Document:

<PAGE>
                                                                  Exhibit 10.107
                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                      AMONG

                         ARIZONA PUBLIC SERVICE COMPANY

                          DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                              NEVADA POWER COMPANY

                         SALT RIVER PROJECT AGRICULTURAL
                         IMPROVEMENT AND POWER DISTRICT

                          TUCSON GAS & ELECTRIC COMPANY

                          THE UNITED STATES OF AMERICA

                                                                   DWP No. 10498

<PAGE>

                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

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

                                       i

<PAGE>

Navajo Project
Co-Tenancy Agreement
Table of Contents

<TABLE>
<CAPTION>

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

                                       ii

<PAGE>

Navajo Project
Co-Tenancy Agreement
Table of Contents

<TABLE>
<CAPTION>

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

EXHIBITS

     A        NAVAJO GENERATING STATION

B & B-B       TRANSMISSION SYSTEM

     C        NAVAJO PROJECT GENERAL PROVISIONS

                                      iii

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                                 NAVAJO PROJECT
                              CO-TENANCY AGREEMENT

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

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

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

                                       1
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      Central Arizona Project. Pursuant to Section 303 of said Act, the
      Secretary is authorized to enter into agreements with non-Federal
      interests proposing to construct thermal generating Power plants whereby
      the United States shall acquire the right to such portions of their
      Capacity, including the delivery of Power and Energy over the appurtenant
      transmission facilities to mutually agreed upon delivery points, as he
      determines are required in connection with the operation of the Central
      Arizona Project.

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

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

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

                                       2

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

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

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

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

                                       3

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

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

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

3.    AGREEMENT: The Participants agree as follows:

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

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

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

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

                                       4

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

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

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

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

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

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

                                      -5-

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      in accordance with Accounting Practice would be capitalized.

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

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

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

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

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

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

            5.14 CONTRACTS FOR INTERIM SALE OF UNITED STATES'

                                      -6-

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

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

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

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

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

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

                                      -7-

<PAGE>

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

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

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

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

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

            5.18 ENERGY: Kilowatt-hours (kwh).

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

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

                                      -8-

<PAGE>

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

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

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

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

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

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

                                      -9-

<PAGE>

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

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

            5.26 NAVAJO TRIBE: The Navajo Tribe of Indians.

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

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

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

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

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

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

                                      -10-

<PAGE>

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

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

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

                                      -11-

<PAGE>

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

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

            5.37 RAILROAD: The railroad described in Exhibit A hereto.

            5.38 SECRETARY: The Secretary of the Interior.

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

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

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

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

                                      -12-

<PAGE>

      reconstruction, of or for the Navajo Generating Station.

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

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

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

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

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

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

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

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

6.    OWNERSHIPS AND TITLES:

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

            6.1.1       Arizona         = 14.0%

            6.1.2       Los Angeles     = 21.2%

            6.1.3       Nevada          = 11.3%

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

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

            6.1.5       Tucson          =  7.5%

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

                                      -14-
<PAGE>

            6.2.1 Navajo 500 kv Switchyard

                  Navajo-Moenkopi 500 kv line

                  (i)   Arizona         = 14.0%

                  (ii)  Los Angeles     = 21.2%

                  (iii) Nevada          = 11.3%

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

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

                  (v)   Tucson          =  7.5%

            6.2.2 Navajo-Westwing 500 kv line

                  Moenkopi-Westwing 500 kv line

                  Westwing 500 kv Switchyard

                  (i)   Arizona         = 24.7%

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

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

                  (iii) Tucson          = 13.3%

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

                  (i)   Arizona         = 28.5%

                                      -15-
<PAGE>

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

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

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

                  (i)   Arizona         = 19.5%

                  (ii)  Tucson          = 80.5%

            6.2.5 Westwing 230 kv Switchyard

                  (i)   Arizona         = 39.9%

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

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

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

                  (i)   Arizona         = 32.1%

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

                                          31.8% for the use and

                                      -16-
<PAGE>

                                                benefit of the United States in
                                                accordance with Project
                                                Agreements.

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

            6.2.7 Navajo-McCullough 500 KV line and McCullough Line Compensation

                  (i)   Los Angeles     = 48.9%

                  (ii)  Nevada          = 26.1%

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

            6.2.8 McCullough 500 kv Switchyard

                  (i)   Los Angeles     = 74.8%

                  (ii)  Nevada          = 19.0%

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

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

                  (i)   Los Angeles     = 67.9%

                  (ii)  Nevada          = 23.9%

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

                                      -17-
<PAGE>

                                                benefit of the United States in
                                                accordance with Project
                                                Agreements.

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

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

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

                                      -18-
<PAGE>

      any successor following such transfer or assignment.

7.    ENTITLEMENT TO NAVAJO GENERATING STATION CAPACITY AND ENERGY:

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

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

8.    USE OF THE TRANSMISSION SYSTEM:

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

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

                                      -19-
<PAGE>

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

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

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

            8.5 The Participants' designated points of

                                      -20-
<PAGE>

      delivery shall be as follows:

                  8.5.1 Arizona      =  Navajo 500 kv Switchyard and Westwing
                                        Substation.

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

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

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

                  8.5.5 Tucson       =  Navajo 500 kv Switchyard and Westwing
                                        Substation.

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

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

            8.7 Upon agreement with all the other Partici-

                                      -21-
<PAGE>

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

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

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

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

                                      -22-
<PAGE>

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

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

9.    ADMINISTRATION:

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

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

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

            9.2.1 Provide liaison among the Participants at the management
                  level.

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

            9.2.3 Consider matters referred to it by another committee.

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

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

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

                                      -24-

<PAGE>

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

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

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

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

                                      -25-
<PAGE>

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

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

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

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

            9.5.2 Review accounting and financial

                                      -26-
<PAGE>

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

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

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

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

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

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

                                      -27-
<PAGE>

      Project Agreements.

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

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

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

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

                                      -28-
<PAGE>

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

11.   MORTGAGE AND TRANSFER OF INTERESTS:

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

                                      -29-
<PAGE>

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

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

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

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

           11.3.2 To any entity merged or consolidated

                                      -30-
<PAGE>

                  with  such Co-Tenant; or

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

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

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

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

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

                                      -31-
<PAGE>

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

12.   RIGHT OF FIRST REFUSAL:

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

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

                  12.1.2 The fair market value.

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

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

                                      -32-
<PAGE>

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

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

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

                                      -33-

<PAGE>

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

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

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

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

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

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

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

                                      -35-
<PAGE>

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

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

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

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

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

13.   DESTRUCTION :

            13.1 If a generating unit of the Navajo Generat-

                                       36

<PAGE>

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

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

                                      -37-
<PAGE>

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

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

15.   CAPITAL IMPROVEMENTS:

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

                                       38

<PAGE>

      by laws and regulations applicable to the Navajo Project.

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

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

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

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

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

            16.2 Salt River Project shall not execute any

                                      -39-
<PAGE>

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

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

                                       40
<PAGE>

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

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

                                      -41-
<PAGE>

      excess to the United States or its designee.

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

18.   DEFAULTS AND COVENANTS REGARDING OTHER AGREEMENTS:

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

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

                                      -42-
<PAGE>

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

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

            18.4 In the event that any Participant shall

                                      -43-
<PAGE>

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

                                       44
<PAGE>

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

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

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

                                      -45-
<PAGE>

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

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

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

                                      -46-
<PAGE>

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

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

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

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

                                       47
<PAGE>

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

19.   ARBITRATION:

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

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

                                      -48-
<PAGE>

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

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

                                      -49-
<PAGE>

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

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

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

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

            19.7 The award of the arbitrators shall contain

                                       50
<PAGE>

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

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

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

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

                                       51
<PAGE>

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

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

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

                                       52
<PAGE>

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

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

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

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

22.   COVENANTS RUNNING WITH THE LAND:

                                       53
<PAGE>

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

                  22.1.1 Each such Co-Tenant;

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

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

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

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

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

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

23.   RELATIONSHIP OF PARTICIPANTS:

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

                                      -55-
<PAGE>

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

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

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

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

                                      -56-
<PAGE>

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

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

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

                                      -57-

<PAGE>

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

28.   NONDEDICATION OF FACILITIES:

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

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

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

29.   ENVIRONMENTAL PROTECTION:

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

                                      -58-
<PAGE>

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

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

                                      -59-
<PAGE>

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

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

                  29.2.2 The Participants during normal working

                                      -60-
<PAGE>

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

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

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

            29.4 The Participants shall take appropriate

                                      -61-

<PAGE>

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

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

31.   USE OF FACILITIES OF LOS ANGELES:

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

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

                                      -62-
<PAGE>

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

32.   NOTICES

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

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

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

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

                                      -63-
<PAGE>

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

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

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

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

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

33.   MISCELLANEOUS PROVISIONS CONCERNING THE PROJECT AGREEMENTS:

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

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

                                      -64-
<PAGE>

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

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

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

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

            33.7 It is acknowledged by the Participants that

                                      -65-

<PAGE>

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

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

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

                                      -66-
<PAGE>

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

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

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

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

35.   COMPLIANCE WITH COMPACTS:

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

                                      -67-
<PAGE>

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

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

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

                                      -68-
<PAGE>

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

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

                               UNITED STATES OF AMERICA

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

                               ARIZONA PUBLIC SERVICE COMPANY

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

ATTEST:

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

                               DEPARTMENT OF WATER AND POWER
                               OF THE CITY OF LOS ANGELES

                                          by

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

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

                                                     and

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

                                      -69-
<PAGE>

                               NEVADA POWER COMPANY

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

ATTEST:

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

                               SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
                               POWER DISTRICT

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

ATTEST:

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

                               TUCSON GAS & ELECTRIC COMPANY

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

ATTEST:

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

District of           )
                      )  ss
Columbia              )

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

                                      -70-

<PAGE>

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

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

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

My commission expires:
Sept, 30, 1973

State of Arizona      )
                      ) ss
County of Maricopa    )

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

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

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

My commission expires:
March 30, 1973

                                      -71-
<PAGE>

State of California     )
                        ) ss
County of Los Angeles   )

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

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

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

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

State of Nevada    )
                   ) ss
County of Clark    )

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

                                      -72-
<PAGE>

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

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

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

My commission expires:

______________________

State of Arizona        )
                        )  ss
County of Maricopa      )

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

                                      -73-

<PAGE>

purposes therein contained.

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

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

My commission expires:

My Commission Expires July 11, 1972

State of Arizona   )
                   )  ss
County of Pima     )

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

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

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

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

                                      -74-
<PAGE>

                                    EXHIBIT A

                            NAVAJO GENERATING STATION

      The Navajo Generating Station shall consist of the following:

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

      II. All auxiliary equipment associated with said units.

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

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

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

      VI. Standby auxiliary Power transformation equipment and related
facilities.

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

<PAGE>

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

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

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

                                       A-2

<PAGE>

                                    Exhibit B

                              TRANSMISSION SYSTEM*

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

      A. NAVAJO 500 KV SWITCHYARD

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

      B. McCULLOUGH LINE COMPENSATION

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

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

                                       B-1

<PAGE>

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

      C. NAVAJO-MOENKOPI 500 KV LINE

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

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

      D. NAVAJO-WESTWING 500 KV LINE

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

            2.    The Project Series Capacitors and shunt

                                      B-2
<PAGE>

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

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

      E. MOENKOPI-WESTWING 500 KV LINE

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

                                       B-3

<PAGE>

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

      F. OTHER ASSOCIATED COMPONENTS

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

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

                                      B-4
<PAGE>

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

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

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

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

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

                                      B-5
<PAGE>

                  and structures.

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

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

      G. WESTWING SUBSTATION

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

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

                                      B-6
<PAGE>

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

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

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

                                      B-7
<PAGE>

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

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

      A. McCULLOUGH SUBSTATION

         The McCullough Substation shall consist of the following components:

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

                                       B-8

<PAGE>

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

      B. NAVAJO-McCULLOUGH 500 KV LINE

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

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

                                       B-9

<PAGE>

      C. WESTERN TRANSMISSION COMMUNICATIONS SYSTEM

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

                                      B-10

<PAGE>

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

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

<PAGE>
                              EXHIBIT B-B SHEET 2

                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                           WESTWING 230 KV SWITCHYARD

                      [WESTWING 230 KV SWITCHYARD CRART]

                                    OWNERSHIP

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

APS                                           39.9%           32.1%

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

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

<PAGE>

                                    Exhibit C

                                 NAVAJO PROJECT

                           GENERAL CONTRACT PROVISIONS

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

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

3.    EQUAL OPPORTUNITY CLAUSE:

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

                                       C-1

<PAGE>

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

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

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

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

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

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

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

                                      C-3
<PAGE>

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

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

                                      C-4
<PAGE>

4. WORK HOURS ACT OF 1962:

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

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

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

                                      C-5
<PAGE>

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

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

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

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

                                      C-6
<PAGE>

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

6.    ASSIGNMENT OF CLAIMS:

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

                                      C-7
<PAGE>

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

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

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

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

                                      C-8
<PAGE>

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

                                      C-9
<PAGE>

                                   CERTIFICATE

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

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

<PAGE>

                          CERTIFIED COPY OF RESOLUTION

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

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

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

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

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

<PAGE>

                   (1)  Participation Agreement

                   (2)  Coordination Agreement

                   (3)  Interconnection Agreement

                   (4)  Plant Site Lease

                   (5)  Fuel Supply and Transportation Agreement

                   (6)  Co-Tenancy Agreement

                   (7)  Moenkopi Agreement

                   (8)  Amendment to Navajo Wholesale Power Agreement

                   (9)  Plant Construction Agreement

                  (10)  Plant Operating Agreement

                  (11)  Transmission Construction Agreement

                  (12)  Transmission Operating Agreement

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

                  (14)  Layoff Agreement

      and

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

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

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

<PAGE>

                                  CERTIFICATION

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

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

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

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

(SEAL)

<PAGE>

                                   CERTIFICATE

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

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

<PAGE>

                                   RESOLUTION

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

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

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

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

                                   CERTIFICATE

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

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

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

<PAGE>

                         TUCSON GAS & ELECTRIC COMPANY

                         Certified Copy of Resolutions
                       Adopted by the Board of Directors

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

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

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

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

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

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

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

                                                              RESOLUTION NO. 556

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

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

Navajo Generating Station
   Construction Agreement                10499

Navajo Project Western
   Transmission System
   Construction Agreement                10500

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

                                      -2-
<PAGE>

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

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

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

                                      -3-
<PAGE>

                              Ordinance No. 148,153

                                  CERTIFICATION

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

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

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

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

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

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

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

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

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

                                TABLE OF CONTENTS

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

                                      -i-

<PAGE>

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

1.    PARTIES:

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

2.    RECITALS:

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

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

<PAGE>

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

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

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

3.    AGREEMENT:

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

4.    EFFECTIVE DATE:

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

5.    AMENDMENT TO SECTION 6.2.4:

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

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

             (i) Tucson                              100%"

                                      -2-

<PAGE>

6.    AMENDMENT TO SECTION 8.5:

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

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

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

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

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

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

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

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

                                      -3-

<PAGE>

7.    AMENDMENT TO EXHIBIT B-B:

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

                                      -4-
<PAGE>

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

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

                                      -5-

<PAGE>

8.    CO-TENANCY AGREEMENT GOVERNS:

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

9.    EXECUTION:

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

                                      -6-

<PAGE>

10.   SIGNATURE CLAUSE:

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

                                     THE UNITED STATES OF AMERICA

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

Approved as to Form:                 ARIZONA PUBLIC SERVICE COMPANY

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

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

                                     By

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

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

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

                                     NEVADA  POWER COMPANY

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

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

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

                                     TUCSON ELECTRIC POWER COMPANY

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

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

1.    PARTIES:

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

2.    RECITALS:

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

<PAGE>

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

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

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

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

<PAGE>

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

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

            6.2.5.2 Waddell 230kV Interconnection

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

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

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

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

<PAGE>

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

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

<PAGE>

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

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

<PAGE>

6.    SIGNATURE CLAUSE:

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

                                    UNITED STATES OF AMERICA

                                    SIGNATURE  /s/ Robert W. Johnson
                                              __________________________________

                                    NAME  Robert W. Johnson
                                         _______________________________________

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

                                    DATE SIGNED  March 3, 1996
                                                ________________________________

                                    ARIZONA PUBLIC SERVICE COMPANY

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

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

                                    DEPARTMENT OF WATER AND  POWER
                                    OF THE  CITY   OF LOS   ANGELES

                                    By

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

                                    and  /s/ Irene N. Kiski
                                        ________________________________________
                                                    Secretary

<PAGE>

                                    NEVADA POWER COMPANY

                                    SIGNATURE  /s/ Steven V. Rigazio
                                              __________________________________

                                    NAME Steven V. Rigazio

                                    TITLE Vice President, Finance and
                                          Planning, Treasurer and CFO

                                    DATE SIGNED  November 28, 1995

                                    SALT RIVER PROJECT AGRICULTURAL
                                    IMPROVEMENT AND POWER DISTRICT

                                    SIGNATURE  /s/ Mark B. Bonsall
                                              __________________________________

                                    NAME  Mark B. Bonsall
                                         _______________________________________

                                    TITLE  Associate General Manager
                                          ______________________________________

                                    DATE SIGNED  August 22, 1995
                                                ________________________________

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

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

                                    NAME        Steven J. Glaser

                                    TITLE       Vice President

                                    DATE SIGNED July 31, 1995

<PAGE>

                              EXHIBIT B-B SHEET 2

                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                       WESTWING 230kV SWITCHYARD CIRCUIT

                                  [FLOW CHART]

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

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

<PAGE>

                                                          APS CONTRACT NO. 48178
                                                                   DWP No. 10498

                                 AMENDMENT NO. 3

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

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

Execution Original

<PAGE>

                                                          APS CONTRACT NO. 48178

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

                                TABLE OF CONTENTS

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

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

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

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

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

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

                                       i
<PAGE>

                                                          APS CONTRACT NO. 48178

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

1     PARTIES

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

2     RECITALS:

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

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

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

                                       1
<PAGE>

                                                    APS CONTRACT NO. 48178

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

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

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

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

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

                                 2
<PAGE>

                                                          APS CONTRACT NO. 48178

3     AMENDMENTS:

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

            "6.2.2 Navajo Westwing 500 kv line

                  Moenkopi-Yavapai 500 kv line

                  Yavapai-Westwing 500 kv line

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

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

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

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

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

            "6.2.2A Yavapai Switchyard

                   Arizona = 100%"

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

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

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

                                       3
<PAGE>

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

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

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

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

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

            "E. MOENKOPI-YAVAPAI 500 KV LINE

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

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

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

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

                                       4
<PAGE>

                                                          APS CONTRACT NO. 48178

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

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

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

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

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

            "G. YAVAPAI SWITCHYARD

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

                                       5

<PAGE>

                                                          APS CONTRACT NO. 48178

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

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

                  "H. YAVAPAI-WESTWING 500 KV LINE

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

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

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

                  "I. WESTWING SUBSTATION

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

                                       6

<PAGE>

                                                          APS CONTRACT NO. 48178

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

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

                  4. Westwing 230 kv Switchyard

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

                                       7

<PAGE>

                                                          APS CONTRACT NO. 48178

                              and land rights.

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

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

4     EFFECT:

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

                                       8

<PAGE>

                                                          APS CONTRACT NO. 48178

5     EXECUTION AND EFFECTIVE DATE:

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

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

                                       9

<PAGE>

                                                          APS CONTRACT NO. 48178

6     SIGNATURE CLAUSE:

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

                                      UNITED STATES OF AMERICA

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

                                      NAME___________________________________

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

                                      DATE SIGNED____________________________

                                      ARIZONA PUBLIC SERVICE COMPANY

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

                                      TITLE__________________________________

                                      DATE SIGNED____________________________

                                      10
<PAGE>

                                                          APS CONTRACT NO. 48178

                                      DEPARTMENT OF WATER AND POWER
                                      OF THE CITY OF LOS ANGELES

                                      By

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

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

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

                                      NEVADA POWER COMPANY

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

                                      NAME Steven W. Rigazio

                                      TITLE Vice President, Finance and
                                             Planning, Treasurer and CFO

                                      DATE SIGNED June 21, 1996

[STAMP]                               SALT RIVER PROJECT AGRICULTURAL
                                      IMPROVEMENT AND POWER DISTRICT

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

                                      NAME Mark B. Bonsall

                                      TITLE Associate General Manager

                                      DATE SIGNED July 25, 1996

                                       11

<PAGE>

                                                          APS CONTRACT NO. 48178

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

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

                                      NAME        Steven J. Glaser

                                      TITLE       Vice President

                                      DATE SIGNED  February 23, 1996

                                       12

<PAGE>

                              EXHIBIT B-B SHEET 1

                      NAVAJO PROJECT CO-TENANCY AGREEMENT

                         TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

<PAGE>

                                                          APS CONTRACT NO. 51763
                                                                   DWP No. 10498

                                 AMENDMENT NO. 4

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

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

Execution Original
<PAGE>
                                                          APS CONTRACT NO. 51763

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

                                TABLE OF CONTENTS

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

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

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

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

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

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

                                        i
<PAGE>

                                                          APS CONTRACT NO. 51763

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

1.    PARTIES

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

2     RECITALS

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

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

                                        1
<PAGE>

                                                           APS CONTRACT NO.51763

            Agreements.

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

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

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

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

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

                                        2
<PAGE>

                                                          APS CONTRACT NO. 51763

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

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

3     AMENDMENTS:

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

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

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

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

                                        3

<PAGE>

                                                          APS CONTRACT NO. 51763

              the Participants' cost responsibility in such segment."

4     EFFECT:

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

5     EXECUTION AND EFFECTIVE DATE

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

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

                                        4
<PAGE>

                                                          APS CONTRACT NO. 51763

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

                                        5
<PAGE>

                                                          APS CONTRACT NO. 51763
SIGNATURE CLAUSE:

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

                              UNITED STATES OF AMERICA

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

                              TITLE   U.S. Bureau of Reclamation

                              DATE SIGNED    [ILLEGIBLE]

                              ARIZONA PUBLIC SERVICE COMPANY

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

                              TITLE  Director Transmission Operations & Planning

                              DATE SIGNED      December 17, 1996

                                       6

<PAGE>

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

                                                         APS CONTRACT NO. 51763

                                        DEPARTMENT OF WATER AND POWER
                                        OF THE CITY OF LOS ANGELES

                                        By

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

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

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

                                        NEVADA POWER COMPANY

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

                                        TITLE Vice President, Finance and

                                              Planning, Treasurer and CFO

                                        DATE SIGNED December 11, 1996

                                        SALT RIVER PROJECT AGRICULTURAL
                                        IMPROVEMENT AND POWER DISTRICT

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

                                        TITLE ASSOCIATE GENERAL MANAGER

                                        DATE SIGNED  DECEMBER 30, 1996

                                        7

<PAGE>

                                                          APS CONTRACT NO. 51763

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

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

                          TITLE Manager, System Control

                          DATE SIGNED December 20, 1996

                                       8

<PAGE>

                                 AMENDMENT NO. 5

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

      By FERC order/notice of acceptance dated ___________________ in FERC

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

      rate schedules became effective on _____________________.

EXECUTION ORIGINAL
 January 23, 1998

<PAGE>

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

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

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

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

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

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

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

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

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

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

 D              ORIGINAL WESTWING 230 KV SWITCHYARD OWNERSHIP PERCENTAGES

 E              McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

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

                                        i

<PAGE>

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

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

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

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

                                       1
<PAGE>

                  established certain rights and obligations under the Project
                  Agreements.

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

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

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

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

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

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

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

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

                                       3

<PAGE>

4.    AGREEMENT MODIFICATIONS:

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

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

            "EXHIBITS

            A     NAVAJO GENERATING STATION

            B     TRANSMISSION SYSTEM

            B-B   TRANSMISSION SYSTEM OWNERSHIP

            C     NAVAJO PROJECT GENERAL PROVISIONS

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

            E     McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

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

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

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

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

                                       4

<PAGE>

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

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

            "6.2.5 Westwing 230 kV Switchyard

                   6.2.5.1 Original Westwing 230 kV Switchyard (including common
                           facilities)

                           (i)  Arizona  =  32.1%

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

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

                                       5

<PAGE>

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

                   6.2.5.2 Waddell 230 kV Interconnection

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

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

            "6.2.8 McCullough 500 kV Switchyard

                   (i)   Los Angeles = 70.1%

                   (ii)   Nevada = 17.4%

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

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

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

                                       6

<PAGE>

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

                   (i) Los Angeles = 70.1%

                   (ii)  Nevada    = 17.4%

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

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

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

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

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

                                       7

<PAGE>

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

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

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

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

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

            "A.   NAVAJO 500 KV SWITCHYARD

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

                                       8

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

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

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

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

                                       9

<PAGE>

            "G,   YAVAPAI SWITCHYARD

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

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

                                       10

<PAGE>

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

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

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

                                       11

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

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

            "A,   McCOLLOUGH FACILITIES

                  The McCullough Facilities shall consist of the following
                  components:

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

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

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

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

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

                                      13
<PAGE>

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

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

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

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

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

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

                                      14
<PAGE>

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

6.    EXECUTION AND EFFECTIVE DATE:

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

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

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

                                      15
<PAGE>

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

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

                                   UNITED STATES OF AMERICA

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

                                   Name      LeGrand Neilson

                                             Regional Director
                                             ACTING FOR Lower Colorado Region

                                   Title     U.S. Bureau of Reclamation

                                   Date Signed     September 4, 1998

                                   ARIZONA PUBLIC SERVICE COMPANY

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

                                   Title     Executive V. P.
                                             Commercial Operation

                                   Date Signed 3/16/98

                                      16
<PAGE>

                                                                     [ILLEGIBLE]

                                   DEPARTMENT OF WATER AND POWER
                                   OF THE CITY OF LOS ANGELES

                                   by

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

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

                                   NEVADA POWER COMPANY

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

                                   Name      Authorized Signatory

                                   Title     Vice President, Finance and
                                             Planning,  Treasurer and CFO

                                   Date Signed     2/26/98

                                   SALT RIVER PROJECT AGRICULTURAL
                                   IMPROVEMENT AND POWER DISTRICT

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

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

   DATE  2.13.98                   Title      Associate General Manager

                                   Date Signed    02/20/98

                                   TUCSON ELECTRIC POWER COMPANY

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

                                   Name        T. A. Authorized Signatory

                                   Title       Vice President

                                   Date Signed       3-20-98

                                      17
<PAGE>

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

                          TRANSMISSION SYSTEM OWNERSHIP

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

                                      BB-1
<PAGE>

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

                           NAVAJO GENERATING STATION
                                      AND
                            NAVAJO 500 KV SWITCHYARD

                               [CIRCUIT DIAGRAM]

                                      BB-2
<PAGE>

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

                           MOENKOPI 500 KV SWITCHYARD
                                      AND
                           YAVAPAI 500 KV SWITCHYARD

                               [CIRCUIT DIAGRAM]

                                      BB-3
<PAGE>

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

                              WESTWING SUBSTATION

                               [CIRCUIT DIAGRAM]

                                      BB-4
<PAGE>

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

                             McCULLOUGH SUBSTATION

                               [CIRCUIT DIAGRAM]

                                      BB-5
<PAGE>

                                   EXHIBIT D

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

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

Sum of Ownership Percentages:

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

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

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

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

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

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

                                      D-1
<PAGE>

                                   EXHIBIT E

               MCCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

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

Sum of Ownership Percentages:

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

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

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

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

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

                                                               Dated:[ILLEGIBLE]

                                      E-1
<PAGE>

                                   EXHIBIT F

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

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

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

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

                          500 kV Ownership Percentages
                                       for
                    McCullough Substation Common Facilities

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

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

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

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

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

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

                                       F-1
<PAGE>

                                                                          [SEAL]

                                AMENDMENT NO. 6

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

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

EXECUTION ORIGINAL
  July 31, 1998

<PAGE>

                                AMENDMENT NO. 6

                                     TO THE

                                 NAVAJO PROJECT

                              CO-TENANCY AGREEMENT

                               TABLE OF CONTENTS

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

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

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

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

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

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

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

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

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

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

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

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

 E             McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

 G             CRYSTAL 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

 H             CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
</TABLE>

<PAGE>

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

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

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

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

                                       1
<PAGE>

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

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

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

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

                                        2
<PAGE>

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

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

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

                                       3
<PAGE>

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

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

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

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

                                       4
<PAGE>

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

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

4.    AGREEMENT MODIFICATIONS:

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

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

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

            "6.2.2A Yavapai Switchyard

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

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

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

                                       5
<PAGE>

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

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

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

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

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

            "6.2.7A Crystal Facilities

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

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

                                       6
<PAGE>

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

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

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

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

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

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

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

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

                                       7
<PAGE>

            "B.   NAVAJO-CRYSTAL LINE COMPENSATION

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

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

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

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

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

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

                                       8
<PAGE>

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

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

            "B.   NAVAJO-CRYSTAL 500 KV LINE

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

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

                                       9
<PAGE>

            "C.   CRYSTAL FACILITIES

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

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

                                       10
<PAGE>

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

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

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

            "D.   CRYSTAL-McCULLOUGH 500 KV LINE

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

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

                                       11
<PAGE>

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

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

            "E.   WESTERN TRANSMISSION COMMUNICATIONS SYSTEM

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

                  1.    EQUIPMENT AT NAVAJO 500 KV SWITCHYARD: The Backbone
                        Radio Frequency (RF) System shall include the following:
                        (i) RF microwave equipment; (ii) the coaxial cable;
                        (iii) the antenna; and (iv) batteries and battery
                        chargers. The antenna and the coaxial cable shall be
                        located in the Navajo 500 kV Switchyard and mounted on a
                        tower structure which is part of the Navajo 500 kV
                        Switchyard. The microwave equipment shall be located in
                        the carrier room.

                  2.    EQUIPMENT AT REPEATER STATIONS: The Backbone RF System
                        shall include the following: (i) RF microwave equipment
                        (digital or analog); (ii) all baseband treatment,
                        including but not limited to amplifiers, bridges,
                        filters, pads, and power supplies; (iii) supervisory
                        alarm and control system; (iv) auxiliary power units,
                        generators, fuel tanks, batteries, battery chargers and
                        associated equipment; (v) buildings and associated
                        electrical wiring, lighting, and air conditioning
                        equipment; (vi) all tower

                                       12
<PAGE>

                        structures, antennas, coaxial cable, mounting
                        brackets, and associated equipment; (vii) microwave
                        site property including fencing and other required
                        improvements; (viii) roads required for microwave site
                        access; and (ix) any other material and/or equipment
                        which may be required to implement the Backbone RF
                        System.

                  3.    EQUIPMENT AT RED MOUNTAIN: The Backbone RF System shall
                        include the following: (i) RF microwave equipment; (ii)
                        all baseband treatment; (iii) supervisory alarm and
                        control system; (iv) the antenna; and (v) the coaxial
                        cable."

      4.15  Sheets 1, 2, 4 and 5 of Exhibit B-B, TRANSMISSION SYSTEM OWNERSHIP,
            to the Co-Tenancy Agreement are hereby deleted in their entirety and
            replaced by new Sheets 1, 2, 4, 5 and 6 attached hereto and by this
            reference incorporated herein.

      4.16  Exhibit E, McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES, to
            the Co-Tenancy Agreement is hereby deleted in its entirety and
            replaced by a new Exhibit E attached hereto and by this reference
            incorporated herein.

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

      4.18  A new Exhibit H, CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP
            PERCENTAGES (500 KV PORTION ONLY), attached hereto and by this
            reference incorporated herein, is hereby appended to the Co-Tenancy
            Agreement.

5.    EFFECT: Except for the changes set forth in this Amendment No. 6, all
      provisions of the Co-Tenancy Agreement as supplemented by Supplement No. 1
      and as amended by Amendment Nos. 1, 2, 3, 4 and 5 shall remain in full

                                       13
<PAGE>

      force and effect to the extent that such provisions are not in conflict or
      inconsistent with this Amendment No. 6. In the event of any conflict
      between the provisions of this Amendment No. 6 and the Co-Tenancy
      Agreement as supplemented by Supplement No. 1 and as amended by Amendment
      Nos. 1, 2, 3, 4 and 5, the provisions of this Amendment No. 6 shall
      govern.

6.    EXECUTION AND EFFECTIVE DATE:

      6.1   This Amendment No. 6 may be executed in any number of counterparts
            and, upon execution and delivery by each Participant, the executed
            and delivered counterparts together shall have the same force and
            effect as an original instrument as if all the Participants had
            signed the same instrument. Any signature page of this Amendment No.
            6 may be detached from any counterpart of this Amendment No. 6
            without impairing the legal effect of any signatures thereon, and
            may be attached to another counterpart of this Amendment No. 6
            identical in form thereto, but having attached to it one or more
            signature pages.

      6.2   When this Amendment No. 6 to the Co-Tenancy Agreement has been
            executed by, and delivered to, the duly authorized representative of
            each Participant, Nevada shall promptly file this Amendment No. 6
            with FERC and, if accepted for filing by FERC without condition or
            modification, this Amendment No. 6 shall be effective as of the date
            specified by Nevada in the filing letter to FERC.

      6.3   In the event FERC conditions or modifies this Amendment No. 6,
            Nevada shall promptly notify all the other Participants. Upon
            written notice given within thirty (30) days from the date of
            Nevada's notice to all other Participants by any Participant that
            such condition or modification is objectionable, this Amendment No.
            6 shall terminate and be of no further force or effect. If no
            written notice is given by any Participant that such condition or

                                       14
<PAGE>

            modification is objectionable within such thirty (30) day period,
            this Amendment No. 6 shall become effective the day after such
            thirty (30) day period.

7.    SIGNATURE CLAUSE: Each Participant hereto represents and warrants that the
      person executing this Amendment No. 6 to the Navajo Project Co-Tenancy
      Agreement has been duly authorized to act on its behalf. This Amendment
      No. 6 to the Navajo Project Co-Tenancy Agreement is hereby executed as of
      the 26th day of july, 1999.

                                    UNITED STATES OF AMERICA

                                    Signature /s/ Robert W. Johnson
                                              ----------------------------------

                                    Name Robert W. Johnson

                                          Regional Director
                                          Lower Colorado Region
                                    Title U.S. Bureau of Reclamation

                                    Date Signed Jul 26 1999

                                    ARIZONA PUBLIC  SERVICE COMPANY

                                    Signature /s/ Jack Davis
                                              ----------------------------------
[STAMP]
                                    Name Jack Davis

                                    Title Executive Vice President

                                    Date Signed September 30, 1998

                                    DEPARTMENT OF WATER AND POWER
                                    OF THE CITY OF LOS ANGELES

                                    by

APPROVED AS TO FORM AND LEGALITY    BOARD OF WATER AND POWER COMMISSIONERS
  JAMES K. HAHN CITY ATTORNEY       OF THE CITY OF LOS ANGELES
        MAY 07 1999

By /s/ Kjehl T. Johansen            By /s/ S. David Freeman
   -----------------------------       -----------------------------------------
   KJEHL T JOHANSEN                 S. DAVID FREEMAN, General Manager
   Deputy City Attorney

                                    and /s/ Authorized Signatory
                                        ----------------------------------------
                                                        Secretary

                                    Date Signed Authorized Signatory

                                       15

<PAGE>

                                    NEVADA POWER COMPANY

                                    Signature /s/ Steven W. Rigazio
                                              ----------------------------------

                                    Name Steven W. Rigazio

                                    Title Vice President, Finance and
                                          Planning, Treasurer and CFO

                                    Date Signed October 15, 1998

                                    SALT RIVER PROJECT AGRICULTURAL
                                    IMPROVEMENT AND POWER DISTRICT

                                    Signature /s/ Richard H. Silverman
                                              ----------------------------------

       APPROVED AS TO FORM          Name Richard H. Silverman
SALT RIVER PROJECT LEGAL SERVICES

 By /s/ Authorized Signatory        Title General Manager
    ------------------------------

DATE 10-29-98                       Date Signed December 18,1998

                                    TUCSON ELECTRIC POWER COMPANY

                                    Signature /s/ T.A. Delawdev
                                              ----------------------------------

                                    Name T.A. Delawdev

                                    Title Vice President

                                    Date Signed 12-22-98

                                       16

<PAGE>

                              EXHIBIT B-B, SHEET 1
                      NAVAJO PROJECT CO-TENANCY AGREEMENT

                          TRANSMISSION SYSTEM OWNERSHIP

                                  [FLOW CHART]

                     [TRANSMISSION SYSTEM OWNERSHIP CHART]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

                                                                Revised: 7/31/98
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                                      BB-1

<PAGE>

                              EXHIBIT B-B, SHEET 2
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                            NAVAJO GENERATING STATION
                                       AND
                            NAVAJO 500 kV SWITCHYARD

                                [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

                                                                Revised: 7/31/98
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                                      BB-2

<PAGE>

                              EXHIBIT B-B, SHEET 4
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                               WESTWING SUBSTATION

                                [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

**Ownership percentage calculation shown in Exhibit D.

                                                                Revised: 7/31/98
                                                                AutoCad

                                      BB-4

<PAGE>

                              EXHIBIT B-B, SHEET 5
                      NAVAJO PROJECT CO-TENANCY AGREEMENT
                         TRANSMISSION SYSTEM OWNERSHIP

                              McCULLOUGH SUBSTATION

                               [CIRCUIT DIAGRAM]

*SRP holds title for the use and benefit of
the United States, Department of the
Interior (Bureau of Reclamation).

**Ownership percentage calculation shown in Exhibit E.

***Ownership percentage calculation shown in Exhibit F.

                                      Note: The McCullough 230 kV switchyard and
                                      transformer banks H.I and J are shown for
                                      information purposes only.

                                                                Revised: 7/31/98
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<PAGE>

                              EXHIBIT B-B, SHEET 6
                       NAVAJO PROJECT CO-TENANCY AGREEMENT
                          TRANSMISSION SYSTEM OWNERSHIP

                               CRYSTAL SUBSTATION

                                [CIRCUIT DIAGRAM]

Legend:

          Termination

___  ___  Crystal 500 kV Switchyard

                                   Note: The Crystal 230 kV switchyard, the
                                   500/230 kV transformers banks, and the 230 kV
                                   phase-shifting transformers are shown for
                                   information purposes only.

                                                                Revised: 7/31/98
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<PAGE>
                                    EXHIBIT E

               McCULLOUGH 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                      OWNERSHIP (%)
                                             ------------------------------
                                                                    SRP FOR
                                               LOS                   UNITED
DESCRIPTION OF TERMINATION                   ANGELES      NEVADA    STATES*
-----------------------------                -------     -------    -------
<S>                                          <C>         <C>        <C>
Banks H and I 500 kV                            0.00       50.00     50.00
Crystal-McCullough                             48.90       26.10     25.00
Bank J 500 kV                                  71.67       28.33      0.00
McCullough-Victorville Line 1                 100.00        0.00      0.00
McCullough-Eldorado                           100.00        0.00      0.00
McCullough-Victorville Line 2                 100.00        0.00      0.00
                                             -------     -------    ------
TOTAL                                         420.57      104.43     75.00
</TABLE>

Sum of Ownership Percentages:

Los Angeles + Nevada + SRP for United States* = 420.57 + 104.43 + 75.00
                                              = 600.00

Ownership percentages for the terminations in the McCullough 500 kV Switchyard
are shown in the above table and are used below to determine the ownership
percentages for the McCullough 500 kV Switchyard infrastructure facilities such
as, but not limited to, the busses, bus protection and metering, steel
switchracks and associated concrete works, cable trenches and grounding.

Los Angeles            = (420.57/600.00) x 100% = 70.1%
Nevada                 = (104.43/600.00) x 100% = 17.4%
SRP for United States* = ( 75.00/600.00) x 100% = 12.5%

*     SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

NOTE: The calculation of ownership percentages for the McCullough 500 kV
      Switchyard shall not include any third party terminations at such
      switchyard.

                                                            Dated: July 31, 1998

                                      E-1
<PAGE>

                                    EXHIBIT G

                 CRYSTAL 500 KV SWITCHYARD OWNERSHIP PERCENTAGES

<TABLE>
<CAPTION>
                                                      OWNERSHIP (%)
                                             ------------------------------
                                                                    SRP FOR
                                               LOS                   UNITED
DESCRIPTION OF TERMINATION                   ANGELES      NEVADA    STATES*
--------------------------                   --------     ------    -------
<S>                                          <C>          <C>       <C>
Bank No, 2 - 500 kV                            0.00       100.00      0.00
Bank No. 3 - 500 kV                            0.00       100.00      0.00
Navajo-Crystal                                 0.00       100.00      0.00
Crystal-McCullough                             0.00       100.00      0.00
                                              -----       ------      ----
TOTAL                                          0.00       400.00      0.00
</TABLE>

Sum of Ownership Percentages:

Los Angeles + Nevada + SRP for United States* = 0.00 + 400.00 + 0.00 = 400.00

Ownership percentages for the terminations in the Crystal 500 kV Switchyard are
shown in the above table and are used below to determine the ownership
percentages for the Crystal 500 kV Switchyard infrastructure facilities such as,
but not limited to, the busses, bus protection and metering, steel switchracks
and associated concrete works, cable trenches and grounding.

Los Angeles            = (  0.00/400.00) x 100% =   0.0%
Nevada                 = (400.00/400.00) x 100% = 100.0%
SRP for United States* = (  0.00/400.00) x 100% =   0.0%

*     SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

                                                            Dated: July 31, 1988

                                      G-1
<PAGE>

                                    EXHIBIT H

           CRYSTAL SUBSTATION COMMON FACILITIES OWNERSHIP PERCENTAGES
                              (500 KV PORTION ONLY)

Ownership of the Crystal Substation Common Facilities shall be split between the
Crystal 230 kV switchyard (currently 4 terminations) and the Crystal 500 kV
Switchyard (currently 4 terminations) based on the ratio of the number of
terminations in said switchyard to the total number of terminations in both
switchyards (currently 8 terminations).

                  Crystal 230 kV switchyard: 4/8 = 0.50 or 50%

                  Crystal 500 kV Switchyard: 4/8 = 0.50 or 50%

                          500 kV Ownership Percentages
                                       for
                      Crystal Substation Common Facilities

Los Angeles              (  0.00(1)/400.00(1)) x 100% =   0.0%

Nevada                   (400.00(1)/400.00(1)) x 100% = 100.0%

SRP for United States(2) (  0.00(1)/400.00(1)) x 100% =   0 0%

(1)   Numbers used in the calculation of the 500 kV ownership percentages are
      taken from. Exhibit G hereto.

(2)   SRP holds title for the use and benefit of the United States, Department
      of the Interior (Bureau of Reclamation).

                                                            Dated: July 31, 1998

                                      H-1
<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                       NAVAJO PROJECT CO-TENANCY AGREEMENT

                                     BETWEEN

                         THE NAVAJO PROJECT PARTICIPANTS

                                (DWP NO. 10498S)

DATED: FEB - 5 1976

<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                       NAVAJO PROJECT CO-TENANCY AGREEMENT

                                      AMONG

                           THE UNITED STATE OF AMERICA

                         ARIZONA PUBLIC SERVICE COMPANY

                          DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                              NEVADA POWER COMPANY

                         SALT RIVER PROJECT AGRICULTURAL
                         IMPROVEMENT AND POWER DISTRICT

                         TUCSON GAG & ELECTRIC COMPANY

                                                                  DWP No. 104985
<PAGE>

                                SUPPLEMENT NO. 1

                                     TO THE

                      NAVAJO PROJECT CO-TENANCY AGREEMENT

1.    PARTIES: The parties to this Supplement No. 1 to the Navajo Project
      Co-Tenancy Agreement hereinafter referred to as Supplement No. 1 are: THE
      UNITED STATES OF AMERICA, hereinafter referred to as the "United States",
      acting through the Secretary of the Interior, his duly appointed successor
      or his duly authorized representative; ARIZONA PUBLIC SERVICE COMPANY, an
      Arizona corporation, hereinafter referred to as "Arizona"; DEPARTMENT OF
      WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
      existing under the Charter Of the City of Los Angeles, a municipal
      corporation of the State of California, hereinafter referred to as "Los
      Angeles"; NEVADA POWER COMPANY, a Nevada corporation, hereinafter referred
      to as "Nevada"; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
      DISTRICT, an agricultural improvement district organized and existing
      under the laws of the State of Arizona, hereinafter referred to as "Salt
      River Project"; and TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation,
      hereinafter referred to as "Tucson".

2.    RECITALS: This Supplement No. 1 is made with reference to the following
      facts, among others:

      2.1   The Participants entered into the Participation Agreement, which
            provides the basic principles for

                                     - 1 -
<PAGE>

            their participation in the Navajo Project. These principles are
            intended to be the basis of definitive agreements, included among
            which is the Navajo Project Co-Tenancy Agreement.

      2.2   The Navajo Project Co-Tenancy Agreement, which supersedes in part
            the Navajo Project Participation Agreement, establishes terms and
            conditions relating to the Participants' interests in and ownership
            of the Navajo Project and establishes certain rights and obligations
            under the Project Agreements.

      2.3   The Participants desire by this Supplement No. 1 to clarify their
            intent to preserve, protect and enhance the environment as provided
            in Section 29 (Environmental Protection) of the Co-Tenancy
            Agreement.

3.    AGREEMENT: In consideration of the terms and conditions contained in this
      Supplement No. 1 to the Navajo Project Co-Tenancy Agreement, the
      Participants agree that Section 29 of the Co-Tenancy Agreement is hereby
      supplemented to read as follows:

29.   ENVIRONMENTAL PROTECTION:

      29.1  It is the intent of the Participants to comply with applicable
            ambient air standards in order to protect the public health and
            welfare from pollutants emitted from the Navajo Project.

      29.2  On or before September 30 of each year, a report

                                     - 2 -
<PAGE>

            shall be prepared by Los Angeles at its own expense for the fiscal
            year ending on June 30 preceding such date on environmental matters
            related to the operation and maintenance of the Navajo Generating
            Station and its associated transmission and other facilities and to
            the design and construction of such Navajo Generating Station and
            associated facilities as of such June 30.

            29.2.1 The report shall include, but not be limited to, a review of
                   any applicable or potentially applicable advances in
                   technology of equipment and devices for the protection of the
                   environment, an analysis of the performance and efficiency of
                   existing air quality control equipment and devices at the
                   Navajo Generating Station and its related facilities at the
                   site, a review of new information concerning effects to
                   health and welfare arising from the operation and maintenance
                   of the Navajo Project and should furnish conclusions as to
                   the environmental and economic desirability and feasibility
                   of upgrading the level of protection against such effects.

            29.2.2 A copy of each such report shall be transmitted by Los
                   Angeles, at its expense,

                                     - 3 -
<PAGE>

                   promptly thereafter to each person or group who notifies Los
                   Angeles in writing of a desire to receive a copy thereof. The
                   notification shall be effective from year to year until such
                   time as such person or group notifies Los Angeles in writing
                   of its revocation or fails to provide a correct address for
                   receipt of such report.

                   29.2.2.1 Such transmittal shall include, either by
                            accompanying letter or statement on the inside front
                            cover of such report, an indication that Los Angeles
                            will, for a period of 60 days from the date of such
                            report, receive and consider comments and
                            suggestions on such report and the subject matters
                            thereof. Los Angeles shall summarize the comments of
                            the public and shall present the same annually to
                            representatives of the Participants.

      29.3  The Participants will design, construct, operate and maintain the
            Navajo Project in a manner consistent with the Participants'
            objective of attaining the greatest feasible degree of
            environmental

                                     - 4 -
<PAGE>

            protection. In addition to fulfilling all obligations which have
            been assumed under provisions relating to protection of the
            environment which are contained in existing Project Agreements, the
            Participants affirm their continuing obligation to comply fully with
            applicable Federal, state and local laws, orders, regulations, rules
            and standards relating to environmental protection. The Participants
            shall to the extent practicable anticipate and make provision for
            the future installation of any systems required to comply with
            changes in said laws, orders, regulations, rules and standards.

      29.4  The Participants shall install and diligently operate in the Navajo
            Generating Station the most effective commercially proven air
            quality control equipment for particulate control available at the
            time of design of each unit of the Navajo Generating Station. Stack
            design, the designs of other plant systems related to air quality
            control, and plans for and design of systems for control and
            disposal of waste materials and residue from burned fuel shall be
            subject to such approval by the Secretary as required by Project
            Agreements and to review and comment by the Secretary in all other
            instances in advance of construction, installation, making a

                                     - 5 -
<PAGE>

            Capital Improvement thereto or the retirement of Units of Property
            thereof. The Secretary shall act or comment within 60 days after
            submission of a plan or design. From time to time, at the call of
            either the Secretary or the Coordinating Committee, but at least
            every three (3) years beginning in 1980, representatives of the
            Participants, and the designated representative of the Secretary,
            shall meet to review technological advances in air quality control
            equipment and such reports from Los Angeles set forth in Section
            29.2 hereof, and all comments and suggestions thereof and, provided
            the representatives of the Participants and the designated
            representative of the Secretary agree, shall formulate a
            recommendation to the Coordinating Committee as to the need for and
            feasibility of Installing additional equipment or modifying existing
            equipment to improve air quality control. In the event agreement
            cannot be reached and a recommendation formulated by the designated
            representatives of the Participants and the designated
            representative of the Secretary, the failure to agree shall not be
            subject to arbitration as provided in Section 19 of the co-Tenancy
            Agreement.

            29.4.1 In the operation of the Navajo Generating

                                      - 6 -
<PAGE>
                   Station, the Participants will make such tests and
                   measurements and keep such records as will enable them to
                   make reports to the Secretary relating to the operation and
                   efficiency of the air quality control equipment at such
                   intervals as may be mutually agreed upon, but not less than
                   once annually. The tests and measurements will be made in
                   conformance with the latest American Society of Mechanical
                   Engineers (ASME) test procedures for determining dust
                   concentration in a gas stream and in conformance with other
                   accepted procedures agreed upon by the Secretary and the
                   Participants.

            29.4.2 The Participants during normal working hours will permit
                   representatives of the Secretary to have access to, and to
                   inspect and copy, all records relating to air quality and
                   will permit such representatives to inspect the air quality
                   control systems.

      29.5  The Participants shall install and diligently operate as part of the
            Navajo Generating Station such wastewater, waste material, sewage
            control and disposal systems necessary to comply with and fulfill
            the objectives and obligations set forth in

                                     - 7 -
<PAGE>
            Section 29.3 hereof. Designs and plans for the water quality control
            systems, systems for the disposal of wastewater, waste materials,
            and sewage, and any other plant systems related to control of water
            quality shall be subject to such approval by the Secretary as
            required by the Project Agreements and to review and comment by the
            Secretary in all other instances in advance of construction,
            installation, making a Capital Improvement or the retirement of
            Units of Property thereof. The Secretary shall act or comment within
            60 days after submission of a plan or design.

            29.5.1 The Participants during normal working hours will permit
                   representatives of the Secretary to have access to, and to
                   inspect and copy, all records relating to water quality
                   control and will permit such representatives to inspect the
                   water quality control systems.

      29.6  The Participants shall take appropriate measures to harmonize the
            Navajo Project with the environment. The Participants shall exercise
            care to prevent any unnecessary destruction, scarring, or defacing
            of the natural surroundings in the vicinity of the Navajo Project
            work.

      29.7  In any arbitration as to a dispute arising under the

                                     - 8 -
<PAGE>

            provisions of this Section 29, the arbitrators shall consider the
            cost effectiveness of the course of action under dispute; Federal,
            state and local laws, orders, regulations, rules and standards; the
            ability to obtain appropriations from Congress for such purposes;
            and the ability of the Participants to obtain capital for such
            purposes.

4.    Except as provided herein, the Navajo Project Co-Tenancy Agreement shall
      remain in full force and effect.

            IN WITNESS WHEREOF, the parties hereto have caused this Supplement
            No. 1 to the Navajo Project Co-Tenancy Agreement to be executed as
            of the 18th day of October, 1976.

                                  THE UNITED STATES  OF AMERICA

                                  By  /s/ Manuel Lopez, Jr. Regional Director
                                      ------------------------------------------
                                        Manuel Lopez. Jr. Regional Director
                                  Lower Colorado Region, Bureau of  Reclamation
                                        for Secretary of the  Interior

                                  ARIZONA PUBLIC SERVICE COMPANY

ATTEST:                           By /s/ D.L. Broussard
/s/ Wm. T. Quinsllr                  ------------------------------------------
--------------------------------                  Vice President
  WM. T. QUINSLLR, SECRETARY

                                  NEVADA POWER COMPANY

ATTEST:                           By  /s/ A. E. Pearson
/s/ Authorized Signatory          ------------------------------------------
--------------------------------        President

                                  SALT RIVER PROJECT AGRICULTURAL

                                  IMPROVEMENT AND POWER DISTRICT

ATTEST AND COUNTERSIGN:           By  /s/ Authorized Signatory
/s/ Authorized Signatory              ------------------------------------------
--------------------------------                     President
          Secretary

                                      -9-
[STAMP]
<PAGE>

                                  TUCSON GAS & ELECTRIC COMPANY

ATTEST:                           By  /s/ Einar Creve
/s/ Authorized Signatory              ------------------------------------------
--------------------------------             EXECUTIVE VICE PRESIDENT
     ASSISTANT SECRETARY

                                  DEPARTMENT OF WATER AND POWER

                                  OF THE CITY OF LOS ANGELES

[SEAL]                                         by

                                  BOARD OF   WATER AND POWER COMMISSIONERS

                                  OF THE CITY OF LOS ANGELES

BY:                               By  /s/ Louis H. Winnand
    /s/ Authorized Signatory          ------------------------------------------
--------------------------------        General Manager and Chief Engineer

                                                and

                                  By  /s/ Mary J. Born
                                      ------------------------------------------
                                                        Secretary

                                      -10-

[SEAL]                                                               [STAMP]
<PAGE>

      On this the 18th day of October, 1976, before me, the undersigned officer,
personally appeared Manuel Lopez, Jr., Regional Director, Lower Colorado Region,
Bureau of Reclamation, of the United States of America, known to me to be the
person described in the foregoing instrument, and acknowledged that he executed
the same in the capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

State of Arizona    )                                  /s/ Authorized Signatory
                    )ss                                ------------------------
County of Maricopa  )                                         Notary Public
                                                                 [STAMP]

      On this the 19th day of July, 1976, before me, the undersigned officer,
personally appeared D. L. BROUSSARD, who acknowledged himself to be the Vice
President of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, and that
he, as such Vice President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as Vice President.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                                  Notary Public

My commission expires:
                                                                      [SEAL]
      My Commission Expires Jan. 22, 1979

<PAGE>

State of California   )
                      ) ss
County of Los Angeles )

      On this, the 5th day of February, 1976, before me, the undersigned
officer, personally appeared Louis H. Winnand and Mary J. Born, the General
Manager and Chief Engineer and Board Secretary, respectively, of the DEPARTMENT
OF WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
existing under the Charter of the City of Los Angeles, a municipal corporation
of the State of California, known to me to be the persons described in the
foregoing instrument, and acknowledged that they executed the same in the
capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                      /S/ Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:
                                                                [STAMP]
    May 27, 1977

State of Nevada  )
                 ) ss
County of Clark  )

      On this the 7th day of July, 1976, before me, the undersigned officer,
personally appeared A. E. Pearson, known to me to be the President of NEVADA
POWER COMPANY, a Nevada corporation, and that he, as such President, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained,

<PAGE>

by signing the name of the corporation by himself as President.

      In witness whereof, I hereunto set my hand and official seal.

                                      /s/ Jane Williams
                                      ------------------------------------------
                                              Notary Public

My commission expires:
                                                     [STAMP]
   July 7, 1979

State of Arizona   )
                   ) ss
County of Maricopa )

      On this the 16th day of April, 1976, before me, the undersigned officer,
personally appeared ___________ and __________, the President and
Secretary, respectively, of SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
POWER DISTRICT, an Arizona agricultural improvement district, known to me to be
the persons described in the foregoing instrument, and acknowledged that they
executed the same in the capacity therein stated and for the purposes therein
contained.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/   Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:

   MAY 3, 1979

<PAGE>

State of Arizona )
                 ) ss
County of Pima   )

      On this the 12th day of July, 1976, before me, the undersigned officer,
personally appeared EINAR CREVE, who acknowledged himself to be the EXECUTIVE
VICE PRESIDENT of TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation, and
that he, as such EXECUTIVE VICE PRESIDENT, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as EXECUTIVE VICE PRESIDENT.

      In witness whereof I hereunto set my hand and official seal.

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                              Notary Public

My commission expires:

  My Commission Expires Sept. 1, 1976

<PAGE>

                                                              RESOLUTION NO. 556

      WHEREAS, Resolution No. 610 adopted by the Board ON March 9, 1972,
approved the transmittal of the following agreements to the City Council for
approval by ordinance, which approval was subsequently withheld by the Council:

<TABLE>
<CAPTION>
                         Agreement Title                            DWP Number
------------------------------------------------------------------  ----------
<S>                                                                 <C>
Navajo Project Co-Tenancy Agreement                                   10498

Navajo Generating Station Construction Agreement                      10499

Navajo Project Western Transmission System Construction Agreement     10500

Navajo Project Southern Transmission System Construction Agreement    10501
</TABLE>

            and WHEREAS, Resolution No. 978, adopted by this Board on May 31,
1973, transmitted the above-mentioned agreements to the City Council for
approval by ordinance, which approval was adopted, and subsequently disapproved
by Mayor Tom Bradley on July 26, 1973; and

            WHEREAS, the agreements listed above involve: (1) a legal
instrument, previously executed by the other Navajo Participants, to be recorded
in the State of Arizona which sets forth the Department's ownership rights in
the Navajo Project consisting of the Navajo Generating Station, the Southern
Transmission System, and the Western Transmission System (No. 10498); (2)
technical and financial provisions, previously executed by the other Navajo
Participants, for the construction of the Navajo Generating Station (No. 10499);
(3) technical and financial documents, previously executed by the Navajo
Participants, for the construction of the Southern and Western Transmission
Systems (No. 10500 and No. 10501); and

            WHEREAS, construction has been completed on Navajo Units 1 and 2,
and these units are in commercial operation and have been carrying system load
since February 1, 1974, and

<PAGE>

December 2, 1974, respectively; and Navajo Unit 3 is scheduled to carry system
load in December, 1975 and to begin commercial operation by April, 1976; and

            WHEREAS, construction has been completed on the Southern
Transmission System and it has been carrying Navajo power since February 1,
1974, and major construction has been completed on the Western Transmission
System and it has been carrying Navajo Power since October 27, 1974; and

            WHEREAS, the following agreement supplements the environmental
protection section of the Navajo Project Co-Tenancy Agreement and requires: (1)
an annual environmental report, to be prepared by the Department, which will
include a review of advances in technology of equipment for the protection of
the environment and an analysis of the performance of the existing air quality
control equipment at the Navajo Generating Station; (2) such environmental
report to be made available to the public for their comments and suggestions;
and (3) the Navajo Participants to meet at least every three years to review
technological advances in air quality control equipment and the annual
environmental reports prepared by the Department including comments and
suggestions received from the interested public:

<TABLE>
<CAPTION>

                 Agreement Title                                 DWP Number
-----------------------------------------------------------      ----------
<S>                                                              <C>
Supplement No. 1 to the Navajo Project Co-Tenancy Agreement        10498S
</TABLE>

            WHEREAS, this Department requested that certain practices relating
to the use and occupancy of Navajo and Hopi Indian lands for mining be
incorporated as obligations in the coal contracts, relating to compensation for
displaced Navajo families, reclamation of leased premises, water monitoring
program, and the water supply to Navajo families; and

            WHEREAS, the Navajo Participants and Peabody Coal Company have
agreed and incorporated such obligations in the Amended Navajo Coal Supply
Agreement to be presented to this Board;

            NOW, THEREFORE, BE IT RESOLVED the above agreements, approved as to
form and legality by the City Attorney, and now on file with the Secretary of
this Board, be and the same are

                                       -2-
<PAGE>

hereby approved; and that this Board requests the City Council of The City of
Los Angeles, in accordance with Section 219.4 of the Charter of The City of Los
Angeles, to approve by ordinance the agreements hereinabove referred to and
identified, and to authorize this Board, in its discretion, to execute and enter
into said agreements, all of which relate to the Navajo Project, and following
such approval, the President or the Vice President or the General Manager and
Chief Engineer and the Secretary, Assistant Secretary or the Acting Secretary of
the Board be and they are hereby authorized and directed to execute said
agreements for and on behalf of this Department.

            I HEREBY CERTIFY that the foregoing is a full, true and correct
copy of a resolution adopted by the Board of Water and Power Commissioners of
The City of Los Angeles at ITS meeting held [ILLEGIBLE]

                                      /s/ Authorized Signatory
                                      ------------------------------------------
                                                                Secretary

                                       -3-
<PAGE>

                             ORDINANCE NO. 148,153

                             AN ORDINANCE APPROVING
                           AGREEMENTS RELATING TO THE
                         NAVAJO PROJECT AND [ILLEGIBLE].

                                 CERTIFICATION

STATE OF CALIFORNIA
                         }  ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 148,153

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

on file in my office, and that I have carefully compared the same with the
original.

                                IN WITNESS WHEREOF, I have hereunto set my
                                hand and affixed the Seal of the City of Los
                                Angeles, this 22nd day of March, 1976.

                                   /s/ Rex. E. Layton
                                   -----------------------------
                                       City Clerk of the City of Los Angeles

                                By /s/ Judy Pensland
                                   -----------------------------
                                              Deputy
                                           Judy Pensland
<PAGE>

                             Ordinance No. 118,153<PAGE>
                                                                  Exhibit 10.108

                                                     Contract No. 14-06-300-2131

                                 NAVAJO PROJECT

                            PARTICIPATION AGREEMENT

                                    BETWEEN

                          THE UNITED STATES OF AMERICA

                         ARIZONA PUBLIC SERVICE COMPANY

                         DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                              NEVADA POWER COMPANY

                        SALT RIVER PROJECT AGRICULTURAL
                         IMPROVEMENT AND POWER DISTRICT

                         TUCSON GAS & ELECTRIC COMPANY

<PAGE>

                     NAVAJO PROJECT PARTICIPATION AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                                        PAGE
-------                                                                        ----
<S>         <C>                                                                <C>
      1     PARTIES                                                              1

      2     RECITALS                                                             1

      3     AGREEMENT                                                            2

      4     DEFINITIONS                                                          2

            4.1   CAPACITY                                                       2

            4.2   CONTRACTING OFFICER                                            2

            4.3   CO-TENANTS                                                     2

            4.4   ENERGY                                                         3

            4.5   FIRM OPERATION                                                 3

            4.6   GENERATION ENTITLEMENT SHARE                                   3

            4.7   NAVAJO GENERATING STATION                                      3

            4.8   NAVAJO PLANT SITE                                              4

            4.9   NAVAJO PROJECT                                                 4

            4.10  NET EFFECTIVE GENERATING CAPABILITY                            4

            4.11  OPERATING AGENT                                                4

            4.12  PARTICIPANTS                                                   4

            4.13  POWER                                                          4

            4.14  PROJECT AGREEMENTS                                             4

            4.15  PROJECT INSURANCE                                              5

            4.16  PROJECT MANAGER                                                5

            4.17  SECRETARY                                                      5

            4.18  STATION WORK                                                   5

            4.19  STATION WORK LIABILITY                                         5
</TABLE>

                                      (i)
<PAGE>

<TABLE>
<CAPTION>
SECTION                                                                        PAGE
-------                                                                        ----
<S>         <C>                                                                <C>
      4     DEFINITIONS (Continued)

            4.20  TRANSMISSION SYSTEM                                            6

            4.21  TRANSMISSION WORK                                              6

            4.22  TRANSMISSION WORK LIABILITY                                    6

            4.23  WILLFUL ACTION                                                 7

            4.24  ZERO NET LOAD                                                  9

      5     OWNERSHIP OF NAVAJO PROJECT                                          9

      6     GENERATING STATION CAPACITY AND ENERGY ENTITLEMENTS                 10

      7     TRANSMISSION SYSTEM                                                 11

      8     ADMINISTRATION                                                      15a

      9     OTHER COMMITTEES                                                    21

     10     PROJECT MANAGERS                                                    21

     11     OPERATING AGENTS                                                    23

     12     CONSTRUCTION SCHEDULES                                              24

     13     CONSTRUCTION COSTS                                                  24

     14     OPERATION AND MAINTENANCE COSTS                                     25

     15     ADVANCEMENT OF FUNDS                                                27

     16     TAXES                                                               29

     17     NONPARTITIONMENT                                                    30

     18     MORTGAGE AND TRANSFER OF INTERESTS                                  30

     19     RIGHT OF FIRST REFUSAL                                              33

     20     DESTRUCTION                                                         33

     21     INSURANCE                                                           35

     22     LIABILITY                                                           38
</TABLE>

                                      (ii)
<PAGE>

<TABLE>
<CAPTION>
SECTION                                                                        PAGE
-------                                                                        ----
<S>               <C>                                                          <C>
     23           INTERESTS HELD FOR THE USE AND BENEFIT OF UNITED STATES       41

     24           REIMBURSEMENT FOR COSTS AND EXPENSES                          43

     25           DEFAULTS                                                      43

     26           ARBITRATION                                                   45

     27           ACTIONS PENDING RESOLUTION OF DISPUTES                        46

     28           REMOVAL OF OPERATING AGENTS                                   47

     29           RELATIONSHIP OF PARTICIPANTS                                  47

     30           FEES                                                          48

     31           OFFICIALS NOT TO BENEFIT                                      48

     32           COVENANT AGAINST CONTINGENT FEES                              49

     33           EQUAL OPPORTUNITY                                             49

     34           WORK HOURS ACT OF 1962                                        54

     35           EXAMINATION OF RECORDS                                        56

     36           ASSIGNMENT OF CLAIMS                                          56

     37           CONVICT LABOR                                                 58

     38           UNCONTROLLABLE FORCES                                         58

     39           GOVERNING LAW                                                 59

     40           BINDING OBLIGATIONS                                           59

     41           NONDEDICATION OF FACILITIES                                   60

     42           PROJECT AGREEMENTS                                            60

     43           TERM                                                          61

     44           ASSIGNMENT OF INTERESTS                                       61

     45           NOTICES                                                       62

     46           MISCELLANEOUS PROVISIONS                                      63
</TABLE>

                                     (iii)
<PAGE>

<TABLE>
<CAPTION>
SECTION                                                                        PAGE
-------                                                                        ----
<S>         <C>                                                                <C>
     47     USE OF FACILITIES OF LOS ANGELES                                    65

     48     AGREEMENT SUBJECT TO COLORADO RIVER COMPACT                         66
</TABLE>

                                      (iv)
<PAGE>

                                 NAVAJO PROJECT
                             PARTICIPATION AGREEMENT

1.    PARTIES: The parties to this agreement are: THE UNITED STATES OF AMERICA,
      hereinafter referred to as the "United States", acting through the
      Secretary of the Interior; ARIZONA PUBLIC SERVICE COMPANY, an Arizona
      corporation, hereinafter referred to as "Arizona"; DEPARTMENT OF WATER AND
      POWER OF THE CITY OF LOS ANGELES, a department organized and existing
      under the Charter of the City of Los Angeles, a municipal corporation of
      the State of California, hereinafter referred to as "Los Angeles"; NEVADA
      POWER COMPANY, a Nevada corporation, hereinafter referred to as "Nevada";
      SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an
      agricultural improvement district organized and existing under the laws of
      the State of Arizona, hereinafter referred to as "Salt River Project"; and
      TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation, hereinafter
      referred to as "Tucson".

2.    RECITALS: This agreement is made with reference to the following facts,
      among others:

            2.1 By the Colorado River Basin Project Act (82 Stat. 885) the
      Congress of the United States authorized the construction, operation and
      maintenance of the Central Arizona Project. Pursuant to Section 303 of
      said Act, the Secretary is authorized to enter into agreements

<PAGE>

      with non-Federal interests proposing to construct thermal generating
      powerplants whereby the United States shall acquire the right to such
      portions of their capacity, including delivery of power and energy over
      appurtenant transmission facilities to mutually agreed upon delivery
      points, as he determines is required in connection with the operation of
      the Central Arizona Project.

            2.2 The Secretary has determined that the acquisition of a right to
      a portion of the capacity of the Navajo Project is the most feasible plan
      for supplying the power requirements of the Central Arizona Project and
      augmenting the Lower Colorado River Basin Development Fund.

            2.3 The parties desire to participate in the construction, operation
      and maintenance of the Navajo Project in accordance with the provisions of
      this Participation Agreement and the other Project Agreements.

3.    AGREEMENT: In consideration of the mutual covenants herein, the parties
      agree as follows:

4.    DEFINITIONS: The following terms, when used herein, shall have the
      meanings specified:

            4.1 CAPACITY: Electrical rating expressed in megawatts (mw) or
      megavolt-amperes (mva).

            4.2 CONTRACTING OFFICER: The Secretary of the Interior or his duly
      authorized representative.

            4.3 CO-TENANTS: Any one or all of the parties other

                                      -2-
<PAGE>

      than the United States.

            4.4 ENERGY: Kilowatt-hours (kwh).

            4.5 FIRM OPERATION: The state of completion at which a component of
      the Navajo Project is determined by the appropriate engineering and
      operating committee to be reliable and at which that component can
      reasonably be expected to operate continuously at its rated Capacity.

            4.6 GENERATION ENTITLEMENT SHARE: The percentage entitlement of each
      Participant in each unit of the Navajo Generating Station. Each
      Participant's percentage is as follows:

                4.6.1     United States  =  24.3 per cent.

                4.6.2     Arizona        =  14.0 per cent.

                4.6.3     Los Angeles    =  21.2 per cent.

                4.6.4     Nevada         =  11.3 per cent.

                4.6.5     Salt River     =  21.7 per cent.
                            Project

                4.6.6     Tucson         =  7.5 per cent.

            4.7 NAVAJO GENERATING STATION: Three coal-fired steam electric
      generating units, each having a nameplate rating of 750 mw and an
      estimated Net Effective Generating Capability of 770 mw, and all
      facilities and structures used therewith or related thereto, to be
      constructed at or adjacent to the Navajo Plant Site. The Navajo Generating
      Station is generally described in

                                      -3-
<PAGE>

      Exhibit A-1 hereto.

            4.8 NAVAJO PLANT SITE: A parcel of land in Coconino County, Arizona,
      consisting of approximately 1,020 acres and being generally depicted on
      Exhibit B hereto.

            4.9 NAVAJO PROJECT: The Navajo Project shall consist of the Navajo
      Generating Station and the Transmission System, all as generally described
      and depicted on Exhibit A hereto.

            4.10 NET EFFECTIVE GENERATING CAPABILITY: The maximum continuous
      ability of each unit of the Navajo Generating Station to produce Power
      which is available to the Participants at the high voltage terminals of
      the generator step-up transformers.

            4.11 OPERATING AGENT: A Co-Tenant responsible for the operation and
      maintenance of a component of the Navajo Project in accordance with the
      Project Agreements,

            4.12 PARTICIPANTS: Any one or more of the parties, including the
      United States.

            4.13 POWER: Kilowatts (kw) or megawatts (mw).

            4.14 PROJECT AGREEMENTS: This Participation Agreement, the grants
      from the United States for use of Indian lands pursuant to 25 U.S.C.
      Section 323 (Section 323 grants), the plant site lease, the co-tenancy
      agreements, the construction agreements, the operating agreements, other
      agreements for rights of way and easements for the Navajo Project
      facilities, the Navajo Station Coal

                                      -4-
<PAGE>

      Supply Agreement, agreements related to the transportation of fuel, the
      Water Service Contract dated the 17th day of January, 1969 (Contract No.
      14-06-400-5033), the agreements establishing the rights of the
      Participants in water rights or coal lands, the agreement between the Salt
      River Project and the United States concerning the capacity entitlements
      of the United States, as such agreements are originally executed or as
      they may thereafter be supplemented or amended.

            4.15 PROJECT INSURANCE: Policies of insurance to be procured and
      maintained in accordance with Section 21 hereof.

            4.16 PROJECT MANAGER: A Co-Tenant responsible for the construction
      and completion of a component of the Navajo Project in accordance with the
      Project Agreements.

            4.17 SECRETARY: The Secretary of the Interior.

            4.18 STATION WORK: Engineering, design, contract preparation,
      purchasing, construction, supervision, expediting, inspection, accounting,
      testing, protection, operation, repair, maintenance, replacement,
      reconstruction or use of and for the Navajo Generating Station.

            4.19 STATION WORK LIABILITY: Liability of one or more Participants
      for damage suffered by anyone other than a Participant, whether or not
      resulting from the negligence of any Participant, its directors, officers,

                                      -5-
<PAGE>

      employees or any other person or entity whose negligence would be imputed
      to such Participant, resulting from:

                  4.19.1 The performance or non-performance of Station Work.

                  4.19.2 The use or ownership of the Navajo Generating Station.

                  4.19.3 The past or future performance or non-performance of
                         the obligations of any Participant under any of the
                         Project Agreements, except obligations relating solely
                         to the Transmission System.

            4.20 TRANSMISSION SYSTEM: The Transmission System as generally
      described in Exhibit A-2 hereto.

            4.21 TRANSMISSION WORK: Engineering, design, contract preparation,
      purchasing, construction, supervision, expediting, inspection, accounting,
      testing, protection, operation, repair, maintenance, replacement,
      reconstruction or use of and for the Transmission System.

            4.22 TRANSMISSION WORK LIABILITY: Liability of one or more
      Participants for damage suffered by anyone other than a Participant,
      whether or not resulting from the negligence of any Participant, its
      directors, officers, employees or any other person or entity whose
      negligence would be imputed to such Participant,

                                      -6-
<PAGE>

      resulting from:

                  4.22.1 The performance or non-performance of Transmission
                         Work.

                  4.22.2 The use or ownership of the Transmission System or any
                         component thereof.

                  4.22.3 The past or future performance or non-performance of
                         the obligations of any Participant under any of the
                         Project Agreements, except obligations relating solely
                         to the Navajo Generating Station.

            4.23  WILLFUL ACTION:

                  4.23.1 Action taken or not taken by a Participant at the
                         direction of its directors, officers, Contracting
                         Officer or employees having management or
                         administrative responsibility affecting its performance
                         under any of the Project Agreements, which action is
                         knowingly or intentionally taken or failed to be taken
                         with conscious indifference to the consequences thereof
                         or with intent that injury or damage would result or
                         would probably result therefrom.

                                      -7-
<PAGE>

                         Willful Action does not include any act or failure to
                         act which is merely involuntary, accidental or
                         negligent.

                  4.23.2 Action taken or not taken by a Participant at the
                         direction of its directors, officers, Contracting
                         Officer or employees having management or
                         administrative responsibility affecting its performance
                         under any of the Project Agreements, which action has
                         been determined by final arbitration award or final
                         judgment or judicial decree to be a material default
                         under any of the Project Agreements and which occurs or
                         continues beyond the time specified in such arbitration
                         award or judgment or judicial decree for curing such
                         default or, if no time to cure is specified therein,
                         occurs or continues thereafter beyond a reasonable time
                         to cure such default.

                  4.23.3 Action taken or not taken by a Participant at the
                         direction of its directors, officers, Contracting
                         Officer or employees having management

                                      -8-
<PAGE>

                         or administrative responsibility affecting its
                         performance under any of the Project Agreements, which
                         action is knowingly or intentionally taken or failed to
                         be taken with the knowledge that such action taken or
                         failed to be taken is a material default under any
                         Project Agreements.

                  4.23.4 The phrase "employees having management or
                         administrative responsibility" as used in this Section
                         4.23 means employees of a Participant who are
                         responsible for one or more of the executive functions
                         of planning, organizing, coordinating, directing,
                         controlling and supervising such Participant's
                         performance under any of the Project Agreements.

            4.24 ZERO NET LOAD: The load upon a generating unit when the
      generator gross output equals the total unit auxiliary consumption.

5.    OWNERSHIP OF NAVAJO PROJECT:

            5.1 The Co-Tenants shall acquire and own the Navajo Generating
      Station as tenants in common, as follows:

                  5.1.1  Arizona shall own an undivided 14.0 per cent interest
                         therein.

                                      -9-
<PAGE>

                  5.1.2  Los Angeles shall own an undivided 21.2 per cent
                         interest therein.

                  5.1.3  Nevada shall own an undivided 11.3 per cent interest
                         therein.

                  5.1.4  Salt River Project shall own:

                              (i)   an undivided 21.7 per cent interest therein
                                    for its own use and benefit, and

                              (ii)  an undivided 24.3 per cent interest therein
                                    for the use and benefit of the United States
                                    in accordance with the Project Agreements.

                  5.1.5  Tucson shall own an undivided 7.5 per cent interest
                         therein.

            5.2 The Co-Tenants shall acquire the ownership interests in the
      Transmission System components as described in Exhibit C hereto and shall
      own the same as tenants in common. Not every Co-Tenant will own an
      interest in every component of the Transmission System.

6.    GENERATING STATION CAPACITY AND ENERGY ENTITLEMENTS:

            6.1 The Capacity entitlement of each Participant in each unit of the
      Navajo Generating Station shall be the product of its Generation
      Entitlement Share and the Net Effective Generating Capability of such
      unit.

            6.2 Each Participant shall be entitled to schedule

                                      -10-
<PAGE>

      for its account Power and Energy from any generating unit up to the amount
      of its available Capacity entitlement in such unit.

            6.3 When a Participant requests operation of a unit, each
      Participant shall, unless otherwise mutually agreed, schedule for its
      account its share of minimum net generation which shall be the product of
      its Generation Entitlement Share and the minimum net generation
      established for such unit. At any time any Participant has scheduled from
      any unit an amount of Power in excess of its minimum net generation, then
      each of the other Participants shall only be obligated to schedule for its
      account an amount of Power equal to the product of its Generation
      Entitlement Share and the remaining amount of minimum net generation,
      provided that such reductions do not result in economic detriment to any
      Participant or the Operating Agent.

            6.4 Operation of any unit by the Operating Agent shall be subject to
      scheduled outages or curtailments, operating emergencies and unscheduled
      outages or curtailments of such unit.

7. TRANSMISSION SYSTEM:

            7.1 The Transmission System shall be designed, constructed and
      operated with the objective of permitting each Participant to transmit
      under normal operating conditions its share of entitlement in the Navajo

                                      -11-
<PAGE>

      Generating Station from the Navajo Generating Station to its designated
      points of delivery in a manner which will not, unreasonably affect the
      operation of the electric systems of the Participants, and, so that when
      operated in parallel with such systems, the loss of any one circuit will
      not cause any other circuit or element of and of the parallel transmission
      systems of a Participant to carry Power in excess of the short-time rating
      of such parallel transmission system as may be established by the owner of
      such system.

            7.2 Each Participant shall have the right to use the Transmission
      System to transmit to its designated delivery points under normal
      operating conditions Power in an amount equivalent to its Capacity
      entitlement share in the Navajo Generating Station or to reserve the
      Transmission System for such transmission without regard to the origin,
      source, ownership or type of generation used to produce such Power.

            7.3 Any Participant may acquire firm entitlement in the Transmission
      System, in addition to that provided for in Section 7.2 hereof upon the
      written agreement of all Participants having cost responsibility for the
      facilities over which such firm entitlement is sought, provided that said
      firm entitlement does not materially interfere with the right of any other
      Participant to transmit its entitlement as provided in Section 7.2

                                      -12-
<PAGE>

      hereof. Such written agreement shall specify the amount of monetary
      compensation to be paid to and the allocation among the Participants for
      such firm entitlement.

            7.4 Any Participant may make non-firm use of transmission Capacity
      in addition to its use under Section 7.2 hereof to the extent that
      transmission Capacity is determined to be available by the Operating
      Agents in accordance with criteria to be developed by the engineering and
      operating committee.

            7.5 If two or more Participants concurrently desire to make non-firm
      use of transmission Capacity in the same segment of the Transmission
      System pursuant to Section 7.4 hereof, and the available transmission
      Capacity in such segment is not adequate to satisfy all such requests,
      then, unless otherwise agreed to, the available Capacity will be shared by
      those Participants concurrently requesting such Capacity in proportion to
      their cost responsibility in such segment.

            7.6 The Participants' designated points of delivery shall be as
      follows:

                  7.6.1 Arizona     =  Navajo 500 KV Switchyard and Phoenix Area
                                       Substation (s).

                  7.6.2 Los Angeles =  Navajo 500 KV Switchyard and McCullough
                                       500 KV Switchyard.

                                      -13-
<PAGE>

                  7.6.3  Nevada     =  Navajo 500 KV Switchyard and McCullough
                                       287 KV Switchyard.

                  7.6.4  Salt River =  Navajo 500 KV Switchyard
                           Project     and Phoenix Area Substation (s).

                  7.6.5  Tucson     =  Navajo 500 KV Switchyard and Phoenix Area
                                       Substation (s).

                  7.6.6  United     =  Navajo 500 KV Switchyard,
                           States      McCullough 500 KV Switchyard, Phoenix
                                       Area Substation (s), and the Moenkopi
                                       Switchyard during the period in which the
                                       United States is selling power to
                                       Southern California Edison Company
                                       pursuant to the Contract With Southern
                                       California Edison Company For Interim
                                       Sale Of United States' Entitlement In
                                       Navajo Project for delivery at Moenkopi
                                       switchyard.

            7.7 Each Participant shall be entitled to interconnect its
      transmission system with the Transmission System at its designated points
      of delivery, and the costs of such interconnection shall be paid by such
      Participant.

            7.8 In the event of an outage or curtailment of any circuit or
      element of the Transmission System, the Operating Agents shall make every
      effort to furnish temporary alternate service through other circuits or
      elements of the Transmission System, and the Participants shall make
      every effort to furnish alternate

                                      -14-
<PAGE>

      service to the other Participants over available parallel transmission
      systems, and, in the event of an outage or curtailment of any such
      parallel transmission system of a Participant, the Operating Agents shall
      make every effort to furnish temporary alternate service over the
      Transmission System. There will be no charge to any Participant for such
      service provided pursuant to this Section 7.8, except for compensation in
      Energy for additional losses that may be incurred as a result of providing
      such alternate service.

            7.9 Upon agreement with all the other Participants, a Participant
      may at its expense make interconnections to the Transmission System at
      other points. Such agreement shall specify the terms and conditions
      under which such interconnections may be made and the charges to the
      interconnecting Participant, if any, and the distribution of such charges
      to the other Participants.

            7.10 Unless otherwise agreed to by the engineering and operating
      committee, when the Capacity available to the Participants in any segment
      of the Transmission System is insufficient to accommodate all of the firm
      use of the Transmission System pursuant to Section 7.2 hereof, then the
      use of the available Capacity of that segment of the Transmission System
      will be allocated in proportion to the Participants' cost responsibility
      in such segment. It is not the intention of the Participants

                                      -15-
<PAGE>

      to dedicate any Capacity in the Transmission System for use by third
      parties.

            7.11 The Transmission System will be interconnected with the Four
      Corners-Eldorado 500 KV transmission line at the Moenkopi Switchyard in
      accordance with the memorandum of intent attached as Exhibit H hereto.

            7.12 For the purposes of Section 7, any use of any section of line
      by the United States which is in excess of the greater of (i) the United
      States' percentage cost responsibility in such line times the capability
      of such, or (ii) the capability required to supply the power requirements
      of the Central Arizona Project, shall be deemed to be non-firm use unless
      the right to such use shall have been acquired pursuant to Section 7.3
      hereof.

8.    ADMINISTRATION:

            8.1 The Participants shall establish the following Committees, whose
      functions and shall be as described herein or in the subsequent Project
      Agreements:

                                      -15a-
<PAGE>

                  8.1.1 One coordinating committee for the Navajo Project,
                        consisting of one representative from each Participant,
                        who shall be an officer or general manager of a
                        Participant or the designee of the Secretary, or his
                        authorized alternates.

                  8.1.2 One engineering and operating committee for the Navajo
                        Generating Station, consisting of two representatives
                        from each Participant.

                  8.1.3 One engineering and operating committee for the
                        Transmission System, consisting of two representatives
                        from each Participant.

                  8.1.4 One auditing committee for the Navajo Project,
                        consisting of two representatives from each
                        Participant.

            8.2 The coordinating committee shall have the following functions,
      among others:

                  8.2.1 To provide liaison among the Participants at the
                        management level.

                  8.2.2 To exercise general supervision over the engineering and
                        operating committees and the auditing committee.

                                      -16-
<PAGE>

                  8.2.3 To consider matters referred to it by another committee.

                  8.2.4 To perform such other functions and duties as may be
                        assigned to it in the Project Agreements.

            8.3 The engineering and operating committees shall have the
      following functions, among others, at the construction stages:

                  8.3.1 To provide liaison among the Participants and between
                        them and the respective Project Managers and Operating
                        Agents with respect to the engineering, construction and
                        start-up of the components of the Navajo Project.

                  8.3.2 To consider such matters and take such actions as are
                        assigned to them in the Project Agreements.

                  8.3.3 To perform such other functions and duties as may be
                        assigned to them by the coordinating committee.

            8.4 The engineering and operating committee for the Navajo
      Generating Station shall have the following functions, among others, with
      respect to the operation of the Navajo Generating Station:

                  8.4.1 To provide liaison among the

                                      -17-
<PAGE>

                        Participants and between them and the Operating Agent.

                  8.4.2 To review and act upon the Operating Agent's
                        recommendations concerning:

                              Budgets for operation and maintenance and for
                                capital expenditures

                              Manning tables

                              Operating and maintenance practices and procedures

                              Planned maintenance schedules

                              Policies for establishing inventories

                              Statistical and administrative reports, budgets
                                and information and other similar records, and
                                the form and preparation thereof, to be kept and
                                performed by the Operating Agent

                              Procedures for determining Capacities of
                                facilities

                              Procedures for capital expenditures

                              Procedures for performance and efficiency testing

                              Procedures for maintaining Power and Energy
                                accounting

                              Procedures for dealing with operating emergencies
                                or curtailed operations

                              Practices and procedures for scheduling Power and
                                Energy

                  8.4.3 To perform such other functions and duties as may be
                        assigned to it in the Project Agreements or by the
                        coordinating committee.

            8.5 The engineering and operating committee for the Transmission
      System shall have the following functions, among others, with respect to
      the operation of the Transmission System:

                                      -18-
<PAGE>

                  8.5.1 To provide liaison among the Participants and between
                        them and the Operating Agents.

                  8.5.2 To review and act upon the Operating Agents'
                        recommendations concerning:

                              Practices and procedures for accounting for
                                transmission losses

                              Budgets for operation and maintenance and for
                                capital expenditures

                              Operating and maintenance practices and procedures

                              Planned maintenance schedules

                              Policies for establishing inventories

                              Statistical and administrative reports, budgets
                                and information and other similar records, and
                                the form and preparation thereof, to be kept and
                                performed by the Operating Agents

                              Procedures for determining Capacities of
                                facilities

                              Procedures for capital expenditures

                              Procedures for performance testing

                              Procedures for maintaining Power and Energy
                                accounting

                              Procedures for dealing with operating emergencies
                                or curtailed operations

                  8.5.3 To perform such other functions and duties as may be
                        assigned to it in the Project Agreements or by the
                        coordinating committee.

            8.6 The auditing committee shall have the following functions, among
      others:

                  8.6.1 To develop procedures for proper

                                      -19-
<PAGE>

                        accounting and financial liaison among the Participants
                        in connection with the engineering, construction,
                        operation, replacement and reconstruction of the Navajo
                        Project.

                  8.6.2 To review accounting and financial aspects thereof.

                  8.6.3 To advise and make recommendations to the coordinating
                        committee, the Project Managers and the Operating Agents
                        on matters involving auditing and financial
                        transactions.

                  8.6.4 To perform such other functions and duties as may be
                        assigned to it in the Project Agreements or by the
                        coordinating committee.

            8.7 Within thirty (30) days after the execution of this agreement,
      each Participant shall designate its representatives on the committees
      hereby established. Such designation shall be in writing, with copies
      mailed to each of the Participants.

            8.8 Any action or determination of a committee must be unanimous.

            8.9 All actions, agreements or determinations made by the committees
      shall be reduced to writing. In addition, the engineering and operating
      committees and

                                      -20-
<PAGE>

      the auditing committee shall keep written minutes and records of all
      meetings.

         8.10  The committees shall have no authority to
         modify any of the terms, covenants or conditions of the
      Project Agreements.

            8.11 If the engineering and operating committees or the auditing
      committee fail to agree while performing the functions and duties assigned
      to them in this agreement or in the other Project Agreements, then such
      disagreement shall be referred to the coordinating committee.

9. OTHER COMMITTEES:

            9.1 Other committees may be established by the coordinating
      committee to perform such other functions and have such responsibility as
      may be assigned to them by the coordinating committee.

10. PROJECT MANAGERS:

            10.1  The Project Managers shall be as follows:

                  10.1.1 Salt River Project shall be the Project Manager for the
                         Navajo Generating Station.

                  10.1.2 Arizona shall be the Project Manager for the
                         Transmission System, except for the Navajo-McCullough
                         500 KV line and the McCullough Substation.

                                      -21-
<PAGE>
                  10.1.3 Los Angeles shall be the Project Manager for the
                         Navajo-McCullough 500 KV line and the McCullough
                         Substation.

            10.2  A Project Manager shall:

                  10.2.1 Provide for the engineering, design, contract
                         preparation, purchasing, construction, supervision,
                         expediting, inspection, accounting, testing and
                         start-up of its designated component so as to complete
                         such component for Firm Operation.

                  10.2.2 Promptly supply the Participants with information on
                         major matters regarding its designated component and
                         significant factors which affect construction
                         schedules.

                  10.2.3 Provide the committees with all necessary records and
                         information pertaining to matters within their
                         designated responsibilities.

            10.3 The Project Managers of the Transmission System shall optimize
      the design of the Transmission System. The Participants recognize that
      such optimization may result in modifications in the Transmission System
      as described in Exhibit A-2. In the event of such

                                      -22-
<PAGE>

      modifications, the Participants shall agree on an equitable method of
      allocating the construction, operation and maintenance cost
      responsibilities.

11. OPERATING AGENTS:

            11.1  The Operating Agents shall be as follows:

                        11.1.1 Salt River Project shall be the Operating Agent
                               for the Navajo Generating Station.

                        11.1.2 Arizona shall be the Operating Agent for the
                               Transmission System, except for the
                               Navajo-McCullough 500 KV line and the McCullough
                               Substation.

                        11.1.3 Los Angeles shall be the Operating Agent for the
                               McCullough Substation.

                        11.1.4 Nevada shall be the Operating Agent for the
                               Navajo-McCullough 500 KV line.

            11.2 The Operating Agents shall be responsible for the operation and
      maintenance of their designated components of the Navajo Project, and in
      connection therewith shall:

                        11.2.1 Provide for engineering, contract preparation,
                               purchasing, repair, supervision, training,
                               expediting, inspection, testing, protection,
                               operation, maintenance, retirement

                                      -23-
<PAGE>

                               and replacement.

                        11.2.2 Prepare recommendations covering the matters
                               which are to be reviewed and acted upon by the
                               engineering and operating committees.

                        11.2.3 Follow the practices and procedures which have
                               been reviewed and approved by the engineering and
                               operating committees and generally accepted
                               practices in the electric utility industry.

                        11.2.4 Keep the Participants fully and promptly advised
                               of material changes in conditions or other
                               material developments affecting the performance
                               of their designated responsibilities.

12.   CONSTRUCTION SCHEDULES:

            12.1 Construction of the Navajo Project has been planned with the
      objective of having each component available for start-up operation or
      energization for test date and for Firm Operation on the dates specified
      in Exhibit D hereto.

13.   CONSTRUCTION COSTS:

            13.1 Construction costs shall include all payments made and
      obligations incurred by the Project Managers for or in connection with the
      construction of the

                                      -24-
<PAGE>

      Navajo Project, including but not limited to those costs specified in
      Exhibit E hereto.

            13.2 The construction costs of the Navajo Generating Station shall
      be shared and paid for by the Participants in proportion to their
      Generation Entitlement Shares.

            13.3 The construction costs of the Transmission System shall be
      shared and paid for by the Participants in the manner shown in Exhibit C
      hereto.

            13.4 United States shall not bear any part of any other
      Participant's costs for interest, interest during construction, financing
      charges and franchise fees.

14.   OPERATION AND MAINTENANCE COSTS:

            14.1 Operation and maintenance costs of the Navajo Generating
      Station shall include all payments made and obligations incurred by the
      Operating Agent for or in connection with operation and maintenance,
      including but not limited to those costs specified in Exhibit F hereto.

            14.2 The operation and maintenance costs of the Navajo Generating
      Station, including costs of water but excluding costs of fuel, shall be
      shared by the Participants in proportion to their Generation Entitlement
      Shares. The amount of fuel required for active storage and the initial
      emergency fuel storage, the rate of fuel consumption for Zero Net Load
      operation and the costs of start-up shall be determined in accordance with
      procedures to be established by the engineering and

                                      -25-
<PAGE>

      operating committee, and the costs thereof and fixed fuel transportation
      charges, if any, shall be shared by the Participants in proportion to
      their Generation Entitlement Shares.

            14.3 Except as provided in Section 14.2 hereof, the costs of fuel
      for each generating unit and the variable fuel transportation charges
      shall be shared by each Participant in the ratio that such Participant's
      monthly net energy generation scheduled from such unit bears to the total
      monthly net energy generation scheduled from such unit.

            14.4 The costs of ash disposal shall be shared among the
      Participants in the same proportions as the monthly allocations of fuel
      costs among the Participants.

            14.5 The operation and maintenance costs of the Transmission System
      shall include all payments made and obligations incurred by the Operating
      Agent for and in connection with such operation and maintenance, including
      but not limited to those costs specified in Exhibit G hereto.

            14.6 The operation and maintenance costs of the Transmission System
      shall be shared and paid for by the Participants in the manner specified
      in Exhibit C hereto.

            14.7 United States shall not bear any part of any other
      Participant's costs for interest, interest during

                                      -26-
<PAGE>
      construction, financing charges and franchise fees.

15.   ADVANCEMENT OF FUNDS:

            15.1 Each Participant shall advance its share of construction costs
      and the operating and maintenance costs prior to the date when funds are
      required by the Project Managers or Operating Agents to pay such costs so
      that the Project Managers and Operating Agents in their capacity as such
      will not have to advance any funds on behalf of another Participant.

            15.2 The Participants shall pay in advance all construction costs in
      accordance with cost estimates and payment schedules to be established by
      the Project Managers. The first such cost estimate and payment schedule
      shall be established not less than sixty (60) days following the execution
      of this agreement and shall be updated monthly thereafter. At least once
      each month following the initial payment of construction costs, as called
      for by such cost estimates and payment schedules, the Project Managers
      shall notify each Participant of the estimated weekly expenditures for the
      succeeding month, and each Participant shall pay to the Project Managers
      once each week its share of such estimate. Following completion of
      construction, each Project Manager shall compute the total costs of
      construction of its designated component of the Navajo Project and each
      Participant shall promptly settle any

                                      -27-
<PAGE>

      balance of its indebtedness in accordance therewith. If at any time it is
      determined that a Participant has made advances which are greater or less
      than its share of the construction costs, the difference shall be paid,
      refunded or credited.

            15.3 Each Participant shall pay its share of operating and
      maintenance costs in accordance with requests for funds submitted by the
      Operating Agents. Funds shall be requested as near to the date such funds
      are required by the Operating Agents as is practical under the
      circumstances, but a Participant shall have not less than three (3)
      business days advance notice prior to the due date for requested funds.

            15.4 The United States shall be given appropriate credit for any
      interest in Federal lands, other than Indian lands, administered by the
      Department of the Interior which are made available for the Navajo
      Project. In instances where Federal laws or regulations prescribe fees or
      charges, or the basis or method for determining such fees or charges, for
      the use of Federal lands which are so administered and made available for
      the Navajo Project, the amount of such fees or charges or the provisions
      of such laws or regulations shall govern the determination of the credit
      to be given to the United States. In the absence of applicable Federal
      laws or regulations, the amount of the credit to be

                                      -28-
<PAGE>

      given to the United States shall be as mutually agreed upon by the
      Participants or, failing such agreement, as conclusively determined by the
      Secretary.

16.   TAXES:

            16.1 The Participants shall use their best efforts to have any
      taxing authority imposing any taxes or assessments on the Navajo Project,
      or any interests or rights therein, assess and levy such taxes or
      assessments directly against the ownership or beneficial interest of each
      Participant.

            16.2 All taxes or assessments levied against each Participant's
      ownership or beneficial interest in the Navajo Project, excepting those
      taxes or assessments levied against an individual Participant in behalf of
      any or all of the other Participants, shall be the sole responsibility of
      the Participant upon whose ownership or beneficial interest said taxes or
      assessments are levied.

            16.3 If any property taxes or any other taxes or assessments are
      levied or assessed in a manner other than as specified in Section 16.1
      hereof, it shall be the responsibility of the coordinating committee to
      establish equitable practices and procedures for the apportionment among
      the Participants of such taxes and assessments and the payment thereof.

                                      -29-
<PAGE>

17.   NONPARTITIONMENT:

            17.1 Each Co-Tenant hereto agrees to waive any rights which it may
      have to partition any component of the Navajo Project, whether by
      partitionment in kind or by sale and division of the proceeds, and further
      agrees that it will not resort to any action in law or in equity to
      partition such component, and it waives the benefits of all laws that may
      now or hereafter authorize such partition for a term (i) which shall be
      co-terminus with the co-tenancy agreement for such component, or (ii)
      which shall be for such lesser period as may be required under applicable
      law.

18.   MORTGAGE AND TRANSFER OF INTERESTS:

            18.1 Except as provided in Section 18.6 hereof, each Co-Tenant shall
      have the right at any time and from time to time to mortgage, create or
      provide for a security interest in or convey in trust all or a part of its
      ownership share in the Navajo Project, together with an equal interest in
      the Project Agreements to a trustee or trustees under deeds of trust,
      mortgages or indentures, or to secured parties under a security agreement,
      as security for its present or future bonds or other obligations or
      securities, and to any successors or assigns thereof, without need for the
      prior written consent of any other Participant, and without such
      mortgagee, trustee or secured party assuming or becoming

                                      -30-
<PAGE>

      in any respect obligated to perform any of the obligations of the
      Participants.

            18.2 Except as provided in Section 18.6 hereof, any mortgagee,
      trustee or secured party under present or future deeds of trust,
      mortgages, indentures or security agreements of any of the Co-Tenants and
      any successor or assign thereof, and any receiver, referee or trustee in
      bankruptcy or reorganization of any of the Co-Tenants, and any successor
      by action of law or otherwise, and any purchaser, transferee or assignee
      of any thereof may, without need for the prior written consent of the
      other Participants, succeed to and acquire all the rights, titles and
      interests of such Co-Tenant in the Navajo Project and the Project
      Agreements, and may take over possession of or foreclose upon said
      property, rights, titles and interests of such Co-Tenant.

            18.3 Except as provided in Section 18.6 hereof, each Co-Tenant shall
      have the right to transfer or assign all or part of its ownership share in
      the Navajo Project, together with an equal interest in the Project
      Agreements, to any of the following without the need for prior written
      consent of any other Participant:

                 18.3.1 To any entity acquiring all or substantially all of the
                        property of such Co-Tenant; or

                 18.3.2 To any entity merged or consolidated

                                      -31-
<PAGE>

                        with such Co-Tenant; or

                 18.3.3 To any entity which is wholly-owned by a Co-Tenant; or

                 18.3.4 To the Salt River Valley Water Users' Association, an
                        Arizona corporation, in the case of a transfer by Salt
                        River Project.

            18.4 Except as otherwise provided in Sections 18.1, 18.2, and 18.6
      hereof, any successor to the rights, titles and interests of a Co-Tenant
      in the Navajo Project, together with an equal interest in the Project
      Agreements, shall assume and agree to fully perform and discharge all of
      the obligations hereunder of such Co-Tenant, and such successor shall
      notify each of the other Participants in writing of such transfer,
      assignment or merger, and shall furnish to each Participant evidence of
      such transfer, assignment or merger.

            18.5 No Participant shall be relieved of any of its obligations
      under the Project Agreements by an assignment under this Section 18
      without the express prior written consent of all of the remaining
      Participants.

            18.6 The rights set forth in Sections 18.1, 18.2 and 18.3 hereof
      shall not apply to such interests of Salt River Project in the Navajo
      Project or in the Project Agreements as are held for the use and benefit
      of the United States, and Salt River Project shall transfer,

                                      -32-
<PAGE>

      convey, mortgage, encumber or hypothecate any such interest only upon the
      prior written instruction of the United States.

19.   RIGHT OF FIRST REFUSAL:

            19.1 Except as provided in Section 18 hereof, should any Co-Tenant
      desire to transfer its ownership in the Navajo Project, or any portion
      thereof, to any person, entity or another Co-Tenant, each remaining
      Co-Tenant shall have the right of first refusal to purchase such interest
      on the basis of the greater of the following amounts:

                 19.1.1 The amount of the bona fide written offer from the
                        buyers, or

                 19.1.2 The fair market value.

            19.2 If more than one of the Co-Tenants desire to purchase such
      interest, it shall be transferred in the ratio that the Generation
      Entitlement Share of each Co-Tenant desiring to purchase bears to the
      total Generation Entitlement Shares of such Co-Tenants.

            19.3 The provisions of this Section 1.9 shall not apply to any
      interest held by the Salt River Project for the use and benefit of the
      United States.

20.   DESTRUCTION:

            20.1 If a generating unit of the Navajo Generating Station should be
      destroyed to the extent that the cost of repairs or reconstruction is less
      than 60% of the

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<PAGE>

      original cost thereof, the Participants shall, unless otherwise agreed,
      repair or reconstruct such generating unit to substantially the same
      general character or use as the original. The Participants shall share the
      costs of such repairs or reconstruction in proportion to their Generation
      Entitlement Shares in the generating unit so destroyed.

            20.2 If a generating unit of the Navajo Generating Station should be
      destroyed to the extent that the cost of repairs or reconstruction is 60%
      or more of the original cost, the Participants shall, upon agreement,
      restore or reconstruct such unit to substantially the same general
      character or use as the original; provided, however, that should all of
      the Participants not agree to restore or reconstruct such unit, but some
      of the Participants nevertheless desire so to do, then the Participants
      who do not agree to restore or reconstruct shall sell their interests in
      such unit to the remaining Participants at their proportionate interests
      in the salvage value thereof. The Participants agreeing to repair or
      reconstruct such unit shall share the costs of repair or reconstruction in
      the proportion that the Generation Entitlement Share of each bears to the
      total Generation Entitlement Share of such Participants.

            20.3 If any facilities of the Transmission System should be
      destroyed, the Participants shall, unless

                                      -34-
<PAGE>

      otherwise agreed, repair or reconstruct such facilities to substantially
      the same general character or use as the original. The Participants shall
      share the costs of such repair or reconstruction in proportion to their
      original cost responsibility for the facilities so destroyed.

21.   INSURANCE:

            21.1 During the construction stage, each Project Manager shall
      procure or cause to be procured and maintain in force policies of
      comprehensive bodily injury and property damage liability insurance; all
      risk builder's risk insurance; contractor's equipment all risk floater
      insurance; employees' dishonesty bonds; automobile liability insurance;
      and workmen's compensation insurance covering employees of such Project
      Manager engaged in the performance of its responsibilities under the
      Project Agreements at the job site, and such other coverage as the
      Participants may agree is desirable.

            21.2 During the operating stage, each Operating Agent shall procure
      or cause to be procured and maintain broad form steam turbine insurance,
      including reasonable expediting expenses; broad form boiler and pressure
      vessel insurance, including reasonable expediting expenses; work men's
      compensation insurance covering employees of the Operating Agent engaged
      in the performance of its responsibilities under the Project Agreements at
      the job site; physical damage insurance; comprehensive bodily

                                      -35-
<PAGE>

      injury and property damage liability insurance; employees dishonesty
      bonds; and automobile liability insurance; and such other coverage as the
      Participants may agree is desirable.

            21.3 Each Participant shall be named an insured, individually and
      jointly with the other Participants, on all insurance, and the
      comprehensive bodily injury and property damage liability insurance shall
      carry cross-liability endorsements.

            21.4 Salt River Project shall be the loss payee for all property
      insurance covering such interests in the Navajo Project as it holds for
      the use and benefit of the United States. Any proceeds paid to Salt River
      Project by reason of the destruction or damage of such interests shall be
      held or disposed of by it pursuant to the terms of the Project Agreements.

            21.5 The insurable values, limits, deductibles, retentions and other
      special terms of the Project Insurance shall be agreed upon by the
      Participants prior to the placement of such Project Insurance. Pending
      such agreement, the Project Managers or Operating Agents shall procure
      insurance binders providing such coverage as in their respective judgments
      is necessary. After such agreement, a policy of Project Insurance shall
      not be changed without the prior written consent of all of the
      Participants, except for minor changes and insurance

                                      -36-
<PAGE>

      binders procured pursuant to this Section 21.5, as to which notification
      shall be given to the other Participants by the Project Manager or
      Operating Agent responsible for procuring such Project Insurance.

            21.6 Each Participant shall be furnished with either a certified
      copy of each of the policies of the Project Insurance or a certified copy
      of each of the policy forms of Project Insurance, together with a line
      sheet therefor (and any subsequent amendments) naming the insurers and
      underwriters and the extent of their participation.

            21.7 Each Co-Tenant shall have the right, by written notice to the
      party procuring the policy, to name any mortgagee, trustee or secured
      party on all or any of the Project Insurance policies as loss payees or
      additional insureds as their interests may appear.

            21.8 Each of the Project Insurance policies shall be endorsed so as
      to provide that all additional named insureds shall be given the same
      advance notice of cancellation or material change as that required to be
      given to the party having procured the policy.

            21.9 Project Insurance policies shall be primary insurance for all
      purposes and shall be so endorsed. Any insurance carried by a Participant
      individually shall not participate with the Project Insurance as respects
      any loss or claim for which valid and collectible Project Insurance shall
      apply and shall apply solely as respects

                                      -37-
<PAGE>

      the individual interest of the Participant carrying such insurance.

            21.10 In the event that any other Co-Tenant's insurance program
      affords equal or better coverage on a more favorable cost basis than that
      available to the Project Manager or Operating Agent responsible for
      procuring such Project Insurance, the Participants may agree by separate
      written agreement that such insurance program may be utilized to afford
      all or part of the Project Insurance coverage required by Sections 21.1 or
      21.2 hereof.

22.   LIABILITY:

            22.1 Except for any damage resulting from Willful Action, and except
      to the extent of any damage covered by valid and collectible Project
      Insurance, liability on the part of any Participant (first Participant),
      or any of its directors, officers or employees, for any damage to any
      Participant (second Participant), whether or not caused by negligence,
      which occurs as the result of performance or non-performance of its
      responsibilities under the Project Agreements may not be collected from
      the Participant (first Participant), or any of its directors, officers or
      employees, by any action in law or equity by the Participant (second
      Participant).

            22.2 In the event any insurer providing Project Insurance refuses to
      pay any judgment obtained by a Participant (second Participant) against
      another

                                      -38-
<PAGE>

      Participant (first Participant), or any of its directors, officers or
      employees, on account of liability referred to in Section 22.1 hereof, the
      Participant (first Participant), or any of its directors, officers or
      employees, against whom the judgment is obtained, shall, at the request of
      the prevailing Participant (second Participant) and in consideration for
      the release given in Section 22.1 hereof, execute such documents as may be
      necessary to effect an as assignment of its contractual rights against the
      non-paying insurer and thereby give the prevailing Participant (second
      Participant) the opportunity to enforce its judgment directly against such
      insurer.

            22.3 Except for Station Work Liability resulting from Willful
      Action, and except as provided in Section 22.6 hereof, the costs and
      expenses of discharging all Station Work Liability imposed upon one or
      more of the Participants for which payment is not made by Project
      Insurance shall be allocated among the Participants in proportion to their
      Generation Entitlement Shares.

            22.4 Except for Transmission Work Liability resulting from Willful
      Action, and except as provided in Section 22.6 hereof, the costs and
      expenses of discharging all Transmission Work Liability imposed upon one
      or more of the Participants for which payment is not made by the Project
      Insurance shall be allocated among the Participants in proportion to their
      cost responsibility in the

                                      -39-
<PAGE>

      facilities involved in the operative facts which give rise to the
      Transmission Work Liability. However, if the proximate cause of such
      liability cannot be determined or is not related to any particular
      facilities, then such costs and expenses shall be allocated among the
      Participants in proportion to their Generation Entitlement Shares.

            22.5 Each Participant shall be responsible for the consequences of
      its own Willful Action, and shall indemnify and hold harmless the other
      Participants from the consequences thereof.

            22.6 Except for liability resulting from Willful Action, any
      Participant whose electric customer shall make a claim or bring an action
      for any death, injury, loss or damage arising out of electric service to
      such customer, shall indemnify and hold harmless all other Participants,
      their directors, officers and employees, from and against any liability
      for such death, injury, loss or damage. The term "electric customer" shall
      mean an electric consumer to whom no Power is delivered for resale.

            22.7 The provisions of this Section 22 shall not be construed so as
      to relieve any insurer of its obligation to pay any insurance proceeds in
      accordance with the terms and conditions of valid and collectible Project
      Insurance policies.

            22.8 The terms "Participant" and "Participants",

                                      -40-
<PAGE>

      as used in this Section 22, shall include any Project Manager or Operating
      Agent, in its capacity as such.

23.   INTERESTS HELD FOR THE USE AND BENEFIT OF UNITED STATES:

            23.1 Salt River Project shall acquire and hold the interests
      acquired for the use and benefit of the United States so that the United
      States will realize the full use and benefit of its entitlement as
      provided for in the Project Agreements.

            23.2 Salt River Project shall not execute any Project Agreement or
      any other agreement which purports to apply to the rights, titles or
      interests held for the use and benefit of the United States to which the
      United States is not a contracting party in its capacity as a Participant
      without the prior written consent of the United States. Except as
      otherwise provided in the Project Agreements, Salt River Project shall not
      exercise any rights, privileges or options in any such agreement for or on
      behalf of the United States without the prior written consent of the
      United States. With respect to any Project Agreement to which the United
      States is not a contracting party, except as otherwise provided in the
      Project Agreements, the United States shall have a right, co-equal with
      the rights of the Participants who are contracting parties to such Project
      Agreement, to participate in any decision or action taken under such
      Project Agreement which in any manner applies to or affects a right,

                                      -41-
<PAGE>

      title or interest held by Salt River Project for the use and benefit of
      the United States, to the same extent and to the same effect as though the
      United States were a contracting party to such Project Agreement.

            23.3 Although it is the intention of the Participants that no
      Co-Tenant should incur any additional liability or burden by reason of the
      generating and transmission Capacity dedicated for the use and benefit of
      the United States,should any such liability or burden be imposed upon
      Salt River Project solely by reason of its holding legal title to any
      property or holding an interest in the Project Agreements for the use and
      benefit of the United States such liability or burden shall be shared by
      the Co-Tenants and allocated among them in the ratio that each Co-Tenant's
      Generation Entitlement Share bears to the total Generation Entitlement
      Shares of the Co-Tenants.

            23.4 All moneys paid to Salt River Project pursuant to the Project
      Agreements which are for the use and benefit of the United States shall
      be segregated from its general funds and, upon written request of the
      Contracting Officer, such funds will be invested by Salt River Project in
      the manner specified in such request. All interest earned and appreciation
      in value on such investments shall inure to the benefit of the United
      States and all losses on such investments shall be at the risk of the
      United States. If the proceeds exceed the amount

                                      -42-
<PAGE>

      of the obligation for which they are designated or held, then, upon
      written request of the United States, Salt River Project shall pay such
      excess to the United States or its designee.

24.   REIMBURSEMENT FOR COSTS AND EXPENSES:

            24.1 The United States shall reimburse Salt River Project for all
      costs and expenses not otherwise specifically provided for in the Project
      Agreements but which are imposed upon, measured by and associated with the
      interests held by Salt River Project for the use and benefit of the United
      States.

25.   DEFAULTS:

            25.1 Unless otherwise provided in the Project Agreements, in the
      event of a default by any Participant under any of the Project Agreements:

                  25.1.1 The non-defaulting Participants, following receipt of
                         reasonable notice, shall remedy the default, with the
                         costs thereof allocated among and paid by each of the
                         non-defaulting Participants in the ratio that their
                         Generation Entitlement Shares bear to the total
                         Generation Entitlement Shares of all non-defaulting
                         Participants.

                                      -43-
<PAGE>

                  25.1.2 The defaulting Participant shall remedy such default as
                         soon as possible and shall pay upon demand to each non-
                         defaulting Participant any amount paid by such
                         non-defaulting Participant for the account of the
                         defaulting Participant plus interest thereon at the
                         rate of ten per cent (10%) per annum or the legal
                         maximum rate of interest, whichever is the lesser, from
                         the date of expenditure by the non-defaulting
                         Participant.

                  25.1.3 If such default by a Co-Tenant shall continue for a
                         period of six (6) months or more without having been
                         remedied by the defaulting Co-Tenant, following a
                         determination as a result of arbitration or judicial
                         proceeding that an act of default exists, the matter
                         may be re-submitted to arbitration as permitted by law,
                         with a request that the arbitrators determine what
                         additional remedies may be reasonably necessary or
                         required under the circumstances.

                  25.1.4 The United States shall not be liable

                                      -44-
<PAGE>

                        for any interest charges or attorneys' fees.

            25.2 Any Participant may dispute an asserted default by it, provided
      that such Participant shall pay the disputed payment or perform the
      disputed obligation under written protest. Payments made without protest
      shall be deemed to be correct, except to the extent that audits may reveal
      the necessity for adjustments.

26    ARBITRATION:

            26.1 If a dispute between any of the Participants should arise under
      the Project Agreements which does not involve the legal rights of or which
      will not create a legal obligation upon the United States under the
      Project Agreements, or will not affect the interests or rights held for
      the use and benefit of the United States under the Project Agreements, any
      Participant may call for submission of the dispute to arbitration, which
      call shall be binding upon all of the other Participants. Except as
      specifically provided in the Project Agreements, the arbitration shall be
      governed by the rules and practices of the American Arbitration
      Association. The award of the arbitrators shall be final and binding upon
      the Participants, and the costs and expenses of the arbitrators shall be
      shared equally by the Participants participating in the arbitration,
      unless otherwise decided by the arbitrators.

                                      -45-
<PAGE>
            26.2 If a dispute arises between any of the Participants which does
      or may involve the legal rights of or which will or may create a legal
      obligation upon the United States under the Project Agreements, or which
      affects or may affect the interests or rights held for the use and benefit
      of the United States under the Project Agreements, then any Participant
      may call for submission to arbitration of any part of the dispute, issue
      or action related thereto which the United States may lawfully submit to
      arbitration. If the Contracting Officer agrees to such arbitration, or if
      the Contracting Officer refuses or fails to arbitrate and a court of
      competent jurisdiction thereafter finally decides that the United States
      may lawfully submit the matter in dispute to arbitration, it shall be
      conducted in the manner set forth in Section 26.1 hereof, or in such
      other manner as may be provided for by Federal law.

27.   ACTIONS PENDING RESOLUTION OF DISPUTES:

            27.1 If a dispute should arise which is not resolved by the
      coordinating committee, then, pending the resolution of the dispute by
      arbitration or judicial proceedings, the Project Managers or Operating
      Agents shall proceed with the Station Work or Transmission Work in a
      manner consistent with the Project Agreements and generally accepted
      practice in the electric utility industry, and the Participants shall
      advance the funds required to

                                      -46-
<PAGE>

      perform such Station Work or Transmission Work in accordance with the
      applicable provisions of the Project Agreements. The resolution of any
      dispute involving the failure of one of the committees to reach agreement
      upon matters involving future expenditures shall have prospective
      application from the date of final determination, and amounts advanced by
      the Participants pursuant to this Section 27.1 during the pendency of such
      dispute shall not be subject to refund except upon a final determination
      that the expenditures were not made in a manner consistent with generally
      accepted practice in the electric utility industry.

28.   REMOVAL OF OPERATING AGENTS:

            28.1 If an Operating Agent shall fail to remedy any material act of
      default within a reasonable time following a final determination by a
      panel or arbitrators or judicial proceeding that the Operating Agent is in
      default, then any Participant may cause the Operating Agent to be removed
      by serving written notice of removal upon such Operating Agent and upon
      all of the other Participants.

29.   RELATIONSHIP OF PARTICIPANTS:

            29.1 The covenants, obligations and liabilities of the Participants
      are intended to be several and not joint or collective and, except as
      expressly provided in the Project Agreements, nothing herein contained
      shall ever

                                      -47-
<PAGE>

      be construed to create an association, joint venture, trust or
      partnership, or to impose a trust or partnership covenant, obligation or
      liability on or with regard to any one or more of the Participants. Each
      Participant shall be individually responsible for its own covenants,
      obligations and liabilities as herein provided. No Participant or group of
      Participants shall be under the control of or shall be deemed to control
      any other Participant or the Participants as a group. No Participant shall
      be the agent of or have a right or power to bind any other Participant
      without its express written consent, except as provided in the Project
      Agreements.

            29.2 The Co-Tenants hereby elect to be excluded from the application
      of Subchapter "K" of Chapter 1 of Subtitle "A" of the Internal Revenue
      Code of 1954, or such portion or portions thereof as may be permitted or
      authorized by the Secretary of the Treasury or his delegate insofar as
      such Subchapter, or any portion or portions thereof, may be applicable to
      the Co-Tenants under the Project Agreements.

30.   FEES:

            30.1 No Project Manager or Operating Agent shall receive any fee or
      profit hereunder.

31.   OFFICIALS NOT TO BENEFIT:

            31.1 No Member of or Delegate to Congress or Resident Commissioner
      shall be admitted to any share or part of

                                      -48-
<PAGE>

      this agreement or to any benefit that may arise herefrom, but this
      restriction shall not be construed to extend to this agreement if made
      with a corporation or company for its general benefit.

32.   COVENANT AGAINST CONTINGENT FEES:

            32.1 The Co-Tenants warrant that no person or selling agency has
      been employed or retained to solicit or secure this agreement upon an
      agreement or understanding for a commission, percentage, brokerage or
      contingent fee, excepting bona fide employees or bona fide established
      commercial or selling agencies maintained by a Co-Tenant for the purpose
      of securing business. For breach or violation of this warranty the United
      States shall have the right to annul this agreement without liability or
      in its discretion to deduct from the payments to be made hereunder, or
      otherwise recover the full amount of such commission, percentage,
      brokerage or contingent fee.

33.   EQUAL OPPORTUNITY:

            33.1 Except as provided in Title.42 U.S.C. Section 2000-e-2(i) and
      in keeping with any obligation undertaken by any of the Co-Tenants, in
      this section referred to as the Contractor, or their assigns, pursuant to
      the terms of said Title 42 U.S.C. Section 2000-e-2(i) to give preference
      for employment to qualified Indians for work on or near an Indian
      Reservation, during the performance of this

                                      -49-
<PAGE>

      agreement, the Contractor agrees as follows:

                  33.1.1 The Contractor will not discriminate against any
                         employee or applicant for employment because of race,
                         color, religion, sex or national origin. The Contractor
                         will take affirmative action to insure that applicants
                         are employed, and that employees are treated during
                         employment without regard to their race, color,
                         religion, sex or national origin. Such action shall
                         include, but not be limited to the following:
                         Employment, upgrading, demotion or transfer;
                         recruitment or recruitment advertising; layoff or
                         termination; rates of pay or other forms of
                         compensation; and selection for training, including
                         apprenticeship. The Contractor agrees to post in
                         conspicuous places available to employees and
                         applicants for employment, notices to be provided by
                         the Contracting Officer setting forth the provisions of
                         this equal

                                      -50-
<PAGE>

                         opportunity clause.

                  33.1.2 The Contractor will, in all solicitations or
                         advertisements for employees placed by or on behalf of
                         the Contractor, state that all qualified applicants
                         will receive consideration for employment without
                         regard to race, color, religion, sex or national
                         origin.

                  33.1.3 The Contractor will send to each labor union or
                         representative of workers with which it has a
                         collective bargaining agreement or other contract or
                         understanding, a notice to be provided by the agency
                         Contracting Officer advising the labor union or
                         workers' representative of the Contractor's commitments
                         under this equal opportunity clause, and shall post
                         copies of the notice in conspicuous places available to
                         employees and applicants for employment.

                  33.1.4 The Contractor will comply with all provisions of
                         Executive Order No. 11246 of September 24, 1965, and of
                         the rules, regulations and

                                      -51-
<PAGE>

                         relevant orders of the Secretary of Labor.

                  33.1.5 The Contractor will furnish all information and reports
                         required by Executive Order No. 11246 of September 24,
                         1965, and by the rules, regulations and orders of the
                         Secretary of Labor, or pursuant thereto, and will
                         permit access to its book, records and accounts by the
                         contracting agency and the Secretary of Labor for
                         purposes of investigation to ascertain compliance with
                         such rules, regulations and orders.

                  33.1.6 In the event of the Contractor's non-compliance with
                         this equal opportunity clause, or with any of the said
                         rules, regulations or orders, this agreement may be
                         cancelled, terminated or suspended in whole or in part,
                         and the Contractor may be declared ineligible for
                         further government contracts in accordance with
                         procedures authorized in Executive Order

                                      -52-
<PAGE>

                         No. 11246 of September 24, 1965, and such other
                         sanctions may be imposed and remedies invoked as
                         provided in Executive Order No. 11246 of September 24,
                         1965, or by rule, regulation or order of the Secretary
                         of Labor, or as otherwise provided by law.

                  33.1.7 The Contractor will include the provisions Of Sections
                         33.1.1 through 33.1.7 hereof in every subcontract or
                         purchase order unless exempted by rules, regulations or
                         orders of the Secretary of Labor issued pursuant to
                         Section 204 of Executive Order No. 11246 of September
                         24, 1965, so that such provisions will be binding upon
                         each subcontractor or vendor. The Contractor will take
                         such action with respect to any subcontract or purchase
                         order as the contracting agency may direct as a means
                         of enforcing such provisions, including sanctions for
                         non-compliance; provided, however, that, in the event
                         the Contractor becomes involved in,

                                      -53-
<PAGE>

                        or is threatened with, litigation with a subcontractor
                        or vendor as a result of such direction by the
                        contracting agency, the Contractor may request the
                        United States to enter into such litigation to protect
                        the interests of the United States.

34.   WORK HOURS ACT OF 1962:

            34.1 This agreement, to the extent that it is of a character.
      specified in the Contract Work Hours Standards Act (Public Law 87-581,
      76 Stat. 357) and is not covered by the Walsh-Healey Public Contracts Act
      (41 U.S.C. Sections 35-45), is subject to the following provisions and to
      all other provisions and exceptions of said Contract Work Hours Standards
      Act:

                  34.1.1 No Contractor or subcontractor contracting for any
                         part of the contract work which may require or involve
                         the employment of laborers or mechanics shall require
                         or permit any laborer or mechanic in any workweek in
                         which he is employed on such work, to work in excess of
                         eight (8) hours in any calendar day or in excess of
                         forty (40) hours in any workweek unless such laborer or
                         mechanic receives compensation at a

                                      -54-
<PAGE>

                        rate not less than one and one-half times his basic rate
                        of pay for all hours worked in excess of eight (8) hours
                        in any calendar day or in excess of forty (40) hours in
                        such workweek, whichever is the greater number of
                        overtime hours.

                  34.1.2 In the event of any violation of the provisions of
                         Section 34.1.1 hereof, the Contractor and any
                         subcontractor responsible for such violation shall be
                         liable to any affected employee for his unpaid wages.
                         In addition, such Contractor or subcontractor shall be
                         liable to the United States for liquidated damages.
                         Such liquidated damages shall be computed, with respect
                         to each individual laborer or mechanic employed in
                         violation of the provisions of Section 34.1.1 hereof,
                         in the sum of Ten Dollars ($10.00) for each calendar
                         day on which such employee was required or permitted to
                         work in excess of eight (8) hours or in excess of forty
                         (40) hours in a workweek without payment of the
                         required overtime wages.

                                      -55-
<PAGE>

                  34.1.3 The Secretary may withhold, or cause to be withheld,
                         from any monies payable on account of work performed by
                         the Contractor or subcontractor, the full amount of
                         wages required by this agreement, and such sums as may
                         administratively be determined to be necessary to
                         satisfy any liabilities of such Contractor or
                         subcontractor for liquidated damages as provided in
                         Section 34.1.2 hereof.

                  34.1.4 The Contractor shall require the foregoing Sections
                         34.1.1, 34.1.2, 34.1.3 and this Section 34.1.4 to be
                         inserted in all subcontracts.

35.   EXAMINATION OF RECORDS:

            35.1 The Co-Tenants agree that the Comptroller General of the United
      States, or any of his duly authorized representatives, shall, until the
      expiration of three (3) years after final payment under the Project
      Agreements, have access to and the right to examine any directly pertinent
      books, documents, papers and records of the Co-Tenants involving
      transactions related to this agreement.

36.   ASSIGNMENT OF CLAIMS:

            36.1 Pursuant to the provisions of the Assignment

                                      -56-
<PAGE>

      of Claims Act of 1940, as amended (31 U.S.C. Section 203, 41 U.S.C.
      Section 15), if this agreement provides for payments aggregating $1,000 or
      more, claims for monies due or to become due any Co-Tenant from the
      Government under this agreement may be assigned to a bank, trust company,
      or other financing institution, including any Federal lending agency, and
      may thereafter be further assigned and reassigned to any such institution.
      Any such assignment or reassignment shall cover all amounts payable under
      this agreement and not already paid, and shall not be made to more than
      one party, except that any such assignment or reassignment may be made to
      one party as agent or trustee for two or more parties participating in
      such financing. Unless otherwise provided in this agreement, payments to
      an assignee of any monies due or to become due under this agreement shall
      not, to the extent provided in said Act, as amended, be subject to
      reduction or setoff. (The preceding sentence applies only if this
      agreement is made in time of war or national emergency as defined in said
      Act and is with the Department of Defense, the General Services
      Administration, the Atomic Energy Commission, the National Aeronautics and
      Space Administration, the Federal Aviation Agency, or any other department
      or agency of the United States designated by the President pursuant to
      Clause 4 of the proviso of Section 1 of the Assignment of Claims Act of
      1940, as amended by the Act

                                      -57-
<PAGE>

      of May 15, 1951, 65 Stat. 41.)

            36.2 In no event shall copies of this agreement or of any plans,
      specifications, or other similar documents relating to work under this
      agreement, if marked "Top Secret", "Secret", or "Confidential", be
      furnished to any assignee of any claim arising under this agreement or to
      any other person not entitled to receive the same. However, a copy of any
      part or all of this agreement so marked may be furnished, or any
      information contained therein may be disclosed, to such assignee upon the
      prior written authorization of the Contracting Officer.

37.   CONVICT LABOR:

            37.1 In connection with the performance of work under this
      agreement, the Contractor agrees not to employ any person undergoing
      sentence or imprisonment at hard labor.

38.   UNCONTROLLABLE FORCES:

            38.1 No Participant shall be considered to be in default in the
      performance of any of its obligations under the Project Agreements (other
      than obligations of said Participant to pay costs and expenses) when a
      failure of performance shall be due to uncontrollable forces. The term
      "uncontrollable forces" shall be any cause beyond the control of the
      Participant affected, including but not restricted to failure of or threat
      of failure of facilities, flood, earthquake, storm, fire, lightning,

                                      -58-
<PAGE>

      epidemic, war, riot, civil disturbance or disobedience, labor dispute,
      labor or material shortage, sabotage, restraint by court order or public
      authority, and action or non-action by or failure to obtain the necessary
      authorizations or approvals from any governmental agency or authority,
      which by exercise of due diligence such Participant could not reasonably
      have been expected to avoid and which by exercise of due diligence it
      shall be unable to overcome. Nothing contained herein shall be construed
      so as to require a Participant to settle any strike or labor dispute in
      which it may be involved. Any Participant rendered unable to fulfill any
      of its obligations under the Project Agreements by reason of
      uncontrollable forces shall exercise due diligence to remove such
      inability with all reasonable dispatch. The term "Participant" as used in
      this Section 38.1 shall include any Project Manager or Operating Agent, in
      its capacity as such.

39.   GOVERNING LAW:

            39.1 To the extent permitted by law, this agreement shall be
      governed by the laws of the State of Arizona, except insofar as
      controversies involving the rights of the United States are concerned.

40.   BINDING OBLIGATIONS:

            40.1 All of the obligations set forth in the Project Agreements
      shall bind the Participants and their

                                      -59-
<PAGE>

      successors and assigns, and such obligations shall run with the
      Co-Tenants' rights, titles and interests in the Navajo Project and with
      all of the interests of each Participant in the Project Agreements;
      provided that any mortgagee, trustee or secured party shall not be finally
      obligated for obligations arising prior to taking of possession or the
      initiation of remedial proceedings.

41.   NONDEDICATION OF FACILITIES:

            41.1 The Project Agreements shall not be construed to grant to any
      Co-Tenant any rights of ownership in, possession of or control over the
      electric system of the United States.

            41.2 The Project Agreements shall not be construed to grant to the
      United States any rights of ownership in, possession of, or control over
      the electric system of any Co-Tenant.

            41.3 The Co-Tenants do not intend to dedicate and nothing in the
      Project Agreements shall be construed as constituting a dedication by any
      Co-Tenant of its properties or facilities, or any part thereof, to the
      United States or to any other Co-Tenant or to the customers of the
      United States or to the customers of any other Co-Tenant.

42.   PROJECT AGREEMENTS:

            42.1 The Participants hereto agree to negotiate in good faith and to
      proceed with diligence to obtain all

                                      -60-
<PAGE>

      of the Project Agreements among the Participants and between the
      Participants and other entities.

            42.2 It is acknowledged by the Participants that one or more of the
      Project Agreements may contain provisions which are in conflict with or
      contrary to the terms of this agreement, and any such provision in a
      Project Agreement executed subsequent to the execution of this agreement
      shall be deemed to supersede, amend or modify any conflicting or contrary
      provision herein. The mutual agreement of the Participants to supersede,
      amend or modify the terms hereof shall constitute the legal consideration
      to support such change in the legal rights and obligations of the
      Participants.

43.   TERM:

            43.1 This agreement shall become effective when it has been duly
      executed and delivered on behalf of all of the Participants and shall be
      effective during the interim between the date of execution thereof and the
      effective date of the last of the Project Agreements; provided if any of
      the Project Agreements shall fail to become effective, then this
      agreement shall have a term of fifty (50) years from its effective date.

44.   ASSIGNMENT OF INTERESTS:

            44.1 Any Co-Tenant who acquires in its name an interest in any real
      or personal property or contract which is part of the Navajo Project shall
      transfer and assign an

                                      -61-
<PAGE>

      undivided interest therein to the other Co-Tenants so that the ownership
      and rights of the Co-Tenants in such property or contract shall be as
      provided for in the Project Agreements.

            45. NOTICES:

            45.1 Any notice, demand or request provided for in the Project
      Agreements shall be deemed properly served, given or made if delivered in
      person or sent by registered or certified mail, postage prepaid, to the
      persons specified below:

                  45.1.1      United States of America
                              c/o The Secretary of the Interior
                              United States Department of the Interior
                              Washington, D. C.  20240

                  45.1.2      Arizona Public Service Company
                              c/o Secretary
                              P. O. Box 21666
                              Phoenix, Arizona  85036

                  45.1.3      Department of Water and Power of the City of
                                Los Angeles
                              c/o General Manager
                              P. O. Box 111
                              Los Angeles, California  90054

                  45.1.4      Nevada Power Company
                              c/o President
                              P. O. Box 230
                              Las Vegas, Nevada  89109

                  45.1.5      Salt River Project Agricultural
                                Improvement and Power District
                              c/o Secretary
                              P. O. Box 1980
                              Phoenix, Arizona  85001

                  45.1.6      Tucson Gas & Electric Company
                              c/o Secretary
                              P. O. Box 711
                              Tucson, Arizona  85702

                                      -62-
<PAGE>

            45.2 Any Participant may, at any time, by written notice to all
      other Participants, designate different or additional persons or different
      addresses for the giving of notices hereunder.

            45.3 Any Project Manager or Operating Agent shall provide to each
      Participant a copy of any notice, demand or request given or received by
      it in connection with any of the Project Agreements.

46.   MISCELLANEOUS PROVISIONS:

            46.1 Each Participant agrees, upon request by the other
      Participants, to make, execute and deliver any and all documents
      reasonably required to implement the Project Agreements,

            46.2 The captions and headings appearing in the Project Agreements
      are inserted merely to facilitate reference and shall have no bearing upon
      the interpretation thereof.

            46.3 Each term, covenant and condition of the Project Agreements is
      deemed to be an independent term, covenant and condition, and the
      obligation of any Participant to perform all of the terms, covenants and
      conditions to be kept and performed by it is not dependent on the
      performance by the other Participants of any or all of the terms,
      covenants and conditions to be kept and performed by them.

            46.4 In the event that any of the terms, covenants or conditions of
      any of the Project Agreements, or the

                                      -63-
<PAGE>

      application of any such term, covenant or condition, shall be held invalid
      as to any person or circumstance by any court having jurisdiction in the
      premises, the remainder of such Project Agreement, and the application of
      its terms, covenants or conditions to such persons or circumstances shall
      not be affected thereby.

            46.5 The Project Agreements shall be subject to filing with, and to
      such changes or modifications as may from time to time be directed by,
      competent regulatory authority, if any, in the exercise of its
      jurisdiction.

            46.6 The Co-Tenants shall install and diligently operate in the
      Navajo Generating Station equipment offering the most effective
      commercially proven electrostatic concept, or other equally effective and
      acceptable equipment available under the technology known at the time of
      design, having a design efficiency for removal of particulate matter of
      99.5% to minimize smoke, flyash and dust in stack emissions; provided
      that, except as amended in this Section 46.6, the provisions of Article 16
      of the Water Service Contract dated January 17, 1969 (Contract No.
      14-06-400-5033) shall remain in full force and effect.

            46.7 Any waiver at any time by any Participant of its rights with
      respect to a default or any other matter arising in connection with this
      agreement shall not be deemed a waiver with respect to any subsequent
      default or matter.

                                      -64-
<PAGE>

47.   USE OF FACILITIES OF LOS ANGELES:

            47.1 The United States may use, for such period or periods of time
      as it desires, the 500 KV transmission line of Los Angeles between
      McCullough Substation and Eldorado Substation and associated terminal
      facilities to the extent of the right of Los Angeles to use such terminal
      facilities. Unless otherwise agreed, the United States' right to use the
      facilities of Los Angeles shall not exceed 250 megawatts. Payment shall be
      made annually by the United States to Los Angeles for any period of such
      use at the rate of eight percent (8%) per annum of the capital cost of Los
      Angeles in such line and in switching facilities at Eldorado and
      McCullough Substations installed to terminate the line, as described in
      Exhibit C, times the ratio that the Capacity desired by the United States
      in megawatts in such line bears to 1,000 megawatts.

            47.2 The land presently held by Los Angeles under Bureau of Land
      Management Grant No. N-2763, dated January 23, 1969, which land comprises
      the site of McCullough Substation, may be utilized by Nevada and United
      States without charge for such use other than as provided in Section 47.3.
      If and when Los Angeles acquires fee title to such land, Nevada and United
      States shall each continue to have the right to use such land, and for any
      period of such use the user shall pay

                                      -65-
<PAGE>
      Los Angeles annually at the rate of six percent (6%) of the investment of
      Los Angeles in such land times the user's Common Facilities cost
      responsibility percentage in McCullough Substation as provided for in
      Exhibit C.

            47.3 During any period of use of land by Nevada or United States
      pursuant to Section 47.2, the user shall reimburse Los Angeles for all
      costs and expenses not otherwise specifically provided for in the Project
      Agreements but which are imposed upon Los Angeles by virtue of its holding
      interests in or owning the land comprising the site for the McCullough
      Substation in the amount determined by multiplying such costs and expenses
      by the user's Common Facilities cost responsibility percentage in
      McCullough Substation as provided in Exhibit C.

48.   AGREEMENT SUBJECT TO COLORADO RIVER COMPACT:

            48.1 This agreement is made upon the express condition and with the
      express understanding that all rights hereunder shall be subject to and
      controlled by the Colorado River Compact, being the compact or agreement
      signed at Santa Fe, New Mexico, November 24, 1922, pursuant to Act of
      Congress approved August 19, 1921, entitled "An Act to permit a compact or
      agreement between the States of Arizona, California, Colorado, Nevada, New
      Mexico, Utah and Wyoming respecting the disposition and apportionment of
      the waters of the Colorado River, and for other purposes", which Compact
      was approved in

                                      -66-

<PAGE>

      Section 13 (a) of the Boulder Canyon Project Act.

            IN WITNESS WHEREOF, the parties hereto have caused this
      Participation Agreement to be executed as of the 30th day of
      September, 1969.

                                     THE UNITED STATES OF AMERICA

                                     By /s/ Walter J. Hickel
                                        --------------------------
                                        Secretary of the Interior

                                     ARIZONA PUBLIC SERVICE COMPANY

ATTEST:                              By /s/ M. C. Titus
/s/ Gerald Griffin                      -------------------------
---------------                         Executive VICE PRESIDENT
Assistant Secretary
                                     DEPARTMENT OF WATER AND POWER
                                     OF THE CITY OF LOS ANGELES

                                                    by

                                     BOARD OF WATER AND POWER COMMISSIONERS
                                     OF THE CITY OF LOS ANGELES

ATTEST:

/s/ Mary J. Born                     By    /s/ Frank R. Palmieri
---------------                            ---------------------
SECRETARY                                   PRESIDENT

                                     NEVADA POWER COMPANY

ATTEST:

/s/ Authorized Signatory             By  /s/ Harry Allen
---------------                          ----------------
Secretary                                President

[STAMP]                                               [STAMP]

                                      -67-

<PAGE>

                                     SALT RIVER PROJECT AGRICULTURAL
                                     IMPROVEMENT AND POWER DISTRICT

ATTEST:

/s/ F. E. Smith                      By /s/ V. I. Corbell
---------------                         ------------------
Secretary                               President

                                     TUCSON GAS & ELECTRIC COMPANY

ATTEST:
                                     By /s/ H. R. Catlin
/s/ W. D. Brooks                        ------------------
----------------                        VICE PRESIDENT
ASSISTANT SECRETARY

                                      -68-

<PAGE>

District of Columbia   )
                       ) ss.
City of Washington     )

      On this the 3rd day of November, 1970, before me, the undersigned officer,
personally appeared Walter J. Hickel, Secretary of the Interior of the United
States of America, known to me to be the person described in the foregoing
Navajo Project Participation Agreement (Contract No. 14-06-300-2131), and
acknowledged that he executed the same in the capacity therein stated and for
the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                     /s/ Kathy A. Willing
[SEAL]                               -------------------------------------
                                     My Commission Expires May 14, 1974

State of Arizona     )
                     ) ss.
County of Maricopa   )

      On this the 16th day of March, 1970, before me, the undersigned officer,
personally appeared M. C. Titus, who acknowledged himself to be the Executive
Vice President of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, and
that he, as such Executive Vice President, being authorized so

                                      -69-

<PAGE>

to do, executed the foregoing Navajo Project Participation Agreement (Contract
No. 14-06-300-2131) for the purposes therein contained, by signing the name of
the corporation by himself as such Executive Vice President.

        In witness whereof I hereunto set my hand and official

[SEAL]                               /s/ Authorized Signatory
                                     ------------------------
                                     Notary Public

My commission expires:

My Commission Expires Oct. 15, 1971
-----------------------------------

State of California    )
                       )  ss.
County of Los Angeles  )                See Page 74

      On this, the _______________ day of_____________________________, 1970,
before me the undersigned officer, personally appeared Frank R. Palmieri, the
President of the Board of Water and Power Commissioners of the DEPARTMENT OF
WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and existing
under the Charter of the City of Los Angeles, a municipal corporation of the
State of California, known to me to be the person described in the foregoing
Navajo Project Participation Agreement (Contract No. 14-06-300-2131), and
acknowledged that he executed the same in the capacity therein stated and for
the purposes therein contained.

                                      -70-

<PAGE>

      In witness whereof I hereunto set my hand and official seal.

                                                            ____________________
                                                              Notary Public
My commission expires:

________________________

State of Nevada       )
                      ) ss.
County of Clark       )

      On this the 12th day of June, 1970, before me, the undersigned officer,
personally appeared Harry Allen, known to me to be the President of NEVADA POWER
COMPANY, a Nevada corporation, and that he, as such President, being authorized
so to do, executed the foregoing Navajo Project Participation Agreement
(Contract No. 14-06-300-2131) for the purposes therein contained, by signing the
name of the corporation by himself as President.

      In witness whereof, I hereunto set my hand and official seal.

                                                         /s/  Myrtice L. Carroll
                                                         -----------------------
                                                               Notary Public
My commission expires:

_____________________

[STAMP]

                                      -71-

<PAGE>

State of Arizona    )
                    ) ss.
County of Maricopa  )

      On this the 16th day of March, 1970, before me, the undersigned officer,
personally appeared V. I. Corbell and F. E. Smith, the President and Secretary,
respectively, of SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT,
an Arizona agricultural improvement district, known to me to be the persons
described in the foregoing Navajo Project Participation Agreement (Contract No.
14-06-300-2131), and acknowledged that they executed the same in the capacity
therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                                 /s/ Joanne Claridge
                                                --------------------     [SEAL]
                                                   Notary Public

My commission expires:

My Commission Expires July 11, 1972
-----------------------------------

State of Arizona       )
                       ) ss.
County of Pima         )

      On this the 11th day of June, 1970, before me, the undersigned officer,
personally appeared H. R. Catlin, who acknowledged himself to be the Vice
President of TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation, and that he,

                                      -72-

<PAGE>

as such Vice President, being authorized so to do, executed the foregoing Navajo
Project Participation Agreement (Contract No. 14-06-300-2131) for the purposes
therein contained, by signing the name of the corporation by himself as Vice
President.

      In witness whereof I hereunto set my hand and official seal.

                                                              /s/ Diana Howland
                                                            --------------------
                                                               Notary Public

       My commission expires:
[SEAL]
       My.Commission Expires Dec. 8, 1972
       -----------------------------------

                                      -73-

<PAGE>

State of California     )
                        ) ss.
County of Los Angeles   )

      On this, the 1st day of October, 1970, before me, the undersigned officer,
personally appeared Frank R. Palmieri and Mary J. Born, who were on November 20,
1969, the President and Secretary, respectively, of the Board of Water and Power
Commissioners of the DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, a
department organized and existing under the Charter of The City of Los Angeles,
a municipal corporation of the State of California, known to me to be the
persons described in the foregoing Navajo Project Participation Agreement
(Contract No. 14-06-300-2131; DWP No. 10334), and acknowledged that they
executed the same on November 20, 1969, in the capacity therein stated and for
the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                                            /s/ Linda L. Newman
                                                            --------------------
                                                             Notary Public

My commission expires:
                                                                 [STAMP]
______________________

                                      -74-

<PAGE>

                                    EXHIBIT A

                          DESCRIPTION OF NAVAJO PROJECT

Exhibit A-l - Description of Navajo Generating Station

      The Navajo Generating Station shall consist of the following:

            I. Three steam electric generating units (Unit 1, Unit 2 and Unit
3), which shall have a nameplate rating of 750,000 KW and shall be
tandem-compound, four flow, single reheat, turbine-generator units with initial
steam conditions of 3500 psig and 1000 F. and reheat to 1000 F. and designed to
take steam from three pulverized coal-fired super-critical steam generator
units.

            II. All auxiliary equipment associated with said units.

            III. An administration building machine shop and warehouse to be
located adjacent to the powerplant.

            IV. A pumping station and all associated equipment to be located on
the Colorado River.

            V. 500 KV step-up transformers and all equipment associated
therewith up to the point where the leads from the said transformers terminate
at the dead-end structure in the Navajo 500 KV Switchyard.

            VI. Standby auxiliary power transformation equipment and related
facilities.

<PAGE>

            VII. Plant control and communication facilities and associated
buildings or equipment.

Exhibit A-2 - Description of Transmission System

      The Transmission System shall consist of the following:

            I. Navajo 500 KV Switchyard

               A. The Navajo 500 KV Switchyard shall be a basic
breaker-and-a-half scheme providing termination for facilities as presently
planned:

                  1.    Navajo Generating Unit #1.

                  2.    Navajo Generating Unit #2.

                  3.    Navajo Generating Unit #3.

                  4.    Navajo-McCullough 500 KV Line.

                  5.    Navajo-Moenkopi 500 KV Line.

                  6.    Navajo-Phoenix Area 500 KV Line.

               B. The switchyard limits for purposes shown on Exhibit C will be
the low voltage bushings of the generator step-up transformer and where the 500
KV leads from the series and shunt compensation attach to the switchyard
structure. The switchyard limits for purposes of design, construction, operation
and maintenance shall be the switchyard side of the first 500 KV transmission
line dead-end tower located outside the switchyard or where the 500 KV leads
from the generator step-up transformers attach to the switchyard structure. The
switchyard will include the metering, protective equipment, communications
equipment,

                                       -2-

<PAGE>

relaying and associated equipment, etc.

            II. Navajo-McCullough 500 KV Line

                The Navajo-McCullough 500 KV line for purposes shown on Exhibit
C shall consist of approximately 250 miles of 500 KV line with associated series
and shunt compensation, terminated at the appropriate 500 KV switchracks in the
Navajo 500 KV Switchyard and McCullough 500 KV Switchyard.

            III. Navajo-Moenkopi 500 KV Line

                The Navajo-Moenkopi 500 KV line for purposes shown on Exhibit C
shall consist of approximately 76 miles of 500 KV line with associated series
and shunt compensation, terminated at the appropriate 500 KV switchracks in the
Navajo 500 KV Switchyard and Moenkopi 500 KV Switchyard.

            IV. Navajo-Phoenix Area 500 KV Line

                The Navajo-Phoenix Area 500 KV line for purposes shown on
Exhibit C shall consist of approximately 249 miles of 500 KV line with
associated series and shunt compensation, terminated at the appropriate
switchracks in the Navajo 500 KV Switchyard and Phoenix Area Substation(s).

            V. Moenkopi-Phoenix Area 500 KV Line

                The Moenkopi-Phoenix Area 500 KV line for purposes shown on
Exhibit C shall consist of approximately 173 miles of 500 KV line with
associated series and shunt compensation, terminated at the appropriate 500 KV
switchracks in the Moenkopi 500 KV Switchyard and Phoenix Area

                                       -3-

<PAGE>

Substation(s).

            VI. Other Associated Components

                A. Moenkopi 500 KV Switchyard to be owned and expanded by
Arizona Public Service Company in accordance with Section 7.11 and Exhibit H of
this agreement.

                B. Additions to series capacitors in the Moenkopi-Eldorado 500
KV line.

                C. Additions to series capacitors in the Arizona Public Service
Company Cholla-Pinnacle Peak 345 KV line.

                D. Additions to series capacitors in the Arizona Public Service
Company Four Corners-Moenkopi 500 KV line.

            VII.  McCullough Substation

                The McCullough Substation shall consist of the following
components:

                  A. The 500 KV switchyard comprising the termination facilities
for the Navajo-McCullough 500 KV Line, McCullough-Victorville 500 KV Line,
McCullough-Eldorado 500 KV Line and transformer bank, including but not limited
to the 500 KV AC buses, power circuit breakers and disconnect switches and the
structures therefor.

                  B. A 400 MVA 500/287 KV transformer bank and the equipment
associated therewith, spare 133 MVA 500/287 KV transformer and the transformer
leads from the high and low voltage transformer bushings to the points of

                                       -4-

<PAGE>

termination on the buses in the 500 KV and 287 KV switchyards.

                  C. The 287 KV switchyards comprising the termination
facilities for two McCullough-Nevada 287 KV Lines, McCullough-Hoover 287 KV Line
and transformer bank, including, but not limited to, the 287 KV buses, power
circuit breakers, disconnect switches and the structures therefor.

                  D. The common facilities, which shall include, but not limited
to, communications equipment, protection equipment controls, batteries,
auxiliary equipment, station grounding grid, lighting and yard improvements, but
shall not include the substation site.

                  E. The substation limits for the purposes shown on Exhibit C
shall be where the leads from the series and shunt compensation for the
Navajo-McCullough 500 KV Line and McCullough-Victorville 500 KV Line, from the
McCullough-Eldorado 500 KV Line, from the two McCullough-Nevada 287 KV Lines,
and from the McCullough-Hoover 287 KV Line attach to the substation structure.
The substation limits for the purpose of design, construction, operation and
maintenance shall be the substation side of the first 500 KV and 287 KV
transmission line dead-end towers located outside the substation. The substation
shall include the metering, protective equipment, communications equipment,
relaying and associated equipment, etc.

                                       -5-

<PAGE>

            VIII. Phoenix Area Substation(s)

                  A. The Phoenix Area Substation(s) shall be a basic
breaker-and-a-half scheme providing termination for facilities presently
planned:

                        1.    Moenkopi-Phoenix Area 500 KV Line.

                        2.    Navajo-Phoenix Area 500 KV Line.

                        3.    A 500/230 KV step-down transformer #1.

                        4.    A 500/230 KV step-down transformer #2.

                        5.    A 500/345 KV step-down transformer.

                  B. The substation limits for purposes shown on Exhibit C will
be where the 500 KV leads from the series and shunt compensation attach to the
switchyard structure and where the 230 KV and 345 KV leads from the step-down
transformer attach to the substation structure in the 230 KV and 345 KV
substation. The substation limits for purposes of design, construction,
operation and maintenance shall be the substation side of the first 500 KV
transmission line dead-end tower located outside the switchyard or where the 230
KV and 345 KV leads from the step-down transformer attach to the substation
structure in the 230 KV and 345 KV substation.

                                       -6-

<PAGE>
                                                                       EXHIBIT B

                                                                  Navajo Project

[MAP]

<PAGE>

                                    EXHIBIT C
                            TRANSMISSION ALLOCATION

<TABLE>
<CAPTION>

                                                                                        CONSTRUCTION AND O&M COST
                                                      OWNERSHIP %                           RESPONSIBILITY %
                                       --------------------------------------     ----------------------------------
                                       SRP 1/   APS    TGE   NPC   L.A.  SRP 2/   SRP   APS   TGE    NPC  L.A.  U.S.
                                       ------  ------  ----  ----  ----  ----     ----  ----  ----  ----  ----  ----
<S>                                    <C>     <C>     <C>   <C>   <C>   <C>      <C>   <C>   <C>   <C>   <C>   <C>
  I.  Navajo 500 KV Switchyard         21.7    14.0     7.5  11.3  21.2  24.3     21.7  14.0   7.5  11.3  21.2  24.3
 II.  Navajo-McCullough 500 KV Line                          26.1  48.9  25.0                       26.1  48.9  25.0
III.  Navajo-Moenkopi 500 KV Line      21.7    14.0     7.5  11.3  21.2  24.3     21.7  14.0   7.5  11.3  21.2  24.3
 IV.  Navajo-Phoenix Area 500 KV Line  38.3    24.7    13.3              23.7     38.3  24.7  13.3              23.7
  V.  Moenkopi-Phoenix Area 500 KV
       Line                            38.3    24.7    13.3              23.7     38.3  24.7  13.3              23.7

 VI.  Other Associated Components 3/
      A. Moenkopi 500 KV Switchyard            100.00                             21.7  14.0   7.5  11.3  21.2  24.3
      B. Moenkopi-Eldorado 500 KV
         Series Capacitor Additions 4/                                                              26.1  48.9  25.0
      C. Cholla-Pinnacle Peak 345 KV
         Series Capacitor Additions            100.00                             38.3  24.7  13.3              23.7
      D. Four Corners-Moenkopi 500 KV
         Series Capacitor Additions            100.00                             38.3  24.7  13.3              23.7

VII.  McCullough Substation 5/

VIII. Phoenix Area 500 KV Substation(s)38.3    24.7    13.3              23.7     38.3  24.7  13.3              23.7
</TABLE>

1/    SRP's ownership for its own use and benefit

2/    SRP's ownership for the use and benefit of the United States.

3/    O&M cost responsibility applies only to the facilities added at these
      locations in conjunction with the Navajo Project.

4/    The capacitors on the Eldorado end of this line will be owned 100% by
      Southern California Edison Co. and those on the Moenkopi end will be owned
      100% by APS.

5/    See Exhibit C-1A for details of ownership and cost responsibility. There
      is attached to this Exhibit C, Exhibits C-1, C-1A and C-1B, which by this
      reference are made a part of this Exhibit C.
<PAGE>
                                  EXHIBIT C-1
                     NAVAJO PROJECT [ILLEGIBLE] DIAGRAM OF
             COST RESPONSIBILITY, PROJECT MANAGER & OPERATING AGENT
                         LIMITS FOR TRANSMISSION SYSTEM

                             [NAVAJO PROJECT PLAN]

<PAGE>

                                  EXHIBIT C-1A
                                 NAVAJO PROJECT
                              MCCULLOUGH SUBSTATION

                                                            NEVADA POWER COMPANY

                             [NAVAJO PROJECT PLAN]

<TABLE>
<CAPTION>
                                                            CONSTRUCTION AND MAINTENANCE
                                        OWNERSHIP %             COST RESPONSIBILITY %
                                --------------------------------------------------------
SUBSTATION COMPONENT             LA       NPC     SRP(1)      LA        NPC       U.S.
                                --------------------------------------------------------
<S>                             <C>      <C>      <C>         <C>       <C>       <C>
500 kv Switchyard               77.4     16.4       6.2       77.4      16.4         6.2
287 kv Switchyard               40.1     59.9        --       40.1      59.9          --
500/287 kv Transformer Bank     60.5     39.5        --       60.5      39.5          --
Common Facilities               67.9     23.9       8.2       67.9      23.9         8.2
</TABLE>

(1)  SRP's ownership for the use and benefit of the United States.

      The cost responsibility percentage for each Participant in Common
Facilities is the proportion that the investment of each Participant in line
compensation within McCullough Substation and in the other components of
McCullough Substation bears to the total investment of the Participants in such
line compensation and components expressed as a percentage and the percentages
for Common Facilities shown in the above table are to be recalculated using this
method when actual cost determinations are made.

      The ownership percentage for each Participant in Common Facilities shall
be the same as the cost responsibility percentage in Common Facilities for such
Participant, except that the ownership percentage in Common Facilities of Salt
River Project shall be the same as the cost responsibility percentage in Common
Facilities of United States.

      The Substation operation cost responsibility percentage shall be the same
as the construction and maintenance cost responsibility percentage Common
Facilities.

      Los Angeles shall construct, operate and maintain additional facilities

<PAGE>

                                  EXHIBIT C-1B

    500 KV TRANSMISSION LINE OF LOS ANGELES BETWEEN McCULLOUGH SUBSTATION AND
     ELDORADO SUBSTATION AND SWITCHING FACILITIES AT ELDORADO AND McCULLOUGH
                  SUBSTATIONS INSTALLED TO TERMINATE THE LINE.

                          [NAVAJO PROJECT FLOW CHART]

SWITCHING FACILITIES INSTALLED TO TERMINATE THE 500KV LINE BETWEEN McCULLOUGH
SUBSTATION AND ELDORADO SUBSTATION ALLOCATED AS A PERCENTAGE OF SUBSTATION
COMPONENTS.

                McCullough Substation

                25.0% of 500 kv Switchyard
                 5.8% of Common Facilities         Note for Exhibit C:

                Eldorado Substation                Exhibit C-1B by this
                                                   [ILLEGIBLE] is made a
                16.7% of 500 kv Switchyard         part of this Exhibit

<PAGE>

                                    EXHIBIT D

                         SCHEDULE OF CONSTRUCTION DATES

                                 NAVAJO PROJECT

<TABLE>
<CAPTION>
                             SCHEDULED           SCHEDULED
      NAVAJO                  START UP             FIRM
GENERATING STATION             DATE              OPERATION
------------------           ---------           ---------
<S>                          <C>                 <C>
Unit #1                         3-1-74              6-1-74
Unit #2                         3-1-75              6-1-75
Unit #3                         3-1-76              6-1-76
</TABLE>

<TABLE>
<CAPTION>
                                                     SCHEDULED
                                      ENERGIZATION     FIRM
TRANSMISSION SYSTEM                   FOR TEST DATE  OPERATION
------------------------------------  -------------  ---------
<S>                                   <C>            <C>
Navajo 500 KV Switchyard                 2-1-74        3-1-74
Navajo-McCullough 500 KV Line            2-1-74        3-1-74
Navajo-Moenkopi 500 KV Line              2-1-74        3-1-74
Navajo-Phoenix Area 500 KV Line          2-1-75        3-1-75
Moenkopi -Phoenix Area 500 KV Line       2-1-74        3-1-74
Moenkopi 500 KV Switchyard               2-1-74        3-1-74
Cholla-Pinnacle Peak 345 KV Line **      2-1-75        3-1-75
Four Corners-Moenkopi 500 KV Line **     2-1-74        3-1-74
Moenkopi-Eldorado 500 KV Line **         2-1-74        3-1-74
McCullough Substation                    2-1-74        3-1-74
Phoenix Area Substation (#1) *           2-1-74        3-1-74
Phoenix Area Substation (#2) *           2-1-75        3-1-75
</TABLE>

----------
*     Phoenix Area #2 Substation needed only if both Phoenix 500 KV lines are
      not terminated in same substation.

**    Compensation only

<PAGE>

                                    EXHIBIT E

                    CONSTRUCTION COSTS OF THE NAVAJO PROJECT,
                     INCLUDING THE NAVAJO GENERATING STATION
                           AND THE TRANSMISSION SYSTEM

      1.1 Construction costs shall consist of payments made and obligations
incurred (other than obligations for interest during construction) for the
account of Station Work or Transmission Work and shall consist of, but not be
limited to, the following:

            1.1.1 All costs of labor, services and studies performed in
                  connection with Station Work or Transmission Work if
                  authorized and approved by the Project Managers.

            1.1.2 Payroll and other expenses of the Project Managers'
                  engineering departments for their employees who perform
                  Station Work or Transmission Work, including customary labor
                  loading charges applicable thereto, such as department
                  overheads, time-off allowances, payroll taxes, compensation
                  insurance and employee benefits.

            1.1.3 All components of the costs of construction, all overhead
                  costs associated with construction (including the allowance
                  for the Project Managers' administrative and

<PAGE>

                  general expenses described in Exhibit E-l of this agreement),
                  all temporary facilities, all land and land rights, all
                  structures and improvements, and all equipment for the Navajo
                  Project, as set forth in the Electric Plant Instructions of
                  the FPC Accounts.

            1.1.4 All costs and expenses, including those of outside consultants
                  and attorneys, incurred by the Project Managers or other
                  Parties in regard to the land and water rights and fuel
                  requirements and supply for the Navajo Project and to the
                  preparation of other agreements relating to Station Work or
                  Transmission Work with entities other than (i) the United
                  States acting in its capacity as a contractor for resources to
                  supply Central Arizona Project pumping power requirements and
                  (ii) the Participants. All Parties anticipating such costs and
                  expenses shall submit an estimate of such costs and expenses
                  to the respective Project Managers for authorization and
                  approval. Any Party incurring such costs and expenses shall
                  bill the respective Project Manager therefor.

                                      -2-

<PAGE>

            1.1.5 All costs, including any rental charges, of materials,
                  supplies, tools, machinery, equipment, apparatus and
                  construction power used in connection with Station Work or
                  Transmission Work.

            1.1.6 All costs of Project Insurance and all costs of any loss,
                  damage or liability arising out of or caused by Station Work
                  or Transmission Work which is not satisfied under the coverage
                  of Project Insurance.

            1.1.7 All federal, state or local taxes of any character imposed
                  upon Station Work or Transmission Work, except any tax
                  assessed directly against an individual Party, unless such tax
                  was assessed to such individual Party in behalf of any or all
                  of the other Parties.

            1.1.8 Expenses of other Parties incurred in the performance of
                  Station Work or Transmission Work, if authorized and approved
                  by the respective Project Manager, and the expenses of the
                  Operating Agents incurred during the engineering design
                  period, the construction period and the testing, the start-up
                  period of each unit of construction,

                                      -3-
<PAGE>
                  excluding any training expenses not properly chargeable to
                  construction costs.

            1.1.9 All costs of relocating existing facilities by Station Work
                  or Transmission Work. Relocation of facilities and costs in
                  connection therewith shall be subject to agreement between the
                  Project Manager and the owners of the facilities involved.

      1.2 In cases where the allocation of a cost item is made between Station
Work or Transmission Work and other work, such allocation shall be made on a
fair and equitable basis.

      1.3 The Project Managers shall use the FPC Accounts to account for
construction costs in the final completion report and any supplement thereto.

      1.4 The Project Managers and the other Parties shall not be entitled to a
fee, price, percentage or any other compensation over and above the costs of
services rendered by them in the performance of Station Work or Transmission
Work.

                                      -4-

<PAGE>

                                   EXHIBIT E-1

                 ADMINISTRATIVE AND GENERAL EXPENSES APPLICABLE
                  TO CONSTRUCTION COSTS OF THE NAVAJO GENERATING
                       STATION AND THE TRANSMISSION SYSTEM

      1.1 The allowance for the Project Manager's administrative and general
expenses to cover the costs of services rendered by it in the performance of
Station Work or Transmission Work shall be allocated monthly at the rate of
one per cent (1%) of construction costs incurred during the preceding month,
excluding from such construction costs:

            1.1.1 Any allowance for administrative and general expenses provided
                  for in this Section 1.1.

            1.1.2 Expenses of other Participants incurred in the performance of
                  Station Work or Transmission Work if authorized and approved
                  by the Project Manager, and the expenses of the Operating
                  Agent incurred during the engineering design period, the
                  construction period and the start-up period of each unit,
                  excluding any training expenses not charged to construction
                  costs, but including expenses which are billed by the
                  Operating Agent to the Project Manager pursuant to Section
                  1.1.3 of this Exhibit E-1.

<PAGE>

            1.1.3 All charges relating to the operation and maintenance of all
                  units during the start-up period of each said unit. Charges
                  shall include (a) the cost of fuel, (b) the cost of all
                  operation and maintenance expenses (exclusive of the cost of
                  maintenance performed by the engineer-constructor start-up
                  crews), and (c) an allowance for the Operating Agent's payroll
                  loading and administrative and general expenses.

            1.1.4 Excepting only death, injury, loss or damage resulting from
                  Willful Action, the Participants shall pay to the extent of
                  their respective Generation Entitlement Shares for the costs
                  of discharging all legal liability imposed upon a Participant
                  for which payment shall not be made on account of valid and
                  collectible Project Insurance, and the expenses incurred in
                  settlement of injury and damage claims, including the costs of
                  labor and related supplies and expenses incurred in injury and
                  damage activities (all as referred to in FPC Account 925),
                  because of any claim arising out of or attributable to the
                  construction of the Navajo Project, the past

                                      -2-

<PAGE>
                  or future performance or non-performance of the obligations
                  and duties of any Participant (including the Project
                  Manager)or the past or future performance or non-performance
                  of Station Work or Transmission Work, including but not
                  limited to any claim resulting from death or injury to persons
                  or damage to property.

      1.2 The allowance for the Operating Agent's administrative and general
expenses to cover the costs of services rendered by it in the performance of
capital additions, capital betterments and capital replacements shall be derived
in accordance with the procedure on Attachment No. 1 to this Exhibit E-1.

                                      -3-

<PAGE>

                                   EXHIBIT E-1

                                ATTACHMENT NO. 1

                    CAPITAL ADMINISTRATIVE AND GENERAL RATIO
                                 NAVAJO PROJECT

      The rate to be applied to the Operating Agent's labor charges, which are
included in expenses for capital additions, capital betterments, and capital
replacements, to determine the Operating Agent's Administrative and General
expenses applicable thereto shall be established annually on the basis of the
Operating Agent's preceding year's construction expenses by the method set
forth herein unless otherwise agreed to by the Participants. The Administrative
and General Ratio will be adjusted to actual at year-end and the adjusted ratio
used in preparation of a revised billing to the Participants. A percentage based
on the Operating Agent's Administrative and General expenses shall be applied to
total construction costs on the following basis:

            I     Administrative and General expenses shall include:

                  (a)   Expenses in F.P.C. accounts 920 and 921 applicable to
                        construction costs. The percentage for determining the
                        amount of such expenses allocable to construction shall
                        be determined as provided in Exhibit F-1, Attachment No.
                        1A.

                  (b)   Payroll taxes applicable to the Administrative

<PAGE>

                        and General salaries in F.P.C. accounts 920 and 921
                        allocable to construction, as provided in Exhibit F,
                        Attachments Nos. 1 and 1A.

                  (c)   Compensation insurance applicable to the Administrative
                        and General salaries in F.P.C. accounts 920 and 921
                        allocable to construction, as provided in Exhibit F,
                        Attachments Nos. 3 and 3A.

                  (d)   Pensions and benefits applicable to the Administrative
                        and General salaries in F.P.C. accounts 920 and 921
                        allocable to construction, as provided in Exhibit F,
                        Attachments Nos. 2 and 2A.

            II    Total pensions and benefits expense allocable to to total
                  labor charged to construction accounts at rate determined as
                  provided in Exhibit F, Attachment No. 2A.

            III   Total Administrative and General expenses allocable to
                  construction accounts shall be reduced by the amount of
                  Administrative and General expenses allocable to contract
                  construction.

      The rate for application of Administrative and General expense to
construction costs, hereinafter referred to as "Capital A & G Ratio", is
expressed as percentage of total allocable Administrative and General expense
to total direct

<PAGE>

labor charged to construction.

        A & G Rate = A / C

  where

             A =  net allocable A & G expenses as set forth
                  in I, II and III above

             C =  total direct labor charged to construction
                  accounts

                                      -3-
<PAGE>

                                    EXAMPLE
                       DEVELOPMENT OR CAPITAL A & G RATIO
                                     FOR THE
                            NAVAJO GENERATING STATION

<TABLE>
<CAPTION>
                                                      Nevada Power Company          Ariz Public Service Co.
                                                      ---------------------         -----------------------
                                                      (Based on 1968 Costs)          (Based on 1968 Costs)
                                                        Labor       Total             Labor        Total
                                                      ----------  ---------         ----------   ----------
<S>                                           <C>     <C>         <C>        <C>    <C>          <C>
Net Allocable A & G Expenses

  A & G salaries and expenses
  charged to F.P.C. Accounts
  920 and 921                                         $  422,728  $ 531,802         $1,363,877   $1,910,668
                                                      ==========  =========         ==========   ==========

  Percent (See Exh. F-1) allocable
  to construction                             29.74%  $  125,719  $158,158   37.14% $  506,544   $  709,622

  Add:
     Payroll Taxes on allocated
     labor (Exh. F, Attach. 1A)                3.83%                  4,815   3.78%                  19,147

     Compensation Ins. on allocated
     labor (Exh. F, Attach. 3A)                1.11%                 1,395    1.14%                   5,775

     Pensions & Benefits on allocated
     labor (Exh. F, Attach. 2A)                7.66%                  9,630  11.92%                  60,380
                                                                  ---------                      ----------

  Total A & G expense allocable
  to construction                                                 $ 173,998                      $  794,924

  Pensions & Benefits expense
  allocable to total labor charged
  to construction accounts
  (Exh. F, Attachment 2A)                      7.66%  $1,282,333  $  98,227  11.92% $4,879,188   $  581,600
                                                                  ---------                      ----------

  Total A & G expense plus pensions
  and benefits expenses
  allocable to construction                                       $ 272,225                      $1,376,524

  Less amount of A & G expenses
  allocable to contract construction.                                 2,580                         188,230
                                                                  ---------                      ----------

  Remainder of A & G plus benefits
  expense allocable to construction                               $ 269,645                      $1,188,294
                                                                  =========                      ==========

Total Direct labor Charged to
Construction Accounts                                             $ 933,695                      $4,293,248
                                                                  =========                      ==========

Capital A & G Ratio =                                 $  269,645                    $1,188,294
                                                      ----------  = 28.88%          ----------   = 27.68%
                                                      $  933,695    =====           $4,293,248     =====
<CAPTION>
                                                        Salt River Project                  L. A. DWP
                                                      -----------------------        ------------------------
                                                      (Based on 1969 Budget)         (Based on 68-69 Costs)
                                                         Labor       Total              Labor        Total
                                                      -----------  ----------        -----------  -----------
<S>                                           <C>     <C>          <C>         <C>   <C>          <C>
Net Allocable A & G Expenses

  A & G salaries and expenses
  charged to F.P.C. Accounts
  920 and 921                                         $1,730,086  $2,334,498          $ 3,412,254  $ 6,126,895
                                                      ==========  ==========          ===========  ===========

  Percent (See Exh. F-1) allocable
  to construction                             38.83%  $  671,792  $  906,486   49.50%  $1,689,066  $ 3,032,813

  Add:
     Payroll Taxes on allocated
     labor (Exh. F, Attach. 1A)                3.38%                  22,707    0.11%                    1,858

     Compensation Ins. on allocated
     labor (Exh. F, Attach. 3A)                2.90%                  19,482    0.94%                   15,877

     Pensions & Benefits on allocated
     labor (Exh. F, Attach. 2A)               12.56%                  84,377   13.66%                  230,726
                                                                  ----------                       -----------

  Total A & G expense allocable
  to construction                                                 $1,033,052                       $ 3,281,274

  Pensions & Benefits expense
  allocable to total labor charged
  to construction accounts
  (Exh. F, Attachment 2A)                     12.56%  $6,606,824  $  829,817   13.66% $43,581,981  $ 5,953,299
                                                                  ----------                       -----------

  Total A & G expense plus pensions
  and benefits expenses allocable to
  construction                                                    $1,862,869                       $ 9,234,573

  Less amount of A & G expenses
  allocable to contract construction.                                 33,806                           692,604
                                                                  ----------                       -----------

  Remainder of A & G plus benefits
  expense allocable to construction                               $1,829,063                       $ 8,541,969
                                                                  ==========                       ===========

Total Direct labor Charged to
Construction Accounts                                             $5,898,725                       $24,417,890
                                                                  ==========                       ===========

                                                      $1,829,063                      $ 8,541,969
Capital A & G Ratio =                                 ----------  = 31.00%            -----------  = 34.98%
                                                      $5,898,725    =====             $24,417,890    =====
</TABLE>
<PAGE>

                                    EXHIBIT F

                       OPERATION AND MAINTENANCE COSTS OF
                          THE NAVAJO GENERATING STATION

1.    Generating Plant:

            1.1 Operation and maintenance costs shall include the following
      expenses to the extent that they are charge-able to the Navajo Generating
      Station in accordance with sound accounting practice:

                  1.1.1 The operation expenses chargeable to FPC Accounts 500,
                        502, 503, 504, 505, 506, 507, 556, 557 and any costs in
                        the following FPC Accounts pertaining to load
                        dispatching:

                        1.1.1.1 560, 561, 562, 566 and 567.

                  1.1.2 The maintenance expenses chargeable to FPC Accounts 510
                        through 514, inclusive, and any costs in the following
                        FPC Accounts pertaining to load dispatching:

                        1.1.2.1 568, 569, 570 and 573.

                  1.1.3 Overhead expenses included in Sections 1.1.1 and 1.1.2
                        of this Exhibit F incurred by the Operating Agent
                        which are allocable to the operation and maintenance
                        of the Navajo Generating Station.

<PAGE>

                  Such overhead expenses shall be determined in accordance with
                  the following allocation procedure:

                  1.1.3.1 Overhead expenses of the Operating Agent applicable
                        to the Navajo Generating Station operation and
                        maintenance expenses will be generated at two sources:

                        1.1.3.1.1 The salaries and expenses of the Operating
                              Agent's functional area responsible for power
                              supply and system operations, the supervisory,
                              administrative and clerical staff, including
                              members of the staff that perform system
                              protection, operation and production functions,
                              including appropriate system dispatching costs.

                        1.1.3.1.2 The salaries and expenses of the Operating
                              Agent's supervisor of steam generation, if not
                              included within Section 1.1.3.1.1 of

                                       -2-
<PAGE>

                        this Exhibit F, and his supervisory, administrative,
                        engineering and clerical staff.

                              These overhead costs shall be applicable to the
                        total payroll supervised by said functional areas of
                        the Operating Agent, respectively. The Navajo Generating
                        Station's share of such costs shall be equal to the sum
                        of: (a) the Operating Agent's functional area overhead
                        costs as described in Section 1.1.3.1.1 of this
                        Exhibit F multiplied by a ratio, the numerator of which
                        is the total Navajo Generating Station payroll and the
                        denominator of which is the Operating Agent's total
                        payroll supervised by said functional area, and (b) the
                        Operating Agent's functional area overhead costs as
                        described in Section 1.1.3.1.2 of this Exhibit F
                        multiplied by a ratio, the numerator of which is the
                        total Navajo Generating Station payroll and the
                        denominator of which is the Operating

                                       -3-
<PAGE>

                        Agent's total payroll supervised by said functional
                        area.

                              The total of the Navajo Generating Station
                        overhead costs set forth herein shall be allocated to
                        all direct labor charges at said Navajo Generating
                        Station, which shall include operation and maintenance
                        labor and work order labor charges. All such overhead
                        charges shall be allocated to the appropriate FPC
                        Account(s).

                  1.1.4 Applicable labor loading charges for Operating Agent's
                        employees whose salaries and wages are charged to the
                        operation and maintenance expense accounts. Such
                        labor loading charges shall include but not be limited
                        to time-off allowances employee payroll taxes chargeable
                        to FPC Account 408 and employee benefits chargeable to
                        FPC Accounts 925 and 926.

                        1.1.4.1 Payroll tax expenses incurred by the Operating
                              Agent which are allocable to the Navajo
                              Generating Station pursuant to Section 1.1.4 of
                              this Exhibit F shall be

                                       -4-
<PAGE>

                              determined by multiplying the sum of the Operating
                              Agent's total labor charges included in the
                              expenses determined in accordance with Sections
                              1.1.1 and 1.1.2 of this Exhibit F by a decimal
                              fraction, hereinafter referred to as the Payroll
                              Tax Ratio. Such Payroll Tax Ratio shall be derived
                              annually in accordance with the procedure and
                              example shown on Attachment Nos. 1 and 1A to this
                              Exhibit F.

                      1.1.4.2 Employee pensions and benefits expenses incurred
                              by the Operating Agent which are allocable to
                              the Navajo Generating Station pursuant to Section
                              1.1.4 of this Exhibit F shall be determined by
                              multiplying the sum of the Operating Agent's total
                              labor charges included in the expenses determined
                              in accordance with Sections 1.1.1 and 1.1.2 of
                              this Exhibit F by a decimal fraction, hereinafter

                                      -5-
<PAGE>

                              referred to as the Benefits Ratio. Such Benefits
                              Ratio shall be derived annually in accordance with
                              the procedure and example shown on Attachment Nos.
                              2 and 2A to this Exhibit F.

                      1.1.4.3 That portion of employee Workmen's Compensation
                              Insurance expenses and the related administrative
                              expenses incurred by the Operating Agent which are
                              allocable to the Navajo Generating Station
                              pursuant to Section 1.1.4 of this Exhibit F shall
                              be determined by multiplying the sum of the
                              Operating Agent's total labor charges included in
                              the expenses determined in accordance with
                              Sections 1.1.1 and 1.1.2 of this Exhibit F by a
                              decimal fraction, hereinafter referred to as the
                              Compensation Insurance Ratio. Such Compensation
                              Insurance Ratio shall be derived annually in
                              accordance with the procedure and example

                                      -6-
<PAGE>

                              shown on Attachment Nos. 3 and 3A to this Exhibit
                              F.

                        1.1.5 Administrative and general expenses of the
                              Operating Agent allocable to operation and
                              maintenance of the Navajo Generating Station
                              pursuant to Exhibit F-1 hereto.

                        1.1.6 The training expenses of operation and maintenance
                              personnel for the Navajo Generating Station,
                              including labor loading charges in accordance
                              with Section 1.1.4 of this Exhibit F and
                              applicable administrative and general expenses as
                              computed in accordance with Exhibit F-1 hereto,
                              which are incurred prior to the date of firm
                              operation and not properly chargeable to the costs
                              of construction of the Navajo Generating Station
                              shall be accumulated by the Operating Agent and
                              shall be apportioned to the Participants in
                              accordance with their Generation Entitlement
                              Shares and billed to the Participants.

                        1.1.7 All expenses of procuring and maintaining policies
                              of Project Insurance.

                        1.1.8 All costs chargeable to FPC Account 501.

                                       -7-
<PAGE>

                                    EXHIBIT F
                                ATTACHMENT NO. 1

                                PAYROLL TAX RATIO
                 APPLICABLE TO OPERATING & MAINTENANCE EXPENSES
                        OF THE NAVAJO GENERATING STATION

            The Payroll Tax Ratio to be applied to the labor expense portion of
the Navajo Generating Station Operation & Maintenance Expenses shall be
determined annually on the basis of the Operating Agent's preceding year's
expenses as set forth herein unless otherwise agreed to by the Participants.
The Payroll Tax Ratio will be adjusted to actual at year-end and the adjusted
ratio used in preparation of a revised billing to Participants.

                              Payroll Tax Ratio =  T/P

Where:  T =           The Operating Agent's payroll tax expenses
                      chargeable to F.P.C. account 408 as applicable
                      to the labor expenses included in its total
                      system operation, maintenance, construction,
                      and general ledger accounts.

        P =           The Operating Agent's labor expenses as paid to
                      employees and distributed to total system operation,
                      maintenance, construction, and general ledger accounts.

<PAGE>

            The example in Exhibit F, Attachment No. 1A, sets forth the method
to be employed by the Operating Agent to determine the Payroll Tax Ratio.

                                      -2-
<PAGE>

                                                                   EXHIBIT F

                                                                   ATTACHMENT 1A

                                     EXAMPLE

                        DEVELOPMENT OF PAYROLL TAX RATIO
              APPLICABLE TO OPERATING & MAINTENANCE EXPENSES OF THE
                            NAVAJO GENERATING STATION

<TABLE>
<CAPTION>

                                           N. P. Co.              A.P.S. Co.               S.R.P.                L.A. DWP
                                         ------------            ------------           -------------          -------------
                                         (1968 Costs)            (1968 Costs)           (1969 Budget)          (68-69 Costs)
                                         ------------            ------------           -------------          -------------
<S>                                      <C>            <C>      <C>            <C>     <C>             <C>    <C>
(T)  Total Payroll Taxes                 $    183,746            $    933,421           $     580,000          $     106,112*
                                         ============            ============           =============          =============

(P)  Labor Base

      Total labor charged
      to operation, maintenance,
      construction, and general
      ledger accounts                    $  4,797,468            $ 24,690,234           $  17,148,862          $  93,904,454
                                         ============            ============           =============          =============

                                         $    183,746            $    933,421           $     580,000          $     106,112
                                         ------------ = 3.83%    ------------ = 3.78%   ------------- = 3.38%  ------------- = 0.11%
Payroll Tax Ratio =                      $  4,797,468   ====     $ 24,690,234   ====    $  17,148,862   ====   $  93,904,454   ====
</TABLE>

* Yearly estimate on basis of payroll periods from 5/18/69 to 6/30/69.

<PAGE>

                                    EXHIBIT F
                                ATTACHMENT NO. 2

                          BENEFITS RATIO APPLICABLE TO
                        OPERATING & MAINTENANCE EXPENSES
                        OF THE NAVAJO GENERATING STATION

      The Benefits Ratio to be applied to the labor expense portion of the
Navajo Generating Station Operations and Maintenance Expenses shall be
determined annually on the basis of the Operating Agent's preceding year's
experience as set forth herein unless otherwise agreed to by the Participants.
The Benefits Ratio will be adjusted to actual at year-end and the adjusted ratio
used in preparation of a revised billing to Participants.

                       Benefits Ratio = B/L

Where:  B =  That portion of the Operating Agent's total system employee
             pensions and benefits chargeable to F.P.C. account 926, including
             payroll taxes and Employee Compensation Insurance Expense on labor
             charges to account 926.

        L =  The Operating Agent's labor expenses as paid to employees and
             distributed to its total system operation, maintenance,
             construction, and general ledger accounts less labor charges to
             F.P.C. account 926.

<PAGE>

      The example in Exhibit F, Attachment No. 2A, sets forth the method to be
employed by the Operating Agent to determine the Benefits Ratio.

                                       -2-
<PAGE>

                                                                       EXHIBIT F
                                                                   Attachment 2A

                                     EXAMPLE

                         DEVELOPMENT OF BENEFITS RATIO
             APPLICABLE TO OPERATING & MAINTENANCE EXPENSES OF THE
                            NAVAJO GENERATING STATION

<TABLE>
<CAPTION>
                          Nevada Power Company   Ariz. Public Service Co.   Salt River Project              L. A. DWP
                          --------------------   ------------------------ ----------------------   ------------------------
                          (based on 1968 Costs)  (Based on 1968 Costs)    (Based on 1969 budget)    (Based on 68-69 Costs)
                            Labor       Total      Labor         Total      Labor       Total        Labor         Total
                          ---------  ----------- ---------   ------------ ---------  ------------  ----------  ------------
<S>                       <C>        <C>         <C>         <C>          <C>        <C>           <C>         <C>
Pensions & Benefits

  Employee
   Pensions
   & Benefits
   Charged to
   Account 926             $ 15,331  $   279,249 $ 216,978   $  2,905,654 $ 164,315  $  2,124,326  $  199,426  $ 12,802,019

  Add: Pensions &
       Benefits
       Capitalized                        86,488                       --                      --                        --
                                     -----------             ------------            ------------              ------------
  Subtotal                           $   365,737             $  2,905,654            $  2,124,326              $ 12,802,019

  Add:

       Payroll Taxes
       (Exh. F,
       Attach, 1A)        @ 3.83%                @ 3.78%                  @ 3.38%                  @ 0.11%
                          of labor = $       587 of labor =  $      8,202 of labor = $      5,554  of labor =  $        219

       Compensation Ins.
       (Exh. F,
       Attach, 3A)        @1.11%                 @ 1.14%                  @ 2.69%                  @ 0.94%
                          of labor = $       170 of labor =  $      2,474 of labor = $      4,421  of labor =  $      1,875
                                     -----------             ------------            ------------              ------------
  Total Pensions &
   Benefits Expense                  $   366,494             $  2,916,330            $  2,134,301              $ 12,804,113
                                     ===========             ============            ============              ============

Labor Base

  Total labor charged
  to Operation, Main-
  tenance, Construc-
  tion,  and General
  Ledger Accounts,
  exclusive of labor
  charged to Account 926.            $ 4,782,137             $ 24,473,256            $ 16,984,547              $ 93,705,028
                                     ===========             ============            ============              ============

Benefits Ratio =                     $   366,494             $  2,916,330            $  2,134,301              $ 12,804,113
                                     -----------  =  7.66%   ------------ = 11.92%   ------------ = 12.56%     ------------ = 13.66%
                                     $ 4,782,137    =====    $ 24,473,256   =====    $ 16,984,547   =====      $ 93,703,028   =====
</TABLE>
<PAGE>
                                   EXHIBIT F
                                ATTACHMENT NO. 3

                          COMPENSATION INSURANCE RATIO
                                     FOR THE
                            NAVAJO GENERATING STATION

      The Compensation Insurance Ratio to be applied to the labor expenses
included in the Operating Agent's Administrative and General expense accounts
shall be determined annually on the basis of the Operating Agent's preceding
year's expenses as set forth herein unless otherwise agreed to by the
Participants. The Compensation Insurance Ratio will be adjusted to actual at
year-end and the adjusted ratio used in preparation of a revised billing to
Participants.

      Compensation Insurance Ratio = l/P

Where:   l =  The Operating Agent's total system Compensation Insurance
              premiums and accruals for self-insurance charges to F.P.C. Account
              925, less amounts billed to others under participation agreements.

         P =  The Operating Agent's labor expenses included in its total
              system operation, maintenance, construction, and general ledger
              accounts, less amounts for labor billed to others under joint
              participation project agreements.
<PAGE>

      The example in Exhibit F, Attachment No. 3A, sets forth the method to be
employed by the Operating Agent to determine the Compensation Insurance Ratio.

                                       -2-

<PAGE>

                                                                   EXHIBIT F
                                                                   ATTACHMENT 3A

                                     EXAMPLE
                   DEVELOPMENT OF COMPENSATION INSURANCE RATIO
             APPLICABLE TO OPERATING & MAINTENANCE EXPENSES
                                     OF THE
                           NAVAJO GENERATING STATION
<TABLE>
<CAPTION>
                                              N.P. Co.              A.P.S. Co.             S.R.P.               L.A. DWP
                                            -----------            -----------          ------------          ------------
                                            (1968 Costs)           (1968 Costs)         (1969 Budget)         (68-69 Costs)
                                            -----------            -----------          ------------          ------------
<S>                                         <C>                    <C>                  <C>                   <C>
(T) Total Compensation Insurance Cost

   Total Compensation Insurance             $   39,114             $   282,548          $   496,494           $    879,659
   Cost in Account 925                      ==========             ===========          ===========           ============

(P) Labor Base

   Total labor charged to operation,
   maintenance, and general ledger
   accounts                                 $3,515,135             $15,541,752          $11,250,137           $50,322,473

   Total labor charged to                   *(Not Applicable)      $ 9,148,482          $ 5,898,725           $43,581,981
   construction accounts                    ----------------       -----------          -----------           -----------

       Total Labor Expense                  $3,515,135             $24,690,234          $17,148,862           $93,904,454
                                            ==========             ===========          ===========           ===========

 Compensation Insurance Ratio =             $   39,114             $   282,548          $   496,494           $   879,659
                                            ---------- = 1.11%     ----------- = 1.14%  ----------- = 2 .90%  ----------- = 0.94%
                                            $3,515,135   ====      $24,690,234   ====   $17,148,862   =====   $93,904,454   ====

</TABLE>

*     Nevada Power Company charges Compensation Insurance costs to plant labor
      from liability account 232.2.

<PAGE>

                                   EXHIBIT F-1

                 ADMINISTRATIVE AND GENERAL EXPENSES APPLICABLE
                        TO OPERATION AND MAINTENANCE OF
                         THE NAVAJO GENERATING STATION

      1.1 The allowance for the Operating Agent's administrative and general
expenses to cover the costs of services rendered by it in the performance of
operation and maintenance of the Navajo Generating Station shall be derived in
accordance with the procedure and examples shown on Attachment Nos. 1, 1A, 2
and 2A to this Exhibit F-1.

<PAGE>

                                   EXHIBIT F-1
                                ATTACHMENT NO. 1

                    DETERMINATION OF RATIO OF O & M LABOR AND
                    CONSTRUCTION LABOR TO TOTAL LABOR FOR THE
                            NAVAJO GENERATING STATION

            I.    Determination of the ratio of operating and maintenance labor
to total labor shall be as follows:

                          O & M Ratio = O/L

            where
                          O = total labor charged to operation and
                              maintenance accounts less labor charged to
                              A & G accounts 920 through 932 inclusive

                          L = total labor charged to operating and
                              maintenance, construction, and general ledger
                              accounts, less labor charged to A & G accounts
                              920 through 932 inclusive

            II.   Determination of the ratio of construction labor to total
labor shall be as follows:

                          Construction Ratio = C/L

            where

                          C = total labor in construction accounts

                          L = total labor charged to operation and
                              maintenance, construction, and general ledger
                              accounts, less labor charged to A & G accounts
                              920 through 932 inclusive

<PAGE>

                                                                   EXHIBIT F-1
                                                                   ATTACHMENT 1A

                                     EXAMPLE
   DETERMINATION OF RATIO OF O & M LABOR AND CONSTRUCTION LABOR TO TOTAL LABOR
                                    FOR THE
                           NAVAJO GENERATING STATION

<TABLE>
<CAPTION>
                                                N. P. Co.           A.P.S. Co.               S.R.P.              L. A. DWP
                                              -----------          -----------           ------------          ------------
                                              (1968 Costs)         (1968 Costs)          (1969 Budget)         (68-69 Costs)
                                              -----------          -----------           ------------          ------------
<S>                                           <C>                  <C>                   <C>                   <C>
(1) Total Labor in
    Operation and Maintenance Accounts        $ 3,290,399          $  9,663,668          $ 11,245,752          $ 50,300,847

    Less Labor charged to A &
    G Accounts 920, thru 932
    inclusive                                     485,437             1,405,923             1,958,894             5,863,153
                                              -----------          ------------          ------------          ------------

    Net Labor in O & M Accounts               $ 2,804,962          $  8,257,745          $  9,286,858          $ 44,437,694

    Total Labor charged to
      General Ledger Accounts                     224,736                     -                 4,385                21,626

    Total Labor in
      Construction Accounts                     1,282,333             4,879,188             5,898,725            43,581,981
                                              -----------          ------------          ------------          ------------

         Total Labor Base                     $ 4,312,031          $ 13,136,933          $ 15,189,968          $ 88,041,301
                                              ===========          ============          ============          ============

    Ratio of Net O & M Labor to Total         $ 2,804,962          $  8,257,745          $  9,286,858          $ 44,437,694
                                              ----------- = 65.05% ------------ = 62.86% ------------ = 61.14% ------------ = 50.47%
    Labor  =                                  $ 4,312,031   =====  $ 13,136,933   =====  $ 15,189,968   =====  $ 88,041,301   =====

(11) Ratio of Construction Labor to Total     $ 1,282,333          $  4,879,188          $  5,898,725          $ 43,581,981
                                              ----------- = 29.74% ------------ = 37.14% ------------ = 38.83% ------------ = 49.50%
     Labor =                                  $ 4,312,031   =====  $ 13,136,933   =====  $ 15,189,968   =====  $ 88,041,301   =====

</TABLE>

<PAGE>

                                   EXHIBIT F-1
                                ATTACHMENT NO. 2

                       ADMINISTRATIVE AND GENERAL EXPENSE
                     APPLICABLE TO OPERATION & MAINTENANCE
                        OF THE NAVAJO GENERATING STATION

      That portion of the Operating Agent's administrative and general expenses
which are allocable to operation and maintenance of the Navajo Generating
Station shall be determined by multiplying the total operating and maintenance
labor of the Navajo Generating Station by a decimal fraction hereinafter
referred to as the "Administrative and General Expense Ratio." Such
Administrative and General Ratio shall be derived annually based on the
preceding year's expenses, as set forth herein unless otherwise agreed to by the
participants. The Administrative and General Ratio will be adjusted to actual at
year-end, and the adjusted ratio used in preparation of a revised billing to
participants.

      The Administrative and General expenses charged to F.P.C. accounts 920 and
921 shall be multiplied by a percentage representing the ratio of operation and
maintenance labor to total labor. To the result shall be added the total in
F.P.C. accounts 923 and 932 plus additives to labor in F.P.C. accounts 920, 921,
and 932 as illustrated in Attachment No. 2A hereof. The resulting Administrative
and General expenses applicable to Operating and Maintenance

<PAGE>

expense shall be divided by the total Operating and Maintenance expense labor
subject to Administrative and General expense allocation.

      Administrative and General Expense Ratio = A/B

Where:  A = Portion of Administrative and General Expenses charged to F.P.C.
            accounts 920 and 921, plus total in F.P.C. accounts 923 and 932,
            plus additives to labor in F.P.C. account 932 and to a portion of
            the labor in F.P.C. accounts 920 and 921, as illustrated in
            Attachment No. 2A hereof.

        B = Total operating and maintenance labor, less labor, less labor in
            Administrative and General expense accounts 920 thru 932 inclusive.

                                      -2-

<PAGE>

                                                                     EXHIBIT F-1
                                                                   ATTACHMENT 2A

                                     EXAMPLE

                 DEVELOPMENT OF ADMINISTRATIVE & GENERAL RATIO
                  APPLICABLE TO OPERATION & MAINTENANCE EXPENSE
                                     OF THE
                            NAVAJO GENERATING STATION

<TABLE>
<CAPTION>
                                         Nevada Power Company          Ariz. Public Service Co.        Salt River Project
                                        ---------------------          ------------------------       ---------------------
                                        (Based on 1968 Costs)           (Based on 1968 Costs)         (Based on 1969 Costs)
                                        Labor         Total             Labor        Total             Labor        Total
                                       -------      ---------           -------    --------           -------      -------
<S>                                    <C>          <C>                <C>         <C>                <C>          <C>
   Administrative & General
     Expenses

   Account 920 A & G Salaries          $   422,728  $  422,728         $1,363,877  $1,428,643         $1,647,490   $1,647,490
   Account 921 A & G
     Office Supplies &
     Expense                                           109,074                        482,025             82,596      687,008
                                       -----------  ----------         ----------  ----------         ----------   ----------

       Total Accounts 920
        and 921                        $   422,728  $  531,802         $1,363,877  $1,910,668         $1,730,086   $2,334,498
                                       ===========  ==========         ==========  ==========         ==========   ==========

   Percent Applicable to
     Operation and Maintenance
     (See Exh. F-1, Attach. 1A) 65.05% $   274,985  $  345,937 62.86%  $  857,333  $1,201,046 61.14%  $1,057,775   $1,427,312

   Account 923 Outside
     Services                                           31,247                        225,952                          93,356
           932 General Maintenance          28,161      65,978            264,235     456,799             64,493       94,263
                                       -----------  ----------         ----------  ----------         ----------   ----------

                  Subtotal             $   303,146  $ 443,162          $1,121,568  $1,883,797         $1,122,268   $1,614,931

   Payroll Taxes as a
     percentage of labor
     (Exh. F, Attach. 1A)        3.83%              $   11,610  3.78%              $   42,395  3.38%               $   37,933
   Compensation Ins. as a
     percentage of labor (Exh.
     F, Attach. 3A)              1.11%                   3,365  1.14%                  12,786  2.69%                   30,189
   Pensions & Benefits as a
     percentage of labor
    (Exh. F, Attach. 2A)         7.66%                  23,221 11.92%                 133,691 12.56%                  140,957
                                                    ----------                     ----------                      ----------
       Total A & G
       Expense allocable
       to Operation
       & Maintenance Accounts                       $  481,358                     $2,072,669                      $1,824,010
                                                    ==========                     ==========                      ==========
3) Net Labor Charged to
   Operation & Maintenance
   Accounts
   (Excluding labor in A & G
   Accounts 920 thru 932
   inclusive)                                       $2,804,962                     $8,257,745                      $9,286,858
                                                    ==========                     ==========                      ==========

   [ILLEGIBLE] & G Ratio =             $   481,358                     $2,072,669                      $1,824,010
                                       ----------- = 17.16%            ---------- = 25.10%             ---------- = 19.64%
                                       $ 2,804,962   ======            $8,257,745   =====              $9,286,858   =====

<CAPTION>
                                                   L.A. DWP
                                           ------------------------
                                           (Based on 60-69 Costs)
                                             Labor         Total
                                           -----------  -----------
<S>                                        <C>          <C>
    Administrative & General
      Expenses

    Account 920 A & G Salaries             $ 3,412,254  $ 3,412,254
    Account 921 A & G
      Office Supplies &
      Expense                                             2,714,641
                                           -----------  -----------

        Total Accounts 920
         and 921                           $ 3,412,254  $ 6,126,895
                                           ===========  ===========

    Percent Applicable to
      Operation and Maintenance (See
      Exh. F-1, Attach. 1A)            50.47%    $ 1,722,165  $ 3,092,244
    Account 923 Outside
      Services                                                    404,288
            932 General Maintenance                   77,719      471,040
                                                 -----------  -----------

                 Subtotal                        $ 1,799,884  $ 3,967,572

    Payroll Taxes as a
      percentage of labor
      (Exh. F, Attach. 1A)              0.11%                 $     1,980
    Compensation Ins. as a
      percentage of labor (Exh.
      F, Attach. 3A)                    0.94%                      16,919
    Pensions & Benefits as a
      percentage of labor (Exh, F.
      Attach. 2A)                      13.66%                     245,864
                                                              -----------

        Total A & G
        Expense allocable
        to Operation
        & Maintenance Accounts                          $ 4,232,335
                                                        ===========

3)  Net Labor Charged to
    Operation & maintenance
    Accounts
    (Excluding labor in A & G                           $44,437,694
                                                        ===========
    Accounts 920 thru 932
    inclusive)

    [ILLEGIBLE] & G Ratio =                $ 4,232,335
                                           ----------- = 9.52%
                                           $44,437,694   ====

</TABLE>

<PAGE>

                                    EXHIBIT G

                         OPERATION AND MAINTENANCE COSTS
                           OF THE TRANSMISSION SYSTEM

      1.1 Operation and maintenance costs shall include the following expenses
to the extent that they are chargeable to the Transmission System in accordance
with sound accounting practice:

            1.1.1 The Transmission System operation costs chargeable to FPC
                  Accounts 560, 561, 562, 563, 566 and 567.

            1.1.2 The Transmission System maintenance costs chargeable to FPC
                  Accounts 568, 569, 570, 571 and 573.

            1.1.3 The general plant maintenance costs chargeable to FPC Account
                  932 for maintenance of equipment, the book cost of which is
                  includable in FPC Account 397, Communication Equipment, and
                  FPC Account 398, Miscellaneous Equipment.

            1.1.4 Overhead expenses included in Sections 1.1.1, 1.1.2 and 1.1.3
                  of this Exhibit G incurred by the Operating Agent which are
                  allocable to the operation and maintenance of the Transmission
                  System. Such overhead

<PAGE>

                  expenses shall be determined in accordance with the following
                  allocation procedure:

                  1.1.4.1 Overhead expenses of the Operating Agent applicable to
                          Transmission System operation and maintenance expenses
                          will be generated at various functional areas. The
                          overhead costs of each functional area shall be
                          applicable to the total payroll supervised by said
                          functional areas of the Operating Agent. The
                          Transmission System's share of such costs shall be
                          equal to the sum of each applicable Operating Agent's
                          functional area overhead costs multiplied by a ratio,
                          the numerator of which is the total Transmission
                          System payroll and the denominator of which is the
                          Operating Agent's total payroll supervised by said
                          functional area.

                        The total of the Transmission System overhead costs set
                  forth herein shall be allocated to all direct labor charges at
                  said Transmission System, which shall

                                       -2-

<PAGE>

                  include operation and maintenance labor and work order labor
                  charges. All such overhead charges shall be allocated to the
                  appropriate FPC Account(s).

                  1.1.5 Applicable labor loading charges for Operating Agent's
                        employees whose salaries and wages are charged to the
                        operation and maintenance expense accounts. Such labor
                        loading charges shall include but not be limited to
                        time-off allowances, employee payroll taxes chargeable
                        to FPC Account 408 and employee benefits chargeable to
                        FPC Accounts 925 and 926 as provided in Section 1.1.4 of
                        Exhibit F hereto.

                  1.1.6 Administrative and general expenses of the Operating
                        Agent allocable to operation and maintenance of the
                        Transmission System pursuant to Exhibit G-1 hereto.

                                       -3-

<PAGE>

                                   EXHIBIT G-1

                 ADMINISTRATIVE AND GENERAL EXPENSES APPLICABLE
                      TO OPERATION AND MAINTENANCE OF THE
                              TRANSMISSION SYSTEM

      1.1 The allowance for the Operating Agent's administrative and general
expenses to cover the costs of services rendered by it in the performance of
operation and maintenance of the Transmission System shall be derived in
accordance with the procedure and examples shown on Attachment Nos. 1, 1A, 2 and
2A to Exhibit F-1 hereto.

<PAGE>

                               SALT RIVER PROJECT

                                   RESOLUTION

WHEREAS, the Board of Directors of the Salt River Project Agricultural
Improvement and Power District (herein called "Salt River Project") has
determined that it is in Salt River Project's best interest to enter into
various contracts relating to the construction, operation and maintenance of the
proposed Navajo Project consisting of three 750 MW (nameplate rating) coal-fired
steam electric generating units (herein called "Navajo Generating Station"),
located on the Navajo Indian Reservation near Page, Arizona, and the related 500
KV transmission system (herein called "Navajo transmission system"), with
ownership interests in the Navajo Generating Station to be as follows:

<TABLE>
<S>                                          <C>
Arizona Public Service Co. (Arizona)         14.0%

City of Los Angeles, Department of
Water and Power (Los Angeles)                21.2%

Nevada Power Company (Nevada)                11.3%

Salt River Project Agricultural
Improvement and Power District
(Salt River Project)                         46.0%

Tucson Gas and Electric Company
(Tucson)                                      7.5%
</TABLE>

all of said entities referred to herein as the "Co-Owners," and

WHEREAS, Salt River Project shall own 21.7% of the Navajo Generating Station for
its own use and benefit and shall own and hold the remaining 24.3% of its
ownership interest in the Navajo Generating Station for the use and benefit of
the United States, Department of Interior, Bureau of Reclamation for the United
States' use to provide power and energy for Central Arizona Project pumping (the
"United States" and the above listed companies being herein collectively called
"Participants"), and

WHEREAS, the following described Agreements have been reviewed on this day with
this Board and this Board has determined that it is in the best interest of Salt
River Project to enter into said Agreements to effectuate the construction,
operation and maintenance of the Navajo Project;

NOW, THEREFORE, BE IT HEREBY RESOLVED, That the Board of Directors of Salt River
Project has and does hereby approve the Navajo Project Participation Agreement
among the Participants, and has and does hereby empower and direct that the
President or Vice President, and the

<PAGE>

                               SALT RIVER PROJECT

Secretary or Assistant Secretary, make, execute and deliver said Participation
Agreement for, and on behalf of, the Salt River Project with such minor changes
or omissions therein as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve the Indenture of Lease for Navajo Units 1, 2 and 3,
and has and does hereby empower and direct that the President or Vice President,
and the Secretary or Assistant Secretary, make, execute, acknowledge and deliver
said Indenture of Lease for Navajo Units 1, 2 and 3 for and on behalf of the
Salt River Project with such minor changes or omissions therein as management
may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Federal Rights of Way, granted in
conformity with the Act of February 15, 1901, between the Secretary of Interior
and the Co-Owners as Grantees, and does hereby authorize, empower and direct
that the President or Vice President, and the Secretary or Assistant Secretary,
make, execute, acknowledge and deliver said Federal Rights of Way for, and on
behalf of, Salt River Project with such minor changes or omissions therein as
management may make in the premises, and this Board of Directors also
authorizes, empowers and directs its officers and management to make and file an
Application for Grant of Rights of Way under the Act of February 15, 1901, 31
Stat. 790, 43 U.S.C., Section 959, underlying any or all Project land rights,
and to take and perform all necessary acts in making and filing such
Application, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Federal Rights of Way and Easements,
granted in conformity of February 5, 1948, by and between the Secretary of
Interior and Salt River Project and the other Co-Owners as Grantees and does
hereby authorize, empower and direct that the President or Vice President, and
the Secretary or Assistant Secretary, make, execute, acknowledge and deliver
said Federal Rights of Way and Easements for, and on behalf of, the Salt River
Project with such minor changes and omissions therein as management may make in
the premises, and does hereby authorize, empower and direct its officers and
management to make and file an Application for the Grant of Rights of Way and
Easements under the Act of February 5, 1948, 62 Stat. 17, 25 U.S.C. Section 323,
underlying any or all Project land rights, and to take and perform all necessary
acts in making and filing such Application, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve the Memorandum of Agreement

<PAGE>

                               SALT RIVER PROJECT

providing for execution of Navajo Station Coal Supply Agreement among it, the
other Co-Owners and Peabody Coal Company together with the Letter Agreement
relating thereto which sets forth additional understandings and agreements
concerning the Navajo Station Coal Supply Agreement, and has and does hereby
authorize, empower and direct that the President or Vice President, and the
Secretary or Assistant Secretary, make, execute, acknowledge and deliver said
Memorandum of Agreement and said Letter of Understanding for and on behalf of
the Salt River Project with such minor changes and omissions therein as
management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Power Coordination Contract between the
Co-Owners and the United States and has and does hereby authorize, empower and
direct that the President or Vice President, and the Secretary or Assistant
Secretary, make, execute and deliver said Power Coordination Contract for and on
behalf of the Salt River Project with such minor changes and omissions therein
as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that, the Board of Directors of Salt River Project
has and does hereby approve the Principles of Interconnected Operation for the
Navajo Project between the Co-Owners, the United States and the Southern
California Edison Company (whether or not said Southern California Edison
Company is party thereto), and does hereby authorize, empower and direct that
the President or Vice President, and the Secretary or Assistant Secretary make,
execute and deliver said Principles of Interconnected Operation for and on
behalf of the Salt River Project with such minor changes and omissions therein
as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Contract for Interim Use of United
States Entitlement in the Navajo Project (herein called "Layoff Contract")
between it and the United States and does hereby authorize, empower and direct
that the President or Vice President, and the Secretary or Assistant Secretary,
make, execute and deliver said Layoff Contract for and on behalf of the Salt
River Project with such minor changes and omissions therein as management may
make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Memorandum Transmission Agreement
between it, the other Participants, and the Southern California Edison Company,
and has and does hereby authorize, empower and direct that the President or
Vice President, and the Secretary or Assistant Secretary, make, execute and
deliver said

<PAGE>

                               SALT RIVER PROJECT

Memorandum Transmission Agreement for and on behalf of the Salt River Project
with such minor changes and omissions therein as management may make in the
premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Agreement for Delivery of the United
States Power and Energy for the McCullough Substation to the Mead Substation
between it, the United States and the other Eldorado System Co-Owners (whether
or not such entities become parties thereto), and has and does hereby authorize,
empower and direct that the President or Vice President, and the Secretary or
Assistant Secretary, make, execute and deliver said Agreement for and on behalf
of the Salt River Project with such minor changes and omissions therein as
management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Spinning Reserve Pooling Agreement
between it, and the other Participants, excepting the City of Los Angeles,
Department of Water and Power (whether or not all such other Participants become
parties thereto), and has and does hereby authorize, empower and direct that the
President or Vice President, and the Secretary or Assistant Secretary, make,
execute and deliver said Spinning Reserve Fueling Agreement for and on behalf of
the Salt River Project with such minor changes and omissions therein as
management may make in the premises.

                                   CERTIFICATE

I, F. E. Smith, the duly appointed, qualified and acting Secretary of the Salt
River Project Agricultural Improvement and Power District, HEREBY CERTIFY that
the foregoing is a true and complete copy of a resolution adopted by the Board
of Directors of said District at a special meeting thereof duly held on the 25th
day of August 1969, at which meeting a quorum was present and voted.

WITNESS my hand and seal of Salt River Project Agricultural Improvement and
Power District this 19th day of November 1969.

                                             /s/ F. E. Smith
                                             -------------------------------
                                                 F. E. Smith, Secretary

<PAGE>

                                   CERTIFICATE

      I, Samuel P. Cowley, certify that I am the Secretary of the Nevada Power
Company, a corporation named herein; that Harry Allen who signed the above
contract on behalf of said corporation was then its President; that said
contract was duly signed for and in behalf of said corporation by authority of
its governing body and is within the scope of its corporate powers.

                                             /s/ Samuel P. Cowley
                                             -------------------------------
                                             Samuel P. Cowley, Secretary

<PAGE>

                          TUCSON GAS & ELECTRIC COMPANY

                          Certified Copy of Resolutions
                       Adopted by the Board of Directors

            RESOLVED, that the proper officers of the Company be, and they
      hereby are authorized to enter into a Participation Agreement between the
      United States of America, Arizona Public Service Company, Department of
      Water and Power of the City of Los Angeles, Nevada Power Company, Salt
      River Project Agricultural Improvement and Power District and Tucson Gas &
      Electric Company for the ownership of the Navajo Project wherein Tucson
      Gas & Electric Company shall own an undivided 7-1/2% interest in the
      Navajo Generating Station and varying percentage interests in the
      transmission system. The Agreement shall be substantially in the form of
      the draft filed with the Secretary of the Company marked "Filed September
      23, 1969 with the Secretary of Tucson Gas & Electric Company", and be it

            FURTHER RESOLVED, that the proper officers of the Company be, and
      they hereby are further authorized to execute and enter into on behalf of
      the Company the necessary Project Agreements contemplated by said
      Participation Agreement, and such other documents reasonably required to
      implement said Participation Agreement and Project Agreements.

                                 **************

            I, P. L. ABBOTT, Secretary of TUCSON GAS & ELECTRIC COMPANY
      (hereinafter called the "Company"), DO HEREBY CERTIFY that the above and
      foregoing is a true and complete copy of resolutions duly adopted by the
      Board of Directors at the Regular Monthly Meeting held on the 23rd day of
      September, 1969, at which meeting a quorum was present and acted thereon;
      and

            I DO FURTHER CERTIFY that said resolution is in full force and
      effect on the date hereof.

            IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
      of the Company this 29th day of September, 1969.

                                           /s/ Authorized Signatory
                                           ------------------------

<PAGE>

                                   CERTIFICATE

            I, GERALD J. GRIFFIN, certify that I am an Assistant Secretary of
      ARIZONA PUBLIC SERVICE COMPANY, the corporation named herein; that M. C.
      TITUS, who signed the above contract on behalf of said Corporation was
      then its Executive Vice President; that said contract was duly signed for
      and in behalf of said Corporation by authority of its governing body and
      is within the scope of its corporate powers.

                                             /s/ Gerald J. Griffin
                                             ---------------------------
                                             Assistant Secretary

<PAGE>

                          CERTIFIED COPY OF RESOLUTION

      I, GERALD J. GRIFFIN, Assistant Secretary of ARIZONA PUBLIC SERVICE
COMPANY, an Arizona corporation, HEREBY CERTIFY that, at a meeting of the Board
of Directors of said Company, duly convened and held on August 21, 1969, at
which a quorum was present and acting throughout, the following resolution was
adopted and is now in full force and effect:

            RESOLVED, that the Board of Directors approves and ratifies the
      action of the officers in negotiating and carrying forward the proposal
      for the participation by the Company, along with others, in the so-called
      Navajo Project, involving the construction near Page, Arizona, of three
      generating units (presently estimated at 750 MW nameplate), with ownership
      being held as tenants in common in the following respective undivided
      interests:

<TABLE>
<CAPTION>
<S>                                          <C>
Arizona Public Service Company               14.0%
Tucson Gas & Electric Company                 7.5%
City of Los Angeles                          21.2%
Nevada Power Company                         11.3%
Salt River Project Agricultural
   Improvement and Power District (For
   Itself)                                   21.7%
   (As Agent for U.S.B.R.)                   24.3%
</TABLE>

      the said project to include certain transmission facilities to be located
      in Arizona, with APS to be the Project Manager and Operating Agent for
      said facilities, which are to be owned by APS and others as joint tenants
      in various percentages related to projected use, these facilities
      including a 500 kv line from the switchyard of the Navajo Plant near Page
      to the Moenkopi Switching Station and from there to the Westwing
      switchyard near Phoenix, and with another 500 kv line extending directly
      from the Navajo switchyard to Westwing, together with various related
      interconnections and switching facilities; and

            FURTHER RESOLVED, that in connection with the Navajo Project, the
      appropriate officers of the Company be, and they are hereby authorized to
      negotiate and to execute and effectuate the necessary instruments and
      agreements, including among others, the following:

                  (1)   Participation Agreement
                  (2)   Coordination Agreement
                  (3)   Interconnection Agreement
                  (4)   Plant Site Lease
                  (5)   Fuel Supply and Transportation
                           Agreement

<PAGE>

                                                             RESOLUTION NO.  416

      BE IT RESOLVED by the Board of Water and Power Commissioners of The City
of Los Angeles that the President and the Secretary of this Board be and they
are hereby authorized to execute, on behalf of this Board, certain agreements
relating to the construction, ownership, operation and maintenance of facilities
for the generation of electrical power and energy and related facilities,
including fuel supply, copies of which agreements are on file with the Secretary
of this Board and which are identified as follows, that is:

<TABLE>
<CAPTION>
Agreement Title                                                      DWP Number
---------------                                                      ----------
<S>                                                                  <C>
Navajo Project Participation Agreement                                 10334
Memorandum of Agreement Providing for Execution of Navajo              10335
  Station Coal Supply Agreement
Letter Agreement                                                       10336
Application for Federal Rights-of-Way and Easements                    10337
Application and Grant of Rights-of-Way and Easements (25 U.S.C.        10338
 Section 323)
United States, Department of the Interior, Power Coordination          10339
 Contract
Interim Arrangement for Interconnected Operations                      10340
Contract with Department of Water and Power of The City of             10341
 Los Angeles for Interim Sale of United States Entitlement of
 Navajo Project
Memorandum Transmission Agreement                                      10342
Victorville-Lugo Interconnection Agreement                             10343
</TABLE>

<PAGE>

                   (6)   Co-Tenancy Agreement
                   (7)   Moenkopi Agreement
                   (8)   Amendment to Navajo Wholesale Power Agreement
                   (9)   Plant Construction Agreement
                  (10)   Plant Operating Agreement
                  (11)   Transmission Construction Agreement
                  (12)   Transmission Operating Agreement
                  (13)   Applications for Various Rights-of-Way and Easements
                  (14)   Layoff Agreement

            and

                  FURTHER RESOLVED, that the appropriate officers of the Company
            are authorized to take such actions and to execute such further
            agreements, instruments, applications, certificates, contracts or
            other documents as may be necessary or appropriate in connection
            with the foregoing to complete and effectuate the Company's proposed
            participation in the Navajo Project.

            IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
      corporation this 3rd day of October, 1969.

                                             /s/ Gerald J. Griffin
                                             ---------------------------
                                             Assistant Secretary

                                      -2-
<PAGE>

Agreement Title (Continued)              DWP Number
--------------------------               ----------
Indenture of Lease                        10344
Letter Agreement                          10350

      I HEREBY CERTIFY that the foregoingis a full, true and correct copy of a
resolution adopted by the Board of Water and Power Commissioners of The City of
Los Angeles at its meeting held NOV 20 1969

                                                  /s/ Mary J. Born
                                                  ------------------------
                                                         Secretary

<PAGE>

                              ORDINANCE NO. 139,629

      AN ORDINANCE APPROVING AGREEMENTS RELATING TO PARTICIPATION BY THE
DEPARTMENT OF WATER AND POWER IN THE NAVAJO PROJECT

          THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS:

      Section 1. That the Board of Water and Power Commissioners of The City of
Los Angeles be and it is hereby authorized, in its discretion, to execute and
enter into the following agreements, substantially in the form of those which
are on file with the City Clerk and identified below, relating to the
transmission and use of electrical Power and energy associated with the Navajo
Project:

<TABLE>
<CAPTION>
       AGREEMENT TITLE                                                  DWP NUMBER
----------------------------------------------------------------        ----------
<S>                                                                     <C>
Interim Arrangement for Interconnected                                       10340
  Operations
Contrast with Department of Water and Power of The City
  of Los Angeles for Interim Sale of United States, Entitle-
  ment of Navajo Project                                                     10341
Memorandum Transmission Agreement                                            10342
Victorville-Lugo Interconnection Agreement                                   10343
Letter Agreement                                                             10350
</TABLE>

      Sec. 2. The City Clerk shall certify to the passage of this ordinance and
cause the same to be published in some daily newspaper printed and published in
the City of Los Angeles.

      I hereby certify that the foregoing ordinance was introduced at the
meeting of the Council of the City of Los Angeles of November 10, 1969 and was
passed at its meeting of November 17, 1969.

                                                    REX E.  LAYTON.  City Clerk,
                                                        By M. B. Wilson, Deputy.
Approved November 18, 1969.
File No. 147173 Sup #1                                      SAM YORTY, Mayor.

                               (E54726) Nov 19 It

                                  CERTIFICATION

STATE OF CALIFORNIA,
                        }   ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 139,629 of the City of Los Angeles,

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

on file in my office, and that I have carefully compared the same with the
original.

                     IN WITNESS WHEREOF, I have hereunto set my hand and affixed
                     the Seal of the City of Los Angeles, this 19th day
                     of November, 1969
                                                 /s/ Rex E. Layton
                                        ----------------------------------------
                                        City Clerk of the City of  Los Angeles

                                     By /s/ Authorized Signatory
                                        ----------------------------------------
Form Clerk 22 -- 5M -- 11-68 (R)                          Deputy

<PAGE>

                              ORDINANCE NO. 139,630

      AN ORDINANCE APPROVING AGREEMENTS RELATING TO PARTICIPATION BY THE
DEPARTMENT OF WATER AND POWER IN THE NAVAJO PROJECT

          THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS:

      Section 1. That the Board of Water and Power Commissioners of The City of
Los Angeles be and it is hereby authorized in its discription, to execute and
enter into the following agreements, substantially in the form of those which
are on file with the City Clerk and identified below, relating to the
construction, ownership, operation and maintenance of facilities for generation
of electrical power and energy and related facilities, including fuel supply:

<TABLE>
<CAPTION>
       AGREEMENT TITLE                                                  DWP NUMBER
----------------------------------------------------------------        ----------
<S>                                                                     <C>
Navajo  Project Participation Agreement                                      10384
Memorandum of Agreement Providing for Execution of
Navajo Station Coal Supply Agreement                                         10385
Letter Agreement                                                             10386
Application for Federal Rights-of-Way and Easements                          10387
Grant of Federal Rights-of-Way and Eassements                                10388
United States Department of the Interlor, Power Coor-
 dination Contract                                                           10339
Indenture of Lease                                                           10344
</TABLE>

      Sec. 2. The City Clerk shall certify to the passage of this ordinance and
cause the same to be published in some daily newspaper printed and published in
the City of LOS Angeles.

      I hereby certify that the foregoing ordinance was introduced at the
meeting of the Council of the City of Los Angeles, of November , 10, 1965 and
was passed at its meeting of November 17, 1968.

                                                       REX E. LAYTEN City Clerk,
                                                        By M. B. Wilson, Deputy.
Approved November 18, 1969.
File No. 147178                                                SAM YORTY, Mayor.
                               (E54727) Nov 19 It

                                  CERTIFICATION

STATE OF CALIFORNIA,
                        } ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordiance No. 139,630 of the City of Los Angeles,

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

on file in my office, and that I have carefully compared the same with the
original.

                     IN WITNESS WHEREOF, I have hereunto set my hand and affixed
                     the Seal of the City of Los Angeles, this 19th day
                     of  November, 1969

                                                /s/ REX E. LAYTON
                                         --------------------------------------
                                         City Clerk of the City of  Los Angeles

                                        By  /s/ Authorized Signatory
                                            ------------------------------------
 Form Clerk 22 -- 5M -- 11-68 (R)                     Deputy

<PAGE>
                                    ORIGINAL

                       Southern California Edison Company

                                 P. O. BOX 351

                         LOS ANGELES, CALIFORNIA 90053

                                 October 3, 1969

ARIZONA PUBLIC SERVICE COMPANY

DEPARTMENT OF WATER AND POWER OF THE
CITY OF LOS ANGELES, BY THE BOARD
OF WATER AND POWER COMMISSIONERS

NEVADA POWER COMPANY

SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT

TUCSON GAS & ELECTRIC COMPANY

Gentlemen:

      This letter will confirm the agreement reached in. the course of
negotiations of the Memorandum Transmission Agreement between the Participants
in the Navajo Project and Southern California Edison Company, concerning the
liability provisions to be agreed upon by the non-Federal parties to such
Memorandum Transmission Agreement. These provisions are to be in effect among
such non-Federal parties concerning the disposition of certain liabilities
arising out of the operations of their respective electric systems. It is agreed
that the following liability provisions will apply to the Memorandum
Transmission Agreement and that the reference to "Party" and "Parties" therein
shall mean a party or the parties to the Memorandum Transmission Agreement other
than The United States of America.

6. LIABILITY

      6.1   Except for any loss, damage, claim, cost, charge or expense
            resulting from Willful Action, no Party (First Party), its
            directors, officers, or employees, shall be liable to any other
            Party (Second Party) for any loss, damage, claim, cost, charge or
            expense of any kind or nature incurred by any Second Party
            (including direct, indirect,

<PAGE>
                                      - 2 -

            or consequential loss, damage, claim, cost, charge or expense; and
            whether or not resulting from the negligence of any Party, its
            directors, officers, employees, or any other person or entity whose
            negligence would be imputed to such Party) from (i) engineering,
            repair, supervision, inspection, testing, protection, operation,
            maintenance, replacement, reconstruction, use or ownership of First
            Party's electric system,or (ii) the performance or non-performance
            of the obligations of any Party under this Memorandum Transmission
            Agreement. Except for any loss, damage, claim, cost, charge or
            expense resulting from Willful Action, each Second Party releases
            each other First Party, its directors, officers, and employees, from
            any such liability.

      6.2   Except for liability resulting from Willful Action, any Party whose
            electric customer shall make a claim or bring an action for any
            death, injury, loss or damage arising out of electric service to
            such customer, shall indemnify and hold harmless all other Parties,
            their directors, officers, and employees, from and against any
            liability for such death, injury, loss or damage. The term "electric
            customer" shall mean an electric consumer to whom no power is
            delivered for resale.

      6.3   Each Party shall be responsible for the consequences of

<PAGE>

                                      - 3 -

            its Willful Action, and shall indemnify and save harmless the other
            Parties, their directors, officers, and employees, from the
            consequences thereof.

      6.4   The term "Willful Action" as used in this Section 6 is defined as
            follows:

            6.4.1 Action taken or not taken by a Party at the direction of its
                  directors, officers, or employees, having management or
                  administrative responsibility affecting its performance under
                  the Memorandum Transmission Agreement, which action is
                  knowingly or intentionally taken or failed to be taken with
                  conscious indifference to the consequences thereof, or with
                  intent that injury or damage would result or would probably
                  result therefrom. Willful Action does not include any act or
                  failure to act which is merely involuntary, accidental or
                  negligent.

            6.4.2 Action taken or not taken by a Party at the direction of its
                  directors, officers, or employees, having management or
                  administrative responsibility affecting its performance under
                  the Memorandum Transmission Agreement, which action has been
                  determined by final arbitration award or final judgment or
                  judicial decree to be a material default under the Memorandum
                  Transmission Agreement

<PAGE>
                                     - 4 -

                  and which occurs or continues beyond the time specified in
                  such arbitration award or judgment or judicial decree for
                  curing such default, or, if no time to cure is specified
                  therein, occurs or continues thereafter beyond a reasonable
                  time to cure such default.

            6.4.3 Action taken or not taken by a Party at the direction of its
                  directors, officers, or employees, having management or
                  administrative responsibility affecting its performance under
                  the Memorandum Transmission Agreement, which action is
                  knowingly or intentionally taken or failed to be taken with
                  the knowledge that such action taken or failed to be taken is
                  a material default under any Project Agreements.

            6.4.4 The phrase "employees having management or administrative,
                  responsibility" as used in this Section 6.4 means employees of
                  a Party who are responsible for one or more of the executive
                  functions of planning, organizing, coordinating, directing,
                  controlling and supervising such Party's performance under
                  this Memorandum Transmission Agreement.

      It is understood and agreed that as between The United States of America
and one or more of the non-Federal parties, liabilities within the purview of
Section 6 of the Memorandum Transmission Agreement shall be governed by the
provisions of Section 6 in such agreement, but that liability of one non-Federal
party to one or more other non-Federal parties to the Memorandum Transmission

<PAGE>

                                      - 5 -

Agreement that are within the purview of Section 6 as set forth in this letter
agreement shall be governed by the Section 6 herein.

      Will you please signify your agreement to the terms and conditions of this
letter by executing the appropriate acceptance provisions hereof.

                                             Very truly yours,

 APPROVED AS TO FORM:
ROLLIN E. WOODBURY                           SOUTHERN CALIFORNIA EDISON COMPANY
Vice President & General Counsel

By /s/ David Barry
   ----------------------------
        Assistant Counsel

   10-3, 1969

                                             By /s/ William R. Gould
                                                ----------------------------
                                                Senior Vice President

     The terms and conditions of this letter are agreed to this 31st day of
October, 1969.

                              ARIZONA PUBLIC SERVICE COMPANY
                              By  /s/ MC Titus
                                  ----------------------------
                              Title   Executive Vice President

DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, BY THE BOARD OF WATER
AND POWER COMMISSIONERS OF THE CITY OF LOS ANGELES

/s/ Authorized Signatory
------------------------
                              By  /s/ Authorized Signatory
                                  ----------------------------
                                  President

                              And /s/ Authorized Signatory
                                  ----------------------------
                                           Secretary

                             NEVADA POWER COMPANY

                              By  /s/ Authorized Signatory
                                  ----------------------------
                              Title President

<PAGE>
                                      - 6 -

                              SALT RIVER PROJECT AGRICULTURAL
                              IMPROVEMENT AND POWER DISTRICT

                              By  /s/ Authorized Signatory
                                  --------------------------------
                              Title President

                              TUCSON GAS & ELECTRIC COMPANY

                              By  /s/ J. Luther Davies
                                  --------------------------------
                              Title President

<PAGE>

                                                    Contract No. 14-06-300-2140

                       MEMORANDUM TRANSMISSION AGREEMENT

                                     between

                       PARTICIPANTS IN THE NAVAJO PROJECT

                                       and

                       SOUTHERN CALIFORNIA EDISON COMPANY

                                                                    DWPNO. 10342
<PAGE>

                        MEMORANDUM TRANSMISSION AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                  PAGE
-------                                                  ----
<S>           <C>                                        <C>
1             PARTIES                                       1

2             RECITALS                                      1

3             AGREEMENT                                     3

4             TRANSMISSION PRINCIPLES                      14

5             SUBSEQUENT AGREEMENTS                        16

6             LIABILITY AND INSURANCE                      16

7             ARBITRATION                                  19

8             EFFECTIVE DATE                               21

9             REGULATORY APPROVAL                          21

10            AGREEMENT SUBJECT TO COLORADO
                RIVER COMPACT                              22

11            AUTHORIZED REPRESENTATIVES OF THE            22
                PARTIES

12            GENERAL POWER CONTRACT PROVISIONS            22
</TABLE>

<PAGE>

                        MEMORANDUM TRANSMISSION AGREEMENT

1.    PARTIES

            The Parties to this Memorandum Transmission Agreement are: ARIZONA
      PUBLIC SERVICE COMPANY, an Arizona corporation ("Arizona"); DEPARTMENT OF
      WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
      existing under the charter of the City of Los Angeles, a municipal
      corporation of the State of California ("Los Angeles"); NEVADA POWER
      COMPANY, a Nevada corporation ("Nevada"); SALT RIVER PROJECT AGRICULTURAL
      IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district
      organized and existing under the laws of the State of Arizona ("Salt River
      Project"); TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation
      ("Tucson"); THE UNITED STATES OF AMERICA ("United States") represented by
      the officer executing this Memorandum Transmission Agreement, his duly
      appointed successor or duly authorized representative ("contracting
      officer"); all of the above collectively referred to as the
      "Participants"; and SOUTHERN CALIFORNIA EDISON COMPANY, a California
      corporation ("Edison").

2.    RECITALS

            This Memorandum Transmission Agreement is made with reference to the
      following facts, among others:

      2.1   Edison and Arizona entered into the Edison-Arizona

<PAGE>

      Transmission Agreement dated July 20, 1966, and Amendment No. 1 thereto
      dated August 26, 1966, covering the terms and conditions of the
      construction, ownership, operation and maintenance of a 500-kv
      transmission line from the Four Corners Generating Station to the Eldorado
      Substation, and the Moenkopi Switchyard (hereinafter referred to as the
      "Edison-Arizona Transmission System").

      2.2   The Participants have entered into the Navajo Project Participation
            Agreement, which provides for the construction, ownership, operation
            and maintenance of the Navajo Project, including the Transmission
            System.

      2.3   The Transmission System will include the following transmission
            lines and related switchyard and substation facilities:

                  Navajo -        McCullough                     500-kv line
                  Navajo -        Moenkopi                       500-kv line
                  Navajo -        Phoenix Area                   500-kv line
                  Moenkopi -      Phoenix Area                   500-kv line

      2.4   The Transmission System will operate interconnected with the
            Edison-Arizona Transmission System.

      2.5   The Parties desire to provide series capacitors ("Project Series
            Capacitors") in the Transmission System and the Edison-Arizona
            Transmission System, which will enable said systems to transmit
            power in an amount equivalent to the Participants' entitlements

                                      -2-
<PAGE>

            in the Navajo Generating Station, including the Central Arizona
            Project pumping requirements, to their respective delivery points.

      2.6   The Parties desire to provide series capacitors ("Incremental Series
            Capacitors"), in addition to those referred to in Section 2.5 above,
            which will provide an incremental amount of transmission capacity
            on both the Navajo-McCullough 500-kv line and the Moenkopi-Eldorado
            500-kv line between Moenkopi Switchyard and Eldorado Substation
            equal to the Edison Moenkopi Delivery (defined in Section 2.7
            hereof).

      2.7   The United States desires to sell to Edison for delivery to Edison
            at Moenkopi Switchyard a portion of its entitlement to power from
            the Navajo Generating Station in accordance with provisions of the
            Contract with Edison of even date for Interim Sale of United States
            Entitlement in Navajo Project (such portion herein referred to as
            the "Edison Moenkopi Delivery").

3.    AGREEMENT

            The Parties agree as follows:

      3.1   Arizona shall furnish, install, own, operate and maintain:

            3.1.1 Project Series Capacitors and associated equipment located in
                  the Moenkopi Switchyard

                                      -3-
<PAGE>

                  on the Moenkopi-Eldorado 500-kv line.

            3.1.2 Incremental Series Capacitors and associated equipment located
                  in the Moenkopi Switchyard on the Moenkopi-Eldorado 500-kv
                  line.

      3.2   Edison shall furnish, install, own, operate and maintain:

            3.2.1 Project Series Capacitors and associated equipment in the
                  Eldorado Substation on the Moenkopi-Eldorado 500-kv line.

            3.2.2 Incremental Series Capacitors and associated equipment in the
                  Eldorado Substation on the Moenkopi-Eldorado 500-kv line, and
                  Edison shall assume the cost thereof.

      3.3   Arizona shall furnish, install, own, operate and maintain Project
            Series Capacitors and associated equipment in the Moenkopi
            Switchyard on the Navajo-Moenkopi 500-kv line.

      3.4   Arizona shall furnish, install, own, operate and maintain Project
            Series Capacitors, shunt reactors and associated equipment in the
            Moenkopi Switchyard on the Moenkopi-Phoenix Area 500-kv line.

      3.5   Arizona shall furnish, install, own, operate and maintain Project
            Series Capacitors and associated equipment in both the Four Corners
            Switchyard and the Moenkopi Switchyard on the Four Corners-Moenkopi
            500-kv line.

                                      -4-
<PAGE>

      3.6   Arizona shall furnish, install, own, operate and maintain Project
            Series Capacitors and associated equipment in the Cholla Switchyard
            and Pinnacle Peak Substation on the Cholla-Pinnacle Peak 345-kv
            lines.

      3.7   Arizona shall furnish, install, own, operate and maintain power
            circuit breakers and related equipment (excluding series capacitors,
            shunt reactors and associated equipment) in the Moenkopi Switchyard
            for the interconnection of the Transmission System and the
            Edison-Arizona Transmission System.

      3.8   Participants in the Navajo-McCullough 500-kv line
            ("Navajo-McCullough Participants") shall furnish, install, operate
            and maintain at their cost Project Series Capacitors, shunt reactors
            and associated equipment at the terminals of the Navajo-McCullough
            500-kv line, or at the midpoint of said line, or at all such
            locations.

      3.9   The Navajo-McCullough Participants shall furnish, install, operate
            and maintain Incremental Series Capacitors and associated equipment
            at the terminals of the Navajo-McCullough 500-kv line, or at the
            mid-point of said line, or at all such locations.

      3.10  The Navajo-McCullough Participants shall make appropriate financial
            arrangements with Edison to cover the costs incurred by Edison in
            complying with Section 3.2.1 hereof.

                                      -5-
<PAGE>

      3.11  The Navajo-McCullough Participants shall make appropriate financial
            arrangements with Arizona to cover the costs incurred by Arizona in
            complying with Section 3.1.1 hereof.

      3.12  The Participants shall make appropriate financial arrangements with
            Arizona to cover the costs incurred by Arizona in complying with
            Sections 3.3 and 3.7 hereof.

      3.13  The Participants in Moenkopi-Phoenix Area 500-kv line (hereinafter
            referred to as the "Moenkopi-Phoenix Area Participants") shall
            make appropriate financial arrangements with Arizona to cover the
            costs incurred by Arizona in complying with Sections 3.4, 3.5 and
            3.6 hereof.

      3.14  Edison shall make appropriate financial arrangements with Arizona to
            cover the costs incurred by Arizona in complying with Section 3.1.2
            hereof.

      3.15  Edison shall make appropriate financial arrangements with the
            Participants to cover the costs incurred by the Participants in
            complying with Section 3.9 hereof.

      3.16  The phrase "make appropriate financial arrangements" as used in
            Sections 3.10 through 3.15 hereof, shall mean one of two alternates:

            3.16.1 A contribution in aid of construction for the equipment to be
                  furnished and installed

                                      -6-
<PAGE>

                   and a mutually agreed monthly payment to cover all costs
                   other than depreciation and return on investment.

            3.16.2 A monthly payment; substantially in accordance with present
                   formula and schedules of the Edison-Arizona Transmission
                   Agreement.

            Within one year after the effective date of this Memorandum
            Transmission Agreement, each Participant with a financial obligation
            hereunder shall choose either of the above described alternates.

      3.17  In lieu of the payment options provided in Section 3.16 hereof, the
            Parties may exchange obligations or property by mutual agreement of
            such Parties.

      3.18  Arizona's charges to the Parties to cover all costs other than
            depreciation and return on investment incurred in connection with
            the Moenkopi Switchyard (including all series capacitors, shunt
            reactors and associated equipment) shall be billed in proportion to
            the initial gross investment in the Moenkopi Switchyard for which
            they are responsible under the provisions of the Edison-Arizona
            Transmission Agreement in the case of Edison and under the
            provisions of the Participation Agreement in the case of the
            Participants.

      3.19  Edison and the Navajo-McCullough Participants shall each provide
            reciprocal emergency service rights in

                                      -7-

<PAGE>

      accordance with this Section 3.19 for which there shall be no charge made
      by Edison to the Navajo-McCullough Participants, or by the
      Navajo-McCullough Participants to Edison.

      3.19.1 In the event of an outage of the Navajo-McCullough 500-kv line or
             associated terminal facilities, subject to Section 3.19.3 hereof,
             (i) the Navajo-McCullough Participants shall be entitled to have an
             amount of power equivalent to their entitlement in the Navajo
             Generating Station, less transmission losses, transmitted between
             said station and McCullough Substation over the Moenkopi-Eldorado
             and Eldorado-McCullough 500-kv lines and associated terminal
             facilities; provided that, for the purposes of computing such
             entitlements, the entitlement of the United States shall be deemed
             to be 250/561 of the United States' entitlement in the Navajo
             Generating Station; and (ii) Edison shall be entitled to have an
             amount of power equivalent to its entitlement of 48% of the net
             effective generating capacity of Four Corners Units 4 and 5 plus an
             amount of power equal to the Edison Mocnkopi Delivery,

                                      -8-

<PAGE>

             less transmission losses, transmitted between the Moenkopi
             Switchyard and the Eldorado Substation over the Moenkopi-Eldorado
             500-kv line and associated terminal facilities.

      3.19.2 In the event of an outage of the Moenkopi-Eldorado 500-kv line or
             associated terminal facilities, subject to Section 3.19.3 hereof,
             (i) Edison shall be entitled to have an amount of power equivalent
             to its entitlement of 48% of the net effective generating capacity
             of Four Corners Units 4 and 5 plus an amount of power equal to the
             Edison Moenkopi Delivery, less transmission losses, transmitted
             between the Moenkopi Switchyard and the Eldorado Substation over
             the Navajo-Moenkopi, Navajo-McCullough and Eldorado-McCullough
             500-kv lines and associated terminal facilities; and (ii) the
             Navajo-McCullough Participants shall be entitled to have an amount
             of power equivalent to their entitlement in the Navajo Generating
             Station, less transmission losses, transmitted between said station
             and the McCullough Substation over the Navajo-McCullough 500-kv
             line and associated

                                      -9-

<PAGE>

             terminal facilities; provided, that, for the purposes of computing
             such entitlements, the entitlement of the United States shall be
             deemed to be 250/561 of the United States' entitlement in the
             Navajo Generating Station.

      3.19.3 Unless otherwise agreed upon by the system dispatchers of Edison
             and the Navajo-McCullough Participants, in the event of an outage
             of the Navajo-McCullough 500-kv line or the Moenkopi-Eldorado
             500-kv line, the Navajo-McCullough Participants and Edison shall
             reduce transmission of power and associated energy within one-half
             hour after the occurrence of such outage so that the scheduled
             delivery over the remaining in-service line does not exceed 1,000
             megawatts. Said 1,000 megawatt limitation may be changed from time
             to time by mutual agreement of the authorized representatives of
             Edison and the Navajo-McCullough Participants. The entitlement of
             each Navajo-McCullough Participant to capacity in the remaining
             in-service transmission line shall be equal to the capacity of such
             remaining in-service line as established above times the ratio that
             such Participant's

                                      -10-

<PAGE>

            entitlement in the Navajo Generating Station bears to the total
            capability described in Section 3.26 hereof. Edison's entitlement to
            capacity in the remaining in-service transmission line shall be
            equal to the capacity of such remaining in-service line as
            established above times the ratio that Edison's entitlement of 48%
            of the net effective generating capacity of Four Corners Units 4 and
            5 and the Edison-Moenkopi Delivery bears to the total capability
            described in Section 3.26 hereof. For the purposes of this Section
            3.19.3, the entitlement of the United States in the Navajo
            Generating Station shall be deemed to be 250/561 of its entitlement
            in the Navajo Generating Station.

      3.20  Equitable adjustment for transmission losses in the Edison-Arizona
            Transmission System and the Transmission System shall be agreed upon
            between Edison and the Participants.

      3.21  Edison and the Participants shall coordinate the design of the
            Transmission System, the additions to the Edison-Arizona
            Transmission System, and any interconnections thereto, including
            criteria related to line loading, series capacitor ratings and
            similar matters.

                                      -11-

<PAGE>

      3.22  Arizona shall transmit for Edison between the Moenkopi Switchyard
            and the Colorado River over the Edison-Arizona Transmission System
            an amount of electric power equal to the Edison Moenkopi Delivery.

      3.23  The ownership interests and cost responsibilities of the
            Participants for the facilities to be installed pursuant to this
            Memorandum Transmission Agreement shall be as provided in the Navajo
            Project Agreements.

      3.24  The Participants shall have the right to transmit power in an amount
            equivalent to their entitlements in the Navajo Generating Station
            through the Moenkopi Switchyard.

      3.25  The Navajo-McCullough 500-kv line and the Moenkopi-Eldorado 500-kv
            line will be interconnected at each end through other facilities,
            and under normal operating conditions said two lines will be
            operated in parallel as a system.

      3.26  For the purposes of this Agreement, the total capability of the
            system described in Section 3.25 hereof shall be deemed to be an
            amount equivalent to the sum of: (i) the sum of the entitlements of
            Nevada and Los Angeles in the Navajo Generating Station and 250/561
            of the entitlement of the United States in the Navajo Generating
            Station; (ii) the Edison entitlement in Four Corners Units 4 and 5,

                                      -12-

<PAGE>

            which is 48% of the net effective generating capacity of said units;
            and (iii) the Edison Moenkopi Delivery.

      3.27  In the event that the Navajo-McCullough Participants desire to
            schedule delivery of power over the Navajo-McCullough 500-kv line in
            an aggregate amount in excess of the amount described in Section
            3.26(i) hereof or Edison desires to schedule delivery of power over
            the Moenkopi-Eldorado 500-kv line in an amount in excess of the sum
            of the amounts described in Sections 3.26(ii) and 3.26(iii) hereof,
            the Navajo-McCullough Participants and Edison shall conduct
            engineering studies to determine the capability of the system
            described in Section 3.25 hereof to deliver such additional power.
            The deemed capability of said system as established in Section 3.26
            hereof may be changed upon mutual agreement of all the
            Navajo-McCullough Participants and Edison.

      3.28  Until such time as the United States recaptures all of the Edison
            Moenkopi Delivery, the Navajo-Phoenix Area Participants shall not
            schedule power over the Transmission System in an amount which is in
            excess of the sum of their entitlements in the Navajo Generating
            Station without the mutual agreement of the Navajo-Phoenix Area
            Participants and Edison.

      3.29  The Participants shall have the right  to interconnect

                                      -13-

<PAGE>

            their systems with the Transmission System at their designated
            points of delivery for the purpose of transmitting power in amounts
            equivalent to their entitlements in the Navajo Generating Station.

      3.30  Except as provided in Section 3.29 hereof, the Participants shall
            not interconnect the Transmission System with their systems or
            permit any third party to interconnect the Transmission System with
            its system in a manner which would unreasonably jeopardize or
            unreasonably impair the operation by Edison and Arizona of the
            Edison-Arizona Transmission System.

      3.31  Edison and Arizona shall not interconnect the Edison-Arizona
            Transmission System with their systems or permit any third party to
            interconnect the Edison-Arizona Transmission System with its system
            in a manner which would unreasonably jeopardize or unreasonably
            impair the operation of the Transmission System.

4.    TRANSMISSION PRINCIPLES

      4.1   Each Party shall, independently of the transmission capacity
            otherwise maintained by others, maintain in its system, or between
            its system and the system of other Parties or other entities,
            sufficient capacity, by ownership or contract, which will permit it
            to transmit all power and energy introduced

                                      -14-

<PAGE>

            into its system to meet its own commitments and to fulfill its
            written obligations, if any, to provide transmission service for
            other Parties or other entities, regardless of the origin, source,
            ownership or type of generation used to produce such power and
            energy.

      4.2   It is recognized that flows of electric energy may occur through
            interconnections between the systems of the Parties as a result of
            parallel operation of the systems of the Parties with each other and
            with other entities. Each Party shall use its best efforts at all
            times to maintain as nearly as practicable the scheduled quantities
            of power and energy into and out of the control area containing its
            system.

      4.3   The Parties agree that, should differences arise between them
            regarding the implementation of the foregoing principles, they will
            seek an equitable solution and, if necessary, will perform joint
            technical studies in an effort to agree upon (i) the amounts of
            power that can be scheduled and transmitted on their systems or
            between one Party's system and the systems of other Parties or other
            entities in accordance with the principles of Section 4.1 hereof, or
            (ii) upon whether any Party has been in violation of Section 4.2
            hereof. In

                                      -15-

<PAGE>

            the event such agreement cannot be reached, the matter shall be
            submitted to arbitration, subject to and in accordance with the
            provisions of Section 7 hereof, and in accordance with guidelines to
            be established by the Parties for purposes of determining each
            particular dispute.

5.    SUBSEQUENT AGREEMENTS

      5.1   The Parties intend that the obligations and principles of this
            Memorandum Transmission Agreement will be implemented by definitive
            agreements, including appropriate amendments to the Edison-Arizona
            Transmission Agreement, which will be negotiated in good faith and
            executed by the applicable Parties. In the event that all required
            definitive agreements are not consummated, the Parties agree that
            this Memorandum Transmission Agreement shall serve as the basis for
            requiring the performance of all obligations herein set forth,
            subject to the terms and conditions herein set forth.

6.    LIABILITY AND INSURANCE

      6.1   The Parties agree to use their best efforts to obtain a policy or
            policies of liability insurance with cross liability endorsements
            specifically limited to protecting the Parties from claims and
            liabilities inter se arising out of the interconnected operation
            provided for in the Memorandum

                                      -16-

<PAGE>

            Transmission Agreement.

      6.2   Except for any damage resulting from Willful Action, and except to
            the extent of any damage covered by valid and collectible insurance,
            if any, described in Section 6.1 hereof, and as between the
            Participants, except to the extent of any damage covered by valid
            and collectible Project Insurance as defined in the Navajo Project
            Participation Agreement, liability on the part of any Party (First
            Party), or any of its directors, officers or employees, for any
            damage to any Party (Second Party) whether or not caused by
            negligence, which occurs as the result of performance or
            non-performance of its responsibilities under this Memorandum
            Transmission Agreement may not be collected from the Party (First
            Party), or any of its directors, officers or employees, by any
            action in law or equity by the Party (Second Party).

      6.3   Except for liability resulting from Willful Action, any Party whose
            electric customer shall make a claim or bring an action for any
            death, injury, loss or damage arising out of electric service to
            such customer, shall indemnify and hold harmless all other Parties,
            their directors, officers and employees, from and against any
            liability for such death, injury, loss or damage. The term "electric

                                      -17-

<PAGE>

            customer" shall mean an electric customer to whom no power is
            delivered for resale.

      6.4   Each Party shall be responsible for the consequences of its own
            Willful Action, and shall indemnify and save harmless the other
            Parties from the consequences thereof.

      6.5   The term "Willful Action" as used in this Section 6 is defined as
            follows:

            6.5.1 Action taken or not taken by a Party at the direction of its
                  directors, officers, contracting officer, or employees, having
                  management or administrative responsibility affecting its
                  performance under the Memorandum Transmission Agreement, which
                  action is knowingly or intentionally taken or failed to be
                  taken with conscious indifference to the consequences thereof,
                  or with intent that injury or damage would result or would
                  probably result therefrom. Willful Action does not include any
                  act or failure to act which is merely involuntary, accidental
                  or negligent.

            6.5.2 Action taken or not taken by a Party at the direction of its
                  directors, officers, contracting officer, or employees, having
                  management or administrative responsibility affecting its
                  performance under the Memorandum

                                      -18-

<PAGE>

                  Transmission Agreement, which action has been determined by
                  final arbitration award or final judgment or judicial decree
                  to be a material default under the Memorandum Transmission
                  Agreement and which occurs or continues beyond the time
                  specified in such arbitration award or judgment or judicial
                  decree for curing such default, or, if no time to cure is
                  specified therein, occurs or continues thereafter beyond a
                  reasonable time to cure such default.

            6.5.3 Action taken or not taken by a Party at the direction of its
                  directors, officers, contracting officer, or employees, having
                  management or administrative responsibility affecting its
                  performance under the Memorandum Transmission Agreement, which
                  action is knowingly or intentionally taken or failed to be
                  taken with the knowledge that such action taken or failed to
                  be taken is a material default under this agreement.

            6.5.4 The phrase "employees having management or administrative
                  responsibility" as used in this Section 6.5 means employees of
                  a Party who are responsible for one or more of the executive
                  functions of planning, organizing,

                                      -19-
<PAGE>

                  coordinating, directing, controlling and supervising such
                  Party's performance under this Memorandum Transmission
                  Agreement.

7.  ARBITRATION

      7.1   If a dispute between any of the Parties should arise under this
            Memorandum Transmission Agreement which does not involve the legal
            rights of or which will not create a legal obligation upon the
            United States under this Memorandum Transmission Agreement, or will
            not affect the interests or rights held for the use and benefit of
            the United States under the applicable Navajo Project Agreements,
            any Party may call for submission of the dispute to arbitration,
            which call shall be binding upon all of the other Parties. Except
            as specifically provided in an applicable agreement, the
            arbitration shall be governed by the rules and practices of the
            American Arbitration Association. The award of the arbitrators shall
            be final and binding upon the Parties, and the costs and expenses
            of the arbitrators shall be shared equally by the Parties
            participating in the arbitration, unless otherwise decided by the
            arbitrators.

      7.2   If a dispute arises between any of the Parties which does or may
            involve the legal rights of or which will or may create a legal
            obligation upon the United States under this Memorandum Transmission
            Agreement,

                                      -20-
<PAGE>

            or which affects or may affect the interests or rights held for the
            use and benefit of the United States under the applicable Navajo
            Project Agreements, then any Party may call for submission to
            arbitration of any part of the dispute, issue or action related
            thereto which the United States may lawfully submit to arbitration.
            If the contracting officer agrees to such arbitration, or if the
            contracting officer refuses or fails to arbitrate and a court of
            competent jurisdiction thereafter finally decides that the United
            States may lawfully submit the matter in dispute to arbitration, it
            shall be conducted in the manner set forth in this Section 7, or in
            such other manner as may be provided for by Federal law.

8.    EFFECTIVE DATE

            This Memorandum Transmission Agreement shall become effective when
      it has been duly executed and delivered on behalf of the Parties.

9.    REGULATORY APPROVAL

      9.1   This Memorandum Transmission Agreement shall be subject to filing
            with, and to such changes or modifications as may from time to time
            be directed by, competent regulatory authority, if any, in the
            exercise of its jurisdiction.

                                      -21-
<PAGE>

10.   AGREEMENT SUBJECT TO COLORADO RIVER COMPACT

      10.1  This agreement is made upon the express condition and with the
            express understanding that all rights hereunder shall be subject to
            and controlled by the Colorado River Compact, being the compact or
            agreement signed at Santa Fe, New Mexico, November 24, 1922,
            pursuant to Act of Congress approved August 19, 1921, entitled "An
            Act to permit a compact or agreement between the States of Arizona,
            California, Colorado, Nevada, New Mexico, Utah and Wyoming
            respecting the disposition and apportionment of the waters of the
            Colorado River, and for other purposes", which Compact was approved
            in Section 13(a) of the Boulder Canyon Project Act.

11.   AUTHORIZED REPRESENTATIVES OF THE PARTIES

      11.1  Each Party and the contracting officer, by written notice to the
            other, shall designate the representative who is authorized to act
            in its and his behalf with respect to those matters contained herein
            which are the functions and responsibilities of the authorized
            representatives of the Parties. Each Party may change the
            designation of its authorized representative upon written notice to
            the other.

12.   GENERAL POWER CONTRACT PROVISIONS

      12.1  The General Power Contract Provisions effective

                                      -22-
<PAGE>

            April 27, 1961, with revised Page 2 dated August 7, 1968, revised
            Page 3 dated January 2, 1969, and revised Page 6 dated July 28,
            1969, attached hereto are hereby made a part of this Memorandum
            Transmission Agreement; provided, however, that Provisions A through
            D, F through N, Q through S, V, Y, Z and AA through GG shall not
            apply to this Memorandum Transmission Agreement; and provided that,
            as to Provision P, since Title 42 U.S.C. 2000-e-2(i) provides for
            the giving of preference to Indians in employment on or near an
            Indian Reservation, the obligations of the non-federal Parties under
            Provision P shall be subject to any obligation undertaken by said
            non-federal Parties to give preference to Indians for employment on
            or near an Indian Reservation.

      IN WITNESS WHEREOF, the Parties have caused this Memorandum Transmission
Agreement to be executed as of this 30th day of September, 1969.

                                            THE UNITED STATES OF AMERICA

                                            By /s/ Walter J. Hickel
                                               --------------------------------
                                               Secretary of the Interior

                                               ARIZONA PUBLIC SERVICE COMPANY

ATTEST:                                    By  /s/ M.C. Titus
/s/ Gerald J. Griffin                          --------------------------------
----------------------                         EXECUTIVE VICE PRESIDENT
Assistant Secretary

                                      -23-
<PAGE>

                          DEPARTMENT OF WATER AND POWER
                           OF THE CITY OF LOS ANGELES

                                       by

By /s/ Donald J. Reisner        Board of Water and Power Commissioners of
--------------------            the City of Los Angeles

ATTEST:                         By  /s/ Authorized Signatory
                                     -----------------------
/s/ Mary J. Born                     PRESIDENT
--------------------
Secretary                       NEVADA POWER COMPANY

ATTEST:                         By /s/ Harry Allen
                                   -----------------
/s/ Authorized Signatory           President
------------------------
Secretary
                                SALT RIVER PROJECT AGRICULTURAL
                                IMPROVEMENT AND POWER DISTRICT

                                By  /s/ Authorized Signatory
ATTEST:                             ------------------------
                                   President
/s/ Authorized Signatory
------------------------
Secretary                       TUSCON GAS AND ELECTRIC COMPANY

                                By  /s/ HR Catlin
                                    ---------------
ATTEST:                             VICE PRESIDENT

/s/ W.D. Brooks
------------------------        SOUTHERN CALIFORNIA EDISON COMPANY
ASSISTANT SECRETARY
                                By  /s/ William R. Gould
                                    ----------------------------
                                    SENIOR VICE PRESIDENT
ATTEST:

/s/ Authorized Signatory            [STAMP]
------------------------
ASSISTANT SECRETARY                 Approved as to form

                                      -24-

<PAGE>

                                                        Effective April 27, 1961

                    UNITED STATES DEPARTMENT OF THE INTERIOR
                             BUREAU OF RECLAMATION

                       GENERAL POWER CONTRACT PROVISIONS

A.    Characteristics of Power and Energy.

            Electric energy supplied hereunder will be three-phase, alternating
      current, at a nominal frequency of sixty (60) cycles per second.

B.    Delivery of Energy in Excess of Contract Obligation.

            The Contractor may from time to time, in the absence of objection by
      the contracting officer, use energy at rates of power delivery greater
      than the contract rate of delivery in effect for each type of service
      provided for in this contract, but such greater use shall not be deemed to
      establish in the Contractor any right thereto and the Contractor shall
      cease any such greater use whenever and for the periods of time requested
      by the contracting officer. Nothing in this contract contained shall
      obligate or be construed to obligate the United States to increase any
      contract rate of delivery hereunder. If additional power is not available
      from the United States, the responsibility for securing additional power
      shall rest wholly with the Contractor.

C.    Continuity of Electric Service to be Furnished.

            The electric service, unless otherwise specified, will be furnished
      continuously except (1) for interruptions or reductions due to
      uncontrollable forces, as defined herein; (2) for interruptions or
      reductions due to operation of devices installed for power system
      protection; and (3) for temporary interruptions or reductions, which, in
      the opinion of the contracting officer, are necessary or desirable for the
      purposes of maintenance, repairs, replacements, installation of equipment,
      or investigation and inspection. The United States, except in case of
      emergency as determined by the contracting officer, will give the
      Contractor reasonable advance notice of such temporary interruptions or
      reductions and will remove the cause thereof with diligence.

D.    Multiple Points of Delivery.

            When electric service is furnished at two or more points of
      delivery under the same schedule of rates, said schedule of rates shall
      apply separately to the service supplied at each point of delivery;
      Provided, That where the meter readings are considered separately and the
      Contractor's system may be interconnected between points of delivery
      during emergencies, the meter readings at any point of delivery will be
      adjusted when necessary to compensate for duplication of power demand
      recorded by meters at alternate points of delivery due to emergency
      conditions which are beyond the Contractor's control or temporary
      conditions caused by scheduled outages.

E.    Uncontrollable Forces.

            Neither party shall be considered to be in default in respect to any
      obligation hereunder, if prevented from fulfilling such obligation by
      reason of uncontrollable forces, the term uncontrollable forces being
      deemed for the purpose of this contract to mean any cause beyond the
      control of the party affected, including, but not limited to, failure of
      facilities, flood, earthquake, storm, lightning, fire, epidemic, war,
      riot, civil disturbance, labor disturbance, sabotage, and restraint by
      court or public authority, which by exercise of due diligence and
      foresight such party could not reasonably have been expected to avoid.
      Either party rendered unable to fulfill any obligation by reason of
      uncontrollable forces shall exercise due diligence to remove such
      inability with all reasonable dispatch.

F.    Modification of Rates.

            The rate schedule specified in this contract shall be subject to
      successive modification by the United States through the promulgation of
      superseding rate schedules. If at any time the United States promulgates a
      rate schedule superseding the rate schedule then in effect under this
      contract, it will promptly notify the Contractor thereof. Said superseding
      rate schedule, as of its effective date, shall become effective as to this
      contract unless the Contractor, by notice in writing given to the
      contracting officer within 180 days after notice to it by the United
      States of promulgation of said superseding rate schedule, shall elect to
      terminate this contract effective as of such date not more than three (3)
      years subsequent thereto as the Contractor shall therein specify. In the
      event of such termination, said superseding rate schedule shall not be
      effective during the period of the remaining unexpired term of this
      contract or during a period of two years from the date of notice to the
      Contractor of the promulgation of said superseding rate schedule,
      whichever period is shorter.

G.    Minimum Annual Capacity Charge.

            When the rate schedule in effect under this contract provides for a
      minimum annual capacity charge, a statement of the minimum annual capacity
      charge due, if any, shall be included in the bill rendered for electric
      service for the last billing period of each calendar year, appropriately
      adjusted on a pro rata basis if the full billing periods for the
      adjustable items (including increases or decreases in the contract rate of
      delivery) in the calendar year are less than 12. Fractional billing
      periods will not be considered in such determination. Where multiple
      points of delivery are involved and the contract rate of delivery is
      stated to be a maximum aggregate rate of delivery for all points, in
      determining the minimum annual capacity charge due, if any, the monthly
      capacity charges at the individual points of delivery shall be added
      together. If this contract represents a continuation of electric service
      to an existing customer, for the purpose of determining the minimum annual
      capacity charge, (1) the first 24 full billing periods shall begin with
      the date that electric service was first rendered under the same or a
      similar rate schedule in the expired or superseded contracts, and (2) for
      the calendar year in which electric service is begun under this contract,
      the minimum annual capacity charges under this contract and the contracts
      it succeeded or superseded shall be combined into one such charge due at
      the end of said calendar year and the monthly capacity charges during said
      entire calendar year shall be credited against said combined minimum
      annual capacity charge.

H.    Billing and Payments.

            The United States will submit bills to the Contractor on or before
      the tenth day of each month for electric service furnished during the
      preceding month, and payments will be due and payable by the Contractor on
      the first day of the month immediately succeeding the date each bill is
      submitted.

I.    Nonpayment of Bills.

            If the Contractor fails to pay any bill when due an interest charge
      of one per cent (1%) of the amount unpaid shall be added thereto as
      liquidated damages, and thereafter, as further liquidated damages, an
      additional interest charge of one-half of one per cent (1/2%) of the
      principal sum unpaid shall be added on the first day of each succeeding
      calendar month until the amount due, including interest, is paid in full.
      The United States shall have the right upon not less than fifteen (15)
      days' advance written notice to discontinue furnishing electric service to
      the Contractor for nonpayment of bills and to refuse to resume same so
      long as any part of the amount due remains unpaid. Such a discontinuance
      of electric service will
<PAGE>

                        GENERAL POWER CONTRACT PROVISIONS

      not relieve the Contractor of liability for the minimum charge during the
      time electric service is so discontinued. The rights given herein to the
      United States shall be in addition to all other remedies available to the
      United States, either at law or in equity, for the breach of any of the
      provisions hereof.

J.    Adjustments for Fractional Billing Period.

            (a) For a fractional part of a billing period at the beginning or
      end of service, and for fractional periods due to withdrawals of service,
      the demand or capacity charge, the kilowatthour blocks of the energy
      charge, and the minimum charge shall each be proportionately adjusted in
      the ratio that the number of hours that electric service is furnished to
      the Contractor in such fractional billing period bears to the total number
      of hours in the billing period involved.

            (b) Whenever irrigation and/or drainage pumping service is supplied
      under this contract, adjustments in the demand or capacity charge and in
      the kilowatthour blocks of the energy charge as applicable, and in the
      minimum charge of the rate schedule under which service is supplied, shall
      be made for the fractional part of the billing period at the beginning and
      end of pumping service in each year in like manner as is provided for in
      section (a) of this article. If pumping service is supplied in conjunction
      with service for other purposes and is not metered separately, the billing
      demand for pumping service shall be considered to be the difference
      between the highest 30-minute integrated demand measured during the
      billing period and the contract rate of delivery for firm power.

K.    Adjustments for Curtailments to Service.

            Unless curtailment of service is due to a request by the customer,
      billing adjustments will be made if the delivery of electric energy is
      curtailed because of conditions on the power system of the United States,
      which system for the purpose of such adjustments hereunder shall include
      transmission facilities utilized but not owned by the United States, for
      periods of one (1) hour or longer in duration each. The total number of
      hours of curtailed service in any billing period shall be determined by
      adding (1) the sum of the number of hours of interrupted service to (2)
      the product of: the number of hours of reduced service multiplied by the
      percentage of said reduction below the lesser of (a) the contract rate of
      delivery, or (b) the obligation of the United States to deliver firm power
      and energy as established under the operating agreement entered into
      pursuant to the Auxiliary Power Service article hereof, or (c) the rate of
      delivery required by the Contractor at the time of such reduction. The
      demand or capacity charge, the kilowatthour blocks of the energy charge,
      and the minimum charge shall each be proportionately adjusted in the ratio
      that the total number of hours of such curtailed service as herein
      determined bears to the total number of hours in the billing period
      involved. The Contractor shall make written claim within thirty (30) days
      after receiving the monthly bill, for adjustment on account of any
      curtailment to service, for periods of one (1) hour or longer in duration
      each, alleged to have occurred and which is not reflected in such bill.
      Failure to make such written claim, within said thirty (30) day period,
      shall constitute a waiver thereof. All curtailments to service, which are
      due to conditions on the power system of the United States, shall be
      subject to the provisions of this article and the Contractor shall be
      limited in its remedy to the relief granted by this article; Provided,
      That withdrawal of power and energy under contract provisions shall not be
      deemed curtailments to service.

L.    Metering.

            (a) The total electric power and energy delivered to the Contractor
      will be measured by metering equipment to be furnished and maintained by
      the United States. Meters shall be sealed and the seals shall be broken
      only upon occasions when the meters are to be inspected, tested, or
      adjusted, and representatives of the Contractor shall be afforded
      reasonable opportunity to be present upon such occasions. Metering
      equipment shall be inspected and/or tested at least once each year by the
      United States and at any reasonable time upon request therefor by either
      party. Any metering equipment found to be defective or inaccurate shall be
      repaired and readjusted or replaced. Should any meter fail to register,
      the electric power and energy delivered during such period of failure to
      register shall, for billing purposes, be estimated by the contracting
      officer from the best information available.

            (b) If any of the inspections and/or tests provided for herein
      disclose an error exceeding two per cent (2%), correction based upon the
      inaccuracy found shall be made of the records of electric service
      furnished since the beginning of the monthly billing period immediately
      preceding the billing period during which the test was made; Provided,
      That no correction shall be made for a longer period than such inaccuracy
      may be determined by the contracting officer to have existed. Any
      correction in billing resulting from such correction in meter records
      shall be made in the next monthly bill rendered by the United States to
      the Contractor, and such correction when made shall constitute full
      adjustment of any claim between the parties hereto arising out of such
      inaccuracy of metering equipment.

M.    Resale of Electric Energy.

            The Contractor shall not sell any of the electric energy delivered
      to it hereunder to any customer of the Contractor for resale by that
      customer.

N.    Power Factor.

            While the Contractor normally will be required to maintain the power
      factor as stated in the rate schedule then in effect under this contract,
      the Contractor will be permitted to operate at a lower power factor when
      conditions are such, as determined by the contracting officer, that a
      lower power factor will be mutually advantageous to the Contractor and to
      the United States.

O.    Cooperation of Contracting Parties.

            (a) If, in the maintenance of their respective power systems end/or
      electrical equipment and the utilization thereof for the purposes of this
      contract, it becomes necessary by reason of any emergency or extraordinary
      condition for either party to request the other to furnish personnel,
      materials, tools, and equipment For the accomplishment thereof, the party
      so requested shall cooperate with the other and render such assistance as
      the party so requested may determine to be available. The party making
      such request, upon receipt of properly itemized bills from the other
      party, shall reimburse the party rendering such assistance for all costs
      properly and reasonably incurred by it in such performance, including not
      to exceed fifteen percent (15%) thereof for administrative and general
      expenses, such costs to be determined on the basis of current charges or
      rates used in its own operations by the party rendering assistance.

                                        2
<PAGE>

                        GENERAL POWER CONTRACT PROVISIONS

            (b) This contract shall be subject to all the provisions and
      conditions of the Act of Congress entitled the Work Hours Act of 1962,
      approved August 13, 1962 (76 Stat. 357), which establishes standards for
      hours of work and overtime pay of laborers and mechanics employed on work
      done under contract for, or with the financial aid of, the United States,
      the same as if that Act had been specifically set forth herein.

P. Provisions Relative to Employment

      (1)   During the performance of this contract, the Contractor agrees as
            follows:

            (a)   The Contractor will not discriminate against any employee or
                  applicant for employment because of race, color, religion,
                  sex, or national origin. The Contractor will take affirmative
                  action to ensure that applicants are employed, and that
                  employees are treated during employment, without regard to
                  their race, color, religion, sex, or national origin. Such
                  action shall include, but not be limited to, the following:
                  Employment, upgrading, demotion, or transfer; recruitment or
                  recruitment advertising; layoff or termination; rates of pay
                  or other forms of compensation; and selection for training,
                  including apprenticeship. The Contractor agrees to post in
                  conspicuous places, available to employees and applicants for
                  employment, notices to be provided by the Contracting Officer
                  setting forth the provisions of this Equal Opportunity clause.

            (b)   The Contractor will, in all solicitations or advertisements
                  for employees placed by or on behalf of the Contractor, state
                  that all qualified applicants will receive consideration for
                  employment without regard to race, color, religion, sex, or
                  national origin.

            (c)   The Contractor will send to each labor union or representative
                  of workers with which he has a collective bargaining agreement
                  or other contract or understanding, a notice, to be provided
                  by the agency Contracting Officer, advising the labor union or
                  workers' representative of the Contractor's commitments under
                  this Equal Opportunity clause, and shall post copies of the
                  notice in conspicuous places available to employees and
                  applicants for employment.

            (d)   The Contractor will comply with all provisions of Executive
                  Order No. 11246 of September 24, 1965, and of the rules,
                  regulations, and relevant orders of the Secretary of Labor.

            (e)   The Contractor will furnish all information and reports
                  required by Executive Order No. 11246 of September 24, 1965,
                  and by the rules, regulations, and orders of the Secretary of
                  Labor, or pursuant thereto, and will permit access to his
                  books, records, and accounts by the contracting agency and the
                  Secretary of Labor for purposes of investigation to ascertain
                  compliance with such rules, regulations, and orders.

            (f)   In the event of the Contractor's noncompliance with the Equal
                  Opportunity clause of this contract or with any of the said
                  rules, regulations, or orders, this contract may be canceled,
                  terminated, or suspended, in whole or in part, and the
                  Contractor may be declared ineligible for further Government
                  contracts in accordance with procedures authorized in
                  Executive Order No. 11246 of September 24, 1965, and such
                  other sanctions' may be imposed and remedies invoked as
                  provided in Executive Order No. 11246 of September 24, 1965,
                  or by rule, regulation, or order of the Secretary of Labor, or
                  as otherwise provided by law.

            (g)   The Contractor will include the provisions of paragraphs (a)
                  through (g) in every subcontract or purchase order unless
                  exempted by rules, regulations, or orders of the Secretary of
                  Labor issued pursuant to Section 204 of Executive Order No.
                  11246 of September 24, 1965, so that such provisions will be
                  binding upon each subcontractor or vendor. The Contractor will
                  take such action with respect to any subcontract or purchase
                  order as the contracting agency may direct as a means of
                  enforcing such provisions, including sanctions for
                  noncompliance: Provided, however, That in the event the
                  Contractor becomes involved in, or is threatened with,
                  litigation with a subcontractor or vendor as a result of such
                  direction by the contracting agency, the Contractor may
                  request the United States to enter into such litigation to
                  protect the interests of the United States.

      (2)   In the performance of any part of the work contemplated by this
            contract, the Contractor shall not employ any person undergoing
            sentence of imprisonment at hard labor.

Q. Transfer of Interest in Contract by Contractor

            No voluntary transfer of this contract or of the rights of the
      Contractor hereunder shall be made without the written approval of the
      Secretary of the Interior; Provided, That if the Contractor operates a
      project financed in whole or in part by the Rural Electrification
      Administration, the Contractor may transfer or assign its interest in the
      contract to the Rural Electrification Administration or any other
      department or agency of the Federal Government without such written
      approval; Provided further, That any successor to or assignee of the
      rights of the Contractor, whether by voluntary transfer, judicial sale,
      foreclosure sale, or otherwise, shall be subject to all the provisions and
      conditions of this contract to the same extent as though such successor or
      assignee were the original Contractor hereunder; and, Provided further,
      That the execution of a mortgage or trust deed, or judicial or foreclosure
      sales made thereunder, shall not be deemed voluntary transfers within the
      meaning of this article.

                                        3
<PAGE>

                        GENERAL POWER CONTRACT PROVISION

R.    License to the Contractor.

            The United States hereby grants the Contractor a license to
      construct, install, operate, maintain, replace, or repair, either or all,
      upon property of the United States under the administrative control and
      jurisdiction of the Bureau of Reclamation such facilities as in the
      opinion of the contracting officer are necessary or desirable for the
      purposes of this contract. Said license shall remain in effect during the
      term of this contract and shall expire coincidently therewith. Any
      facilities so installed by the Contractor pursuant hereto shall be and
      remain the property of the Contractor, notwithstanding that the same may
      have been affixed to the promises, and the Contractor shall have a
      reasonable times after the expiration of said license in which to remove
      its facilities so installed.

S.    License to the United States.

            The Contractor, upon request from time to time by the contracting
      officer, will grant to the United States a license or licenses to
      construct, install, operate, maintain, replace, or repair, either or all,
      upon the property of the Contractor such facilities as in the opinion of
      the Contractor are necessary or desirable for the purposes of this
      contract. The license or licenses so granted shall be in form and of legal
      sufficiency acceptable to the contracting officer, shall be and remain in
      effect during the term of this contract, and shall expire coincidently
      therewith. Any facilities so installed by the United States pursuant to
      said license or licenses shall be and remain the property of the United
      States, notwithstanding that the same may have been affixed to the
      promises, and the United States shall have a reasonable times after the
      expiration of said license or licenses in which to remove the facilities
      so installed.

T.    Waivers.

            Any waiver at any time by either party hereto of its rights with
      respect to a default or any other matter arising in connection with this
      contract shall not be deemed to be a waiver with respect to any subsequent
      default or matter.

U.    Notices.

            Any notice, deemed or request required or authorized by this
      contract shall be deemed properly given if mailed, postage prepaid, to the
      contracting officer at the address shown on the signature page hereof, on
      behalf of the United States, except where otherwise herein specifically
      provided, and to the officer signing for the Contractor at the address
      shown on the signature page hereof, on behalf of the Contractor. The
      designation of the person to be notified or the address of such person may
      be changed at any time by similar notice.

V.    Contingent Upon Appropriations.

            Where the operations of this contract extend beyond the current
      fiscal year, the contract is made contingent upon Congress making the
      necessary appropriation for expenditures hereunder after such current year
      shall have expired. In such appropriation as may be all liability due to
      the failure of Congress to make such appropriation.

W.    Officials Not to Benefit.

            No Member of or Delegate to Congress or Resident Commissioner shall
      be admitted to any share or part of this contract or to any benefit that
      may arise herefrom, but this restriction shall not be construed to extend
      to this contract if made with a corporation or company for its general
      benefit.

X.    Covenant Against Contingent Fees.

            The Contractor warrants that no person or selling agency has been
      employed or retained to solicit or secure this contract upon an agreement
      or understanding for a commission, percentage, brokerage, or contingent
      fee, excepting bona fide employee or bona fide established commercial or
      selling agencies maintained by the Contractor for the purpose of securing
      business. For branch or violation of this warranty the United States shall
      have the right to annual this contract without liability or in its
      discretion to deduct from the contract price or consideration the full
      amount of such commission, percentage, brokerage, or contingent fee.

Y.    Assignment of Industrial Contract by the United States.

            When the Contractor hereunder is denominated an industrial customer,
      the United States may transfer and assign this contract at any time
      without the consent of the Contractor to any utility engaged in the
      business of distributing electric power and energy purchased at wholesale
      from the United States if such assignee agrees to take over and assume all
      the rights, duties, and obligations of the United States under this
      contract. Whenever a transfer or assignment of this contract is made by
      the United States to a utility pursuant hereto, such transfer or
      assignment shall be and constitute a novation and thereafter the United
      States shall be relieved of all liability under said contract and under
      said assignment and the Contractor shall look solely to the assignee for
      performance of this contract.

Z.    Contract Subject to Colorado River Compact.

            Where the energy sold hereunder is generated from waters of the
      Colorado River system, this contract is made upon the express condition
      and with the express covenant that all rights hereunder shall be subject
      to and controlled by the Colorado River Compact approved by section 13(a)
      of the Boulder Canyon Project Act of December 21, 1928, (45 Stat. 1057)
      and the parties hereto shall observe and be subject to and controlled by
      said Colorado River Compact in the construction, management, and operation
      of the dams, reservoirs, and powerplants from which electrical energy is
      to be furnished by the United States to the Contractor hereunder, and in
      the storage, diversion, delivery, and use of water for the generation of
      electrical energy to be delivered by the United States to the Contractor
      hereunder.

                                       4
<PAGE>

                       GENERAL POWER CONTRACT PROVISIONS

         THE FOLLOWING PROVISIONS ARE APPLICABLE ONLY WHEN THE ELECTRIC SERVICE
    TO BE FURNISHED ARTICLE PROVIDES THAT SERVICE WILL BE FURNISHED OVER THE
    FACILITIES OF A THIRD PARTY:

AA. Existence of Transmission Service Contract.

         In search as the electric service hereunder is to be supplied over
    facilities not owned by the United States, the obligation of the United
    States to furnish electric service hereunder shall at all times be subject
    to and contingent upon the existence of a transmission service contract
    granting the United States the right to use such facilities not owned by it
    as are necessary to the rendering of electric service hereunder; Provided,
    That, if the United States acquires or constructs facilities which would
    enable it to furnish direct service to the contractor, the United States, at
    its option, may furnish the electric service hereunder over its own
    facilities.

BB. Conditions of Transmission Service.

         Anything to the contrary in this contract notwithstanding, when the
    electric service under this contract is furnished by the United States over
    the facilities of other by virtue of a transmission service arrangement,
    the electric power and energy will be furnished at the voltage available and
    under the conditions which exist from time to time on the transmission
    system over which the service is supplied. The United States will
    endeavor to inform the Contractor from time to time of any changes
    contemplated on the system over which the service is supplied but the costs
    of any changes made necessary in the Contractor's system because of changes
    or conditions on the system over which the service is supplied shall not be
    a charge against or a liability of the United States; Provided, That if the
    Contractor, because of changes or conditions on the system over which
    service hereunder is supplied, is subjected to the necessity of making
    changes on its system at its own expense in order to continue receiving
    service hereunder, then the Contractor may terminate this contract on not
    less than sixty (60) days' written notice given to the United States at any
    time prior to the making of said changes on its system, but not thereafter;
    Provided further. That if the electric service requirements of the
    Contractor, to the extent that the United States is obligated or determines
    that it can become obligated to furnish such requirements, are not being met
    or the United States advises the Contractor cannot be met because of
    an insufficiency of capacity available to the United States under its
    transmission service arrangement in the facilities of others over which
    service hereunder is supplied, than the contractor may terminate this
    contract on not less than sixty (60) days' written notice given to the
    United States at any time prior to the time that the United States advises
    the Contractor that the needed capacity is available, but not thereafter.

         THE FOLLOWING PROVISIONS ARE APPLICABLE ONLY WHEN SERVICE IS RENDERED
    TO CONTRACTORS UNDER A "SCHEDULE OF RATES FOR WHOLESALE POWER SERVICE TO
    CUSTOMERS HAVING THEIR OWN GENERATING FACILITIES."

CC. Purchase of System Energy Requirements.

         The Contractor agrees that it will, to the extent of the availability
    of secondary energy contracted for hereunder, purchase its system energy
    requirements in lieu of operating its own generating equipment except that
    this provision shall not be construed to prohibit the Contractor's use of
    by-product power and energy.

DD. Withdrawal of SecondaryEnergy.

         The United States shall have the right, upon not less than 24 hours'
    advance notice from the contracting officer to the Contractor, to withdraw
    secondary energy by reducing, in whole or in part, the contract rate of
    delivery for secondary energy provided for herein for such period or period
    of time as the contracting officer deem necessary or advisable. The
    United States also shall have the right, upon not less than 90 days, advance
    written notice from the contracting officer to the Contractor, to terminate
    the obligation of the United States hereunder to deliver secondary energy.
    The maximum rate of delivery shall be appropriately adjusted to conform to
    changes under this section in the contract rate of delivery for secondary
    energy as of the effective dates thereof.

EE. Contractor's Capacity.

         The Contractor's capacity as referred to herein is defined to be the
    sustained load carrying ability of the Contractor's electric generating
    plants, whether owned or leased, at system load factor, less station use, as
    limited by transmission and substation facilities. The Contractor's
    capacity, insofar as practicable, will be initially determined by a test
    jointly conducted by the parties hereto immediately prior to initial
    service hereunder. Therefore, the Contractor's capacity shall be
    redetermined from time to time upon the request of the contracting officer
    by additional jointly conducted tests to the extent practicable, but such
    tests shall not be required more frequently than once in each 12 months
    unless a permanent changed condition is known to exist. When tests are
    impracticable, the capacities shall be determined by the contracting officer
    from the best information available.

FF. Adjustments for Curtailments to service.

         Adjustments for curtailments to service for periods of one (1) hour or
    longer in duration each because of conditions on the power system of the
    United States, which system for the purpose of such adjustments hereunder
    shall include transmission facilities utilized but not owned by the United
    States, shall be made in the following manner in lieu of the procedure set
    out in Article K hereof:

         (1)   Energy Charge and Monthly Minimum Bill Adjustment:

               The total number of hours of curtailed service in any billing
         period shall be determined by adding (1) the sum of the hours of
         interrupted service to (2) the product of: the number of hours of
         reduced service multiplied by the percentage of said reduction below
         the lesser of (a) the maximum rate of delivery then in effect, or (b)
         the obligation of the United States to deliver firm power and energy
         and/or secondary energy as established under the operating agreement
         entered into pursuant to the Auxiliary Power Service article hereof, or
         (c) the rate

                                       5
<PAGE>

                        GENERAL POWER CONTRACT PROVISIONS

            of delivery required by the Contractor at the time of such
            reduction. The kilowatt-hour blocks of the energy charge and the
            monthly minimum bill shall each be proportionately adjusted in the
            ratio that the total number of hours of such curtailed service as
            herein determined bears to the total number of hours in the billing
            period involved.

            (2)   Demand or Capacity Charge and Minimum Annual Capacity Charge
                  Adjustment:

                  The total number of hours of curtailed service in any billing
            period shall be determined by adding (1) the sum of the number of
            hours of interrupted service to (2) the product of: the number of
            hours of reduced service multiplied by the percentage of said
            reduction below the lesser of (a) the contract rate of delivery for
            firm power, or (b) the obligation of the United States to deliver
            firm power and energy as established under the operating agreement
            entered into pursuant to the Auxiliary Power Service article hereof,
            or (c) the rate of delivery required by the Contractor at the time
            of such reduction. The demand or capacity charge and the minimum
            annual capacity charge shall each be proportionately adjusted in the
            ratio that the total number of hours of such curtailed service as
            herein determined bears to the total number of hours in the billing
            period involved.

      The Contractor shall make written claim, within thirty (30) days after
      receiving the monthly bill for adjustment on account of any curtailment to
      service as specified in subsections (1) and (2) of this article for
      periods of one (1) hour or longer in duration each, alledged to have
      occurred and which is not reflected in such bill. Failure to make such
      written claim, within said thirty (30) day period, shall constitute a
      waiver thereof. All curtailments to service, which are due to conditions
      on the power system of the United States, shall be subject to the
      provisions of this article and the Contractor shall be limited in its
      remedy therefor to the relief granted by this article; Provided. That
      withdrawal of power and energy under contract provisions shall not be
      deemed curtailments to service.

            THE FOLLOWING PROVISION IS APPLICABLE ONLY WHEN ELECTRIC SERVICE
      INVOLVES MULTIPLE POINTS OF DELIVERY FROM BOTH DIRECT AND WHEELED POINTS:

GG.   Multiple Points of Delivery Involving Direct and Wheeled Deliveries

            The United States has provided line and substation capacity under
      the terms of this contract for the purpose of delivering electric service
      directly to the Contractor at specific points of delivery. It also has
      agreed to absorb wheeling allowances and/or discounts up to a specified
      maximum amount for deliveries of power over other system(s). In the event
      the Contractor shifts any of its loads served hereunder from direct
      delivery to wheeled delivery, the United States will not absorb the
      wheeling costs on such shifted load until the unused capacity, as
      determined solely by the contracting officer, available at the direct
      delivery point(s) affected is fully utilized.

                                        6
<PAGE>

                               SALT RIVER PROJECT

                                   RESOLUTION

WHEREAS, the Board of Directors of the Salt River Project Agricultural
Improvement and Power District (herein called "Salt River Project") has
determined that it is in Salt River Project's best interest to enter into
various contracts relating to the construction, operation and maintenance of the
proposed Navajo Project consisting of three 750 MW (nameplate rating) coal-fired
steam electric generating units (herein called "Navajo Generating Station"),
located on the Navajo Indian Reservation near Page, Arizona, and the related 500
KV transmission system (herein called "Navajo transmission system"), with
ownership interests in the Navajo Generating Station to be as follows:

<TABLE>
<S>                                                   <C>
Arizona Public Service Co. (Arizona)                  14.0%

City of Los Angeles, Department of
Water and Power (Los Angeles)                         21.2%

Nevada Power Company (Nevada)                         11.3%

Salt River Project Agricultural
Improvement and Power District
(Salt River Project)                                  46.0%

Tucson Gas and Electric Company
(Tucson)                                               7.5%
</TABLE>

all of said entities referred to herein as the "Co-Owners," and

WHEREAS, Salt River Project shall own 21.7% of the Navajo Generating Station
for its own use and benefit and shall own and hold the remaining 24.3% of its
ownership interest in the Navajo Generating Station for the use and benefit of
the United States, Department of Interior, Bureau of Reclamation for the United
States' use to provide power and energy for Central Arizona Project pumping (the
"United States" and the above listed companies being herein collectively called
"Participants"), and

WHEREAS, the following described Agreements have been reviewed on this day with
this Board and this Board has determined that it is in the best interest of Salt
River Project to enter into said Agreements to effectuate the construction,
operation and maintenance of the Navajo Project;

NOW, THEREFORE, BE IT HEREBY RESOLVED, That the Board of Directors of Salt River
Project has and does hereby approve the Navajo Project Participation Agreement
among the Participants, and has and does hereby empower and direct that the
President or Vice President, and the

<PAGE>

                               SALT RIVER PROJECT

Secretary or Assistant Secretary, make, execute and deliver said
Participation Agreement for, and on behalf of, the Salt River Project with such
minor changes or omissions therein as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve the Indenture of Lease for Navajo Units 1, 2 and 3,
and has and does hereby empower and direct that the President or Vice President,
and the Secretary or Assistant Secretary, make, execute, acknowledge and deliver
said Indenture of Lease for Navajo Units 1, 2 and 3 for and on behalf of the
Salt River Project with such minor changes or omissions therein as management
may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Federal Rights of Way, granted in
conformity with the Act of February 15, 1901, between the Secretary of Interior
and the Co-Owners as Grantees, and does hereby authorize, empower and direct
that the President or Vice President, and the Secretary or Assistant Secretary,
make, execute, acknowledge and deliver said Federal Rights of Way for, and on
behalf of Salt River Project with such minor changes or omissions therein as
management may make in the premises, and this Board of Directors also
authorizes, empowers and directs its officers and management to make and file an
Application for Grant of Rights of Way under the Act of February 15, 1901, 31
Stat. 790, 43 U.S.C., Section 959, underlying any or all Project land rights,
and to take and perform all necessary acts in making and filing such
Application, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Federal Rights of Way and Easements,
granted in conformity of February 5, 1948, by and between the Secretary of
Interior and Salt River Project and the other Co-Owners as Grantees and does
hereby authorize, empower and direct that the President or Vice President, and
the Secretary or Assistant Secretary, make, execute, acknowledge and deliver
said Federal Rights of Way and Easements for, and on behalf of, the Salt River
Project with such minor changes and omissions therein as management may make in
the premises, and does hereby authorize, empower and direct its officers and
management to make and file an Application for the Grant of Rights of Way and
Easements under the Act of February 5, 1948, 62 Stat. 17, 25 U.S.C. Section 323,
underlying any or all Project land rights, and to take and perform all necessary
acts in making and filing such Application, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve the Memorandum of Agreement

<PAGE>

                               SALT RIVER PROJECT

providing for execution of Navajo Station Coal Supply Agreement among it, the
other Co-Owners and Peabody Coal Company together with the Letter Agreement
relating thereto which sets forth additional understandings and agreements
concerning the Navajo Station Coal Supply Agreement, and has and does hereby
authorize, empower and direct that the President or Vice President, and the
Secretary or Assistant Secretary, make, execute, acknowledge and deliver said
Memorandum of Agreement and said Letter of Understanding for and on behalf of
the Salt River Project with such minor changes and omissions therein as
management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Power Coordination Contract between the
Co-Owners and the United States and has and does hereby authorize, empower and
direct that the President or Vice President, and the Secretary or Assistant
Secretary, make, execute and deliver said Power Coordination Contract for and on
behalf of the Salt River Project with such minor changes and omissions therein
as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve the Principles of Inter connected Operation for
the Navajo Project between the Co-Owners, the United States and the Southern
California Edison Company (whether or not said Southern California Edison
Company is party thereto), and does hereby authorize, empower and direct that
the President or Vice President, and the Secretary or Assistant Secretary make,
execute and deliver said Principles of Interconnected Operation for and on
behalf of the Salt River Project with such minor changes and omissions therein
as management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Contract for Interim Use of United
States Entitlement in the Navajo Project (herein called "Layoff Contract")
between it and the United States and does hereby authorize, empower and direct
that the President or Vice President, and the Secretary or Assistant Secretary,
make, execute and deliver said Layoff Contract for and on behalf of the Salt
River Project with such minor changes and omissions therein as management may
make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Memorandum Transmission Agreement
between it, the other Participants, and the Southern California Edison Company,
and has and does hereby authorize, empower and direct that the President or Vice
President, and the Secretary or Assistant Secretary, make, execute and deliver
said

<PAGE>

                               SALT RIVER PROJECT

Memorandum Transmission Agreement for and on behalf of the Salt River Project
with such minor changes and omissions therein as management may make in the
premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Agreement for Delivery of the United
States Power and Energy for the McCullough Substation to the Mead Substation
between it, the United States and the other Eldorado System Co-Owners (whether
or not such entities become parties thereto), and has and does hereby authorize,
empower and direct that the President or Vice President, and the Secretary or
Assistant Secretary, make, execute and deliver said Agreement for and on behalf
of the Salt River Project with such minor changes and omissions therein as
management may make in the premises, and

BE IT HEREBY FURTHER RESOLVED that the Board of Directors of Salt River Project
has and does hereby approve that certain Spinning Reserve pooling Agreement
between it, and the other Participants, excepting the City of Los Angeles,
Department of Water and Power (whether or not all such other Participants become
parties thereto), and has and does hereby authorize, empower and direct that the
President or Vice President, and the Secretary or Assistant Secretary, make,
execute and deliver said Spinning Reserve Fueling Agreement for and on behalf of
the Salt River Project with such minor changes and omissions therein as
management may make in the premises.

                                   CERTIFICATE

I,F.E, Smith, the duly appointed, qualified and acting Secretary of the Salt
River Project Agricultural Improvement and Power District, HEREBY CERTIFY that
the foregoing is a true and complete copy of a resolution adopted by the Board
of Directors of said District at a special meeting thereof duly held on the 25th
day of August 1969, at which meeting a quorum was present and voted.

WITNESS my hand and seal of Salt River Project Agricultural Improvement and
Power District this 19th day of November 1969.

                                                    /s/ F. E. Smith
                                                    --------------------------
                                                    F. E. Smith, Secretary

<PAGE>

                                   CERTIFICATE

      I, Samuel P. Cowley, certify that I am the Secretary of the Nevada power
Company, a corporation named herein; that Harry Allen who signed the above
contract on behalf of said corporation was then its President that said
contract was duly signed for and in behalf of said corporation by authority of
its governing body and is within the scope of its corporate powers.

                                                /s/ Samuel P. Cowley
                                                ---------------------------
                                                Samuel P. Cowley, Secretary

<PAGE>

                          TUCSON GAS & ELECTRIC COMPANY

                          Certified Copy of Resolutions
                        Adopted by the Board of Directors

            RESOLVED, that the proper officers of the Company be, and they
hereby are authorized to enter into a Participation Agreement between the United
States of America, Arizona Public Service Company, Department of Water and Power
of the City of Los Angeles, Nevada Power Company, Salt River Project
Agricultural Improvement and Power District and Tucson Gas & Electric Company
for the ownership of the Navajo Project wherein Tucson Gas & Electric Company
shall own an undivided 7-1/2% Interest in the Navajo Generating Station and
varying percentage interests in the transmission system. The Agreement shall be
substantially in the form of the draft filed with the Secretary of the Company
marked "Filed September 23, 1969 with the Secretary of Tucson Gas & Electric
Company", and be it

            FURTHER RESOLVED, that the proper officers of the Company be, and
they hereby are further authorized to execute and enter into on behalf of the
Company the necessary Project Agreements contemplated by said Participation
Agreement, and such other documents reasonably required to implement said
Participation Agreement and Project Agreements.

                           * * * * * * * * * * * * * *

            I, P. L. ABBOTT, Secretary of TUCSON GAS & ELECTRIC COMPANY
(herein after called the "Company"), DO HEREBY CERTIFY that the above and
foregoing is a true and complete copy of resolutions duly adopted by the Board
of Directors at the Regular Monthly Meeting held on the 23rd day of September,
1969, at which meeting a quorum was present and acted thereon; and

            I DO FURTHER CERTIFY that said resolution is in full force and
effect on the date hereof.

            IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 29th day of September, 1969.

                                                          /s/ P.L. Abbott
                                                          ----------------------
                                                          Secretary

<PAGE>

                                   CERTIFICATE

      I, GERALD J. GRIFFIN, certify that I am an Assistant Secretary of ARIZONA
PUBLIC SERVICE COMPANY, the corporation named herein; that M. C. TITUS, who
signed the above contract on behalf of said Corporation was then its Executive
Vice President; that said contract was duly signed for and in behalf of said
Corporation by authority of its governing body and is within the scope of its
corporate powers.

                                                       /s/ Gerald J. Griffin
                                                       -------------------------
                                                       Assistant Secretary

(SEAL)

<PAGE>

                                                              RESOLUTION NO. 416

            BE IT RESOLVED by the Board of Water and Power Commissioners of The
City of Los Angeles that the President and the Secretary of this Board be and
they are hereby authorized to execute, on behalf of this Board, certain
agreements relating to the construction, ownership, operation and maintenance of
facilities for the generation of electrical power and energy and related
facilities, including fuel supply, copies of which agreements are on file with
the Secretary of this Board and which are identified as follows, that is:

<TABLE>
<CAPTION>
         Agreement Title                                      DWP Number
         ---------------                                      ----------
<S>                                                           <C>
Navajo Project Participation Agreement                          10334

Memorandum of Agreement Providing for
 Execution of Navajo Station Coal
 Supply Agreement                                               10335

Letter Agreement                                                10336

Application for Federal Rights-of-Way
 and Easements                                                  10337

Application and Grant of Rights-of-
 Way and Easements (25 U.S.C. Section 323)                      10338

United States, Department of the Interior,
 Power Coordination Contract                                    10339

Interim Arrangement for Interconnected
 Operations                                                     10340

Contract with Department of Water and
 Power of The City of Los Angeles for
 Interim Sale of United States
 Entitlement of Navajo Project                                  10341

Memorandum Transmission Agreement                               10342

Victorville-Lugo Interconnection
 Agreement                                                      10343
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
         Agreement Title (Continued)                          DWP Number
         ---------------                                      ----------
<S>                                                           <C>
Indenture of Lease                                              10344
Letter Agreement                                                10350
</TABLE>

            I HEREBY CERTIFY that the foregoing is a full, true and correct copy
of a resolution adopted by the Board of Water and Power Commissioners of The
City of Los Angeles at its meeting held NOV 20 1969

                                                        /s/ Mary J. Born
                                                        ---------------------
                                                        Secretary
<PAGE>

                              ORDINANCE NO. 139,629

AN ORDINANCE APPROVING AGREEMENTS RELATING TO PARTICIPATION BY THE DEPARTMENT OF
      WATER AND POWER IN THE NAVAJO PROJECT

                      THE PEOPLE OF THE CITY OF LOS ANGELES
                              DO ORDAIN AS FOLLOWS:

      Section 1. That the Board of Water and Power Commissioners of The City of
Los Angeles be and it is hereby authorized in its discretion, to execute and
enter into the following agreements, substantially in the form of those which
are on file with the City Clerk and identified below, relating to the
transmission and use of electrical power and energy associated with the Navajo
Project:

<TABLE>
<CAPTION>
                              AGREEMENT TITLE                                                DWP NUMBER
<S>                                                                                          <C>
Interim Arrangement for Interconnected Operations                                               10310
Contract with Department of Water and Power of The City of Los
  Angeles for Interim Sale of United States Entitlement of Navajo Project                       10341
Memorandum Transmission Agreement                                                               10342
Victorville-Lugo Interconnection Agreement                                                      10343
[ILLEGIBLE] Agreement                                                                           10350
</TABLE>

      Sec. 2. The City Clerk shall certify to the passage of this ordinance and
cause the same to be published in some daily newspaper printed and published in
the City of Los Angeles.

      I hereby certify that the foregoing ordinance was introduced at the
meeting of the Council of the City of Los Angeles of November 10, 1969 and was
passed at its meeting of November 17, 1969.

                                                      REX E. LAYTON, City Clerk,
                                                        By M. B. Wilson, Deputy.

      Approved November 18, 1969.
File No. 147173 Sup #1                                    SAM YORTY, Mayor.
                               (E54726) Nov 19 1t

                                  CERTIFICATION

STATE OF CALIFORNIA,    )
                        )       ss.
COUNTY OF LOS ANGELES,  )

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 139,629 of the City of Los Angeles, on file in my office, and that
I have carefully compared the same with the original.

                        IN WITNESS WHEREOF, I have hereunto set my hand and
                        affixed the Seal of the City of Los Angeles, this 19th
                        day of November, 1969

                                /s/ Rex E. Layton
                                -------------------------------------
                                City Clerk of the City of Los Angeles

                        By /s/ Authorized Signatory
                           ------------------------------------
                             Deputy

Form Clerk 22-5M-11-68 (R)
<PAGE>

                              ORDINANCE NO. 139,630

AN ORDINANCE APPROVING AGREEMENTS RELATING TO PARTICIPATION BY THE DEPARTMENT OF
    WATER AND POWER IN THE NAVAJO PROJECT

                      THE PEOPLE OF THE CITY OF LOS ANGELES
                              DO ORDAIN AS FOLLOWS:

      Section 1. That the Board of Water and Power Commissioners of The City of
Los Angeles be and it is hereby authorised in its directors, to execute
and enter into the following agreements, substantially in the form of those
which are on file with the City Clerk and identified below, relating to
the construction, ownership, operation and maintenance of facilities for
generation of electrical power and energy and related facilities, including
fuel supply:

<TABLE>
<CAPTION>
        AGREEMENT TITLE                                            DWP NUMBER
<S>                                                                <C>
Navajo Project Participation Agreement                               10384
Memorandum of Agreement Providing for Execution of Navajo
 Station Coal Supply Agreement
Letter Agreement
Application for Federal Rights-of-Way and Easements                  10337
Grant of Federal Rights-of-Way and Easements                         10338
United States Department of the Interior, Power
 Coordination Contract                                               10339
Indenture of Lease                                                   10344
</TABLE>

      Sec. 2. The City Clerk shall certify to the passage of this ordinance and
cause the same to be published in some daily newspaper printed and published in
the City of Los Angeles.

      I hereby certify that the foregoing [ILLEGIBLE] was introduced at the
meeting of the Council of the City of Los Angeles of November 10, 1969
and was passed at its meeting of November 17, 1969.

                                                 REX E. LAYTON, City Clerk,
                                                 By M.B. Wilson, Deputy.
      Approved November 18, 1969.
File No. [ILLEGIBLE]                                            SAM YORTY Mayor.
                               (E54727) NOV 19 IT

                                  CERTIFICATION

STATE OF CALIFORNIA,    } ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 139,630 of the City of Los Angeles, on file in my office, and that
I have carefully compared the same with the original.

                     IN WITNESS WHEREOF, I have hereunto set my hand and affixed
                     the Seal of the City of Los Angeles, this 19th day
                     of November, 1969

                                                  REX E. LAYTON
                                        City Clerk of the City of Los Angeles

                     By /s/ Authorized Signatory
                        ------------------------
                            Deputy

Form Clerk 22-5M-11-68 (R)
<PAGE>

                      RESOLUTION OF THE BOARD OF DIRECTORS

                     OF SOUTHERN CALIFORNIA EDISON COMPANY

                            ADOPTED NOVEMBER 20, 1969

                    RE:    RATIFICATION OF EXECUTION OF
                           CONTRACTS WITH THE UNITED
                           STATES DEPARTMENT OF INTERIOR,
                           BUREAU OF RECLAMATION, AND OTHER
                           PARTICIPANTS IN THE NAVAJO
                           PROJECT, CONCERNING THE NAVAJO
                           PROJECT AND RELATED MATTERS

            WHEREAS, this corporation has executed a contract with the United
States of America, providing for the interim purchase of a portion of the United
States' entitlement to capacity and energy in the Navajo Project, which portion
shall amount to approximately 336 mw of capacity and associated energy from
Units 1, 2 and 3 of the Navajo Generating Station, and will provide for the
right to use part of the entitlement of the United States in the Navajo Project
transmission system for the purpose of delivering such portion of capacity and
associated energy from the Navajo Generating Station to this corporation's
points of delivery at Moenkopi Switchyard in Arizona, and the Eldorado
Substation in Nevada; and

            WHEREAS, a copy of said contract, entitled Contract With Southern
California Edison Company For Interim Sale Of United States' Entitlement Of
Navajo Project and bearing the designation Contract No. 14-06-300-2135, has been
presented to this meeting; and

            WHEREAS, this corporation has executed a contract with the United
States of America, Arizona Public Service Company, Department of water and power
of the City Los Angeles,

<PAGE>

Nevada Power Company, Salt River Project Agricultural Improvement and Power
District, and Tucson Gas and Electric Company, providing certain principles
related to the interconnection of the Navajo Project transmission system with
the Edison-Arizona 500-kv transmission system at Moenkopi Switchyard, and for
the parallel operation of the Moenkopi-Eldorado 500 kv line and the proposed
Navajo-McCullough 500-kv line, and certain related matters, all of which
principles are to be incorporated in a more definitive and complete agreement to
be executed at a later time; and

            WHEREAS, a copy of said contract, entitled Memorandum Transmission
Agreement between Participants in the Navajo Project and Southern California
Edison Company, dated September 30, 1969, and bearing the designation Contract
No. 14-06-30-2140, has been presented to this meeting, and

            WHEREAS, this corporation has executed a letter agreement with
Arizona Public Service Company, Department of Water and Power of the City of Los
Angeles, Nevada Power Company, Salt River Project Agricultural Improvement and
Power District, Tucson Gas and Electric Company, and The United States of
America, adopting certain principles for the interconnected operations of the
respective electric systems of the parties, including establishment of
principles with respect to forecast capacity resources margin, spinning reserve
capacity, emergency service, interruptible load as a substitute for spinning
reserve capacity and system operations, all of which principles are to be
incorporated in a more definitive and complete

                                      -2-
<PAGE>

agreement to be executed at a later time; and

            WHEREAS, a copy of said principles, entitled Principles of
Interconnected Operation For The Navajo Interconnection Agreement, September 30,
1969, together with a covering execution letter agreement entitled Interim
Arrangement For Interconnected Operations, dated September 30, 1969, and bearing
the designation Contract No. 14-06-300-2139, has been presented to this meeting
and;

            WHEREAS, execution of said three documents has not been completed by
all the other parties thereto.

            NOW, THEREFORE, BE IT RESOLVED that the execution and delivery of
the aforesaid three documents by and on behalf of this corporation is hereby
ratified, confirmed and approved;

            BE IT FURTHER RESOLVED, that the Chairman of the Board, the
President, a Senior Vice President, a Vice President of this corporation, and
any of them, is authorized hereby to execute and deliver in the name of and on
behalf of this corporation, the definitive Navajo Interconnection Agreement and
the definitive Transmission Agreement hereinabove described.

            BE IT FURTHER RESOLVED, that the Secretary of this corporation is
hereby directed to mark appropriately for Identification and to file with the
records of this corporation the aforesaid copies of said documents presented to
this meeting.

                                       -3-
<PAGE>

            I, C. D. LESTER, Secretary of SOUTHERN CALIFORNIA EDISON COMPANY, do
hereby certify that the foregoing is a full, true, and correct copy of a
resolution of the Board of Directors of said corporation, adopted at a meeting
of said Board of Directors duly held on November 20, 1969.

            WITNESS my hand and the seal of said corporation this 20th day of
November, 1969.

                                  /s/ C.D.LESTER
                        ----------------------------------
                                    SECRETARY
                        SOUTHERN CALIFORNIA EDISON COMPANY

<PAGE>

                        COORDINATING COMMITTEE AGREEMENT

                                      No. 1

            SUBJECT: All Risk Insurance for Navajo-Mohave SO2 Removal
                                   Pilot Plant

The Coordinating Committee hereby directs the Navajo Generating Station Project
Manager not to maintain all risk insurance insofar as the Navajo-Mohave S02
Removal Research Pilot Plant is concerned.

Section 21.1 of the Navajo Project Participation Agreement, as amended, provides
that during the construction stage each Project Manager shall procure or cause
to be procured and maintain in force certain insurance coverages, including all
risk insurance.

The Generating Station Project Manager contemplates entering into an agreement
with Southern California Edison Company (Edison) , as "project manager" and
"operating agent" for the Mohave Project, pursuant to which Edison as "program
manager" will provide for the design, engineering, construction and testing of
an S02 removal pilot plant on behalf of the Navajo Project Participants and the
Mohave Project Participants.

The pilot plant, to be constructed at the Mohave Plant Site, will be included
within the existing Mohave Project insurance program. The applicable Mohave
Project policy providing the all risk insurance coverage referred to in Section
21.1 of the Participation Agreement, as amended, for damage to the pilot plant,
carries a deductible of

<PAGE>

$200,000.00. Engineering and insurance personnel of the "program manager" have
concluded the total potential loss upon the occurrence of any single event, in
their opinion, as reflected in Attachment A hereto, does not exceed the Edison
physical damage insurance deductible of $200,000.00. Therefore, any dollars paid
toward premiums would be wasted as there is no foreseeable loss of that
magnitude.

Notwithstanding this decision all contractors of the "program manager"
performing work on the pilot plant will be required to maintain all risk
coverages for any portion of work to be performed by them on the pilot plant.

Approved as of the 31 day of September, 1971.

                                         SALT RIVER PROJECT AGRICULTURAL
                                           IMPROVEMENT AND POWER DISTRICT

                                         By    /s/ Authorized Signatory
                                           -------------------------------------
                                           Coordinating Committee Representative

                                         ARIZONA PUBLIC SERVICE COMPANY

                                         By    /s/ Authorized Signatory
                                           -------------------------------------
                                           Coordinating Committee Representative

                                         TUCSON GAS & ELECTRIC COMPANY

                                         By    /s/ Authorized Signatory
                                           -------------------------------------
                                           Coordinating Committee Representative
<PAGE>
                                     DEPARTMENT OF WATER AND POWER
                                     OF THE CITY OF LOS ANGELES

                                     By        /s/ Authorized Signatory
                                        ----------------------------------------
                                        Coordinating Committee Representative

                                     NEVADA POWER COMPANY

                                     By        /s/ Authorized Signatory
                                        ----------------------------------------
                                        Coordinating Committee Representative

                                     UNITED STATES OF AMERICA

                                     By        /s/ Authorized Signatory
                                        ----------------------------------------
                                        Coordinating Committee Representative

<PAGE>

                           AMENDMENT AND SUPPLEMENT #1
                                       TO
                                 NAVAJO PROJECT
                             PARTICIPATION AGREEMENT

1.    PARTIES: The parties to this amendatory and supplemental agreement are:
      THE UNITED STATES OF AMERICA, hereinafter referred to as the "United
      States", acting through the Secretary of the Interior; ARIZONA PUBLIC
      SERVICE COMPANY, an Arizona corporation, hereinafter referred to as
      "Arizona"; DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES, a
      department organized and existing under the Charter of the City of Los
      Angeles, a municipal corporation of the State of California, hereinafter
      referred to as "Los Angeles"; NEVADA POWER COMPANY, a Nevada corporation,
      hereinafter referred to as "Nevada"; SALT RIVER PROJECT AGRICULTURAL
      IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district
      organized and existing under the laws of the State of Arizona, hereinafter
      referred to as "Salt River Project"; and TUCSON GAS & ELECTRIC COMPANY, an
      Arizona corporation, hereinafter referred to as "Tucson".

2.    RECITALS: This amendatory and supplemental agreement is made with
      reference to the following facts, among others:

            2.1 By the Colorado River Basin Project Act (82 Stat. 885) the
      Congress of the United States authorized the construction, operation and
      maintenance of the Central Arizona Project. Pursuant to Section 303 of
      said Act, the Secretary is authorized to enter into agreements with

                                      - 1 -
<PAGE>

      non-Federal interests proposing to construct thermal generating
      powerplants whereby the United States shall acquire the right to such
      portions of their capacity, including delivery of power and energy over
      appurtenant transmission facilities to mutually agreed upon delivery
      points, as he determines is required in connection with the operation of
      the Central Arizona Project.

            2.2 The Secretary has determined that the acquisition of a right to
      a portion of the capacity of the Navajo Project is the most feasible plan
      for supplying the power requirements of the Central Arizona Project and
      augmenting the Lower Colorado River Basin Development Fund.

            2.3 As of September 30, 1969, the parties entered into a
      Participation Agreement, to establish certain terms, covenants and
      conditions relating to participation in the construction, operation and
      maintenance of the Navajo Project in accordance with the provisions of the
      Participation Agreement and the other Project Agreements.

            2.4 The parties desire, by this Amendment and Supplement #1 to
      Navajo Project Participation Agreement, to amend and supplement certain
      terms, covenants and conditions in the Participation Agreement relating to
      the Navajo Project.

3.    AGREEMENT: In consideration of the mutual covenants herein, the parties
      agree as follows:

4.    DEFINITIONS: The following terms, when used herein, shall

                                      - 2 -
<PAGE>

      have the meanings specified:

            4.1 AMENDMENT AND SUPPLEMENT #1 TO NAVAJO PROJECT PARTICIPATION
      AGREEMENT. This agreement.

5.    Section 4 of the Participation Agreement is amended and supplemented by
      the addition of the following definitions:

            "4.25 RAIL LOADING SITE: The site for the conveyor termination and
      rail loading facilities, related facilities and equipment and coal storage
      as described on Exhibit 3 to the Navajo Plant Site lease."

            "4.26 RAILROAD: The railroad described in Exhibit A-1 hereto."

6.    Section 18 of the Participation Agreement is amended and supplemented by
      the addition of the following section:

            "18.7 The 11.3% undivided ownership interest of Nevada in the
      Railroad may be transferred to Arizona by Nevada and subsequently
      transferred to Nevada by Arizona, pursuant to any agreement between
      Arizona and Nevada presently or hereafter existing, without the prior
      written consent of any other Participant; provided, however, that in each
      instance the transferee shall (i) notify each of the other Participants in
      writing of such transfer, (ii) furnish to each Participant evidence of
      such transfer, and (iii) assume and agree to fully perform and discharge
      all of the obligations created by the Project Agreements which arise out
      of said 11.3% undivided ownership interest in the Railroad. Appropriate
      amendments to the Project Agreements will be adopted

                                      - 3 -
<PAGE>

      recognizing any such transfer."

7.    The Participation Agreement is supplemented by the addition of the
      following section:

            "49. COMPLIANCE WITH UPPER COLORADO RIVER BASIN COMPACT:

                        49.1 The Department of the Interior is the federal
                  department responsible for administering the terms of the
                  Water Service Contract dated January 17, 1969, Contract No.
                  14-06-400-5033. The Department of the Interior also has been
                  directed by P.L. 90-537 to comply with the terms of the
                  Colorado River Compact dated November 24, 1922 and the Upper
                  Colorado River Basin Compact dated October 11, 1948. In
                  compliance with that responsibility and those directives, the
                  Secretary of the Interior hereby agrees to take any and all
                  actions within the power and authority of the Department of
                  the Interior which are necessary and required to prevent total
                  depletions chargeable to the State of Arizona under the Upper
                  Colorado River Basin Compact resulting from consumptive use of
                  water from the Upper Colorado River System in the State of
                  Arizona as measured at Lee Ferry in the manner provided for in
                  Article VI of the Upper Colorado River Basin Compact from
                  exceeding the 50,000 acre feet apportioned to the State of
                  Arizona by the Upper

                                      - 4 -
<PAGE>

                  Colorado River Basin Compact.

                        The Secretary of the Interior further agrees to make the
                  reports required by Section 601 (b) (1) of P.L. 90-537 as
                  they pertain to Arizona's Upper Basin uses annually rather
                  than every five years. Within fifteen days following the
                  completion of said reports, the Secretary of the Interior
                  shall furnish copies of such reports to the Co-Tenants, the
                  Navajo Tribe, each of the Upper Basin States, and the Upper
                  Colorado River Commission.

                        It is the intention of the parties to this contract that
                  each of the Upper Basin States shall be a third party
                  beneficiary of the terms and conditions of this Section 49."

8.    Exhibit A-1 to the Participation Agreement is amended and supplemented by
      the addition of the following:

            "VIII. Railroad right-of-way and railroad approximately 80 miles in
            length extending from the Rail Loading Site into the Navajo Plant
            Site, engines, coal cars, related facilities and equipment.

9.    Except as modified by this Amendment and Supplement #1 to Navajo Project
      Participation Agreement, the Navajo Project Participation Agreement dated
      as of September 30, 1969, shall remain in full force and effect in
      accordance with its terms.

                                      - 5 -
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Supplement #1 to Navajo Project Participation Agreement to be executed as of the
16th day of January, 1970.

                                     UNITED STATES OF AMERICA

                                     By /s/ Authorized Signatory
                                        ----------------------------------------

                                     ARIZONA PUBLIC SERVICE COMPANY

                                     By /s/ Keith L. Turkey
                                        ----------------------------------------
                                           Executive Vice President

[SEAL]

ATTEST:

/s/ Authorized Signatory
-------------------------
Assistant Secretary

                                     DEPARTMENT OF WATER AND POWER
                                     OF THE CITY OF LOS ANGELES

                                                by

                                     BOARD OF WATER AND POWER COMMISSIONERS

[SEAL]

By /s/ Mary J. Born                   By /s/ John W. Luhring
   ----------------------                ---------------------------------------
         SECRETARY                                     PRESIDENT

                                     NEVADA POWER COMPANY

                                     By /s/ Harry Allen
                                        ----------------------------------------

ATTEST:

/s/ Authorized Signatory
-------------------------

                                     SALT RIVER PROJECT AGRICULTURAL
                                     IMPROVEMENT AND POWER DISTRICT

                                     By /s/ N. Clifford Dobson
                                        ----------------------------------------
                                                     President

[SEAL]

ATTEST AND COUNTERSIGN:

/s/ F.E. Smith
-----------------------
       Secretary

[STAMP]                                                                  [STAMP]

                                     - 6 -
<PAGE>

                                     TUCSON GAS & ELECTRIC COMPANY

                                     By /s/  H. R. Catlin
                                        ----------------------------------------
                                                SENIOR VICE PRESIDENT

[SEAL]

ATTEST:

/s/ Authorized Signatory
----------------------
ASSISTANT SECRETARY

                        )
                        )ss
                        )

      On this the 9th day of July, 1970, before me, the undersigned officer,
personally appeared James R. Smith, of the United States of America, known to
me to be the person described in the foregoing instrument, and acknowledged
that he executed the same in the capacity therein stated and for the purposes
therein contained.

      In witness whereof I hereunto set my hand and official seal.

[SEAL]

My Commission expires                        /s/ Harold L. Carlson
November 14, 1973                       ----------------------------------------
                                                 Notary Public
State of Arizona      )
                      )ss
County of Maricopa    )

      On this the 11th day of June, 1970, before me, the undersigned officer,
personally appeared KEITH L TURLEY, who acknowledged himself to be the Executive
Vice President of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, and
that he, as such Executive Vice President, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as

                                      - 7 -
<PAGE>

Executive Vice President.

      In witness whereof I hereunto set my hand and official seal

[SEAL]
                                              /s/ Authorized Signatory
                                             -----------------------------------
                                                Notary Public

My commission expires:
March 30, 1973

State of California       )
                          ) ss
County of Los Angeles     )

      On this, the 20 day of August, 1970, before me, the undersigned officer,
personally appeared JOHN W. LUHRING and Mary J. Born, the PRESIDENT and
SECRETARY, respectively, Board of Water & Power Commissioners of the DEPARTMENT
OF WATER AND POWER OF THE CITY OF LOS ANGELES, a department organized and
existing under the Charter of the City of Los Angeles, a municipal corporation
of the State of California, known to me to be the persons described in the
foregoing instrument, and acknowledged that they executed the same in the
capacity therein stated and for the purposes therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                        /s/ Linda L. Newman
                                        ----------------------------------------
                                                    Notary Public

My commission expires:                     [STAMP]

---------------------------

                                      - 8 -
<PAGE>

State of Nevada       )
                      ) ss
County of Clark       )

      On this the 12th day of June, 1970, before me, the undersigned officer,
personally appeared Harry Allen, known to me to be the President of NEVADA POWER
COMPANY, a Nevada corporation, and that he, as such President, being authorized
so to do, executed the foregoing instrument for the purposes therein contained,
by signing the name of the corporation by himself as President.

      In witness whereof, I hereunto set my hand and official seal.

MYRTICE L. CARROLL

                                        /s/ MYRTICE L. CARROLL
                                        ----------------------------------------
                                                   Notary Public

My commission expires:                                   [STAMP]
______________________

State of Arizona        )
                        )ss
County of Maricopa      )

      On this the 11th day of June, 1970, before me, the undersigned officer,
personally appeared N. CLIFFORD DOBSON and F.E. SMITH, The PRESIDENT and
SECRETARY, respectively, of SALT RIVER PROJECT. AGRICULTURAL IMPROVEMENT AND
POWER DISTRICT, an Arizona agricultural improvement district, known to me to be
the persons described in the foregoing instrument, and acknowledged that

                                      - 9 -
<PAGE>

they executed the same in the capacity therein stated and for the purposes
therein contained.

      In witness whereof I hereunto set my hand and official seal.

                                       /s/ [ILLEGIBLE]
                                      ------------------------------------------
                                                     Notary Public

My commission expires:

My Commission Expires May 3, 1971

State of Arizona     )
                     )ss
County of Pima       )

      On this the 11th day of June, 1970, before me the undersigned officer,
personally appeared H. R. Catlin who acknowledged himself to be the SENIOR VICE
PRESIDENT of TUCSON GAS & ELECTRIC COMPANY, an Arizona corporation, and that he,
as such SENIOR VICE PRESIDENT, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as SENIOR VICE PRESIDENT.

                                      /s/ Diane Howland
                                      ------------------------------------------
                                                     Notary Public
[SEAL]

My commission expires:

My Commission Expires Dec. 8, 1972

                                      - 10 -
<PAGE>

                          CERTIFIED COPY OF RESOLUTION

      I, GERALD J. GRIFFIN, Assistant Secretary of ARIZONA PUBLIC SERVICE
COMPANY, an Arizona corporation, HEREBY CERTIFY that, at a meeting of the Board
of Directors of said Company, duly convened and held on August 21, 1969, at
which a quorum was present and acting throughout, the following resolution was
adopted and is now in full force and effect:

            RESOLVED, that the Board of Directors approves and ratifies the
      action of the officers in negotiating and carrying forward the proposal
      for the participation by the Company, along with others, in the so-called
      Navajo Project, involving the construction near Page, Arizona, of three
      generating units (presently estimated at 750 MW nameplate), with ownership
      being held as tenants in common in the following respective undivided
      interests:

<TABLE>
<S>                                                    <C>
Arizona Public Service Company                         14.0%
Tucson Gas & Electric Company                           7.5%
City of Los Angeles                                    21.2%
Nevada Power Company                                   11.3%
Salt River Project Agricultural Improvement
 and Power District
(For ITSELF)                                           21.7%
(As Agent for U.S.B.R.)                                24.3%
</TABLE>

      the said Project to include certain transmission facilities to be located
      in Arizona, with APS to be the Project Manager and Operating Agent for
      said facilities, which are to be owned by APS and others as joint tenants
      in various percentages related to projected use, these facilities
      including a 500 kv line from the switchyard of the Navajo Plant near Page
      to the Moenkopi Switching Station and from there to the Westwing
      switchyard year Phoenix, and with another 500 kv line extending directly
      from the Navajo switchyard to Westwing, together with various related
      interconnections and switching facilities; and

            FURTHER RESOLVED, that in connection with the Navajo Project, the
      appropriate officers of the Company be, and they are hereby authorized to
      negotiate and to execute and effectuate the necessary instruments and
      agreements, including among others, the following:

<PAGE>

                  (1)   Participation Agreement

                  (2)   Coordination Agreement

                  (3)   Interconnection Agreement

                  (4)   Plant Site Lease

                  (5)   Fuel Supply and Transportation Agreement

                  (6)   Co-Tenancy Agreement

                  (7)   Moenkopi Agreement

                  (8)   Amendment to Navajo Wholesale Power Agreement

                  (9)   Plant Construction Agreement

                  (10)  Plant Operating Agreement

                  (11)  Transmission Construction Agreement

                  (12)  Transmission Operating Agreement

                  (13)  Applications for Various Rights-of-Way and Easements

                  (14)  Layoff Agreement

      and

            FURTHER RESOLVED, that the appropriate officers of the Company are
      authorized to take such actions and to execute such further agreements,
      instruments, applications, certificates, contracts or other documents as
      may be necessary or appropriate in connection with the foregoing to
      complete and effectuate the Company's proposed participation in the Navajo
      Project.

      IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
corporation this 26th day of August, 1970.

                                       /s/ Gerald J. Griffin
                                      ------------------------------------------
                                                 Assistant Secretary

                                      -2-
<PAGE>
                                                             RESOLUTION NO.  132

      BE IT RESOLVED that upon approval by ordinance by the City Council of The
City of Los Angeles of the Amendment and Supplement #1 to Navajo Project
Participation Agreement (DWP No. 10334), the President or Vice President of the
Board, or the General Manager and Chief Engineer or the Assistant General
Manager and Chief Engineer of the Department of Water and Power, and the
Secretary or Assistant Secretary of the Board be and they are hereby authorized
and directed to execute said Amendment and Supplement #1 to Navajo Project
Participation Agreement (DWP No. 10334) on behalf of this Department upon
publication of the Ordinance.

      I HEREBY CERTIFY that the foregoing is a full, true and correct copy of a
resolution adopted by the Board of Water and Power Commissioners of The City of
Los Angeles at its meeting held Aug 20 1970

                                                               /s/ Mary J. Born
                                                               ----------------
                                                                    Secretary

<PAGE>

                             ORDINANCE NO. 119,849

                                  CERTIFICATION

STATE OF CALIFORNIA,
                        }  ss.
COUNTY OF LOS ANGELES,

      I, REX E. LAYTON, City Clerk of the City of Los Angeles and ex-officio
Clerk of the City Council of the City of Los Angeles, do hereby certify and
attest the foregoing to be a full, true and correct copy of the original
Ordinance No. 140,840, passed by the City Council of Los Angeles at its meeting
of August 18, 1970, on file in my office, and that I have carefully compared the
same with the original.

                          In Witness Whereof, I have hereunto set my hand and
                          affixed the Seal of the City of Los Angles, this 20th
                          day of August, 1970

                              /s/ REX E. LAYTON

                              City clerk or the City of Los Angeles

                              /s/ Lee C. Gable
                           By -------------------------------------
                                             Deputy

<PAGE>

                                  CERTIFICATION

      I, the undersigned, being the duly elected Secretary of Nevada Power
Company, certify and declare that the following are true and correct copies of
resolutions adopted by the Board of Directors at its meeting held September 19,
1969 and by the Executive Committee at its meeting held October 23, 1969,
respectively:

      RESOLVED: That the Executive Committee shall have the authority to
      authorize the signing of any and all contracts necessary to proceed with
      the Company's participation in the Navajo Project.

      RESOLVED: That the officers of the Company are hereby authorized to sign
      all contracts necessary to proceed with the Company's proposed
      participation in the Navajo Project, to take the necessary action to
      qualify to do business in the State of Arizona and to take any other steps
      necessary or incidental thereto.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of the corporation this 26th day of August, 1970.

                                     /s/ Samuel P. Cowley
                                     --------------------------------
                                     Samuel P. Cowley, Secretary

[SEAL]

<PAGE>

                                   RESOLUTION

      WHEREAS, the Salt River Project Agricultural Improvement and Power
      District (Salt River Project) entered into a Participation Agreement dated
      September 30, 1969, to construct the Navajo Generating Project, and

      WHEREAS, it is in the interest of the Salt River Project to amend and
      supplement said Participation Agreement to include necessary conditions
      for the efficient and successful construction and operation of said Navajo
      Project through an Amendment and Supplement No. 1;

      NOW, THEREFORE, BE IT RESOLVED, That this Board hereby approves, ratifies
      and confirms entering into such Amendment and Supplement No. 1 and hereby
      directs, empowers, ratifies and confirms the execution and delivery of
      such document on behalf of the Salt River Project Agricultural Improvement
      and Power District by its President or Vice President and Secretary or
      Assistant Secretary.

                                   CERTIFICATE

      I, F. E. Smith, the duly appointed, qualified and acting Secretary of the
      Salt River Project Agricultural Improvement and Power District, HEREBY
      CERTIFY that the foregoing is a true and complete copy of a resolution
      adopted by the Board of Directors Of said District at a meeting thereof
      duly held on the 6th day of July 1970, at which meeting a quorum was
      present and voted.

      WITNESS my hand and seal of Salt River Project Agricultural Improvement
      and Power District this 26th day of August 1970.

                                               /s/ F.E. Smith
                                               ----------------------
                                               F. E. Smith, Secretary

<PAGE>

                          TUCSON GAS & ELECTRIC COMPANY

                         Certified Copy of Resolutions
                       Adopted by the Board of Directors

      RESOLVED, that the proper officers of the Company be, and they hereby are
authorized to enter into a Participation Agreement between the United States of
America, Arizona Public Service Company, Department of Water and Power of the
City of Los Angeles, Nevada Power Company, Salt River Project Agricultural
Improvement and Power District and Tucson Gas & Electric Company for the
ownership of the Navajo Project wherein Tucson Gas & Electric Company shall own
an undivided 7-1/2% interest in the Navajo Generating Station and varying
percentage interests in the transmission system. The Agreement shall be
substantially in the form of the draft filed with the Secretary of the Company
marked "Filed September 23, 1969 with the Secretary of Tucson Gas & Electric
Company, and be it

      FURTHER RESOLVED, that the proper officers of the Company be, and they
hereby are further authorized to execute and enter into on behalf of the Company
the necessary Project Agreements contemplated by said Participation Agreement,
and such other documents reasonably required to implement said Participation
Agreement and Project Agreements.

                           * * * * * * * * * * * * *

      I, P. L. ABBOTT, Secretary of TUCSON GAS & ELECTRIC COMPANY (hereinafter
called the "Company"), DO HEREBY CERTIFY that the above and foregoing is a true
and complete copy of resolutions duly adopted by the Board of Directors at the
Regular Monthly Meeting held on the 23rd day of September, 1969, at which
meeting a quorum was present and acted thereon; and

      I DO FURTHER CERTIFY that said resolution is in full force and effect on
the date hereof.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 20th day of August, 1970.

                                                     /s/ Authorized Signatory
                                                     ------------------------
                                                             Secretary

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