.60         $ 149,736.60          $  864,483.60

(Total of Column D) > (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a)
----------------------------------------------------------------------------------------------------

H.    Annual True-up - Delivered Energy                                (Total E - Total G)     $  100,770.00

I.     Average Cost of Delivered Energy after True-up ($/MWh)          (Total E / Total C)     $      135.76

<CAPTION>
                   J                K                        L                    M                      N
              Replacement    Replacement Energy      Gross Replacement   Adjusted Replacement    Invoiced Replacement
   Month      Energy (MWh)     x Average Cost          Cost of Energy        Cost of Energy          Cost of Energy
   -----      ------------     --------------          --------------        --------------          --------------
                                   (I x J)
<S>           <C>            <C>                     <C>                 <C>                     <C>
     1            150                                   $   4,900.00                                   $     0.00
     2            150                                      25,680.00                                     5,316.00
     3            150                                       4,560.00                                     1,401.00
     4              0                                           0.00                                         0.00
     5              0                                           0.00                                         0.00
     6              0                                           0.00                                         0.00
     7              0                                           0.00                                         0.00
     8              0                                           0.00                                         0.00
     9              0                                           0.00                                         0.00
     10             0                                           0.00                                         0.00
     11             0                                           0.00                                         0.00
----------------------------------------------------------------------------------------------
</TABLE>

                                      D-4
<PAGE>

                                   EXHIBIT E
                           YEAR END TRUE-UP INVOICE
                                     0.00

<TABLE>
<S>                            <C>           <C>                 <C>                      <C>                     <C>
        12                       0                                      0.00                                             0.00
-------------------------------------------------------------------------------------------------------------------------------
      Total                    450           $ 61,092.00         $ 35,140.00              $      0.00             $  6,717.00

O.    Annual True-up - Replacement Costs                                (Total N - Total M)                       $  6,717.00

TOTAL ANNUAL TRUE-UP *                                                        (H + O)                             $107,487.00
===============================================================================================================================
</TABLE>

EXAMPLE 2
---------

<TABLE>
<CAPTION>
                               C                   D                   E                      F                       G

                           Delivered        Market Price x      Price Ceiling x         Price Floor x        Supplier's Invoiced
           Month          Energy (MWh)     Delivered Energy    Delivered Energy       Delivered Energy         Amount - Energy
           -----          ------------     ----------------    ----------------       ----------------         ---------------
                                                                   (A x C)                 (B x C)
<S>                       <C>              <C>                 <C>                    <C>                    <C>
             1                 500           $ 24,460.00         $ 67,880.00              $ 10,530.00             $ 24,460.00
             2                 500             68,640.00           67,880.00                10,530.00               67,880.00
             3                 500              9,060.00           67,880.00                10,530.00               10,530.00
             4                 720            113,760.00           97,747.20                15,163.20               97,747.20
             5                 720             24,480.00           97,747.20                15,163.20               24,480.00
             6                 520             17,680.00           70,595.20                10,951.20               17,680.00
             7                 720             25,920.00           97,747.20                15,163.20               25,920.00
             8                 720             24,480.00           97,747.20                15,163.20               24,480.00
             9                 350             14,000.00           47,516.00                 7,371.00               14,000.00
            10                 720             23,040.00           97,747.20                15,163.20               23,040.00
            11                 720            104,400.00           97,747.20                15,163.20               97,747.20
            12                 420             65,520.00           57,019.20                 8,845.20               57,019.20
------------------------------------------------------------------------------------------------------------------------------
           Total             7,110           $515,440.00         $965,253.60              $149,736.60             $484,983.60

(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)
----------------------------------------------------------------------------------------------------

H.    Annual True-up - Delivered Energy                               (Total D - Total G)                         $ 30,456.40

I.    Average Cost of Delivered Energy after True-up ($/MWh)          (Total D / Total C)                         $     72.50

<CAPTION>
                             J                   K                        L                    M                      N
                        Replacement      Replacement Energy       Gross Replacement   Adjusted Replacement   Invoiced Replacement
           Month        Energy (MWh)      x  Average Cost           Cost of Energy        Cost of Energy         Cost of Energy
           -----        ------------      ---------------           --------------        --------------         --------------
                                              (I x J)
<S>                     <C>              <C>                      <C>                 <C>                    <C>
             1             150                                        $  4,900.00                                $      0.00
             2             150                                          25,680.00                                   5,316.00
             3             150                                           4,560.00                                   1,401.00
             4               0                                               0.00                                       0.00
             5               0                                               0.00                                       0.00
             6               0                                               0.00                                       0.00
             7               0                                               0.00                                       0.00
             8               0                                               0.00                                       0.00
             9               0                                               0.00                                       0.00
            10               0                                               0.00                                       0.00
            11               0                                               0.00                                       0.00
            12               0                                               0.00                                       0.00
------------------------------------------------------------------------------------------------------------------------------
           Total           450              $ 32,622.78               $ 35,140.00            $  2,517.22         $  6,717.00
</TABLE>

                                      D-5
<PAGE>

                                   EXHIBIT E

                           YEAR END TRUE-UP INVOICE

O.   Annual True-up - Replacement Costs         (Total N - Total M)  $  4,199.78

Total Annual True-up *                                (H + O)        $ 34,656.18
================================================================================

EXAMPLE 3
---------

<TABLE>
<CAPTION>
                                 C                   D                  E                     F                         G
                             Delivered        Market Price x      Price Ceiling x        Price Floor x         Supplier's Invoiced
           Month            Energy (MWh)     Delivered Energy    Delivered Energy       Delivered Energy         Amount - Energy
           -----            ------------     ----------------    ----------------       ----------------         ---------------
                                                                      (A x C)               (B x C)
<S>                         <C>              <C>                 <C>                    <C>                    <C>
             1                    500           $ 24,460.00         $ 67,880.00            $ 10,530.00              $ 24,460.00
             2                    500             68,640.00           67,880.00              10,530.00                67,880.00
             3                    500              9,060.00           67,880.00              10,530.00                10,530.00
             4                    720             23,040.00           97,747.20              15,163.20                23,040.00
             5                    720             21,600.00           97,747.20              15,163.20                21,600.00
             6                    520             14,560.00           70,595.20              10,951.20                14,560.00
             7                    720             18,720.00           97,747.20              15,163.20                18,720.00
             8                    720             20,160.00           97,747.20              15,163.20                20,160.00
             9                    350              9,800.00           47,516.00               7,371.00                 9,800.00
            10                    720             23,040.00           97,747.20              15,163.20                23,040.00
            11                    720             20,160.00           97,747.20              15,163.20                20,160.00
            12                    420             10,920.00           57,019.20               8,845.20                10,920.00
-------------------------------------------------------------------------------------------------------------------------------
           Total                7,110           $264,160.00         $965,253.60            $149,736.60              $264,870.00

<CAPTION>
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)
----------------------------------------------------------------------------------------------------
<S>                                                              <C>                                                <C>
H.  Annual True-up - Delivered Energy                            (Total D - Total G)                                $   (710.00)

I.  Average Cost of Delivered Energy after True-up ($/MWh)       (Total D / Total C)                                $     37.15

<CAPTION>
                                    J                   K                   L                     M                      N

                               Replacement         Replacement      Gross Replacement    Adjusted Replacement        Invoiced
                                                     Energy                                                         Replacement
           Month               Energy (MWh)      x  Average Cost     Cost of Energy         Cost of Energy        Cost of Energy
           -----               ------------      ---------------     --------------         --------------        --------------
                                                     (I x J)
 <S>                           <C>               <C>                 <C>                 <C>                      <C>
             1                      150                                $  4,900.00                                  $      0.00
             2                      150                                  25,680.00                                     5,316.00
             3                      150                                   4,560.00                                     1,401.00
             4                        0                                       0.00                                         0.00
             5                        0                                       0.00                                         0.00
             6                        0                                       0.00                                         0.00
             7                        0                                       0.00                                         0.00
             8                        0                                       0.00                                         0.00
             9                        0                                       0.00                                         0.00
            10                        0                                       0.00                                         0.00
            11                        0                                       0.00                                         0.00
            12                        0                                       0.00                                         0.00
-------------------------------------------------------------------------------------------------------------------------------
           Total                    450             $ 16,718.99        $ 35,140.00             $ 18,421.01          $  6,717.00

O.    Annual True-up - Replacement Costs                                               (Total N - Total M)          $(11,704.01)
</TABLE>

                                      D-6
<PAGE>

                                   EXHIBIT E
                           YEAR END TRUE-UP INVOICE

Total Annual True-up *                             (H + O)          $(12,414.01)
================================================================================

EXAMPLE 4
---------

<TABLE>
<CAPTION>
                                    C                   D                   E                     F                      G
                                Delivered        Market Price x      Price Ceiling x        Price Floor x       Supplier's Invoiced
         Month                 Energy (MWh)     Delivered Energy    Delivered Energy       Delivered Energy       Amount - Energy
         -----                -------------     ----------------    ----------------       ----------------       ---------------
                                                                         (A x C)                (B x C)
         <S>                  <C>               <C>                 <C>                    <C>                  <C>
           1                        500           $ 24,460.00         $ 67,880.00            $ 10,530.00            $ 24,460.00
           2                        500             68,640.00           67,880.00              10,530.00              67,880.00
           3                        500              9,060.00           67,880.00              10,530.00              10,530.00
           4                        720              5,760.00           97,747.20              15,163.20              15,163.20
           5                        720              5,760.00           97,747.20              15,163.20              15,163.20
           6                        520              4,160.00           70,595.20              10,951.20              10,951.20
           7                        720              5,760.00           97,747.20              15,163.20              15,163.20
           8                        720              5,760.00           97,747.20              15,163.20              15,163.20
           9                        350              2,800.00           47,516.00               7,371.00               7,371.00
          10                        720              5,760.00           97,747.20              15,163.20              15,163.20
          11                        720              5,760.00           97,747.20              15,163.20              15,163.20
          12                        420              3,360.00           57,019.20               8,845.20               8,845.20
-------------------------------------------------------------------------------------------------------------------------------
         Total                    7,110           $147,040.00         $965,253.60            $149,736.60            $221,016.60
</TABLE>

(Total of Column E) > (Total of Column D) therefore Annual True-up calculated
-----------------------------------------------------------------------------
under Section 7.5.1(b)
----------------------

<TABLE>
<S>                                                                            <C>                            <C>
H.  Annual True-up - Delivered Energy                                          (Total F - Total G)            $   (71,280.00)

I.  Average Cost of Delivered Energy after True-up ($/MWh)                     (Total F / Total C)            $        21.06
</TABLE>

<TABLE>
<CAPTION>
                                J                  K                       L                      M                     N
                           Replacement     Replacement Energy      Gross Replacement    Adjusted Replacement   Invoiced Replacement
         Month             Energy (MWh)      x Average Cost          Cost of Energy         Cost of Energy        Cost of Energy
         -----             ------------      --------------          --------------         --------------        --------------
                                                (I x J)
         <S>               <C>             <C>                     <C>                  <C>                    <C>
           1                    150                                   $  4,900.00                                  $       0.00
           2                    150                                     25,680.00                                      5,316.00
           3                    150                                      4,560.00                                      1,401.00
           4                      0                                          0.00                                          0.00
           5                      0                                          0.00                                          0.00
           6                      0                                          0.00                                          0.00
           7                      0                                          0.00                                          0.00
           8                      0                                          0.00                                          0.00
           9                      0                                          0.00                                          0.00
          10                      0                                          0.00                                          0.00
          11                      0                                          0.00                                          0.00
          12                      0                                          0.00                                          0.00
-------------------------------------------------------------------------------------------------------------------------------
         Total                  450           $  9,477.00             $ 35,140.00            $  25,663.00          $   6,717.00

O.    Annual True-up - Replacement Costs                                                  (Total N - Total M)      $ (18,946.00)

Total Annual True-up *                                                                          (H + O)            $ (90,226.00)
===============================================================================================================================
</TABLE>

                                      D-7
<PAGE>

                                   EXHIBIT E
                           YEAR END TRUE-UP INVOICE

* Positive Total Annual True-up is indicative of a payment form Buyer to
Supplier; Negative Total Annual True-up is indicative of a payment form Supplier
to Buyer.

                                      D-8
<PAGE>

                                    EXHIBIT F
                   NOTICES, BILLING AND PAYMENT INSTRUCTIONS

Supplier:
--------

a) Agreement Notices:      Name and Address
   ------------------
                           Phone:
                           Fax:

b) Payment Check:          Name and Address
   --------------

c) Payment Wire Transfer:   Bank:
   ----------------------
                            ABA #:
                            For: Supplier's Name
                            Account No:
                            For:

d) Invoices:                Name and Address
   --------
                            Phone:
                            Fax:

e) Operating Notifications:
   -----------------------

     i)   (Management, if required)

     ii)  Pre-Schedule:     Phone:
                            Fax:

     iii) Real Time:        Phone:
                            Fax:

     iv)  Monthly Checkout  Phone:
          Person:           Fax:

                                      F-2
<PAGE>

Buyer:
-----

a) Agreement Notices:
   -----------------
     Address:     Gary Craythorn
                  Manager, Resource Contracts
                  Nevada Power Company
                  6226 West Sahara Avenue, M/S 26A
                  Las Vegas, Nevada 89146
     Phone:       702/367-5425
     Fax:         702/227-2455
     E-mail:      gcraythorn@nevp.com

b) Invoices:
   --------

     US Post Office:      (Via Certified Mail)   Overnight Delivery
     ---------------                             ------------------
     Address:     Nevada Power Company           Address: Nevada Power Company
                  Attn: Kathy Crews              Attn: Kathy Crews
                  P.O. Box 230, M/S 20           6226 West Sahara Ave., M/S 20
                  Las Vegas, Nevada 89151        Las Vegas, Nevada 89146
                  Telephone:   702/227-2476
                  Fax:         702/367-5096
                  E-mail:      kcrews@nevp.com

c) Schedules:
   ---------
<TABLE>
<S>                                                     <C>
     i)   Pre-Schedule: Primary Name:   Rick Engebretson  Phone: 702/862-7195
                                                          E-mail:  rengebretson@nevp.com
                        Alternate Name: Tim Schuster      Phone: 702/862-7194
                                                          E-mail:  tschuster@nevp.com
                                                          Fax:     702/227-2404
     ii)  Real Time:                                      Phone:   702/862-7106
                                                          Fax:     702/227-2404
     iii) Monthly Checkout:           Kathy Crews         Phone:   702/227-2476
                                                          Fax:702/367-5096
                                                          E-mail:  kcrews@nevp.com
</TABLE>

d) Control Area/Transmission:
   -------------------------
     i)   Reliability Dispatch:     Phone: (702) 451-2026
                                    Fax: (702) 862-7113
     ii)  Transmission Dispatch:    Phone: (702) 451-8346
                                    Fax: (702) 862-7113

                                      F-3
<PAGE>

                                   EXHIBIT G
                          FORM OF AVAILABILITY NOTICE

Date of Notice:

Time of Notice:

Supplier:

Name of Supplier's Representative:

Buyer:

Asset Bundle:

Availability Dates (96 hours total):

<TABLE>
<CAPTION>
                                        A                  B                C                 D                   E*
                                                                         Permitted       Asset Bundle
  Availability         Hour       Available from     Total Derating     Derating of      Capacity of        Alternative Point(s)
     Date             Ending       Unit 1 (MW)       of Unit 1 (MW)     Unit 1 (MW)      Unit 1 (MW)          of Delivery
     ----             ------       ----------        -------------      ----------       ----------           -----------
<S>                   <C>         <C>                <C>                <C>              <C>                <C>
                                     (A ** or          (___ - A)        (C ** or = B)      (A - C)
                                      = ---)
                        600
                        700
                        800
                       0900
                       1000
                       1100
                       1200
                       1300
                       1400
                       1500
                       1600
                       1700
                       1800
                       1900
                       2000
                       2100
                       2200
                       2300
                       2400
                       0100
                       0200
                       0300
                       0400
                       0500
                       0600
                       0700
                         :
 (96 hours total)
                         :
                        300
                        400
                        500

<CAPTION>
                                                   F
  Availability         Hour       Cause and Expected Duration of Deratings
     Date             Ending      and Identification of Permitted Deratings
     ----             ------      -----------------------------------------
<S>                   <C>         <C>

                        600
                        700
                        800
                       0900
                       1000
                       1100
                       1200
                       1300
                       1400
                       1500
                       1600
                       1700
                       1800
                       1900
                       2000
                       2100
                       2200
                       2300
                       2400
                       0100
                       0200
                       0300
                       0400
                       0500
                       0600
                       0700
                         :
 (96 hours total)
                         :
                        300
                        400
                        500
</TABLE>

     * The Parties' operational personnel shall develop the necessary procedure
     to document requests and responses to utilize Alternative Point(s) of
     Delivery.
     **  less than
     *** Greater than

                                      G-1
<PAGE>

                                   EXHIBIT H
                               FORM OF GUARANTY

     This Guaranty is entered into as of ______________, 2000 by
_______________, a ___________ corporation ("Guarantor"), on behalf of
_________________, a ___________ corporation ("Supplier"), in favor of and for
the benefit of Nevada Power Company, a Nevada corporation ("NPC")./2/2 NPC is
sometimes referred to herein as "Beneficiary".

     WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase
Agreement dated as of _____________, 2000 (the "TPPA") by which Supplier has
agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as
defined in the TPPA) produced by the ______________ generating station being
sold by NPC; and

     WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA
for Guarantor to guaranty the Supplier's obligations under the TPPA in an amount
not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied
Obligations").

     1. Guaranty. Guarantor irrevocably and unconditionally guaranties, as
primary obligor and not merely as surety, the due and punctual payment in full
of all Guarantied Obligations (including amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C.(S) 362(a)).

     In the event that all or any portion of the Guarantied Obligations is paid
by Supplier, the obligations of Guarantor hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) is rescinded or recovered directly or
indirectly from the Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Obligations (to the extent such payments, in the
aggregate, do not exceed the Credit Amount).

     Subject to the other provisions of this Section 1, upon failure of Supplier
to pay any of the Guarantied Obligations when and as the same shall become due,
Guarantor will upon demand pay, or cause to be paid, in cash, to NPC, an amount
equal to the aggregate of the unpaid Guarantied Obligations. In the event
Guarantor fails to pay the Guarantied Obligations, each and every default in the
payment shall give rise to a separate cause of action and separate causes of
action may be brought hereunder as each such cause of action arises.

_____________________
/2/ Sierra Pacific Power Company, as the case may be.

                                      H-2
<PAGE>

     2. Expenses. The Guarantor agrees to reimburse NPC for all reasonable costs
and expenses (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any default by Guarantor hereunder and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings of
or involving the Guarantor, judicial or regulatory proceedings of or involving
the Guarantor and workout, restructuring or other negotiations or proceedings of
or involving the Guarantor (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 2.

     3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when
due and not of collectibility; (b) the obligations of Guarantor hereunder are
independent of the obligations of Supplier under the TPPA and a separate action
or actions may be brought and prosecuted against Guarantor whether or not any
action is brought against the Supplier and whether or not the Supplier is joined
in any such action or actions; and (c) Guarantor's payment of a portion, but not
all, of the Guarantied Obligations shall in no way limit, affect, modify or
abridge Guarantor's liability for any portion of the Guarantied Obligations that
has not been paid. This Guaranty is a continuing guaranty and shall be binding
upon Guarantor and its successors and assigns.

     4. Actions by Beneficiary. The Beneficiary may from time to time, without
notice or demand and without affecting the validity or enforceability of this
Guaranty or giving rise to any limitation, impairment or discharge of
Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations, (c) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Guaranty or the Guarantied Obligations, (d) release, exchange,
compromise, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect to
the Guarantied Obligations, (e) enforce and apply any security hereafter held by
or for the benefit of the Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that the Beneficiary may have against any
such security, and (f) exercise any other rights available to NPC under the
TPPA.

                                      H-3
<PAGE>

     5. No Discharge. This Guaranty and the obligations of Guarantor hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Guarantied Obligations), including without limitation the occurrence of any of
the following, whether or not Guarantor shall have had notice or knowledge of
any of them: (a) any failure to assert or enforce or agreement not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Guarantied Obligations, (b) any waiver or modification of, or any
consent to departure from, any of the terms or provisions of any other guaranty
or security for the Guarantied Obligations, (c) the Guarantied Obligations, or
any agreement relating thereto, at any time being found to be illegal, invalid
or unenforceable in any respect, (d) the application of payments received from
any source to the payment of indebtedness other than the Guarantied Obligations,
even if the Beneficiary might have elected to apply such payment to any part or
all of the Guarantied Obligations, (e) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the
Supplier may assert against the Beneficiary in respect of the Guarantied
Obligations, including but not limited to failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction, and (g) any other act or thing or omission, or delay to do any
other act or thing, which may or might in any manner or to any extent vary the
risk of Guarantor as an obligor in respect of the Guarantied Obligations.

     6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the
benefit of Beneficiary: (a) any right to require the Beneficiary, as a condition
of payment or performance by Guarantor, to (i) proceed against the Supplier, any
other guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from the Supplier, any other guarantor of
the Guarantied Obligations or any other Person, or (iii) pursue any other remedy
in the power of the Beneficiary; (b) any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of the Supplier
including, without limitation, any defense based on or arising out of the lack
of validity or the unenforceability of the Guarantied Obligations or any
agreement or instrument relating thereto or by reason of the cessation of the
liability of the Supplier from any cause other than payment in full of the
Guarantied Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) (i) any
principles or provisions of law, statutory or otherwise, that are or might be in
conflict with the terms of this Guaranty and any legal or equitable discharge of
Guarantor's obligations hereunder, (ii) the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that the

                                      H-4
<PAGE>

Beneficiary protect, secure, perfect or insure any lien on any property subject
thereto; (e) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
of this Guaranty; and (f) to the fullest extent permitted by law, any defenses
or benefits that may be derived from or afforded by law which limit the
liability of or exonerate guarantors or sureties, or which may conflict with the
terms of this Guaranty.

     7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or
remedy, direct or indirect, that Guarantor now has or may hereafter have against
the Supplier or any of its assets in connection with this Guaranty or the
performance by Guarantor of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including without limitation (a) any right of
subrogation, reimbursement or indemnification that Guarantor now has or may
hereafter have against the Supplier, (b) any right to enforce, or to participate
in, any claim, right or remedy that the Beneficiary now has or may hereafter
have against the Supplier, and (c) any benefit of, and any right to participate
in, any collateral or security hereafter held by the Beneficiary. Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement and indemnification as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Guarantor may have against the Supplier or against any
collateral or security shall be junior and subordinate to any rights the
Beneficiary may have against Supplier, to all right, title and interest the
Beneficiary may have in any such collateral or security, and to any right the
Beneficiary may have against such other guarantor.

     8. Representations and Warranties of Guarantor. Guarantor represents and
warrants to NPC as follows:

     (a)  Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation. Guarantor has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.

     (b)  Guarantor has the corporate power and authority to execute and deliver
this Guaranty and to consummate the transactions contemplated hereby. The
execution and delivery of this Guaranty and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Guarantor, and no other corporate proceedings on the part of
Guarantor, including the approval of its shareholders, are necessary to
authorize this Guaranty or to consummate the transactions so contemplated. This
Guaranty has been duly and validly executed and delivered by Guarantor and
constitutes a valid and binding agreement of Guarantor, enforceable against
Guarantor in accordance with its terms.

     (c)  There are no legal or arbitral proceedings by or before any
governmental or regulatory authority or agency, now pending or (to Guarantor's

                                      H-5
<PAGE>

knowledge) threatened against Guarantor or its subsidiaries that could
reasonably be expected to have a material adverse effect on the consolidated
financial condition, operations or business taken as a whole of it and its
subsidiaries.

     (d)  The representations and warranties made herein will remain true until
Guarantor has fulfilled all obligations to pay in full the Guaranteed
Obligations.

     9. Set Off. In addition to any other rights the Beneficiary may have under
law or in equity, if any amount shall at any time be due and owing by Guarantor
to the Beneficiary under this Guaranty, the Beneficiary is authorized at any
time or from time to time, without notice (any such notice being expressly
waived), to set off and to appropriate and to apply any indebtedness of the
Beneficiary owing to Guarantor and any other property of Guarantor held by the
Beneficiary to or for the credit or the account of Guarantor against and on
account of the Guarantied Obligations and liabilities of Guarantor to the
Beneficiary under this Guaranty.

     10.  Disputes. Any action, claim or dispute arising out of or relating to
this Guaranty (any such action, claim or dispute, a "Dispute") shall be
submitted in writing to the other Party. In the event Guarantor and NPC are
unable to resolve the Dispute satisfactorily within thirty (30) days from the
receipt of notice of the Dispute, either Guarantor or NPC may initiate
arbitration through the serving and filing of a demand for arbitration.
Guarantor and NPC expressly agree that such arbitration shall be the exclusive
means to further resolve any Dispute and hereby irrevocably waive their right to
a jury trial with respect to any Dispute, provided that at any time a request
made for provisional remedies requesting preservation of respective rights and
obligations under the Guaranty may be resolved by a court of law located in the
County of the principal place of business of NPC. Arbitration shall be conducted
in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA.

     11.  Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of NPC and, in the case of any such amendment or modification,
Guarantor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.

     12.  Miscellaneous. It is not necessary for Beneficiary to inquire into the
capacity or powers of Guarantor or Supplier or the officers, directors or any
agents acting or purporting to act on behalf of any of them.

     The rights, powers and remedies given to Beneficiary by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiary by virtue of any statute or rule of law or in the
TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or

                                      H-6
<PAGE>

remedy or be construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.

     In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

     This Guaranty shall inure to the benefit of Beneficiary and its respective
successors and assigns.

     13.  Notices. All notices, requests, demands, waivers, consents and other
communications hereunder shall be in writing, shall be delivered either in
person, by telegraphic, facsimile or other electronic means, by overnight air
courier or by mail, and shall be deemed to have been duly given and to have
become effective (a) upon receipt if delivered in person or by telegraphic,
facsimile or other electronic means, (b) one (1) business day after having been
delivered to an air courier for overnight delivery or (c) three (3) business
days after having been deposited in the U.S. mails as certified or registered
mail, return receipt requested, all fees prepaid, directed to the parties at the
following addresses:

     If to Guarantor, addressed to:

     If to NPC, addressed to:      William E. Peterson
                                   Nevada Power Company
                                   6100 Neil Road
                                   Reno, Nevada 89511
                                   Facsimile:  (775) 834-5959

     IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
and delivered by its officers thereunto duly authorized as of the date first
written above.

                        By: __________________________
                        Title:_________________________
                        Address: __________________________
                                 ___________________________
                                 ___________________________

                                      H-7
<PAGE>

                                   EXHIBIT I
                           COMPANY OBSERVED HOLIDAYS

                New Year's Day              January 1/st/
                Martin Luther King's Day    Third Monday in January
                President's Day             Third Monday in February
                Memorial Day (observed)     Last Monday in May
                Independence Day            July 4/th/
                Labor Day                   First Monday in September
                Veteran's Day               November 11/th/
                Thanksgiving Day            Fourth Thursday in November
                Thanksgiving Friday         Friday after Thanksgiving
                Christmas Eve               December 24/th/
                Christmas Day               December 25/th/

     Holidays falling on Saturday will be observed on the preceding Friday and
those falling on Sunday will be observed on the following Monday.

                                      I-1
<PAGE>

                                   EXHIBIT J
                          ADJUSTMENTS TO TPPA AMOUNT

<TABLE>
<CAPTION>
                            Monthly                                                                     Monthly
     Month                 Adjustment                                                 Month             Adjustment
---------------------------------------------                             ---------------------------------------------
<S>                        <C>                                            <C>                           <C>
            Mar-01                      1.1%                                              Mar-02                  1.4%
            Apr-01                      2.4%                                              Apr-02                  3.1%
            May-01                      2.7%                                              May-02                  3.2%
            Jun-01                      3.0%                                              Jun-02                  3.3%
            Jul-01                     12.4%                                              Jul-02                  9.7%
            Aug-01                     12.7%                                              Aug-02                  9.9%
            Sep-01                     12.9%                                              Sep-02                 10.0%
            Oct-01                      2.2%                                              Oct-02                  1.8%
            Nov-01                      2.3%                                              Nov-02                  1.9%
            Dec-01                      2.4%                                              Dec-02                  1.9%
            Jan-02                      1.3%                                              Jan-03                  1.6%
            Feb-02                      1.4%                                              Feb-03                  1.6%
</TABLE>

Example 1 - Effective Date of Agreement is April 15, 2001
---------------------------------------------------------

A.   TPPA Amount:                       $         15,000,000

<TABLE>
<CAPTION>
                               B                            C                         D
                            Monthly                    Applicable                Applicable
      Month               Adjustment                    Portion *                Adjustment
---------------------------------------------------------------------------------------------
                                                                                   (B x C)
<S>                       <C>                          <C>                       <C>           <C>
            Apr-01                      2.4%                           50.0%          1.2%
            May-01                      2.7%                          100.0%          2.7%
---------------------------------------------------------------------------------------------
      Total                                                                           3.9%

E.  Total of Monthly Applicable Adjustments                                                              3.9%
F   Adjusted TPPA Amount                                                 (A x (1+D))           $  15,585,000
=======================================================================================================================
</TABLE>

Example 2 - Effective Date of Agreement is September 15, 2001
-------------------------------------------------------------

<TABLE>
<CAPTION>
G.    TPPA Amount:                           $   15,000,000
                               H                            I                         J
                            Monthly                    Applicable                Applicable
      Month               Adjustment                    Portion *                Adjustment
----------------------------------------------------------------------------------------------
                                                                                   (H x I)
<S>                      <C>                 <C>                                <C>
            Jun-01                      3.0%                          100.0%                3.0%
            Jul-01                     12.4%                          100.0%               12.4%
</TABLE>

                                      J-1
<PAGE>

                                   EXHIBIT J
                          ADJUSTMENTS TO TPPA AMOUNT

<TABLE>
<S>                            <C>                          <C>                             <C>
     Aug-01                    12.7%                        100.0%                          12.7%
     Sep-01                    12.9%                         50.0%                           6.5%
-------------------------------------------------------------------------------------------------
  Total                                                                                     34.6%

K.  Total of Monthly Applicable Adjustments                                                                    34.6%
L   Adjusted TPPA Amount                                               (G x (1-K))                 $      9,810,000
===================================================================================================================
</TABLE>

Example 3 - Termination Date of December 31, 2002
-------------------------------------------------

M.   TPPA Amount:                           $         15,000,000

<TABLE>
<CAPTION>
                               N                            O                         P
                            Monthly                    Applicable                Applicable
      Month               Adjustment                   Portion **                Adjustment
------------------------------------------------------------------------------------------------
<S>                       <C>                         <C>                        <C>
                                                                                   (N x O)
          Jan-03                      1.6%                          100.0%                  1.6%
          Feb-03                      1.6%                          100.0%                  1.6%
------------------------------------------------------------------------------------------------
  Total                                                                                     3.2%

Q.  Total of Monthly Applicable Adjustments                                                                      3.2%
R   Payment Amount                                                                 (M x Q)         $         480,000
====================================================================================================================
</TABLE>

*  The applicable portion of the month is the number of days in the month during
which deliveries of energy from Supplier to Buyer were made divided by the
number of days in the month.
** The applicable portion of the month is the number of days in the month during
which deliveries of energy from Supplier to Buyer would have been made divided
by the number of days in the month.

                                   EXHIBIT K
                      ADJUSTMENTS TO MINIMUM ANNUAL TAKE

<TABLE>
<CAPTION>
        A                     B                    C                  D                   E                    F
                         Base Number          Base Energy         Sales per         Current Number      Adjusted Energy
     Class *            of Customers          Sales (MWh)       Customer (MWh)       of Customers         Sales (MWh)
--------------------------------------------------------------------------------------------------------------------------
                                                                   (C / B)                                (D x E) **
<S>                     <C>                   <C>               <C>                 <C>                 <C>
Residential                        475,000         5,800,000                   12            470,000             5,738,947
Commercial                          65,000         2,800,000                   43             60,000             2,584,615
Industrial                           1,000         4,900,000                                     800             3,600,000
Street Lighting                          5           130,000                                       5               130,000
</TABLE>

                                      J-2
<PAGE>

                                   EXHIBIT K
                      ADJUSTMENTS TO MINIMUM ANNUAL TAKE

Other Retail                    50        600,000              50       600,000
Wholesale                        5        850,000               5       850,000
-------------------------------------------------------------------------------
                           541,060     15,080,000         530,860    13,503,563

G.  Adjustment to Minimum Annual Take                (F / C)              89.55%
H.  Minimum Annual Take from Exhibit A (MWh)                             40,000
I.  Revised Minimum Annual Take (MWh)                (G x H)             35,820

       J                 K
 Month During     Applicable Min.
 Contract Year   Annual Take (MWh)
----------------------------------
       1                    40,000
       2                    40,000
       3                    40,000
       4                    40,000
       5                    35,820
       6                    35,820
       7                    35,820
       8                    34,000
       9                    34,000
      10                    32,000
      11                    32,000
      12                    32,000
----------------------------------
     Total                 431,460

L.  Minimum Take for Contract Year (MWh)        (Total of K / 12)        35,955

*  As reported on Buyer"s FERC Form 1
** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other
Retail, and Wholesale customers will be based upon actual sales during the base
period.

                                   EXHIBIT L
                   ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE

<TABLE>
<CAPTION>
    A             B               C             D              E *             F            G **
 Dispatch       Supply        Delivered     Permitted         Force       Replacement    Applicable
   Hour      Amount (MWh)   Energy (MWh)  Derating(MWh)   Majeure(MWh)    Energy(MWh)   Energy(MWh)
-------------------------------------------------------------------------------------------------------
                                                                                         (C+D+E+F)
<S>          <C>            <C>           <C>             <C>             <C>           <C>
    1             72             72                                                         72
    2             72             72                                                         72
    3             72             72                                                         72
</TABLE>

                                      K-2
<PAGE>

                                    EXHIBIT L

                   ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE

<TABLE>
<CAPTION>
           <S>                <C>               <C>                <C>               <C>               <C>               <C>
            4                 72                72                                                                       72
            5                 72                72                                                                       72
            6                 72                52                 20                                                    72
            7                 72                52                 20                                                    72
            8                 72                52                                                     20                72
            9                 72                72                                                                       72
           10                 72                72                                                                       72
           11                 72                72                                                                       72
           12                 72                72                                                                       72
           13                 72                 0                                   72                                  72
           14                 72                 0                                   72                                  72
           15                 72                 0                                   72                                  72
           16                 72                 0                                   72                                  72
           17                 72                22                                                     30                52
           18                 72                72                                                                       72
           19                 72                72                                                                       72
           20                 72                72                                                                       72
           21                 72                72                                                                       72
           22                 72                72                                                                       72
           23                 72                72                                                                       72
           24                 52                52                                                                       52
           25                 42                42                                                                       42
           26                 52                52                                                                       52
           27                 42                12                 30                                                    42
           28                 52                52                                                                       52
           29                 72                72                                                                       72
           30                 72                72                                                                       72
           31                 72                72                                                                       72
           32                 72                72                                                                       72
           33                 72                72                                                                       72
           34                 72                72                                                                       72
           35                 72                72                                                                       72
           36                 72                72                                                                       72
---------------------------------------------------------------------------------------------------------------------------
        total              2,472             2,044                 70               288                50             2,452
</TABLE>

*  Includes energy excused because of Supplier's and Buyer's events of Force
   Majeure
** G cannot be greater than B

                                      L-2
<PAGE>

                                   EXHIBIT M
                    CONTRACTUAL AND OPERATIONAL CONSTRAINTS

1.   For the purposes of this Exhibit M, "Constrained Capacity" shall mean that
     portion of the Asset Bundle Capacity that has been designated as being
     subject to contractual and operational constraints in accordance with the
     provisions of this Exhibit M.

2.   Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset
     Bundle Capacity in excess of the Supply Amount, shall not be applicable to
     Constrained Capacity.

3.   Asset Bundle Capacity scheduled in accordance with Section 5.1 of the
     Agreement, which addresses Buyer's notifications to Supplier, shall not be
     deemed to include Constrained Capacity unless Buyer's schedules
     specifically designate Constrained Capacity as being applicable to the
     schedules.

4.   The Asset Bundle Capacity described in the following table shall be deemed
     Constrained Capacity.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   Source of Capac-                                        Monthly                                Daily
          ity                 Annual Limit                  Limit             Daily Limit        Start-Up        Minimum Load
-----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                              <C>                <C>                <C>             <C>
                          6,135 hours if operated on
         Unit 3                  natural gas/1/                                  20 hours at
     (72 MW summer)                                         None              max. capacity         1               30 MW
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

_____________________
/1/  The number of operating hours shall be decreased in accordance with the
environmental permits for the Harry Allen Unit if that unit is operated on oil.
The basis for such reductions will be the overall level of NOx emissions.

                                      M-2

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