Base Rate Increase, Plus Other Recovery to Add $12.7 Million to Revenues

PNM Resources’ (NYSE:PNM) electric transmission and distribution utility, Texas-New Mexico Power, today announced it has reached an agreement with all parties that would allow a $6.8 million increase to base rates, plus an additional $5.9 million of revenue associated with hurricane restoration and financing costs.

The agreement, which lays out the key elements of the settlement, was presented today to the administrative law judges of the Texas State Office of Administrative Hearings. A formal stipulation, which will be based on these key settlement provisions, is to be filed by mid-July with the Public Utilities Commission of Texas. The PUCT is expected to consider approving the agreement in August.

The agreement is a “black-box settlement,” meaning parties agreed to a specific revenue number, but disagreed on certain elements of that number. If approved without modifications, the agreed-upon rate increase would go into effect Sept. 1 and would allow TNMP to:

• Increase base rates by $6.8 million, or approximately 4.4 percent,
• Recover approximately $4.8 million annually over the next five years for costs related to Hurricane Ike recovery efforts,
• Collect an additional $1.1 million annually associated with the Competitive Transition Charge, based on TNMP’s cost of debt,
• File for an adjustment to transmission rates to recover capital investments made since March 31, 2008. The stipulation also would allow TNMP to update its transmission rates annually.

The agreement allows a return on equity of 10.25 percent on Hurricane Ike recovery costs and future transmission rate base. If ultimately approved by the PUCT, the financial impact of the agreement is anticipated to add approximately $4.4 million of pre-tax earnings in 2009.

“This is a fair settlement for TNMP and our customers,” said Jeff Sterba, PNM Resources chairman and CEO. “If approved, the settlement would allow us to recover costs incurred as a result of Hurricane Ike and a turbulent capital market, which increased interest expense.”

The increases would impact retail electricity providers, or REPs, that serve 231,000 customers in 76 cities within TNMP’s service territory in Texas. REPs likely will pass the increases on to their retail customers.

¹ Reflects adjustments agreed to in rebuttal testimony plus recovery of energy efficiency costs through a rate rider vs. base rates.

Background:

PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2008 consolidated operating revenues from continuing and discontinued operations of $2.5 billion. Through its utility and energy subsidiaries, PNM Resources has more than 2,700 megawatts of generation resources and serves electricity to more than 859,000 homes and businesses in New Mexico and Texas. The company also has a 50-percent ownership of Optim Energy, formerly known as EnergyCo, which owns approximately 920 megawatts of generation. For more information, visit the company’s Web site at www.PNMResources.com.

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