pnm-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

Name of Registrant, State of Incorporation, Address Of Principal Executive Offices, Telephone Number, Commission File No., IRS Employer Identification No.

PNM Resources, Inc.

(A New Mexico Corporation)

414 Silver Ave. SW

Albuquerque, New Mexico 87102-3289

Telephone Number - (505) 241-2700

Commission File No. - 001-32462

IRS Employer Identification No. - 85-0468296

Public Service Company of New Mexico

(A New Mexico Corporation)

414 Silver Ave. SW

Albuquerque, New Mexico 87102-3289

Telephone Number - (505) 241-2700

Commission File No. - 001-06986

IRS Employer Identification No. - 85-0019030

Texas-New Mexico Power Company

(A Texas Corporation)

577 N. Garden Ridge Blvd.

Lewisville, Texas 75067

Telephone Number - (972) 420-4189

Commission File No. - 002-97230

IRS Employer Identification No. - 75-0204070

Securities registered pursuant to Section 12(b) of the Act:


Registrant	Title of each class	Trading Symbol(s)	Name of exchange on which registered
PNM Resources, Inc.	Common Stock, no par value	PNM	New York Stock Exchange

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

PNM Resources, Inc. (“PNMR”)

Yes

☑

☐

Public Service Company of New Mexico (“PNM”)

Yes

☑

☐

Texas-New Mexico Power Company (“TNMP”)

Yes

☐

☑

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

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Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

PNMR

Yes

☑

☐

PNM

Yes

☑

☐

TNMP

Yes

☑

☐

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated

filer

Non-accelerated

filer

Smaller reporting company

Emerging growth company

PNMR

☑

☐

Large accelerated
filer

Accelerated

filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

PNM

☐

☑

☐

Large accelerated

filer

Accelerated

filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

TNMP

☐

☑

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 24, 2020, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM, no par value per share, outstanding as of July 24, 2020 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP, $10 par value per share, outstanding as of July 24, 2020 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).

This combined Form 10-Q is separately filed by PNMR, PNM, and TNMP. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants. When this Form 10-Q is incorporated by reference into any filing with the SEC made by PNMR, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX


			Page No.
GLOSSARY			4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PNM RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)			8
Condensed Consolidated Statements of Comprehensive Income (Loss)			9
Condensed Consolidated Statements of Cash Flows			10
Condensed Consolidated Balance Sheets			12
Condensed Consolidated Statements of Changes in Equity			14
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)			15
Condensed Consolidated Statements of Comprehensive Income (Loss)			16
Condensed Consolidated Statements of Cash Flows			17
Condensed Consolidated Balance Sheets			19
Condensed Consolidated Statements of Changes in Equity			21
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings			22

Condensed Consolidated Statements of Cash Flows			23
Condensed Consolidated Balance Sheets			24
Condensed Consolidated Statements of Changes in Common Stockholder’s Equity			26
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			27
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			82
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			117
ITEM 4. CONTROLS AND PROCEDURES			119
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			120
ITEM 1A. RISK FACTORS			120

ITEM 6. EXHIBITS			121
SIGNATURE			123

Table of Contents

GLOSSARY


Definitions:

2017 IRP						PNM’s 2017 IRP
ABCWUA						Albuquerque Bernalillo County Water Utility Authority

AEP OnSite Partners						AEP OnSite Partners, LLC, a subsidiary of American Electric Power, Inc.
Afton						Afton Generating Station
AFUDC						Allowance for Funds Used During Construction

ALJ						Administrative Law Judge
AMI						Advanced Metering Infrastructure
AMS						Advanced Meter System

AOCI						Accumulated Other Comprehensive Income

APS						Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners

ARO						Asset Retirement Obligation
ASU						Accounting Standards Update
August 2016 RD						Recommended Decision in PNM’s NM 2015 Rate Case issued by the Hearing Examiner on August 4, 2016
BART						Best Available Retrofit Technology
BDT						Balanced Draft Technology

Board						Board of Directors of PNMR
BSER						Best System of Emissions Reduction Technology



CAA						Clean Air Act
CARES Act						Coronavirus Aid, Relief, and Economic Security Act

CCAE						Coalition for Clean Affordable Energy
CCN						Certificate of Convenience and Necessity
CCR						Coal Combustion Residuals
CFRE						Citizens for Fair Rates and the Environment
CIAC						Contributions in Aid of Construction
CO₂						Carbon Dioxide
CSA						Coal Supply Agreement
CTC						Competition Transition Charge
DC Circuit						United States Court of Appeals for the District of Columbia Circuit

DOE						United States Department of Energy
DOI						United States Department of Interior
EGU						Electric Generating Unit


EPA						United States Environmental Protection Agency

ERCOT						Electric Reliability Council of Texas
ESA						Endangered Species Act
ESG						Environmental, Social and Governance principles
ETA						The New Mexico Energy Transition Act
EUEA						The New Mexico Efficient Use of Energy Act
Exchange Act						Securities Exchange Act of 1934
Farmington						The City of Farmington, New Mexico
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission

Four Corners						Four Corners Power Plant

FPPAC						Fuel and Purchased Power Adjustment Clause
FTY						Future Test Year
GAAP						Generally Accepted Accounting Principles in the United States of America
GHG						Greenhouse Gas Emissions
GWh						Gigawatt hours

IRC						Internal Revenue Code
IRP						Integrated Resource Plan
IRS						Internal Revenue Service

kV						Kilovolt
KW						Kilowatt

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KWh						Kilowatt Hour
La Luz						La Luz Generating Station
LIBOR						London Interbank Offered Rate
Lightning Dock Geothermal						Lightning Dock geothermal power facility, also known as the Dale Burgett Geothermal Plant
Lordsburg						Lordsburg Generating Station
Los Alamos						The Incorporated County of Los Alamos, New Mexico
Luna						Luna Energy Facility
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU						Million British Thermal Units
Moody’s						Moody’s Investor Services, Inc.

MW						Megawatts
MWh						Megawatt Hour
NAAQS						National Ambient Air Quality Standards
Navajo Acts						Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT						Nuclear Decommissioning Trusts for PVNGS

NEE						New Energy Economy
NEPA						National Environmental Policy Act

New Mexico Wind						New Mexico Wind Energy Center
NM 2015 Rate Case						Request for a General Increase in Electric Rates Filed by PNM on August 27, 2015
NM 2016 Rate Case						Request for a General Increase in Electric Rates Filed by PNM on December 7, 2016
NM AREA						New Mexico Affordable Reliable Energy Alliance, formerly New Mexico Industrial Energy Consumers Inc.
NM Capital						NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR, now known as New Mexico PPA Corporation
NM District Court						United States District Court for the District of New Mexico
NM Supreme Court						New Mexico Supreme Court

NMED						New Mexico Environment Department

NMMMD						The Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRC						New Mexico Public Regulation Commission
NMRD						NM Renewable Development, LLC, owned 50% each by PNMR Development and AEP OnSite Partners, LLC
NOx						Nitrogen Oxides
NOPR						Notice of Proposed Rulemaking
NPDES						National Pollutant Discharge Elimination System
NRC						United States Nuclear Regulatory Commission
NSPS						New Source Performance Standards
NSR						New Source Review
NTEC						Navajo Transitional Energy Company, LLC, an entity owned by the Navajo Nation
OATT						Open Access Transmission Tariff
OCI						Other Comprehensive Income
OPEB						Other Post-Employment Benefits
OSM						United States Office of Surface Mining Reclamation and Enforcement

PCRBs						Pollution Control Revenue Bonds
PNM						Public Service Company of New Mexico and Subsidiaries



PNM 2017 New Mexico Credit Facility						PNM’s $40.0 Million Unsecured Revolving Credit Facility

PNM 2017 Term Loan						PNM’s $200.0 Million Unsecured Term Loan

PNM 2019 $40.0 Million Term Loan						PNM's $40.0 Million Unsecured Term Loan
PNM 2019 $250.0 Million Term Loan						PNM’s $250.0 Million Unsecured Term Loan, which was repaid on April 15, 2020

PNM 2020 Fixed Rate PCRBs						PNM's $302.5 million PCRBs remarketed on July 22, 2020

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PNM 2020 Note Purchase Agreement						PNM's Agreement for the sale of PNM 2020 SUNs
PNM 2020 SUNs						PNM's $200.0 million Senior Unsecured Notes issued on April 30, 2020
PNM 2020 Term Loan						PNM’s $250.0 million Unsecured Term Loan issued on April 15, 2020, of which $100.0 million was repaid on April 30, 2020
PNM Floating Rate PCRBs						PNM's $100.3 million PCRBs remarketed on July 1, 2020
PNM Revolving Credit Facility						PNM’s $400.0 Million Unsecured Revolving Credit Facility
PNMR						PNM Resources, Inc. and Subsidiaries




PNMR 2018 SUNS						PNMR’s $300.0 Million Senior Unsecured Notes issued on March 9, 2018
PNMR 2018 Two-Year Term Loan						PNMR’s $50.0 Million Two-Year Unsecured Term Loan
PNMR 2019 Term Loan						PNMR's $150.0 Million Two-Year Unsecured Term Loan
PNMR 2020 Forward Equity Sale Agreements						PNMR's Block Equity Sale of 6.2 million Shares of PNMR Common Stock with Forward Equity Sales Agreements
PNMR Development						PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR
PNMR Development Revolving Credit Facility						PNMR Development’s $40.0 Million Unsecured Revolving Credit Facility
PNMR Development Term Loan						PNMR Development’s $90.0 Million Unsecured Term Loan
PNMR Revolving Credit Facility						PNMR’s $300.0 Million Unsecured Revolving Credit Facility

PPA						Power Purchase Agreement

PSD						Prevention of Significant Deterioration
PUCT						Public Utility Commission of Texas
PV						Photovoltaic
PVNGS						Palo Verde Nuclear Generating Station
RCRA						Resource Conservation and Recovery Act
RCT						Reasonable Cost Threshold
REA						New Mexico’s Renewable Energy Act, as amended by the ETA
REC						Renewable Energy Certificates
Red Mesa Wind						Red Mesa Wind Energy Center
REP						Retail Electricity Provider

Rio Bravo						Rio Bravo Generating Station
RMC						Risk Management Committee
ROE						Return on Equity
RPS						Renewable Energy Portfolio Standard

S&P						Standard and Poor’s Ratings Services



SEC						United States Securities and Exchange Commission
SIP						State Implementation Plan
SJCC						San Juan Coal Company
SJGS						San Juan Generating Station
SJGS Abandonment Application						PNM’s July 1, 2019 NMPRC consolidated application for approval to retire PNM’s share of SJGS in 2022, for related replacement generating resources, and for the issuance of securitized bonds under the ETA
SJGS CSA						San Juan Generating Station Coal Supply Agreement


SNCR						Selective Non-Catalytic Reduction
SO₂						Sulfur Dioxide


Tax Act						Federal tax reform legislation enacted on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act

TECA						Texas Electric Choice Act
Tenth Circuit						United States Court of Appeals for the Tenth Circuit
TNMP						Texas-New Mexico Power Company and Subsidiaries
TNMP 2018 Rate Case						TNMP’s General Rate Case Application Filed May 30, 2018

TNMP 2019 Bonds						TNMP’s First Mortgage Bonds issued under the TNMP 2019 Bond Purchase Agreement

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TNMP 2020 Bond Purchase Agreement						An agreement under which TNMP agreed to issue an aggregate of $185.0 Million of First Mortgage Bonds in 2020
TNMP 2020 Bonds						TNMP's First Mortgage Bonds issued under the TNMP 2020 Bond Purchase Agreement
TNMP Revolving Credit Facility						TNMP’s $75.0 Million Secured Revolving Credit Facility
TNP						TNP Enterprises, Inc. and Subsidiaries
Tri-State						Tri-State Generation and Transmission Association, Inc.
Tucson						Tucson Electric Power Company
UAMPS						Utah Associated Municipal Power Systems

U.S						The United States of America
US Supreme Court						United States Supreme Court
Valencia						Valencia Energy Facility

VIE						Variable Interest Entity
WACC						Weighted Average Cost of Capital

Western Spirit Line						A 165-mile 345-kV transmission line that PNM has agreed to purchase, subject to certain conditions being met prior to closing
Westmoreland						Westmoreland Coal Company

WRA						Western Resource Advocates
WSJ						Westmoreland San Juan, LLC, formerly an indirect wholly-owned subsidiary of Westmoreland, and former owner of SJCC
WSJ LLC						Westmoreland San Juan Mining, LLC, a subsidiary of Westmoreland Mining Holdings, LLC

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands, except per share amounts)
Electric Operating Revenues:
Contracts with customers	$	343,075	$	314,917	$	666,057	$	630,614
Alternative revenue programs	4,466		5,844		4,892		6,480
Other electric operating revenue	10,108		9,467		20,322		42,778
Total electric operating revenues	357,649		330,228		691,271		679,872
Operating Expenses:
Cost of energy	93,863		83,782		192,573		205,408
Administrative and general	50,453		42,833		96,485		95,170
Energy production costs	33,345		42,905		66,963		77,977
Regulatory disallowances and restructuring costs	—		149,254		—		150,599
Depreciation and amortization	70,022		66,065		138,995		131,421
Transmission and distribution costs	18,034		19,195		35,320		35,872
Taxes other than income taxes	20,782		19,809		42,047		40,317
Total operating expenses	286,499		423,843		572,383		736,764
Operating income (loss)	71,150		(93,615)		118,888		(56,892)
Other Income and Deductions:
Interest income	3,071		3,460		6,494		7,048
Gains (losses) on investment securities	21,620		4,599		(11,229)		18,613
Other income	4,390		3,350		6,706		6,795
Other (deductions)	(3,307)		(3,117)		(6,780)		(6,369)
Net other income and deductions	25,774		8,292		(4,809)		26,087
Interest Charges	31,088		29,791		61,522		61,425
Earnings (Loss) before Income Taxes	65,836		(115,114)		52,557		(92,230)
Income Taxes (Benefits)	4,275		(42,831)		2,395		(41,608)
Net Earnings (Loss)	61,561		(72,283)		50,162		(50,622)
(Earnings) Attributable to Valencia Non-controlling Interest	(3,940)		(3,499)		(7,669)		(6,328)
Preferred Stock Dividend Requirements of Subsidiary	(132)		(132)		(264)		(264)
Net Earnings (Loss) Attributable to PNMR	$	57,489	$	(75,914)	$	42,229	$	(57,214)
Net Earnings (Loss) Attributable to PNMR per Common Share:
Basic	$	0.72	$	(0.95)	$	0.53	$	(0.72)
Diluted	$	0.72	$	(0.95)	$	0.53	$	(0.72)
Dividends Declared per Common Share	$	0.308	$	0.290	$	0.615	$	0.580

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Net Earnings (Loss)	$	61,561	$	(72,283)	$	50,162	$	(50,622)
Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Debt Securities:
Net change in unrealized holding gains arising during the period, net of income tax (expense) of $(3,556), $(2,250), $(2,468), and $(4,048)	10,444		6,610		7,249		11,890
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $476, $1,251, $777, and $1,423	(1,398)		(3,674)		(2,282)		(4,178)
Pension Liability Adjustment:

Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(527), $(470), $(1,054), and $(940)	1,548		1,381		3,096		2,762
Fair Value Adjustment for Cash Flow Hedges:
Change in fair market value, net of income tax (expense) benefit of $(203), $494, $304, $805	597		(1,450)		(894)		(2,364)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $117, $(65), $127, and $(133)	(345)		190		(373)		392
Total Other Comprehensive Income	10,846		3,057		6,796		8,502
Comprehensive Income (Loss)	72,407		(69,226)		56,958		(42,120)
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,940)		(3,499)		(7,669)		(6,328)
Preferred Stock Dividend Requirements of Subsidiary	(132)		(132)		(264)		(264)
Comprehensive Income (Loss) Attributable to PNMR	$	68,335	$	(72,857)	$	49,025	$	(48,712)

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash Flows From Operating Activities:
Net earnings (loss)	$	50,162	$	(50,622)
Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:
Depreciation and amortization	155,799		148,090
Deferred income tax expense (benefit)	2,087		(41,930)

(Gains) losses on investment securities	11,229		(18,613)
Stock based compensation expense	5,230		4,526
Regulatory disallowances and restructuring costs	—		150,599
Allowance for equity funds used during construction	(3,475)		(4,158)
Other, net	2,998		1,247
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(25,121)		4,205
Materials, supplies, and fuel stock	8,253		(2,656)
Other current assets	(18,475)		(6,020)
Other assets	12,935		21,858
Accounts payable	(5,919)		(812)
Accrued interest and taxes	(15,568)		(6,180)
Other current liabilities	7,687		(6,381)

Other liabilities	(22,040)		(21,288)
Net cash flows from operating activities	165,782		171,865

Cash Flows From Investing Activities:
Additions to utility plant and non-utility plant	(343,807)		(293,076)
Proceeds from sales of investment securities	354,651		234,011
Purchases of investment securities	(359,840)		(239,609)




Investments in NMRD	(18,250)		(13,250)
Other, net	19		(187)
Net cash flows from investing activities	(367,227)		(312,111)

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net	$	494	$	—
Revolving credit facilities borrowings (repayments), net	66,955		106,500
Long-term borrowings	660,345		475,000
Repayment of long-term debt	(450,345)		(372,302)

Proceeds from stock option exercise	24		943
Awards of common stock	(11,984)		(9,892)

Dividends paid	(49,251)		(46,463)
Valencia’s transactions with its owner	(10,794)		(7,948)
Transmission interconnection and security deposit arrangements	3,364		—
Refunds paid under transmission interconnection arrangements	(3,816)		(1,661)
Debt issuance costs and other, net	(4,557)		(1,827)

Net cash flows from financing activities	200,435		142,350

Change in Cash, Restricted Cash, and Equivalents	(1,010)		2,104
Cash, Restricted Cash, and Equivalents at Beginning of Period	3,833		2,122
Cash, Restricted Cash, and Equivalents at End of Period	$	2,823	$	4,226





Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	57,600	$	61,539
Income taxes paid (refunded), net	$	(131)	$	(2,768)

Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	$	21,265	$	30,451

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,823	$	3,833
Accounts receivable, net of allowance for credit losses of $1,911 and $1,163	96,209		85,889
Unbilled revenues	70,480		57,416
Other receivables	10,349		12,165

Materials, supplies, and fuel stock	69,676		77,929
Regulatory assets	21,574		7,373

Income taxes receivable	4,494		4,933

Other current assets	51,279		44,472
Total current assets	326,884		294,010
Other Property and Investments:

Investment securities	389,452		388,832
Equity investment in NMRD	84,037		65,159
Other investments	336		356
Non-utility property, net	19,679		12,459
Total other property and investments	493,504		466,806
Utility Plant:
Plant in service, held for future use, and to be abandoned	8,030,505		7,918,601
Less accumulated depreciation and amortization	2,773,434		2,713,503
	5,257,071		5,205,098
Construction work in progress	309,513		161,106
Nuclear fuel, net of accumulated amortization of $41,140 and $42,354	101,994		99,805
Net utility plant	5,668,578		5,466,009
Deferred Charges and Other Assets:
Regulatory assets	582,586		556,930
Goodwill	278,297		278,297
Operating lease right-of-use assets, net of accumulated amortization	118,140		131,212

Other deferred charges	106,478		105,510
Total deferred charges and other assets	1,085,501		1,071,949
	$	7,574,467	$	7,298,774

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	252,549	$	185,100
Current installments of long-term debt	779,372		490,268
Accounts payable	75,933		103,118
Customer deposits	10,004		10,585
Accrued interest and taxes	60,807		76,815
Regulatory liabilities	3,659		505
Operating lease liabilities	26,744		29,068

Dividends declared	132		24,625

Other current liabilities	56,574		47,397
Total current liabilities	1,265,774		967,481
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	2,437,246		2,517,449
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	647,883		626,058
Regulatory liabilities	867,953		866,243
Asset retirement obligations	181,805		181,962
Accrued pension liability and postretirement benefit cost	87,248		95,037
Operating lease liabilities	91,320		105,512

Other deferred credits	227,282		185,753
Total deferred credits and other liabilities	2,103,491		2,060,565
Total liabilities	5,806,511		5,545,495
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock of Subsidiary
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)	11,529		11,529
Equity:
PNMR common stockholders’ equity:
Common stock (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)	1,143,822		1,150,552
Accumulated other comprehensive income (loss), net of income taxes	(92,581)		(99,377)
Retained earnings	645,259		627,523
Total PNMR common stockholders’ equity	1,696,500		1,678,698
Non-controlling interest in Valencia	59,927		63,052
Total equity	1,756,427		1,741,750
	$	7,574,467	$	7,298,774

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Attributable to PNMR												Non- controlling Interest in Valencia
	Common Stock		AOCI		Retained Earnings		Total PNMR Common Stockholders’ Equity				Total Equity
	(In thousands)
Balance at March 31, 2020	$	1,142,879	$	(103,427)	$	587,770	$	1,627,222	$	60,347	$	1,687,569
Net earnings before subsidiary preferred stock dividends	—		—		57,621		57,621		3,940		61,561
Total other comprehensive income	—		10,846		—		10,846		—		10,846
Subsidiary preferred stock dividends	—		—		(132)		(132)		—		(132)


Awards of common stock	(486)		—		—		(486)		—		(486)
Stock based compensation expense	1,429		—		—		1,429		—		1,429
Valencia’s transactions with its owner	—		—		—		—		(4,360)		(4,360)
Balance at June 30, 2020	$	1,143,822	$	(92,581)	$	645,259	$	1,696,500	$	59,927	$	1,756,427

Balance at December 31, 2019	$	1,150,552	$	(99,377)	$	627,523	$	1,678,698	$	63,052	$	1,741,750



Net earnings before subsidiary preferred stock dividends	—		—		42,493		42,493		7,669		50,162
Total other comprehensive income	—		6,796		—		6,796		—		6,796
Subsidiary preferred stock dividends	—		—		(264)		(264)		—		(264)
Dividends declared on common stock	—		—		(24,493)		(24,493)		—		(24,493)
Proceeds from stock option exercise	24		—		—		24		—		24
Awards of common stock	(11,984)		—		—		(11,984)		—		(11,984)

Stock based compensation expense	5,230		—		—		5,230		—		5,230
Valencia’s transactions with its owner	—		—		—		—		(10,794)		(10,794)



Balance at June 30, 2020	$	1,143,822	$	(92,581)	$	645,259	$	1,696,500	$	59,927	$	1,756,427


Balance at March 31, 2019	$	1,148,364	$	(103,239)	$	639,554	$	1,684,679	$	62,779	$	1,747,458
Net earnings (loss) before subsidiary preferred stock dividends	—		—		(75,782)		(75,782)		3,499		(72,283)
Total other comprehensive income	—		3,057		—		3,057		—		3,057

Dividends declared on common stock	—		—		(132)		(132)		—		(132)
Proceeds from stock option exercise	13		—		—		13		—		13
Awards of common stock	(956)		—		—		(956)		—		(956)
Stock based compensation expense	1,269		—		—		1,269		—		1,269
Valencia’s transactions with its owner	—		—		—		—		(3,686)		(3,686)
Balance at June 30, 2019	$	1,148,690	$	(100,182)	$	563,640	$	1,612,148	$	62,592	$	1,674,740

Balance at December 31, 2018	$	1,153,113	$	(108,684)	$	643,953	$	1,688,382	$	64,212	$	1,752,594
Net earnings (loss) before subsidiary preferred stock dividends	—		—		(56,950)		(56,950)		6,328		(50,622)
Total other comprehensive income	—		8,502		—		8,502		—		8,502
Subsidiary preferred stock dividends	—		—		(264)		(264)		—		(264)
Dividends declared on common stock	—		—		(23,099)		(23,099)		—		(23,099)
Proceeds from stock option exercise	943		—		—		943		—		943
Awards of common stock	(9,892)		—		—		(9,892)		—		(9,892)

Stock based compensation expense	4,526		—		—		4,526		—		4,526
Valencia’s transactions with its owner	—		—		—		—		(7,948)		(7,948)



Balance at June 30, 2019	$	1,148,690	$	(100,182)	$	563,640	$	1,612,148	$	62,592	$	1,674,740

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Electric Operating Revenues:
Contracts with customers	$	248,151	$	228,061	$	483,909	$	464,002
Alternative revenue programs	2,529		691		4,690		756
Other electric operating revenue	10,108		9,467		20,322		42,778
Total electric operating revenues	260,788		238,219		508,921		507,536
Operating Expenses:
Cost of energy	67,884		58,866		142,408		158,204
Administrative and general	45,051		40,237		86,719		87,639
Energy production costs	33,345		42,905		66,963		77,977
Regulatory disallowances and restructuring costs	—		149,254		—		150,599
Depreciation and amortization	41,763		39,811		83,212		79,036
Transmission and distribution costs	11,275		11,838		22,190		22,471
Taxes other than income taxes	11,886		11,285		24,241		23,295
Total operating expenses	211,204		354,196		425,733		599,221
Operating income (loss)	49,584		(115,977)		83,188		(91,685)
Other Income and Deductions:
Interest income	3,147		3,530		6,643		7,187
Gains (losses) on investment securities	21,620		4,599		(11,229)		18,613
Other income	1,758		1,920		3,267		4,552
Other (deductions)	(2,424)		(2,340)		(5,110)		(4,629)
Net other income and deductions	24,101		7,709		(6,429)		25,723
Interest Charges	19,178		18,526		36,807		36,886
Earnings (Loss) before Income Taxes	54,507		(126,794)		39,952		(102,848)
Income Taxes (Benefits)	4,895		(43,481)		2,536		(41,508)
Net Earnings (Loss)	49,612		(83,313)		37,416		(61,340)
(Earnings) Attributable to Valencia Non-controlling Interest	(3,940)		(3,499)		(7,669)		(6,328)
Net Earnings (Loss) Attributable to PNM	45,672		(86,812)		29,747		(67,668)
Preferred Stock Dividends Requirements	(132)		(132)		(264)		(264)
Net Earnings (Loss) Available for PNM Common Stock	$	45,540	$	(86,944)	$	29,483	$	(67,932)

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,

	2020		2019		2020		2019
	(In thousands)
Net Earnings (Loss)	$	49,612	$	(83,313)	$	37,416	$	(61,340)
Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Debt Securities:
Net change in unrealized holding gains arising during the period, net of income tax (expense) of $(3,556), $(2,250), $(2,468), and $(4,048)	10,444		6,610		7,249		11,890
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $476, $1,251, $777, and $1,423	(1,398)		(3,674)		(2,282)		(4,178)
Pension Liability Adjustment:

Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(527), $(470), $(1,054), and $(940)	1,548		1,381		3,096		2,762



Total Other Comprehensive Income	10,594		4,317		8,063		10,474
Comprehensive Income (Loss)	60,206		(78,996)		45,479		(50,866)
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,940)		(3,499)		(7,669)		(6,328)
Comprehensive Income (Loss) Attributable to PNM	$	56,266	$	(82,495)	$	37,810	$	(57,194)

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash Flows From Operating Activities:
Net earnings (loss)	$	37,416	$	(61,340)
Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:
Depreciation and amortization	98,841		94,467
Deferred income tax expense (benefit)	2,861		(41,292)

(Gains) losses on investment securities	11,229		(18,613)
Regulatory disallowances and restructuring costs	—		150,599
Allowance for equity funds used during construction	(2,399)		(3,456)
Other, net	3,605		1,173
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(19,898)		8,778
Materials, supplies, and fuel stock	8,773		(2,423)
Other current assets	(11,790)		(1,509)
Other assets	9,436		18,132
Accounts payable	(727)		(4,049)
Accrued interest and taxes	(9,504)		3,615
Other current liabilities	7,790		24,019

Other liabilities	(20,190)		(22,483)
Net cash flows from operating activities	115,443		145,618

Cash Flows From Investing Activities:
Utility plant additions	(183,276)		(157,874)
Proceeds from sales of investment securities	354,651		234,011
Purchases of investment securities	(359,840)		(239,609)


Other, net	19		1
Net cash flows from investing activities	(188,446)		(163,471)

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash Flows From Financing Activities:
Revolving credit facilities borrowings (repayments), net	$	29,055	$	(200)
Short-term borrowings (repayments) – affiliate, net	—		(19,800)
Long-term borrowings	550,345		250,000
Repayment of long-term debt	(450,345)		(200,000)

Dividends paid	(40,918)		(264)
Valencia’s transactions with its owner	(10,794)		(7,948)
Transmission interconnection and security deposit arrangements	1,962		—
Refunds paid under transmission interconnection arrangements	(3,816)		(1,661)
Debt issuance costs and other, net	(2,541)		(120)
Net cash flows from financing activities	72,948		20,007

Change in Cash, Restricted Cash, and Equivalents	(55)		2,154
Cash, Restricted Cash, and Equivalents at Beginning of Period	1,001		85
Cash, Restricted Cash, and Equivalents at End of Period	$	946	$	2,239





Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	34,371	$	34,308
Income taxes paid (refunded), net	$	—	$	(3,383)

Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	$	13,601	$	13,213

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	946	$	1,001
Accounts receivable, net of allowance for credit losses of $1,911 and $1,163	66,618		60,447
Unbilled revenues	58,592		46,602
Other receivables	9,459		11,039
Affiliate receivables	8,941		8,825
Materials, supplies, and fuel stock	63,452		72,225
Regulatory assets	17,722		7,373

Income taxes receivable	15,448		15,122
Other current assets	40,114		36,561
Total current assets	281,292		259,195
Other Property and Investments:

Investment securities	389,452		388,832
Other investments	158		178
Non-utility property, net	7,587		4,470
Total other property and investments	397,197		393,480
Utility Plant:
Plant in service, held for future use, and to be abandoned	5,807,772		5,753,267
Less accumulated depreciation and amortization	2,112,706		2,076,291
	3,695,066		3,676,976
Construction work in progress	175,076		108,787
Nuclear fuel, net of accumulated amortization of $41,140 and $42,354	101,994		99,805
Net utility plant	3,972,136		3,885,568
Deferred Charges and Other Assets:
Regulatory assets	471,696		435,467
Goodwill	51,632		51,632
Operating lease right-of-use assets, net of accumulated amortization	109,042		120,585

Other deferred charges	94,427		97,064
Total deferred charges and other assets	726,797		704,748
	$	5,377,422	$	5,242,991

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt	$	87,055	$	58,000

Current installments of long-term debt	189,921		350,268
Accounts payable	52,418		66,746
Affiliate payables	15,708		12,524
Customer deposits	10,004		10,585
Accrued interest and taxes	34,439		43,617
Regulatory liabilities	2,741		371
Operating lease liabilities	24,039		25,927

Dividends declared	132		132


Other current liabilities	31,051		25,066
Total current liabilities	447,508		593,236
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	1,656,684		1,397,752
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	540,434		521,990

Regulatory liabilities	676,454		683,398
Asset retirement obligations	180,888		181,081
Accrued pension liability and postretirement benefit cost	80,715		87,838
Operating lease liabilities	85,028		97,992

Other deferred credits	191,984		155,744
Total deferred credits and liabilities	1,755,503		1,728,043
Total liabilities	3,859,695		3,719,031
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)	11,529		11,529
Equity:
PNM common stockholder’s equity:
Common stock (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)	1,264,918		1,264,918
Accumulated other comprehensive income (loss), net of income taxes	(90,992)		(99,055)
Retained earnings	272,345		283,516
Total PNM common stockholder’s equity	1,446,271		1,449,379
Non-controlling interest in Valencia	59,927		63,052
Total equity	1,506,198		1,512,431
	$	5,377,422	$	5,242,991

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Attributable to PNM
									Total PNM Common Stockholder’s Equity		Non- controlling Interest in Valencia

	Common Stock		AOCI		Retained Earnings								Total Equity

	(In thousands)
Balance at March 31, 2020	$	1,264,918	$	(101,586)	$	226,805	$	1,390,137	$	60,347	$	1,450,484
Net earnings	—		—		45,672		45,672		3,940		49,612
Total other comprehensive income	—		10,594		—		10,594		—		10,594
Dividends declared on preferred stock	—		—		(132)		(132)		—		(132)
Valencia’s transactions with its owner	—		—		—		—		(4,360)		(4,360)
Balance at June 30, 2020	$	1,264,918	$	(90,992)	$	272,345	$	1,446,271	$	59,927	$	1,506,198

Balance at December 31, 2019	$	1,264,918	$	(99,055)	$	283,516	$	1,449,379	$	63,052	$	1,512,431


Net earnings	—		—		29,747		29,747		7,669		37,416
Total other comprehensive income	—		8,063		—		8,063		—		8,063
Dividends declared on preferred stock	—		—		(264)		(264)		—		(264)

Dividends declared on common stock	—		—		(40,654)		(40,654)		—		(40,654)
Valencia’s transactions with its owner	—		—		—		—		(10,794)		(10,794)





Balance at June 30, 2020	$	1,264,918	$	(90,992)	$	272,345	$	1,446,271	$	59,927	$	1,506,198


Balance at March 31, 2019	$	1,264,918	$	(104,265)	$	261,875	$	1,422,528	$	62,779	$	1,485,307
Net earnings (loss)	—		—		(86,812)		(86,812)		3,499		(83,313)
Total other comprehensive income	—		4,317		—		4,317		—		4,317
Dividends declared on preferred stock	—		—		(132)		(132)		—		(132)
Valencia’s transactions with its owner	—		—		—		—		(3,686)		(3,686)
Balance at June 30, 2019	$	1,264,918	$	(99,948)	$	174,931	$	1,339,901	$	62,592	$	1,402,493

Balance at December 31, 2018	$	1,264,918	$	(110,422)	$	242,863	$	1,397,359	$	64,212	$	1,461,571
Net earnings (loss)	—		—		(67,668)		(67,668)		6,328		(61,340)
Total other comprehensive income	—		10,474		—		10,474		—		10,474
Dividends declared on preferred stock	—		—		(264)		(264)		—		(264)


Valencia’s transactions with its owner	—		—		—		—		(7,948)		(7,948)





Balance at June 30, 2019	$	1,264,918	$	(99,948)	$	174,931	$	1,339,901	$	62,592	$	1,402,493

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Electric Operating Revenues:
Contracts with customers	$	94,924	$	86,856	$	182,148	$	166,612
Alternative revenue programs	1,937		5,153		202		5,724

Total electric operating revenues	96,861		92,009		182,350		172,336
Operating Expenses:
Cost of energy	25,979		24,916		50,165		47,204
Administrative and general	10,757		9,097		21,530		20,655

Depreciation and amortization	22,368		20,502		44,204		40,716
Transmission and distribution costs	6,759		7,357		13,130		13,401
Taxes other than income taxes	7,823		7,559		15,801		15,197
Total operating expenses	73,686		69,431		144,830		137,173
Operating income	23,175		22,578		37,520		35,163
Other Income and Deductions:

Other income	2,029		1,191		2,699		1,940
Other (deductions)	(66)		(460)		(175)		(623)
Net other income and deductions	1,963		731		2,524		1,317
Interest Charges	7,361		6,560		14,533		15,361
Earnings before Income Taxes	17,777		16,749		25,511		21,119
Income Taxes	1,603		1,482		2,245		1,754
Net Earnings	$	16,174	$	15,267	$	23,266	$	19,365

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash Flows From Operating Activities:
Net earnings	$	23,266	$	19,365
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	44,767		41,379
Deferred income tax expense (benefit)	(4,882)		(8,004)


Other, net	(1,054)		(680)
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(5,223)		(4,573)
Materials and supplies	(520)		(233)
Other current assets	(4,329)		(7,155)
Other assets	4,359		3,544
Accounts payable	(2,108)		2,442
Accrued interest and taxes	893		1,175
Other current liabilities	4,059		3,130
Other liabilities	(1,079)		(1,234)
Net cash flows from operating activities	58,149		49,156
Cash Flows From Investing Activities:
Utility plant additions	(148,000)		(124,376)


Net cash flows from investing activities	(148,000)		(124,376)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net	494		—
Revolving credit facilities borrowings (repayments), net	(2,400)		37,500
Short-term borrowings (repayments) – affiliate, net	—		1,500
Long-term borrowings	110,000		225,000
Repayment of long-term debt	—		(172,302)


Transmission interconnection arrangements	1,402		—
Dividends paid	(18,439)		(14,811)

Debt issuance costs and other, net	(1,975)		(1,667)
Net cash flows from financing activities	89,082		75,220

Change in Cash and Cash Equivalents	(769)		—
Cash and Cash Equivalents at Beginning of Period	1,000		—
Cash and Cash Equivalents at End of Period	$	231	$	—

Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	13,465	$	16,342
Income taxes paid (refunded), net	$	(131)	$	615

Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	$	1,816	$	12,182

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	231	$	1,000
Accounts receivable	29,591		25,442
Unbilled revenues	11,888		10,814
Other receivables	2,512		2,713

Materials and supplies	6,224		5,704
Regulatory assets	3,852		—

Other current assets	2,135		1,280
Total current assets	56,433		46,953
Other Property and Investments:
Other investments	178		178
Non-utility property, net	10,814		6,684
Total other property and investments	10,992		6,862
Utility Plant:
Plant in service and plant held for future use	1,971,908		1,919,256
Less accumulated depreciation and amortization	530,230		516,795
	1,441,678		1,402,461
Construction work in progress	124,383		42,554
Net utility plant	1,566,061		1,445,015
Deferred Charges and Other Assets:
Regulatory assets	110,890		121,463
Goodwill	226,665		226,665
Operating lease right-of-use assets, net of accumulated amortization	8,535		9,954
Other deferred charges	6,145		3,527
Total deferred charges and other assets	352,235		361,609
	$	1,985,721	$	1,860,439

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt	$	13,094	$	15,000


Accounts payable	16,674		20,598
Affiliate payables	7,020		5,419
Accrued interest and taxes	42,961		42,068

Regulatory liabilities	918		134
Operating lease liabilities	2,428		2,753
Other current liabilities	5,823		3,565
Total current liabilities	88,918		89,537
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	780,561		670,691
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	139,855		140,151
Regulatory liabilities	191,499		182,845
Asset retirement obligations	917		881
Accrued pension liability and postretirement benefit cost	6,533		7,199
Operating lease liabilities	5,897		7,039
Other deferred credits	12,087		7,469
Total deferred credits and other liabilities	356,788		345,584
Total liabilities	1,226,267		1,105,812
Commitments and Contingencies (Note 11)
Common Stockholder’s Equity:
Common stock ($10 par value; 12,000,000 shares authorized; issued and outstanding 6,358 shares)	64		64
Paid-in-capital	614,166		614,166

Retained earnings	145,224		140,397
Total common stockholder’s equity	759,454		754,627
	$	1,985,721	$	1,860,439

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER’S EQUITY

(Unaudited)


	Common Stock		Paid-in Capital		Retained Earnings		Total Common Stockholder’s Equity
	(In thousands)
Balance at March 31, 2020	$	64	$	614,166	$	136,142	$	750,372
Net earnings	—		—		16,174		16,174
Dividends declared on common stock	—		—		(7,092)		(7,092)
Balance at June 30, 2020	$	64	$	614,166	$	145,224	$	759,454

Balance at December 31, 2019	$	64	$	614,166	$	140,397	$	754,627
Net earnings	—		—		23,266		23,266


Dividends declared on common stock	—		—		(18,439)		(18,439)
Balance at June 30, 2020	$	64	$	614,166	$	145,224	$	759,454


Balance at March 31, 2019	$	64	$	534,166	$	133,248	$	667,478
Net earnings	—		—		15,267		15,267
Dividends declared on common stock	—		—		(4,098)		(4,098)
Balance at June 30, 2019	$	64	$	534,166	$	144,417	$	678,647

Balance at December 31, 2018	$	64	$	534,166	$	139,863	$	674,093
Net earnings	—		—		19,365		19,365


Dividends declared on common stock	—		—		(14,811)		(14,811)
Balance at June 30, 2019	$	64	$	534,166	$	144,417	$	678,647

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Significant Accounting Policies and Responsibility for Financial Statements

Financial Statement Preparation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at June 30, 2020 and December 31, 2019, and the consolidated results of operations and comprehensive income for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year.

The Notes to Condensed Consolidated Financial Statements include disclosures for PNMR, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. Certain amounts in the 2019 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2020 financial statement presentation.

These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual audited Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to PNMR’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2019 Annual Reports on Form 10-K.

GAAP defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events as required by GAAP.

Principles of Consolidation

The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates Valencia. See Note 6. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants. The agreements for the jointly-owned plants provide that if an owner were to default on its payment obligations, the non-defaulting owners would be responsible for their proportionate share of the obligations of the defaulting owner. In exchange, the non-defaulting owners would be entitled to their proportionate share of the generating capacity of the defaulting owner. There have been no such payment defaults under any of the agreements for the jointly-owned plants.

PNMR shared services’ expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost and are reflected as general and administrative expenses in the business segments. Other significant intercompany transactions between PNMR, PNM, and TNMP include interest and income tax sharing payments, as well as equity transactions, and interconnection billings. See Note 15. All intercompany transactions and balances have been eliminated.

Dividends on Common Stock

Dividends on PNMR’s common stock are declared by the Board. The timing of the declaration of dividends is dependent on the timing of meetings and other actions of the Board. This has historically resulted in dividends attributable to the second quarter of each year being declared through actions of the Board during the third quarter of the year. The Board declared dividends on common stock considered to be for the second quarter of $0.3075 per share in July 2020 and $0.2900 per share in July 2019, which are reflected as being in the second quarter within "Dividends Declared per Common Share" on the PNMR Condensed Consolidated Statements of Earnings.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

PNM paid cash dividends on its common stock to PNMR of $40.7 million in the three and six months ended June 30, 2020 that were declared in the three months ended March 31, 2020. PNM did not pay cash dividends on its common stock to PNMR in the three and sixth months ended June 30, 2019. TNMP declared and paid cash dividends on its common stock to PNMR of $7.1 million and $18.4 million in the three and six months ended June 30, 2020 and paid $4.1 million and $14.8 million in the three and six months ended June 30, 2019.

New Accounting Pronouncements

Information concerning recently issued accounting pronouncements that have not been adopted by the Company is presented below. The Company does not expect difficulty in adopting these standards by their required effective dates.

Accounting Standards Update 2018-14 – Compensation – Retirement Benefits – Defined Benefit Plans (Topic 715) Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14 to improve benefit plan sponsors’ disclosures for defined benefit pension and other post-employment benefit plans. ASU 2018-14 removes the requirement to disclose the amounts in other comprehensive income expected to be recognized as benefit cost over the next fiscal year and the requirement to disclose the impact of a one-percentage-point change in the assumed health care cost trend rate; clarifies the disclosure requirements for plans with assets that are less than their projected benefit, or accumulated benefit obligation; and requires significant gains and losses affecting benefit obligations during the period be disclosed. ASU 2018-14 is effective for the Company on December 31, 2020, although early adoption is permitted, and requires retrospective application. As discussed in Note 11 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and in Note 10, PNM and TNMP maintain qualified defined benefit, other postretirement benefit plans providing medical and dental benefits, and executive retirement programs. The Company is in the process of evaluating the requirements of ASU 2018-14 but does not anticipate these changes will have a significant impact on the Company’s defined benefit and other postretirement benefit plan disclosures.

Accounting Standards Update 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12 as part of its initiative to reduce complexity in accounting standards. The amendments in ASU 2019-12 simplify accounting for income taxes by removing several accounting exceptions to accounting for income taxes. ASU 2019-12 also eliminates or simplifies other income tax accounting requirements, including a requirement that entities recognize franchise tax (or similar tax) that is partially based on income as an income-based tax. ASU 2019-12 is effective for the Company beginning on January 1, 2021 and allows for early adoption. ASU 2019-12 is to be applied prospectively or retrospectively in the period of adoption depending on the type of amendment. The Company is in the process of analyzing the impacts of this new standard.

(2) Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM

PNM includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM also includes the generation and sale of electricity into the wholesale market, as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM’s jurisdictional capacity, as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale power and transmission rates.

TNMP

TNMP is an electric utility providing services in Texas under the TECA. TNMP’s operations are subject to traditional rate regulation by the PUCT. TNMP provides transmission and distribution services at regulated rates to various REPs that, in turn, provide retail electric service to consumers within TNMP’s service area. TNMP also provides transmission services at regulated rates to other utilities that interconnect with TNMP’s facilities.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company. The activities of PNMR Development, NM Capital, and the equity method investment in NMRD are also included in Corporate and Other. Eliminations of intercompany transactions are reflected in the Corporate and Other segment.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

PNMR SEGMENT INFORMATION


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2020
Electric operating revenues	$	260,788	$	96,861	$	—	$	357,649
Cost of energy	67,884		25,979		—		93,863
Utility margin	192,904		70,882		—		263,786
Other operating expenses	101,557		25,339		(4,282)		122,614
Depreciation and amortization	41,763		22,368		5,891		70,022
Operating income (loss)	49,584		23,175		(1,609)		71,150
Interest income	3,147		—		(76)		3,071
Other income (deductions)	20,954		1,963		(214)		22,703
Interest charges	(19,178)		(7,361)		(4,549)		(31,088)
Segment earnings (loss) before income taxes	54,507		17,777		(6,448)		65,836
Income taxes (benefit)	4,895		1,603		(2,223)		4,275
Segment earnings (loss)	49,612		16,174		(4,225)		61,561
Valencia non-controlling interest	(3,940)		—		—		(3,940)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	45,540	$	16,174	$	(4,225)	$	57,489

Six Months Ended June 30, 2020
Electric operating revenues	$	508,921	$	182,350	$	—	$	691,271
Cost of energy	142,408		50,165		—		192,573
Utility margin	366,513		132,185		—		498,698
Other operating expenses	200,113		50,461		(9,759)		240,815
Depreciation and amortization	83,212		44,204		11,579		138,995
Operating income (loss)	83,188		37,520		(1,820)		118,888
Interest income	6,643		—		(149)		6,494
Other income (deductions)	(13,072)		2,524		(755)		(11,303)
Interest charges	(36,807)		(14,533)		(10,182)		(61,522)
Segment earnings (loss) before income taxes	39,952		25,511		(12,906)		52,557
Income taxes (benefit)	2,536		2,245		(2,386)		2,395
Segment earnings (loss)	37,416		23,266		(10,520)		50,162
Valencia non-controlling interest	(7,669)		—		—		(7,669)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	29,483	$	23,266	$	(10,520)	$	42,229

At June 30, 2020:
Total Assets	$	5,377,422	$	1,985,721	$	211,324	$	7,574,467
Goodwill	$	51,632	$	226,665	$	—	$	278,297

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2019
Electric operating revenues	$	238,219	$	92,009	$	—	$	330,228
Cost of energy	58,866		24,916		—		83,782
Utility margin	179,353		67,093		—		246,446
Other operating expenses	255,519		24,013		(5,536)		273,996
Depreciation and amortization	39,811		20,502		5,752		66,065
Operating income (loss)	(115,977)		22,578		(216)		(93,615)
Interest income	3,530		—		(70)		3,460
Other income (deductions)	4,179		731		(78)		4,832
Interest charges	(18,526)		(6,560)		(4,705)		(29,791)
Segment earnings (loss) before income taxes	(126,794)		16,749		(5,069)		(115,114)
Income taxes (benefit)	(43,481)		1,482		(832)		(42,831)
Segment earnings (loss)	(83,313)		15,267		(4,237)		(72,283)
Valencia non-controlling interest	(3,499)		—		—		(3,499)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	(86,944)	$	15,267	$	(4,237)	$	(75,914)

Three Months Ended June 30, 2019
Electric operating revenues	$	507,536	$	172,336	$	—	$	679,872
Cost of energy	158,204		47,204		—		205,408
Utility margin	349,332		125,132		—		474,464
Other operating expenses	361,981		49,253		(11,299)		399,935
Depreciation and amortization	79,036		40,716		11,669		131,421
Operating income (loss)	(91,685)		35,163		(370)		(56,892)
Interest income	7,187		—		(139)		7,048
Other income (deductions)	18,536		1,317		(814)		19,039
Interest charges	(36,886)		(15,361)		(9,178)		(61,425)
Segment earnings (loss) before income taxes	(102,848)		21,119		(10,501)		(92,230)
Income taxes (benefit)	(41,508)		1,754		(1,854)		(41,608)
Segment earnings (loss)	(61,340)		19,365		(8,647)		(50,622)
Valencia non-controlling interest	(6,328)		—		—		(6,328)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	(67,932)	$	19,365	$	(8,647)	$	(57,214)

At June 30, 2019:
Total Assets	$	5,105,090	$	1,768,831	$	174,746	$	7,048,667
Goodwill	$	51,632	$	226,665	$	—	$	278,297

The Company defines utility margin as electric operating revenues less cost of energy. Cost of energy consists primarily of fuel and purchase power costs for PNM and costs charged by third-party transmission providers for TNMP. The Company believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all such costs are offset in revenues as fuel and purchase power costs are passed through to customers under PNM’s FPPAC and third-party transmission costs are passed on to customers through TNMP’s transmission cost recovery factor. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(3) Accumulated Other Comprehensive Income (Loss)

Information regarding accumulated other comprehensive income (loss) for the six months ended June 30, 2020 and 2019 is as follows:


	Accumulated Other Comprehensive Income (Loss)
	PNM											Corporate and Other		PNMR Consolidated
	Unrealized Gains on Available-for-Sale Debt Securities		Pension Liability Adjustment					Fair Value Adjustment for Cash Flow Hedges


							Total						Total

	(In thousands)


Balance at December 31, 2019	$	10,638	$	(109,693)	$	(99,055)		$	(322)	$	(99,377)
Amounts reclassified from AOCI (pre-tax)	(3,059)		4,150		1,091			(500)		591
Income tax impact of amounts reclassified	777		(1,054)		(277)			127		(150)
Other OCI changes (pre-tax)	9,717		—		9,717			(1,198)		8,519
Income tax impact of other OCI changes	(2,468)		—		(2,468)			304		(2,164)
Net after-tax change	4,967		3,096		8,063			(1,267)		6,796
Balance at June 30, 2020	$	15,605	$	(106,597)	$	(90,992)		$	(1,589)	$	(92,581)











Balance at December 31, 2018	$	1,939	$	(112,361)	$	(110,422)	$	1,738	$	(108,684)
Amounts reclassified from AOCI (pre-tax)	(5,601)		3,702		(1,899)		525		(1,374)
Income tax impact of amounts reclassified	1,423		(940)		483		(133)		350
Other OCI changes (pre-tax)	15,938		—		15,938		(3,169)		12,769
Income tax impact of other OCI changes	(4,048)		—		(4,048)		805		(3,243)
Net after-tax change	7,712		2,762		10,474		(1,972)		8,502
Balance at June 30, 2019	$	9,651	$	(109,599)	$	(99,948)	$	(234)	$	(100,182)

The Condensed Consolidated Statements of Earnings include pre-tax amounts reclassified from AOCI related to Unrealized Gains on Available-for-Sale Debt Securities in gains (losses) on investment securities, related to Pension Liability Adjustment in other (deductions), and related to Fair Value Adjustment for Cash Flow Hedges in interest charges. The income tax impacts of all amounts reclassified from AOCI are included in income taxes in the Condensed Consolidated Statements of Earnings.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(4) Earnings Per Share

In accordance with GAAP, dual presentation of basic and diluted earnings per share is presented in the Condensed Consolidated Statements of Earnings of PNMR. PNMR’s potentially dilutive shares consist of restricted stock and PNMR common stock issuable under the PNMR 2020 Forward Equity Sale Agreements, which are calculated under the treasury stock method. See Note 9. Information regarding the computation of earnings per share is as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands, except per share amounts)
Net Earnings (Loss) Attributable to PNMR	$	57,489	$	(75,914)	$	42,229	$	(57,214)
Average Number of Common Shares:
Outstanding during period	79,654		79,654		79,654		79,654
Vested awards of restricted stock	186		263		202		251
Average Shares – Basic	79,840		79,917		79,856		79,905
Dilutive Effect of Common Stock Equivalents:
PNMR 2020 Forward Equity Sale Agreements	—		—		86		—
Restricted stock	36		—		37		—
Average Shares – Diluted⁽¹⁾	79,876		79,917		79,979		79,905

Net Earnings (Loss) Per Share of Common Stock:
Basic	$	0.72	$	(0.95)	$	0.53	$	(0.72)
Diluted	$	0.72	$	(0.95)	$	0.53	$	(0.72)

⁽¹⁾ No potentially dilutive restricted stock have been included in the computation of Average Shares – Diluted for the three and six months ended June 30, 2019 since the effect would be anti-dilutive.

(5) Electric Operating Revenues

PNMR is an investor-owned holding company with two regulated utilities providing electricity and electric services in New Mexico and Texas. PNMR’s electric utilities are PNM and TNMP.

Additional information concerning electric operating revenue is contained in Note 4 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable consists primarily of trade receivables from customers. In the normal course of business, credit is extended to customers on a short-term basis. The Company estimates the allowance for credit losses on trade receivables based on historical experience and estimated default rates. Accounts receivable balances are reviewed monthly and adjustments to the allowance for credit losses are made as necessary and amounts that are deemed uncollectible are written off. On January 1, 2020, the Company adopted Accounting Standards Update 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. As a result of the adoption of the new standard, PNM updated its allowance for accounts receivable balances and recorded incremental credit losses of $0.4 million and $0.7 million in the three and six months ended June 30, 2020. See additional discussion of ASU 2016-13 in Note 7.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Disaggregation of Revenues

A disaggregation of revenues from contracts with customers by the type of customer is presented in the table below. The table also reflects alternative revenue program revenues ("ARP") and other revenues.


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2020	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	109,090	$	37,302	$	146,392
Commercial	93,364		28,106		121,470
Industrial	20,373		6,857		27,230
Public authority	4,907		1,419		6,326
Economy energy service	3,278		—		3,278
Transmission	14,097		20,238		34,335
Miscellaneous	3,042		1,002		4,044
Total revenues from contracts with customers	248,151		94,924		343,075
Alternative revenue programs	2,529		1,937		4,466
Other electric operating revenues	10,108		—		10,108
Total Electric Operating Revenues	$	260,788	$	96,861	$	357,649


Six Months Ended June 30, 2020
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	211,899	$	69,200	$	281,099
Commercial	179,713		56,791		236,504
Industrial	39,838		13,390		53,228
Public authority	9,254		2,842		12,096
Economy energy service	8,531		—		8,531
Transmission	28,264		38,250		66,514
Miscellaneous	6,410		1,675		8,085
Total revenues from contracts with customers	483,909		182,148		666,057
Alternative revenue programs	4,690		202		4,892
Other electric operating revenues	20,322		—		20,322
Total Electric Operating Revenues	$	508,921	$	182,350	$	691,271

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2019	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	86,328	$	33,640	$	119,968
Commercial	98,968		28,058		127,026
Industrial	15,329		5,295		20,624
Public authority	4,596		1,391		5,987
Economy energy service	6,024		—		6,024
Transmission	14,342		17,585		31,927
Miscellaneous	2,474		887		3,361
Total revenues from contracts with customers	228,061		86,856		314,917
Alternative revenue programs	691		5,153		5,844
Other electric operating revenues	9,467		—		9,467
Total Electric Operating Revenues	$	238,219	$	92,009	$	330,228

Three Months Ended June 30, 2019
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	193,629	$	64,072	$	257,701
Commercial	184,201		55,487		239,688
Industrial	30,076		10,911		40,987
Public authority	9,307		2,764		12,071
Economy energy service	12,946		—		12,946
Transmission	27,727		31,589		59,316
Miscellaneous	6,116		1,789		7,905
Total revenues from contracts with customers	464,002		166,612		630,614
Alternative revenue programs	756		5,724		6,480
Other electric operating revenues	42,778		—		42,778
Total Electric Operating Revenues	$	507,536	$	172,336	$	679,872

Contract Balances

Performance obligations related to contracts with customers are typically satisfied when the energy is delivered and the customer or end-user utilizes the energy. Accounts receivable from customers represent amounts billed, including amounts under ARPs. For PNM, accounts receivable reflected on the Condensed Consolidated Balance Sheets, net of allowance for credit losses, includes $65.2 million at June 30, 2020 and $59.3 million at December 31, 2019 resulting from contracts with customers. All of TNMP’s accounts receivable results from contracts with customers.

Contract assets are an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance). The Company has no contract assets as of June 30, 2020 or December 31, 2019. Contract liabilities arise when consideration is received in advance from a customer before satisfying the performance obligations. Therefore, revenue is deferred and not recognized until the obligation is satisfied. Under its OATT, PNM accepts upfront consideration for capacity reservations requested by transmission customers, which requires PNM to defer the customer’s transmission capacity rights for a specific period of time. PNM recognizes the revenue of these capacity reservations over the period it defers the customer's capacity rights. Other utilities pay PNM and TNMP in advance for the joint-use of their utility poles. These revenues are

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

recognized over the period of time specified in the joint-use contract, typically for one calendar year. Deferred revenues on these arrangements are recorded as contract liabilities. PNMR's, PNM's, and TNMP's contract liabilities and related revenues are insignificant for all periods presented. The Company has no other arrangements with remaining performance obligations to which a portion of the transaction price would be required to be allocated.

(6) Variable Interest Entities

GAAP determines how an enterprise evaluates and accounts for its involvement with variable interest entities, focusing primarily on whether the enterprise has the power to direct the activities that most significantly impact the economic performance of a variable interest entity (“VIE”). GAAP also requires continual reassessment of the primary beneficiary of a VIE. Additional information concerning PNM’s VIEs is contained in Note 10 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Valencia

PNM has a PPA to purchase all of the electric capacity and energy from Valencia, a 158 MW natural gas-fired power plant near Belen, New Mexico, through May 2028. A third party built, owns, and operates the facility while PNM is the sole purchaser of the electricity generated. PNM is obligated to pay fixed operation and maintenance and capacity charges in addition to variable operation and maintenance charges under this PPA. For the three and six months ended June 30, 2020, PNM paid $5.0 million and $10.0 million for fixed charges and $0.5 million and $0.9 million for variable charges. For the three and six months ended June 30, 2019, PNM paid $5.0 million and $9.9 million for fixed charges and $0.2 million and $0.3 million for variable charges. PNM does not have any other financial obligations related to Valencia. The assets of Valencia can only be used to satisfy its obligations and creditors of Valencia do not have any recourse against PNM’s assets. During the term of the PPA, PNM has the option, under certain conditions, to purchase and own up to 50% of the plant or the VIE. The PPA specifies that the purchase price would be the greater of 50% of book value reduced by related indebtedness or 50% of fair market value.

PNM sources fuel for the plant, controls when the facility operates through its dispatch, and receives the entire output of the plant, which factors directly and significantly impact the economic performance of Valencia. Therefore, PNM has concluded that the third-party entity that owns Valencia is a VIE and that PNM is the primary beneficiary of the entity under GAAP since PNM has the power to direct the activities that most significantly impact the economic performance of Valencia and will absorb the majority of the variability in the cash flows of the plant. As the primary beneficiary, PNM consolidates Valencia in its financial statements. Accordingly, the assets, liabilities, operating expenses, and cash flows of Valencia are included in the Condensed Consolidated Financial Statements of PNM although PNM has no legal ownership interest or voting control of the VIE. The assets and liabilities of Valencia set forth below are immaterial to PNM and, therefore, not shown separately on the Condensed Consolidated Balance Sheets. The owner’s equity and net income of Valencia are considered attributable to non-controlling interest.

Summarized financial information for Valencia is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	5,495	$	5,177	$	10,848	$	10,129
Operating expenses	1,555		1,678		3,179		3,801
Earnings attributable to non-controlling interest	$	3,940	$	3,499	$	7,669	$	6,328

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	3,393	$	5,094
Net property, plant, and equipment	57,163		58,581
Total assets	60,556		63,675
Current liabilities	629		623
Owners’ equity – non-controlling interest	$	59,927	$	63,052

Westmoreland San Juan Mining, LLC

As discussed in the subheading Coal Supply in Note 11, PNM purchases coal for SJGS under the SJGS CSA. On October 9, 2018, Westmoreland filed a Current Report on Form 8-K with the SEC announcing it had filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. On March 15, 2019, Westmoreland emerged from Chapter 11 bankruptcy as a privately held company owned and operated by a group of its former creditors. Under the reorganization, the assets of SJCC were sold to Westmoreland San Juan Mining, LLC (“WSJ LLC”), a subsidiary of Westmoreland Mining Holdings, LLC. As successor entity to SJCC, WSJ LLC assumed all rights and obligations of WSJ including obligations to PNM under the SJGS CSA and to PNMR under letter of credit support agreements.

PNMR issued $30.3 million in letters of credit to facilitate the issuance of reclamation bonds required in order for SJCC to mine coal to be supplied to SJGS. As discussed above, WSJ LLC assumed the rights and obligations of SJCC, including obligations to PNMR for the letters of credit. The letters of credit support results in PNMR having a variable interest in WSJ LLC since PNMR is subject to possible loss in the event performance by PNMR is required under the letters of credit support. PNMR considers the possibility of loss under the letters of credit support to be remote since the purpose of posting the bonds is to provide assurance that WSJ LLC performs the required reclamation of the mine site in accordance with applicable regulations and all reclamation costs are reimbursable under the SJGS CSA. Also, much of the mine reclamation activities will not be performed until after the expiration of the SJGS CSA. In addition, each of the SJGS participants has established and actively fund trusts to meet future reclamation obligations.

WSJ LLC is considered a VIE. PNMR’s analysis of its arrangements with WSJ LLC concluded that WSJ LLC has the ability to direct its mining operations, which is the factor that most significantly impacts the economic performance of WSJ LLC. Other than PNM being able to ensure that coal is supplied in adequate quantities and of sufficient quality to provide the fuel necessary to operate SJGS in a normal manner, the mining operations are solely under the control of WSJ LLC, including developing mining plans, hiring of personnel, and incurring operating and maintenance expenses. Neither PNMR nor PNM has any ability to direct or influence the mining operation. PNM’s involvement through the SJGS CSA is a protective right rather than a participating right and WSJ LLC has the power to direct the activities that most significantly impact the economic performance of WSJ LLC. The SJGS CSA requires WSJ LLC to deliver coal required to fuel SJGS in exchange for payment of a set price per ton, which is escalated over time for inflation. If WSJ LLC is able to mine more efficiently than anticipated, its economic performance will be improved. Conversely, if WSJ LLC cannot mine as efficiently as anticipated, its economic performance will be negatively impacted. Accordingly, PNMR believes WSJ LLC is the primary beneficiary and, therefore, WSJ LLC is not consolidated by either PNMR or PNM. The amounts outstanding under the letters of credit support constitute PNMR’s maximum exposure to loss from the VIE at June 30, 2020.

(7) Fair Value of Derivative and Other Financial Instruments

Additional information concerning energy related derivative contracts and other financial instruments is contained in Note 9 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Fair value is defined under GAAP as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is based on current market quotes as available and is supplemented by

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

modeling techniques and assumptions made by the Company to the extent quoted market prices or volatilities are not available. External pricing input availability varies based on commodity location, market liquidity, and term of the agreement. Valuations of derivative assets and liabilities take into account nonperformance risk, including the effect of counterparties’ and the Company’s credit risk. The Company regularly assesses the validity and availability of pricing data for its derivative transactions. Although the Company uses its best judgment in estimating the fair value of these instruments, there are inherent limitations in any estimation technique.

Energy Related Derivative Contracts

Overview

The primary objective for the use of commodity derivative instruments, including energy contracts, options, swaps, and futures, is to manage price risk associated with forecasted purchases of energy and fuel used to generate electricity, as well as managing anticipated generation capacity in excess of forecasted demand from existing customers. PNM’s energy related derivative contracts manage commodity risk. PNM is required to meet the demand and energy needs of its customers. PNM is exposed to market risk for the needs of its customers not covered under the FPPAC.

Beginning January 1, 2018, PNM is exposed to market risk for its 65 MW interest in SJGS Unit 4, which is held as merchant plant as ordered by the NMPRC. PNM has entered into agreements to sell power from 36 MW of that capacity to a third party at a fixed price for the period January 1, 2018 through May 31, 2022, subject to certain conditions. Under these agreements, PNM is obligated to deliver 36 MW of power only when SJGS Unit 4 is operating. These agreements are not considered derivatives because there is no notional amount due to the unit-contingent nature of the transactions.

PNM and Tri-State have a hazard sharing agreement that expires in May 2022. Under this agreement, each party sells the other party 100 MW of capacity and energy from a designated generation resource on a unit contingent basis, subject to certain performance guarantees. Both the purchases and sales are made at the same market index price. This agreement serves to reduce the magnitude of each party’s single largest generating hazard and assists in enhancing the reliability and efficiency of their respective operations. PNM passes the sales and purchases through to customers under PNM’s FPPAC.

PNM’s operations are managed primarily through a net asset-backed strategy, whereby PNM’s aggregate net open forward contract position is covered by its forecasted excess generation capabilities or market purchases. PNM could be exposed to market risk if its generation capabilities were to be disrupted or if its load requirements were to be greater than anticipated. If all or a portion of load requirements were required to be covered as a result of such unexpected situations, commitments would have to be met through market purchases. TNMP does not enter into energy related derivative contracts.

Commodity Risk

Marketing and procurement of energy often involve market risks associated with managing energy commodities and establishing positions in the energy markets, primarily on a short-term basis. PNM routinely enters into various derivative instruments such as forward contracts, option agreements, and price basis swap agreements to economically hedge price and volume risk on power commitments and fuel requirements and to minimize the effect of market fluctuations. PNM monitors the market risk of its commodity contracts in accordance with approved risk and credit policies.

Accounting for Derivatives

Under derivative accounting and related rules for energy contracts, PNM accounts for its various instruments for the purchase and sale of energy, which meet the definition of a derivative, based on PNM’s intent. During the six months ended June 30, 2020 and the year ended December 31, 2019, PNM was not hedging its exposure to the variability in future cash flows from commodity derivatives through designated cash flows hedges. The derivative contracts recorded at fair value that do not qualify or are not designated for cash flow hedge accounting are classified as economic hedges. Economic hedges are defined as derivative instruments, including long-term power agreements, used to economically hedge generation assets, purchased power and fuel costs, and customer load requirements. Changes in the fair value of economic hedges are reflected in results of operations and are classified between operating revenues and cost of energy according to the intent of the hedge. PNM has no trading transactions.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Commodity Derivatives

PNM’s commodity derivative instruments that are recorded at fair value, all of which are accounted for as economic hedges and considered Level 2 fair value measurements, are presented in the following line items on the Condensed Consolidated Balance Sheets:


	Economic Hedges
	June 30, 2020		December 31, 2019
	(In thousands)
Other current assets	$	1,096	$	1,089
Other deferred charges	1,004		1,507
	2,100		2,596

Other current liabilities	(1,096)		(1,089)
Other deferred credits	(1,004)		(1,507)
	(2,100)		(2,596)
Net	$	—	$	—

PNM’s commodity derivative instruments in the above table are subject to master netting agreements whereby assets and liabilities could be offset in the settlement process. PNM does not offset fair value and cash collateral for derivative instruments under master netting arrangements and the above table reflects the gross amounts of fair value assets and liabilities for commodity derivatives. All of the assets and liabilities in the table above at June 30, 2020 and December 31, 2019 result from PNM’s hazard sharing arrangements with Tri-State. The hazard sharing arrangements are net-settled upon delivery.

At June 30, 2020 and December 31, 2019, PNM had no amounts recognized for the legal right to reclaim cash collateral. However, at both June 30, 2020 and December 31, 2019, amounts posted as cash collateral under margin arrangements were $0.5 million. At both June 30, 2020 and December 31, 2019, obligations to return cash collateral were $0.9 million. Cash collateral amounts are included in other current assets and other current liabilities on the Condensed Consolidated Balance Sheets.

PNM has a NMPRC-approved hedging plan to manage fuel and purchased power costs related to customers covered by its FPPAC. There were no amounts hedged under this plan as of June 30, 2020 or December 31, 2019.

The effects of mark-to-market commodity derivative instruments on PNM’s revenues and cost of energy during the three and six months ended June 30, 2020 and 2019 were less than $0.1 million. Commodity derivatives had no impact on OCI for the periods presented.

PNM has no open energy or gas commodity volume positions at June 30, 2020 or December 31, 2019.

PNM has contingent requirements to provide collateral under commodity contracts having an objectively determinable collateral provision that are in net liability positions and are not fully collateralized with cash. In connection with managing its commodity risks, PNM enters into master agreements with certain counterparties. If PNM is in a net liability position under an agreement, some agreements provide that the counterparties can request collateral if PNM’s credit rating is downgraded; other agreements provide that the counterparty may request collateral to provide it with “adequate assurance” that PNM will perform; and others have no provision for collateral. At June 30, 2020 and December 31, 2019, PNM had no such contracts in a net liability position.

Non-Derivative Financial Instruments

The carrying amounts reflected on the Condensed Consolidated Balance Sheets approximate fair value for cash, receivables, and payables due to the short period of maturity. Investment securities are carried at fair value. Investment securities consist of PNM assets held in the NDT for its share of decommissioning costs of PVNGS and trusts for PNM’s share of final reclamation costs related to the coal mines serving SJGS and Four Corners. See Note 11. At June 30, 2020 and December 31, 2019, the fair value of investment securities included $335.5 million and $336.0 million for the NDT and $53.9 million and $52.8 million for the mine reclamation trusts.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In June 2016, the FASB issued Accounting Standards Update 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the way entities recognize impairments of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining lives of the assets. The majority of the amendments made by the new standard are required to be applied using a modified retrospective approach. The amendments in ASU 2016-13 also require entities to separately measure and realize an impairment for credit losses on available-for-sale debt securities for which carrying value exceeds fair value, unless such securities have been determined to be other than temporarily impaired and the entire decrease in value has been realized as an impairment. The amendments relating to available-for-sale debt securities are required to be applied prospectively on the date of adoption. PNM records a realized loss as an impairment for any available-for-sale debt security that has a fair value that is less than its carrying value. As a result, the Company has no available-for-sale debt securities for which carrying value exceeds fair value and there are no impairments considered to be “other than temporary” that are included in AOCI and not recognized in earnings. The Company adopted ASU 2016-13 on January 1, 2020, its required effective date. Adoption of the standard did not result in the Company recording a cumulative effect adjustment or impact the Company's accounting for its available-for-sale debt securities. All gains and losses resulting from sales and changes in the fair value of equity securities are recognized immediately in earnings.

Gains and losses recognized on the Condensed Consolidated Statements of Earnings related to investment securities in the NDT and reclamation trusts are presented in the following table:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Equity securities:
Net gains (losses) from equity securities sold	$	5,356	$	2,774	$	4,041	$	4,161
Net gains (losses) from equity securities still held	13,377		303		(5,554)		9,905
Total net gains (losses) on equity securities	18,733		3,077		(1,513)		14,066
Available-for-sale debt securities:


Net gains (losses) on debt securities	2,887		1,522		(9,716)		4,547
Net gains (losses) on investment securities	$	21,620	$	4,599	$	(11,229)	$	18,613

The proceeds and gross realized gains and losses on the disposition of securities held in the NDT and coal mine reclamation trusts are shown in the following table. Realized gains and losses are determined by specific identification of costs of securities sold. Gross realized losses shown below exclude the (increase)/decrease in realized impairment losses of $4.0 million and $(8.7) million for the three and six months ended June 30, 2020 and $(0.8) million and $2.6 million for the three and six months ended June 30, 2019.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Proceeds from sales	$	205,296	$	159,551	$	354,651	$	234,011
Gross realized gains	$	11,262	$	10,906	$	17,087	$	15,095
Gross realized (losses)	$	(7,002)	$	(5,802)	$	(14,037)	$	(8,972)

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At June 30, 2020, the available-for-sale debt securities held by PNM, had the following final maturities:


	Fair Value
	(In thousands)
Within 1 year	$	22,402
After 1 year through 5 years	83,549
After 5 years through 10 years	82,539
After 10 years through 15 years	14,192
After 15 years through 20 years	10,791
After 20 years	40,010
	$	253,483

Fair Value Disclosures

The Company determines the fair values of its derivative and other financial instruments based on the hierarchy established in GAAP, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

For investment securities, Level 2 and Level 3 fair values are provided by fund managers utilizing a pricing service. For Level 2 fair values, the pricing provider predominantly uses the market approach using bid side market values based upon a hierarchy of information for specific securities or securities with similar characteristics. Fair values of Level 2 investments in mutual funds are equal to net asset value. For commodity derivatives, Level 2 fair values are determined based on market observable inputs, which are validated using multiple broker quotes, including forward price, volatility, and interest rate curves to establish expectations of future prices. Credit valuation adjustments are made for estimated credit losses based on the overall exposure to each counterparty. For the Company’s long-term debt, Level 2 fair values are provided by an external pricing service. The pricing service primarily utilizes quoted prices for similar debt in active markets when determining fair value. The valuation of Level 3 investments, when applicable, requires significant judgment by the pricing provider due to the absence of quoted market values, changes in market conditions, and the long-term nature of the assets. The Company has no Level 3 investments as of June 30, 2020 and December 31, 2019. Management of the Company independently verifies the information provided by pricing services.

In August 2018, the FASB issued Accounting Standards Update 2018-13 – Fair Value Measurements (Topic 820) Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurements, to improve fair value disclosures. ASU 2018-13 eliminates certain disclosure requirements related to transfers between Levels 1 and 2 of the fair value hierarchy and the requirement to disclose the valuation process for Level 3 fair value measurements. ASU 2018-13 also amends certain disclosure requirements for investments measured at net asset value and requires new disclosures for Level 3 investments, including a new requirement to disclose changes in unrealized gains or losses recorded in OCI related to Level 3 fair value measurements. The Company adopted ASU 2018-13 on January 1, 2020, its required effective date. The Company applied the requirements of the new standard using retrospective application, except for the new disclosures related to Level 3 investments, which are to be applied prospectively. Adoption of the standard did not have a material impact on the Company's disclosures.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Items recorded at fair value by PNM on the Condensed Consolidated Balance Sheets are presented below by level of the fair value hierarchy along with gross unrealized gains on investments in available-for-sale debt securities:


			GAAP Fair Value Hierarchy
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unrealized Gains
	(In thousands)
June 30, 2020
Cash and cash equivalents	$	11,496	$	11,496	$	—
Equity securities:
Corporate stocks, common	65,664		65,664		—
Corporate stocks, preferred	8,498		2,770		5,728
Mutual funds and other	50,311		50,311		—
Available-for-sale debt securities:
U.S. government	47,190		29,315		17,875		$	1,497
International government	13,734		—		13,734		1,630
Municipals	47,392		—		47,392		2,179
Corporate and other	145,167		464		144,703		15,616
	$	389,452	$	160,020	$	229,432	$	20,922







December 31, 2019

Cash and cash equivalents	$	15,606	$	15,606	$	—
Equity securities:
Corporate stocks, common	64,527		64,527		—
Corporate stocks, preferred	9,033		2,212		6,821
Mutual funds and other	49,848		49,786		62
Available-for-sale debt securities:
U.S. government	48,439		31,389		17,050		$	535
International government	15,292		—		15,292		1,193
Municipals	46,642		—		46,642		1,768
Corporate and other	139,445		187		139,258		10,801
	$	388,832	$	163,707	$	225,125	$	14,297

The carrying amounts and fair values of long-term debt, all of which are considered Level 2 fair value measurements and are not recorded at fair value on the Condensed Consolidated Balance Sheets, are presented below:



	Carrying Amount		Fair Value
June 30, 2020	(In thousands)
PNMR	$	3,216,618	$	3,343,648


PNM	$	1,846,605	$	1,951,768


TNMP	$	780,561	$	797,604


December 31, 2019
PNMR	$	3,007,717	$	3,142,704


PNM	$	1,748,020	$	1,795,149


TNMP	$	670,691	$	753,317

The carrying amount and fair value of the Company’s other investments presented on the Condensed Consolidated Balance Sheets are not material and not shown in the above table.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(8) Stock-Based Compensation

PNMR has various stock-based compensation programs, including stock options, restricted stock, and performance shares granted under the Performance Equity Plan (“PEP”). Although certain PNM and TNMP employees participate in the PNMR plans, PNM and TNMP do not have separate employee stock-based compensation plans. The Company has not awarded stock options since 2010 and all employee stock options expired or were exercised as of February 2020. Certain restricted stock awards are subject to achieving performance or market targets. Other awards of restricted stock are only subject to time vesting requirements. Additional information concerning stock-based compensation under the PEP is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Restricted stock under the PEP refers to awards of stock subject to vesting, performance, or market conditions rather than to shares with contractual post-vesting restrictions. Generally, the awards vest ratably over three years from the grant date of the award. However, awards with performance or market conditions vest upon satisfaction of those conditions. In addition, plan provisions provide that upon retirement, participants become 100% vested in certain stock awards. The vesting period for awards of restricted stock to non-employee members of the Board is one-year.

The stock-based compensation expense related to restricted stock awards without performance or market conditions to participants that are retirement eligible on the grant date is recognized immediately at the grant date and is not amortized. Compensation expense for other such awards is amortized over the shorter of the requisite vesting period or the period until the participant becomes retirement eligible. Compensation expense for performance-based shares is recognized ratably over the performance period as required service is provided and is adjusted periodically to reflect the level of achievement expected to be attained. Compensation expense related to market-based shares is recognized ratably over the measurement period, regardless of the actual level of achievement, provided the employees meet their service requirements. At June 30, 2020, PNMR had unrecognized expense related to stock awards of $6.1 million, which is expected to be recognized over an average of 1.8 years.

PNMR receives a tax deduction for certain stock option exercises during the period the options are exercised, generally for the excess of the price at which the options are sold over the exercise prices of the options, and a tax deduction for the value of restricted stock at the vesting date. GAAP requires that all excess tax benefits and deficiencies be recorded to tax expense and classified as operating cash flows when used to reduce income taxes payable. See Note 14.

The grant date fair value for restricted stock and stock awards with internal Company performance targets is determined based on the market price of PNMR common stock on the date of the agreements reduced by the present value of future dividends that will not be received prior to vesting. The grant date fair value is applied to the total number of shares that are anticipated to vest, although the number of performance shares that ultimately vest cannot be determined until after the performance periods end. The grant date fair value of stock awards with market targets is determined using Monte Carlo simulation models, which provide grant date fair values that include an expectation of the number of shares to vest at the end of the measurement period.

The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:


	Six Months Ended June 30,
Restricted Shares and Performance Based Shares	2020			2019
Expected quarterly dividends per share	$	0.3075		$	0.2900
Risk-free interest rate	0.72		%	2.47		%

Market-Based Shares
Dividend yield	2.51		%	2.59		%
Expected volatility	19.41			19.55
Risk-free interest rate	0.72			2.51

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes activity in restricted stock awards, including performance-based and market-based shares, and stock options, for the six months ended June 30, 2020:


	Restricted Stock				Stock Options
	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2019	161,542	$	38.21	2,000	$	12.22
Granted	246,029	36.73		—	—
Exercised	(238,054)	34.86		(2,000)	12.22
Forfeited	(1,456)	41.32		—	—

Outstanding at June 30, 2020	168,061	$	40.77	—	$	—

PNMR’s current stock-based compensation program provides for performance and market targets through 2022. Included in the above table are 122,277 previously awarded shares that were earned for the 2017-2019 performance measurement period and ratified by the Board in February 2020 (based upon achieving market and performance targets at near "maximum" levels). Excluded from the table above are 150,543, 142,080 and 142,047 shares for the three-year performance periods ending in 2020, 2021 and 2022 that will be awarded if all performance and market criteria are achieved at maximum levels and all executives remain eligible.

In 2015, the Company entered into a retention award agreement with its Chairman, President, and Chief Executive Officer under which she would receive a total of 53,859 shares of PNMR’s common stock if PNMR meets certain performance targets at the end of 2017 and 2019 and she remained an employee of the Company. The retention award was made under the PEP and was approved by the Board on February 26, 2015. Under the agreement, she was to receive 17,953 of the total shares if PNMR achieved specific performance targets at the end of 2017. The specified performance target was achieved at the end of 2017 and the Board ratified her receiving 17,953 shares in February 2018. The second portion of the agreement of 35,906 shares was achieved at the end of 2019. The Board ratified her receiving the shares in February 2020 and such shares are included in the above table.

The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares, and stock options:


	Six Months Ended June 30,
Restricted Stock	2020		2019
Weighted-average grant date fair value	$	36.73	$	37.92
Total fair value of restricted shares that vested (in thousands)	$	11,740	$	6,227

Stock Options


Total intrinsic value of options exercised (in thousands)	$	84	$	2,617

(9) Financing

The Company’s financing strategy includes both short-term and long-term borrowings. The Company utilizes short-term revolving credit facilities, as well as cash flows from operations, to provide funds for both construction and operating expenditures. Depending on market and other conditions, the Company will periodically sell long-term debt or enter into term loan arrangements and use the proceeds to reduce borrowings under the revolving credit facilities or refinance other debt. Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the PNMR and PNMR Development agreements this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities and term loans generally also contain customary covenants, events of default, cross-

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

default provisions, and change-of-control provisions. PNM must obtain NMPRC approval for any financing transaction having a maturity of more than 18 months. In addition, PNM files its annual short-term financing plan with the NMPRC. Additional information concerning financing activities is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Financing Activities

In October 2016, PNMR entered into letter of credit arrangements with JPMorgan Chase Bank N.A. (the "JPM LOC Facility") under which letters of credit aggregating $30.3 million were issued to facilitate the posting of reclamation bonds, which SJCC was required to post in connection with permits relating to the operation of the San Juan mine. On March 15, 2019, WSJ LLC acquired the assets of SJCC following the bankruptcy of Westmoreland. WSJ LLC assumed all obligations of SJCC, including under the letter of credit support arrangements. See Note 11. In May 2020, JPMorgan Chase Bank N.A. gave notice that it would not extend the letters of credit, which expire on October 21, 2020. The Company is currently pursuing a replacement agreement.

On January 7, 2020, PNMR entered into forward sale agreements with each of Citibank N.A., and Bank of America N.A., as forward purchasers and an underwriting agreement with Citigroup Global Markets Inc., and BofA Securities, Inc. as representatives of the underwriters named therein, relating to an aggregate of approximately 6.2 million shares of PNMR common stock (including 0.8 million shares of PNMR common stock pursuant to the underwriters’ option to purchase additional shares) with each of Citibank N.A., and Bank of America N.A., as forward purchasers (the “PNMR 2020 Forward Equity Sale Agreements”). On January 8, 2020, the underwriters exercised in full their option to purchase the additional 0.8 million shares of PNMR common stock and PNMR entered into separate forward sales agreements with respect to the additional shares. The initial forward sale price of $47.21 per share is subject to adjustments based on a net interest rate factor and by expected future dividends paid on PNMR common stock as specified in the forward sale agreements. PNMR did not initially receive any proceeds upon the execution of these agreements and, except in certain specified circumstances, has the option to elect physical, cash, or net share settlement on or before the date that is 12 months from their effective dates.

PNMR expects to physically settle all shares under the PNMR 2020 Forward Equity Sale Agreements by delivering newly issued shares to the forward purchasers on or before January 7, 2021 in exchange for cash at the then applicable forward sales price. PNMR also has the option to net settle the agreement in cash or shares of PNMR common stock. Under a net cash settlement, under which no PNMR common stock would be issued, PNMR would receive net proceeds for a decrease in the market value of PNMR's common stock relative to the then applicable forward sales price per share, or would owe cash in the event of an increase in the market value of PNMR common stock. Under a net share settlement, PNMR would not receive any cash proceeds and may be required to deliver a sufficient number of shares of PNMR common stock to satisfy its obligation to the forward purchasers. The number of shares to be delivered to the forward purchasers would be based on the increase in the PNMR's common stock price relative to the then applicable forward sales price per share. The forward sale agreements meet the derivative scope exception requirements for contracts involving an entity’s own equity. Until settlement of the forward sale agreements, PNMR’s EPS dilution resulting from the agreements, if any, will be determined using the treasury stock method, which will result in dilution during periods when the average market price of PNMR stock during the reporting period is higher than the applicable forward sales price as of the end of that period. See Note 4.

On April 24, 2020, TNMP entered into the TNMP 2020 Bond Purchase Agreement with institutional investors for the sale of $185.0 million aggregate principal amount of four series of TNMP first mortgage bonds (the "TNMP 2020 Bonds") offered in private placement transactions. TNMP issued $110.0 million of TNMP 2020 Bonds on April 24, 2020 and used the proceeds to repay borrowings under the TNMP Revolving Credit Facility and for other corporate purposes. TNMP issued the remaining $75.0 million of TNMP 2020 Bonds on July 15, 2020 and used the proceeds from that issuance to repay borrowings under the TNMP Revolving Credit facility and for other corporate purposes. The TNMP 2020 Bonds are subject to continuing compliance with the representations, warranties and covenants of the TNMP 2020 Bond Purchase Agreement. The terms of the TNMP 2020 Bond Purchase Agreement include customary covenants, including a covenant that requires TNMP to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, a cross-default provision, and a change-of-control provision. TNMP will have the right to redeem any or all of the TNMP 2020 Bonds prior to their respective maturities, subject to payment of a customary make-whole premium.

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Information concerning the funding dates, maturities and interest rates on the TNMP 2020 Bonds issued in April and July 2020 are as follows:


Funding Date	Maturity Date	Principal Amount		Interest Rate
		(In millions)
April 24, 2020	April 24, 2030	$	85.0	2.73	%
April 24, 2020	April 24, 2050	25.0		3.36
		110.0

July 15, 2020	July 15, 2035	25.0		2.93
July 15, 2020	July 15, 2050	50.0		3.36
		$	185.0

On April 15, 2020, PNM entered into a $250.0 million term loan agreement (the "PNM 2020 Term Loan"), between PNM, the lenders party thereto, and U.S. Bank, as administrative agent. Proceeds from the PNM 2020 Term Loan were used to prepay the PNM 2019 $250.0 million Term Loan due July 2020, without penalty. The PNM 2020 Term Loan bears interest at a variable rate, which was 2.70% at June 30, 2020, and matures on June 15, 2021. As discussed below, on April 30, 2020, PNM used $100.0 million of proceeds from the PNM 2020 SUNs to prepay without penalty an equal amount of the PNM 2020 Term Loan.

On April 30, 2020, PNM entered into an agreement (the "PNM 2020 Note Purchase Agreement") with institutional investors for the sale of $200.0 million aggregate principal amount of senior unsecured notes offered in private placement transactions. Under the agreement, PNM issued $150.0 million aggregate principal amount of its 3.21% senior unsecured notes, Series A, due April 30, 2030, and $50.0 million of its aggregate principal amount of its 3.57% senior unsecured notes, Series B, due April 29, 2039 (the "PNM 2020 SUNs"). The PNM 2020 SUNs were issued on April 30, 2020. PNM used $100.0 million of proceeds from the PNM 2020 SUNs to repay an equal amount of the PNM 2020 Term Loan. The remaining $100.0 million of the PNM 2020 SUNs were used to repay borrowings on the PNM Revolving Credit Facility and for other corporate purposes. The PNM 2020 SUNs agreement includes customary covenants, including a covenant that requires PNM to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, including a cross-default provision, and covenants regarding parity of financial covenants, liens and guarantees with respect to PNM’s material credit facilities. In the event of a change of control, PNM will be required to offer to prepay the PNM 2020 SUNs at par. PNM has the right to redeem any or all of the PNM 2020 SUNs prior to their maturities, subject to payment of a customary make-whole premium.

At December 31, 2019, PNM had $40.0 million of outstanding PCRBs, which have a final maturity of June 1, 2040 and two series of outstanding PCRBs of $39.3 million and $21.0 million, which have a final maturity of June 1, 2043. These PCRBs, aggregating $100.3 million, were subject to mandatory tender on June 1, 2020. On June 1, 2020, PNM purchased these PCRBs utilizing borrowings under the PNM Revolving Credit Facility and converted the PCRBs to the weekly mode. PNM held these PCRBs (without legally canceling them) until July 1, 2020, when they were remarketed in the weekly mode (the "PNM Floating Rate PCRBs") and PNM used the remarketing proceeds to repay the revolver borrowings. PNM Floating Rate PCRBs in the weekly mode bear interest at rates that are reset weekly, giving investors the option to return the PCRBs for remarketing to new investors upon 7 days' notice. At July 24, 2020, this rate was 0.47%. A corresponding portion of the borrowing capacity under the PNM Revolving Credit Facility will be reserved to support the investors' option to return the PNM Floating Rate PCRBs upon 7 days' notice. In accordance with GAAP, as PNM can demonstrate the intent and ability to keep the PNM Floating Rate PCRBs outstanding through at least the October 31, 2023 maturity of the PNM Revolving Credit Facility, the borrowings under the PNM Revolving Credit Facility used to purchase the PNM Floating Rate PCRBs, aggregating $100.3 million, are reflected as long-term debt in the Condensed Consolidated Balance Sheets at June 30, 2020. Additionally, the PNM Floating Rate PCRBs, supported by the borrowing capacity under the PNM Revolving Credit Facility, will continue to be reflected as long-term debt.

At June 30, 2020 and December 31, 2019, PNM had PCRBs outstanding of $36.0 million at 6.25% issued by the Maricopa County, Arizona Pollution Control Corporation as well as $255.0 million at 5.90% and $11.5 million at 6.25% issued by the City of Farmington, New Mexico. The $36.0 million PCRBs became callable at 101% of par on January 1, 2020 and the remaining $266.5 million PCRBs became callable at par on June 1, 2020. On June 22, 2020, PNM provided notice to the

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

bondholders that it was calling the PCRBs aggregating $302.5 million. On July 22, 2020, PNM purchased the PCRBs in lieu of redemption and remarketed them to new investors (the "PNM 2020 Fixed Rate PCRBs").

Information concerning the funding dates, mandatory tender dates, and interest rates on the PNM 2020 Fixed Rate PCRBs are as follows:


Funding Date	Mandatory Tender Date	Principal Amount		Interest Rate
		(In millions)
July 22, 2020	June 1, 2022	$	36.0	1.05	%
July 22, 2020	June 1, 2022	11.5		1.20
July 22, 2020	June 1, 2023	130.0		1.10
July 22, 2020	June 1, 2024	125.0		1.15
		$	302.5

At June 30, 2020, variable interest rates were 0.98% on the $50.0 million PNMR 2018 Two-Year Term Loan that matures in December 2020, 1.14% on the PNMR 2019 Term Loan that matures in June 2021, 2.70% on the PNM 2020 Term Loan that matures in June 2021, 0.84% on the PNM 2019 $40.0 million Term Loan that matures in June 2021, and 0.98% on the $90.0 million PNMR Development Term Loan that matures in November 2020.

On April 1, 2020, the NMPRC approved PNM’s request to issue approximately $361 million of Securitized Bonds upon the retirement of SJGS in 2022. The NMPRC's approval of the issuance of these Securitized Bonds is currently being appealed to the NM Supreme Court. See SJGS Abandonment Application in Note 12.

Short-term Debt and Liquidity

Currently, the PNMR Revolving Credit Facility has a financing capacity of $300.0 million and the PNM Revolving Credit Facility has a financing capacity of $400.0 million. Both facilities currently expire on October 31, 2023 and contain options to be extended through October 2024, subject to approval by a majority of the lenders. PNM also has the $40.0 million PNM 2017 New Mexico Credit Facility that expires on December 12, 2022. The TNMP Revolving Credit Facility is a $75.0 million revolving credit facility secured by $75.0 million aggregate principal amount of TNMP first mortgage bonds and matures on September 23, 2022. PNMR Development has a $40.0 million revolving credit facility that expires on February 23, 2021. PNMR Development has the option to further increase the capacity of this facility to $50.0 million upon 15-days advance notice. The PNMR Development Revolving Credit Facility bears interest at a variable rate and contains terms similar to the PNMR Revolving Credit Facility. PNMR has guaranteed the obligations of PNMR Development under the facility. PNMR Development uses the facility to finance its participation in NMRD and for other activities. Variable interest rates under these facilities are based on LIBOR but contain provisions which allow for the replacement of LIBOR with other widely accepted interest rates.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Short-term debt outstanding consists of:


	June 30,		December 31,
Short-term Debt	2020		2019
	(In thousands)
PNM:
PNM Revolving Credit Facility⁽¹⁾	$	47,055	$	48,000
PNM 2017 New Mexico Credit Facility	40,000		10,000
	87,055		58,000
TNMP:
TNMP Revolving Credit Facility	12,600		15,000
TNMP Electricity Relief ERCOT loan (Note 12)	494		—
	13,094		15,000

PNMR Revolving Credit Facility	152,400		112,100



	$	252,549	$	185,100

⁽¹⁾ Outstanding amount as of June 30, 2020 excludes $100.3 million considered long-term debt as discussed above.

At June 30, 2020, the weighted average interest rate was 1.68% for the PNMR Revolving Credit Facility, 1.43% for the PNM Revolving Credit Facility, 1.44% for the PNM 2017 New Mexico Credit Facility, and 0.91% for the TNMP Revolving Credit Facility. There were no borrowings outstanding under the PNMR Development Revolving Credit Facility at June 30, 2020.

In addition to the above borrowings, PNMR, PNM, and TNMP had letters of credit outstanding of $4.6 million, $2.2 million, and $0.1 million at June 30, 2020 that reduce the available capacity under their respective revolving credit facilities. The above table excludes intercompany debt. As of June 30, 2020, and December 31, 2019, each of PNM, TNMP, and PNMR Development had zero intercompany borrowings from PNMR.

In 2017, PNMR entered into three separate four-year hedging agreements whereby it effectively established fixed interest rates of 1.926%, 1.823%, and 1.629%, plus customary spreads over LIBOR for three separate tranches, each of $50.0 million, of its variable rate debt. These hedge agreements are accounted for as cash flow hedges and had fair values of $2.1 million and $0.4 million at June 30, 2020 and December 31, 2019 that are included in other current liabilities on the Condensed Consolidated Balance Sheets. As discussed in Note 3, changes in the fair value of the cash flow hedges are deferred in AOCI and amounts reclassified to the Condensed Consolidated Statement of Earnings are recorded in interest charges. The fair values were determined using Level 2 inputs under GAAP, including using forward LIBOR curves under the mid-market convention to discount cash flows over the remaining term of the agreement.

At July 24, 2020, PNMR, PNM, TNMP, and PNMR Development had availability of $153.5 million, $343.9 million, $74.9 million, and $37.0 million under their respective revolving credit facilities, including reductions of availability due to outstanding letters of credit. PNM had no availability under the PNM 2017 New Mexico Credit Facility. Total availability at July 24, 2020, on a consolidated basis, was $609.3 million for PNMR. Availability under PNM's Revolving Credit Facility and total availability at PNMR, on a consolidated basis, does not reflect a reduction of $100.3 million that PNM has reserved to provide liquidity support for the PNM Floating Rate PCRBs. As of July 24, 2020, PNM, TNMP, and PNMR Development had no borrowings from PNMR under their intercompany loan agreements. At July 24, 2020, PNMR, PNM, and TNMP had invested cash of $0.9 million, zero, and $63.5 million.

The Company’s debt arrangements have various maturities and expiration dates. The $90.0 million PNMR Development Term Loan matures in November 2020, the $50.0 million PNMR 2018 Two-Year Term Loan matures in December 2020, the $300.0 million PNMR 2018 SUNs mature on March 9, 2021, the $150.0 million PNMR 2019 Term Loan matures in June 2021, the PNM 2019 $40.0 million Term Loan matures in June 2021, and the PNM 2020 Term Loan that currently has $150.0 million outstanding matures in June 2021. Additional information on debt maturities is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(10) Pension and Other Postretirement Benefit Plans

PNMR and its subsidiaries maintain qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs (collectively, the “PNM Plans” and “TNMP Plans”). PNMR maintains the legal obligation for the benefits owed to participants under these plans. The periodic costs or income of the PNM Plans and TNMP Plans are included in regulated rates to the extent attributable to regulated operations. In accordance with GAAP, the Company presents the service cost component of its net periodic benefit costs in administrative and general expenses and the non-service costs components in other income (deductions), net of amounts capitalized or deferred to regulatory assets and liabilities, on the Condensed Consolidated Statements of Earnings. PNM and TNMP receive a regulated return on the amounts funded for pension and OPEB plans in excess of accumulated periodic cost or income to the extent included in retail rates (a “prepaid pension asset”).

Additional information concerning pension and OPEB plans is contained in Note 11 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. Annual net periodic benefit cost for the plans is actuarially determined using the methods and assumptions set forth in that note and is recognized ratably throughout the year. Differences between TNMP's annual net periodic costs (income) and amounts included in its regulated rates are deferred to regulatory assets or liabilities, for recovery or refund in future rate proceedings.

PNM Plans

The following table presents the components of the PNM Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	10	$	13	$	—	$	—
Interest cost	4,985		6,294		613		829		122		162
Expected return on plan assets	(7,363)		(8,527)		(1,387)		(1,318)		—		—
Amortization of net (gain) loss	4,465		3,880		87		169		101		79
Amortization of prior service cost	(138)		(241)		—		(99)		—		—
Net Periodic Benefit Cost (Income)	$	1,949	$	1,406	$	(677)	$	(406)	$	223	$	241






	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	20	$	26	$	—	$	—
Interest cost	9,971		12,587		1,227		1,658		244		324
Expected return on plan assets	(14,726)		(17,051)		(2,774)		(2,636)		—		—
Amortization of net (gain) loss	8,930		7,759		174		338		201		158
Amortization of prior service cost	(277)		(483)		—		(198)		—		—
Net Periodic Benefit Cost (Income)	$	3,898	$	2,812	$	(1,353)	$	(812)	$	445	$	482

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

PNM did not make any contributions to its pension plan trust in the six months ended June 30, 2020 and 2019 and does not anticipate making any contributions to the pension plan in 2020 or 2021, but expects to contribute $4.6 million in 2022 and $19.1 million in 2023, and $19.0 million in 2024 based on current law, funding requirements, and estimates of portfolio performance. Funding assumptions were developed using discount rates of 3.4% to 3.5%. Actual amounts to be funded in the future will be dependent on the actuarial assumptions at that time, including the appropriate discount rate. PNM may make additional contributions at its discretion. PNM did not make any cash contributions to the OPEB trust in the six months ended June 30, 2020 and 2019, however, a portion of the disbursements attributable to the OPEB trust are paid by PNM and are therefore considered to be contributions to the OPEB plan. Payments by PNM on behalf of the PNM OPEB plan were $1.0 million and $2.1 million in the three and six months ended June 30, 2020 and $0.7 million and $1.5 million in the three and six months ended June 30, 2019 and are expected to total $3.7 million in 2020 and $13.5 million for 2021-2024. Disbursements under the executive retirement program, which are funded by PNM and considered to be contributions to the plan, were $0.3 million and $0.8 million in the three and six months ended June 30, 2020 and $0.4 million and $0.7 million in the three and six months ended June 30, 2019 and are expected to total $1.5 million during 2020 and $5.4 million for 2021-2024.

TNMP Plans

The following table presents the components of the TNMP Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	12	$	13	$	—	$	—
Interest cost	544		672		93		113		6		8
Expected return on plan assets	(821)		(967)		(135)		(129)		—		—
Amortization of net (gain) loss	315		235		(80)		(110)		6		4
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	38	$	(60)	$	(110)	$	(113)	$	12	$	12








	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	23	$	26	$	—	$	—
Interest cost	1,088		1,344		187		226		11		16
Expected return on plan assets	(1,642)		(1,934)		(268)		(258)		—		—
Amortization of net (gain) loss	629		470		(162)		(220)		12		8
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	75	$	(120)	$	(220)	$	(226)	$	23	$	24

TNMP did not make any contributions to its pension plan trust in the six months ended June 30, 2020 and 2019 and does not anticipate making any contributions to the pension plan in 2020 - 2022, but expects to contribute $1.1 million in 2023 and $2.8 million in 2024, based on current law, funding requirements, and estimates of portfolio performance. Funding assumptions were developed using discount rates of 3.4% to 3.5%. Actual amounts to be funded in the future will depend on the actuarial assumptions at that time, including the appropriate discount rate. TNMP may make additional contributions at its discretion. TNMP did not make any contributions to the OPEB trust in the three and six months ended June 30, 2020 and 2019 and does not expect to make contributions to the OPEB trust during the period 2020-2024. However, a portion of the disbursements attributable to the OPEB trust are paid by TNMP and are therefore considered to be contributions to the OPEB

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plan. Payments by TNMP on behalf of the TNMP OPEB plan were $0.2 million and $0.3 million in the three and six months ended June 30, 2020 and $0.1 million and $0.2 million in the three and six months ended June 30, 2019. Disbursements under the executive retirement program, which are funded by TNMP and considered to be contributions to the plan, were zero in the three and six months ended June 30, 2020 and 2019 and are expected to total $0.1 million during 2020 and $0.3 million in 2021-2024.

(11) Commitments and Contingencies

Overview

There are various claims and lawsuits pending against the Company. In addition, the Company is subject to federal, state, and local environmental laws and regulations and periodically participates in the investigation and remediation of various sites. In addition, the Company periodically enters into financial commitments in connection with its business operations. Also, the Company is involved in various legal and regulatory proceedings in the normal course of its business. See Note 12. It is not possible at this time for the Company to determine fully the effect of all litigation and other legal and regulatory proceedings on its financial position, results of operations, or cash flows.

With respect to some of the items listed below, the Company has determined that a loss is not probable or that, to the extent probable, cannot be reasonably estimated. In some cases, the Company is not able to predict with any degree of certainty the range of possible loss that could be incurred. The Company assesses legal and regulatory matters based on current information and makes judgments concerning their potential outcome, giving due consideration to the nature of the claim, the amount and nature of any damages sought, and the probability of success. Such judgments are made with the understanding that the outcome of any litigation, investigation, or other legal proceeding is inherently uncertain. In accordance with GAAP, the Company records liabilities for matters where it is probable a loss has been incurred and the amount of loss is reasonably estimable. The actual outcomes of the items listed below could ultimately differ from the judgments made and the differences could be material. The Company cannot make any assurances that the amount of reserves or potential insurance coverage will be sufficient to cover the cash obligations that might be incurred as a result of litigation or regulatory proceedings. Except as otherwise disclosed, the Company does not expect that any known lawsuits, environmental costs, and commitments will have a material effect on its financial condition, results of operations, or cash flows.

Additional information concerning commitments and contingencies is contained in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Commitments and Contingencies Related to the Environment

Nuclear Spent Fuel and Waste Disposal

Nuclear power plant operators are required to enter into spent fuel disposal contracts with the DOE that require the DOE to accept and dispose of all spent nuclear fuel and other high-level radioactive wastes generated by domestic power reactors. Although the Nuclear Waste Policy Act required the DOE to develop a permanent repository for the storage and disposal of spent nuclear fuel by 1998, the DOE announced that it would not be able to open the repository by 1998 and sought to excuse its performance of these requirements. In November 1997, the DC Circuit issued a decision preventing the DOE from excusing its own delay but refused to order the DOE to begin accepting spent nuclear fuel. Based on this decision and the DOE’s delay, a number of utilities, including APS (on behalf of itself and the other PVNGS owners, including PNM), filed damages actions against the DOE in the Court of Federal Claims. The lawsuits filed by APS alleged that damages were incurred due to DOE’s continuing failure to remove spent nuclear fuel and high-level waste from PVNGS. In August 2014, APS and the DOE entered into a settlement agreement that establishes a process for the payment of claims for costs incurred through December 31, 2019. Under the settlement agreement, APS must submit claims annually for payment of allowable costs. PNM records estimated claims on a quarterly basis. The benefit from the claims is passed through to customers under the FPPAC to the extent applicable to NMPRC regulated operations. In July 2020, APS accepted the DOE's extension of the settlement agreement for recovery of costs incurred through December 31, 2022.

PNM estimates that it will incur approximately $59.6 million (in 2019 dollars) for its share of the costs related to the on-site interim storage of spent nuclear fuel at PVNGS during the term of the operating licenses. PNM accrues these costs as a

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component of fuel expense as the nuclear fuel is consumed. At June 30, 2020 and December 31, 2019, PNM had a liability for interim storage costs of $13.0 million and $12.7 million, which is included in other deferred credits.

PVNGS has sufficient capacity at its on-site Independent Spent Fuel Storage Installation (“ISFSI”) to store all of the nuclear fuel that will be irradiated during the initial operating license period, which ends in December 2027. Additionally, PVNGS has sufficient capacity at its on-site ISFSI to store a portion of the fuel that will be irradiated during the period of extended operation, which ends in November 2047. If uncertainties regarding the U.S. government’s obligation to accept and store spent fuel are not favorably resolved, APS will evaluate alternative storage solutions that may obviate the need to expand the ISFSI to accommodate all of the fuel that will be irradiated during the period of extended operation.

The Clean Air Act

Regional Haze

In 1999, EPA developed a regional haze program and regional haze rules under the CAA. The rule directs each of the 50 states to address regional haze. Pursuant to the CAA, states have the primary role to regulate visibility requirements by promulgating SIPs. States are required to establish goals for improving visibility in national parks and wilderness areas (also known as Class I areas) and to develop long-term strategies for reducing emissions of air pollutants that cause visibility impairment in their own states and for preventing degradation in other states. States must establish a series of interim goals to ensure continued progress by adopting a new SIP every ten years. In the first SIP planning period, states were required to conduct BART determinations for certain covered facilities, including utility boilers, built between 1962 and 1977 that have the potential to emit more than 250 tons per year of visibility impairing pollution. If it was demonstrated that the emissions from these sources caused or contributed to visibility impairment in any Class I area, then BART must have been installed by the beginning of 2018. For all future SIP planning periods, states must evaluate whether additional emissions reduction measures may be needed to continue making reasonable progress toward natural visibility conditions.

On January 10, 2017, EPA published in the Federal Register revisions to the regional haze rule. EPA also provided a companion draft guidance document for public comment. The new rule delayed the due date for the next cycle of SIPs from 2019 to 2021, altered the planning process that states must employ in determining whether to impose “reasonable progress” emission reduction measures, and gave new authority to federal land managers to seek additional emission reduction measures outside of the states’ planning process. Finally, the rule made several procedural changes to the regional haze program, including changes to the schedule and process for states to file 5-year progress reports. EPA’s new rule was challenged by numerous parties. On January 19, 2018, EPA filed a motion to hold the case in abeyance in light of several letters issued by EPA on January 17, 2018 to grant various petitions for reconsideration of the 2017 rule revisions. EPA’s decision to revisit the 2017 rule is not a determination on the merits of the issues raised in the petitions.

On December 20, 2018, EPA released a new guidance document on tracking visibility progress for the second planning period. EPA is allowing states discretion to develop SIPs that may differ from EPA’s guidance as long as they are consistent with the CAA and other applicable regulations. On August 20, 2019, EPA finalized the draft guidance that was released in 2016 as a companion to the regional haze rule revisions. The final guidance differs from the draft in several ways. For example, the final guidance recognizes that sources already subject to BART may not need to be re-evaluated under the full four-factor analysis whereas the draft guidance encouraged states to evaluate all sources regardless of whether they were previously subject to BART. In addition, the final guidance recognizes that states may consider both visibility benefits and the cost of different control options when applying the four-factor analysis whereas the draft guidance recommended states require any control measures identified to be reasonable after considering the four-factor analysis alone. SIPs for the second compliance period are due in July 2021. NMED is currently preparing its SIP for the second compliance period and has notified PNM that it will not require a regional haze four-factor analysis for SJGS since PNM will retire its share of SJGS in 2022. PNM cannot predict the outcome of these matters with respect to Four Corners.

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Four Corners

Four Corners Federal Agency Lawsuit – On April 20, 2016, several environmental groups filed a lawsuit against OSM and other federal agencies in the U.S. District Court for the District of Arizona in connection with their issuance of the approvals that extended the life of Four Corners and the adjacent mine. The lawsuit alleges that these federal agencies violated both the ESA and NEPA in providing the federal approvals necessary to extend operations at Four Corners and the adjacent mine past July 6, 2016. The court granted an APS motion to intervene in the litigation. NTEC, the current owner of the mine providing coal to Four Corners, filed a motion to intervene for the limited purpose of seeking dismissal of the lawsuit based on NTEC’s tribal sovereign immunity. The court granted NTEC’s motion and dismissed the case with prejudice, terminating the proceedings. In November 2017, the environmental group plaintiffs filed a Notice of Appeal of the dismissal in the U.S. Court of Appeals for the Ninth Circuit, and the court granted their subsequent motion to expedite the appeal. The Ninth Circuit issued a decision affirming the District Court’s dismissal of the case. In September 2019, the environmental groups filed a motion for reconsideration, which was denied in December 2019. On March 24, 2020, the environmental groups filed a petition for writ of certiorari in the U.S. Supreme Court seeking review of the Ninth Circuit's decision. The Supreme Court denied the petition on June 29, 2020, making the decision of the Ninth Circuit to affirm the District Courts dismissal of the case final. This matter is now complete.

Carbon Dioxide Emissions

On August 3, 2015, EPA established standards to limit CO₂ emissions from power plants. EPA took three separate but related actions in which it: (1) established the Carbon Pollution Standards for new, modified, and reconstructed power plants; (2) established the Clean Power Plan to set standards for carbon emission reductions from existing power plants; and (3) released a proposed federal plan associated with the final Clean Power Plan. The Clean Power Plan was published on October 23, 2015.

Multiple states, utilities, and trade groups filed petitions for review in the DC Circuit to challenge both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources. Numerous parties also simultaneously filed motions to stay the Clean Power Plan during the litigation. On January 21, 2016, the DC Circuit denied petitions to stay the Clean Power Plan, but 29 states and state agencies successfully petitioned the US Supreme Court for a stay, which was granted on February 9, 2016. The decision meant that the Clean Power Plan was not in effect and neither states nor sources were obliged to comply with its requirements. With the US Supreme Court stay in place, the DC Circuit heard oral arguments on the merits of the Clean Power Plan on September 27, 2016 in front of a ten judge en banc panel. However, before the DC Circuit could issue an opinion, the Trump Administration asked that the case be held in abeyance while the rule was being re-evaluated, which was granted. In addition, the DC Circuit issued a similar order in connection with a motion filed by EPA to hold cases challenging the NSPS in abeyance. On September 17, 2019, the DC Circuit issued an order that granted motions by various petitioners, including industry groups and EPA, to dismiss cases challenging the Clean Power Plan as moot due to EPA's issuance of the Affordable Clean Energy rule, which repealed the Clean Power Plan.

On March 28, 2017, President Trump issued an Executive Order on Energy Independence. The order put forth two general policies: promote clean and safe development of energy resources, while avoiding regulatory burdens, and ensure electricity is affordable, reliable, safe, secure, and clean. The order directed the EPA Administrator to review and, if appropriate and consistent with law, suspend, revise, or rescind (1) the Clean Power Plan, (2) the New Source Performance Standards (“NSPS”) for GHG from new, reconstructed, or modified electric generating units, (3) the Proposed Clean Power Plan Model Trading Rules, and (4) the Legal Memorandum supporting the Clean Power Plan. In response to the Executive Order, EPA filed a petition with the DC Circuit requesting the cases challenging the Clean Power Plan be held in abeyance until after the conclusion of EPA’s review and any subsequent rulemaking, which was granted. In addition, the DC Circuit issued a similar order in connection with a motion filed by EPA to hold cases challenging the NSPS in abeyance. On September 17, 2019, the DC Circuit issued an order that granted motions by various petitioners, including industry groups and EPA, to dismiss the cases challenging the Clean Power Plan as moot due to EPA’s issuance of the Affordable Clean Energy rule.

EPA’s efforts to replace the Clean Power Plan with the Affordable Clean Energy rule began on October 10, 2017, when EPA issued a NOPR proposing to repeal the Clean Power Plan and filed its status report with the court requesting the case be held in abeyance until the completion of the rulemaking on the proposed repeal. The NOPR proposed a legal interpretation concluding that the Clean Power Plan exceeded EPA’s statutory authority. On August 31, 2018, EPA published a proposed

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rule, known as the Affordable Clean Energy rule, to replace the Clean Power Plan. On June 19, 2019, EPA released the final version of the Affordable Clean Energy rule. EPA takes three actions in the final rule: (1) repealing of the Clean Power Plan; (2) promulgating the Affordable Clean Energy rule; and (3) revising the implementing regulations for all emission guidelines issued under Clean Air Act Section 111(d), which, among other things, extends the deadline for state plans and the timing for EPA's approval process. The final rule is very similar to the August 2018 proposed rule. EPA set the Best System of Emissions Reduction (“BSER”) for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” that can be applied inside the fence-line. Rather than setting a specific numerical standard of performance, EPA’s rule directs states to determine which of the candidate technologies to apply to each coal-fired unit and establish standards of performance based on the degree of emission reduction achievable based on the application of BSER. The final rule requires states to submit a plan to EPA by July 8, 2022 and then EPA has one year to approve the plan. If states do not submit a plan or their submitted plan is not acceptable, EPA will have two years to develop a federal plan. The Affordable Clean Energy rule is not expected to impact SJGS since EPA’s final approval of a state SIP would occur after PNM retires its share of SJGS in 2022.

Since the Navajo Nation does not have primacy over its air quality program, EPA would be the regulatory authority responsible for implementing the Affordable Clean Energy rule on the Navajo Nation. PNM is unable to predict the potential financial or operational impacts on Four Corners.

While corresponding NSR reform regulations were proposed as part of the proposed Affordable Clean Energy rule, the final rule did not include such reform measures. EPA has indicated that it plans to finalize the proposed NSR reform in 2020. Unrelated to the Affordable Clean Energy rule, EPA issued a proposed rule on August 1, 2019 to clarify one aspect of the pre-construction review process for evaluating whether the NSR permitting program would apply to a proposed project at an existing source of emissions. The proposed rule clarifies that both emissions increases and decreases resulting from a project are to be considered in determining whether the proposed project will result in an increase in air emissions.

On December 20, 2018, EPA published in the Federal Register a proposed rule that would revise the Carbon Pollution Standards rule published in October 2015 for new, reconstructed, or modified coal-fired EGUs. The proposed rule would revise the standards for new coal-fired EGUs based on the revised BSER as the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units), instead of partial carbon capture and sequestration. As a result, the proposed rule contains less stringent CO₂ emission performance standards for new units. EPA has also proposed revisions to the standards for reconstructed and modified fossil-fueled power plants to align with the proposed standards for new units. EPA is not proposing any changes nor reopening the standards of performance for newly constructed or reconstructed stationary combustion turbines. A final rule is expected in 2020.

National Ambient Air Quality Standards (“NAAQS”)

The CAA requires EPA to set NAAQS for pollutants reasonably anticipated to endanger public health or welfare. EPA has set NAAQS for certain pollutants, including NOx, SO₂,ozone, and particulate matter. In 2010, EPA updated the primary NOx and SO₂ NAAQS to include a 1-hour standard while retaining the annual standards for NOx and SO₂and the 24-hour SO₂ standard. EPA also updated the final particulate matter standard in 2012 and updated the ozone standard in 2015.

NOx Standard – On April 18, 2018, EPA published the final rule to retain the current primary health-based NOx standards of which NO₂is the constituent of greatest concern and is the indicator for the primary NAAQS. EPA concluded that the current 1-hour and annual primary NO₂ standards are requisite to protect public health with an adequate margin of safety. The rule became effective on May 18, 2018.

SO₂ Standard – On May 13, 2014, EPA released the draft data requirements rule for the 1-hour SO₂ NAAQS, which directs state and tribal air agencies to characterize current air quality in areas with large SO₂ sources to identify maximum 1-

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hour SO₂ concentrations. This characterization requires areas be designated as attainment, nonattainment, or unclassifiable for compliance with the 1-hour SO₂ NAAQS.

On August 11, 2015, EPA released the Data Requirements Rule for SO₂, telling states how to model or monitor to determine attainment or nonattainment with the new 1-hour SO₂ NAAQS. On June 3, 2016, NMED notified PNM that air quality modeling results indicated that SJGS was in compliance with the standard. In January 2017, NMED submitted its formal modeling report regarding attainment status to EPA. The modeling indicated that no area in New Mexico exceeds the 1-hour SO₂ standard. NMED submitted the first annual report for SJGS as required by the Data Requirements Rule in June 2018. That report recommended that no further modeling was warranted due to decreased SO₂emissions. NMED submitted the second and third annual modeling report to EPA in July 2019 and July 2020. Those reports retained the recommendation that no further modeling is needed at this time and is subject to EPA review.

On February 25, 2019, EPA announced its final decision to retain without changes the primary health-based NAAQS for SO₂. Specifically, EPA will retain the current 1-hour standard for SO₂, which is 75 parts per billion, based on the 3-year average of the 99th percentile of daily maximum 1-hour SO₂ concentrations. SO₂ is the most prevalent SO₂ compound and is used as the indicator for the primary SO₂ NAAQS.

On May 14, 2015, PNM received an amendment to its NSR air permit for SJGS, which reflects the revised state implementation plan for regional haze BART and required the installation of SNCRs. The revised permit also required the reduction of SO₂ emissions to 0.10 pound per MMBTU on SJGS Units 1 and 4 and the installation of BDT equipment modifications for the purpose of reducing fugitive emissions, including NOx, SO_2, and particulate matter. These reductions help SJGS meet the NAAQS for these constituents. The BDT equipment modifications were installed at the same time as the SNCRs, in order to most efficiently and cost effectively conduct construction activities at SJGS. See a discussion of the regulatory treatment of BDT in Note 12.

Ozone Standard – On October 1, 2015, EPA finalized the new ozone NAAQS and lowered both the primary and secondary 8-hour standard from 75 to 70 parts per billion. With ozone standards becoming more stringent, fossil-fueled generation units will come under increasing pressure to reduce emissions of NOx and volatile organic compounds since these are the pollutants that form ground-level ozone. On July 13, 2020, EPA proposed to retain the existing ozone NAAQS based on a review of the full body of currently available scientific evidence and exposure/risk information, but that proposal has not yet been published in the Federal Register, and EPA is unlikely to finalize the proposal until after the next presidential election.

On November 10, 2015, EPA proposed a rule revising its Exceptional Events Rule, which outlines the requirements for excluding air quality data (including ozone data) from regulatory decisions if the data is affected by events outside an area’s control. The proposed rule is important in light of the more stringent ozone NAAQS final rule since western states like New Mexico and Arizona are subject to elevated background ozone transport from natural local sources, such as wildfires and stratospheric inversions, and transported via winds from distant sources in other regions or countries. EPA finalized the rule on October 3, 2016 and released related guidance in 2018 and 2019 to help implement its new exceptional events policy.

During 2017 and 2018, EPA released rules establishing area designations for ozone. In those rules, San Juan County, New Mexico, where SJGS and Four Corners are located, is designated as attainment/unclassifiable and only a small area in Doña Ana County, New Mexico is designated as marginal non-attainment. Although Afton is located in Doña Ana County, it is not located within the small area designated as nonattainment for the 2015 ozone standard. The final rule also establishes the timing of attainment dates for each non-attainment area classification, which are marginal, moderate, serious, severe, or extreme. The rule became effective May 8, 2018. Attainment plans for nonattainment areas are due in August 2021.

NMED has responsibility for bringing the small area in Doña Ana County designated as marginal/non-attainment for ozone into compliance and will look at all sources of NOx and volatile organic compounds. On November 22, 2019, EPA issued findings that several states, including New Mexico, had failed to submit SIPs for the 8-hour ozone NAAQS. In response, in December 2019, NMED published the Public Review Draft of the New Mexico 2013 NAAQS Good Neighbor SIP that outlines the strategies and emissions control measures that are expected to improve air quality in the area by May 8, 2021. These strategies and measures would aim to reduce the amount of NOx and volatile organic compounds emitted to the

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atmosphere and will rely upon current or upcoming federal rules, new or revised state rules, and other programs. Comments or requests for a public hearing were required by January 21, 2020.

PNM does not believe there will be material impacts to its facilities as a result of NMED’s non-attainment designation of the small area within Doña Ana County. Until EPA approves attainment designations for the Navajo Nation and releases a proposal to implement the revised ozone NAAQS, PNM is unable to predict what impact the adoption of these standards may have on Four Corners. PNM cannot predict the outcome of this matter.

PM Standard – On January 30, 2020, EPA published in the Federal Register a notice announcing the availability of its final Policy Assessment for the Review of the National Ambient Air Quality Standards for Particulate Matter (the "Final PA"). The final assessment was prepared as part of the review of the primary and secondary PM NAAQS. In the assessment, EPA recommend lowering the primary annual PM2.5 standard to between 8 µg/m3 and 10 µg/m3. However, on April 30, 2020, EPA published a proposed rule to retain the current standards for PM due to uncertainties in the data relied upon in the Final PA. EPA accepted comments on the proposed rule through June 29, 2020. EPA anticipates issuing a final rulemaking in late 2020. PNM cannot predict the outcome of this matter or whether it will have a material impact on its financial position, results of operations, or cash flows.

Navajo Nation Environmental Issues

Four Corners is located on the Navajo Nation and is held under easements granted by the federal government, as well as agreements with the Navajo Nation which grant each of the owners the right to operate on the site. The Navajo Acts purport to give the Navajo Nation Environmental Protection Agency authority to promulgate regulations covering air quality, drinking water, and pesticide activities, including those activities that occur at Four Corners. In October 1995, the Four Corners participants filed a lawsuit in the District Court of the Navajo Nation challenging the applicability of the Navajo Acts to Four Corners. In May 2005, APS and the Navajo Nation signed an agreement resolving the dispute regarding the Navajo Nation’s authority to adopt operating permit regulations under the Navajo Nation Air Pollution Prevention and Control Act. As a result of this agreement, APS sought, and the court granted, dismissal of the pending litigation in the Navajo Nation Supreme Court and the Navajo Nation District Court, to the extent the claims relate to the CAA. The agreement does not address or resolve any dispute relating to other aspects of the Navajo Acts. PNM cannot currently predict the outcome of these matters or the range of their potential impacts.

Cooling Water Intake Structures

In 2014, EPA issued a rule establishing national standards for certain cooling water intake structures at existing power plants and other facilities under the Clean Water Act to protect fish and other aquatic organisms by minimizing impingement mortality (the capture of aquatic wildlife on intake structures or against screens) and entrainment mortality (the capture of fish or shellfish in water flow entering and passing through intake structures).

To minimize impingement mortality, the rule provides operators of facilities, such as SJGS and Four Corners, seven options for meeting Best Technology Available (“BTA”) standards for reducing impingement. SJGS has a closed-cycle recirculating cooling system, which is a listed BTA and may also qualify for the “de minimis rate of impingement” based on the design of the intake structure. The permitting authority must establish the BTA for entrainment on a site-specific basis, taking into consideration an array of factors, including endangered species and social costs and benefits. Affected sources must submit source water baseline characterization data to the permitting authority to assist in the determination. Compliance deadlines under the rule are tied to permit renewal and will be subject to a schedule of compliance established by the permitting authority.

The rule is not clear as to how it applies and what the compliance timelines are for facilities like SJGS that have a cooling water intake structure and only a multi-sector general stormwater permit. However, EPA has indicated that it is contemplating a December 31, 2023 compliance deadline. PNM is working with EPA regarding this issue and does not expect material changes as a result of any requirements that may be imposed upon SJGS, particularly given the NMPRC's April 1, 2020 approval for PNM to retire its share of SJGS by June 2022.

On May 23, 2018, several environmental groups sued EPA Region IX in the U.S. Court of Appeals for the Ninth Circuit Court over EPA’s failure to timely reissue the Four Corners NPDES permit. The petitioners asked the court to issue a writ of

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mandamus compelling EPA Region IX to take final action on the pending NPDES permit by a reasonable date. EPA subsequently reissued the NPDES permit on June 12, 2018. The permit did not contain conditions related to the cooling water intake structure rule as EPA determined that the facility has achieved BTA for both impingement and entrainment by operating a closed-cycle recirculation system. On July 16, 2018, several environmental groups filed a petition for review with EPA’s Environmental Appeals Board concerning the reissued permit. The environmental groups alleged that the permit was reissued in contravention of several requirements under the Clean Water Act and did not contain required provisions concerning certain revised effluent limitation guidelines, existing-source regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities. On December 19, 2018, EPA withdrew the Four Corners NPDES permit in order to examine issues raised by the environmental groups. Withdrawal of the permit moots the appeal pending before the Environmental Appeals Board. EPA’s Environmental Appeals Board thereafter dismissed the environmental groups’ appeal. EPA issued an updated NPDES permit on September 30, 2019. The permit has been stayed pending an appeal filed by several environmental groups on November 1, 2019 to EPA's Environmental Appeals Board. Oral argument on this appeal has been scheduled for September 3, 2020. PNM cannot predict the outcome of this matter or whether it will have a material impact on PNM’s financial position, results of operations or cash flows.

Effluent Limitation Guidelines

On June 7, 2013, EPA published proposed revised wastewater effluent limitation guidelines establishing technology-based wastewater discharge limitations for fossil fuel-fired electric power plants. EPA’s proposal offered numerous options that target metals and other pollutants in wastewater streams originating from fly ash and bottom ash handling activities, scrubber activities, and non-chemical metal cleaning waste operations. All proposed alternatives establish a “zero discharge” effluent limit for all pollutants in fly ash transport water. Requirements governing bottom ash transport water differ depending on which alternative EPA ultimately chooses and could range from effluent limits based on Best Available Technology Economically Achievable to “zero discharge” effluent limits.

EPA signed the final Steam Electric Effluent Guidelines rule on September 30, 2015. The final rule, which became effective on January 4, 2016, phases in the new, more stringent requirements in the form of effluent limits for arsenic, mercury, selenium, and nitrogen for wastewater discharged from wet scrubber systems and zero discharge of pollutants in ash transport water that must be incorporated into plants’ NPDES permits. Each plant must comply between 2018 and 2023 depending on when it needs a new or revised NPDES permit.

The Effluent Limitations Guidelines rule was challenged in the U.S. Court of Appeals for the Fifth Circuit by numerous parties. On April 12, 2017, EPA signed a notice indicating its intent to reconsider portions of the rule, and on August 22, 2017, the Fifth Circuit issued an order severing the issues under reconsideration and holding the case in abeyance as to those issues. However, the court allowed challenges to other portions of the rule to proceed. On April 12, 2019, the Fifth Circuit granted those challenges and issued an opinion vacating several portions of the rule, specifically those related to legacy wastewater and leachate, for which the court deemed the standards selected by EPA arbitrary and capricious.

On September 18, 2017, EPA published a final rule for postponement of certain compliance dates. The rule postponed the earliest date on which compliance with the effluent limitation guidelines for these waste streams would be required from November 1, 2018 until November 1, 2020. Although the new deadlines were challenged in court, the Fifth Circuit rejected those challenges on August 28, 2019. On November 22, 2019, EPA published a proposed rule revising the original Effluent Limitation Guidelines while maintaining the compliance dates. Comments were due January 21, 2020.

Because SJGS is zero discharge for wastewater and is not required to hold a NPDES permit, it is expected that minimal to no requirements will be imposed. Reeves Station, a PNM-owned gas-fired generating station, discharges cooling tower blowdown to a publicly owned treatment plant and holds an NPDES permit. It is expected that minimal to no requirements will be imposed at Reeves Station.

EPA reissued an NPDES permit for Four Corners on June 12, 2018. Since that time, the NPDES permit at Four Corners has been subject to various challenges by environmental groups. See Cooling Water Intake Structures above for additional discussion of Four Corners' current NPDES permit. Four Corners may be required to change equipment and operating practices affecting boilers and ash handling systems, as well as change its waste disposal techniques during the next

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NPDES permit renewal in 2023. PNM is unable to predict the outcome of these matters or a range of the potential costs of compliance.

Santa Fe Generating Station

PNM and NMED are parties to agreements under which PNM has installed a remediation system to treat water from a City of Santa Fe municipal supply well and an extraction well to address gasoline contamination in the groundwater at the site of PNM’s former Santa Fe Generating Station and service center. A 2008 NMED site inspection report states that neither the source nor extent of contamination at the site has been determined and that the source may not be the former Santa Fe Generating Station. During 2013 and 2014, PNM and NMED collected additional samples that showed elevated concentrations of nitrate and volatile organic compounds in some of the monitoring wells at the site. In addition, one monitoring well contained free-phase hydrocarbon products. PNM collected a sample of the product for “fingerprint” analysis. The results of this analysis indicated the product was a mixture of older and newer fuels. The presence of newer fuels in the sample suggests the hydrocarbon product likely originated from off-site sources. In December 2015, PNM and NMED entered into a memorandum of understanding to address changing groundwater conditions at the site under which PNM agreed to continue hydrocarbon investigation under the supervision of NMED. Qualified costs are eligible for payment through the New Mexico Corrective Action Fund (“CAF”), which is administered by the NMED Petroleum Storage Tank Bureau. In March 2019, PNM received notice from NMED that an abatement plan for the site is required to address concentrations of previously identified compounds, unrelated to those discussed above, found in the groundwater. NMED approved PNM’s abatement plan proposal, which covers field work and reporting.

Field work related to the investigation under both the CAF and abatement plan requirements was completed in October 2019. Activities and findings associated with the field work were presented in two separate reports and released to stakeholders in early 2020. The reports’ conclusions support PNM’s contention that off-site sources have impacted, and are continuing to impact, the local groundwater in the vicinity of the former Santa Fe Generating Station.

The City of Santa Fe has stopped operating its well at the site, which is needed for PNM’s groundwater remediation system to operate. As a result, PNM has stopped performing remediation activities at the site. However, PNM’s monitoring and other abatement activities at the site are ongoing and will continue until the groundwater meets applicable federal and state standards or until the NMED determines remediation is not required, whichever is earlier. PNM is not able to assess the duration of this project or estimate the impact on its obligations if PNM is required to resume groundwater remediation activities at the site. PNM is unable to predict the outcome of these matters.

Coal Combustion Residuals Waste Disposal

CCRs consisting of fly ash, bottom ash, and gypsum generated from coal combustion and emission control equipment at SJGS are currently disposed of in the surface mine pits adjacent to the plant. SJGS does not operate any CCR impoundments or landfills. The NMMMD currently regulates mine reclamation activities at the San Juan mine, including placement of CCRs in the surface mine pits, with federal oversight by the OSM. APS disposes of CCRs in ponds and dry storage areas at Four Corners. Ash management at Four Corners is regulated by EPA and the New Mexico State Engineer’s Office.

EPA’s final coal ash rule, which became effective on October 19, 2015, included a non-hazardous waste determination for coal ash. The rule was promulgated under Subtitle D of RCRA and sets minimum criteria for existing and new CCR landfills and surface impoundments. On December 16, 2016, the Water Infrastructure Improvements for the Nation Act (the “WIIN Act”) was signed into law to address critical water infrastructure needs in the U.S. and contains a number of provisions related to the CCR rules. Among other things, the WIIN Act allows, but does not require, states to develop and submit CCR permit programs for EPA approval, provides flexibility for states to incorporate EPA’s final rule for CCRs or develop other criteria that are at least as protective as EPA’s final rule, and requires EPA to approve state permit programs within 180 days of submission by the state. Because states are not required to implement their own CCR permit programs, EPA will implement the permit program in states that choose not to implement a program, subject to Congressional funding. Until permit programs are in effect, EPA has authority to directly enforce the CCR rule. For facilities located within the boundaries of Native American reservations, such as the Navajo Nation where Four Corners is located, EPA is required to develop a federal permit program regardless of appropriated funds. There is no timeline for establishing either state or federal permitting programs.

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On July 30, 2018, EPA published a rule that constitutes “Phase One, Part One” of its ongoing reconsideration and revision of the April 17, 2015 coal ash rule. The final rule includes two types of revisions. The first revision extended the deadline to allow EGUs with unlined impoundments or that fail to meet the uppermost aquifer requirement to continue to receive coal ash until October 31, 2020. The rule also authorized a “Participating State Director” or EPA to approve suspension of groundwater monitoring and to issue certifications related to the location restrictions, design criteria, groundwater monitoring, remedy selection and implementation. The revisions also modify groundwater protection standards for certain constituents, which include cobalt, molybdenum, lithium, and lead without a maximum contamination level. EPA intends to issue multiple proposed rulemakings with a final rule expected in 2020 that will include the following: (1) deadlines for unlined surface impoundments to cease receiving waste; (2) a “Phase Two” rule to address amendments to the national minimum criteria; and (3) rulemaking for alternative demonstration for unlined surface impoundments with a request for comment on inclusion of legacy units. On August 14, 2019, the “Phase Two” proposed rule was published in the Federal Register with comments due on October 15, 2019. This rule proposes revisions to reporting and accessibility to public information, the definition of CCR piles, the definition of beneficial use, and the requirements for management of CCR piles. A final rule is expected in mid to late 2020. On November 4, 2019, EPA proposed a change to the CCR rule that, subject to EPA authorization for each facility, would allow facilities that have committed to cease burning coal in the near-term to qualify for alternative closure. CCR disposal units at such plants could continue operating even though they would otherwise have been subject to forced closure. On December 2, 2019, EPA published the proposed Part A CCR rule requiring a new date of August 31, 2020 for companies to initiate closure of unlined CCR impoundments and changing the classification of compacted soil-lined or clay-lined surface impoundments from “lined” to “unlined”. On February 20, 2020, EPA published a proposed rule establishing a federal permitting program for the handling of CCR within the boundaries of Native American reservations and in states without their own federally authorized state programs. Permits for units within the boundaries of Native American reservations would be due 18 months after the effective date of the rule. The deadline to provide comments was extended to July 19, 2020. The final rule is expected in 2020. PNM cannot predict the outcome of EPA’s rule making activity or the outcome of any related litigation, and whether or how such a ruling would affect operations at Four Corners.

The CCR rule does not cover mine placement of coal ash. OSM is expected to publish a proposed rule covering mine placement in the future and will likely be influenced by EPA’s rule and the determination by EPA that CCRs are non-hazardous. PNM cannot predict the outcome of OSM’s proposed rulemaking regarding CCR regulation, including mine placement of CCRs, or whether OSM’s actions will have a material impact on PNM’s operations, financial position, or cash flows. Based upon the requirements of the final rule, PNM conducted a CCR assessment at SJGS and made minor modifications at the plant to ensure that there are no facilities that would be considered impoundments or landfills under the rule. PNM would seek recovery from its ratepayers of all CCR costs for retail jurisdictional assets that are ultimately incurred. PNM does not expect the rule to have a material impact on operations, financial position, or cash flows.

As indicated above, CCRs at Four Corners are currently disposed of in ash ponds and dry storage areas. The CCR rule requires ongoing, phased groundwater monitoring. Utilities that own or operate CCR disposal units, such as those at Four Corners were required to collect sufficient groundwater sampling data to initiate a detection monitoring program. Four Corners completed the analysis for its CCR disposal units, which identified several units that will need corrective action or will need to cease operations and initiate closure by October 31, 2020 under current regulations. As part of this assessment, Four Corners will continue to gather additional groundwater data and perform remedial evaluations. At this time, PNM does not anticipate its share of the cost to complete these corrective actions, to close the CCR disposal units, or to gather and perform remedial evaluations on groundwater at Four Corners will have a significant impact on its operations, financial position, or cash flows.

Other Commitments and Contingencies

Coal Supply

SJGS

The coal requirements for SJGS are supplied by WSJ LLC. WSJ LLC holds certain federal, state, and private coal leases. In addition to coal delivered to meet the current needs of SJGS, PNM has prepaid the current San Juan mine owner and operator, WSJ LLC, for certain coal mined but not yet delivered to the plant site. At both June 30, 2020 and December 31,

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2019, prepayments for coal, which are included in other current assets, amounted to $26.3 million. Additional information concerning the coal supply for SJGS is contained in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

In conjunction with the activities undertaken to comply with the CAA for SJGS, PNM and the other owners of SJGS evaluated alternatives for the supply of coal to SJGS. On July 1, 2015, PNM and Westmoreland entered into a new coal supply agreement (the “SJGS CSA”), pursuant to which Westmoreland, through its indirectly wholly-owned subsidiary SJCC, agreed to supply all of the coal requirements of SJGS through June 30, 2022. PNM and Westmoreland also entered into agreements under which CCR disposal and mine reclamation services for SJGS would be provided. As discussed in Note 6, with the closing of the sale of the assets of SJCC on March 15, 2019, WSJ LLC assumed the rights and obligations of SJCC under the SJGS CSA and the agreements for CCR disposal and mine reclamation services. Pricing under the SJGS CSA is primarily fixed, with adjustments to reflect changes in general inflation. The pricing structure takes into account that WSJ LLC has been paid for coal mined but not delivered.

PNM had the option to extend the SJGS CSA, subject to negotiation of the term of the extension and compensation to the miner. In 2018, PNM, Los Alamos, UAMPS, and Tucson provided notice of their intent to exit SJGS in 2022 and Farmington gave notice that it wishes to continue SJGS operations and to extend the terms of both agreements. On November 30, 2018, PNM provided notice to Westmoreland that PNM does not intend to extend the term of the SJGS CSA or to negotiate a new coal supply agreement for SJGS, which will result in the current agreement expiring on its own terms on June 30, 2022. See additional discussion of PNM’s SJGS Abandonment Application in Note 12.

In connection with certain mining permits relating to the operation of the San Juan mine, the San Juan mine owner was required to post reclamation bonds of $118.7 million with the NMMMD. In order to facilitate the posting of reclamation bonds by sureties on behalf of the San Juan mine owner, PNMR entered into letter of credit arrangements with a bank under which letters of credit aggregating $30.3 million have been issued. In May 2020, JPMorgan Chase Bank N.A. gave notice that it would not extend the letters of credit, which expire on October 21, 2020. PNMR is currently pursuing a replacement agreement. As discussed in Note 6, on March 15, 2019, the assets owned by SJCC were sold to WSJ LLC, a subsidiary of Westmoreland Mining Holdings, LLC. Under the sale agreement, WSJ LLC assumed the rights and obligations of SJCC, including obligations to PNMR under the outstanding letters of credit.

Four Corners

APS purchases all of Four Corners’ coal requirements from NTEC, an entity owned by the Navajo Nation, under a coal supply contract (the “Four Corners CSA”) that expires in 2031. The coal comes from reserves located within the Navajo Nation. NTEC has contracted with Bisti Fuels Company, LLC, a subsidiary of The North American Coal Corporation, for management and operation of the mine. The contract provides for pricing adjustments over its term based on economic indices. PNM's share of the coal costs is being recovered through the FPPAC. See additional discussion of the Four Corners CSA in Note 17 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Coal Mine Reclamation

As indicated under Coal Combustion Residuals Waste Disposal above, SJGS currently disposes of CCRs in the surface mine pits adjacent to the plant and Four Corners disposes of CCRs in ponds and dry storage areas. As discussed in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, in conjunction with the proposed shutdown of SJGS Units 2 and 3 to comply with the BART requirements of the CAA, periodic updates to the coal mine reclamation study were requested by the SJGS participants. These updates have generally increased PNM's share of the estimated cost of mine reclamation and have included adjustments to reflect the December 2017 shutdown of SJGS Units 2 and 3, the terms of the reclamation services agreement with WSJ LLC, and changes to reflect the requirements of the 2015 San Juan mine permit plan.

In December 2018, PNM remeasured its liability for coal mine reclamation for the mine that serves SJGS to reflect that reclamation activities may occur beginning in 2022, rather than in 2053 as previously anticipated. This estimate resulted in an increase in overall reclamation costs of $39.2 million due to an increase in the amount of fill dirt required to remediate the mine areas and the timing of activities necessary to reclaim the mine that serves SJGS. The increase includes costs for both the

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underground and surface mines that serve SJGS. PNM recovers from retail customers reclamation costs associated with the underground mine. However, the NMPRC has capped the amount that can be collected from retail customers for final reclamation of the surface mines at $100.0 million. As a result, PNM recorded $9.4 million of the increase in the liability related to the underground mine in regulatory assets on the Condensed Consolidated Balance Sheets and received recovery for such costs in its SJGS Abandonment Application. See Note 12. PNM’s estimate of the costs necessary to reclaim the mine that serves SJGS is subject to many assumptions, including the timing of reclamation, generally accepted practices at the time reclamation activities occur, and then current inflation and discount rates. PNM cannot predict the ultimate cost to reclaim the mine that serves SJGS and would seek to recover all costs related to reclaiming the underground mine from its customers but could be exposed to additional loss related to surface mine reclamation.

A draft coal mine reclamation study for the mine that serves Four Corners was issued in July 2019. The study reflected operation of the mine through 2031, the term of the Four Corners CSA. In June 2019, the draft study resulted in a net decrease in PNM’s share of the coal mine reclamation obligation of $0.3 million, which was primarily driven by lower overhead costs offset by an increase driven by a reduction in the discount rate used by PNM to measure the liability. In September 2019, the study was finalized and included the same assumptions used in the draft study with limited modifications. PNM updated its liability using the final study and to reflect the appropriate discount rates, which had decreased since PNM’s prior measurement. These updates resulted in an increase to PNM’s share of the coal mine reclamation obligation for the mine that serves Four Corners of $1.1 million during the three months ended September 30, 2019.

Based on the most recent estimates and PNM’s ownership share of SJGS, PNM’s remaining payments as of June 30, 2020 for mine reclamation, in future dollars, are estimated to be $90.6 million for the surface mines at both SJGS and Four Corners and $40.0 million for the underground mine at SJGS. At June 30, 2020 and December 31, 2019, liabilities, in current dollars, of $69.9 million and $70.3 million for surface mine reclamation and $26.4 million and $25.3 million for underground mine reclamation were recorded in other deferred credits.

Under the terms of the SJGS CSA, PNM and the other SJGS owners are obligated to compensate WSJ LLC for all reclamation costs associated with the supply of coal from the San Juan mine. The SJGS owners entered into a reclamation trust funds agreement to provide funding to compensate WSJ LLC for post-term reclamation obligations. As discussed in Note 16 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, as part of the restructuring of SJGS ownership the SJGS owners negotiated the terms of an amended agreement to fund post-term reclamation obligations under the CSA. The trust funds agreement requires each owner to enter into an individual trust agreement with a financial institution as trustee, create an irrevocable reclamation trust, and periodically deposit funds into the reclamation trust for the owner’s share of the mine reclamation obligation. Deposits, which are based on funding curves, must be made on an annual basis. As part of the restructuring of SJGS ownership discussed above, the SJGS participants agreed to adjusted interim trust funding levels. PNM funded $5.5 million in December 2019. Based on PNM’s reclamation trust fund balance at June 30, 2020, the current funding curves indicate PNM’s required contributions to its reclamation trust fund would be $8.8 million in 2020, $10.9 million in 2021, and $11.7 million in 2022.

Under the Four Corners CSA, which became effective on July 7, 2016, PNM is required to fund its ownership share of estimated final reclamation costs in annual installments into an irrevocable escrow account solely dedicated to the final reclamation cost of the surface mine at Four Corners. PNM contributed $2.1 million in July 2019 and anticipates providing additional funding of $1.9 million in each of the years from 2020 through 2024.

If future estimates increase the liability for surface mine reclamation, the excess would be expensed at that time. The impacts of changes in New Mexico state law as a result of the enactment of the ETA and regulatory determinations made by the NMPRC may also affect PNM’s financial position, results of operations, and cash flows. See additional discussion regarding PNM’s SJGS Abandonment Application in Note 12. PNM is currently unable to determine the outcome of these matters or the range of possible impacts.

Continuous Highwall Mining Royalty Rate

In August 2013, the DOI Bureau of Land Management (“BLM”) issued a proposed rulemaking that would retroactively apply the surface mining royalty rate of 12.5% to continuous highwall mining (“CHM”). Comments regarding the rulemaking

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were due on October 11, 2013 and PNM submitted comments in opposition to the proposed rule. There is no legal deadline for adoption of the final rule.

SJCC, as former owner and operator of San Juan mine, utilized the CHM technique from 2000 to 2003, and with the approval of the Farmington, New Mexico Field Office of BLM to reclassify the final highwall as underground reserves, applied the 8.0% underground mining royalty rate to coal mined using CHM and sold to SJGS. In March 2001, SJCC learned that the DOI Minerals Management Service (“MMS”) disagreed with the application of the underground royalty rate to CHM. In August 2006, SJCC and MMS entered into an agreement tolling the statute of limitations on any administrative action to recover unpaid royalties until BLM issued a final, non-appealable determination as to the proper rate for CHM-mined coal. The proposed BLM rulemaking has the potential to terminate the tolling provision of the settlement agreement. Underpaid royalties of approximately $5 million for SJGS would become due if the proposed BLM rule is adopted as proposed. PNM’s share of any amount that is ultimately paid would be approximately 46.3%, none of which would be passed through PNM’s FPPAC. PNM is unable to predict the outcome of this matter.

PVNGS Liability and Insurance Matters

Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act, which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan. In accordance with this act, the PVNGS participants are insured against public liability exposure for a nuclear incident up to $13.9 billion per occurrence. PVNGS maintains the maximum available nuclear liability insurance in the amount of $450 million, which is provided by American Nuclear Insurers. The remaining $13.5 billion is provided through a mandatory industry-wide retrospective assessment program. If losses at any nuclear power plant covered by the program exceed the accumulated funds, PNM could be assessed retrospective premium adjustments. Based on PNM’s 10.2% interest in each of the three PVNGS units, PNM’s maximum potential retrospective premium assessment per incident for all three units is $42.1 million, with a maximum annual payment limitation of $6.2 million, to be adjusted periodically for inflation.

The PVNGS participants maintain insurance for damage to, and decontamination of, property at PVNGS in the aggregate amount of $2.8 billion, a substantial portion of which must first be applied to stabilization and decontamination. These coverages are provided by Nuclear Electric Insurance Limited (“NEIL”). The primary policy offered by NEIL contains a sublimit of $2.25 billion for non-nuclear property damage. If NEIL’s losses in any policy year exceed accumulated funds, PNM is subject to retrospective premium adjustments of $5.4 million for each retrospective premium assessment declared by NEIL’s Board of Directors due to losses. The insurance coverages discussed in this and the previous paragraph are subject to certain policy conditions, sublimits, and exclusions.

PVNGS Decommissioning Liability

PNM is responsible for all decommissioning obligations related to its entire interest in PVNGS, including portions under lease both during and after termination of the leases. PNM records its share of the PVNGS decommissioning obligation as an ARO on its Condensed Consolidated Balances Sheet. Studies on the decommissioning costs of PVNGS are performed periodically and revisions to the ARO liability are recorded. In May 2020, a new decommissioning cost study was completed, which required PNM to remeasure its PVNGS decommissioning ARO. The new study resulted in a decrease to PNM’s share of the nuclear decommissioning obligation of $6.4 million as of June 30, 2020. Additional information concerning the Company's PVNGS ARO is contained in Note 15 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Water Supply

Because of New Mexico’s arid climate and periodic drought conditions, there is concern in New Mexico about the use of water, including that used for power generation. Although PNM does not believe that its operations will be materially affected by drought conditions at this time, it cannot forecast long-term weather patterns. Public policy, local, state and federal regulations, and litigation regarding water could also impact PNM operations. To help mitigate these risks, PNM has secured permanent groundwater rights for the existing plants at Reeves Station, Rio Bravo, Afton, Luna, Lordsburg, and La Luz. Water availability is not an issue for these plants at this time. However, prolonged drought, ESA activities, and a federal lawsuit by

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the State of Texas (suing the State of New Mexico over water deliveries) could pose a threat of reduced water availability for these plants.

For SJGS and Four Corners, PNM and APS have negotiated an agreement with senior water rights holders (tribes, municipalities, and agricultural interests) in the San Juan basin to mutually share the impacts of water shortages through 2021.

In April 2010, APS signed an agreement on behalf of the PVNGS participants with five cities to provide cooling water essential to power production at PVNGS for 40 years.

PVNGS Water Supply Litigation

In 1986, an action commenced regarding the rights of APS and the other PVNGS participants to the use of groundwater and effluent at PVNGS. APS filed claims that dispute the court’s jurisdiction over PVNGS’ groundwater rights and their contractual rights to effluent relating to PVNGS and, alternatively, seek confirmation of those rights. In 1999, the Arizona Supreme Court issued a decision finding that certain groundwater rights may be available to the federal government and Native American tribes. In addition, the Arizona Supreme Court issued a decision in 2000 affirming the lower court’s criteria for resolving groundwater claims. Litigation on these issues has continued in the trial court. No trial dates have been set in these matters. PNM does not expect that this litigation will have a material impact on its results of operation, financial position, or cash flows.

San Juan River Adjudication

In 1975, the State of New Mexico filed an action in NM District Court to adjudicate all water rights in the San Juan River Stream System, including water used at Four Corners and SJGS. PNM was made a defendant in the litigation in 1976. In March 2009, then President Obama signed legislation confirming a 2005 settlement with the Navajo Nation. Under the terms of the settlement agreement, the Navajo Nation’s water rights would be settled and finally determined by entry by the court of two proposed adjudication decrees. The court issued an order in August 2013 finding that no evidentiary hearing was warranted in the Navajo Nation proceeding and, on November 1, 2013, issued a Partial Final Judgment and Decree of the Water Rights of the Navajo Nation approving the proposed settlement with the Navajo Nation. A number of parties subsequently appealed to the New Mexico Court of Appeals. PNM entered its appearance in the appellate case and supported the settlement agreement in the NM District Court. On April 3, 2018, the New Mexico Court of Appeals issued an order affirming the decision of the NM District Court. Several parties filed motions requesting a rehearing with the New Mexico Court of Appeals seeking clarification of the order, which were denied. The State of New Mexico and various other appellants filed a writ of certiorari with the NM Supreme Court. The NM Supreme Court granted the State of New Mexico’s petition and denied the other parties’ requests. The issues regarding the Navajo Nation settlement have been briefed and are awaiting a decision by the NM Supreme Court. Adjudication of non-Indian water rights is ongoing.

PNM is participating in this proceeding since PNM’s water rights in the San Juan Basin may be affected by the rights recognized in the settlement agreement and adjudicated to the Navajo Nation, which comprise a significant portion of water available from sources on the San Juan River and in the San Juan Basin and which have priority in times of shortages. PNM is unable to predict the ultimate outcome of this matter or estimate the amount or range of potential loss and cannot determine the effect, if any, of any water rights adjudication on the present arrangements for water at SJGS and Four Corners. Final resolution of the case cannot be expected for several years. An agreement reached with the Navajo Nation in 1985, however, provides that if Four Corners loses a portion of its rights in the adjudication, the Navajo Nation will provide, for an agreed upon cost, sufficient water from its allocation to offset the loss.

Rights-of-Way Matter

On January 28, 2014, the County Commission of Bernalillo County, New Mexico passed an ordinance requiring utilities to enter into a use agreement and pay a yet-to-be-determined fee as a condition to installing, maintaining, and operating facilities on county rights-of-way. The fee is purported to compensate the county for costs of administering and maintaining the rights-of-way, as well as for capital improvements. After extensive challenges to the validity of the ordinance, the utilities filed a writ of certiorari with the NM Supreme Court, which was denied. The utilities and Bernalillo County had reached a standstill agreement whereby the county would not take any enforcement action against the utilities pursuant to the ordinance during the

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pendency of then pending litigation, but not including any period for appeal of a judgment, or upon 30 days written notice by either the county or the utilities of their intention to terminate the agreement. After court-ordered settlement discussions, PNM and Bernalillo County executed a franchise fee agreement with a term of 15 years. Under the agreement, PNM will pay franchise fees to the county at an amount similar to those paid by PNM in other jurisdictions. PNM will recover the cost of the franchise fees as a direct pass-through to customers located in Bernalillo County. The agreement is subject to approval by the New Mexico Second District Court in Bernalillo County. PNM cannot predict the outcome of this matter.

Navajo Nation Allottee Matters

In September 2012, 43 landowners filed a notice of appeal with the Bureau of Indian Affairs (“BIA”) appealing a March 2011 decision of the BIA Regional Director regarding renewal of a right-of-way for a PNM transmission line. The landowners claim to be allottees, members of the Navajo Nation, who pursuant to the Dawes Act of 1887, were allotted ownership in land carved out of the Navajo Nation and allege that PNM is a rights-of-way grantee with rights-of-way across the allotted lands and are either in trespass or have paid insufficient fees for the grant of rights-of-way or both. The allottees generally allege that they were not paid fair market value for the right-of-way, that they were denied the opportunity to make a showing as to their view of fair market value, and thus denied due process. The allottees filed a motion to dismiss their appeal with prejudice, which was granted in April 2014. Subsequent to the dismissal, PNM received a letter from counsel on behalf of what appears to be a subset of the 43 landowner allottees involved in the appeal, notifying PNM that the specified allottees were revoking their consents for renewal of right of way on six specific allotments. On January 22, 2015, PNM received a letter from the BIA Regional Director identifying ten allotments with rights-of-way renewals that were previously contested. The letter indicated that the renewals were not approved by the BIA because the previous consent obtained by PNM was later revoked, prior to BIA approval, by the majority owners of the allotments. It is the BIA Regional Director’s position that PNM must re-obtain consent from these landowners. On July 13, 2015, PNM filed a condemnation action in the NM District Court regarding the approximately 15.49 acres of land at issue. On September 18, 2015, the allottees filed a separate complaint against PNM for federal trespass. On December 1, 2015, the court ruled that PNM could not condemn two of the five allotments at issue based on the Navajo Nation’s fractional interest in the land. PNM filed a motion for reconsideration of this ruling, which was denied. On March 31, 2016, the Tenth Circuit granted PNM’s petition to appeal the December 1, 2015 ruling. Both matters have been consolidated. Oral argument before the Tenth Circuit was heard on January 17, 2017. On May 26, 2017, the Tenth Circuit affirmed the district court. On July 8, 2017, PNM filed a Motion for Reconsideration en banc with the Tenth Circuit, which was denied. The NM District Court stayed the case based on the Navajo Nation’s acquisition of interests in two additional allotments and the unresolved ownership of the fifth allotment due to the owner’s death. On November 20, 2017, PNM filed its petition for writ of certiorari with the US Supreme Court, which was denied. The underlying litigation continues in the NM District Court. On March 27, 2019, several individual allottees filed a motion for partial summary judgment on the issue of trespass. The Court held a hearing on the motion on June 18, 2019 and took the motion under advisement. Mediation on the matter is ongoing and parties are continuing to discuss a potential settlement. PNM cannot predict the outcome of these matters.

(12) Regulatory and Rate Matters

The Company is involved in various regulatory matters, some of which contain contingencies that are subject to the same uncertainties as those described in Note 11. Additional information concerning regulatory and rate matters is contained in Note 17 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

PNM

New Mexico General Rate Cases

New Mexico 2015 General Rate Case (“NM 2015 Rate Case”)

On August 27, 2015, PNM filed an application with the NMPRC for a general increase in retail electric rates. The application proposed a revenue increase of $123.5 million, including base non-fuel revenues of $121.7 million, and proposed that new rates become effective beginning in July 2016. The NMPRC ordered PNM to file additional testimony regarding

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PNM’s interests in PVNGS, including the 64.1 MW of PVNGS Unit 2 that PNM repurchased in January 2016 pursuant to the terms of the initial sales-leaseback transactions.

In August 2016, the Hearing Examiner in the case issued a recommended decision (the “August 2016 RD”). The August 2016 RD, among other things, recommended that the NMPRC find PNM was imprudent in the actions taken to purchase the previously leased 64.1 MW of capacity in PVNGS Unit 2, extending the leases for 114.6 MW of capacity of PVNGS Units 1 and 2, and installing the BDT equipment on SJGS Units 1 and 4. As a result, the August 2016 RD recommended the NMPRC disallow recovery of the entire $163.3 million purchase price for the January 15, 2016 purchases of the assets underlying three leases aggregating 64.1 MW of PVNGS Unit 2, the undepreciated capital improvements made during the period the 64.1 MW of purchased capacity was leased, rent expense aggregating $18.1 million annually for leases aggregating 114.6 MW of capacity that were extended through January 2023 and 2024 (Note 13), and recovery of the costs of converting SJGS Units 1 and 4 to BDT.

On September 28, 2016, the NMPRC issued an order that authorized PNM to implement an increase in non-fuel rates of $61.2 million, effective for bills sent to customers after September 30, 2016. The order generally approved the August 2016 RD, but with certain significant modifications. The modifications to the August 2016 RD included:

•Inclusion of the January 2016 purchase of the assets underlying three leases of capacity, aggregating 64.1 MW, of PVNGS Unit 2 at an initial rate base value of $83.7 million; and disallowance of the recovery of the undepreciated costs of capitalized improvements made during the period the 64.1 MW was being leased by PNM, which aggregated $43.8 million when the order was issued

•Recovery of annual rent expenses associated with the 114.6 MW of capacity under the extended leases

•Disallowance of the recovery of any future contributions for PVNGS decommissioning costs related to the 64.1 MW of capacity purchased in January 2016 and the 114.6 MW of capacity under the extended leases

On September 30, 2016, PNM filed a notice of appeal with the NM Supreme Court regarding the order in the NM 2015 Rate Case. Specifically, PNM appealed the NMPRC’s determination that PNM was imprudent in certain matters in the case, including the NMPRC’s disallowance of the full purchase price of the 64.1 MW of capacity in PVNGS Unit 2, the undepreciated costs of capitalized improvements made during the period the 64.1 MW of capacity was leased by PNM, the cost of converting SJGS Units 1 and 4 to BDT, and future contributions for PVNGS decommissioning attributable to the 64.1 MW of purchased capacity and the 114.6 MW of capacity under the extended leases. NEE, NM AREA, and ABCWUA filed notices of cross-appeal to PNM’s appeal. The issues appealed by the various cross-appellants included, among other things, the NMPRC allowing PNM to recover any of the costs of the lease extensions for the 114.6 MW of PVNGS Units 1 and 2 and the purchase price for the 64.1 MW in PVNGS Unit 2, the costs incurred under the Four Corners CSA, and the inclusion of the “prepaid pension asset” in rate base.

During the pendency of the appeal, PNM evaluated the consequences of the order in the NM 2015 Rate Case and the related appeals to the NM Supreme Court as required under GAAP. These evaluations indicated that it was reasonably possible that PNM would be successful on the issues it was appealing but would not be provided capital costs recovery until the NMPRC acted on a decision of the NM Supreme Court. PNM also evaluated the accounting consequences of the issues being appealed by the cross-appellants and concluded that the issues raised in the cross-appeals did not have substantial merit.

In accordance with GAAP, PNM periodically updated its estimate of the amount of time necessary for the NM Supreme Court to render a decision and for the NMPRC to take action on any remanded issues. As a result of those evaluations, through March 31, 2019, PNM had recorded accumulated pre-tax impairments of its capital investments subject to the appeal in the amount of $19.7 million.

On May 16, 2019, the NM Supreme Court issued its decision on the matters that had been appealed in the NM 2015 Rate Case. The NM Supreme Court rejected the matters appealed by the cross-appellants and affirmed the NMPRC’s disallowance of a portion of the purchase price of the 64.1 MW of capacity in PVNGS Unit 2; the undepreciated costs of capital improvements made during the time the 64.1 MW capacity was leased by PNM; and the costs to install BDT at SJGS Units 1 and 4. The NM Supreme Court also ruled that the NMPRC’s decision to permanently disallow recovery of future decommissioning costs related to the 64.1 MW of PVNGS Unit 2 and the 114.6 MW of PVNGS Units 1 and 2 deprived PNM of its rights to due process of law and remanded the case to the NMPRC for further proceedings consistent with the court’s

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findings. On January 8, 2020, the NMPRC issued its order on remand, which reaffirmed its September 2016 order except for the decision to permanently disallow recovery of certain future decommissioning costs related to PVNGS Units 1 and 2. The NMPRC indicated that PNM’s ability to recover these costs will be addressed in a future proceeding and closed the NM 2015 Rate Case docket.

As a result of the NM Supreme Court’s ruling, as of June 30, 2019, PNM recorded pre-tax impairments of $150.6 million, which included $1.3 million recorded in the three months ended March 31, 2019, and is reflected as regulatory disallowances and restructuring costs on the Condensed Consolidated Statements of Earnings. The impairment includes $73.2 million for a portion of the purchase price for 64.1 MW in PVNGS Unit 2, $39.7 million of undepreciated capitalized improvements made during the period the 64.1 MW was being leased by PNM, and $37.7 million for BDT on SJGS Units 1 and 4. The impairment was offset by tax impacts of $45.7 million.

New Mexico 2016 General Rate Case (“NM 2016 Rate Case”)

On December 7, 2016, PNM filed an application with the NMPRC for a general increase in retail electric rates. PNM did not include any of the costs disallowed in the NM 2015 Rate Case that were at issue in its then pending appeal to the NM Supreme Court. PNM’s original application used a FTY beginning January 1, 2018 and requested an increase in base non-fuel revenues of $99.2 million based on a ROE of 10.125%. The primary drivers of PNM’s revenue deficiency included implementation of modifications to PNM’s resource portfolio, which were approved by the NMPRC in December 2015 as part of the SJGS regional haze compliance plan, infrastructure investments, including environmental upgrades at Four Corners, declines in forecasted energy sales due to successful energy efficiency programs and other economic factors, and updates to FERC/retail jurisdictional allocations.

After extensive settlement negotiations and public proceedings, the NMPRC issued a Revised Order Partially Adopting Certification of Stipulation dated January 10, 2018 (the “Revised Order”). The key terms of the Revised Order include:

•An increase in base non-fuel revenues totaling $10.3 million, which includes a reduction to reflect the impact of the decrease in the federal corporate income tax rate and updates to PNM’s cost of debt (aggregating an estimated $47.6 million annually)

•A ROE of 9.575%

•Returning to customers over a three-year period the benefit of the reduction in the New Mexico corporate income tax rate to the extent attributable to PNM’s retail operations (Note 14)

•Disallowing PNM’s ability to collect an equity return on certain investments aggregating $148.1 million at Four Corners, but allowing recovery with a debt-only return

•An agreement to not implement non-fuel base rate changes, other than changes related to PNM’s rate riders, with an effective date prior to January 1, 2020

•A requirement to consider the prudency of PNM’s decision to continue its participation in Four Corners in PNM's next general rate case filing

In accordance with the settlement agreement and the NMPRC’s final order, PNM implemented 50% of the approved increase for service rendered beginning February 1, 2018 and implemented the rest of the increase for service rendered beginning January 1, 2019.

Renewable Portfolio Standard

As discussed in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, the ETA was enacted in June 2019. Prior to the enactment of the ETA, the REA established a mandatory RPS requiring a utility to acquire a renewable energy portfolio equal to 10% of retail electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The ETA also removes diversity requirements and certain customer caps and exemptions relating to the application of the RPS under the REA.

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The REA provides for streamlined proceedings for approval of utilities’ renewable energy procurement plans, assures that utilities recover costs incurred consistent with approved procurement plans, and requires the NMPRC to establish a RCT for the procurement of renewable resources to prevent excessive costs being added to rates. The ETA sets a RCT of $60 per MWh using an average annual levelized resource cost basis. PNM makes renewable procurements consistent with the NMPRC approved plans. PNM recovers certain renewable procurement costs from customers through a rate rider. See Renewable Energy Rider below.

Included in PNM’s approved procurement plans are the following renewable energy resources:

•157 MW of PNM-owned solar-PV facilities

•A PPA through 2044 for the output of New Mexico Wind, having a current aggregate capacity of 204 MW, and a PPA through 2035 for the output of Red Mesa Wind, having an aggregate capacity of 102 MW

•A PPA through 2040 for 140 MW of output from La Joya Wind, which is expected to be operational by December 31, 2020

•A PPA through 2042 for the output of the Lightning Dock Geothermal facility with a current capacity of 15 MW

•Solar distributed generation, aggregating 138.6 MW at June 30, 2020, owned by customers or third parties from whom PNM purchases any net excess output and RECs

Renewable Energy Rider

The NMPRC has authorized PNM to recover certain renewable procurement costs through a rate rider billed on a per KWh basis. In its 2019 renewable energy procurement plan case, which was approved by the NMPRC on November 28, 2018, PNM proposed to collect $49.6 million for the year. The 2019 renewable energy procurement plan became effective on January 1, 2019. In its 2020 renewable energy procurement plan case, PNM proposed to collect $58.9 million through a revised rate rider beginning in 2020. In addition, PNM proposed that its FPPAC be reset from a July 1 through June 30 fiscal year to a calendar year. The NMPRC approved PNM's 2020 renewable energy procurement plan on January 29, 2020, and the revised rate rider became effective on February 1, 2020. PNM recorded revenues from the rider of $15.2 million and $30.3 million in the three and six months ended June 30, 2020 and $12.8 million and $25.5 million in the three and six months ended June 30, 2019. On June 1, 2020, PNM filed its renewable energy procurement plan for 2021 which proposes to collect $67.8 million, including $2.3 million related to PNM's voluntary Sky Blue renewable energy program. PNM is not proposing any new procurements in the plan. The NMPRC assigned this matter to a hearing examiner who scheduled a hearing for September 24, 2020. PNM cannot predict the outcome of this matter.

Under the renewable rider, if PNM’s earned rate of return on jurisdictional equity in a calendar year, adjusted for items not representative of normal operations, exceeds the NMPRC-approved rate by 0.5%, PNM is required to refund the excess to customers during May through December of the following year. PNM did not exceed such limitation in 2019.

Energy Efficiency and Load Management

Program Costs and Incentives/Disincentives

The New Mexico Efficient Use of Energy Act (“EUEA”) requires public utilities to achieve specified levels of energy savings and to obtain NMPRC approval to implement energy efficiency and load management programs. The EUEA requires the NMPRC to remove utility disincentives to implementing energy efficiency and load management programs and to provide incentives for such programs. The NMPRC has adopted a rule to implement this act. PNM’s costs to implement approved programs and incentives are recovered through a rate rider. During the 2019 New Mexico legislative session, the EUEA was amended to, among other things, include a decoupling mechanism for disincentives, preclude a reduction to a utility’s ROE based on approval of disincentive or incentive mechanisms, establish energy savings targets for the period 2021 through 2025, and require that annual program funding be 3% to 5% of an electric utility's annual customer bills excluding gross receipt taxes, franchise and right-of-way access fees, provided that a customer's annual cost not exceed seventy-five thousand dollars.

In 2019, PNM submitted a filing to address incentives to be earned in 2020. PNM’s proposed incentive mechanism is similar to that approved for 2018 and 2019 with minor modifications to reflect input from interested parties. The proposed incentive mechanism includes a base incentive of 7.1% of program costs, or approximately $1.8 million, based on savings of 59 GWh in 2020 with a sliding scale that provides for additional incentive if savings exceed 68 GWh. On May 28, 2020, PNM

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began collecting $0.5 million of additional incentive resulting from PNM's 2019 energy efficiency reconciliation. No hearings were considered necessary and PNM’s 2020 energy efficiency rider reflecting the 2020 incentive became effective beginning December 30, 2019.

On April 15, 2020, PNM filed an application for energy efficiency and load management programs to be offered in 2021, 2022, and 2023. The proposed program portfolio consists of twelve programs with a total annual budget of $31.4 million in 2021, $31.0 million in 2022, and $29.6 million in 2023. The application also seeks approval of an annual base incentive of 7.1% of the portfolio budget if PNM achieves energy savings of at least 80 GWh in a year. The proposed incentive would increase if PNM is able to achieve savings greater than 80 GWh in a year. The application also proposes an advanced metering infrastructure (“AMI”) pilot program, which includes the installation of 5,000 AMI meters at a cost of $2.9 million. PNM is proposing the pilot program to comply with an NMPRC order denying PNM’s February 2016 application to replace its existing customer metering equipment with AMI. The NMPRC assigned this matter to a hearing examiner, who scheduled a hearing for August 31, 2020. PNM cannot predict the outcome of this matter.

Integrated Resource Plans

NMPRC rules require that investor owned utilities file an IRP every three years. The IRP is required to cover a 20-year planning period and contain an action plan covering the first four years of that period.

2017 IRP

PNM filed its 2017 IRP on July 3, 2017. The 2017 IRP addresses the 20-year planning period from 2017 through 2036 and includes an action plan describing PNM’s plan to implement the 2017 IRP in the four-year period following its filing. The 2017 IRP analyzed several scenarios utilizing assumptions that PNM continues service from its SJGS capacity beyond mid-2022 and that PNM retires its capacity after mid-2022. Key findings of the 2017 IRP included, among other things, that retiring PNM’s share of SJGS in 2022 and existing ownership in Four Corners in 2031 would provide long-term cost savings for PNM’s customers and that the best mix of new resources to replace the retired coal generation would include solar energy and flexible natural gas-fired peaking capacity as well as energy storage, if the economics support it, and wind energy provided additional transmission capacity becomes available. The 2017 IRP also indicated that PNM should retain the currently leased capacity in PVNGS. See additional discussion of PNM’s leased capacity in PVNGS below and in Note 13. PNM's 2017 IRP was subject to extensive hearings and legal challenges and was accepted as compliant with the applicable statute and rules by the NMPRC on December 19, 2018, with further consideration being denied.

As discussed below, on July 1, 2019, PNM submitted its SJGS Abandonment Application with the NMPRC requesting approval to retire SJGS in 2022, for replacement resources, and for issuance of Securitized Bonds under the ETA. Many of the assumptions and findings included in PNM’s July 1, 2019 filing were consistent with those identified in PNM’s 2017 IRP. The SJGS Abandonment Application and the 2017 IRP are not final determinations of PNM’s future generation portfolio. PNM will also be required to obtain NMPRC approval of an exit from Four Corners, which PNM will seek at an appropriate time in the future. Likewise, NMPRC approval of new generation resources through CCNs, PPAs, or other applicable filings will be required.

2020 IRP

In the third quarter of 2019, PNM initiated its 2020 IRP process which will cover the 20-year planning period from 2019 through 2039. Consistent with historical practice, PNM has provided notice to various interested parties and has hosted a series of public advisory presentations. PNM will continue to seek input from interested parties as a part of this process. NMPRC rules require PNM to file its 2020 IRP in July 2020. On March 16, 2020, PNM filed a motion to extend the deadline to file its 2020 IRP to six months after the NMPRC issues a final order approving a replacement resource portfolio and closes the docket in the bifurcated SJGS Abandonment Application and replacement resource proceedings. On April 8, 2020, the NMPRC approved PNM's motion to extend the deadline to file its 2020 IRP as requested. On July 29, 2020 the NMPRC issued a final order for a replacement resource portfolio in the SJGS proceedings.

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SJGS Abandonment Application

As discussed in Note 16 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, on March 22, 2019, the Governor signed into New Mexico state law Senate Bill 489, known as the Energy Transition Act (“ETA”). The ETA became effective as of June 14, 2019 and sets a statewide standard that requires investor-owned electric utilities to have specified percentages of their electric-generating portfolios be from renewable and zero-carbon generating resources. Prior to the enactment of the ETA, the REA established a mandatory RPS requiring utilities to acquire a renewable energy portfolio equal to 10% of retail electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The ETA also provides for a transition from fossil-fuel generation resources to renewable and other carbon-free resources through certain provisions relating to the abandonment of coal-fired generating facilities. These provisions include the use of “energy transition bonds,” which are designed to be highly rated bonds that can be issued to finance certain costs of abandoning coal-fired facilities that are retired prior to January 1, 2023 for facilities operated by a “qualifying utility,” or prior to January 1, 2032 for facilities that are not operated by the qualifying utility.

On July 1, 2019, PNM filed a Consolidated Application for the Abandonment and Replacement of SJGS and Related Securitized Financing Pursuant to the ETA (the “SJGS Abandonment Application”). The SJGS Abandonment Application sought NMPRC approval to retire PNM’s share of SJGS after the existing coal supply and participation agreements end in June 2022, for approval of replacement resources, and for the issuance of “energy transition bonds,” as provided by the ETA. PNM’s application proposed several replacement resource scenarios including PNM’s recommended replacement scenario, which would have provided cost savings to customers compared to continued operation of SJGS, preserved system reliability, and is consistent with PNM’s plan to have an emissions-free generation portfolio by 2040. This plan would have provided PNM authority to construct and own a 280 MW natural gas-fired peaking plant to be located on the existing SJGS facility site, and 70 MW of battery storage facilities. In addition, PNM’s recommended replacement resource scenario would have allowed PNM to execute PPAs to procure renewable energy from a total of 350 MW of solar-PV generating facilities and for energy from a total of 60 MW of battery storage facilities. PNM’s application included three other replacement resource scenarios that would have placed a greater amount of resources in the San Juan area, or resulted in no new fossil-fueled generating facilities, or no battery storage facilities being added to PNM’s portfolio. When compared to PNM's recommended replacement resource scenario, the three alternative resource scenarios were expected to result in increased costs to customers and the two alternative resource scenarios that result in no new fossil-fueled generating facilities were expected to not provide adequate system reliability. The SJGS Abandonment Application also included a request to issue approximately $361 million of energy transition bonds (the “Securitized Bonds”). PNM’s request for the issuance of Securitized Bonds included approximately $283 million of forecasted undepreciated investments in SJGS at June 30, 2020, an estimated $28.6 million for plant decommissioning and coal mine reclamation costs, approximately $9.6 million in upfront financing costs, and approximately $20.0 million for job training and severance costs for affected employees. Proceeds from the Securitization Bonds would also be used to fund approximately $19.8 million for economic development in the four corners area.

On July 10, 2019, the NMPRC issued an order requiring the SJGS Abandonment Application be considered in two proceedings: one addressing SJGS abandonment and related financing, and the other addressing replacement resources. The NMPRC indicated that PNM’s July 1, 2019 filing is responsive to the January 30, 2019 order but did not definitively indicate if the abandonment and financing proceedings would be evaluated under the requirements of the ETA. The NMPRC’s July 10, 2019 order also extended the deadline to issue the abandonment and financing order to nine months and to issue the replacement resources order to 15 months.

After several requests for clarification and legal challenges and following oral argument on January 29, 2020, the NM Supreme Court issued a ruling requiring the NMPRC to apply the ETA to all aspects of PNM’s SJGS Abandonment Application, indicating any previous NMPRC orders inconsistent with the ruling should be vacated, and denying parties’ request for stay. The NM Supreme Court issued a subsequent opinion, on July 23, 2020, more fully explaining the legal rationale for the January 29, 2020 ruling. Hearings on the abandonment and securitized financing proceedings were held in December 2019 and hearings on replacement resources were held in January 2020.

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On February 21, 2020, the Hearing Examiners issued two recommended decisions recommending approval of PNM’s proposed abandonment of SJGS, subject to approval of replacement resources, and approval of PNM’s proposed financing order to issue Securitized Bonds. The Hearing Examiners recommended that PNM be authorized to abandon SJGS by June 30, 2022, and to record regulatory assets for certain other abandonment costs that are not specifically addressed under the provisions of the ETA to preserve its ability to recover the costs in a future general rate case. The Hearing Examiner recommended that this authority only extend to the deferral of the costs and it not be an approval of any ratemaking treatment. The Hearing Examiners also recommended PNM be authorized to issue Securitized Bonds of up to $361 million and establish a rate rider to collect non-bypassable customer charges for repayment of the bonds and be subject to bi-annual adjustments (the “Energy Transition Charge”). The Hearing Examiners recommended an interim rate rider adjustment upon the start date of the Energy Transition Charge to provide immediate credits to customers for the full value of PNM’s revenue requirement related to SJGS until those reductions are reflected in base rates. In addition, the Hearing Examiners recommended PNM be granted authority to establish regulatory assets to recover costs that PNM will pay prior to the issuance of the Securitized Bonds, including costs associated with the bond issuances as well as for severances, job training, economic development, and workforce training. On April 1, 2020, the NMPRC unanimously approved the Hearing Examiners' recommended decisions regarding the abandonment of SJGS and the related securitized financing under the ETA. On April 10, 2020, CFRE and NEE filed a notice of appeal with the NM Supreme Court of the NMPRC's approval of PNM's request to issue securitized financing under the ETA. The NM Supreme Court granted motions to intervene filed by PNM, WRA, CCAE, and the Sierra Club. On May 8, 2020, CFRE and NEE filed a joint statement of issues with the NM Supreme Court which asserts that the NMPRC improperly applied the ETA and that the ETA violates the New Mexico Constitution. On June 19, 2020, WRA filed a motion to dismiss CFRE and NEE’s constitutional challenges to the ETA on the ground that the New Mexico Constitution provides that only New Mexico district courts have original jurisdiction over the claims. On July 24, 2020, the NM Supreme Court issued an order denying WRA’s motion to dismiss and requiring briefs in chief to be filed by August 17, 2020. PNM cannot predict the outcome of this matter.

PNM evaluated the consequences of the NMPRC's April 1, 2020 orders approving the abandonment of SJGS and the related issuance of Securitized Bonds under GAAP. This evaluation indicated that it is probable that PNM will be required to fund severances for PNM employees at the facility upon its retirement in 2022 and for PNMR shared services employees providing administrative and other support services to SJGS. In addition, the evaluation indicated that it is probable PNM will be obligated to fund severances and other costs for the WSJ LLC employees and to fund certain state agencies for economic development and workforce training upon the issuance of the Securitized Bonds. PNM believes these obligations can be reasonably estimated as of March 31, 2020 and, pursuant to the NMPRC's April 1, 2020 orders and the requirements of the ETA, are recoverable from New Mexico retail customers. As a result, in March 2020, PNMR and PNM recorded obligations of $9.4 million and $8.1 million for estimated severances, $8.9 million for obligations to fund severances and other costs of WSJ LLC employees, and to fund $19.8 million to state agencies for economic development and workforce training upon the issuance of the Securitized Bonds. The total amount recorded for these estimates of $38.1 million and $36.8 million is reflected in other deferred credits and as a corresponding deferred regulatory asset on PNMR's and PNM's Condensed Consolidated Balance Sheets as of June 30, 2020. These estimates may be adjusted in future periods as the Company refines its expectations. In addition, as discussed above these costs may be challenged by parties pursuant to the notices of appeal filed with the NM Supreme Court on April 10, 2020.

On March 27, 2020, the Hearing Examiners issued a partial recommended decision on PNM’s request for approval of replacement resources recommending that the NMPRC bifurcate consideration of PNM’s requested replacement resources. The Hearing Examiners recommended that the NMPRC approve two of PNM’s requested replacement resources, including the 300 MW solar PPA combined with a 40 MW battery storage agreement and the 50 MW solar PPA combined with a 20 MW battery storage agreement. The Hearing Examiners recommended that the two solar and battery procurements be approved first because they are the most cost-effective resources proposed in the case, are supported by the majority of parties, and the economics of the projects will be in jeopardy if approval is delayed past April 30, 2020. The Hearing Examiners recommended that PNM be permitted to recover the energy costs of these PPAs through its FPPAC, and that PNM should recover the demand cost of the energy storage agreements in base rates in a future general rate case. On April 29, 2020, the NMPRC issued an order declining to bifurcate a determination on replacement resources and deferring final consideration until the issuance of a comprehensive recommended decision addressing the entire portfolio of replacement resources.

On June 24, 2020, the Hearing Examiners issued a second recommended decision on PNM's request for approval of replacement resources that addressed the entire portfolio of replacement resources and superseded their March 27, 2020 partial recommended decision. The Hearing Examiners concluded that the ultimate selection of a portfolio of replacement resources

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involves policy considerations that are the province of the NMPRC and stated that they did not intend to make that decision for the NMPRC. The Hearing Examiners recommended that the NMPRC take one of two approaches to select replacement resources. The first approach emphasized resource selection criteria identified in the ETA which include the location of replacement resources over resource selection criteria traditionally applied by the NMPRC including price and reliability. This approach recommended approval of a replacement resource portfolio that includes a 300 MW solar PPA combined with a 150 MW battery storage agreement, a 50 MW solar PPA combined with a 20 MW battery storage agreement, a 200 MW solar PPA combined with a 100 MW battery storage agreement, a 100 MW solar PPA combined with a 30 MW battery storage agreement, and approximately 24 MW of demand response. The second approach emphasized the NMPRC’s traditional resource selection criteria including price and reliability, which included a mix of solar PPAs combined with battery storage agreements and a 200 MW PNM-owned natural gas facility. The Hearing Examiners recommended that the NMPRC require PNM to file, within 30 days, any new proposed PPAs and battery storage agreements required to implement the replacement resource portfolio approved by the NMPRC in a new docket for expedited consideration. The Hearing Examiners also recommended that PNM be permitted to recover the energy costs of these PPAs through its FPPAC, and that PNM should recover the demand cost of the battery storage agreements in base rates in a future general rate case. On July 29, 2020, the NMPRC issued an order approving the Hearing Examiners' first recommended approach, concluding that this approach satisfies threshold reliability considerations for replacement resources. The order also granted in part PNM’s request for an extension of time for PNM to file the application to implement the replacement resource portfolio. PNM has 60 days from the date of the order to file an application in a separate case seeking approval of the proposed final, executed contracts, for any replacement resources that are not currently in evidence that have been approved by the NMPRC.

The financial impact of an early retirement of SJGS and the NMPRC approval process are influenced by many factors outside of PNM’s control, including the economic impact of the SJGS abandonment on the area surrounding the plant and the related mine, as well as the overall political and economic conditions of New Mexico. See additional discussion of the ETA and SJGS Abandonment Application in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. PNM cannot predict the outcome of these matters.

Joint Petition to Investigate PNM’s Option to Purchase Assets Underlying Certain Leases in PVNGS

On April 22, 2019, NEE and other parties, which consist primarily of environmental not-for-profit organizations, filed a joint petition for expedited investigation with the NMPRC. The joint petition requested the NMPRC open an investigation regarding PNM’s option to purchase the assets underlying the PVNGS Unit 1 and 2 leases that will expire in January 2023 and 2024. Various parties filed to participate in the request. On May 8, 2019, the NMPRC issued an order requiring a response from both PNM and NMPRC staff. PNM filed responses indicating, among other things, that the joint petition should be denied, and that PNM has not yet made a decision to purchase or return the assets underlying the leases that expire in January 2023 and 2024. On September 16, 2019, NEE and the other parties filed a motion reiterating their initial petition and seeking the appointment of a hearing examiner to preside over the requested proceeding. On September 30, 2019, PNM filed its response in opposition stating that PNM had previously refuted NEE’s arguments and that there is no need for a hearing examiner to be assigned to this matter. The NMPRC subsequently issued an order denying the petition for investigation. On January 3, 2020, PNM filed notice with the NMPRC of 60-day waivers of the deadline to provide notice to purchase or return the assets underlying the PVNGS Unit 1 leases. On April 10, 2020, PNM filed additional notices of waivers indicating the deadline for PNM to provide irrevocable notice of its intent to purchase or return the PVNGS Unit 1 lease interests was June 15, 2020. On June 11, 2020, PNM provided notices to the lessors and the NMPRC that PNM will return the leased assets under both its PVNGS Unit 1 and Unit 2 leases upon expiration of the leases in January 2023 and 2024. PNM issued an RFP for replacement power resources on June 25, 2020. PNM intends to file for the abandonment approval of replacement resources for of its share of PVNGS leased capacity with the NMPRC in early 2021. PNM cannot predict the outcome of this matter.

PNM Solar Direct

On May 31, 2019, PNM filed an application with the NMPRC for approval of a program under which qualified governmental and large commercial customers could participate in a voluntary renewable energy procurement program. PNM proposed to recover costs of the program directly from subscribing customers through a rate rider. Under the rider, PNM would procure renewable energy from 50 MW of solar-PV facilities under a 15-year PPA. PNM had fully subscribed the entire output of the 50 MW facilities at the time of the filing. Hearings on the application concluded on January 9, 2020. On March 11, 2020, the hearing examiner issued a recommended decision recommending approval of PNM's application. The hearing

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

examiner's recommended decision was approved by the NMPRC on March 25, 2020. These facilities are expected to begin commercial operations on March 31, 2021. This matter is now concluded.

COVID-19 Regulatory Matters

In March 2020, PNM and other utilities voluntarily implemented a temporary suspension of disconnections and late payment fees for non-payment of utility bills in response to the impacts of the novel coronavirus global pandemic (“COVID-19”). On March 18, 2020, the NMPRC conducted an emergency open meeting for the purpose of adopting emergency amendments to its rules governing service to residential customers. The NMPRC’s emergency order is applicable during the duration of the Governor of New Mexico's emergency executive order and allows for the closure of payment centers, prohibits the discontinuance of a residential customer’s service for non-payment, and suspends the expiration of medical certificates for certain customers. On April 27, 2020, PNM, El Paso Electric Company, New Mexico Gas Company, and Southwestern Public Service Company filed a joint motion with the NMPRC requesting authorization to track costs resulting from each utility's response to the COVID-19 outbreak. The utilities propose these incremental costs and uncollected customer accounts receivable resulting from COVID-19 during the period March 11, 2020 through December 31, 2020 be recorded as a regulatory asset. On June 24, 2020, the NMPRC issued an order authorizing all public utilities regulated by the NMPRC to create a regulatory asset to defer incremental costs related to COVID-19, including increases to bad debt expense incurred during the period beginning March 11, 2020 through the termination of the Governor of New Mexico’s emergency executive order. The NMPRC order requires public utilities creating regulatory assets to pursue all federal, state, or other subsidies available, to record a regulatory liability for all offsetting cost savings resulting from the COVID-19 pandemic, and allows PNM to request recovery in future ratemaking proceedings. As a result, PNM deferred incremental costs related to COVID-19 of $1.3 million as a regulatory asset on the Condensed Consolidated Balance Sheet at June 30, 2020. The NMPRC’s order also imposed additional quarterly reporting requirements on public utilities creating regulatory assets that include changes in customer usage and increased costs and savings recorded to regulatory assets and liabilities.

2020 Decoupling Petition

On May 28, 2020, PNM filed a petition for approval of a rate adjustment mechanism that would decouple the rates of its residential and small power rate classes. Decoupling is a rate design principle that severs the link between the recovery of fixed costs of the utility through volumetric charges. PNM proposes to record the difference between the annual revenue per customer derived from the cost of service approved in the NM 2015 Rate Case and the annual revenue per customer actually recovered from the rate classes beginning on January 1, 2021. If approved, on January 1, 2022, PNM would begin to collect the difference from customers if the revenue per customer from the NM 2015 Rate Case exceeds the actual revenue recovered in 2021, or return the difference to customers if the actual revenue per customer recovered in 2021 exceeds the revenue per customer from the NM 2015 Rate Case. The NMPRC assigned this matter to a hearing examiner, who scheduled a hearing on PNM's petition for October 13, 2020. On July 13, 2020, NEE, ABCWUA, the City of Albuquerque, and Bernalillo County filed motions to dismiss the petition on the grounds that approving PNM’s proposed rate adjustment mechanism outside of a general rate case would result in retroactive ratemaking and piecemeal ratemaking. The motions to dismiss also allege that PNM’s proposed rate adjustment mechanism is inconsistent with the EUEA. Responses to the motions to dismiss are due by August 7, 2020. PNM cannot predict the outcome of this matter.

Audit of PNM’s Compliance with OATT and Financial Reporting

On December 8, 2017, FERC informed PNM it was commencing an audit of PNM’s compliance with several requirements, including compliance with FERC’s Uniform System of Accounts for the annual reporting periods ending December 31, 2015 through December 31, 2019. On July 7, 2020, FERC audit staff issued their final audit report and provided their findings and recommendations. The severity of the findings and recommendations was low as no overall market or customer harm was found. One finding disallowed inclusion of certain costs in the computation of AFUDC and required PNM to reduce previously capitalized AFUDC. As a result, PNM recorded $1.9 million pre-tax increase to interest charges for debt AFUDC and a decrease of less than $0.1 million to other income for equity AFUDC in the three and six months ended June 30, 2020. In addition, FERC also recommended PNM revise its procedures to record upfront and quarterly commitment fees, previously recorded as interest expense, to administrative and general expense. PNM has agreed to the findings and recommendations for corrective action in the report and is required to submit its implementation plan to comply with the recommendations within 30 days.

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

TNMP

TNMP 2018 Rate Case

On May 30, 2018, TNMP filed a general rate proceeding with the PUCT (the “TNMP 2018 Rate Case”) requesting an annual increase to base rates of $25.9 million based on a ROE of 10.5%, a cost of debt of 7.2%, and a capital structure comprised of 50% debt and 50% equity. As part of the application, TNMP proposed to return the regulatory liability related to federal tax reform to customers and to reduce the federal corporate income tax rate to 21%. On December 20, 2018, the PUCT approved an unopposed settlement agreement in the case. The PUCT’s final order results in a $10.0 million annual increase to base rates. The key elements of the approved settlement include a ROE of 9.65%, a cost of debt of 6.44%, and a capital structure comprised of 55% debt and 45% equity. As stated by the settlement agreement, the PUCT’s final order excludes certain items from rate base that were requested in TNMP’s original filing, including approximately $10.6 million of transmission investments that TNMP included in its January 2019 transmission cost of service filing, which was approved by the PUCT in March 2019. In addition, the PUCT’s final order requires TNMP to reflect the lower federal income tax rate of 21% in rates and refund approximately $37.8 million of the regulatory liability recorded at December 31, 2017 related to federal tax reform to customers over a period of five years and the remaining amount over the estimated useful lives of plant in service as of December 31, 2017; approves TNMP’s request to integrate revenues historically recorded under TNMP’s AMS rider, as well as other unrecovered AMS investments, into base rates; approves TNMP’s request for new depreciation rates; and approves a new rider to recover Hurricane Harvey restoration costs, net of amounts to be refunded to customers resulting from the reduction in the federal income tax rate in 2018. See Note 14. The new rider is being charged to customers over a period of approximately three years beginning on the effective date of new base rates. New rates under the TNMP 2018 Rate Case were effective beginning on January 1, 2019.

Recovery of TNMP Rate Case Costs

Recovery of the cost of TNMP’s rate case was moved into a separate proceeding to begin after the conclusion of TNMP 2018 Rate Case. TNMP sought recovery of costs incurred through August 2019 in the amount of $3.8 million and proposed these costs be collected from customers over a three-year period. In October 2019, TNMP and other parties to the proceedings filed an unopposed settlement stipulation that reduced TNMP’s cost recovery to $3.3 million and provide for recovery over a period not to exceed three-years beginning on March 1, 2020. On January 16, 2020, the PUCT approved the settlement. As a result of the PUCT's order, TNMP recorded a pre-tax write-off of $0.5 million in December 2019.

Transmission Cost of Service Rates

TNMP can update its transmission cost of service (“TCOS”) rates twice per year to reflect changes in its invested capital although updates are not allowed while a general rate case is in process. Updated rates reflect the addition and retirement of transmission facilities, including appropriate depreciation, federal income tax and other associated taxes, and the approved rate of return on such facilities.

The following sets forth TNMP’s recent interim transmission cost rate increases:


Effective Date	Approved Increase in Rate Base		Annual Increase in Revenue
	(In millions)










March 21, 2019	$	111.8	$	14.3
September 19, 2019	21.9		3.3
March 27, 2020	59.2		7.8

On July 24, 2020, TNMP filed an application to further update its transmission rates to reflect an increase in total rate base of $10.8 million, which would increase revenues by $2.0 million annually. The application is pending before the PUCT.

Periodic Distribution Rate Adjustment

PUCT rules permit interim rate adjustments to reflect changes in investments in distribution assets. Distribution utilities may file for a periodic rate adjustment between April 1 and April 8 of each year as long as the electric utility is not earning more than its authorized rate of return using weather-normalized data.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On April 6, 2020, TNMP filed its first application for a distribution cost recovery factor (the "2020 DCOS"). The 2020 DCOS application requests an increase in TNMP's annual distribution revenue requirement of $14.7 million based on net capital incremental distribution investments of $149.2 million. TNMP requested a procedural schedule that would result in rates being effective in September 2020. On June 26, 2020, the parties filed a unanimous settlement for a $14.3 million annual distribution revenue requirement with rates effective September 1, 2020. Subsequently, the ALJ issued an order on June 30, 2020, approving interim rates effective September 1, 2020, and remanding the case to the PUCT for approval. The case is pending review by the PUCT.

Energy Efficiency

TNMP recovers the costs of its energy efficiency programs through an energy efficiency cost recovery factor (“EECRF”), which includes projected program costs, under and over collected costs from prior years, rate case expenses, and performance bonuses (if programs exceed mandated savings goals). TNMP’s 2019 EECRF filing requested recovery of $5.9 million, including a performance bonus of $0.8 million, and became effective on March 1, 2020. On May 29, 2020, TNMP filed its request to adjust the EECRF to reflect changes in costs for 2021. The total amount requested was $5.9 million of program costs in 2021, which includes a performance bonus of $1.0 million based on TNMP’s energy efficiency achievements in the 2019 plan year. A procedural schedule was issued setting a hearing on merits for August 21, 2020. On July 2, 2020, the parties filed a joint motion to abate the procedural schedule in order to pursue settlement and on July 27, 2020, a unanimous settlement stipulation was filed with the PUCT to recover its requested costs in 2021, including the performance bonus of $1.0 million. The settlement stipulation is pending PUCT approval.

COVID-19 Electricity Relief Program

On March 26, 2020, the PUCT issued an order establishing an electricity relief program for electric utilities, REPs, and customers impacted by COVID-19. The program allows providers to implement a rider to collect unpaid residential retail customer bills and to ensure these customers continue to have electric service. In addition, the program provides transmission and distribution providers access to zero-interest loans from ERCOT. Collectively, ERCOT’s loans may not exceed $15 million. The program has a term of six months unless extended by the PUCT. In a separate order, the PUCT authorized electric utilities to establish a regulatory asset for costs related to COVID-19. These costs may include but are not limited to costs related to unpaid accounts.

TNMP filed its rider on March 30, 2020. The rider was effective immediately and establishes a charge of $0.33 per MWh in accordance with the PUCT's order. As of June 30, 2020, collections under the rider exceeded unpaid residential retail customer bills and are presented net as a regulatory liability of $0.4 million on the Condensed Consolidated Balance Sheet. Other COVID-19 related costs of $0.3 million were recorded separately as a regulatory asset on the Condensed Consolidated Balance Sheet. On April 14, 2020, TNMP executed an interest-free loan agreement to borrow $0.5 million from ERCOT. The loan must be repaid upon completion of the electricity relief program.

Competition Transition Charge Final Reconciliation

In connection with the adoption of Senate Bill 7 by the Texas Legislature in 1999 that deregulated electric utilities operating within ERCOT, TNMP was allowed to recover its stranded costs through the CTC including a carrying charge. On July 10, 2020, TNMP filed to reconcile and stop the CTC surcharge beginning on September 1, 2020, as TNMP will have fully collected its CTC regulatory asset. On July 23, 2020, the ALJ accepted TNMP's filing effectively stopping the CTC surcharge on September 1, 2020. Additionally, TNMP must make a subsequent compliance filing, by September 14, 2020, to reconcile any under- or over-recoveries that may exist.

(13) Lease Commitments

The Company leases office buildings, vehicles, and other equipment. In addition, PNM leases interests in PVNGS Units 1 and 2 and certain rights-of-way agreements are classified as leases. All of the Company's leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings.

See additional discussion of the Company's leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

PVNGS

PNM leases interests in Units 1 and 2 of PVNGS. The PVNGS leases were entered into in 1985 and 1986 and initially were scheduled to expire on January 15, 2015 for the four Unit 1 leases and January 15, 2016 for the four Unit 2 leases. Following procedures set forth in the PVNGS leases, PNM notified four of the lessors under the Unit 1 leases and one lessor under the Unit 2 lease that it would elect to renew those leases on the expiration date of the original leases. The four Unit 1 leases now expire on January 15, 2023 and the one Unit 2 lease now expires on January 15, 2024. The annual lease payments during the renewal periods aggregate $16.5 million for PVNGS Unit 1 and $1.6 million for Unit 2.

The terms of each of the extended leases do not provide for additional renewal options beyond their currently scheduled expiration dates. PNM had the option to purchase the assets underlying each of the extended leases at their fair market value or to return the lease interests to the lessors on the expiration dates. Under the terms of the extended leases, PNM had until January 15, 2020 for the Unit 1 leases and until January 15, 2021 for the Unit 2 lease to provide notices to the lessors of PNM’s intent to exercise the purchase options or to return the leased assets to the lessors. On January 3, 2020, PNM filed notice with the NMPRC of 60-day waivers of the deadline to provide notice to purchase or return the assets underlying the PVNGS Unit 1 leases. On March 3, 2020, and April 10, 2020, PNM filed additional notices of waivers of the deadlines. The waivers did not impact the PVNGS Unit 1 leases’ current January 15, 2023 expiration dates. PNM’s elections are independent for each lease and are irrevocable. In the proceeding addressing PNM’s 2017 IRP, PNM agreed to promptly notify the NMPRC of a decision to extend the Unit 1 or 2 leases, or to exercise its option to purchase the leased assets at fair market value upon the expiration of leases. See Note 12. On June 11, 2020, PNM provided notice to the lessors and the NMPRC of its intent to return the assets underlying both the PVNGS Unit 1 and Unit 2 leases upon their expiration in January 2023 and 2024. Although PNM elected to return the assets underlying the extended leases, PNM retains certain obligations related to PVNGS, including costs to decommission the facility. PNM is depreciating its capital improvements related to the extended leases using NMPRC approved rates through the end of the NRC license period for each unit, which expire in June 2045 for Unit 1 and in June 2046 for Unit 2. Any transfer of the assets underlying the leases will be required to comply with NRC licensing requirements. For example, the NRC could limit the transfer of ownership of the assets underlying all or a portion of PNM's currently leased interests in PVNGS. If a qualified buyer cannot be identified, PNM may be required to retain all or a portion of its currently leased capacity in PVNGS or be exposed to other claims for damages by the lessors. PNM will seek to recover its undepreciated investments, as well as any other obligations related to PVNGS from NM retail customers.

PNM is exposed to loss under the PVNGS lease arrangements upon the occurrence of certain events that PNM does not consider reasonably likely to occur. Under certain circumstances (for example, the NRC issuing specified violation orders with respect to PVNGS or the occurrence of specified nuclear events), PNM would be required to make specified payments to the lessors and take title to the leased interests. If such an event had occurred as of June 30, 2020, amounts due to the lessors under the circumstances described above would be up to $154.5 million, payable on July 15, 2020 in addition to the scheduled lease payments due on that date.

Land Easements and Rights-of-Ways

Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2020 payment for the amount due under the Navajo Nation right-of-way lease was $7.1 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019 are considered variable lease payments.

PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed Consolidated Statement of Earnings over their term. As of June 30, 2020 and December 31, 2019, the unamortized balance of these rights-of-ways was $58.8 million and $60.2 million. PNM recognized amortization expense associated with these

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

agreements of $0.9 million and $1.9 million in the three and six months ended June 30, 2020, and $0.9 million and $1.9 million in the three and six months ended June 30, 2019.

Fleet Vehicles and Equipment

Fleet vehicle and equipment leases commencing on or after January 1, 2019 are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018 are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At June 30, 2020, residual value guarantees on fleet vehicle and equipment leases are $0.7 million, $1.3 million, and $2.0 million for PNM, TNMP, and PNMR Consolidated.

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating leases:
Operating lease assets, net of amortization	$	109,042	$	8,535	$	118,140	$	120,585	$	9,954	$	131,212
Current portion of operating lease liabilities	24,039		2,428		26,744		25,927		2,753		29,068
Long-term portion of operating lease liabilities	85,028		5,897		91,320		97,992		7,039		105,512

As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases. Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Financing leases:
Non-utility property	$	8,561	$	9,712	$	18,540	$	4,857	$	4,910	$	10,028
Accumulated depreciation	(1,070)		(1,137)		(2,267)		(482)		(466)		(973)
Non-utility property, net	7,491		8,575		16,273		4,375		4,444		9,055

Other current liabilities	1,512		1,623		3,203		722		850		1,637
Other deferred credits	5,699		6,958		12,800		3,333		3,597		7,102

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2020 is presented below:



	PNM		TNMP		PNMR Consolidated
Weighted average remaining lease term (years):
Operating leases	6.10		3.85		5.93
Financing leases	4.94		5.48		5.21

Weighted average discount rate:
Operating leases	3.90	%	4.00	%	3.91	%
Financing leases	3.12	%	3.26	%	3.19	%

Information for the components of lease expense is as follows:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,847	$	746	$	7,658	$	13,740	$	1,521	$	15,393
Amounts capitalized	(247)		(602)		(849)		(538)		(1,237)		(1,774)
Total operating lease expense	$	6,600	$	144	$	6,809	$	13,202	$	284	$	13,619
Financing lease cost:
Amortization of right-of-use assets	341		382		741		588		672		1,294
Interest on lease liabilities	52		68		121		97		124		224
Amounts capitalized	(226)		(369)		(594)		(401)		(653)		(1,053)
Total financing lease expense	167		81		268		284		143		465

Variable lease expense	63		—		63		95		—		95
Short-term lease expense	75		1		75		160		1		161
Total lease expense for the period	$	6,905	$	226	$	7,215	$	13,741	$	428	$	14,340


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,803	$	815	$	7,692	$	14,386	$	1,713	$	16,312
Amounts capitalized	(344)		(662)		(1,006)		(696)		(1,319)		(2,015)
Total operating lease expense	$	6,459	$	153	$	6,686	$	13,690	$	394	$	14,297
Financing lease cost:
Amortization of right-of-use assets	77		81		158		143		139		282
Interest on lease liabilities	14		17		31		30		34		64
Amounts capitalized	(41)		(38)		(79)		(82)		(75)		(157)
Total financing lease expense	50		60		110		91		98		189

Variable lease expense	32		—		32		32		—		32
Short-term lease expense	75		2		101		149		5		195
Total lease expense for the period	$	6,616	$	215	$	6,929	$	13,962	$	497	$	14,713

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental cash flow information related to the Company’s leases is as follows:


	Six Months Ended June 30 ,										Six Months Ended June 30 ,
	2020										2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,511	$	331	$	17,125	$	16,704	$	529	$	17,494
Operating cash flows from financing leases	36		20		59		18		20		38
Finance cash flows from financing leases	207		120		360		54		76		130

Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—	$	—	$	143,816	$	12,942	$	157,440
Financing leases	3,703		4,802		8,513		2,516		2,305		4,821

Capitalized costs excluded from the operating and financing cash paid for leases above for the six months ended June 30, 2020, are $0.5 million and $0.4 million at PNM, $1.2 million and $0.7 million at TNMP, and $1.8 million and $1.1 million at PNMR. For the six months ended June 30, 2019, capitalized costs excluded are $0.7 million and $0.1 million at PNM, $1.3 million and $0.1 million at TNMP, and $2.0 million and $0.2 million at PNMR. These capitalized costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019.

Future expected lease payments are shown below:


	As of June 30, 2020
	PNM						TNMP						PNMR Consolidated
	Financing		Operating		Financing		Operating		Financing		Operating
	(In thousands)
Remainder of 2020	$	862	$	9,979	$	944	$	1,437	$	1,842	$	11,686
2021	1,688		26,576		1,845		2,448		3,606		29,316
2022	1,642		26,266		1,766		1,996		3,480		28,473
2023	1,587		17,735		1,617		1,508		3,241		19,423
2024	985		7,908		1,379		877		2,364		8,833
Later years	1,019		34,466		1,791		765		2,811		35,489
Total minimum lease payments	7,783		122,930		9,342		9,031		17,344		133,220
Less: Imputed interest	572		13,863		761		705		1,340		15,167
Lease liabilities as of June 30, 2020	$	7,211	$	109,067	$	8,581	$	8,326	$	16,004	$	118,053

The above table includes $10.1 million, $14.7 million, and $24.8 million for PNM, TNMP, and PNMR at June 30, 2020 for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties. The Company’s contractual commitments for leases that have not yet commenced are insignificant.

(14) Income Taxes

In December 2017, comprehensive changes in United States federal income taxes were enacted through legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made many significant modifications to the tax laws, including reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Tax Act also eliminated federal bonus depreciation for utilities, limited interest deductibility for non-utility businesses and limited the

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

deductibility of officer compensation. During 2019, the IRS issued proposed regulations related to certain officer compensation and proposed regulations on interest deductibility that provide a 10% “de minimis” exception that allows entities with predominantly regulated activities to fully deduct interest expenses. In addition, the IRS issued proposed regulations interpreting Tax Act amendments to depreciation provisions of the IRC that allow the Company to claim a bonus depreciation deduction on certain construction projects placed in service subsequent to the third quarter of 2017. See additional discussion of the impacts of the Tax Act in Note 18 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. Among other things, the CARES Act includes tax provisions that generally loosen restrictions on NOL utilization and business interest deductions, and accelerate refunds of previously generated alternative minimum tax credits. In addition, the CARES Act includes a temporary provision allowing businesses to defer payments to the government for some payroll taxes. The CARES Act provisions related to NOL utilization and business interest deductions are not applicable for the Company however, in June 2020, the Company applied for $5.2 million of accelerated refunds of previously generated alternative minimum tax credits and is deferring payments of certain payroll taxes.

Beginning February 2018, PNM’s NM 2016 Rate Case reflects the reduction in the federal corporate income tax rate, including amortization of excess deferred federal and state income taxes. In accordance with the order in that case, PNM is returning the protected portion of excess deferred federal income taxes to customers over the average remaining life of plant in service as of December 31, 2017, the unprotected portion of excess deferred federal income taxes to customers over a period of approximately twenty-three years, and excess deferred state income taxes to customers over a period of three years. The approved settlement in the TNMP 2018 Rate Case includes a reduction in customer rates to reflect the impacts of the Tax Act beginning on January 1, 2019. PNMR, PNM, and TNMP will amortize federal and state excess deferred income taxes of $30.6 million, $21.6 million, and $9.0 million in 2020. See additional discussion of PNM’s NM 2016 Rate Case and TNMP’s 2018 Rate Case in Note 12.

As required under GAAP, the Company makes an estimate of its anticipated effective tax rate for the year as of the end of each quarterly period within its fiscal year. In interim periods, income tax expense is calculated by applying the anticipated annual effective tax rate to year-to-date earnings before income taxes. GAAP also provides that certain unusual or infrequently occurring items, including excess tax benefits related to stock awards, be excluded from the estimated annual effective tax rate calculation. At June 30, 2020, PNMR, PNM, and TNMP estimated their effective income tax rates for the year ended December 31, 2020 would be 6.21%, 8.73%, and 9.23%. The primary difference between the statutory income tax rates and the effective tax rates is the effect of the reduction in income tax expense resulting from the amortization of excess deferred federal and state income taxes ordered by the NMPRC in PNM’s NM 2016 Rate Case and the amortization of excess deferred federal income taxes as ordered by the PUCT in TNMP’s 2018 Rate Case. During the three and six months ended June 30, 2020, income tax expense calculated by applying the expected annual effective income tax rate to earnings before income taxes was further reduced by excess tax benefits related to stock awards of zero and $0.4 million for PNMR, of which zero and $0.3 million was allocated to PNM and zero and $0.1 million was allocated to TNMP.

(15) Related Party Transactions

PNMR, PNM, TNMP, and NMRD are considered related parties as defined under GAAP, as is PNMR Services Company, a wholly-owned subsidiary of PNMR that provides corporate services to PNMR and its subsidiaries in accordance with shared services agreements. These services are billed at cost on a monthly basis to the business units. In addition, PNMR provides construction and operations and maintenance services to NMRD, a 50% owned subsidiary of PNMR Development. PNM purchases renewable energy from certain NMRD-owned facilities at a fixed price per MWh of energy produced. PNM also provides interconnection services to PNMR Development and NMRD. See Note 16 for additional discussion of NMRD.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The table below summarizes the nature and amount of related party transactions of PNMR, PNM, TNMP, and NMRD:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Services billings:
PNMR to PNM	$	24,521	$	22,925	$	46,644	$	49,751
PNMR to TNMP	9,703		8,385		18,430		18,443
PNM to TNMP	113		114		189		189
TNMP to PNMR	35		36		70		71

PNMR to NMRD	49		54		125		95
Renewable energy purchases:
PNM from NMRD	2,404		949		3,923		1,574
Interconnection billings:
PNM to NMRD	130		—		350		—
PNM to PNMR	—		—		—		—
Interest billings:
PNMR to PNM	6		972		6		1,905
PNM to PNMR	77		77		158		149
PNMR to TNMP	1		10		2		42
Income tax sharing payments:
PNMR to PNM	—		—		—		—
TNMP to PNMR	—		—		—		—

(16) Equity Method Investment

As discussed in Note 1 of the Company's 2019 Annual Reports on Form 10-K, PNMR Development and AEP OnSite Partners created NMRD in September 2017 to pursue the acquisition, development, and ownership of renewable energy generation projects, primarily in the state of New Mexico. As of June 30, 2020, NMRD’s renewable energy capacity in operation was 85.1 MW. PNMR Development and AEP OnSite Partners each have a 50% ownership interest in NMRD. The investment in NMRD is accounted for using the equity method of accounting because PNMR’s ownership interest results in significant influence, but not control, over NMRD and its operations.

In the six months ended June 30, 2020 and 2019, PNMR Development made cash contributions of $18.3 million and $13.3 million to NMRD to be used primarily for its construction activities.

PNMR presents its share of net earnings from NMRD in other income on the Condensed Consolidated Statements of Earnings. Summarized financial information for NMRD is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	2,641	$	1,103	$	4,308	$	1,828
Operating expenses	1,472		655		3,052		1,451
Net earnings	$	1,169	$	448	$	1,256	$	377

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	5,672	$	7,187
Net property, plant, and equipment	163,629		132,772
Non-current assets	1,214		—
Total assets	170,515		139,959
Current liabilities	2,073		9,640
Non-current liabilities	368		—
Owners’ equity	$	168,074	$	130,319

(17) Goodwill

The excess purchase price over the fair value of the assets acquired and the liabilities assumed by PNMR for its 2005 acquisition of TNP was recorded as goodwill and was pushed down to the businesses acquired. In 2007, the TNMP assets that were included in its New Mexico operations, including goodwill, were transferred to PNM. PNMR’s reporting units that currently have goodwill are PNM and TNMP.

GAAP requires the Company to evaluate its goodwill for impairment annually at the reporting unit level or more frequently if circumstances indicate that the goodwill may be impaired. Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each reporting unit.

GAAP provides that in certain circumstances an entity may perform a qualitative analysis to conclude that the goodwill of a reporting unit is not impaired. Under a qualitative assessment an entity considers macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events affecting a reporting unit, as well as whether a sustained decrease (both absolute and relative to its peers) in share price has occurred. An entity considers the extent to which each of the adverse events and circumstances identified could affect the comparison of a reporting unit’s fair value with its carrying amount. An entity places more weight on the events and circumstances that most affect a reporting unit’s fair value or the carrying amount of its net assets. An entity also considers positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity evaluates, on the basis of the weight of evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative analysis is not required if, after assessing events and circumstances, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount.

In other circumstances, an entity may perform a quantitative analysis to reach the conclusion regarding impairment with respect to a reporting unit. An entity may choose to perform a quantitative analysis without performing a qualitative analysis and may perform a qualitative analysis for certain reporting units, but a quantitative analysis for others. The first step of the quantitative impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill. If as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, GAAP currently requires the entity to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded. The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount. This exercise would require the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit. Any remaining fair value would be the implied fair value of goodwill on the testing date. To the extent the recorded amount of goodwill of a reporting unit exceeds the implied fair value determined in step two, an impairment loss would be reflected in results of operations.

PNMR periodically updates its quantitative analysis for both PNM and TNMP. The use of a quantitative approach in a given period is not necessarily an indication that a potential impairment has been identified under a qualitative approach.

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PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

When PNMR performs a quantitative analysis for PNM or TNMP, a discounted cash flow methodology is primarily used to estimate the fair value of the reporting unit. This analysis requires significant judgments, including estimations of future cash flows, which is dependent on internal forecasts, estimations of long-term growth rates for the business, and determination of appropriate weighted average cost of capital for the reporting unit. Changes in these estimates and assumptions could materially affect the determination of fair value and the conclusion of impairment.

When PNMR performs a qualitative or quantitative analysis for PNM or TNMP, PNMR considers market and macroeconomic factors including changes in growth rates, changes in the WACC, and changes in discount rates. PNMR also evaluates its stock price relative to historical performance, industry peers, and to major market indices, including an evaluation of PNMR’s market capitalization relative to the carrying value of its reporting units.

For its annual evaluations performed as of April 1, 2019, PNMR performed qualitative analyses for both the PNM and TNMP reporting units. In addition to the typical considerations discussed above, the qualitative analysis considered changes in the Company’s expectations of future financial performance since the April 1, 2018 quantitative analysis performed for PNM, as well as the quantitative analysis performed for TNMP at April 1, 2016 and the previous qualitative analyses through April 1, 2018. This analysis considered Company specific events such as the potential impacts of legal and regulatory matters discussed in Note 11 and Note 12, including potential outcomes in PNM’s SJGS Abandonment Application, the impacts of the NM Supreme Court’s decision in the appeal of the NM 2015 Rate Case, and other potential impacts of changes in PNM’s resource needs based on PNM’s 2017 IRP. Based on an evaluation of these and other factors, PNMR determined it was not more likely than not that the April 1, 2019 carrying values of PNM or TNMP exceeded their fair values.

For its annual evaluations performed as of April 1, 2020, PNMR performed a qualitative analysis for the PNM reporting unit and a quantitative analysis for the TNMP reporting unit. In addition to the typical considerations discussed above, the qualitative analysis considered changes in PNM’s expectations of future financial performance since the April 1, 2018 quantitative analysis performed for PNM, as well as the previous qualitative analyses through April 1, 2019. The April 1, 2018 quantitative evaluations indicated the fair value of the PNM reporting unit, which has goodwill of $51.6 million, exceeded its carrying value by approximately 19%. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2020 carrying value of PNM exceeded its fair value. Using the methods and considerations discussed above, the 2020 quantitative analysis indicated the fair value of the TNMP reporting unit, which has goodwill of $226.7 million, exceeded its carrying value by approximately 38%. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2020 carrying value of TNMP exceed its fair value. Since the April 1, 2020 annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below their carrying values.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations for PNMR is presented on a combined basis, including certain information applicable to PNM and TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-Q General Instruction H(2). This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. A reference to a “Note” in this Item 2 refers to the accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1, unless otherwise specified. Certain of the tables below may not appear visually accurate due to rounding.

MD&A FOR PNMR

EXECUTIVE SUMMARY

Overview and Strategy

PNMR is a holding company with two regulated utilities serving approximately 794,000 residential, commercial, and industrial customers and end-users of electricity in New Mexico and Texas. PNMR’s electric utilities are PNM and TNMP. PNMR strives to create a clean and bright energy future for customers, communities, and shareholders. PNMR’s strategy and decision-making are focused on safely providing reliable, affordable, and environmentally responsible power built on a foundation of Environmental, Social and Governance (ESG) principles.

Financial and Business Objectives

PNMR is focused on achieving three key financial objectives:

•Earning authorized returns on regulated businesses

•Delivering at or above industry-average earnings and dividend growth

•Maintaining investment grade credit ratings

In conjunction with these objectives, PNM and TNMP are dedicated to:

•Maintaining strong employee safety, plant performance, and system reliability

•Delivering a superior customer experience

•Demonstrating environmental stewardship in business operations, including transitioning to an emissions-free generating portfolio by 2040

•Supporting the communities in their service territories

Earning Authorized Returns on Regulated Businesses

PNMR’s success in accomplishing its financial objectives is highly dependent on two key factors: fair and timely regulatory treatment for its utilities and the utilities’ strong operating performance. The Company has multiple strategies to achieve favorable regulatory treatment, all of which have as their foundation a focus on the basics: safety, operational excellence, and customer satisfaction, while engaging stakeholders to build productive relationships. Both PNM and TNMP seek cost recovery for their investments through general rate cases, interim cost of service filings, and various rate riders.

Fair and timely rate treatment from regulators is crucial to PNM and TNMP in earning their allowed returns and critical for PNMR to achieve its financial objectives. PNMR believes that earning allowed returns is viewed positively by credit rating agencies and that improvements in the Company’s ratings could lower costs to utility customers.

Additional information about rate filings is provided in Note 17 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and in Note 12.

State Regulation

The rates PNM and TNMP charge retail customers are subject to traditional rate regulation by the NMPRC, FERC, and the PUCT.

New Mexico 2015 Rate Case – On September 28, 2016, the NMPRC issued an order that authorized PNM to implement an increase in base non-fuel rates of $61.2 million for New Mexico retail customers, effective for bills sent after September 30,

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2016. This order was on PNM’s application for a general increase in retail electric rates (the “NM 2015 Rate Case”) filed in August 2015. The NMPRC's order included a determination that PNM was imprudent in purchasing certain leased capacity in PVNGS Unit 2, extending other PVNGS leased capacity, and installing BDT environmental controls equipment on SJGS. PNM appealed the NMPRC's imprudence findings to the NM Supreme Court. Specifically, PNM appealed the NMPRC’s determination that PNM was imprudent in certain matters in the case, including the disallowance of the full purchase price of 64.1 MW of capacity in PVNGS Unit 2, the undepreciated costs of capitalized improvements made during the period the 64.1 MW of capacity was leased by PNM, the costs of converting SJGS Units 1 and 4 to BDT, and future contributions for PVNGS decommissioning attributable to 64.1 MW of purchased capacity and the 114.6 MW of capacity under the extended leases.

In May 2019, the NM Supreme Court issued its decision on the matters that had been appealed in the NM 2015 Rate Case. The NM Supreme Court upheld all of the decisions in the NMPRC's order except for their decision to permanently disallow recovery of future decommissioning costs related to the purchased and extended leases because PNM was deprived of its rights to due process of law and remanded the case to the NMPRC for further proceedings. In January 2020, the NMPRC issued its order in response to the NM Supreme Court’s remand that reaffirmed its September 2016 order except for the decision to permanently disallow recovery of certain future decommissioning costs related to PVNGS Units 1 and 2. The NMPRC indicated that PNM’s ability to recover these costs will be addressed in a future proceeding and closed the NM 2015 Rate Case docket.

As a result of the NM Supreme Court’s ruling, PNM recorded a pre-tax impairment of $149.3 million as of June 30, 2019 which is reflected as regulatory disallowances and restructuring costs in the Condensed Consolidated Statements of Earnings. This amount reflects capital costs not previously impaired during the pendency of the appeal related to PNM's purchase of 64.1 MW, in PVNGS Unit 1, undepreciated capital improvements made during the period such interests had been leased, and investments in BDT environmental controls equipment on SJGS Units 1 and 4. The impairment was offset by tax impacts of $45.7 million which are reflected as income taxes on the Condensed Consolidated Statements of Earnings.

New Mexico 2016 Rate Case – In January 2018, the NMPRC approved a settlement agreement that authorized PNM to implement an increase in base non-fuel rates of $10.3 million, which includes a reduction to reflect the impact of the decrease in the federal corporate income tax rate and updates to PNM’s cost of debt (aggregating $47.6 million annually). This order was on PNM's application for a general increase in retail electric rates filed in December 2016 (the "NM 2016 Rate Case"). The key terms of the order include:

•A ROE of 9.575%

•A requirement to return to customers over a three-year period the benefit of the reduction in the New Mexico corporate income tax rate to the extent attributable to PNM’s retail operations (Note 14)

•A disallowance of PNM’s ability to collect an equity return on certain investments aggregating $148.1 million at Four Corners, but allowing recovery of a debt-only return

•An agreement to not implement non-fuel base rate changes, other than changes related to PNM’s rate riders, with an effective date prior to January 1, 2020

•A requirement to consider the prudency of PNM’s decision to continue its participation in Four Corners in PNM's next general rate case filing

PNM implemented 50% of the approved increase for service rendered beginning February 1, 2018 and implemented the rest of the increase for service rendered beginning January 1, 2019. This matter is now concluded.

2020 Decoupling Petition - On May 28, 2020, PNM filed a petition for approval of a rate adjustment mechanism that would decouple the rates of its residential and small power rate classes. Decoupling is a rate design principle that severs the link between the recovery of fixed costs of the utility through volumetric charges. If approved, customer bills will not be impacted until January 1, 2022. PNM cannot predict the outcome of this matter.

TNMP 2018 Rate Case – On December 20, 2018, the PUCT approved a settlement stipulation allowing TNMP to increase annual base rates by $10.0 million based on a ROE of 9.65%, a cost of debt of 6.44%, and a capital structure comprised of 55% debt and 45% equity. In addition, the approved settlement stipulation allows TNMP to refund the regulatory liability recorded at December 31, 2017 related to federal tax reform to customers and reflects the reduction in the federal corporate income tax rate to 21%. New rates under the TNMP 2018 Rate Case became effective January 1, 2019.

Advanced Metering – TNMP completed its mass deployment of advanced meters across its service territory in 2016 and has installed more than 242,000 advanced meters. Beginning in 2019 the majority of costs associated with TNMP’s AMS program are being recovered through base rates.

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In February 2016, PNM filed an application with the NMPRC requesting approval of a project to replace its existing customer metering equipment with Advanced Metering Infrastructure (“AMI”), which was denied. As ordered by the NMPRC, PNM’s 2020 filing for energy efficiency programs to be offered in 2021, 2022, and 2023 includes a proposal for an AMI pilot project.

Rate Riders and Interim Rate Relief – The PUCT has approved mechanisms that allow TNMP to recover capital invested in transmission and distribution projects without having to file a general rate case. The NMPRC has approved PNM recovering fuel costs through the FPPAC, as well as rate riders for renewable energy and energy efficiency. These mechanisms allow for more timely recovery of investments.

On April 6, 2020, TNMP filed its first application for a periodic distribution rate adjustment (the "2020 DCOS"). TNMP's 2020 DCOS application requests an increase in annual distribution revenues of $14.7 million and that new rates go into effect beginning in September 2020. On June 26, 2020, TNMP reached a unanimous settlement agreement with parties that would authorize TNMP to collect a $14.3 million annual distribution revenue requirement beginning in September 2020. The case is pending review by the PUCT. See Note 12.

FERC Regulation

Rates PNM charges wholesale transmission customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula. The formula includes updating cost of service components, including investment in plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as including projected transmission capital projects to be placed into service in the following year. The projections included are subject to true-up. Certain items, including changes to return on equity and depreciation rates, require a separate filing to be made with FERC before being included in the formula rate.

In May 2019, PNM filed an application with FERC requesting approval to purchase a new 165-mile long 345-kV transmission line and related facilities (the “Western Spirit Line”). Under related agreements, PNM will provide transmission service to approximately 800 MW of new wind generation to be located in eastern New Mexico beginning in 2021 using an incremental rate. All necessary regulatory approvals for PNM to purchase and provide transmission service from the Western Spirit Line have been obtained.

PNM has no full-requirements wholesale generation customers.

Delivering At or Above Industry-Average Earnings and Dividend Growth

PNMR’s financial objective to deliver at or above industry-average earnings and dividend growth enables investors to realize the value of their investment in the Company’s business. PNMR’s current target is 5% to 6% earnings and dividend growth for the period 2020 through 2023. Earnings growth is based on ongoing earnings, which is a non-GAAP financial measure that excludes from GAAP earnings certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company’s operations. PNMR uses ongoing earnings to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees.

PNMR targets a dividend payout ratio in the 50% to 60% range of its ongoing earnings. PNMR expects to provide at or above industry-average dividend growth in the near-term and to manage the payout ratio to meet its long-term target. The Board will continue to evaluate the dividend on an annual basis, considering sustainability and growth, capital planning, and industry standards. The Board approved the following increases in the indicated annual common stock dividend:


Approval Date						Percent Increase






December 2017						9%
December 2018						9%
December 2019						6%

Maintaining Investment Grade Credit Ratings

The Company is committed to maintaining investment grade credit ratings in order to reduce the cost of debt financing and to help ensure access to credit markets, when required. See the subheading Liquidity included in the full discussion of Liquidity and Capital Resources below for the specific credit ratings for PNMR, PNM, and TNMP. On April 6, 2020, S&P downgraded the ratings for PNMR, PNM, and TNMP one notch and affirmed TNMP's first mortgage bond rating. All of the

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credit ratings issued by both Moody’s and S&P on the Company’s debt continue to be investment grade.

Business Focus

To achieve its business objectives, focus is directed in key areas: Safe, Reliable and Affordable Power; Utility Plant and Strategic Investments; Environmentally Responsible Power; and Customer, Stakeholders, and Community Engagement. The Company works closely with its stakeholders to ensure that resource plans and infrastructure investments benefit from robust public dialogue and balance the diverse needs of our communities. Equally important is the focus of PNMR’s utilities on customer satisfaction and community engagement.

Safe, Reliable, and Affordable Power

PNMR and its utilities are aware of the important roles they play in enhancing economic vitality in their service territories. Management believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. When contemplating expanding or relocating their operations, businesses consider energy affordability and reliability to be important factors. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience. Investing in PNM’s and TNMP’s infrastructure is critical to ensuring reliability and meeting future energy needs. Both utilities have long-established records of providing customers with safe and reliable electric service.

In March 2020, the World Health Organization declared COVID-19 a global pandemic and President Trump declared the COVID-19 pandemic a national emergency in the U.S. The Company continues to closely monitor developments and has taken and continues to take steps to mitigate the potential risks related to the COVID-19 pandemic. The Company has assessed and updated its existing business continuity plans in response to the impacts of the pandemic through crisis team meetings and working with other utilities and operators. It has identified its critical workforce, staged backups and limited access to control rooms and critical assets. The Company has worked to protect the safety of its employees using a number of measures, including minimizing exposure to other employees and the public and mandating work-from-home and flexible arrangements for all applicable job functions. The Company is also working with its suppliers to understand the potential impacts to its supply chain and remains focused on the integrity of its information systems and other technology systems used to run its business. However, the Company cannot predict the extent or duration of the ongoing COVID-19 pandemic, its effects on the global, national or local economy, or on the Company's financial position, results of operations, and cash flows. The Company will continue to monitor developments related to COVID-19 and will remain focused on protecting the health and safety of its customers, employees, contractors, and other stakeholders, and on its objective to provide safe, reliable, affordable and environmentally responsible power. As discussed in Note 12, both PNM and TNMP have suspended disconnecting certain customers for past due bills and waived late fees during the pandemic and have been provided regulatory mechanisms to recover these and other costs resulting from COVID-19. See additional discussion below regarding the Company's customer, community, and stakeholder engagement in response to COVID-19 and in Item 1A. Risk Factors. On March 26, 2020, the PUCT issued an order establishing an electricity relief program for electric utilities, REPs, and customers impacted by COVID-19. The program allows providers to implement a rider to collect unpaid residential retail customer bills and to ensure these customers continue to have electric service. In a separate order, the PUCT authorized electric utilities to establish a regulatory asset for costs related to COVID-19 which includes but is not limited to costs related to unpaid accounts. On June 24, 2020, the NMPRC authorized the creation of a regulatory asset to defer incremental costs related to COVID-19, including increases to bad debt expense and the creation of a regulatory liability for all offsetting cost savings resulting from COVID-19. The NMPRC Order allows the Company to request recovery in future ratemaking proceedings and imposes additional reporting requirements related to COVID-19 on changes to customer usage, increased costs and savings recorded to regulatory assets and liabilities and impacts to delinquent accounts.

Utility Plant and Strategic Investments

Utility Plant Investments – During the 2017 to 2019 period, PNM and TNMP together invested $1.5 billion in utility plant, including substations, power plants, nuclear fuel, and transmission and distribution systems. During 2018 and 2019, PNM constructed an additional 50 MW of PNM-owned solar-PV facilities, which were approved by the NMPRC in PNM’s 2018 renewable energy procurement plan. On May 1, 2019, PNM executed an agreement to purchase the Western Spirit Line, which has been approved by FERC and the NMPRC. Under the agreement, subject to certain conditions being met prior to closing, PNM will purchase the Western Spirit Line upon its expected commercial operation date in 2021 at a net cost of approximately $285 million, including customer reimbursements.

New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix of energy resources to customers. PNM has launched the Wired for the Future capital program, which emphasizes new investments in its transmission and distribution infrastructure with three primary objectives: delivering clean energy, enhancing customer

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satisfaction and increasing grid resilience. Projects are aimed at advancing the infrastructure beyond its original architecture to a more flexible and redundant system accommodating growing amounts of intermittent and distributed generation resources and integrating evolving technologies that provide long-term customer value. See the subheading Capital Requirements included in the full discussion of Liquidity and Capital Resources below for additional discussion of the Company’s projected capital requirements.

Strategic Investments – In 2017, PNMR Development and AEP OnSite Partners created NMRD to pursue the acquisition, development, and ownership of renewable energy generation projects, primarily in the state of New Mexico. Abundant renewable resources, large tracts of affordable land, and strong government and community support make New Mexico a favorable location for renewable generation. New Mexico ranks 3^rd in the nation for energy potential from solar power according to the Nebraska Department of Energy & Energy Sun Index and ranks 3rd in the nation for land-based wind capacity according to the U.S. Office of Energy Efficiency and Renewable Energy. PNMR Development and AEP OnSite Partners each have a 50% ownership interest in NMRD. Through NMRD, PNMR anticipates being able to provide additional renewable generation solutions to customers within and surrounding its regulated jurisdictions through partnering with a subsidiary of one of the United States’ largest electric utilities. As of June 30, 2020, NMRD’s renewable energy capacity in operation was 85.1 MW, which includes 80 MW of solar-PV facilities to supply energy to the Facebook data center located within PNM’s service territory, 1.9 MW to supply energy to Columbus Electric Cooperative located in southwest New Mexico, 2.0 MW to supply energy to the Central New Mexico Electric Cooperative, and 1.2 MW of solar-PV facilities to supply energy to the City of Rio Rancho, New Mexico. The NMPRC has approved PNM’s request to enter into an additional 25-year PPA to purchase renewable energy and RECs from an aggregate of approximately 50 MW of capacity from solar-PV facilities to be constructed by NMRD to supply power to the Facebook data center. These facilities began commercial operation on July 1, 2020. NMRD actively explores opportunities for additional renewable projects, including large-scale projects to serve future data centers and other customer needs.

Integrated Resource Plan

NMPRC rules require that investor-owned utilities file an IRP every three years. The IRP is required to cover a 20-year planning period and contain an action plan covering the first four years of that period.

PNM filed its 2017 IRP on July 3, 2017. The 2017 IRP analyzed several scenarios utilizing assumptions that PNM continues service from its SJGS capacity beyond mid-2022 and that PNM retires its capacity after mid-2022. Key findings of the 2017 IRP included, among other things, that retiring PNM’s share of SJGS in 2022 and exiting ownership in Four Corners in 2031 would provide long-term cost savings for PNM’s customers and that the best mix of new resources to replace the retired coal generation would include solar energy and flexible natural gas-fired peaking capacity as well as energy storage, if the economics support it, and wind energy provided additional transmission capacity becomes available. The 2017 IRP also indicated that PNM should retain the currently leased capacity in PVNGS. On June 11, 2020, PNM provided notice to the lessors and the NMPRC that PNM will return the leased assets for both PVNGS Unit 1 and 2 upon expiration of the leases in January 2023 and 2024. PNM issued an RFP for replacement power resources on June 25, 2020 and intends to file for abandonment and approval of replacement resources with the NMPRC in early 2021. See additional discussion regarding PNM’s leased capacity in PVNGS in Note 13 as well as PNM’s 2017 IRP and the SJGS Abandonment Application in Note 12.

In the third quarter of 2019, PNM initiated its 2020 IRP process which will cover the 20-year planning period from 2019 through 2039. Consistent with historical practice, PNM has provided notice to various interested parties and has hosted a series of public advisory presentations. NMPRC rules require PNM to file its 2020 IRP in July 2020. In April 2020, the NMPRC approved PNM's request to extend the deadline to file its 2020 IRP until six months after the NMPRC issues a final order approving replacement resources in PNM's SJGS Abandonment Application. PNM will continue to seek input from interested parties as a part of this process. PNM cannot predict the outcome of this matter.

Environmentally Responsible Power

PNMR has a long-standing record of environmental stewardship. PNM’s environmental focus is in three key areas:

•Developing strategies to provide reliable and affordable power while transitioning to a 100% emissions-free generating portfolio by 2040

•Preparing PNM’s system to meet New Mexico’s increasing renewable energy requirements as cost-effectively as possible

•Increasing energy efficiency participation

PNMR’s corporate website (www.pnmresources.com) includes a dedicated section providing key environmental and other sustainability information related to PNM’s and TNMP’s operations demonstrating the Company’s commitment to ESG

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principles. This information highlights plans for PNM to be coal-free by 2031 (subject to regulatory approval) and to have an emissions-free generating portfolio by 2040.

The Energy Transition Act (“ETA”)

On June 14, 2019, Senate Bill 489, known as the ETA, became effective. Prior to the enactment of the ETA, the REA established a mandatory RPS requiring utilities to acquire a renewable energy portfolio equal to 10% of retail electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The ETA also amends sections of the REA to allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed from retail jurisdictional rates, provided replacement resources to be included in retail rates have lower or zero-carbon emissions. The ETA provides for a transition from fossil-fueled generating resources to renewable and other carbon-free resources by allowing utilities to issue securitized bonds, or “energy transition bonds,” related to the retirement of certain coal-fired generating facilities to qualified investors. See additional discussion of the ETA in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and below in PNM’s SJGS Abandonment Application.

PNM expects the ETA will have a significant impact on PNM’s future generation portfolio, including PNM’s planned retirement of SJGS in 2022. PNM cannot predict the full impact of the ETA on potential future generating resource abandonment and replacement filings with the NMPRC.

SJGS

SJGS Abandonment Application – As discussed in Note 12, on July 1, 2019, PNM filed a Consolidated Application for the Abandonment and Replacement of SJGS and Related Securitized Financing Pursuant to the ETA (the “SJGS Abandonment Application”). The SJGS Abandonment Application sought NMPRC approval to retire PNM’s share of SJGS in mid-2022, and for approval of replacement resources and the issuance of approximately $361 million of energy transition bonds as provided by the ETA. The application included several replacement resource scenarios including PNM’s recommended replacement scenario, which is consistent with PNM’s goal of having a 100% emissions-free generating portfolio by 2040 and would have provided cost savings to customers while preserving system reliability. The application included three other replacement resource scenarios that would have placed a greater amount of resources in the San Juan area, or resulted in no new fossil-fueled generating facilities, or no battery storage facilities being added to PNM’s portfolio. When compared to PNM's recommended replacement resource scenario, the three alternative resource scenarios were expected to result in increased costs to customers and the two alternative resource scenarios that resulted in no new fossil-fueled generating facilities were expected to not provide adequate system reliability.

The NMPRC issued an order requiring the SJGS Abandonment Application be considered in two proceedings: one addressing SJGS abandonment and related financing and the other addressing replacement resources but did not definitively indicate if the abandonment and financing proceedings would be evaluated under the requirements of the ETA. The NMPRC’s July 10, 2019 order also extended the deadline to issue the abandonment and financing order to nine months and to issue the replacement resources order to 15 months. After several requests for clarification and legal challenges, in January 2020, the NM Supreme Court ruled the NMPRC is required to apply the ETA to all aspects of PNM’s SJGS Abandonment Application, and that any previous NMPRC orders inconsistent with their ruling should be vacated. The NM Supreme Court issued a subsequent opinion, on July 23, 2020, more fully explaining the legal rationale for the January 2020 ruling. Hearings on the abandonment and securitized financing proceedings were held in December 2019 and hearings on replacement resources were held in January 2020.

In February 2020, the Hearing Examiners issued two recommended decisions recommending approval of PNM’s proposed abandonment of SJGS, subject to approval of the separate replacement resources proceeding, and approval of PNM’s proposed financing order to issue Securitized Bonds. The Hearing Examiners recommended, among other things, that PNM be authorized to abandon SJGS by June 30, 2022, to issue Securitized Bonds of up to $361 million, and to establish a rate rider to collect non-bypassable customer charges for repayment of the bonds (the “Energy Transition Charge”). The Hearing Examiners recommended an interim rate rider adjustment upon the start date of the Energy Transition Charge to provide immediate credits to customers for the full value of PNM’s revenue requirement related to SJGS until those reductions are reflected in base rates. In addition, the Hearing Examiners recommended PNM be granted authority to establish regulatory assets to recover costs that PNM will pay prior to the issuance of the Securitized Bonds, including costs associated with the bond issuances as well as for severances, job training, and economic development funds.

On March 27, 2020, the Hearing Examiners issued a partial recommended decision related to PNM's requested replacement resources. The Hearing Examiners recommended the NMPRC approve PNM's requested PPA replacement resources related to 350 MW of solar-PV facilities and 60 MW of battery storage facilities. On April 1, 2020, the NMPRC

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unanimously approved the Hearing Examiners' recommended decisions regarding the abandonment of SJGS and the Securitized Bonds. On April 29, 2020, the NMPRC issued an order declining to bifurcate a determination on replacement resources and deferring final consideration until the issuance of a comprehensive recommended decision addressing the entire portfolio of replacement resources. On June 24, 2020, the Hearing Examiners issued a second recommended decision on PNM's request for approval of replacement resources that addressed the entire portfolio of replacement resources. The Hearing Examiners recommended that the NMPRC take one of two approaches to select replacement resources. The first approach emphasized resource selection criteria identified in the ETA and would include PPA's for 650 MW of solar and 300 MW of battery storage. The second approach emphasized the NMPRC’s traditional resource selection criteria including price and reliability, which included a mix of solar PPAs combined with battery storage agreements and a 200 MW PNM-owned natural gas facility. On July 29, 2020 the NMPRC issued an order approving the Hearing Examiners' first recommended approach, concluding that this approach satisfies threshold reliability considerations for replacement resources. PNM has 60 days from the date of the order to file an application in a separate case seeking approval of the proposed final, executed contracts, for any replacement resources that are not currently in evidence that have been approved by the NMPRC.

Pursuant to the NMPRC's April 1, 2020 order approving the abandonment of SJGS and the related issuance of Securitized Bonds, PNMR recorded obligations totaling $38.1 million for estimated severances and other costs resulting from the planned retirement of SJGS in 2022, and for expected funding to state agencies for economic development and workforce training upon the issuance of the Securitized Bonds. This obligation is reflected in other deferred credits and as a corresponding deferred regulatory asset on PNMR's Condensed Consolidated Balance Sheets as of June 30, 2020. These estimates may be adjusted in future periods as the Company refines its expectations. See additional discussion of PNM's SJGS Abandonment Application and the related challenges filed with the NM Supreme Court in Note 12.

Other Environmental Matters – In addition to the regional haze rule and the ETA, SJGS and Four Corners may be required to comply with other rules that affect coal-fired generating units. In March 2017, President Trump issued an Executive Order on Energy Independence. The order sets out two general policies: promote clean and safe development of energy resources, while avoiding regulatory burdens, and ensure electricity is affordable, reliable, safe, secure, and clean. On June 19, 2019, EPA released the final Affordable Clean Energy rule. EPA is taking three separate actions in the final rule: (1) repealing the Clean Power Plan; (2) promulgating the Affordable Clean Energy rule; and (3) revising the implementing regulations for all emission guidelines issued under Clean Air Act Section 111(d) which, among other things, extends the deadline for state plans and the timing of EPA's approval process. EPA set the Best System of Emissions Reduction (“BSER”) for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” that can be applied inside the fence-line. Rather than setting a specific numerical standard of performance, EPA’s rule directs states to determine which of the candidate technologies to apply to each coal-fired unit and establish standards of performance based on the degree of emission reduction achievable based on the application of BSER. The final rule requires states to submit a plan to EPA by July 8, 2022 and then EPA has one year to approve the plan. If states do not submit a plan or their submitted plan is not acceptable, EPA will have two years to develop a federal plan. The rule is not expected to impact SJGS since EPA’s final approval of a state SIP would occur after the planned shutdown of SJGS in 2022 (subject to NMPRC approval). The Company is reviewing the rule with respect to impacts to Four Corners. See Note 11.

On December 20, 2018, EPA published in the Federal Register a proposed rule that would revise the Carbon Pollution Standards rule issued in October 2015 for certain fossil-fueled power plants. The proposal would revise the emissions standards for new, reconstructed, or modified coal-fired EGUs to make them less stringent. PNM does not expect SJGS or Four Corners will be subject to the Carbon Pollution Standards rule that EPA has proposed to revise.

PNM’s review of the GHG emission reductions standards under the Affordable Clean Energy rule and the revised proposed Carbon Pollution Standards rule is ongoing. The Affordable Clean Energy rule has been challenged by several parties and may be impacted by further litigation. As discussed above, SJGS may also be required to comply with additional CO₂emissions restrictions issued by the New Mexico Environmental Improvement Board pursuant to the recently enacted ETA. PNM cannot predict the impact these standards may have on its operations or a range of the potential costs of compliance, if any.

Renewable Energy

PNM’s renewable procurement strategy includes utility-owned solar capacity, as well as solar, wind and geothermal energy purchased under PPAs. As of June 30, 2020, PNM has 157 MW of utility-owned solar capacity in operation. In addition, PNM purchases power from a customer-owned distributed solar generation program that had an installed capacity of 138.6 MW at June 30, 2020. PNM also owns the 500 KW PNM Prosperity Energy Storage Project. The project was one of the first combinations of battery storage and solar-PV energy in the nation and involved extensive research and development of advanced grid concepts. The facility also was the nation’s first solar storage facility fully integrated into a utility’s power grid. PNM also purchases the output from New Mexico Wind, a 204 MW wind facility, and the output of Red Mesa Wind, an existing 102 MW wind energy center. PNM's 2020 renewable energy procurement plan was approved by the NMPRC in January 2020 and includes a PPA to procure 140 MW of renewable energy and RECs from La Joya Wind beginning in 2021.

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The NMPRC's approved portfolio to replace the planned retirement of SJGS will result in PNM executing solar PPAs of 650 MW combined with 300 MW of battery storage facilities. The majority of these renewable resources are key means for PNM to meet the RPS and related regulations that require PNM to achieve prescribed levels of energy sales from renewable sources, including those set by the recently enacted ETA, without exceeding cost requirements.

As discussed in Strategic Investments above, PNM is currently purchasing the output of 130 MW of solar capacity from NMRD that is used to serve the Facebook data center which includes two 25-year PPAs to purchase renewable energy and RECs from an aggregate of approximately 100 MW of capacity from two solar-PV facilities to be constructed by NMRD to supply power to Facebook, Inc. The first 50 MW of these facilities began commercial operations in November 2019 and the second 50 MW facility began commercial operation in July 2020. Additionally, PNM has entered into three separate 25-year PPAs to purchase renewable energy and RECs to be used by PNM to supply additional renewable power to the Facebook data center. These PPAs include the purchase of power and RECs from a 50 MW wind project, which was placed in commercial operation in November 2018, a 166 MW wind project to be operational in December 2020, and a 50 MW solar-PV project to be operational in December 2021.

On May 31, 2019, PNM filed an application with the NMPRC for approval of a program under which qualified governmental and large commercial customers could participate in a voluntary renewable energy procurement program ("PNM Solar Direct"). The costs of the program would be recovered directly from subscribing customers through a rate rider, including the costs to procure renewable energy from 50 MW of solar-PV facilities under a 15-year PPA. These facilities are expected to be placed in commercial operation by March 31, 2021. In March 2020, the NMPRC approved PNM's application, including the rate rider and PPA.

PNM will continue to procure renewable resources while balancing the impact to customers’ electricity costs in order to meet New Mexico’s escalating RPS and carbon-free resource requirements.

Energy Efficiency

Energy efficiency plays a significant role in helping to keep customers’ electricity costs low while meeting their energy needs and is one of the Company’s approaches to supporting environmentally responsible power. PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In 2019, incremental energy saved as a result of new participation in PNM’s portfolio of energy efficiency programs is estimated to be approximately 65 GWh. This is equivalent to the annual consumption of approximately 9,500 homes in PNM’s service territory. PNM’s load management and annual energy efficiency programs also help lower peak demand requirements. In 2019, TNMP’s incremental energy saved as a result of new participation in TNMP’s energy efficiency programs is estimated to be approximately 16 GWh. This is equivalent to the annual consumption of approximately 1,285 homes in TNMP’s service territory. In April 2018, TNMP received the “Partner of the Year Energy Efficiency Delivery Award” for its High-Performance Homes Program. As discussed above, in April 2020, PNM filed an application for energy efficiency and load management programs to be offered in 2021, 2022, and 2023. The proposed program also requests an AMI pilot program. PNM cannot predict the outcome of this matter.

Water Conservation and Solid Waste Reduction

PNM continues its efforts to reduce the amount of fresh water used to make electricity (about 35% more efficient than in 2007). Continued growth in PNM’s fleet of solar and wind energy sources, energy efficiency programs, and innovative uses of gray water and air-cooling technology have contributed to this reduction. Water usage has continued to decline as PNM has substituted less fresh-water-intensive generation resources to replace SJGS Units 2 and 3 starting in 2018, as water consumption at that plant has been reduced by approximately 50%. Focusing on responsible stewardship of New Mexico’s scarce water resources improves PNM’s water-resilience in the face of persistent drought and ever-increasing demands for water to spur the growth of New Mexico’s economy.

In addition to the above areas of focus, the Company is working to reduce the amount of solid waste going to landfills through increased recycling and reduction of waste. In 2019, 16 of the Company’s 23 facilities met the solid waste diversion goal of a 65% diversion rate. The Company expects to continue to do well in this area in the future.

Customer, Stakeholder, and Community Engagement

Another key element of the Company’s commitment to ESG principles is fostering relationships with its customers, stakeholders and communities. The Company strives to deliver a superior customer experience. Through outreach, collaboration, and various community-oriented programs, the Company has demonstrated a commitment to building productive relationships with stakeholders, including customers, community partners, regulators, intervenors, legislators, and shareholders. PNM continues to focus its efforts to enhance the customer experience through customer service improvements, including enhanced customer service engagement options, strategic customer outreach, and improved communications. These efforts are

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supported by market research to understand the varying needs of customers, identifying and establishing valued services and programs, and proactively communicating and engaging with customers. As a result, PNM has seen significant gains in customer satisfaction in recent years in both the JD Power Electric Utility Residential Customer Satisfaction Study^SM and its own proprietary relationship surveys.

The Company has leveraged a number of communications channels and strategic content to better serve and engage its many stakeholders. PNM’s website www.pnm.com, provides the details of major regulatory filings, including general rate requests, as well as the background on PNM’s efforts to maintain reliability, keep prices affordable, and protect the environment. The Company’s website is also a resource for information about PNM’s operations and community outreach efforts, including plans for building a sustainable energy future for New Mexico and to transition to an emissions-free generating portfolio by 2040. PNM has also leveraged social media in communications with customers on various topics such as education, outage alerts, safety, customer service, and PNM’s community partnerships in philanthropic projects. As discussed above, PNMR's corporate website, www.pnmresources.com, includes a dedicated section providing additional information regarding the Company’s commitment to ESG principles and other sustainability efforts.

With reliability being the primary role of a transmission and distribution service provider in Texas’ deregulated market, TNMP continues to focus on keeping end-users updated about interruptions and to encourage consumer preparation when severe weather is forecasted.

Local relationships and one-on-one communications remain two of the most valuable ways both PNM and TNMP connect with their stakeholders. Both companies maintain long-standing relationships with governmental representatives and key electricity consumers to ensure that these stakeholders are updated on Company investments and initiatives. Key electricity consumers also have dedicated Company contacts that support their important service needs.

Another demonstration of ESG principles is the Company’s tradition of supporting the communities it serves in New Mexico and Texas. This support extends beyond financial donations from the PNM Resources Foundation and corporate giving to also include collaborations on community projects, customer low-income assistance programs, and employee volunteerism. In response to COVID-19, additional efforts were made in each of these areas and exhibit the Company’s core value of caring for its customers and communities.

In addition to the extensive engagement both PNM and TNMP have with nonprofit organizations in their communities, the PNM Resources Foundation provides more than $1 million in grant funding each year across New Mexico and Texas. These grants help nonprofits innovate or sustain programs to grow and develop business, develop and implement environmental programs, and provide educational opportunities. Beginning in 2020, the PNM Resources Foundation is funding grants with a three-year focus on decreasing homelessness, increasing access to affordable housing, reducing carbon emissions, and community safety with an emphasis on COVID-19 programs in 2020. As part of this emphasis, $0.2 million has been awarded to nonprofits in New Mexico and Texas to assist with work being done on the front lines of the pandemic for community safety, with a focus on helping senior citizens and people currently experiencing homelessness during the shelter-in-place directives. Also in 2020, the PNM Resources Foundation expanded its matching donation program to offer 2-to-1 matching on donations made to social justice nonprofits and increasing the annual amount of matching donations available to each of its employees.

During the three years ending December 2019, corporate giving contributed approximately $6.2 million to civic, educational, environmental, low income, and economic development organizations. PNMR recognizes its responsibility to support programs and organizations that enrich the quality of life for the people in its service territories and communities and seeks opportunities to further demonstrate its commitment in these areas as needs arise. In 2020, PNM has partnered with key local organizations to initiate funding for programs focused on diversity, equity and inclusion. In response to COVID-19 community needs, PNMR donated to an Emergency Action Fund in partnership with key local agencies to benefit approximately ninety nonprofits and small businesses facing challenges due to lack of technology, shifting service needs, and cancelled fundraising events. Additionally, employee teams have supported first responders and other front-line workers through the delivery of food and other supplies often procured from local businesses struggling during stay-at-home orders. While its service territory does not include the Navajo Nation, PNM’s operations include generating facilities and employees in this region that has been disproportionately affected by the pandemic. In response, employee teams focused efforts to this region and also provided available supplies of personal protective equipment. PNM has also collaborated with the Navajo Tribal Utility Authority Wireless (NTUAW) to set up wireless “hot spots” throughout the Navajo Nation in areas without internet access to assist first responders and support continued education opportunities amidst school closures. These actions supplement PNM’s continued support for the Navajo Nation. The PNM Navajo Nation Workforce Training Scholarship Program provides support for Navajo tribal members and encourages the pursuit of education and training in existing and emerging jobs in the communities in which they live. In 2019, PNM invested an additional $500,000 into this scholarship program to further assist in the development and education of the Navajo Nation workforce. PNM also continues to partner in the Light up Navajo project, piloted in 2019 and modeled after mutual aid to connect homes without electricity to the power grid.

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Another important outreach program is tailored for low-income customers and includes the PNM Good Neighbor Fund to provide customer assistance with their electric utility bills. COVID-19 has increased the needs of these customers along with customers who may not otherwise need to seek assistance. In addition to the suspension of customer disconnections and expansion of customer payment plans, PNM responded with increased communications through media outlets and customer outreach to connect customers with nonprofit community service providers offering financial assistance, food, clothing, medical programs, and services for seniors. As a result of these communication efforts, approximately 1,000 families in need have received emergency assistance through the PNM Good Neighbor Fund during the second quarter of this year.

Volunteerism is also an important facet of employee culture keeping our communities safer, stronger, smarter and more vibrant. In 2019, PNM and TNMP employees and retirees contributed over 13,300 volunteer hours serving local communities by supporting at least 250 organizations. Volunteers also participate in a company-wide annual Day of Service at nonprofits across New Mexico and Texas along with participation on a variety of nonprofit boards and independent volunteer activities throughout the year.

Economic Factors

PNM – In the three and six months ended June 30, 2020, PNM experienced a decrease in weather-normalized retail load of 1.7% and 0.3% compared to 2019. PNM experienced decreased sales to commercial customers partially offset by an increase in the usage of residential customers when compared to 2019 as a result of New Mexico state restrictions related to COVID-19 and did not experience significant impacts to its other customer classes.

TNMP – In the three and six months ended June 30, 2020, TNMP experienced an increase in volumetric weather-normalized retail load of 2.9% and 1.5% compared to 2019. Weather-normalized demand-based load, excluding retail transmission customers, decreased 2.8% in the three months ended June 30, 2020 and was flat for the six months ended June 30, 2020 compared to 2019. TNMP has experienced increased volumetric usage related to residential consumers offset by decreases in its demand based commercial consumer class as a result of impacts related to COVID-19.

The Company is unable to determine the duration or final impacts from COVID-19 as discussed in more detail in Item 1A. Risk Factors. The Company expects that some of the negative impacts to customer usage at PNM and TNMP will be offset by reduced operations and maintenance expenses resulting from the Company's efforts to maintain social distancing and that these costs could be further reduced if the economic impacts of COVID-19 persist into the summer. However, if current economic conditions extend through the summer and beyond, the Company may be required to implement additional measures such as further reducing or delaying operating and maintenance expenses and planned capital expenditures.

Results of Operations

Net earnings (loss) attributable to PNMR were $42.2 million, or $0.53 per diluted share in the six months ended June 30, 2020 compared to ($57.2) million, or ($0.72) per diluted share, in 2019. Among other things, earnings in the six months ended June 30, 2020 benefited from regulatory disallowance recorded in 2019 resulting from the NM Supreme Court's opinion in PNM's appeal of the NMPRC's decisions in the NM 2015 Rate Case, warmer weather at PNM, higher earnings on PNM's renewable rate rider, higher transmission rates at PNM and TNMP, lower plant maintenance costs at PNM and lower employee related and outside service expenses at PNM. These increases were partially offset by increased depreciation and property taxes due to increased plant in service at PNM and TNMP, and losses on PNM's PVNGS and coal mine reclamation investment securities. Additional information on factors impacting results of operations for each segment is discussed below under Results of Operations.

Liquidity and Capital Resources

PNMR and PNM have revolving credit facilities with capacities of $300.0 million and $400.0 million that currently expire in October 2023. Both facilities provide for short-term borrowings and letters of credit and can be extended through October 2024, subject to approval by a majority of the lenders. In addition, PNM has a $40.0 million revolving credit facility with banks having a significant presence in New Mexico, which expires in December 2022, and TNMP has a $75.0 million revolving credit facility, which expires in September 2022. PNMR Development has a revolving credit facility with a capacity of $40.0 million, with the option to further increase the capacity up to $50.0 million upon 15-days advance notice, that expires in February 2021. The PNMR Development Revolving Credit Facility bears interest at a variable rate and contains terms similar to the PNMR Revolving Credit Facility. Total availability for PNMR on a consolidated basis was $609.3 million at July 24, 2020. Total availability at PNMR, on a consolidated basis, does not reflect a reduction of $100.3 million that PNM has reserved to provide liquidity support for the PNM Floating Rate PCRBs. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational expenditures. PNMR also has intercompany loan agreements with each of its subsidiaries.

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PNMR projects that its consolidated capital requirements, consisting of construction expenditures, capital contributions for PNMR Development’s 50% ownership interest in NMRD, and dividends, will total $4.5 billion for 2020 - 2024, including amounts expended through June 30, 2020. The construction expenditures include estimated amounts for an anticipated expansion of PNM’s transmission system, including the planned purchase of the Western Spirit Line, and expenditures for PNM’s Wired for the Future capital program.

In January 2020, PNMR entered into agreements to sell approximately 6.2 million shares of PNMR common stock under forward purchase arrangements (the “PNMR 2020 Forward Equity Sale Agreements”). Under the PNMR 2020 Forward Equity Sale Agreements, PNMR has the option to physically deliver, cash settle, or net share settle all or a portion of PNMR common stock on or before a date that is 12 months from their effective dates. PNMR did not initially receive any proceeds upon execution of these agreements. The initial forward sales price of $47.21 per share is subject to adjustments based on net interest rate factor and by expected future dividends on PNMR’s common stock. PNMR expects to physically settle all shares under the agreements on or before January 7, 2021. See Note 9.

To fund capital spending requirements to meet growth that balances earnings goals, credits metrics and liquidity needs, the Company has entered into a number of other financing arrangements in 2020, including the TNMP 2020 Bond Purchase Agreements, the PNM 2020 Term Loan and the PNM 2020 Note Purchase Agreement. For further discussion on these financing arrangements see Liquidity and Capital Resources discussion below as well as Note 9.

See discussion of the NMPRC's April 1, 2020 approval of PNM's request to issue approximately $361 million of Securitized Bonds upon the retirement of SJGS in 2022, and the related appeal of that order to the NM Supreme Court in Note 12.

After considering the effects of these financings and the Company's short-term liquidity position as of July 24, 2020, the Company has consolidated maturities of long-term and short-term debt aggregating approximately $1,019.2 million through July 2021. In addition to internal cash generation, the Company anticipates that it will be necessary to obtain additional long-term financing in the form of debt refinancing, new debt issuances, and/or new equity in order to fund its capital requirements during the 2020-2024 period. The Company currently believes that its internal cash generation, existing credit arrangements, and access to public and private capital markets will provide sufficient resources to meet the Company’s capital requirements for at least the next twelve months. The Company is in compliance with its debt covenants.

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto. Trends and contingencies of a material nature are discussed to the extent known. Refer also to Disclosure Regarding Forward Looking Statements and to Part II, Item 1A. Risk Factors.

A summary of net earnings attributable to PNMR is as follows:


	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		Change		2020		2019		Change
	(In millions, except per share amounts)
Net earnings (loss) attributable to PNMR	$	57.5	$	(75.9)	$	133.4	$	42.2	$	(57.2)	$	99.4
Average diluted common and common equivalent shares⁽¹⁾	79.9		79.9		—		80.0		79.9		0.1
Net earnings attributable to PNMR per diluted share	$	0.72	$	(0.95)	$	1.67	$	0.53	$	(0.72)	$	1.25

⁽¹⁾ Excludes anti-dilutive shares for the three and six months ending June 30, 2019.

The components of the change in net earnings attributable to PNMR are:



	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
	(In millions)
PNM	$	132.4	$	97.4
TNMP	0.9		3.9

Corporate and Other	—		(1.9)
Net change	$	133.4	$	99.4

Information regarding the factors impacting PNMR’s operating results by segment are set forth below.

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Segment Information

The following discussion is based on the segment methodology that PNMR’s management uses for making operating decisions and assessing performance of its various business activities. See Note 2 for more information on PNMR’s operating segments.

PNM

PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.

The following table summarizes the operating results for PNM:


	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		Change		2020		2019		Change
	(In millions)
Electric operating revenues	$	260.8	$	238.2	$	22.6	$	508.9	$	507.5	$	1.4
Cost of energy	67.9		58.9		9.0		142.4		158.2		(15.8)
Utility margin	192.9		179.4		13.5		366.5		349.3		17.2
Operating expenses	101.6		255.5		(153.9)		200.1		362.0		(161.9)
Depreciation and amortization	41.8		39.8		2.0		83.2		79.0		4.2
Operating income	49.6		(116.0)		165.6		83.2		(91.7)		174.9
Other income (deductions)	24.1		7.7		16.4		(6.4)		25.7		(32.2)
Interest charges	(19.2)		(18.5)		(0.7)		(36.8)		(36.9)		0.1
Segment earnings (loss) before income taxes	54.5		(126.8)		181.3		40.0		(102.8)		142.8
Income (taxes) benefit	(4.9)		43.5		(48.4)		(2.5)		41.5		(44.0)
Valencia non-controlling interest	(3.9)		(3.5)		(0.4)		(7.7)		(6.3)		(1.4)
Preferred stock dividend requirements	(0.1)		(0.1)		—		(0.3)		(0.3)		—
Segment earnings	$	45.5	$	(86.9)	$	132.4	$	29.5	$	(67.9)	$	97.4

The following table shows total GWh sales, including the impacts of weather, by customer class and average number of customers:


	Three Months Ended June 30,						Six Months Ended June 30,
			Percentage				Percentage
	2020	2019	Change		2020	2019	Change
	(Gigawatt hours, except customers)
Residential	809.0	660.6	22.5	%	1,577.3	1,456.2	8.3	%
Commercial	813.5	933.7	(12.9)		1,652.2	1,761.9	(6.2)
Industrial	337.3	266.2	26.7		671.6	516.3	30.1
Public authority	59.7	54.2	10.1		108.2	103.8	4.2
Economy energy service ⁽¹⁾	94.7	163.9	(42.2)		261.2	320.8	(18.6)

Other sales for resale	654.9	484.4	35.2		1,260.1	1,359.1	(7.3)
	2,769.1	2,563.0	8.0	%	5,530.6	5,518.1	0.2	%
Average retail customers (thousands)	534.4	529.6	0.9	%	533.7	529.3	0.8	%

⁽¹⁾ PNM purchases energy for a large customer on the customer’s behalf and delivers the energy to the customer’s location through PNM’s transmission system. PNM charges the customer for the cost of the energy as a direct pass through to the customer with only a minor impact in utility margin resulting from providing ancillary services.

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Operating Results – Three Months Ended June 30, 2020 compared to 2019

The following table summarizes the significant changes to utility margin:


		Three Months Ended June 30, 2020
		Change
Utility margin:				(In millions)


	Retail customer usage/load – Weather normalized KWh sales decreased 1.7%, due to decreased sales to commercial customers partially offset by increased sales to residential customers	$	(2.0)
	Weather – Warmer weather in 2020; cooling degree days were 76.6% higher in 2020	8.4

	Transmission – Higher revenues under formula transmission rates	2.0



	Rate riders – Includes renewable energy, fuel clause, and energy efficiency riders	5.6

	Other	(0.5)
	Net Change	$	13.5

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Three Months Ended June 30, 2020
		Change
Operating expenses:				(In millions)

	Lower plant maintenance and administrative costs at SJGS, PVNGS, and gas-fired plants, partially offset by higher costs at Four Corners	$	(8.3)


	Regulatory disallowance resulting from the NM Supreme Court's May 2019 decision in PNM's appeal of the NM 2015 Rate Case (Note 12)	(149.3)
	Higher property taxes due to increases in utility plant in service	0.6
	Higher employee related and outside service expenses	1.1
	Reclassification of upfront and quarterly commitment fees, offset in interest charges	0.6




	Other	1.4
	Net Change	$	(153.9)





Depreciation and amortization:

	Increased utility plant in service, including solar facilities under the renewable rider	$	1.5
	Other	0.5
	Net Change	$	2.0





Other income (deductions):

	Higher gains on investment securities in the NDT and coal mine reclamation trusts	$	17.0
	Lower equity AFUDC	(0.3)


	Lower interest income and trust expenses related to investment securities in the NDT and coal mine reclamation trusts	(0.3)


	Net Change	$	16.4

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		Three Months Ended June 30, 2020
		Change
Interest charges:				(In millions)





	Lower interest on term loans	$	0.7
	Interest on deposit by PNMR Development for transmission interconnections in 2019, which is offset in Corporate and Other	1.0

	Issuance of $200.0 million of SUNs in April 2020	(1.1)
	Lower debt AFUDC resulting from FERC audit (Note 12)	(1.9)
	Reclassification of upfront and quarterly commitment fees, offset in operating expenses	0.6
	Net Change	$	(0.7)





Income (taxes) benefits:

	Higher segment earnings before income taxes	$	(45.9)
	Changes in the anticipated effective tax rate, including amortization of excess deferred income taxes (Note 14)	5.1
	Reversal of excess deferred income taxes resulting from regulatory disallowances in the NM 2015 Rate Case (Note 12)	(7.5)

	Other	(0.1)
	Net Change	$	(48.4)

Operating Results – Six Months Ended June 30, 2020 compared to 2019

The following table summarizes the significant changes to utility margin:


		Six Months Ended June 30, 2020
		Change
Utility margin:				(In millions)


	Retail customer usage/load – Weather normalized KWh sales decreased 0.3% due to decreased sales to commercial customers partially offset by increased sales to residential customers	$	(1.4)
	Weather – Warmer weather in 2020; cooling degree days were 76.3% higher in 2020	6.2
	Leap Year – Increase in revenue due an additional day in 2020	1.8
	Transmission – Increase primarily due to higher revenues under formula transmission rates and the addition of new customers	2.8



	Rate riders – Includes renewable energy, fuel clause and energy efficiency riders	9.2

	Other	(1.4)
	Net Change	$	17.2

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The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Six Months Ended June 30, 2020
		Change
Operating expenses:				(In millions)

	Lower plant maintenance and administrative costs at SJGS, PVNGS, and gas-fired plants, partially offset by higher costs at Four Corners	$	(9.4)



	Regulatory disallowance resulting from the NM Supreme Court’s May 2019 decision in PNM’s appeal of the NM 2015 Rate Case (Note 12)	(150.6)



	Higher property taxes due to increases in utility plant in service	0.8
	Lower employee related and outside service expenses	(3.4)
	Reclassification of upfront and quarterly commitment fees, offset in interest charges	0.6


	Other	0.1
	Net Change	$	(161.9)





Depreciation and amortization:

	Increased utility plant in service, including solar facilities under the renewable rider	$	3.5

	Other	0.7
	Net Change	$	4.2





Other income (deductions):

	Lower gains on investment securities in the NDT and coal mine reclamation trusts	$	(29.8)
	Lower equity AFUDC	(1.1)


	Lower interest income and trust expenses related to investment securities in the NDT and coal mine reclamation trusts	(0.4)

	Other	(0.9)
	Net Change	$	(32.2)





Interest charges:

	Lower interest on term loans	$	0.9
	Interest on deposit by PNMR Development for potential transmission interconnections in 2019, which is offset in Corporate and Other	1.9
	Issuance of $200.0 million of SUNs in April 2020	(1.1)
	Lower debt AFUDC resulting from FERC audit (Note 12)	(1.9)
	Reclassification of upfront and quarterly commitment fees, offset in operating expenses	0.6
	Other	(0.3)
	Net Change	$	0.1





Income (taxes) benefits:

	Higher segment earnings before income taxes	$	(35.9)
	Changes in the anticipated effective tax rate, including amortization of excess deferred income taxes (Note 14)	(0.6)
	Reversal of excess deferred income taxes resulting from regulatory disallowances in the NM 2015 Rate Case (Note 12)	(7.5)



	Net Change	$	(44.0)

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TNMP

TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.

The following table summarizes the operating results for TNMP:


	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		Change		2020		2019		Change
	(In millions)
Electric operating revenues	$	96.9	$	92.0	$	4.9	$	182.4	$	172.3	$	10.1
Cost of energy	26.0		24.9		1.1		50.2		47.2		3.0
Utility margin	70.9		67.1		3.8		132.2		125.1		7.1
Operating expenses	25.3		24.0		1.3		50.5		49.3		1.2
Depreciation and amortization	22.4		20.5		1.9		44.2		40.7		3.5
Operating income	23.2		22.6		0.6		37.5		35.2		2.3
Other income (deductions)	2.0		0.7		1.3		2.5		1.3		1.2
Interest charges	(7.4)		(6.6)		(0.8)		(14.5)		(15.4)		0.9
Segment earnings before income taxes	17.8		16.7		1.1		25.5		21.1		4.4
Income (taxes)	(1.6)		(1.5)		(0.1)		(2.2)		(1.8)		(0.4)
Segment earnings	$	16.2	$	15.3	$	0.9	$	23.3	$	19.4	$	3.9

The following table shows total sales, including the impacts of weather, by retail tariff consumer class and average number of consumers:


	Three Months Ended June 30,						Six Months Ended June 30,
			Percentage				Percentage
	2020	2019	Change		2020	2019	Change





Volumetric load ⁽¹⁾ (GWh)	789.1	744.0	6.1	%	1,395.7	1,370.5	1.8	%
Demand-based load ⁽²⁾(MW)	4,902.1	4,587.5	6.9	%	9,786.0	9,309.5	5.1	%
Average retail consumers (thousands) ⁽³⁾	258.3	255.0	1.3	%	257.7	254.4	1.3	%

⁽¹⁾Volumetric load consumers are billed on KWh usage.

⁽²⁾ Demand-based load includes consumers billed on monthly KW peak and also includes retail transmission customers that are primarily billed under TNMP’s rate riders.

⁽³⁾TNMP provides transmission and distribution services to REPs that provide electric service to their customers in TNMP’s service territories. The number of consumers above represents the customers of these REPs. Under TECA, consumers in Texas have the ability to choose any REP to provide energy.

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Operating Results – Three Months Ended June 30, 2020 compared to 2019

The following table summarizes the significant changes to utility margin:


		Three Months Ended June 30, 2020
		Change
Utility margin:				(In millions)


	Transmission rate relief/load – Transmission cost of service rate increases in September 2019, and March 2020	$	2.6
	Volumetric-based customer usage/load – Weather normalized KWh sales increased 2.9%, the average number of retail consumers increased 1.3%	0.5
	Demand-based customer usage/load – Lower demand-based revenues for large commercial and industrial customers; weather normalized billed demand excluding retail transmission customers decreased 2.8%	(0.7)
	Weather – Warmer weather in 2020; cooling degree days were 6.7% higher in 2020	0.9
	Rate Riders – Impacts of rate riders, including the CTC surcharge, energy efficiency rider, rate case expense rider, and transmission cost recovery factor	0.5


	Net Change	$	3.8

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Three Months Ended June 30, 2020
		Change
Operating expenses:				(In millions)


	Higher employee related expenses	$	1.2
	Higher capitalization of administrative and general and other expenses due to higher construction expenditures	(0.4)

	Higher property taxes due to increased utility plant in service	0.3
	Other	0.2
	Net Change	$	1.3





Depreciation and amortization:

	Increased utility plant in service	$	1.6


	Other	0.3
	Net Change	$	1.9





Other income (deductions):


	Higher equity AFUDC	$	0.5
	Higher CIAC	0.7
	Other	0.1
	Net Change	$	1.3





Interest charges:

	Repayment of $35.0 million term loan in December 2019	$	0.3
	Issuance of $80.0 million first mortgage bonds in July 2019	(0.7)
	Issuance of $110.0 million first mortgage bonds in April 2020	(0.6)

	Other	0.2
	Net Change	$	(0.8)

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		Three Months Ended June 30, 2020
		Change
Income (taxes) benefits:				(In millions)


	Higher segment earnings before income taxes	$	(0.2)
	Other	0.1

	Net Change	$	(0.1)

Operating Results – Six Months Ended June 30, 2020 compared to 2019

The following table summarizes the significant changes to utility margin:


		Six Months Ended June 30, 2020
		Change
Utility margin:				(In millions)


	Transmission rate relief/load – Transmission cost of service rate increases in March 2019, September 2019, and March 2020	6.6
	Volumetric-based customer usage/load – Weather normalized KWh sales increased 1.5% in addition to the leap-year impact; the average number of retail consumers increased 1.3%	0.5
	Demand-based customer usage/load - Demand-based revenues for large commercial and industrial customers excluding retail transmission customers is flat	—
	Weather – Milder weather in the first quarter was offset by warmer weather in the second quarter	(0.1)
	Rate Riders – Impacts of rate riders, including the CTC surcharge, energy efficiency rider, rate case expense rider, and transmission cost recovery factor	0.3

	Other	(0.2)
	Net Change	$	7.1

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Six Months Ended June 30, 2020
		Change
Operating expenses:				(In millions)


	Higher employee related expenses	$	0.3


	Higher capitalization of administrative and general and other expenses due to higher construction expenditures	(0.2)
	Higher property taxes due to increased utility plant in service	0.7


	Other	0.4
	Net Change	$	1.2





Depreciation and amortization:

	Increased utility plant in service	$	3.3



	Other	0.2
	Net Change	$	3.5

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		Six Months Ended June 30, 2020
		Change
Other income (deductions):				(In millions)



	Higher equity AFUDC	$	0.4
	Higher CIAC	0.7
	Other	0.1
	Net Change	$	1.2





Interest charges:

	Repayment of $172.3 million 9.50% first mortgage bonds in April 2019	$	4.3
	Issuance of $225.0 million first mortgage bonds in March 2019	(2.2)
	Issuance of $80.0 million first mortgage bonds in July 2019	(1.5)
	Repayment of $35.0 million term loan in December 2019	0.6
	Issuance of $110.0 million first mortgage bonds in April 2020	(0.6)
	Other	0.3
	Net Change	$	0.9





Income (taxes) benefits:

	Higher segment earnings before income taxes	$	(0.9)
	Amortization of excess deferred federal income taxes (Note 14)	0.5


	Net Change	$	(0.4)

Corporate and Other

The table below summarizes the operating results for Corporate and Other:


	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		Change		2020		2019		Change
	(In millions)
Electric operating revenues	$	—	$	—	$	—	$	—	$	—	$	—
Cost of energy	—		—		—		—		—		—
Utility margin	—		—		—		—		—		—
Operating expenses	(4.3)		(5.5)		1.2		(9.8)		(11.3)		1.5
Depreciation and amortization	5.9		5.8		0.1		11.6		11.7		(0.1)
Operating income (loss)	(1.6)		(0.2)		(1.4)		(1.8)		(0.4)		(1.4)
Other income (deductions)	(0.3)		(0.1)		(0.2)		(0.9)		(1.0)		0.1
Interest charges	(4.5)		(4.7)		0.2		(10.2)		(9.2)		(1.0)
Segment earnings (loss) before income taxes	(6.4)		(5.1)		(1.3)		(12.9)		(10.5)		(2.4)
Income (taxes) benefit	2.2		0.8		1.4		2.4		1.9		0.5
Segment earnings (loss)	$	(4.2)	$	(4.2)	$	—	$	(10.5)	$	(8.6)	$	(1.9)

Corporate and Other operating expenses shown above are net of amounts allocated to PNM and TNMP under shared services agreements. The changes in operating expense for the three months and six months ended June 30, 2020 include an increase for the reclassification of $0.4 million in upfront and quarterly commitment fees, previously recorded as interest charges, and an increase of $1.0 million in legal and consulting costs that were not allocated to PNM or TNMP. Substantially all depreciation and amortization expense and other income (deductions) are offset in operating expenses as a result of allocation of these costs to other business segments.

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Operating Results – Three Months Ended June 30, 2020 compared to 2019

The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:


		Three Months Ended June 30, 2020
		Change
Other income (deductions):				(In millions)

	Higher equity method investment income from NMRD	$	0.4

	Increase in donations and other contributions	(0.5)

	Other	(0.1)
	Net Change	$	(0.2)





Interest charges:


	Lower interest on term loans	$	1.4
	Higher short-term borrowings	(0.7)
	Reclassification of upfront and quarterly commitment fees, offset in operating expense	0.4

	Elimination of intercompany interest	(1.0)
	Other	0.1
	Net Change	$	0.2





Income (taxes) benefits:

	Impact of difference in effective tax rates used by PNMR and its subsidiaries in the calculation of income taxes in interim periods	$	1.1
	Higher segment loss before income taxes	0.3

	Net Change	$	1.4

Operating Results – Six Months Ended June 30, 2020 compared to 2019

The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:


		Six Months Ended June 30, 2020
		Change
Other income (deductions):				(In millions)

	Higher equity method investment income from NMRD	$	0.4
	Increase in donations and other contributions	(0.6)


	Other	0.3
	Net Change	$	0.1





Interest charges:

	Lower interest on term loans	$	1.9
	Higher short-term borrowings	(1.4)
	Reclassification of upfront and quarterly commitment fees, offset in operating expenses	0.4




	Elimination of intercompany interest	(1.9)


	Net Change	$	(1.0)

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		Six Months Ended June 30, 2020
		Change
Income (taxes) benefits:				(In millions)


	Impact of difference in effective tax rates used by PNMR and its subsidiaries in the calculation of income taxes in interim periods	$	—
	Higher segment loss before income taxes	0.6
	Other	(0.1)
	Net Change	$	0.5

LIQUIDITY AND CAPITAL RESOURCES

Statements of Cash Flows

The changes in PNMR’s cash flows for the six months ended June 30, 2020 compared to June 30, 2019 are summarized as follows:


	Six Months Ended June 30,
	2020		2019		Change
	(In millions)
Net cash flows from:
Operating activities	$	165.8	$	171.9	$	(6.1)
Investing activities	(367.2)		(312.1)		(55.1)
Financing activities	200.4		142.4		58.0
Net change in cash and cash equivalents	$	(1.0)	$	2.1	$	(3.1)

Cash Flows from Operating Activities

Changes in PNMR’s cash flow from operating activities result from net earnings, adjusted for items impacting earnings that do not provide or use cash. See Results of Operations above. Certain changes in assets and liabilities resulting from normal operations, including the effects of the seasonal nature of the Company’s operations, also impact operating cash flows.

Cash Flows from Investing Activities

The changes in PNMR’s cash flows from investing activities relate primarily to changes in utility plant additions. Cash flows from investing activities include purchases and sales of investment securities in the NDT and coal mine reclamation trusts as well as activity related to NMRD.

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Major components of PNMR’s cash inflows and (outflows) from investing activities are shown below:


	Six Months Ended June 30,
	2020		2019		Change
Cash (Outflows) for Utility Plant Additions	(In millions)
PNM:
Generation	$	(33.5)	$	(36.3)	$	2.8
Renewables	—		(31.7)		31.7
Transmission and distribution	(136.2)		(78.2)		(58.0)

Nuclear fuel	(13.6)		(11.7)		(1.9)
	(183.3)		(157.9)		(25.4)

TNMP:
Transmission	(81.3)		(47.1)		(34.2)
Distribution	(66.7)		(77.3)		10.6

	(148.0)		(124.4)		(23.6)

Corporate and Other:
Computer hardware and software	(12.5)		(10.8)		(1.7)


Total cash (outflows) for additions to utility plant	$	(343.8)	$	(293.1)	$	(50.7)


Other Cash Flows from Investing Activities
Proceeds from sales of investment securities	$	354.6	$	234.0	$	120.6
Purchases of investment securities	(359.8)		(239.6)		(120.2)


Investments in NMRD	(18.2)		(13.3)		(4.9)
Other, net	—		(0.1)		0.1
Total cash (outflows) from investing activities	$	(367.2)	$	(312.1)	$	(55.1)

Cash Flow from Financing Activities

The changes in PNMR’s cash flows from financing activities include:

•Short-term borrowings increased $67.4 million in 2020 compared to an increase of $106.5 million in 2019, resulting in a net decrease in cash flows from financing activities of $39.1 million

•In 2020, PNM borrowed $250.0 million under the PNM 2020 Term Loan and used the proceeds to prepay the PNM 2019 $250.0 million Term Loan

•In 2020, PNM issued $200.0 million of PNM 2020 SUNs and used $100.0 million of proceeds to repay $100.0 million of the PNM 2020 Term Loan. The remaining $100.0 million of the PNM 2020 SUNs was used to repay borrowings on the PNM Revolving Credit Facility and for other corporate purposes

•In 2020, TNMP issued $110.0 million of TNMP 2020 Bonds and used the proceeds to reduce short-term debt and for other corporate purposes.

•In 2020, PNM purchased and held three series of PCRBs totaling $100.3 million that were subject to mandatory tender on June 1, 2020. PNM purchased these bonds utilizing borrowings under the PNM Revolving Credit Facility and held the bonds until July 1, 2020, on which date they were remarketed in weekly mode, whereby interest rates will reset weekly

•In 2019, PNM borrowed $250.0 million under the PNM 2019 Term Loan and used the proceeds to repay the $200.0 million PNM 2017 Term Loan

•In 2019, TNMP issued $225.0 million of TNMP 2019 Bonds and use the proceeds to repay the $172.3 million 9.50% First Mortgage Bonds

Financing Activities

See Note 7 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and Note 9 for additional information concerning the Company’s financing activities. PNM must obtain NMPRC approval for any financing transaction having a maturity of more than 18 months. In addition, PNM files its annual short-term financing plan with the NMPRC. The Company’s ability to access the credit and capital markets at a reasonable cost is largely dependent upon its:

•Ability to earn a fair return on equity

•Results of operations

•Ability to obtain required regulatory approvals

•Conditions in the financial markets

•Credit ratings

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The Company is closely monitoring developments and is taking steps to mitigate the potential risks related to COVID-19. The Company currently believes it has adequate liquidity but cannot predict the extent or duration of the outbreak, its effects on the global, national or local economy, including the Company's ability to access capital in the financial markets, or on the Company's financial position, results of operations, and cash flows.

Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the PNMR and PNMR Development agreements, this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities and term loans generally also contain customary covenants, events of default, cross-default provisions, and change-of-control provisions. The Company is in compliance with its debt covenants.

On October 21, 2016, PNMR entered into letter of credit arrangements with JPMorgan Chase Bank, N.A. (the “JPM LOC Facility”) under which letters of credit aggregating $30.3 million were issued to facilitate the posting of reclamation bonds, which WSJ LLC is required to post in connection with permits relating to the operation of the San Juan mine. See Note 11. In May 2020, JPMorgan Chase Bank N.A. gave notice that it would not extend the letters of credit, which expire on October 21, 2020. The Company is currently pursuing a replacement agreement.

As discussed in Note 9, in January 2020, PNMR entered into forward sale agreements to sell approximately 6.2 million shares of PNMR common stock. The initial forward sale price of $47.21 per share is subject to adjustments based on a net interest rate factor and by expected future dividends paid on PNMR common stock as specified in the forward sale agreements. PNMR did not initially receive any proceeds upon the execution of these agreements and, except in certain specified circumstances, has the option to elect physical, cash, or net share settlement on or before the date that is 12 months from their effective dates. PNMR expects to physically settle all shares under the agreements on or before January 7, 2021.

In April 2020, PNM entered into the $250.0 million PNM 2020 Term Loan and used the proceeds to prepay the PNM 2019 $250.0 million Term Loan, without penalty. As discussed below, on April 30, 2020, PNM used $100.0 million of proceeds from the PNM 2020 SUNs to prepay without penalty an equal amount of the PNM 2020 Term Loan.

On April 24, 2020, TNMP entered into the TNMP 2020 Bond Purchase Agreement with institutional investors for the sale of $185.0 million aggregate principal amount of four series of TNMP first mortgage bonds (the "TNMP 2020 Bonds") offered in private placement transactions. TNMP issued $110.0 million of TNMP 2020 Bonds on April 24, 2020 and used the proceeds to repay borrowings under the TNMP Revolving Credit Facility and for other corporate purposes. TNMP issued the remaining $75.0 million of TNMP 2020 Bonds on July 15, 2020 and used the proceeds from that issuance to repay borrowings under the TNMP Revolving Credit Facility and for other corporate purposes. The TNMP 2020 Bonds are subject to continuing compliance with the representations, warranties and covenants of the TNMP 2020 Bond Purchase Agreement. The terms of the TNMP 2020 Bond Purchase Agreement include customary covenants, including a covenant that requires TNMP to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, a cross-default provision, and a change-of-control provision. TNMP will have the right to redeem any or all of the TNMP 2020 Bonds prior to their respective maturities, subject to payment of a customary make-whole premium.

On April 30, 2020, PNM issued $200.0 million aggregate principal amount of PNM 2020 SUNs offered in private placement transactions. PNM used $100.0 million of proceeds from the PNM 2020 SUNs to repay an equal amount of the PNM 2020 Term Loan. The remaining $100.0 million of the PNM 2020 SUNs was used to repay borrowings on the PNM Revolving Credit Facility and for other corporate purposes. The PNM 2020 Note Purchase Agreement includes customary covenants, including a covenant that requires PNM to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, including a cross-default provision, and covenants regarding parity of financial covenants, liens and guarantees with respect to PNM’s material credit facilities. In the event of a change of control, PNM will be required to offer to prepay the PNM 2020 SUNs at par. PNM has the right to redeem any or all of the PNM 2020 SUNs prior to their maturities, subject to payment of a customary make-whole premium.

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At June 30, 2020 and December 31, 2019, PNM had PCRBs outstanding of $36.0 million at 6.25% issued by the Maricopa County, Arizona Pollution Control Corporation as well as $255.0 at 5.90% and $11.5 million at 6.25% issued by the City of Farmington, New Mexico. On June 22, 2020, PNM provided notice to the bondholders that it was calling the PCRBs aggregating $302.5 million. On July 22, 2020, PNM purchased the PCRBs in lieu of redemption and remarketed them to new investors (the "PNM 2020 Fixed Rate PCRBs"). For information concerning the funding dates, mandatory tender dates, and interest rates on the PNM 2020 Fixed Rate PCRBs see Note 9.

See discussion of the NMPRC's April 1, 2020 approval of PNM’s request to issue up to $361 million of Securitized Bonds in the SJGS Abandonment Application, and the related appeal to the NM Supreme Court in Note 12.

In 2017, PNMR entered into three separate four-year hedging agreements whereby it effectively established fixed interest rates on three separate tranches, each of $50.0 million, of its variable rate debt. The hedging agreements effectively fix interest rates on the aggregate $150.0 million of short-term debt at rates of 1.926%, 1.823%, and 1.629%, plus customary spreads over LIBOR, and are subject to changes if there is a change in PNMR’s credit rating.

Capital Requirements

PNMR’s total capital requirements consist of construction expenditures, cash dividend requirements for PNMR common stock and PNM preferred stock, and capital contributions for PNMR Development’s 50% ownership interest in NMRD. Key activities in PNMR’s current construction program include:

•Investments in transmission and distribution infrastructure

•Upgrading generation resources and delivering clean energy

•Purchasing nuclear fuel

Projected capital requirements, including amounts expended through June 30, 2020, are:


	2020		2021-2024		Total
	(In millions)
Construction expenditures	$	778.9	$	3,139.2	$	3,918.1
Capital contributions to NMRD	27.0		—		27.0
Dividends on PNMR common stock	98.0		422.3		520.3
Dividends on PNM preferred stock	0.5		2.1		2.6
Total capital requirements	$	904.4	$	3,563.6	$	4,468.0

The construction expenditure estimates are under continuing review and subject to ongoing adjustment, as well as to Board review and approval. The construction expenditures above include $116.8 million in 2020-2021 for anticipated expansions of PNM’s transmission system and a net investment of approximately $285 million resulting from PNM’s agreement to purchase the Western Spirit Line, subject to certain conditions being met prior to closing. Also included in the table above are approximately $450 million in expenditures for PNM’s Wired for the Future capital program that includes investments in transmission and distribution infrastructure to deliver clean energy, enhance customer satisfaction, and increase grid resilience. Not included in the table above are potential incremental expenditures for new customer growth in New Mexico and Texas, and other transmission and renewable energy expansion in New Mexico. The ability of PNMR to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to pay dividends to PNMR. Note 6 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K describes regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.

During the six months ended June 30, 2020, PNMR met its capital requirements and construction expenditures through cash generated from operations, as well as its liquidity arrangements and the borrowings discussed in Financing Activities above.

In addition to the capital requirements for construction expenditures and dividends, the Company has long-term debt and term loans that must be paid or refinanced at maturity. The $90.0 million PNMR Development Term Loan matures in November 2020, the $50.0 million PNMR 2018 Two-Year Term Loan matures in December 2020, the $300.0 million PNMR 2018 SUNs mature in March 2021, the $150.0 million PNMR 2019 Term Loan matures June 2021, the PNM 2019 $40.0 million Term Loan matures in June 2021, and the PNM 2020 Term Loan matures in June 2021. Note 7 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K contains additional information about the maturities of long-term debt. The Company anticipates that funds to repay long-term debt maturities and term loans will come from entering into new arrangements similar to the existing agreements, borrowing under the revolving credit facilities, issuance of new long-term debt or equity in the public or private capital markets, or a combination of these sources. The

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Company has from time to time refinanced or repurchased portions of its outstanding debt before scheduled maturity. PNM had $36.0 million of PCRBs that became callable at 101% of par on January 1, 2020 and an additional $266.5 million of PCRBs that became callable at par on June 1, 2020. On July 22, 2020, PNM purchased the bonds in lieu of redemption and remarketed them to new investors.

Liquidity

PNMR’s liquidity arrangements include the PNMR Revolving Credit Facility, the PNM Revolving Credit Facility, and the TNMP Revolving Credit Facility. The PNMR and PNM facilities currently expire in October 2023 but can be extended through October 2024, subject to approval by a majority of the lenders. The $75.0 million TNMP Revolving Credit Facility matures in September 2022. PNM also has the $40.0 million PNM 2017 New Mexico Credit Facility that expires in December 2022. PNMR Development has a $40.0 million revolving credit facility that expires on February 23, 2021. PNMR Development has the option to further increase the capacity of this facility to $50.0 million upon 15-days advanced notice. The PNMR Development Revolving Credit Facility bears interest at a variable rate and contains terms similar to the PNMR Revolving Credit Facility. PNMR has guaranteed the obligations of PNMR Development under the facility. PNMR Development uses the facility to finance its participation in NMRD and for other activities. See Note 16. The Company believes the terms and conditions of these facilities are consistent with those of other investment grade revolving credit facilities in the utility industry. Variable interest rates under these facilities are based on LIBOR but contain provisions which allow for the replacement of LIBOR with other widely accepted interest rates. The Company expects that it will be able to extend or replace these credit facilities under similar terms and conditions prior to their expirations.

The revolving credit facilities and the PNM 2017 New Mexico Credit Facility provide short-term borrowing capacity. The revolving credit facilities also allow letters of credit to be issued. Letters of credit reduce the available capacity under the facilities. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational expenditures. The Company’s business is seasonal with more revenues and cash flows from operations being generated in the summer months. In general, the Company relies on the credit facilities to be the initial funding source for construction expenditures. Accordingly, borrowings under the facilities may increase over time. Depending on market and other conditions, the Company will periodically sell long-term debt and use the proceeds to reduce the borrowings under the credit facilities.

Information regarding the range of borrowings for each facility is as follows:


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
Range of Borrowings	Low		High		Low		High
	(In millions)
PNM:
PNM Revolving Credit Facility	$	15.0	$	147.9	$	15.0	$	147.9
PNM 2017 New Mexico Credit Facility	20.0		40.0		10.0		40.0
TNMP Revolving Credit Facility	—		74.9		—		74.9
PNMR Revolving Credit Facility	130.0		168.1		110.5		188.6

At June 30, 2020, the weighted average interest rates were 1.68% for the PNMR Revolving Credit Facility, 1.43% for the PNM Revolving Credit Facility, 1.44% for the PNM 2017 New Mexico Credit Facility, and 0.91% for the TNMP Revolving Credit Facility. There were no borrowings outstanding under the PNMR Development Revolving Credit Facility at June 30, 2020.

The Company currently believes that its capital requirements for at least the next twelve months can be met through internal cash generation, existing, extended, or new credit arrangements, and access to public and private capital markets as discussed above and in Note 9. The Company anticipates that it will be necessary to obtain additional long-term financing to fund its capital requirements and to balance its capital structure during the 2020-2024 period. This could include new debt and/or equity issuances, including instruments such as mandatory convertible securities beginning in 2021. To cover the difference in the amounts and timing of internal cash generation and cash requirements, the Company intends to use short-term borrowings under its current and future liquidity arrangements or other short-term loans. However, if difficult market conditions persist or worsen, the Company may not be able to access the capital markets or renew credit facilities when they expire or the cost of these facilities and debt issuances may increase. Should that occur, the Company would seek to improve cash flows by reducing capital expenditures and exploring other available alternatives.

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As of July 24, 2020, ratings on the Company’s securities were as follows:

PNMR

PNM

TNMP

S&P

Issuer rating

BBB

BBB+

Senior secured debt

Senior unsecured debt

BBB-

BBB

Short-term issuer rating

A-2

Preferred stock

BB+

Moody’s

Issuer rating

Baa3

Baa2

Senior secured debt

Senior unsecured debt

Baa3

Baa2

Short-term issuer rating

P-2

* Not applicable

Currently, all of the credit ratings issued by both Moody’s and S&P on the Company’s debt are investment grade. On June 25, 2020, Moody's assigned PNM a short-term issuer rating of P-2. On June 22, 2020, S&P assigned PNM a short-term issuer rating of A-2. On June 29, 2018, Moody’s changed the ratings outlook for PNMR and PNM from positive to stable, maintained the stable outlook for TNMP, and affirmed the long-term credit ratings of each entity. In August 2019, Moody’s affirmed the credit rating and stable outlook for PNMR, PNM and TNMP. On April 6, 2020, S&P reduced the issuer credit ratings for PNMR, PNM, and TNMP by one notch, reduced the senior unsecured debt ratings for PNMR and PNM by one notch, affirmed TNMP's senior secured debt rating, and issued a stable outlook for each entity. In addition, S&P reduced PNM's preferred stock rating to BB+. Investors are cautioned that a security rating is not a recommendation to buy, sell, or hold securities, that each rating is subject to revision or withdrawal at any time by the rating organization, and that each rating should be evaluated independently of any other rating.

A summary of liquidity arrangements as of July 24, 2020 is as follows:


	PNM		TNMP		PNMR Separate		PNMR Development		PNMR Consolidated
	(In millions)
Financing capacity:
Revolving credit facility	$	400.0	$	75.0	$	300.0	$	40.0	$	815.0
PNM 2017 New Mexico Credit Facility	40.0		—		—		—		40.0

Total financing capacity	$	440.0	$	75.0	$	300.0	$	40.0	$	855.0


Amounts outstanding as of July 24, 2020:
Revolving credit facility	$	53.9	$	—	$	141.8	$	3.0	$	198.7
PNM 2017 New Mexico Credit Facility	40.0		—		—		—		40.0

Letters of credit	2.2		0.1		4.7		—		7.0

Total short-term debt and letters of credit	96.1		0.1		146.5		3.0		245.7

Remaining availability as of July 24, 2020⁽¹⁾	$	343.9	$	74.9	$	153.5	$	37.0	$	609.3
Invested cash as of July 24, 2020	$	—	$	63.5	$	0.9	$	—	$	64.4

⁽¹⁾ Availability for the PNM Revolving Credit Facility does not reflect a reduction of $100.3 million that PNM has reserved to provide liquidity support for the PNM Floating Rate PCRBs.

In addition to the above, PNMR has $30.3 million of letters of credit issued under the JPM LOC Facility. See Note 9. The above table excludes intercompany debt. As of July 24, 2020, neither PNM, TNMP, nor PNMR Development had any intercompany borrowings from PNMR. The remaining availability under the revolving credit facilities at any point in time varies based on a number of factors, including the timing of collections of accounts receivables and payments for construction and operating expenditures.

PNMR has an automatic shelf registration that provides for the issuance of various types of debt and equity securities that expires in March 2021. PNM has a shelf registration statement for up to $650.0 million of senior unsecured notes that expires in May 2023.

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Off-Balance Sheet Arrangements

PNMR has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Commitments and Contractual Obligations

PNMR, PNM, and TNMP have contractual obligations for long-term debt, leases, construction expenditures, purchase obligations, and certain other long-term obligations. See MD&A – Commitments and Contractual Obligations in the 2019 Annual Reports on Form 10-K. See Note 13 for further details regarding the PVNGS leases.

Contingent Provisions of Certain Obligations

As discussed in the 2019 Annual Reports on Form 10-K, PNMR, PNM, and TNMP have a number of debt obligations and other contractual commitments that contain contingent provisions. Some of these, if triggered, could affect the liquidity of the Company. In the unlikely event that the contingent requirements were to be triggered, PNMR, PNM, or TNMP could be required to provide security, immediately pay outstanding obligations, or be prevented from drawing on unused capacity under certain credit agreements. The contingent provisions also include contractual increases in the interest rate charged on certain of the Company’s short-term debt obligations in the event of a downgrade in credit ratings. The Company believes its financing arrangements are sufficient to meet the requirements of the contingent provisions. As discussed above, in April 2020, S&P downgraded PNMR's and PNM's senior unsecured debt ratings which triggered pricing changes in the PNMR and PNM Revolving Credit Facilities. No other conditions have occurred that would result in any of the above contingent provisions being implemented.

Capital Structure

The capitalization tables below include the current maturities of long-term debt, but do not include short-term debt and do not include lease obligations as debt.


	June 30, 2020		December 31, 2019
PNMR
PNMR common equity	34.5	%	35.8	%
Preferred stock of subsidiary	0.2		0.2
Long-term debt	65.3		64.0
Total capitalization	100.0	%	100.0	%
PNM
PNM common equity	43.8	%	45.2	%
Preferred stock	0.3		0.4
Long-term debt	55.9		54.4
Total capitalization	100.0	%	100.0	%
TNMP
Common equity	49.3	%	52.9	%
Long-term debt	50.7		47.1
Total capitalization	100.0	%	100.0	%

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OTHER ISSUES FACING THE COMPANY

Climate Change Issues

Background

For the past several years, management has identified multiple risks and opportunities related to climate change, including potential environmental regulation, technological innovation, and availability of fuel and water for operations, as among the most significant risks facing the Company. Accordingly, these risks are overseen by the Board in order to facilitate more integrated risk and strategy oversight and planning. Board oversight includes understanding the various challenges and opportunities presented by these risks, including the financial consequences that might result from enacted and potential federal and/or state regulation of GHG; plans to mitigate these risks; and the impacts these risks may have on the Company’s strategy. In addition, the Board approves certain procurements of environmental equipment, grid modernization technologies, and replacement generation resources.

Management is also responsible for assessing significant risks, developing and executing appropriate responses, and reporting to the Board on the status of risk activities. For example, management periodically updates the Board on the implementation of corporate environmental policy, and the Company’s environmental management systems, including the promotion of energy efficiency programs, and the use of renewable resources. The Board is also informed of the Company’s practices and procedures to assess the impacts of operations on the environment. The Board considers issues associated with climate change, the Company’s GHG exposures, and the financial consequences that might result from enacted and potential federal and/or state regulation of GHG. Management has published, with Board oversight, a Climate Change Report available at http://www.pnmresources.com/about-us/sustainability-portal.aspx, that details the Company’s efforts to transition to an emissions-free generating portfolio by 2040.

As part of management’s continuing effort to monitor climate-related risks and assess opportunities, the Company has advanced its understanding of climate change by participating in the “2 Degree Scenario” planning by participating in the Electric Power Research Institute (“EPRI”) Understanding Climate Scenarios & Goal Setting Activities program. The program is focused on characterizing and analyzing the relationship of individual electric utility company’s carbon emissions and global temperature goals. Activities include analyzing the current scientific understanding of global emissions pathways that are consistent with limiting global warming and providing insight to assist companies in developing approaches to climate scenario planning. As PNM expands its sustainability efforts, EPRI’s program has also been useful in gaining a better understanding of the Task Force on Climate-Related Financial Disclosures’ (“TCFD”) recommendations for sustainability reporting. On November 19, 2019, TCFD announced the formation of the TCFD Advisory Group on Climate-Related Guidance. EPRI was invited to participate as one of seven members of the group that will provide guidance on implementing scenario analysis at the utility company level and to assist in understanding how climate-related issues affect business strategies.

The Company cannot anticipate or predict the potential long-term effects of climate change or climate change related regulation on its results of operations, financial position, or cash flows.

Greenhouse Gas Emissions Exposures

In 2019, GHG associated with PNM’s interests in its fossil-fueled generating plants included approximately 5.6 million metric tons of CO₂, which comprises the vast majority of PNM’s GHG.

As of December 31, 2019, approximately 63% of PNM’s generating capacity, including resources owned, leased, and under PPAs, all of which is located within the U.S., consisted of coal or gas-fired generation that produces GHG. This reflects the retirement of SJGS Units 2 and 3 that occurred in December 2017 and the restructuring of ownership in SJGS Unit 4. These events reduced PNM’s entitlement in SJGS from 783 MW to 562 MW and caused the Company’s output of GHG to decrease when compared to 2017. Many factors affect the amount of GHG emitted, including total electricity sales, plant performance, economic dispatch, and the availability of renewable resources. For example, between 2007 and 2018, production from PNM’s largest single renewable energy resource, New Mexico Wind, has varied from a high of 580 GWh in 2011 to a low of 405 GWh in 2015. Variations are primarily due to how much and how often the wind blows. In addition, if PVNGS experienced prolonged outages or if PNM’s entitlement from PVNGS were reduced, PNM might be required to utilize other power supply resources such as gas-fired generation, which could increase GHG.

PNM has several programs underway to reduce or offset GHG from its generation resource portfolio, thereby reducing its exposure to climate change regulation. As described in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, PNM received approval for the December 31, 2017 shutdown of SJGS Units 2 and 3 as

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part of its strategy to address the regional haze requirements of the CAA. The shutdown of SJGS Units 2 and 3 resulted in a reduction of GHG for the entire station of approximately 54% for 2018, reflecting a reduction of 32% of GHG from the Company’s owned interests in SJGS, below 2005 levels. PNM’s 2017 IRP indicates that retiring PNM’s share of SJGS in 2022 and exiting ownership in Four Corners in 2031 would provide long-term cost savings to its customers. See additional discussion of PNM’s 2017 IRP and the SJGS Abandonment Application in Note 12. If approved by the NMPRC, retiring PNM’s share of SJGS and exiting participation in Four Corners would further reduce PNM’s GHG.

As of June 30, 2020, PNM owns or procures power under PPAs from 608 MW of capacity from renewable generation resources, which include solar-PV, wind, and geothermal facilities including 50 MW of solar-PV capacity to serve retail customers and 50 MW of new solar-PV capacity to serve a data center located in PNM's service territory. Beginning July 1, 2020, an additional 50 MW of solar-PV capacity, to serve the data center, has begun commercial operations. In addition, the NMPRC has granted PNM authority to procure an aggregate of 266 MW of additional renewable energy and RECs from solar-PV and wind facilities to serve a data center and other large customers located in PNM’s service territory. PNM’s 2020 renewable energy procurement plan, which was approved by the NMPRC in January 2020, also includes a PPA for an additional 140 MW of wind energy to serve retail customers beginning in 2021. Finally, the entire portfolio of replacement resources approved by the NMPRC on July 29, 2020, in PNM’s SJGS Abandonment Application, includes replacement of SJGS capacity with procurement of 650 MW of solar PPAs combined with 300 MW of battery storage agreements. These resources will result in PNM owning, leasing, or procuring through PPAs capacity from renewable resources and battery storage facilities totaling 2,014 MW and capacity from emissions-free resources totaling 2,416 MW.

PNM also has a customer distributed solar generation program that represented 138.6 MW at June 30, 2020. PNM’s distributed solar programs will reduce PNM’s annual production from fossil-fueled electricity generation by about 277.2 GWh. PNM has offered its customers a comprehensive portfolio of energy efficiency and load management programs since 2007. PNM’s cumulative savings from these programs was approximately 4,504 GWh of electricity through 2019. Over the next 20 years, PNM projects energy efficiency and load management programs will provide the equivalent of approximately 8,756 GWh of electricity, which will avoid at least 4.7 million metric tons of CO₂ based upon projected emissions from PNM’s system-wide resources. These estimates are subject to change because of the uncertainty of many of the underlying variables, including changes in PNM’s generation portfolio, demand for electricity, energy efficiency, and complex relationships between those variables. Moreover, the effects of COVID-19 are still undetermined and will likely impact the energy efficiency savings for 2020. However, PNM is unable to quantify these impacts at this time.

Because of PNM’s dependence on fossil-fueled generation, legislation or regulation that imposes a limit or cost on GHG could impact the cost at which electricity is produced. While PNM expects to recover any such costs through rates, the timing and outcome of proceedings for cost recovery are uncertain. In addition, to the extent that any additional costs are recovered through rates, customers may reduce their usage, relocate facilities to other areas with lower energy costs, or take other actions that ultimately could adversely impact PNM.

Other Climate Change Risks

PNM’s generating stations are located in the arid southwest. Access to water for cooling for some of these facilities is critical to continued operations. Forecasts for the impacts of climate change on water supply in the southwest range from reduced precipitation to changes in the timing of precipitation. In either case, PNM’s generating facilities requiring water for cooling will need to mitigate the impacts of climate change through adaptive measures. Current measures employed by PNM generating stations such as air cooling, use of grey water, improved reservoir operations, and shortage sharing arrangements with other water users will continue to be important to sustain operations.

PNM’s service areas occasionally experience periodic high winds and severe thunderstorms. TNMP has operations in the Gulf Coast area of Texas, which experiences periodic hurricanes and other extreme weather conditions. In addition to potentially causing physical damage to Company-owned facilities, which disrupts the ability to transmit and/or distribute energy, weather and other events of nature can temporarily reduce customers’ usage and demand for energy. In addition, other events influenced by climate change, such as wildfires, could disrupt Company operations or result in third-party claims against the Company.

EPA Regulation

In April 2007, the US Supreme Court held that EPA has the authority to regulate GHG under the CAA. This decision heightened the importance of this issue for the energy industry. In December 2009, EPA released its endangerment finding for GHG from new motor vehicles, stating that the atmospheric concentrations of six key greenhouse gases (CO₂, methane, nitrous oxides, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) endanger the public health and welfare of current and

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future generations. In May 2010, EPA released the final Prevention of Significant Deterioration (“PSD”) and Title V Greenhouse Gas Tailoring Rule to address GHG from stationary sources under the CAA permitting programs. The purpose of the rule was to “tailor” the applicability of two programs, the PSD construction permit and Title V operating permit programs, to avoid impacting millions of small GHG emitters. On June 23, 2014, the US Supreme Court found EPA lacked authority to “tailor” the CAA’s unambiguous numerical thresholds of 100 or 250 tons per year, and thus held EPA may not require a source to obtain a PSD permit solely on the basis of its potential GHG. However, the court upheld EPA’s authority to apply the PSD program for GHG to “anyway” sources - those sources that have to comply with the PSD program for other non-GHG pollutants.

On June 25, 2013, then President Obama announced his Climate Action Plan, which outlined how his administration planned to cut GHG in the U.S., prepare the country for the impacts of climate change, and lead international efforts to combat and prepare for global warming. The plan proposed actions that would lead to the reduction of GHG by 17% below 2005 levels by 2020.

On August 3, 2015, EPA responded to the Climate Action Plan by issuing three separate but related actions, which were published in October 2015: (1) the Carbon Pollution Standards for new, modified, and reconstructed power plants (under Section 111(b)); (2) the Clean Power Plan for existing power plants (under Section 111(d)); and (3) a proposed federal plan associated with the Clean Power Plan.

EPA’s Carbon Pollution Standards for new sources (those constructed after January 8, 2014) established separate standards for gas and coal-fired units. The standards reflect the degree of emission limitation achievable through the application of what EPA determined to be the BSER demonstrated for each type of unit. For newly constructed and reconstructed base load natural gas-fired stationary combustion turbines, EPA finalized a standard based on efficient natural gas combined cycle technology. The final standards for coal-fired power plants vary depending on whether the unit is new, modified, or reconstructed, but the new unit standards were based on EPA’s determination that the BSER for new units was partial carbon capture and sequestration. The Clean Power Plan established numeric “emission standards” for existing electric generating units - one for “fossil-steam” units (coal and oil-fired units) and one for natural gas-fired units (combined cycle only). The emission standards were based on emission reduction opportunities that EPA deemed achievable using technical assumptions for three “building blocks”: efficiency improvements at coal-fired EGUs, displacement of affected EGUs with renewable energy, and displacement of coal-fired generation with natural gas-fired generation.

Multiple states, utilities, and trade groups filed petitions for review in the DC Circuit to challenge both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources. Numerous parties also simultaneously filed motions to stay the Clean Power Plan during the litigation. The DC Circuit refused to stay the rule, but 29 states and state agencies successfully petitioned the US Supreme Court for a stay, which was granted on February 9, 2016, thus halting implementation of the Clean Power Plan. With the US Supreme Court stay in place, the DC Circuit heard oral arguments on the merits of the Clean Power Plan on September 27, 2016 in front of a 10-judge en banc panel. However, before the DC Circuit could issue an opinion, President Trump took office and his administration asked the court to hold the case in abeyance while the rule was re-evaluated, which the court granted. In addition, the DC Circuit issued a similar order in connection with a motion filed by EPA to hold cases challenging the NSPS in abeyance. On September 17, 2019, the DC Circuit issued an order that granted motions by various petitioners, including industry groups and EPA, to dismiss the cases challenging the Clean Power Plan as moot due to EPA’s issuance of the Affordable Clean Energy rule, which repeals the Clean Power Plan.

On March 28, 2017, President Trump issued an Executive Order titled “Promoting Energy Independence and Economic Growth.” Among its goals are to “promote clean and safe development of our Nation’s vast energy resources, while at the same time avoiding regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation.” The order rescinds several key pieces of the Obama Administration’s climate agenda, including the Climate Action Plan and the Final Guidance on Consideration of Climate Change in NEPA Reviews. It directs agencies to review and suspend, revise or rescind any regulations or agency actions that potentially burden the development or use of domestically produced energy resources. Most notably, the order directed EPA to immediately review and, if appropriate and consistent with law, suspend, revise, or rescind (1) the Carbon Pollution Standards for new, reconstructed or modified electric utilities, (2) the Clean Power Plan, (3) the Proposed Clean Power Plan Model Trading Rules, and (4) the Legal Memorandum supporting the Clean Power Plan. In response, EPA signed a NOPR to repeal the Clean Power Plan on October 10, 2017. The notice proposed a legal interpretation concluding that the Clean Power Plan exceeded EPA’s statutory authority. On June 19, 2019, EPA released the final version of the Affordable Clean Energy rule. EPA takes three actions in the final rule: (1) repealing the Clean Power Plan; (2) promulgating the Affordable Clean Energy rule; and (3) revising the implementing regulations for all emission guidelines issued under CAA Section 111(d) which, among other things, extends the deadline for state plans and extends the timing of EPA's approval process. EPA set the BSER for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” that can be applied inside the fence-line. Rather

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than setting a specific numerical standard of performance, EPA’s rule directs states to determine which of the candidate technologies to apply to each coal-fired unit and establish standards of performance based on the degree of emission reduction achievable based on the application of BSER. The final rule requires states to submit a plan to EPA by July 8, 2022 and then EPA has one year to approve the plan. If states do not submit a plan or their submitted plan is not acceptable, EPA will have two years to develop a federal plan. The Affordable Clean Energy rule is not expected to impact SJGS since EPA’s final approval of a state SIP would occur after the planned shutdown of SJGS in 2022 (subject to NMPRC approval).

While corresponding NSR reform regulations were proposed as part of the proposed Affordable Clean Energy rule, the final rule did not include such reform measures. EPA has indicated that it plans to finalize the proposed NSR reform in 2020. Unrelated to the Affordable Clean Energy rule, EPA issued a proposed rule on August 1, 2019 to clarify one aspect of the pre-construction review process for evaluating whether the NSR permitting program would apply to a proposed project at an existing source of emissions. The proposed rule clarifies that both emissions increases and decreases resulting from projects are to be considered in determining whether the proposed project will result in an increase in air emissions.

The Affordable Clean Energy rule has been challenged by several parties and may be impacted by further litigation. The results of additional judicial review and the outcome of those proceedings cannot be predicted.

Federal Legislation

Prospects for enactment in Congress of legislation imposing a new or enhanced regulatory program to address climate change are highly unlikely in 2020. Although the democratic leadership in the U.S. House of Representatives have begun to consider proposals for legislation aimed at addressing climate change, such legislation is unlikely to pass the republican controlled U.S. Senate or be signed by the President.

State and Regional Activity

Pursuant to New Mexico law, each utility must submit an IRP to the NMPRC every three years to evaluate renewable energy, energy efficiency, load management, distributed generation, and conventional supply-side resources on a consistent and comparable basis. The IRP is required to take into consideration risk and uncertainty of fuel supply, price volatility, and costs of anticipated environmental regulations when evaluating resource options to meet supply needs of the utility’s customers. The NMPRC requires that New Mexico utilities factor a standardized cost of carbon emissions into their IRPs using prices ranging between $8 and $40 per metric ton of CO₂ emitted and escalating these costs by 2.5% per year. Under the NMPRC order, each utility must analyze these standardized prices as projected operating costs. Reflecting the evolving nature of this issue, the NMPRC order states that these prices may be changed in the future to account for additional information or changed circumstances. Although these prices may not reflect the costs that ultimately will be incurred, PNM is required to use these prices for purposes of its IRP. In its 2017 IRP, PNM analyzed resource portfolio plans for scenarios that assumed SJGS will operate beyond the end of the current coal supply agreement that runs through June 30, 2022 and for scenarios that assumed SJGS will cease operations by the end of 2022 as discussed in Note 12. The key findings of the 2017 IRP include that exiting SJGS in 2022 would provide long-term economic benefits to PNM’s customers and that PNM exiting its ownership interest in Four Corners in 2031 would also save customers money. The materials presented in the IRP process are available at www.pnm.com\irp.

Senate Bill 489, known as the Energy Transition Act (“ETA”) was signed into New Mexico state law and became effective on June 14, 2019. The ETA, among other things, requires that investor-owned utilities obtain specified percentages of their energy from renewable and carbon-free resources. Prior to the enactment of the ETA, the REA established a mandatory RPS requiring utilities to acquire a renewable energy portfolio equal to 10% of retail electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The ETA provides for a

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transition from coal-fired generating resources to carbon-free resources by allowing investor-owned utilities to issue securitized bonds, or “energy transition bonds,” related to the retirement of coal-fired generating facilities to qualified investors. Proceeds from the energy transition bonds must be used only for purposes related to providing utility service to customers and to pay “financing costs” (as defined by the ETA). These costs may include coal mine decommissioning, plant decommissioning, and other costs that have not yet been charged to customers or disallowed by the NMPRC or by a court order. Proceeds provided by energy transition bonds may also be used to pay for severances for employees of the retired coal-fired generating facility and related coal mine, as well as to pay for job training, education, and economic development. Energy transition bonds must be issued under an NMPRC financing order and are paid by a non-bypassable charge paid by all customers of the issuing utility. The ETA also amends sections of the REA to allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed from retail jurisdictional rates, provided replacement resources to be included in retail rates have lower or zero-carbon emissions. The ETA requires the NMPRC to prioritize replacement resources in a manner intended to mitigate the economic impact to communities affected by these plant retirements. PNM expects the ETA will have a significant impact on PNM’s future generation portfolio, including PNM’s planned retirement of SJGS in 2022. The NMPRC had not definitively indicated its intent to apply the requirements of the ETA to PNM’s SJGS Abandonment Application and several parties to that case questioned whether the ETA violated the New Mexico State constitution. In December 2019, the Governor of the State of New Mexico, the President of the Navajo Nation and other parties filed a writ of mandamus requesting the NM Supreme Court require the NMPRC to apply the ETA to PNM’s application. On January 29, 2020, the NM Supreme Court ruled that the NMPRC is required to apply the ETA to all of PNM’s SJGS Abandonment Application and denied petitions for a stay. The NM Supreme Court issued a subsequent opinion, on July 23, 2020, more fully explaining the legal rationale for the January 29, 2020 ruling. In February 2020, the Hearing Examiners assigned to the SJGS abandonment and financing proceedings issued recommended decisions recommending approval of PNM’s abandonment application and for the issuance of Securitized Bonds consistent with the requirements of the ETA. On April 1, 2020, the NMPRC approved the Hearing Examiners' recommendation to approve PNM's application to retire its share of SJGS in 2022 and for the issuances of Securitized Bonds. See additional discussion of PNM’s SJGS Abandonment Application in Note 12. PNM cannot predict the full impact of the ETA or the outcome of potential future generating resource abandonment filings with the NMPRC.

International Accords

The United Nations Framework Convention on Climate Change (“UNFCCC”) is an international environmental treaty that was negotiated at the 1992 United Nations Conference on Environment and Development (informally known as the Earth Summit) and entered into force in March 1994. The objective of the treaty is to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” Parties to the UNFCCC, including the U.S., have been meeting annually in Conferences of the Parties (“COP”) to assess progress in meeting the objectives of the UNFCCC.

On December 12, 2015, the Paris Agreement was finalized during the 2015 COP. The aim of the Paris Agreement is to limit global temperature rise to two degrees Celsius above pre-industrial levels. The agreement, which was agreed to by approximately 200 parties, requires that countries submit Intended Nationally Determined Contributions (“INDCs”). INDCs reflect national targets and actions that arise out of national policies and elements relating to oversight, guidance and coordination of actions to reduce emissions by all countries. In November 2014, then President Obama announced the United States’ commitment to reduce GHG, on an economy-wide basis, by 26%-28% from 2005 levels by the year 2025. The U.S. INDC was part of an overall effort by the former administration to have the U.S. achieve economy-wide reductions of around 80% by 2050. The former administration’s GHG reduction target for the electric utility industry was a key element of its INDC and was based on EPA’s GHG regulations for new, existing, and modified and reconstructed sources at that time. Thresholds for the number of countries necessary to ratify or accede to the Paris Agreement and total global GHG percentage were achieved on October 5, 2016 and the Paris Agreement entered into force on November 4, 2016. On June 1, 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement. In his public statement, he indicated that the U.S. would “begin negotiations to reenter either the Paris Accord or a new transaction on terms that are fair to the U.S., its businesses, its workers, its people, its taxpayers.” On November 4, 2019, President Trump announced that the U.S. has officially notified the United Nations that the U.S. will withdraw from the Paris Agreement. The rules of the Paris Agreement impose a one-year waiting period after official notice of withdrawal. As a result of the President’s notice to the United Nations, the U.S. will officially be able to withdraw from the Paris Agreement on November 4, 2020. A future administration would have an opportunity to rejoin the Agreement. It is uncertain if the U.S. will ultimately choose to pursue a transition to a low-carbon economy using a pathway that aligns with the Paris Agreement to keep global temperature rise to below two degrees Celsius (the “2 Degree Scenario”) above pre-industrial levels or in connection with other regulation or legislation. PNM has calculated GHG reductions that would result from implementation of the 2017 IRP scenarios that assume PNM would retire its share of the SJGS in 2022 and would exit from Four Corners in 2031 and PNM has set a goal to have a 100% emissions-free generating portfolio by 2040. While the Company has not conducted an independent 2 Degree Scenario analysis, our

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commitment to becoming 100% emissions-free by 2040 produces a carbon emissions reduction pathway that tracks within the ranges of climate scenario pathways that are consistent with limiting the global warming average to less than 2 degrees Celsius. In addition, as an investor-owned utility operating in the state of New Mexico, PNM is required to comply with the recently enacted ETA, which requires utilities’ generating portfolio be 100% carbon-free by 2045. The requirements of the ETA and the Company’s goal compare favorably to the 26% - 28% by 2025 U.S. INDC and the former administration’s effort to achieve an 80% reduction in carbon emissions by 2050. As discussed in Note 12, on April 1, 2020, the NMPRC approved PNM's application to retire its share of SJGS in 2022. PNM will file for abandonment of Four Corners at an appropriate time in the future.

PNM will continue to monitor the United States’ and other parties’ involvement in international accords, but the potential impact that such accords may have on the Company cannot be determined at this time.

Assessment of Legislative/Regulatory Impacts

The Company has assessed, and continues to assess, the impacts of climate change legislation and regulation on its business. This assessment is ongoing and future changes arising out of the legislative or regulatory process could impact the assessment significantly. PNM’s assessment includes assumptions regarding specific GHG limits; the timing of implementation of these limits; the possibility of a market-based trading program, including the associated costs and the availability of emission credits or allowances; the development of emission reduction and/or renewable energy technologies; and provisions for cost containment. Moreover, the assessment assumes various market reactions such as the price of coal and gas and regional plant economics. These assumptions are, at best, preliminary and speculative. However, based upon these assumptions, the enactment of climate change legislation or regulation could, among other things, result in significant compliance costs, including large capital expenditures by PNM, and could jeopardize the economic viability of certain generating facilities. See Notes 11 and 12. While PNM currently expects the retirement of SJGS in 2022 will provide savings to customers, the ultimate consequences of climate change and environmental regulation could lead to increased costs to customers and affect results of operations, cash flows, and financial condition if the incurred costs are not fully recovered through regulated rates. Higher rates could also contribute to reduced usage of electricity. PNM’s assessment process is evolving and is too speculative at this time for a meaningful prediction of the long-term financial impact.

Financial Reform Legislation

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Reform Act”), enacted in July 2010, includes provisions that will require certain over-the-counter derivatives, or swaps, to be centrally cleared and executed through an exchange or other approved trading facility. It also includes provisions related to swap transaction reporting and record keeping and may impose margin requirements on swaps that are not centrally cleared. The U.S. Commodity Futures Trading Commission (“CFTC”) has published final rules defining several key terms related to the act and has set compliance dates for various types of market participants. The Dodd-Frank Reform Act provides exemptions from certain requirements, including an exception to the mandatory clearing and swap facility execution requirements for commercial end-users that use swaps to hedge or mitigate commercial risk. PNM has elected the end-user exception to the mandatory clearing requirement. PNM expects to be in compliance with the Dodd-Frank Reform Act and related rules within the time frames required by the CFTC. However, as a result of implementing and complying with the Dodd-Frank Reform Act and related rules, PNM’s swap activities could be subject to increased costs, including from higher margin requirements. The Trump Administration has indicated that the provisions of the Dodd-Frank Reform Act will be reviewed and certain regulations may be rolled back, but no formal action has been taken yet. At this time, PNM cannot predict the ultimate impact the Dodd-Frank Reform Act may have on PNM’s financial condition, results of operations, cash flows, or liquidity.

Other Matters

See Notes 11 and 12 herein and Notes 16 and 17 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K for a discussion of commitments and contingencies and rate and regulatory matters. See Note 1 for a discussion of accounting pronouncements that have been issued but are not yet effective and have not been adopted by the Company.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires Company management to select and apply accounting policies that best provide the framework to report the results of operations and financial position for PNMR, PNM, and TNMP. The selection and application of those policies requires management to make difficult, subjective, and/or complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets

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and liabilities at the date of the financial statements. As a result, there exists the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

As of June 30, 2020, there have been no significant changes with regard to the critical accounting policies disclosed in PNMR’s, PNM’s, and TNMP’s 2019 Annual Reports on Forms 10-K. The policies disclosed included regulatory accounting, impairments, decommissioning and reclamation costs, pension and other postretirement benefits, accounting for contingencies, and income taxes.

MD&A FOR PNM

RESULTS OF OPERATIONS

PNM operates in only one reportable segment, as presented above in Results of Operations for PNMR.

MD&A FOR TNMP

RESULTS OF OPERATIONS

TNMP operates in only one reportable segment, as presented above in Results of Operations for PNMR.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

Statements made in this filing that relate to future events or PNMR’s, PNM’s, or TNMP’s expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates. PNMR, PNM, and TNMP assume no obligation to update this information.

Because actual results may differ materially from those expressed or implied by these forward-looking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR’s, PNM’s, and TNMP’s business, financial condition, cash flows, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors include:

•The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions, including the impacts of the NMPRC orders in PNM’s NM 2015 Rate Case, the NM Supreme Court’s decisions in the appeal of that order, the NM 2016 Rate Case and related deferral of the issue of the prudence of PNM’s decision to continue participation in Four Corners to PNM’s next general rate case and recovery of PNM’s investments and other costs associated with that plant, and any actions resulting from the pending appeal of the NMPRC's approval of PNM' request to issue Securitized Bonds and the NMPRC's approval of replacement resources in PNM’s SJGS Abandonment Application (collectively, the “Regulatory Proceedings”) and the impact on service levels for PNM customers if the ultimate outcomes do not provide for the recovery of costs and operating and capital expenditures, as well as other impacts of federal or state regulatory and judicial actions

•The ability of the Company to successfully forecast and manage its operating and capital expenditures, including aligning expenditures with the revenue levels resulting from the ultimate outcomes of the Regulatory Proceedings, or resulting from potential mid-term or long-term impacts related to COVID-19, and supporting forecasts utilized in FTY rate proceedings

•Uncertainty relating to our recent decision to return the currently leased generating capacity in PVNGS Units 1 and 2 at the expiration of their lease terms in 2023 and 2024, including future regulatory requests relating to the ratemaking treatment and replacement resources for the leased assets and the NRC’s actions related to transfer of ownership

•Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects, including the 2022 scheduled expiration of the operational and fuel supply agreements for SJGS, the results of PNM’s 2017 IRP filing, which indicates that PNM’s customers would benefit from PNM’s exit from Four Corners in 2031, including regulatory recovery of undepreciated investments and other costs in the event the NMPRC orders generating facilities be retired, and the impacts of the ETA

•Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines supplying certain power plants, as well as the ability to recover those costs from customers, including the potential impacts of the ultimate outcomes of the Regulatory Proceedings

•The impacts on the electricity usage of customers and consumers due to performance of state, regional, and national economies, energy efficiency measures, weather, seasonality, alternative sources of power, advances in technology, the impacts of COVID-19 on customer usage, and other changes in supply and demand

•The Company’s ability to access the financial markets in order to provide financing to repay or refinance debt as it comes due, as well as for ongoing operations and construction expenditures, including disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates, including any negative impacts that could result from the ultimate outcomes of the Regulatory Proceedings or from the economic impacts of COVID-19

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•The risks associated with completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, and the ability of counterparties to meet their obligations under certain arrangements, and supply chain or other outside support services that may be disrupted by the impacts of COVID-19

•The potential unavailability of cash from PNMR’s subsidiaries due to regulatory, statutory, or contractual restrictions or subsidiary earnings or cash flows

•The performance of generating units, transmission systems, and distribution systems, which could be negatively affected by operational issues, fuel quality and supply issues, unplanned outages, extreme weather conditions, wildfires, terrorism, cybersecurity breaches, and other catastrophic events, including the impacts of COVID-19, as well the costs the Company may incur to repair its facilities and/or the liabilities the Company may incur to third parties in connection with such issues

•State and federal regulation or legislation relating to environmental matters and renewable energy requirements, the resultant costs of compliance, and other impacts on the operations and economic viability of PNM’s generating plants

•State and federal regulatory, legislative, executive, and judicial decisions and actions on ratemaking, and taxes, including guidance related to the Tax Act, and other matters

•Risks related to climate change, including potential financial risks resulting from climate change litigation and legislative and regulatory efforts to limit GHG, including the impacts of the recently enacted ETA

•Employee workforce factors, including cost control efforts and issues arising out of collective bargaining agreements and labor negotiations with union employees

•Variability of prices and volatility and liquidity in the wholesale power and natural gas markets

•Changes in price and availability of fuel and water supplies, including the ability of the mines supplying coal to PNM’s coal-fired generating units and the companies involved in supplying nuclear fuel to provide adequate quantities of fuel

•Regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties

•The impacts of decreases in the values of marketable securities maintained in trusts to provide for decommissioning, reclamation, pension benefits, and other postretirement benefits, including potential increased volatility resulting from international developments and the impacts of COVID-19, as well as PNM's ability to recover future decommissioning and reclamation costs from customers

•Uncertainty surrounding counterparty performance and credit risk, including the ability of counterparties to supply fuel and perform reclamation activities and impacts to financial support provided to facilitate the coal supply at SJGS

•The effectiveness of risk management regarding commodity transactions and counterparty risk

•The outcome of legal proceedings, including the extent of insurance coverage

•Changes in applicable accounting principles or policies

Any material changes to risk factors occurring after the filing of PNMR’s, PNM’s, and TNMP’s 2019 Annual Reports on Form 10-K are disclosed in Item 1A, Risk Factors, in Part II of this Form 10-Q.

For information about the risks associated with the use of derivative financial instruments, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk.”

SECURITIES ACT DISCLAIMER

Certain securities described or cross-referenced in this report have not been registered under the Securities Act of 1933, as amended, or any state securities laws and may not be reoffered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws. This Form 10-Q does not constitute an offer to sell or the solicitation of an offer to buy any securities.

WEBSITES

The PNMR website, www.pnmresources.com, is an important source of Company information. New or updated information for public access is routinely posted. PNMR encourages analysts, investors, and other interested parties to register on the website to automatically receive Company information by e-mail. This information includes news releases, notices of webcasts, and filings with the SEC. Participants will not receive information that was not requested and can unsubscribe at any time.

Our corporate internet addresses are:

•PNMR: www.pnmresources.com

•PNM: www.pnm.com

•TNMP: www.tnmp.com

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principles. This information highlights plans for PNM to be coal-free by 2031 (subject to regulatory approval) and to have an emissions-free generating portfolio by 2040.

The contents of these websites are not a part of this Form 10-Q. The SEC filings of PNMR, PNM, and TNMP, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are accessible free of charge on the PNMR website as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Reports filed with the SEC are available on its website, www.sec.gov. These reports are also available in print upon request from PNMR free of charge.

Also available on the Company’s website at http://www.pnmresources.com/corporate-governance.aspx and in print upon request from any shareholder are PNMR’s:

•Corporate Governance Principles

•Code of Ethics (Do the Right Thing – Principles of Business Conduct)

•Charters of the Audit and Ethics Committee, Nominating and Governance Committee, Compensation and Human Resources Committee, and Finance Committee

•Restated Articles of Incorporation and Bylaws

The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) on its website.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company manages the scope of its various forms of market risk through a comprehensive set of policies and procedures with oversight by senior level management through the Risk Management Committee (“RMC”). The Board’s Finance Committee sets the risk limit parameters. The RMC has oversight over the risk control organization. The RMC is assigned responsibility for establishing and enforcing the policies, procedures, and limits and evaluating the risks inherent in proposed transactions on an enterprise-wide basis. The RMC’s responsibilities include:

•Establishing policies regarding risk exposure levels and activities in each of the business segments

•Approving the types of derivatives entered into for hedging

•Reviewing and approving hedging risk activities

•Establishing policies regarding counterparty exposure and limits

•Authorizing and delegating transaction limits

•Reviewing and approving controls and procedures for derivative activities

•Reviewing and approving models and assumptions used to calculate mark-to-market and market risk exposure

•Proposing risk limits to the Board’s Finance Committee for its approval

•Reporting to the Board’s Audit and Finance Committees on these activities

To the extent an open position exists, fluctuating commodity prices, interest rates, equity prices, and economic conditions can impact financial results and financial position, either favorably or unfavorably. As a result, the Company cannot predict with certainty the impact that its risk management decisions may have on its businesses, operating results, or financial position.

Commodity Risk

Information concerning accounting for derivatives and the risks associated with commodity contracts is set forth in Note 7, including a summary of the fair values of mark-to-market energy related derivative contracts included in the Condensed Consolidated Balance Sheets. During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company had no commodity derivative instruments designated as cash flow hedging instruments.

Commodity contracts that meet the definition of a derivative under GAAP, are recorded at fair value on the Condensed Consolidated Balance Sheets. The impact of commodity derivative mark-to-market energy transactions were not material to the Company's financial position, results of operations, or cash flows as of and for the six months ended June 30, 2020 and 2019.

PNM is exposed to changes in the market prices of electricity and natural gas for the positions in its wholesale portfolio not covered by the FPPAC. The Company manages risks associated with these market fluctuations by utilizing various commodity instruments that may qualify as derivatives, including futures, forwards, options, and swaps. PNM uses such instruments to hedge its exposure to changes in the market prices of electricity and natural gas. PNM also uses such instruments under an NMPRC approved hedging plan to manage fuel and purchased power costs related to customers covered by its FPPAC.

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Credit Risk

The Company is exposed to credit risk from its retail and wholesale customers, as well as the counterparties to derivative instruments. The Company conducts counterparty risk analysis across business segments and uses a credit management process to assess the financial conditions of counterparties. The following table provides information related to credit exposure by the credit worthiness (credit rating) and concentration of credit risk for wholesale counterparties, all of which will mature in less than two years.


Schedule of Credit Risk Exposure
June 30, 2020
Rating ⁽¹⁾	Credit Risk Exposure⁽²⁾		Number of Counter-parties >10%	Net Exposure of Counter-parties >10%
	(Dollars in thousands)
External ratings:
Investment grade	$	1,244	1	$	1,037
Non-investment grade	—		—	—
Split ratings	—		—	—
Internal ratings:
Investment grade	946		1	681
Non-investment grade	—		—	—
Total	$	2,190		$	1,718

⁽¹⁾The rating “Investment Grade” is for counterparties, or a guarantor, with a minimum S&P rating of BBB- or Moody’s rating of Baa3. The category “Internal Ratings – Investment Grade” includes those counterparties that are internally rated as investment grade in accordance with the guidelines established in the Company’s credit policy.

⁽²⁾The Credit Risk Exposure is the gross credit exposure, including long-term contracts (other than the Tri-State hazard sharing agreement), forward sales, and short-term sales. The gross exposure captures the amounts from receivables/payables for realized transactions, delivered and unbilled revenues, and mark-to-market gains/losses. Gross exposures can be offset according to legally enforceable netting arrangements but are not reduced by posted credit collateral. At June 30, 2020, PNMR held $0.9 million of cash collateral to offset its credit exposure.

Net credit risk for the Company’s largest counterparty as of June 30, 2020 was $1.0 million.

Other investments have no significant counterparty credit risk.

Interest Rate Risk

The majority of the Company’s long-term debt is fixed-rate debt and does not expose earnings to a major risk of loss due to adverse changes in market interest rates. However, the fair value of PNMR’s consolidated long-term debt instruments would increase by 2.5%, or $83.6 million if interest rates were to decline by 50 basis points from their levels at June 30, 2020. In general, an increase in fair value would impact earnings and cash flows to the extent not recoverable in rates if all or a portion of debt instruments were acquired in the open market prior to their maturity. The Company is exposed to interest rate risk to the extent of future increases in variable interest rates. However, as discussed in Note 9, PNMR has entered into hedging arrangements to effectively establish fixed interest rates on $150.0 million of variable rate debt. Variable interest rates under these facilities are based on LIBOR but contain provisions which allow for the replacement of LIBOR with other widely accepted interest rates. The Company expects that it will be able to extend or replace these credit facilities under similar terms and conditions prior to their expirations.

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At July 24, 2020, variable rate debt balances and weighted average interest rates were as follows:


Variable Rate Debt	Weighted Average Interest Rate		Balance Outstanding		Capacity
			(In thousands)
Short-term Debt:
PNMR Revolving Credit Facility	1.68	%	$	141,800	$	300,000
PNM Revolving Credit Facility	1.43		53,900		400,000
PNM 2017 New Mexico Credit Facility	1.43		40,000		40,000
TNMP Revolving Credit Facility	—		—		75,000
PNMR-D Revolving Credit Facility	1.18		3,000		40,000
			$	238,700	$	855,000
Long-term Debt:
PNMR 2018 Two-Year Term Loan	0.96	%	$	50,000
PNMR 2019 Term Loan	1.13		150,000
PNM 2019 $40.0 Million Term Loan	0.83		40,000
PNM 2020 Term Loan	2.70		150,000
PNMR Development Term Loan	0.98		90,000
			$	480,000

The investments held by PNM in trusts for decommissioning and reclamation had an estimated fair value of $389.5 million at June 30, 2020, of which 65.1% were fixed-rate debt securities that subject PNM to risk of loss of fair value with increases in market interest rates. If interest rates were to increase by 50 basis points from their levels at June 30, 2020, the decrease in the fair value of the fixed-rate securities would be 2.5%, or $6.3 million.

PNM does not directly recover or return through rates any losses or gains on the securities, including equity investments discussed below, in the trusts for decommissioning and reclamation. However, the overall performance of these trusts does enter into the periodic determinations of expense and funding levels, which are factored into the rate making process to the extent applicable to regulated operations. The NMPRC ruled in the NM 2015 Rate Case that PNM would not be able to include future contributions made by PNM for decommissioning of PVNGS to the extent applicable to certain capacity purchased and leased by PNM in rates charged to retail customers. The NM Supreme Court ruled that the NMPRC’s decision to disallow recovery of such future contributions for decommissioning denied PNM due process and remanded the matter back to the NMPRC for further proceedings. See Note 12. PNM is at risk for shortfalls in funding of obligations due to investment losses, including those from the equity market risks discussed below, to the extent not ultimately recovered through rates charged to customers.

Equity Market Risk

The investments held by PNM in trusts for decommissioning and reclamation include certain equity securities at June 30, 2020. These equity securities expose PNM to losses in fair value should the market values of the underlying securities decline. Equity securities comprised 32.0% of the securities held by the trusts as of June 30, 2020. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $12.4 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of the end of the period covered by this quarterly report, each of PNMR, PNM, and TNMP conducted an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer of each of PNMR, PNM, and TNMP concluded that the disclosure controls and procedures are effective.

Changes in internal controls over financial reporting

There have been no changes in each of PNMR’s, PNM’s, and TNMP’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, each of PNMR’s, PNM’s, and TNMP’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Notes 11 and 12 for information related to the following matters, for PNMR, PNM, and TNMP, incorporated in this item by reference.

Note 11

•Navajo Nation Environmental Issues

•Cooling Water Intake Structures

•Santa Fe Generating Station

•Continuous Highwall Mining Royalty Rate

•PVNGS Water Supply Litigation

•San Juan River Adjudication

•Rights-of-Way Matter

•Navajo Nations Allottee Matters

Note 12

•PNM - New Mexico General Rate Cases

•PNM - Renewable Energy Rider

•PNM – Energy Efficiency and Load Management

•PNM – SJGS Abandonment Application

•PNM – COVID-19 Regulatory Matters

•PNM – Integrated Resource Plans

•PNM – 2020 Decoupling Petition

•TNMP – Periodic Distribution Rate Adjustment

ITEM 1A. RISK FACTORS

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical, under the circumstances, some level of risk and uncertainty will always be present. Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2019, includes a detailed discussion of our risk factors. Those risks and uncertainties have the potential to materially affect our financial condition and results of operations. In addition to the risk factors disclosed in Part I, Item 1A, of our 2019 Annual Report on Form 10-K and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, the following is an additional risk factor that has evolved and become material to our business.

The outbreak of COVID-19 and its impact on business and economic conditions could negatively affect the Company's business, results of operations, financial condition, cash flows, and the trading value of PNMR's common stock and the Company's debt securities.

The scale and scope of the recent COVID-19 outbreak, the resulting global pandemic, and the impact on the economy and financial markets could adversely affect the Company’s business, results of operations, financial condition, cash flows, and access to the capital markets. The Company provides critical electricity and electric service and has implemented business continuity and emergency response plans to continue to provide these services to its customers and to support the Company’s operations. The Company is also working to ensure the health and safety of its employees is not compromised. These measures include precautions with regard to employee and facility hygiene, travel limitations, directing our employees to work remotely whenever possible, and protocols for required work within customer premises to protect our employees, customers and the public. We are also working with our suppliers to understand the potential impacts to our supply chain and have taken steps to ensure the integrity of our information systems.

However, there is no assurance that the continued spread of COVID-19 and efforts to contain the virus will not adversely impact our business, results of operations, financial condition, cash flows, ability to access the capital markets, and the trading value of the Company's common stock and debt securities. The continued spread of COVID-19 and related efforts to contain the virus could adversely impact the Company by:

•reducing usage and/or demand for electricity by our customers in New Mexico and Texas;

•reducing the availability and productivity of our employees;

•increasing costs as a result of our emergency measures, including costs to ensure the security of our information systems and delayed payments from our customers and uncollectable accounts;

•causing delays and disruptions in the availability of and timely delivery of materials and components used in our operations;

120

•causing delays and disruptions in the supply chain resulting in disruptions in the commercial operation dates of certain projects;

•causing a deterioration in the credit quality of our counterparties, including power purchase agreement providers, contractors or retail customers, that could result in credit losses;

•causing impairments of goodwill or long-lived assets and adversely impacting the Company’s ability to develop, construct and operate facilities;

•impacting the Company’s ability to meet the requirements of the covenants in our existing credit facilities, including covenants regarding debt to capitalization;

•causing a deterioration in our financial metrics or the business environment that impacts our credit ratings;

•decreasing the value of our investment securities held in trusts for pension and other postretirement benefits, and for nuclear and coal mine decommissioning, which could lead to increased funding requirements;

•impacting our liquidity position and cost of and ability to access funds from financial institutions and capital markets;

•causing other risks to impact us, such as the risks described in the “Risk Factors” section of the Company’s Annual Reports on Form 10-K filed on March 2, 2020; and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and

•causing other unpredictable events

This continues to be a rapidly evolving situation and the Company cannot predict the extent or duration of the outbreak, the effects of it on the global, national or local economy, including the impacts on the Company’s ability to access capital, or its effects on the Company’s financial position, results of operations, cash flows, ability to access the capital markets, and value of the Company's stock and debt securities.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS


3.1	PNMR	Articles of Incorporation of PNMR, as amended to date (incorporated by reference to Exhibit 3.1 to PNMR’s Current Report on Form 8-K filed November 21, 2008)

3.2	PNM	Restated Articles of Incorporation of PNM, as amended through May 31, 2002 (incorporated by reference to Exhibit 3.1.1 to PNM’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)

3.3	TNMP	Articles of Incorporation of TNMP, as amended through July 7, 2005 (incorporated by reference to Exhibit 3.1.2 to TNMP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005)

3.4	PNMR	Bylaws of PNMR, with all amendments to and including October 24, 2017 (incorporated by reference to Exhibit 3.1 to PNMR’s Current Report on Form 8-K filed October 25, 2017)

3.5	PNM	Bylaws of PNM, with all amendments to and including May 31, 2002 (incorporated by reference to Exhibit 3.1.2 to PNM’s Report on Form 10-Q for the fiscal quarter ended June 30, 2002)

3.6	TNMP	Bylaws of TNMP, with all amendments to and including June 18, 2013 (incorporated by reference to Exhibit 3.6 to TNMP’s Current Report on Form 8-K filed June 20, 2013)

4.1	TNMP	Twelfth Supplemental Indenture, dated as of April 24, 2020 between Texas-New Mexico Power Company and MUFG Union Bank, N.A., as Trustee (incorporated by reference to Exhibit 4 .1 to TNMP’s Current Report on Form 8-K filed April 24, 2020)

10.1	PNM	Note Purchase Agreement dated April 17, 2020 between PNM and the purchasers named therein (PNM 2020 SUNs)

10.2	PNM	Term Loan Agreement dated April 15, 2020 among P ublic Service Company of New Mexico , the lenders party thereto, and U.S. Bank National Association, as administrative agent (incorporated by reference to Exhibit 10.1 to PNM’s Current Report on Form 8-K filed April 17, 2020)

10.3	TNMP	Bond Purchase Agreement dated April 24, 2020, between Texas-New Mexico Power Company and the purchasers named therein (incorporated by reference to Exhibit 10.1 to TNMP’s Current Report on Form 8-K filed April 24, 2020)
































31.1	PNMR	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	PNMR	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3	PNM	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

121

Table of Contents


31.4	PNM	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.5	TNMP	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.6	TNMP	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	PNMR	Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	PNM	Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3	TNMP	Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	PNMR, PNM, and TNMP	XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the Inline XBRL document

101.SCH	PNMR, PNM, and TNMP	Inline XBRL Taxonomy Extension Schema Document

101.CAL	PNMR, PNM, and TNMP	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	PNMR, PNM, and TNMP	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	PNMR, PNM, and TNMP	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	PNMR, PNM, and TNMP	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	PNMR, PNM, and TNMP	Cover Page Inline XBRL File (included in Exhibits 101)

122

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.


		PNM RESOURCES, INC. PUBLIC SERVICE COMPANY OF NEW MEXICO TEXAS-NEW MEXICO POWER COMPANY
		(Registrants)


Date:	July 31, 2020	/s/ Henry E. Monroy
		Henry E. Monroy
		Vice President and Corporate Controller
		(Officer duly authorized to sign this report)

123

Document

Exhibit 10.1

Execution Version

PUBLIC SERVICE COMPANY OF NEW MEXICO

$200,000,000

$150,000,000 3.21% Senior Unsecured Notes, Series A, due April 30, 2030

$50,000,000 3.57% Senior Unsecured Notes, Series B, due April 29, 2039

______________

NOTE PURCHASE AGREEMENT

______________

Dated April 30, 2020

Table of Contents

SECTION HEADING PAGE



SECTION 1.	AUTHORIZATION OF NOTES	1

SECTION 2.	SALE AND PURCHASE OF NOTES	1

SECTION 3.	CLOSING	2

SECTION 4.	CONDITIONS TO CLOSING	2

Section 4.1.	Representations and Warranties	2
Section 4.2.	Performance; No Default	2
Section 4.3.	Compliance Certificates	2
Section 4.4.	Opinions of Counsel	3
Section 4.5.	Purchase Permitted By Applicable Law, Etc	3
Section 4.6.	Sale of Other Notes	3
Section 4.7.	Payment of Special Counsel Fees	3
Section 4.8.	Private Placement Number	3
Section 4.9.	Changes in Corporate Structure	3
Section 4.10.	Funding Instructions	3
Section 4.11.	Regulatory Approvals	4
Section 4.12.	Proceedings and Documents	4

SECTION 5.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	4

Section 5.1.	Organization; Power and Authority	4
Section 5.2.	Authorization, Etc	4
Section 5.3.	Disclosure	5
Section 5.4.	Organization; Affiliates	5
Section 5.5.	Financial Statements; Material Liabilities	5
Section 5.6.	Compliance with Laws, Other Instruments, Etc	5
Section 5.7.	Governmental Authorizations, Etc	6
Section 5.8.	Litigation; Observance of Agreements, Statutes and Orders	6
Section 5.9.	Taxes	6
Section 5.10.	Title to Property; Leases	6
Section 5.11.	Licenses, Permits, Etc	7
Section 5.12.	Compliance with Employee Benefit Plans	7
Section 5.13.	Private Offering by the Company	8
Section 5.14.	Use of Proceeds; Margin Regulations	8
Section 5.15.	Existing Indebtedness; Future Liens	8
Section 5.16.	Foreign Assets Control Regulations, Etc	9
Section 5.17.	Status under Certain Statutes	10
Section 5.18.	Environmental Matters	10
Section 5.19.	Solvency	10

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SECTION 6.	REPRESENTATIONS OF THE PURCHASERS	10

Section 6.1.	Purchase for Investment	10
Section 6.2.	Source of Funds	10

SECTION 7.	INFORMATION AS TO COMPANY	12

Section 7.1.	Financial and Business Information	12
Section 7.2.	Officer’s Certificate	14
Section 7.3.	Visitation	15
Section 7.4.	Electronic Delivery	16

SECTION 8.	PAYMENT AND PREPAYMENT OF THE NOTES	16

Section 8.1.	Maturity	16
Section 8.2.	Optional Prepayments with Make-Whole Amount	16
Section 8.3.	Allocation of Partial Prepayments	17
Section 8.4.	Maturity; Surrender, Etc.	17
Section 8.5.	Purchase of Notes	17
Section 8.6.	Make-Whole Amount	18
Section 8.7.	Change of Control	19
Section 8.8.	Payments Due on Non-Business Days	20

SECTION 9.	AFFIRMATIVE COVENANTS	20

Section 9.1.	Compliance with Laws	20
Section 9.2.	Insurance	21
Section 9.3.	Maintenance of Properties	21
Section 9.4.	Payment of Taxes and Claims	21
Section 9.5.	Corporate Existence, Etc	21
Section 9.6.	Books and Records	22
Section 9.7.	Guarantors	22
Section 9.8.	Most Favored Lender.	23

SECTION 10.	NEGATIVE COVENANTS	24

Section 10.1.	Transactions with Affiliates	24
Section 10.2.	Consolidation and Merger	24
Section 10.3.	Sale or Lease of Assets	24
Section 10.4.	Line of Business	25
Section 10.5.	Economic Sanctions, Etc	25
Section 10.6.	Liens	25
Section 10.7.	Financial Covenant	27

SECTION 11.	EVENTS OF DEFAULT	27

SECTION 12.	REMEDIES ON DEFAULT, ETC.	30

Section 12.1.	Acceleration	30

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Section 12.2.	Other Remedies	30
Section 12.3.	Rescission	31
Section 12.4.	No Waivers or Election of Remedies, Expenses, Etc	31

SECTION 13.	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES	31

Section 13.1.	Registration of Notes	31
Section 13.2.	Transfer and Exchange of Notes	32
Section 13.3.	Replacement of Notes	32

SECTION 14.	PAYMENTS ON NOTES	32

Section 14.1.	Place of Payment	32
Section 14.2.	Payment by Wire Transfer	33
Section 14.3.	FATCA Information	33

SECTION 15.	EXPENSES, ETC.	34

Section 15.1.	Transaction Expenses	34
Section 15.2.	Certain Taxes	34
Section 15.3.	Survival	35

SECTION 16.	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT	35

SECTION 17.	AMENDMENT AND WAIVER	35

Section 17.1.	Requirements	35
Section 17.2.	Solicitation of Holders of Notes	36
Section 17.3.	Binding Effect, Etc	36
Section 17.4.	Notes Held by Company, Etc	36

SECTION 18.	NOTICES	37

SECTION 19.	REPRODUCTION OF DOCUMENTS	37

SECTION 20.	CONFIDENTIAL INFORMATION	38

SECTION 21.	SUBSTITUTION OF PURCHASER	39

SECTION 22.	MISCELLANEOUS	39

Section 22.1.	Successors and Assigns	39
Section 22.2.	Accounting Terms	39
Section 22.3.	Severability	40
Section 22.4.	Construction, Etc	40
Section 22.5.	Counterparts	41
Section 22.6.	Regulatory Statement	41
Section 22.7.	Governing Law	41
Section 22.8.	Jurisdiction and Process; Waiver of Jury Trial	42

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Signature									43

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SCHEDULE A — Defined Terms

SCHEDULE 1-A — Form of 3.21% Senior Unsecured Note, Series A, due April 30,

2030

SCHEDULE 1-B — Form of 3.57% Senior Unsecured Note, Series B, due April 29,

2039

SCHEDULE 4.4(a) — Form of Opinions of Various Counsel for the Company

SCHEDULE 5.3 — Disclosure Materials

SCHEDULE 5.4 — Affiliates of the Company and Directors and Senior Officers

SCHEDULE 5.5 — Financial Statements

SCHEDULE 5.15 — Existing Indebtedness

SCHEDULE 14.3 — Form of Tax Compliance Certificate

PURCHASER SCHEDULE — Information Relating to Purchasers

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PUBLIC SERVICE COMPANY OF NEW MEXICO

414 SILVER AVE. SW

ALBUQUERQUE, NEW MEXICO 87102

$150,000,000 3.21% Senior Unsecured Notes, Series A, due April 30, 2030

$50,000,000 3.57% Senior Unsecured Notes, Series B, due April 29, 2039

April 30, 2020

TO EACH OF THE PURCHASERS LISTED IN

THE PURCHASER SCHEDULE HERETO:

Ladies and Gentlemen:

Public Service Company of New Mexico, a New Mexico corporation (the “Company”), agrees with each of the Purchasers as follows:

SECTION 1. AUTHORIZATION OF NOTES.

The Company will authorize the issue and sale of (i) $150,000,000 aggregate principal amount of its 3.21% Senior Unsecured Notes, Series A, due April 30, 2030 (the “Series A Notes”) and (ii) $50,000,000 aggregate principal amount of its 3.57% Senior Unsecured Notes, Series B, due April 29, 2039 (the “Series B Notes”; collectively with the Series A Notes, the “Notes”). The Notes shall be substantially in the form set out in Schedule 1-A through Schedule 1-B, as applicable. Certain capitalized and other terms used in this Agreement are defined in Schedule A and, for purposes of this Agreement, the rules of construction set forth in Section 22.4 shall govern. References to “Series” of Notes shall refer to the Series A Notes and the Series B Notes or all, as the context may require.

SECTION 2. SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchaser’s name in the Purchaser Schedule at the purchase price of 100% of the principal amount thereof. The Purchasers’ obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.

SECTION 3. CLOSING.

The execution and delivery of this Agreement and the sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603, at 7:00 a.m. Chicago time, at a closing on April 30, 2020 (the “Closing”). At the Closing the Company will deliver to each Purchaser the Notes of such Series to be purchased by such Purchaser in the form of a single Note of such Series (or such greater number of Notes in denominations of at least $100,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser’s name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company in accordance with the instructions delivered by the Company pursuant to Section 4.10. If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure by the Company to tender such Notes or any of the conditions specified in Section 4 not having been fulfilled to such Purchaser’s satisfaction.

SECTION 4. CONDITIONS TO CLOSING.

Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to or at the Closing, of the following conditions:

Section 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the Closing.

Section 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing. From the date of this Agreement to the Closing, before and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14), no Change of Control, Default or Event of Default shall have occurred and be continuing.

Section 4.3. Compliance Certificates.

(a) Officer’s Certificate. The Company shall have delivered to such Purchaser an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

(b) Secretary’s Certificate. The Company shall have delivered to such Purchaser a certificate of its Secretary or Assistant Secretary, dated the date of the Closing, certifying as to (i) the resolutions attached thereto and other corporate proceedings relating to the authorization,

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execution and delivery of the Notes and this Agreement and (ii) the Company’s organizational documents as then in effect.

Section 4.4. Opinions of Counsel. Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing (a) from Troutman Sanders LLP, counsel for the Company, and in-house legal counsel to the Company, covering the matters set forth in Schedule 4.4(a) and covering such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to the Purchasers) and (b) from Chapman and Cutler LLP, the Purchasers’ special counsel in connection with such transactions, covering such matters incident to such transactions as such Purchaser may reasonably request.

Section 4.5. Purchase Permitted By Applicable Law, Etc. On the date of the Closing such Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by such Purchaser, such Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.

Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in the Purchaser Schedule.

Section 4.7. Payment of Special Counsel Fees. Without limiting Section 15.1, the Company shall have paid on or before the date of the Closing the fees, charges and disbursements of the Purchasers’ special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the date of the Closing.

Section 4.8. Private Placement Number. A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for each Series of Notes.

Section 4.9. Changes in Corporate Structure. Other than transactions permitted by Section 10, the Company shall not have changed its jurisdiction of incorporation or organization, as applicable, or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.

Section 4.10. Funding Instructions. At least four (4) Business Days prior to the date of the Closing, each Purchaser shall have received written wire transfer instructions signed by a

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Responsible Officer on letterhead of the Company including (i) the name and address of the transferee bank, (ii) such transferee bank’s ABA number and (iii) the account name and number into which the purchase price for the Notes is to be deposited. Each Purchaser has the right, but not the obligation, upon written notice (which may be by email) to the Company, to elect to deliver a micro deposit (less than $50.00) to the account identified in the written instructions no later than two (2) Business Days prior to Closing. If a Purchaser delivers a micro deposit, a Responsible Officer must verbally verify the receipt and amount of the micro deposit to such Purchaser on a telephone call initiated by such Purchaser prior to Closing. The Company shall not be obligated to return the amount of the micro deposit, nor will the amount of the micro deposit be netted against the Purchaser’s purchase price of the Notes.

Section 4.11. Regulatory Approvals. The issue and sale of the Notes hereunder shall have been duly authorized by each regulatory authority whose consent or approval shall be required for the issue and sale of the Notes to such Purchaser and any orders issued pursuant thereto shall be in full force and effect as of the Closing and all appeal periods, if any, shall have expired; provided, however, that with respect to the registration requirements of section 5 of the Securities Act or to the registration requirements of any Securities or blue sky laws of any applicable jurisdiction, satisfaction of the foregoing condition assumes the accuracy of the representations and warranties of the Purchasers contained in Section 6.1 of this Agreement. Such Purchaser shall have received copies of such consents, approvals or orders including a copy of the approval of the NMPRC authorizing this transaction.

Section 4.12. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser and its special counsel, and such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special counsel may reasonably request.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each Purchaser that:

Section 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.

Section 5.2. Authorization, Etc. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and

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binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 5.3. Disclosure. The Company, through its agents, BofA Securities, Inc. and U.S. Bancorp Investments, Inc., has delivered to each Purchaser a copy of the Private Placement Investor Presentation, dated April 16, 2020 (the “Presentation”), relating to the transactions contemplated hereby. This Agreement, the Presentation, the financial statements listed in Schedule 5.5 and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Company prior to April 23, 2020 in connection with the transactions contemplated hereby and identified in Schedule 5.3 (this Agreement, the Presentation and such documents, certificates or other writings and such financial statements delivered to each Purchaser being referred to, collectively, as the “Disclosure Documents”), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Disclosure Documents, since December 31, 2019, there has been no change in the financial condition, operations, business, or properties of the Company or any Subsidiary except changes that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 5.4. Organization; Affiliates. Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Company’s Affiliates and (ii) the Company’s directors and senior officers. The Company has no active Subsidiaries as of the date of this Agreement.

Section 5.5. Financial Statements; Material Liabilities. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of such financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).

Section 5.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter, regulations or by-laws, shareholders agreement or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, the violation of which would have or would be reasonably be expected to have a Material Adverse Effect, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or

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Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.

Section 5.7. Governmental Authorizations, Etc. No consent, approval, authorization or order of, or registration, filing or declaration with, any Governmental Authority or body having jurisdiction over the Company is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes, except for (i) such approval by the NMPRC as has been obtained and (ii) required notice filings related to this Agreement with the SEC or the NMPRC; provided that with respect to the registration requirements of section 5 of the Securities Act or to the registration requirements of any Securities or blue sky laws of any applicable jurisdiction, the foregoing representation and warranty assumes the accuracy of the representations and warranties of the Purchasers contained in Section 6.1 of this Agreement.

Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in the Disclosure Documents, there are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Neither the Company nor any Subsidiary is (i) in violation of any order, judgment, decree or ruling of any court, any arbitrator of any kind or any Governmental Authority or (ii) in violation of any applicable law, ordinance, rule or regulation of any Governmental Authority (including Environmental Laws, the USA PATRIOT Act or any of the other laws and regulations that are referred to in Section 5.16), which default or violation would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which, individually or in the aggregate, is not Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of U.S. federal, state or other taxes for all fiscal periods are adequate. The U.S. federal income tax liabilities of the Company and its Subsidiaries have been finally determined (whether by reason of completed audits or the statute of limitations having run) for all fiscal years up to and including the fiscal year ended December 31, 2015.

Section 5.10. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after such date

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(except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement except for those defects in title and Liens that, individually or in the aggregate, would not have a Material Adverse Effect. All Material leases are valid and subsisting and are in full force and effect in all material respects.

Section 5.11. Licenses, Permits, Etc. Except as disclosed in the Disclosure Documents, the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others, except for those conflicts that, individually or in the aggregate, would not have a Material Adverse Effect.

Section 5.12. Compliance with Employee Benefit Plans. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Titles I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition relating to such employee benefit plans has occurred or exists that would, individually or in the aggregate, reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Titles I or IV of ERISA or to section 430(k) of the Code or to any such penalty or excise tax provisions under the Code or federal law or section 4068 of ERISA or by the granting of a security interest in connection with the amendment of a Plan, other than such liabilities or Liens as would not be individually or in the aggregate Material.

(b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $70,000,000 in the case of any single Plan and by more than $70,000,000 in the aggregate for all Plans. The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.

(c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

(d) The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 715-60, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

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(e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company to each Purchaser in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as to the sources of the funds to be used to pay the purchase price of the Notes to be purchased by such Purchaser.

(f) The Company and its Subsidiaries do not have any Non-U.S. Plans.

Section 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar Securities for sale to, or solicited any offer to buy the Notes or any similar Securities from, or otherwise approached or negotiated in respect thereof with, any Person other than sixty (60) Institutional Investors (including the Purchasers), each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act or to the registration requirements of any Securities or blue sky laws of any applicable jurisdiction.

Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes hereunder for refinancing existing debt, funding of capital expenditures and general corporate purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

Section 5.15. Existing Indebtedness; Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all individual items of outstanding Indebtedness of the Company and its Subsidiaries that exceeds $40,000,000 (or in the case of Contingent Obligations, such Contingent Obligations guaranteeing or otherwise in respect of obligations that exceed $40,000,000 described in the definition of “Indebtedness”) as of December 31, 2019 (including descriptions of the obligors and obligees, principal amounts outstanding, any collateral therefor and any Guaranty thereof), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary the

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outstanding principal amount of which exceeds $40,000,000 that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

(b) Except as disclosed in Schedule 5.15 or as permitted in Section 10.6, neither the Company nor any Subsidiary has agreed or consented to cause or permit any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness or to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness.

(c) Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including its charter or any other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as disclosed in Schedule 5.15.

Section 5.16. Foreign Assets Control Regulations, Etc. (a) Neither the Company nor any Controlled Entity (i) is a Blocked Person, (ii) has been notified that its name appears or may in the future appear on a State Sanctions List or (iii) is a target of sanctions that have been imposed by the United Nations or the European Union.

(b) Neither the Company nor any Controlled Entity (i) has violated, been found in violation of, or been charged or convicted under, any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or (ii) to the Company’s knowledge, is under investigation by any Governmental Authority for possible violation of any U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.

(i) constitutes or will constitute funds obtained on behalf of any Blocked Person in violation of applicable law or will otherwise be used by the Company or any Controlled Entity, directly or indirectly, (A) in connection with any investment in, or any transactions or dealings with, any Blocked Person or any Sanctioned Jurisdiction in violation of applicable law, (B) for any purpose that would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws or (C) otherwise in violation of any U.S. Economic Sanctions Laws;

(ii) will be used, directly or indirectly, in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or

(iii) will be used, directly or indirectly, for the purpose of making any improper payments, including bribes, to any Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper

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advantage, in each case which would be in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Corruption Laws.

(d) The Company has established procedures and controls which it reasonably believes are adequate (and otherwise in compliance with applicable law) to ensure that the Company and each Controlled Entity is and will continue to be in compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws and Anti-Corruption Laws.

Section 5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, the ICC Termination Act of 1995, or Section 204 of the Federal Power Act, nor is the Company or any Subsidiary a holding company for the purposes of the Public Utility Holding Company Act of 2005.

Section 5.18. Environmental Matters. Except as would not result or reasonably be expected to result in a Material Adverse Effect: (a) each of the real properties of the Company and its Subsidiaries and all operations at such real properties are in substantial compliance with all applicable Environmental Laws, (b) there is no undocumented or unreported violation of any Environmental Laws with respect to such real properties or the businesses operated by the Company and its Subsidiaries that the Company is aware of, and (c) to the Company’s knowledge, there are no conditions relating to such businesses or real properties that have given rise to or would reasonably be expected to give rise to a liability under any applicable Environmental Laws or to any Environmental Claim.

Section 5.19. Solvency. The Company is and, after the issuance of Notes and the consummation of the transactions contemplated by this Agreement, will be, Solvent.

SECTION 6. REPRESENTATIONS OF THE PURCHASERS.

Section 6.1. Purchase for Investment. Each Purchaser severally represents that it is (a) purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser’s or their property shall at all times be within such Purchaser’s or their control and (b) it is an “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act). Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

Section 6.2. Source of Funds. Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:

(a) the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption

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(“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the NAIC (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

(b) the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

(c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

(d) the Source constitutes assets of an “investment fund” (within the meaning of Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM Exemption), no employee benefit plan’s assets that are managed by the QPAM in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, represent more than 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM maintains an ownership interest in the Company that would cause the QPAM and the Company to be “related” within the meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM and (ii) the names of any employee benefit plans whose assets in the investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization, represent 10% or more of the assets of such investment fund, have been disclosed to the Company in writing pursuant to this clause (d); or

(e) the Source constitutes assets of a “plan(s)” (within the meaning of Part IV(h) of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption),

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the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

(f) the Source is a governmental plan; or

(g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

(h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan,” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

SECTION 7. INFORMATION AS TO COMPANY

Section 7.1. Financial and Business Information. The Company shall deliver to each Purchaser and each holder of a Note that is an Institutional Investor:

(a) Quarterly Statements — within sixty (60) days (or such shorter period as is the earlier of (x) fifteen (15) days greater than the period applicable to the filing of the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”) with the SEC regardless of whether the Company is subject to the filing requirements thereof and (y) the date by which such financial statements are required to be delivered under any Material Credit Facility or the date on which such corresponding financial statements are delivered under any Material Credit Facility if such delivery occurs earlier than such required delivery date) after the end of each Fiscal Quarter in each Fiscal Year of the Company (other than the last quarterly fiscal period of each such Fiscal Year), duplicate copies of

(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Quarter,

(ii) consolidated statements of income of the Company and its Subsidiaries, for such Fiscal Quarter and (in the case of the second and third quarters) for the portion of the Fiscal Year ending with such Fiscal Quarter, and

(iii) consolidated statements of changes in shareholders’ equity and cash flows of the Company and its Subsidiaries for the portion of the Fiscal Year ending with such Fiscal Quarter,

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setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments;

(b) Annual Statements — within one hundred twenty (120) days (or such shorter period as is the earlier of (x) fifteen (15) days greater than the period applicable to the filing of the Company’s Annual Report on Form 10-K (the “Form 10-K”) with the SEC regardless of whether the Company is subject to the filing requirements thereof and (y) the date by which such financial statements are required to be delivered under any Material Credit Facility or the date on which such corresponding financial statements are delivered under any Material Credit Facility if such delivery occurs earlier than such required delivery date) after the end of each Fiscal Year of the Company, duplicate copies of

(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Year, and

(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries for such Fiscal Year,

setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon (without a “going concern” or similar qualification or exception and without any qualification or exception as to the scope of the audit on which such opinion is based) of independent public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances;

(c) SEC and Other Reports — promptly upon their becoming available, one copy of (i) each financial statement, report, notice, proxy statement or similar document sent by the Company or any Subsidiary (x) to its creditors under any Material Credit Facility (excluding information sent to such creditors in the ordinary course of administration of a credit facility, such as information relating to pricing and borrowing availability) or (y) to its public Securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the SEC;

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(d) Notice of Default or Event of Default — promptly, and in any event within ten (10) days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

(e) Employee Benefits Matters — promptly, and in any event within ten (10) days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

(i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof;

(ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or

(iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, would reasonably be expected to have a Material Adverse Effect;

(f) Debt Ratings — prompt notice of any change in its Debt Ratings; and

(g) Requested Information — with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries (including actual copies of the Company’s Form 10-Q and Form 10-K) or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such Purchaser or holder of a Note; provided that any such requested information is subject to the confidentiality provisions set forth in Section 20.

Section 7.2. Officer’s Certificate. In connection with each set of financial statements delivered to a Purchaser or holder of a Note pursuant to Section 7.1(a) or Section 7.1(b), the

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Company shall deliver on or before the deadline set forth in Section 7.1(a) or Section 7.1(b), as applicable, a certificate of a Senior Financial Officer:

(a) Covenant Compliance — setting forth the information from such financial statements that is required in order to establish whether the Company was in compliance with the requirements of Section 10 during the quarterly or annual period covered by the financial statements then being furnished (including with respect to each such provision that involves mathematical calculations, the information from such financial statements that is required to perform such calculations) and detailed calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Section, and the calculation of the amount, ratio or percentage then in existence. In the event that the Company or any Subsidiary has made an election to measure any financial liability using fair value (which election is being disregarded for purposes of determining compliance with this Agreement pursuant to Section 22.2) as to the period covered by any such financial statement, such Senior Financial Officer’s certificate as to such period shall include a reconciliation from GAAP with respect to such election;

(b) Event of Default — certifying that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto; and

(c) Guarantors – setting forth a list of all Subsidiaries and other entities that are Guarantors and certifying that each Subsidiary or other entity that is required to be a Guarantor pursuant to Section 9.7 is a Guarantor, in each case, as of the date of such certificate of Senior Financial Officer.

Section 7.3. Visitation. The Company shall permit the representatives of each Purchaser and holder of a Note that is an Institutional Investor:

(a) No Default — if no Default or Event of Default then exists, at the expense of such Purchaser or holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

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(b) Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

Section 7.4. Electronic Delivery. Financial statements, opinions of independent certified public accountants, other information and Officer’s Certificates that are required to be delivered by the Company pursuant to Sections 7.1(a), (b) or (c) and Section 7.2 shall be deemed to have been delivered if the Company satisfies any of the following requirements with respect thereto:

(a) such financial statements satisfying the requirements of Section 7.1(a) or (b) and related Officer’s Certificate satisfying the requirements of Section 7.2 and any other information required under Section 7.1(c) are delivered to each Purchaser or holder of a Note by e-mail at the e-mail address set forth in such Purchaser’s or holder’s Purchaser Schedule or as communicated from time to time in a separate writing delivered to the Company;

(b) the Company shall have timely filed such Form 10-Q or Form 10-K, satisfying the requirements of Section 7.1(a) or Section 7.1(b), as the case may be, with the SEC on EDGAR and shall have made such form and the related Officer’s Certificate satisfying the requirements of Section 7.2 available on its home page on the internet, which is located at https://www.pnm.com as of the date of this Agreement;

(c) such financial statements satisfying the requirements of Section 7.1(a) or Section 7.1(b) and related Officer’s Certificate(s) satisfying the requirements of Section 7.2 and any other information required under Section 7.1(c) are timely posted by or on behalf of the Company on IntraLinks or on any other similar website to which each Purchaser and holder of Notes has free access; or

(d) the Company shall have timely filed any of the items referred to in Section 7.1(c) with the SEC on EDGAR and shall have made such items available on its home page on the internet or on IntraLinks or on any other similar website to which each Purchaser and each holder of Notes has free access;

provided, however, that in no case shall access to such financial statements, other information and Officer’s Certificates be conditioned upon any waiver or other agreement or consent (other than confidentiality provisions consistent with Section 20 of this Agreement); provided, further, that in the case of any of clauses (b), (c) or (d), the Company shall have given each Purchaser and each holder of a Note prior written notice, which may be by e-mail or in accordance with Section 18, of such posting or filing in connection with each delivery, provided, further, that upon request of any Purchaser or any holder to receive paper copies of such forms, financial

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statements, other information and Officer’s Certificates or to receive them by e-mail, the Company will promptly e-mail them or deliver such paper copies, as the case may be, to such Purchaser or such holder.

SECTION 8. PAYMENT AND PREPAYMENT OF THE NOTES.

Section 8.1. Maturity. As provided therein, the entire unpaid principal balance of each Note shall be due and payable on the Maturity Date thereof.

Section 8.2. Optional Prepayments with Make-Whole Amount. (a) The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes of any Series, in an amount not less than 20% of the aggregate principal amount of the Notes of any Series to be prepaid then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than ten (10) days and not more than sixty (60) days prior to the date fixed for such prepayment unless the Company and the Required Holders agree to another time period pursuant to Section 17. Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Notes of each Series to be prepaid on such date, the principal amount of each Note of each Series held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due with respect to each Series of Notes to be prepaid in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two (2) Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

(b) Notwithstanding anything contained in this Section 8.2 to the contrary, if and so long as any Default or Event of Default shall have occurred and be continuing, any prepayment of the Notes pursuant to the provisions of Section 8.2(a) shall be allocated among all of the Notes of all Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof.

Section 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes of the Series to be prepaid shall be allocated among all of the Notes of such Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

Section 8.4. Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From

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and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

Section 8.5. Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes of any Series except (a) upon the payment or prepayment of the Notes of any Series in accordance with this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate pro rata to the holders of all Notes of any Series at the time outstanding upon the same terms and conditions, provided that if and so long as any Default or Event of Default exists, such written offer shall be made pro rata to the holders of all Notes of all Series outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least five (5) Business Days. If the holders of more than 20% of the principal amount of the Notes of the applicable Series then outstanding accept such offer, the Company shall promptly notify the remaining holders of such Series of Notes of such fact and the expiration date for the acceptance by holders of such Series of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least ten (10) Business Days from its receipt of such notice to accept such offer. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment or prepayment of Notes pursuant to this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

Section 8.6. Make-Whole Amount.

The term “Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero; provided further that the Make-Whole Amount shall equal zero with respect to the relevant Series of Notes if such prepayment occurs on or after the date which is 90 days prior to the Maturity Date. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

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“Reinvestment Yield” means, with respect to the Called Principal of any Note, the sum of (a) 0.50% plus (b) the yield to maturity implied by the “Ask Yield(s)” reported as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on-the-run U.S. Treasury securities (“Reported”) having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. If there are no such U.S. Treasury securities Reported having a maturity equal to such Remaining Average Life, then such implied yield to maturity will be determined by (i) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between the “Ask Yields” Reported for the applicable most recently issued actively traded on-the-run U.S. Treasury securities with the maturities (1) closest to and greater than such Remaining Average Life and (2) closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

If such yields are not Reported or the yields Reported as of such time are not ascertainable (including by way of interpolation), then “Reinvestment Yield” means, with respect to the Called Principal of any Note, the sum of (x) 0.50% plus (y) the yield to maturity implied by the U.S. Treasury constant maturity yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for the U.S. Treasury constant maturity having a term equal to the Remaining Average Life of such Called Principal as of such Settlement Date. If there is no such U.S. Treasury constant maturity having a term equal to such Remaining Average Life, such implied yield to maturity will be determined by interpolating linearly between (1) the U.S. Treasury constant maturity so reported with the term closest to and greater than such Remaining Average Life and (2) the U.S. Treasury constant maturity so reported with the term closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

“Remaining Average Life” means, with respect to any Called Principal, the number of years obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years, computed on the basis of a 360-day year comprised of twelve 30-day months and calculated to two decimal places, that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such

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Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1.

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

Section 8.7. Change of Control.

(a) Notice of Change of Control. The Company will, within fifteen (15) Business Days after the occurrence of any Change of Control, give written notice (the “Change of Control Notice”) of such Change of Control to each holder of Notes. Such Change of Control Notice shall contain and constitute an offer to prepay the Notes as described in Section 8.7(b) hereof and shall be accompanied by the certificate described in Section 8.7(e).

(b) Offer to Prepay Notes. The offer to prepay Notes contemplated by Section 8.7(a) shall be an offer to prepay, in accordance with and subject to this Section 8.7, all, but not less than all, of the Notes held by each holder (in this case only, “holder” in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such Change of Control Notice (the “Proposed Prepayment Date”). Such date shall be not fewer than thirty (30) days and not more than sixty (60) days after the date of delivery of the Change of Control Notice.

(c) Acceptance. Any holder of Notes may accept the offer to prepay made pursuant to this Section 8.7 by causing a notice of such acceptance to be delivered to the Company not fewer than ten (10) days prior to the Proposed Prepayment Date. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.7 shall be deemed to constitute a rejection of such offer by such holder.

(d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 8.7 shall be at 100% of the principal amount of such Notes together with accrued and unpaid interest thereon but without any Make-Whole Amount or other premium. The prepayment shall be made on the Proposed Prepayment Date.

(e) Officer’s Certificate. Each offer to prepay the Notes pursuant to this Section 8.7 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of delivery of the Change of Control Notice, specifying: (i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 8.7; (iii) the principal amount of each Note offered to be prepaid (which shall be 100% of the outstanding principal balance of each such Note); (iv) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) that the conditions of this Section 8.7 required to be fulfilled prior to the giving of notice have been fulfilled; and (vi) in reasonable detail, the general nature and date of the Change of Control.

Section 8.8. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, (x) except as set forth in clause (y), any payment of

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interest on any Note that is due on a date that is not a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; and (y) any payment of principal of or Make-Whole Amount on any Note (including principal due on the Maturity Date of such Note) that is due on a date that is not a Business Day shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.

SECTION 9. AFFIRMATIVE COVENANTS.

So long as any of the Notes are outstanding, the Company covenants that:

Section 9.1. Compliance with Laws. Without limiting Section 10.4, the Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject (including ERISA, Environmental Laws, the USA PATRIOT Act and the other laws and regulations that are referred to in Section 5.16) and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 9.2. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

Section 9.3. Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section 9.3 shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and provided, further, that this provision shall not apply to properties required to be closed, discontinued or abandoned pursuant to a law, legal order, mandate or requirement from the NMPRC or any other federal or state governmental authority or regulatory authority with the authority to regulate or oversee any aspect of the business of the Company or its Affiliates.

Section 9.4. Payment of Taxes and Claims. The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and

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discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, levies or claims payable by any of them, to the extent the same have become due and payable and before they have become delinquent, provided that neither the Company nor any Subsidiary need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 9.5. Corporate Existence, Etc. Subject to Section 10.2, the Company will at all times preserve and keep its existence in full force and effect. Subject to Sections 10.2 and 10.3, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless dissolved or merged into the Company or a Wholly-Owned Subsidiary) and all Material rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect.

Section 9.6. Books and Records. The Company will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Company or such Subsidiary, as the case may be. The Company will, and will cause each of its Subsidiaries to, keep books, records and accounts which, in reasonable detail, accurately reflect all transactions and dispositions of assets. The Company and its Subsidiaries have devised a system of internal accounting controls sufficient to provide reasonable assurances that their respective books, records, and accounts accurately reflect all transactions and dispositions of assets and the Company will, and will cause each of its Subsidiaries to, continue to maintain such system.

Section 9.7. Guarantors. (a) The Company will (x) cause each of its Subsidiaries that guarantees or otherwise becomes liable at any time, whether as a borrower or an additional or co-borrower or otherwise, for or in respect of any Indebtedness under any Material Credit Facility (a “Subsidiary Guarantor”) and (y) use commercially reasonable efforts to cause any other entity that is not a Subsidiary that guarantees or otherwise becomes liable at any time, whether as a borrower or an additional or co-borrower or otherwise, for or in respect of any Indebtedness under a Material Credit Facility (a “Non-Subsidiary Guarantor”; together with any other Non-Subsidiary Guarantors and any Subsidiary Guarantors, each a “Guarantor”) to concurrently therewith:

(i) enter into an agreement in form and substance satisfactory to the Required Holders providing for the guaranty by such Guarantor, on a joint and several basis with all other such Guarantors, of (x) the prompt payment in full when due of all amounts payable by the Company pursuant to the Notes (whether for principal, interest, Make-Whole Amount or otherwise) and this Agreement, including all indemnities, fees

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and expenses payable by the Company thereunder and (y) the prompt, full and faithful performance, observance and discharge by the Company of each and every covenant, agreement, undertaking and provision required pursuant to the Notes or this Agreement to be performed, observed or discharged by it (a “NPA Guaranty”); and

(ii) deliver the following to each Purchaser and holder of a Note:

(A) an executed counterpart of such NPA Guaranty;

(B) a certificate signed by an authorized responsible officer of such Guarantor containing representations and warranties on behalf of such Guarantor to the same effect, mutatis mutandis, as those contained in Sections 5.1, 5.2, 5.6, 5.7 and 5.16 of this Agreement (but with respect to such Guarantor and such NPA Guaranty rather than the Company);

(C) all documents as may be reasonably requested by the Required Holders to evidence the due organization, continuing existence and, where applicable, good standing of such Guarantor and the due authorization by all requisite action on the part of such Guarantor of the execution and delivery of such NPA Guaranty and the performance by such Guarantor of its obligations thereunder; and

(D) an opinion of counsel reasonably satisfactory to the Required Holders covering such matters relating to such Guarantor and such NPA Guaranty as the Required Holders may reasonably request.

(b) At the election of the Company and by written notice to each holder of Notes, any Guarantor may be discharged from all of its obligations and liabilities under its NPA Guaranty and shall be automatically released from its obligations thereunder without the need for the execution or delivery of any other document by the holders, provided that (i) if such Guarantor is a guarantor or is otherwise liable for or in respect of any Material Credit Facility, then such Guarantor has been released and discharged (or will be released and discharged concurrently with the release of such Guarantor under its NPA Guaranty) under such Material Credit Facility, (ii) at the time of, and after giving effect to, such release and discharge, no Default or Event of Default shall be existing, (iii) no amount is then due and payable under such NPA Guaranty, (iv) if in connection with such Guarantor being released and discharged under any Material Credit Facility, any fee or other form of consideration is given to any holder of Indebtedness under such Material Credit Facility for such release, the holders of the Notes shall receive equivalent consideration substantially concurrently therewith and (v) each holder shall have received a certificate of a Responsible Officer certifying as to the matters set forth in clauses (i) through (iv).

(c) The failure of a Non-Subsidiary Guarantor to comply with Section 9.7(a)(i) or (ii) will constitute non-compliance by a Guarantor with this Section 9.7.

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Section 9.8. Most Favored Lender. (a) If at any time after the date of this Agreement the Company amends or modifies any financial covenant or any event of default in the nature of a financial covenant (or the related definitions or provisions governing accounting terms) (each, a “Financial Covenant”) in any Material Credit Facility that is similar to any Financial Covenant now or hereafter included herein, or if a Financial Covenant is added to such Material Credit Facility (any such amended, modified or added Financial Covenant, a “Modified Covenant”), then the Company shall provide a Most Favored Lender Notice to each holder of the Notes, and such Financial Covenant herein shall be deemed to be amended, modified or added automatically without any further action on the part of the Company or any holder; provided that if such Modified Covenant is less restrictive on the Company, then the amendment, modification or addition to this Agreement shall take effect fifteen (15) days after all holders’ receipt of such Most Favored Lender Notice, unless the Required Holders notify the Company of their objection to such amendment, modification or addition within such fifteen (15) day period, in which case such amendment, modification or addition to this Agreement will not take effect; provided further that, notwithstanding the foregoing, no such amendment, modification or addition shall increase the ratio contained in this Section 10.7 in excess of 0.65 to 1.00 (whether by amending the ratio, the related definitions or provisions governing accounting terms) without the consent of the Required Holders.

(b) Notwithstanding the foregoing, if a Default or an Event of Default then exists and the amendment, modification or addition of any Financial Covenant herein would make such provision less restrictive on the Company, then such Financial Covenant shall only be deemed automatically amended, modified or added at such time when such Default or Event of Default no longer exists, if such time should occur. Furthermore, if any fee or other consideration shall be given to the lenders under such Material Credit Facility in connection with a Modified Covenant, the equivalent of such fee or other consideration shall be given, pro rata, to the holders of the Notes; provided that no fee or other consideration shall be due if the Modified Covenant is made in connection with a renewal, restatement or extension of or entry into such Material Credit Facility.

(c) “Most Favored Lender Notice” means, in respect of any Modified Covenant, a written notice to each of the holders of the Notes delivered promptly, and in any event within twenty (20) Business Days after the inclusion of such Modified Covenant in any Material Credit Facility (including by way of amendment or other modification of any existing provision thereof) from a Responsible Officer referring to the provisions of this Section 9.8 and setting forth a reasonably detailed description of such Modified Covenant (including any defined terms used therein) and related explanatory calculations, as applicable.

SECTION 10. NEGATIVE COVENANTS.

So long as any of the Notes are outstanding, the Company covenants that:

Section 10.1. Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into directly or indirectly any Material transaction or Material group of related transactions (including the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary),

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except pursuant to the reasonable requirements of the Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

Section 10.2. Consolidation and Merger. The Company will not (a) enter into any transaction of merger or (b) consolidate, liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, so long as no Default or Event of Default shall exist or be caused thereby, a Person may be merged or consolidated with or into the Company so long as the Company shall be the continuing or surviving Person.

Section 10.3. Sale or Lease of Assets. The Company will not (nor will it permit its Subsidiaries to) sell, lease, transfer or otherwise dispose of, any of its assets (including all or substantially all of its assets, whether in one transaction or a series of related transactions) except (a) sales or transfers of accounts receivable and related rights to payment in connection with a State Approved Securitization and other sales and transfers of accounts receivable and related rights to payment so long as such other sales and transfers are non-recourse to the Company (other than with respect to Standard Securitization Undertakings) and are otherwise on commercially reasonable terms, (b) sales of assets (excluding those permitted in clause (a) hereof) for fair value, if the aggregate value of all such transactions in any calendar year, does not exceed 25% of the book value of Total Assets, as calculated as of the end of the most recent Fiscal Quarter and (c) the sale, lease, transfer or other disposition, at less than fair value, of any other assets, provided that the aggregate book value of such assets shall not exceed $20,000,000 in any calendar year.

Section 10.4. Line of Business. The Company will not and will not permit any Subsidiary to engage in any business if, as a result, the general nature of the business in which the Company and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Section 10.5. Economic Sanctions, Etc. The Company will not, and will not permit any Controlled Entity to (a) become (including by virtue of being owned or controlled by a Blocked Person), own or control a Blocked Person or (b) directly or knowingly indirectly have any investment in or engage in any dealing or transaction (including any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment, dealing or transaction (i) would cause any holder or any affiliate of such holder to be in violation of any law or regulation applicable to such holder or (ii) is prohibited by any U.S. Economic Sanctions Laws.

Section 10.6. Liens. The Company will not (nor will it permit its Subsidiaries to) contract, create, incur, assume or permit to exist any Lien with respect to any of its property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, securing any Indebtedness other than the following:

(a) Liens securing the Notes;

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(b) Liens for taxes not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof);

(c) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen’s, mechanics’, warehousemen’s, carrier’s, landlords’ and other nonconsensual statutory Liens which are not yet due and payable, which have been in existence less than ninety (90) days or which are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof);

(d) pledges or deposits made in the ordinary course of business to secure payment of worker’s compensation insurance, unemployment insurance, pensions or social security programs;

(e) Liens arising from good faith deposits in connection with or to secure performance of tenders, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (other than obligations in respect of the payment of borrowed money);

(f) Liens arising from good faith deposits in connection with or to secure performance of statutory obligations and surety and appeal bonds;

(g) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered property for its intended purposes;

(h) judgment Liens that would not constitute an Event of Default;

(i) Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depository institution;

(j) any Lien created or arising over any property which is acquired, constructed or created by the Company or its Subsidiaries, but only if (i) such Lien secures only principal amounts (not exceeding the cost of such acquisition, construction or creation) raised for the purposes of such acquisition, construction or creation, together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof, (ii) such Lien is created or arises on or before one hundred eighty (180) days after the completion of such acquisition, construction or creation, (iii) such Lien is confined solely to the property so acquired, constructed or created and any improvements thereto and (iv) the aggregate principal amount of all Indebtedness secured by such Liens shall not exceed $50,000,000 at any one time outstanding;

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(k) any Lien on Margin Stock;

(l) the assignment of, or Liens on, accounts receivable and related rights to payment in connection with (i) a State Approved Securitization or (ii) any other accounts receivable securitization so long as such other securitization is non-recourse to the Company (other than with respect to Standard Securitization Undertakings) and is otherwise on commercially reasonable terms, and the filing of related financing statements under the Uniform Commercial Code of the applicable jurisdictions;

(m) the assignment of, or Liens on, demand, energy or wheeling revenues, or on capacity reservation or option fees, payable to the Company with respect to any wholesale electric service or transmission agreements, the assignment of, or Liens on, revenues from energy services contracts, and the assignment of, or Liens on, capacity reservation or option fees payable to the Company with respect to asset sales permitted herein;

(n) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Liens referred to in the foregoing clauses (a) through (m), for amounts not exceeding the principal amount of the Indebtedness secured by the Lien so extended, renewed or replaced, provided that such extension, renewal or replacement Lien is limited to all or a part of the same property or assets that were covered by the Lien extended, renewed or replaced (plus improvements on such property or assets);

(o) Liens on Property that is subject to a lease that is classified as an operating lease as of the date of the Second Closing but which is subsequently converted into a capital lease;

(p) Liens securing obligations under Hedging Agreements entered into in the ordinary course of business and not for speculative purposes;

(q) Liens granted by bankruptcy remote special purpose Subsidiaries to secure stranded cost securitization bonds in connection with the San Juan Generating Station or any other energy-generating facility or property of the Company; and

(r) Liens on Property, in addition to those otherwise permitted by clauses (a) through (q) above, securing, directly or indirectly, Indebtedness or obligations arising pursuant to other agreements entered into in the ordinary course of business which do not exceed, in the aggregate at any one time outstanding, $50,000,000; provided that the Company and its Subsidiaries shall not secure pursuant to this Section 10.6(r) any Indebtedness outstanding under any Material Credit Facility unless and until the Notes (and any guaranty delivered in connection therewith) shall concurrently be secured equally and ratably with such Indebtedness pursuant to documentation reasonably acceptable to the Required Holders in substance and in form.

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Section 10.7. Financial Covenant. The Company shall not permit the ratio of (a) Consolidated Indebtedness to (b) Consolidated Capitalization to be greater than 0.65 to 1.0 as of the last day of any Fiscal Quarter.

SECTION 11. EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

(a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b) the Company defaults in the payment of any interest on any Note for more than five (5) Business Days after the same becomes due and payable; or

(c) the Company defaults in the performance of or compliance with any term contained in Section 7.1(d), Section 9.5 or Section 10; or

(d) the Company or any Guarantor defaults in the performance of or compliance with any term contained herein (other than those referred to in Sections 11(a), (b) and (c)) or in any NPA Guaranty and such default is not remedied within thirty (30) days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(d)); or

(e) (i) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made, or (ii) any representation or warranty made in writing by or on behalf of any Guarantor or by any officer of such Guarantor in any NPA Guaranty or any writing furnished in connection with such NPA Guaranty proves to have been false or incorrect in any material respect on the date as of which made; or

(f) (i) the Company or any Significant Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $40,000,000 (or its equivalent in the relevant currency of payment) beyond any period of grace provided with respect thereto, or (ii) the Company or any Significant Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $40,000,000 (or its equivalent in the relevant currency of payment) or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been

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declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Significant Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $40,000,000 (or its equivalent in the relevant currency of payment), or (y) one or more Persons have the right to require the Company or any Significant Subsidiary so to purchase or repay such Indebtedness in an amount of at least $40,000,000; or

(g) the Company or any Significant Subsidiary (i) admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

(h) a court or other Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Significant Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Significant Subsidiaries, or any such petition shall be filed against the Company or any of its Significant Subsidiaries and such petition shall not be dismissed within sixty (60) days; or

(i) any event occurs with respect to the Company or any Significant Subsidiary which under the laws of any jurisdiction is analogous to any of the events described in Section 11(g) or Section 11(h), provided that the applicable grace period, if any, which shall apply shall be the one applicable to the relevant proceeding which most closely corresponds to the proceeding described in Section 11(g) or Section 11(h); or

(j) any final judgment or order for the payment of money aggregating in excess of $40,000,000 or one or more such judgments or orders in excess of $80,000,000 in the aggregate (or its equivalent in the relevant currency of payment), including any such final order enforcing a binding arbitration decision, are rendered against one or more of the Company and its Significant Subsidiaries and which judgments are not, within sixty (60) days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; or

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(k) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) there is any “amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under one or more Plans, determined in accordance with Title IV of ERISA, (iv) the aggregate present value of accrued benefit liabilities under all funded Non-U.S. Plans exceeds the aggregate current value of the assets of such Non-U.S. Plans allocable to such liabilities, (v) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (vi) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, (vii) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder, (viii) the Company or any Subsidiary fails to administer or maintain a Non-U.S. Plan in compliance with the requirements of any and all applicable laws, statutes, rules, regulations or court orders or any Non-U.S. Plan is involuntarily terminated or wound up, or (ix) the Company or any Subsidiary becomes subject to the imposition of a financial penalty (which for this purpose shall mean any tax, penalty or other liability, whether by way of indemnity or otherwise) with respect to one or more Non-U.S. Plans; and any such event or events described in clauses (i) through (ix) above, either individually or together with any other such event or events, would reasonably be expected to have a Material Adverse Effect. As used in this Section 11(k), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in section 3 of ERISA; or

(l) any NPA Guaranty shall cease to be in full force and effect, any Guarantor or any Person acting on behalf of any Guarantor shall contest in any manner the validity, binding nature or enforceability of any NPA Guaranty, or the obligations of any Guarantor under any NPA Guaranty are not or cease to be legal, valid, binding and enforceable in accordance with the terms of such NPA Guaranty.

SECTION 12. REMEDIES ON DEFAULT, ETC.

Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in Section 11(g), (h) or (i) (other than an Event of Default described in clause (i) of Section 11(g) or described in clause (vi) of Section 11(g) by virtue of the fact that such clause encompasses clause (i) of Section 11(g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

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(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

(c) If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including interest accrued thereon at the Default Rate) and (y) the Make-Whole Amount determined in respect of such principal amount, shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note or NPA Guaranty, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

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Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or remedy conferred by this Agreement, any NPA Guaranty or any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including reasonable attorneys’ fees, expenses and disbursements.

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. If any holder of one or more Notes is a nominee, then (a) the name and address of the beneficial owner of such Note or Notes shall also be registered in such register as an owner and holder thereof and (b) at any such beneficial owner’s option, either such beneficial owner or its nominee may execute any amendment, waiver or consent pursuant to this Agreement. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in writing and accompanied by the relevant name, address and other information for notices of each transferee of such Note or part thereof), within ten (10) Business Days thereafter, the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more new Notes of the same series (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Schedule 1-A through Schedule 1-B, as applicable. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes of a Series, one Note of such Series may be in a denomination of less than $100,000. Any transferee, by its acceptance of a

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Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

Section 13.3. Replacement of Notes. Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $50,000,000 or a Qualified Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

(b) in the case of mutilation, upon surrender and cancellation thereof,

within ten (10) Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

SECTION 14. PAYMENTS ON NOTES.

Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New York at the principal office of Wells Fargo Bank, National Association in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

Section 14.2. Payment by Wire Transfer. So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, interest and all other amounts becoming due hereunder by the method and at the address specified for such purpose below such Purchaser’s name in the Purchaser Schedule, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by a Purchaser or its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date

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to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by a Purchaser under this Agreement and that has made the same agreement relating to such Note as the Purchasers have made in this Section 14.2.

Section 14.3. FATCA Information. By acceptance of any Note, the holder of such Note agrees that such holder will with reasonable promptness duly complete and deliver to the Company, or to such other Person as may be reasonably requested by the Company, from time to time (a) in the case of any such holder that is a United States Person, such holder’s United States tax identification number or other Forms reasonably requested by the Company necessary to establish such holder’s status as a United States Person under FATCA and as may otherwise be necessary for the Company to comply with its obligations under FATCA and (b) in the case of any such holder that is not a United States Person, such documentation prescribed by applicable law (including as prescribed by section 1471(b)(3)(C)(i) of the Code) and such additional documentation as may be necessary for the Company to comply with its obligations under FATCA and to determine that such holder has complied with such holder’s obligations under FATCA or to determine the amount (if any) to deduct and withhold from any such payment made to such holder (and the Company agrees that under current FATCA regulations in place as of the date of this Agreement as originally executed, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, as well as a U.S. Tax Compliance Certificate substantially in the form of Schedule 14.3 attached hereto, in both cases completed and executed, shall satisfy this requirement). Nothing in this Section 14.3 shall require any holder to provide information that is confidential or proprietary to such holder unless the Company is required to obtain such information under FATCA and, in such event, the Company shall treat any such information it receives as confidential. Notwithstanding any other provision of this Agreement, the Company or its agent shall be entitled to make a deduction or withholding from any payment which it makes under this Agreement for or on account of any present or future taxes, duties or charges if and to the extent so required by any applicable law and any current or future regulations or agreements thereunder or official interpretations thereof or any law implementing an intergovernmental approach thereto or by virtue of the holder failing to satisfy any certification or other requirements in respect of the Notes, in which event the Company or its agent shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted and shall have no obligation to gross up any payment hereunder or pay any additional amount as a result of such withholding tax.

SECTION 15. EXPENSES, ETC.

Section 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of a special counsel and, if reasonably required by the Required Holders, local or other counsel) incurred by the Purchasers and each other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, any NPA Guaranty or the Notes (whether or not such amendment, waiver or consent becomes effective), including: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this

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Agreement, any NPA Guaranty or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, any NPA Guaranty or the Notes, or by reason of being a holder of any Note, (b) the costs and expenses, including financial advisors’ fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and any NPA Guaranty and (c) the costs and expenses incurred in connection with the initial filing of this Agreement and all related documents and financial information with the SVO, provided that such costs and expenses under this clause (c) shall not exceed $5,000 per Series of Note. If required by the NAIC, the Company shall obtain and maintain at its own cost and expense a Legal Entity Identifier (LEI).

The Company will pay, and will save each Purchaser and each other holder of a Note harmless from, (i) all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those, if any, retained by a Purchaser or other holder in connection with its purchase of the Notes), (ii) any and all wire transfer fees that any bank or other financial institution deducts from any payment under such Note to such holder or otherwise charges to a holder of a Note with respect to a payment under such Note and (iii) any judgment, liability, claim, order, decree, fine, penalty, cost, fee, expense (including reasonable attorneys’ fees and expenses) or obligation resulting from the consummation of the transactions contemplated hereby, including the use of the proceeds of the Notes by the Company.

Section 15.2. Certain Taxes. The Company agrees to pay all stamp, documentary or similar taxes or fees which may be payable in respect of the execution and delivery or the enforcement of this Agreement or any NPA Guaranty or the execution and delivery (but not the transfer) or the enforcement of any of the Notes in the United States or any other jurisdiction where the Company or any Guarantor has assets or of any amendment of, or waiver or consent under or with respect to, this Agreement or any NPA Guaranty or of any of the Notes, and to pay any value added tax due and payable in respect of reimbursement of costs and expenses by the Company pursuant to this Section 15, and will save each holder of a Note to the extent permitted by applicable law harmless against any loss or liability resulting from nonpayment or delay in payment of any such tax or fee required to be paid by the Company hereunder.

Section 15.3. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, any NPA Guaranty or the Notes, and the termination of this Agreement.

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a validly transferred Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this

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Agreement. Subject to the preceding sentence, this Agreement, the Notes and any NPA Guaranty embody the entire agreement and understanding between each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

SECTION 17. AMENDMENT AND WAIVER.

Section 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), only with the written consent of the Company and the Required Holders, except that:

(a) no amendment or waiver of any of Sections 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing; and

(b) no amendment or waiver may, without the written consent of each Purchaser and the holder of each Note at the time outstanding, (i) subject to Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of (x) interest on the Notes or (y) the Make-Whole Amount, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any amendment or waiver or the principal amount of the Notes that the Purchasers are to purchase pursuant to Section 2 upon the satisfaction of the conditions to Closing that appear in Section 4, or (iii) amend any of Sections 8 (except as set forth in the second sentence of Section 8.2), 11(a), 11(b), 12, 17 or 20.

Section 17.2. Solicitation of Holders of Notes.

(a) Solicitation. The Company will provide each Purchaser and each holder of a Note with sufficient information, sufficiently far in advance of the date a decision is required, to enable such Purchaser or such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes or any NPA Guaranty. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to this Section 17 or any NPA Guaranty to each Purchaser and each holder of a Note promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite Purchasers or holders of Notes.

(b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any Purchaser or holder of a Note as consideration for or as an inducement to the entering into by such Purchaser or holder of any waiver or amendment of any of the terms and provisions hereof or of any NPA Guaranty or any Note unless such remuneration is concurrently paid, or security is concurrently granted or other

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credit support concurrently provided, on the same terms, ratably to each Purchaser and each holder of a Note even if such Purchaser or holder did not consent to such waiver or amendment.

(c) Consent in Contemplation of Transfer. Any consent given pursuant to this Section 17 by a holder of a Note that has transferred or has agreed to transfer its Note to (i) the Company, (ii) any Subsidiary or any other Affiliate or (iii) any other Person in connection with, or in anticipation of, such other Person acquiring, making a tender offer for or merging with the Company and/or any of its Affiliates, in each case in connection with such consent, shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such holder.

Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to as provided in this Section 17 or any NPA Guaranty applies equally to all Purchasers and holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and any Purchaser or holder of a Note and no delay in exercising any rights hereunder or under any Note or NPA Guaranty shall operate as a waiver of any rights of any holder of such Note.

Section 17.4. Notes Held by Company, Etc. Solely for the purpose of determining whether the Purchasers or holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, any NPA Guaranty or the Notes, or have directed the taking of any action provided herein or in any NPA Guaranty or the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

SECTION 18. NOTICES.

Except to the extent otherwise provided in Section 7.4, all notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by an internationally recognized overnight delivery service (charges prepaid), (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by an internationally recognized overnight delivery service (charges prepaid). Any such notice must be sent:

(i) if to any Purchaser or its nominee, to such Purchaser or nominee at the address specified for such communications in the Purchaser Schedule, or at such other address as such Purchaser or nominee shall have specified to the Company in writing,

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(ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

(iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Treasurer of the Company, or at such other address as the Company shall have specified to the holder of each Note in writing.

Notwithstanding the foregoing, any notices or communications to be provided by the Company hereunder may be delivered to each Purchaser or its nominee by electronic delivery at the e-mail address set forth for such Purchaser or nominee in the Purchaser Schedule, or, for each Purchaser or its nominee or any holder of a Note, to the e-mail address as communicated from time to time in a separate writing delivered to the Company.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19. REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating thereto, including (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser at any Closing (except the Notes themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, electronic, digital, or other similar process and such Purchaser may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

SECTION 20. CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any Person acting on such Purchaser’s behalf or any Person from whom such disclosure would, to the knowledge of such Purchaser, violate a duty of confidentiality to the Company or any Subsidiary, (c) otherwise becomes known to such Purchaser other than through disclosure by the Company or any Subsidiary or any

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Person from whom such disclosure would, to the knowledge of such Purchaser, violate a duty of confidentiality to the Company or any Subsidiary or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available. Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its auditors, financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by this Section 20), (v) any Person from which it offers to purchase any Security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by this Section 20), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser’s investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser’s Notes, this Agreement or any NPA Guaranty. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying this Section 20.

In the event that as a condition to receiving access to information relating to the Company or its Subsidiaries in connection with the transactions contemplated by or otherwise pursuant to this Agreement, any Purchaser or holder of a Note is required to agree to a confidentiality undertaking (whether through IntraLinks, another secure website, a secure virtual workspace or otherwise) which is different from this Section 20, this Section 20 shall not be amended thereby and, as between such Purchaser or such holder and the Company, this Section 20 shall supersede any such other confidentiality undertaking.

SECTION 21. SUBSTITUTION OF PURCHASER.

Each Purchaser shall have the right to substitute any one of its Affiliates or another Purchaser or any one of such other Purchaser’s Affiliates (a “Substitute Purchaser”) as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Substitute Purchaser,

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shall contain such Substitute Purchaser’s agreement to be bound by this Agreement and shall contain a confirmation by such Substitute Purchaser of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 21), shall be deemed to refer to such Substitute Purchaser in lieu of such original Purchaser. In the event that such Substitute Purchaser is so substituted as a Purchaser hereunder and such Substitute Purchaser thereafter transfers to such original Purchaser all of the Notes then held by such Substitute Purchaser, upon receipt by the Company of notice of such transfer, any reference to such Substitute Purchaser as a “Purchaser” in this Agreement (other than in this Section 21), shall no longer be deemed to refer to such Substitute Purchaser, but shall refer to such original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.

SECTION 22. MISCELLANEOUS.

Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including any subsequent holder of a Note) whether so expressed or not, except that, subject to Section 10.2, the Company may not assign or otherwise transfer any of its rights or obligations hereunder or under the Notes without the prior written consent of each holder. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement.

Section 22.2. Accounting Terms. (a) All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP. Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP and (ii) all financial statements shall be prepared in accordance with GAAP. For purposes of determining compliance with this Agreement (including Section 9, Section 10 and the definition of “Indebtedness”), any election by the Company to measure any financial liability using fair value (as permitted by Financial Accounting Standards Board Accounting Standards Codification Topic No. 825-10-25 – Fair Value Option, International Accounting Standard 39 – Financial Instruments: Recognition and Measurement or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.

(b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in this Agreement (including the financial covenant contained in Section 10.7), and either the Company or the Required Holders shall so request, the holders of Notes and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Holders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Company shall provide to the holders of Notes financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation

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between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

Section 22.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

Section 22.4. Construction, Etc. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

Defined terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein) and, for purposes of the Notes, shall also include any such notes issued in substitution therefor pursuant to Section 13, (b) subject to Section 22.1, any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Sections and Schedules shall be construed to refer to Sections of, and Schedules to, this Agreement, and (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.

Section 22.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement. The parties agree to electronic contracting and signatures with respect to this Agreement and any other agreement or instrument hereunder (other than the Notes). Delivery of an electronic signature to, or a signed copy of, this Agreement and any other agreement or instrument delivered hereunder (other than the Notes) by facsimile, email or other electronic transmission shall be fully binding on the parties to the same extent as the delivery of the signed originals and shall be admissible into

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evidence for all purposes. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and any other agreement or instrument delivered hereunder shall be deemed to include electronic signatures, the electronic matching of assignment terms (other than the Notes) and contract formations on electronic platforms approved by the Issuer, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

Section 22.6. Regulatory Statement. Pursuant to the terms of an order issued by the NMPRC and a stipulation that has been approved by the NMPRC, the Company is required to include the following separateness covenants in any debt instrument:

(a) The Company and its corporate parent, the Parent, are being operated as separate corporate and legal entities. In agreeing to make loans to Parent, Parent’s lenders are relying solely on the creditworthiness of Parent based on the assets owned by Parent, and the repayment of any loan to Parent will be made solely from the assets of Parent and not from any assets of the Company; and the Parent’s lenders will not take any steps for the purpose of procuring the appointment of an administrative receiver or the making of an administrative order for instituting any bankruptcy, reorganization, insolvency, wind up or liquidation or any like proceeding under applicable law in respect of the Company.

(b) Notwithstanding any of the foregoing set forth in this Section 22.6, the Company and the holders hereby acknowledge and agree that (i) this Agreement and the Notes evidence Indebtedness of the Company and not of the Parent, (ii) the holders are not, and shall not at any time be deemed to be, “Parent’s lenders” under this Agreement and the Notes, (iii) as set forth in this Agreement and the Notes, the Company is responsible for the repayment of all amounts outstanding hereunder, and (iv) the holders of Notes reserve all rights to pursue any and all remedies available at law and otherwise (including in bankruptcy) should the Company breach any of its obligations under this Agreement and/or the Notes.

Section 22.7. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

Section 22.8. Jurisdiction and Process; Waiver of Jury Trial. (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or

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proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(b) The Company agrees, to the fullest extent permitted by applicable law, that a final judgment in any suit, action or proceeding of the nature referred to in Section 22.8(a) brought in any such court shall be conclusive and binding upon it subject to rights of appeal, as the case may be, and may be enforced in the courts of the United States of America or the State of New York (or any other courts to the jurisdiction of which it or any of its assets is or may be subject) by a suit upon such judgment.

(c) The Company consents to process being served by or on behalf of any holder of Notes in any suit, action or proceeding of the nature referred to in Section 22.8(a) by mailing a copy thereof by registered, certified, priority or express mail (or any substantially similar form of mail), postage prepaid, return receipt or delivery confirmation requested, to it at its address specified in Section 18 or at such other address of which such holder shall then have been notified pursuant to said Section. The Company agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.

(d) Nothing in this Section 22.8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

(e) The parties hereto hereby waive trial by jury in any action brought on or with respect to this Agreement, the Notes or any other document executed in connection herewith or therewith.

* * * * *

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If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Company, whereupon this Agreement shall become a binding agreement between you and the Company.

Very truly yours,

Public Service Company of New Mexico

By /s/ Michael P. Mertz

Name: Michael P. Mertz

Title: Vice President and Treasurer

[Note Purchase Agreement – Public Service Company of New Mexico]

This Agreement is hereby

accepted and agreed to as

of the date hereof.

PRU US PP CREDIT BM FUND

By: Prudential Private Placement Investors, L.P. (as Investment Advisor)

By: Prudential Private Placement Investors, Inc. (as its General Partner)

By: /s/ Ty Bowman______________________

Vice President

PRUDENTIAL TERM REINSURANCE COMPANY

By: PGIM, Inc., as investment manager

By: /s/ Ty Bowman______________________

Vice President

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By: /s/ Ty Bowman______________________

Vice President

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

THRIVENT FINANCIAL FOR LUTHERANS

By:/s/ William J. Hochmuth________________

Name: William J. Hochmuth

Title: Senior Managing Director

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

By Northwestern Mutual Investment Management Company, LLC,

its investment adviser

By /s/ David A. Barras________

Name: David A Barras_____

Managing Director

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

for its Group Annuity Separate Account

By /s/ David A. Barras_________

Name: David A. Barras______

Its Authorized Representative

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

COBANK, ACB

By: /s/ Kelli Cholas____________________

Name: Kelli Cholas

Title: Assistant Corporate Secretary

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

PACIFIC LIFE INSURANCE COMPANY

By: /s/ Mathew A. Levene__________

Name: Matthew A. Levene

Title: Assistant Vice President

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

TRANSAMERICA LIFE INSURANCE COMPANY

By: AEGON USA Investment Management, LLC, its investment manager

By:/s/ Frederick B. Howard_____________

Name: Frederick B. Howard

Title: Vice President

TRANSAMERICA LIFE (BERMUDA) LTD

By: AEGON USA Investment Management, LLC, its investment manager

By:/s/ Frederick B. Howard_____________

Name: Frederick B. Howard

Title: Vice President

IRONWOOD RE CORP

By: AEGON USA Investment Management, LLC, its investment manager

By:/s/ Frederick B. Howard_____________

Name: Frederick B. Howard

Title: Vice President

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

STATE FARM LIFE INSURANCE COMPANY

By /s/ Julie Hoyer____________________

Name: Julie Hoyer

Title: Investment Executive

By /s/ Rebekah L. Holt_________________

Name: Rebekah L. Holt

Title: Investment Professional

STATE FARM LIFE INSURANCE COMPANIES EMPLOYEE RETIREMENT TRUST

By /s/ Julie Hoyer_____________________

Name: Julie Hoyer

Title: Investment Executive

By /s/ Rebekah L. Holt_________________

Name: Rebekah L. Holt

Title: Investment Professional

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

By: /s/ John W. Kunkle________________

Name: John W. Kunkle

Title: Managing Director

THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.

By: /s/ John W. Kunkle________________

Name: John W. Kunkle

Title: Managing Director

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

MANULIFE (INTERNATIONAL) LIMITED

By: /s/ Elton Shum__________________

Name: Elton Shum

Title: Managing Director, Portfolio Management, Asia, General Account Investments

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

MANUFACTURERS LIFE REINSURANCE LIMITED

By: /s/ Tatsuya Oshiro___________________

Name: Tatsuya Oshiro

Title: Co-Head of Investments,

Manulife General Account Investments (Singapore) Pte. Ltd.

as investment manager of

Manufacturers Life Reinsurance Limited

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

By: Macquarie Investment Management Advisers, a series of Macquarie Investment Management Business Trust, Attorney in Fact

By: /s/ Frank LaTorraca__________________

Name: Frank LaTorraca

Title: Managing Director

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

THE STATE LIFE INSURANCE COMPANY

By: American United Life Insurance Company

Its: Agent

By: /s/ David M. Weisenburger_____________

Name: David M. Weisenburger

Title: VP, Fixed Income Securities

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

MODERN WOODMEN OF AMERICA

By: /s/ Aaron R. Birkland_________________

Name: Aaron R. Birkland

Title: Portfolio Manager, Private Placements

MODERN WOODMEN OF AMERICA

By: /s/ Brett M. Van_____________________

Name: Brett M. Van

Title: Chief Investment Officer & Treasurer

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

FARM BUREAU LIFE INSURANCE COMPANY

By: /s/ Herman L. Riva__________________

Name: Herman L. Riva

Title: Securities Vice President

FARM BUREAU PROPERTY & CASUALTY INSURANCE COMPANY

By: /s/ Herman L. Riva__________________

Name: Herman L. Riva

Title: Securities Vice President

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

STANDARD INSURANCE COMPANY

By: /s/ Chris Beaulieu___________________

Name: Chris Beaulieu

Title: VP, Individual Annuities & Investments

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

UNITED FARM FAMILY MUTUAL INSURANCE COMPANY

By: /s/ Michael Lucado__________________

Name: Michael Lucado

Title: Portfolio Manager

UNITED FARM FAMILY LIFE INSURANCE COMPANY

By: /s/ Michael Lucado__________________

Name: Michael Lucado

Title: Portfolio Manager

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

This Agreement is hereby

accepted and agreed to as

of the date hereof.

SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY

By: /s/ David Divine_____________________

Name: David Divine

Title: Director – Securities Management

[Note Purchase Agreement – Public Service Company of New Mexico]

42197591

Defined Terms

As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

“Acceptable Rating Agency” means S&P, Moody’s or other nationally recognized statistical ratings organization so designated by the SEC, in each case, whose status has been confirmed by the SVO.

“Affiliate” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

“Agreement” means this Note Purchase Agreement, including all Schedules attached to this Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Anti-Corruption Laws” means any law or regulation in a U.S. or any non-U.S. jurisdiction regarding bribery or any other corrupt activity, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.

“Anti-Money Laundering Laws” means any law or regulation in a U.S. or any non-U.S. jurisdiction regarding money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes, including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act) and the USA PATRIOT Act.

“Authorized Officer” means any of the president, chief executive officer, chief financial officer or treasurer of the Company.

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.

“Blocked Person” means (a) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by OFAC, (b) a Person, entity or organization that is blocked or a target of sanctions that have been imposed under U.S. Economic Sanctions Laws or (c) a Person that is an agent, department or instrumentality of, or otherwise beneficially owned fifty percent (50%) or more by, controlled by or acting on behalf of, directly or indirectly, any one or more Person(s), entity or organization described in clause (a) or (b) or a Sanctioned Jurisdiction.

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

Schedule A

(to Note Purchase Agreement)

“Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

“Capital Stock” means (a) in the case of a corporation, all classes of capital stock of such corporation, (b) in the case of a partnership, partnership interests (whether general or limited), (c) in the case of a limited liability company, membership interests and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; including, in each case, all warrants, rights or options to purchase any of the foregoing.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, promulgation, implementation or application thereof by any Governmental Authority, (c) the adoption or taking effect of any request, rule, guideline, policy or directive (whether or not having the force of law) by any Governmental Authority or (d) any change in any request, rule, guideline, policy or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

“Change of Control” means the failure of the Parent to own and control more than 50% of the Voting Stock of the Company.

“Closing” is defined in Section 3.

“Code” means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder from time to time.

“Company” is defined in the first paragraph of this Agreement.

“Confidential Information” is defined in Section 20.

“Consolidated Capitalization” means the sum of (a) all of the shareholders’ equity or net worth of the Company and its Subsidiaries, as determined in accordance with GAAP plus (b) Consolidated Indebtedness minus (c) Securitization Equity.

“Consolidated Indebtedness” means, as of any date of determination, with respect to the Company and its Subsidiaries on a consolidated basis, the difference of (a) an amount equal

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42197591

to all Indebtedness of the Company and its Subsidiaries as of such date minus (b) Non-Recourse Securitization Indebtedness.

“Contingent Obligation” means, with respect to any Person, any direct or indirect liability of such Person with respect to any Indebtedness, liability or other obligations (the “primary obligation”) of another Person (the “primary obligor”), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor in respect thereof to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof; provided, however, that, with respect to the Company and its Subsidiaries, the term Contingent Obligation shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation of any Person shall be deemed to be an amount equal to the maximum amount of such Person’s liability with respect to the stated or determinable amount of the primary obligation for which such Contingent Obligation is incurred or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “Controlled” and “Controlling” shall have meanings correlative to the foregoing.

“Controlled Entity” means (a) any of the Subsidiaries of the Company and any of their or the Company’s respective Controlled Affiliates and (b) if the Company has a parent company, such parent company and its Controlled Affiliates.

“Debt Rating” means the long term unsecured senior noncredit enhanced debt rating of the Company by an Acceptable Rating Agency.

“Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

“Default Rate” means that rate of interest as defined in the first paragraph of the Notes of such Series.

“Disclosure Documents” is defined in Section 5.3.

“EDGAR” means the SEC’s Electronic Data Gathering, Analysis and Retrieval System or any successor SEC electronic filing system for such purposes.

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“Environmental Claim” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, accusations, allegations, notices of noncompliance or violation, investigations (other than internal reports prepared by any Person in the ordinary course of its business and not in response to any third party action or request of any kind) or proceedings relating in any way to any actual or alleged violation of or liability under any Environmental Laws or relating to any permit issued, or any approval given, under any such Environmental Laws (collectively, “Claims”), including (a) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Laws and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to human health or the environment.

“Environmental Laws” means any and all federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to Hazardous Materials.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

“Event of Default” is defined in Section 11.

“FATCA” means (a) sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version), together with any current or future regulations or official interpretations thereof, (b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the United States of America and any other jurisdiction, which (in either case) facilitates the implementation of the foregoing clause (a), and (c) any agreements entered into pursuant to section 1471(b)(1) of the Code.

“Financial Covenant” is defined in Section 9.8(a).

“Fiscal Quarter” means each of the calendar quarters ending as of the last day of each March, June, September and December.

“Fiscal Year” means the calendar year ending December 31.

“Form 10-K” is defined in Section 7.1(b).

“Form 10-Q” is defined in Section 7.1(a).

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“GAAP” means (a) generally accepted accounting principles as in effect from time to time in the United States of America and (b) for purposes of Section 9.6, with respect to any Subsidiary, generally accepted accounting principles (including International Financial Reporting Standards, as applicable) as in effect from time to time in the jurisdiction of organization of such Subsidiary.

“Guarantor” is defined in Section 9.7.

“Governmental Authority” means

(a) the government of

(i) the United States of America or any state or other political subdivision thereof, or

(ii) any other jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or

(b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

“Governmental Official” means any governmental official or employee, employee of any government-owned or government-controlled entity, political party, any official of a political party, candidate for political office, official of any public international organization or anyone else acting in an official capacity.

“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person:

(a) to purchase such indebtedness or obligation or any property constituting security therefor;

(b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;

(c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or

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(d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.

“Hazardous Materials” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any applicable law, including asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.

“Hedging Agreements” means, collectively, interest rate protection agreements, equity index agreements, foreign currency exchange agreements, option agreements or other interest or exchange rate or commodity price hedging agreements (other than forward contracts for the delivery of power or gas written by the Company to its jurisdictional and wholesale customers in the ordinary course of business).

“holder” means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1, provided, however, that if such Person is a nominee, then for the purposes of Sections 7, 12, 17.2 and 18 and any related definitions in this Schedule A, “holder” shall mean the beneficial owner of such Note whose name and address appears in such register.

“INHAM Exemption” is defined in Section 6.2(e).

“Indebtedness” means, with respect to any Person (without duplication), (a) all indebtedness and obligations of such Person for borrowed money or in respect of loans or advances of any kind, (b) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (c) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers’ acceptances (in each case, whether or not drawn or matured and in the stated amount thereof), (d) all obligations of such Person to pay the deferred purchase price of property or services, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (f) all obligations of such Person as lessee under leases that are or are required to be, in accordance with GAAP, recorded as capital leases, to the extent such obligations are required to be so recorded, (g) the net termination obligations of such Person under any Hedging Agreements, calculated as of any date as if such agreement or arrangement were terminated as of such date in accordance with the applicable rules under GAAP, (h) all Contingent Obligations of such Person, (i) all obligations and liabilities of such Person incurred in connection with any transaction or series of transactions providing for the financing of assets through one or more securitizations or in connection with, or pursuant to, any synthetic lease or similar off-balance sheet financing, (j) the aggregate amount of uncollected accounts receivable of such Person subject at the time of

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determination to a sale of receivables (or similar transaction) to the extent such transaction is effected with recourse to such Person (whether or not such transaction would be reflected on the balance sheet of such Person in accordance with GAAP) and (k) all indebtedness referred to in clauses (a) through (j) above secured by any Lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person.

“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than 5% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.

“Lien” means any mortgage, pledge, hypothecation, assignment, security interest, lien (statutory or otherwise), preference, priority, charge or other encumbrance of any nature, whether voluntary or involuntary, including the interest of any vendor or lessor under any conditional sale agreement, title retention agreement, capital lease or any other lease or arrangement having substantially the same effect as any of the foregoing.

“Make-Whole Amount” is defined in Section 8.6.

“Margin Stock” has the meaning ascribed to such term in Regulation U.

“Material” means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement and the Notes or (c) the validity or enforceability of this Agreement or the Notes, provided, however, that a Material Adverse Effect shall not include the effect of the shutdown or closure of the San Juan Generating Station or the Four Corners Power Plant, provided that the Company remains in compliance with Section 10.7 of this Agreement.

“Material Credit Facility” means, as to the Company and its Subsidiaries,

(a) the Fourth Amendment to and Restatement of Credit Agreement dated as of October 19, 2018 among the Company, the lenders identified therein, and Wells Fargo Bank, National Association, as administrative agent, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof;

(b) the Term Loan Agreement dated as of April 15, 2020 among the Company, the lenders identified therein and U.S. Bank, National Association, as administrative agent, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof;

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(c) the Note Purchase Agreement dated as of July 28, 2017 among the Company and the holders of the notes issued thereunder, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof; and

(d) any other agreement(s) creating or evidencing indebtedness for borrowed money entered into on or after the date of this Agreement by the Company or any Subsidiary, or in respect of which the Company or any Subsidiary is an obligor or otherwise provides a guarantee or other credit support (“Credit Facility”), in a principal amount outstanding or available for borrowing equal to or greater than (i) $75,000,000 for the purposes of Section 9.8 (or the equivalent of such amount in the relevant currency of payment, determined as of the date of the closing of such facility based on the exchange rate of such other currency) or (ii) $40,000,000 for all other provisions under this Agreement (or the equivalent of such amount in the relevant currency of payment, determined as of the date of the closing of such facility based on the exchange rate of such other currency); and if no Credit Facility or Credit Facilities equal or exceed such amounts, then the largest Credit Facility shall be deemed to be a Material Credit Facility.

“Maturity Date” is defined in the first paragraph of each Note.

“Modified Covenant” is defined in Section 9.8(a).

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Most Favored Lender Notice” is defined in Section 9.8(c).

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

“NAIC” means the National Association of Insurance Commissioners.

“NMPRC” means the New Mexico Public Regulation Commission or any successor commission.

“Non-U.S. Plan” means any plan, fund or other similar program that (a) is established or maintained outside the United States of America by the Company or any Subsidiary primarily for the benefit of employees of the Company or one or more Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment and (b) is not subject to ERISA or the Code.

“Non-Recourse Securitization Indebtedness” means, as of any date of determination, all Indebtedness related to State Approved Securitizations up to a maximum amount of $500,000,000 at any one time; provided that such Indebtedness is non-recourse to the Company, other than with respect to Standard Securitization Undertakings.

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“Non-Subsidiary Guarantor” is defined in Section 9.7(a).

“Notes” is defined in Section 1.

“NPA Guaranty” is defined in Section 9.7(a).

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing. A list of OFAC Sanctions Programs may be found at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

“Parent” means PNM Resources, Inc., a New Mexico corporation.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or Governmental Authority.

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five (5) years, has been established or maintained, or to which contributions are or, within the preceding five (5) years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability.

“Presentation” is defined in Section 5.3.

“Property” means any right, title or interest in or to any property or asset of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“property” or “properties” means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.

“PTE” is defined in Section 6.2(a).

“Purchaser” or “Purchasers” means each of the purchasers that has executed and delivered this Agreement to the Company and such Purchaser’s successors and assigns (so long as any such assignment complies with Section 13.2), provided, however, that any Purchaser of a Note that ceases to be the registered holder or a beneficial owner (through a nominee) of such Note as the result of a transfer thereof pursuant to Section 13.2 shall cease to be included within the meaning of “Purchaser” of such Note for the purposes of this Agreement upon such transfer.

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“Purchaser Schedule” means the Purchaser Schedule to this Agreement listing the Purchasers of the Notes and including their notice and payment information.

“Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer” within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.

“QPAM Exemption” is defined in Section 6.2(d).

“Related Fund” means, with respect to any holder of any Note, any fund or entity that (a) invests in Securities or bank loans, and (b) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.

“Required Holders” means, at any time, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).

“Responsible Officer” means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.

“Sanctioned Jurisdiction” means, at any time, a country or territory which is itself subject to or the target of any comprehensive country-wide sanctions under U.S. Economic Sanctions (as opposed to individual, entity or other list-based Sanctions) (at the time of this Agreement, the Crimea Region of Ukraine, Cuba, Iran, North Korea, Sudan and Syria).

“S&P” means S&P Global Ratings, and its successors.

“SEC” means the Securities and Exchange Commission of the United States of America.

“Securities” or “Security” shall have the meaning specified in section 2(1) of the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

“Securitization Equity” means, as of any date of determination, with respect to a Subsidiary of the Company formed for the purpose of entering into a State Approved Securitization, all of the equity of such Subsidiary, as determined in accordance with GAAP.

“Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Company.

“Series” is defined in Section 1.

“Series A Notes” is defined in Section 1.

“Series B Notes” is defined in Section 1.

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“Significant Subsidiary” means at any time any Subsidiary that would at such time constitute a “significant subsidiary” (as such term is defined in Regulation S-X of the SEC as in effect on the date of this Agreement) of the Company.

“Solvent” means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities, Contingent Obligations and other commitments as they mature in the normal course of business, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair value of the assets of such Person is greater than the total amount of liabilities of such Person and (e) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured.

“Source” is defined in Section 6.2.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or a Subsidiary thereof that are reasonably customary in non-recourse securitization transactions.

“State Approved Securitization” means a securitization financing entered into by the Company pursuant to existing or future New Mexico statutory authority and regulatory approval by the NMPRC authorizing the imposition on electric customers of a charge to permit the recovery over time of costs identified by a financing order issued by the NMPRC pursuant to statutory authority, so long as such securitization financing is non-recourse to the Company (other than with respect to Standard Securitization Undertakings).

“State Sanctions List” means a list that is adopted by any state Governmental Authority within the United States of America pertaining to Persons that engage in investment or other commercial activities in Iran or any other country that is a target of economic sanctions imposed under U.S. Economic Sanctions Laws.

“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Any reference to a Subsidiary of the Company herein shall not include a Subsidiary that is inactive, has minimal or no assets and does not generate revenues. Unless

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the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

“Substitute Purchaser” is defined in Section 21.

“SVO” means the Securities Valuation Office of the NAIC.

“United States Person” has the meaning set forth in Section 7701(a)(30) of the Code.

“USA PATRIOT Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the rules and regulations promulgated thereunder from time to time in effect.

“U.S. Economic Sanctions Laws” means those laws, executive orders, enabling legislation or regulations administered and enforced by the United States pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime, including the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment Act and any other OFAC Sanctions Program.

“Voting Stock” means the Capital Stock of a Person that is then outstanding and normally entitled to vote in the election of directors and other securities of such Person convertible into or exercisable for such Capital Stock (whether or not such securities are then currently convertible or exercisable).

“Wholly-Owned Subsidiary” means, at any time, any Subsidiary all of the equity interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company’s other Wholly-Owned Subsidiaries at such time.

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[FORM OF SERIES A NOTE]

PUBLIC SERVICE COMPANY OF NEW MEXICO

3.21% SENIOR UNSECURED NOTE, SERIES A, DUE APRIL 30, 2030

No. [_____] [Date]

$[_______] PPN 744542 [__]

FOR VALUE RECEIVED, the undersigned, Public Service Company of New Mexico (herein called the “Company”), a corporation organized and existing under the laws of the State of New Mexico, hereby promises to pay to [____________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on April 30, 2030 (the “Maturity Date”), with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the rate of 3.21% per annum from the date hereof, payable semiannually, on the 30th day of April and October in each year, commencing with the April 30 or October 30 next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the greater of (i) 5.21% or (ii) 2.00% over the rate of interest publicly announced by Wells Fargo Bank, National Association from time to time in New York, New York as its “base” or “prime” rate, payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand) (the “Default Rate”).

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Wells Fargo Bank, National Association or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Unsecured Notes (herein called the “Notes”) issued pursuant to the Note Purchase Agreement, dated April 30, 2020 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of,

Schedule 1-A

(to Note Purchase Agreement)

the transferee. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

PUBLIC SERVICE COMPANY OF NEW MEXICO

By____________________________________

[Title]

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[FORM OF SERIES B NOTE]

PUBLIC SERVICE COMPANY OF NEW MEXICO

3.57% SENIOR UNSECURED NOTE, SERIES B, DUE APRIL 29, 2039

No. [_____] [Date]

$[_______] PPN 744542 [___]

FOR VALUE RECEIVED, the undersigned, Public Service Company of New Mexico (herein called the “Company”), a corporation organized and existing under the laws of the State of New Mexico, hereby promises to pay to [____________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on April 29, 2039 (the “Maturity Date”), with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the rate of 3.57% per annum from the date hereof, payable semiannually, on the 30th day of April and October in each year, commencing with the April 30 or October 30 next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, (x) on any overdue payment of interest and (y) during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the greater of (i) 5.57% or (ii) 2.00% over the rate of interest publicly announced by Wells Fargo Bank, National Association from time to time in New York, New York as its “base” or “prime” rate, payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand).

Schedule 1-B

(to Note Purchase Agreement)

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

PUBLIC SERVICE COMPANY OF NEW MEXICO

By___________________________________

[Title]

1-B-2

PUBLIC SERVICE COMPANY OF MEXICO

Information Relating to Purchasers


			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			PRU US PP CREDIT BM FUND			$4,830,000 Series A

Purchaser Schedule

(to Note Purchase Agreement)


			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			PRUDENTIAL TERM REINSURANCE COMPANY			$4,920,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE PRUDENTIAL INSURANCE COMPANY OF AMERICA			$10,250,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE PRUDENTIAL INSURANCE COMPANY OF AMERICA			$4,000,000 Series B $5,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THRIVENT FINANCIAL FOR LUTHERANS			$20,000,000 Series A $7,000,000 Series B

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	NAME AND ADDRESS OF PURCHASER	PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

I.	THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY	$19,800,000 Series A

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	NAME AND ADDRESS OF PURCHASER	PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

I.	THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY FOR ITS GROUP ANNUITY SEPARATE ACCOUNT	$200,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			COBANK, ACB			$18,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			PACIFIC LIFE INSURANCE COMPANY			$5,000,000 Series A $5,000,000 Series A

Notes to be registered in name of: Mac & Co., as nominee for Pacific Life Insurance Company

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			PACIFIC LIFE INSURANCE COMPANY			$5,000,000 Series B $1,000,000 Series B $1,000,000 Series B

Notes to be registered in name of: Mac & Co., as nominee for Pacific Life Insurance Company

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			TRANSAMERICA LIFE INSURANCE COMPANY			$10,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			TRANSAMERICA LIFE (BERMUDA) LYD			$4,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			IRONWOOD RE CORP			$2,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			STATE FARM LIFE INSURANCE COMPANY			$13,500,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			STATE FARM INSURANCE COMPANIES EMPLOYEE RETIREMENT TRUST			$1,500,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA			$12,500,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.			$1,500,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			MANULIFE (INTERNATIONAL) LIMITED			$6,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			MANUFACTURERS LIFE REINSURANCE LIMITED			$6,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE LINCOLN NATIONAL LIFE INSURANCE COMPANY			$5,000,000 Series A $1,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE LINCOLN NATIONAL LIFE INSURANCE COMPANY			$2,000,000 Series B $2,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			THE STATE LIFE INSURANCE COMPANY			$7,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			MODERN WOODMEN OF AMERICA			$4,000,000 Series A $1,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			FARM BUREAU LIFE INSURANCE COMPANY			$2,000,000 Series B

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			FARM BUREAU PROPERTY & CASUALTY INSURANCE COMPANY			$1,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			STANDARD INSURANCE COMPANY			$3,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			UNITED FARM FAMILY MUTUAL INSURANCE COMPANY			$1,000,000 Series A

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			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			UNITED FARM FAMILY LIFE INSURANCE COMPANY			$1,000,000 Series B

42197591


			NAME AND ADDRESS OF PURCHASER			PRINCIPAL AMOUNT AND SERIES OF NOTES TO BE PURCHASED

			SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY			$1,000,000 Series A $1,000,000 Series B

42197591

Document

PNM Resources

414 Silver Ave. SW

Albuquerque, NM 87102-3289

EXHIBIT 31.1

CERTIFICATION

I, Patricia K. Collawn, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of PNM Resources, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (each registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			Chairman, President and Chief Executive Officer
			PNM Resources, Inc.

Document

PNM Resources

414 Silver Ave. SW

Albuquerque, NM 87102-3289

EXHIBIT 31.2

CERTIFICATION

I, Joseph D. Tarry, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of PNM Resources, Inc.;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			PNM Resources, Inc.

Document

Public Service Company of New Mexico

414 Silver Ave. SW

Albuquerque, NM 87102-3289

EXHIBIT 31.3

CERTIFICATION

I, Patricia K. Collawn, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Public Service Company of New Mexico;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			President and Chief Executive Officer
			Public Service Company of New Mexico

Document

Public Service Company of New Mexico

414 Silver Ave. SW

Albuquerque, NM 87102-3289

EXHIBIT 31.4

CERTIFICATION

I, Joseph D. Tarry, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Public Service Company of New Mexico;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			Public Service Company of New Mexico

Document

Texas-New Mexico Power Company

577 N. Garden Ridge Blvd.

Lewisville, Texas 75067

EXHIBIT 31.5

CERTIFICATION

I, Patricia K. Collawn, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Texas-New Mexico Power Company;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			Chief Executive Officer
			Texas-New Mexico Power Company

Document

Texas-New Mexico Power Company

577 N. Garden Ridge Blvd.

Lewisville, Texas 75067

EXHIBIT 31.6

CERTIFICATION

I, Joseph D. Tarry, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Texas-New Mexico Power Company;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	July 31, 2020	By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			Texas-New Mexico Power Company

Document

PNM Resources

414 Silver Ave. SW

Albuquerque, NM 87102-3289

www.pnmresources.com

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO § 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ended June 30, 2020, for PNM Resources, Inc. (“Company”), as filed with the Securities and Exchange Commission on July 31, 2020 (“Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of § 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			Chairman, President and Chief Executive Officer
			PNM Resources, Inc.

		By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			PNM Resources, Inc.

Document

Public Service Company of New Mexico

414 Silver Ave. SW

Albuquerque, NM 87102-3289

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO § 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ended June 30, 2020, for Public Service Company of New Mexico (“Company”), as filed with the Securities and Exchange Commission on July 31, 2020 (“Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of § 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			President and Chief Executive Officer
			Public Service Company of New Mexico

		By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			Public Service Company of New Mexico

Document

Texas-New Mexico Power Company

577 N. Garden Ridge Blvd.

Lewisville, Texas 75067

EXHIBIT 32.3

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO § 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ended June 30, 2020, for Texas-New Mexico Power Company (“Company”), as filed with the Securities and Exchange Commission on July 31, 2020 (“Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of § 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	July 31, 2020	By:	/s/ Patricia K. Collawn
			Patricia K. Collawn
			Chief Executive Officer
			Texas-New Mexico Power Company

		By:	/s/ Joseph D. Tarry
			Joseph D. Tarry
			Senior Vice President and
			Chief Financial Officer
			Texas-New Mexico Power Company

Cover Page - shares	6 Months Ended
Cover Page - shares	Jun. 30, 2020	Jul. 24, 2020
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Entity Registrant Name	PNM Resources, Inc.
Entity Incorporation, State or Country Code	NM
Entity Address, Address Line One	414 Silver Ave. SW
Entity Address, City or Town	Albuquerque
Entity Address, State or Province	NM
Entity Address, Postal Zip Code	87102-3289
City Area Code	505
Local Phone Number	241-2700
Entity File Number	001-32462
Entity Tax Identification Number	85-0468296
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	PNM
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		79,653,624
Entity Central Index Key	0001108426
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Document Transition Report	false
PNM
Document Information [Line Items]
Entity Registrant Name	Public Service Company of New Mexico
Entity Address, Address Line One	414 Silver Ave. SW
Entity Address, City or Town	Albuquerque
Entity Address, State or Province	NM
Entity Address, Postal Zip Code	87102-3289
City Area Code	505
Local Phone Number	241-2700
Entity File Number	001-06986
Entity Tax Identification Number	85-0019030
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding (in shares)		39,117,799
Entity Central Index Key	0000081023
Current Fiscal Year End Date	--12-31
Texas-New Mexico Power Company
Document Information [Line Items]
Entity Registrant Name	Texas-New Mexico Power Company
Entity Address, Address Line One	577 N. Garden Ridge Blvd.
Entity Address, City or Town	Lewisville
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75067
City Area Code	972
Local Phone Number	420-4189
Entity File Number	002-97230
Entity Tax Identification Number	75-0204070
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding (in shares)		6,358
Entity Central Index Key	0000022767
Current Fiscal Year End Date	--12-31

Condensed Consolidated Statements of Earnings (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Electric Operating Revenues:
Contracts with customers	$ 343,075	$ 314,917	$ 666,057	$ 630,614
Alternative revenue programs	4,466	5,844	4,892	6,480
Other electric operating revenue	10,108	9,467	20,322	42,778
Total electric operating revenues	357,649	330,228	691,271	679,872
Operating Expenses:
Administrative and general	50,453	42,833	96,485	95,170
Regulatory disallowances and restructuring costs	0	149,254	0	150,599
Depreciation and amortization	70,022	66,065	138,995	131,421
Transmission and distribution costs	18,034	19,195	35,320	35,872
Taxes other than income taxes	20,782	19,809	42,047	40,317
Total operating expenses	286,499	423,843	572,383	736,764
Operating income (loss)	71,150	(93,615)	118,888	(56,892)
Other Income and Deductions:
Interest income	3,071	3,460	6,494	7,048
Gains (losses) on investment securities	21,620	4,599	(11,229)	18,613
Other income	4,390	3,350	6,706	6,795
Other (deductions)	(3,307)	(3,117)	(6,780)	(6,369)
Net other income and deductions	25,774	8,292	(4,809)	26,087
Interest Charges	31,088	29,791	61,522	61,425
Earnings (Loss) before Income Taxes	65,836	(115,114)	52,557	(92,230)
Income Taxes (Benefits)	4,275	(42,831)	2,395	(41,608)
Net Earnings (Loss)	61,561	(72,283)	50,162	(50,622)
(Earnings) Attributable to Valencia Non-controlling Interest	(3,940)	(3,499)	(7,669)	(6,328)
Preferred Stock Dividend Requirements of Subsidiary	(132)	(132)	(264)	(264)
Net Earnings (Loss) Available for PNM Common Stock	$ 57,489	$ (75,914)	$ 42,229	$ (57,214)
Net Earnings (Loss) Attributable to PNMR per Common Share:
Basic (dollars per share)	$ 0.72	$ (0.95)	$ 0.53	$ (0.72)
Diluted (dollars per share)	0.72	(0.95)	0.53	(0.72)
Dividends Declared per Common Share (dollars per share)	$ 0.308	$ 0.290	$ 0.615	$ 0.580
Cost of energy
Electric Operating Revenues:
Total electric operating revenues	$ 357,649	$ 330,228	$ 691,271	$ 679,872
Operating Expenses:
Energy costs	93,863	83,782	192,573	205,408
Energy production costs
Operating Expenses:
Energy costs	33,345	42,905	66,963	77,977
PNM
Electric Operating Revenues:
Contracts with customers	248,151	228,061	483,909	464,002
Alternative revenue programs	2,529	691	4,690	756
Other electric operating revenue	10,108	9,467	20,322	42,778
Total electric operating revenues	260,788	238,219	508,921	507,536
Operating Expenses:
Administrative and general	45,051	40,237	86,719	87,639
Regulatory disallowances and restructuring costs	0	149,254	0	150,599
Depreciation and amortization	41,763	39,811	83,212	79,036
Transmission and distribution costs	11,275	11,838	22,190	22,471
Taxes other than income taxes	11,886	11,285	24,241	23,295
Total operating expenses	211,204	354,196	425,733	599,221
Operating income (loss)	49,584	(115,977)	83,188	(91,685)
Other Income and Deductions:
Interest income	3,147	3,530	6,643	7,187
Gains (losses) on investment securities	21,620	4,599	(11,229)	18,613
Other income	1,758	1,920	3,267	4,552
Other (deductions)	(2,424)	(2,340)	(5,110)	(4,629)
Net other income and deductions	24,101	7,709	(6,429)	25,723
Interest Charges	19,178	18,526	36,807	36,886
Earnings (Loss) before Income Taxes	54,507	(126,794)	39,952	(102,848)
Income Taxes (Benefits)	4,895	(43,481)	2,536	(41,508)
Net Earnings (Loss)	49,612	(83,313)	37,416	(61,340)
(Earnings) Attributable to Valencia Non-controlling Interest	(3,940)	(3,499)	(7,669)	(6,328)
Preferred Stock Dividend Requirements of Subsidiary	(132)	(132)	(264)	(264)
Net Earnings (Loss) Attributable to PNMR	45,672	(86,812)	29,747	(67,668)
Net Earnings (Loss) Available for PNM Common Stock	45,540	(86,944)	29,483	(67,932)
PNM \| Cost of energy
Operating Expenses:
Energy costs	67,884	58,866	142,408	158,204
PNM \| Energy production costs
Operating Expenses:
Energy costs	33,345	42,905	66,963	77,977
Texas-New Mexico Power Company
Electric Operating Revenues:
Contracts with customers	94,924	86,856	182,148	166,612
Alternative revenue programs	1,937	5,153	202	5,724
Other electric operating revenue	0	0	0	0
Total electric operating revenues	96,861	92,009	182,350	172,336
Operating Expenses:
Administrative and general	10,757	9,097	21,530	20,655
Depreciation and amortization	22,368	20,502	44,204	40,716
Transmission and distribution costs	6,759	7,357	13,130	13,401
Taxes other than income taxes	7,823	7,559	15,801	15,197
Total operating expenses	73,686	69,431	144,830	137,173
Operating income (loss)	23,175	22,578	37,520	35,163
Other Income and Deductions:
Other income	2,029	1,191	2,699	1,940
Other (deductions)	(66)	(460)	(175)	(623)
Net other income and deductions	1,963	731	2,524	1,317
Interest Charges	7,361	6,560	14,533	15,361
Earnings (Loss) before Income Taxes	17,777	16,749	25,511	21,119
Income Taxes (Benefits)	1,603	1,482	2,245	1,754
Net Earnings (Loss) Attributable to PNMR	16,174	15,267	23,266	19,365
Texas-New Mexico Power Company \| Cost of energy
Operating Expenses:
Energy costs	$ 25,979	$ 24,916	$ 50,165	$ 47,204

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net Earnings (Loss)	$ 61,561	$ (72,283)	$ 50,162	$ (50,622)
Unrealized Gains on Available-for-Sale Debt Securities:
Unrealized holding gains arising during the period, net of income tax (expense)	10,444	6,610	7,249	11,890
Reclassification adjustment for (gains) included in net earnings, net of income tax expense	(1,398)	(3,674)	(2,282)	(4,178)
Pension Liability Adjustment:
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit)	1,548	1,381	3,096	2,762
Fair Value Adjustment for Cash Flow Hedges:
Change in fair market value, net of income tax (expense) benefit of $(203), $494, $304, $805	597	(1,450)	(894)	(2,364)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $117, $(65), $127, and $(133)	(345)	190	(373)	392
Total Other Comprehensive Income	10,846	3,057	6,796	8,502
Comprehensive Income (Loss)	72,407	(69,226)	56,958	(42,120)
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,940)	(3,499)	(7,669)	(6,328)
Preferred Stock Dividend Requirements of Subsidiary	(132)	(132)	(264)	(264)
Comprehensive Income (Loss) Attributable to PNMR	68,335	(72,857)	49,025	(48,712)
PNM
Net Earnings (Loss)	49,612	(83,313)	37,416	(61,340)
Unrealized Gains on Available-for-Sale Debt Securities:
Unrealized holding gains arising during the period, net of income tax (expense)	10,444	6,610	7,249	11,890
Reclassification adjustment for (gains) included in net earnings, net of income tax expense	(1,398)	(3,674)	(2,282)	(4,178)
Pension Liability Adjustment:
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit)	1,548	1,381	3,096	2,762
Fair Value Adjustment for Cash Flow Hedges:
Total Other Comprehensive Income	10,594	4,317	8,063	10,474
Comprehensive Income (Loss)	60,206	(78,996)	45,479	(50,866)
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,940)	(3,499)	(7,669)	(6,328)
Comprehensive Income (Loss) Attributable to PNMR	$ 56,266	$ (82,495)	$ 37,810	$ (57,194)

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Unrealized holding gains (losses) arising during the period, income tax (expense) benefit	$ (3,556)	$ (2,250)	$ (2,468)	$ (4,048)
Reclassification adjustment for (gains) losses included in net earnings, income tax expense (benefit)	476	1,251	777	1,423
Pension liability adjustment, income tax expense (benefit)	(527)	(470)	(1,054)	(940)
Change in fair market value, net of income tax (expense) benefit of $311 and $(472)	(203)	494	304	805
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(68) and $13	117	(65)	127	(133)
PNM
Unrealized holding gains (losses) arising during the period, income tax (expense) benefit	(3,556)	(2,250)	(2,468)	(4,048)
Reclassification adjustment for (gains) losses included in net earnings, income tax expense (benefit)	476	1,251	777	1,423
Pension liability adjustment, income tax expense (benefit)	$ (527)	$ (470)	$ (1,054)	$ (940)

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash Flows From Operating Activities:
Net earnings	$ 50,162	$ (50,622)
Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:
Depreciation and amortization	155,799	148,090
Deferred income tax expense (benefit)	2,087	(41,930)
(Gains) losses on investment securities	11,229	(18,613)
Stock based compensation expense	5,230	4,526
Regulatory disallowances and restructuring costs	0	150,599
Allowance for equity funds used during construction	(3,475)	(4,158)
Other, net	2,998	1,247
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(25,121)	4,205
Materials, supplies, and fuel stock	8,253	(2,656)
Other current assets	(18,475)	(6,020)
Other assets	12,935	21,858
Accounts payable	(5,919)	(812)
Accrued interest and taxes	(15,568)	(6,180)
Other current liabilities	7,687	(6,381)
Other liabilities	(22,040)	(21,288)
Net cash flows from operating activities	165,782	171,865
Cash Flows From Investing Activities:
Additions to utility plant and non-utility plant	(343,807)	(293,076)
Proceeds from sales of investment securities	354,651	234,011
Purchases of investment securities	(359,840)	(239,609)
Investments in NMRD	(18,250)	(13,250)
Other, net	19	(187)
Net cash flows from investing activities	(367,227)	(312,111)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net	494	0
Revolving credit facilities borrowings (repayments), net	66,955	106,500
Long-term borrowings	660,345	475,000
Repayment of long-term debt	(450,345)	(372,302)
Proceeds from stock option exercise	24	943
Awards of common stock	(11,984)	(9,892)
Dividends paid	(49,251)	(46,463)
Valencia’s transactions with its owner	(10,794)	(7,948)
Transmission interconnection and security deposit arrangements	3,364	0
Refunds paid under transmission interconnection arrangements	(3,816)	(1,661)
Debt issuance costs and other, net	(4,557)	(1,827)
Net cash flows from financing activities	200,435	142,350
Change in Cash, Restricted Cash, and Equivalents	(1,010)	2,104
Cash, Restricted Cash, and Equivalents at Beginning of Period	3,833	2,122
Cash, Restricted Cash, and Equivalents at End of Period	2,823	4,226
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	57,600	61,539
Income taxes paid (refunded), net	(131)	(2,768)
Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	21,265	30,451
PNM
Cash Flows From Operating Activities:
Net earnings	37,416	(61,340)
Net earnings	29,747	(67,668)
Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:
Depreciation and amortization	98,841	94,467
Deferred income tax expense (benefit)	2,861	(41,292)
(Gains) losses on investment securities	11,229	(18,613)
Regulatory disallowances and restructuring costs	0	150,599
Allowance for equity funds used during construction	(2,399)	(3,456)
Other, net	3,605	1,173
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(19,898)	8,778
Materials, supplies, and fuel stock	8,773	(2,423)
Other current assets	(11,790)	(1,509)
Other assets	9,436	18,132
Accounts payable	(727)	(4,049)
Accrued interest and taxes	(9,504)	3,615
Other current liabilities	7,790	24,019
Other liabilities	(20,190)	(22,483)
Net cash flows from operating activities	115,443	145,618
Cash Flows From Investing Activities:
Additions to utility plant and non-utility plant	(183,276)	(157,874)
Proceeds from sales of investment securities	354,651	234,011
Purchases of investment securities	(359,840)	(239,609)
Other, net	19	1
Net cash flows from investing activities	(188,446)	(163,471)
Cash Flows From Financing Activities:
Revolving credit facilities borrowings (repayments), net	29,055	(200)
Short-term borrowings (repayments) – affiliate, net	0	(19,800)
Long-term borrowings	550,345	250,000
Repayment of long-term debt	(450,345)	(200,000)
Dividends paid	(40,918)	(264)
Valencia’s transactions with its owner	(10,794)	(7,948)
Transmission interconnection and security deposit arrangements	1,962	0
Refunds paid under transmission interconnection arrangements	(3,816)	(1,661)
Debt issuance costs and other, net	(2,541)	(120)
Net cash flows from financing activities	72,948	20,007
Change in Cash, Restricted Cash, and Equivalents	(55)	2,154
Cash, Restricted Cash, and Equivalents at Beginning of Period	1,001	85
Cash, Restricted Cash, and Equivalents at End of Period	946	2,239
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	34,371	34,308
Income taxes paid (refunded), net	0	(3,383)
Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	13,601	13,213
Texas-New Mexico Power Company
Cash Flows From Operating Activities:
Net earnings	23,266	19,365
Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:
Depreciation and amortization	44,767	41,379
Deferred income tax expense (benefit)	(4,882)	(8,004)
Other, net	(1,054)	(680)
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(5,223)	(4,573)
Materials, supplies, and fuel stock	(520)	(233)
Other current assets	(4,329)	(7,155)
Other assets	4,359	3,544
Accounts payable	(2,108)	2,442
Accrued interest and taxes	893	1,175
Other current liabilities	4,059	3,130
Other liabilities	(1,079)	(1,234)
Net cash flows from operating activities	58,149	49,156
Cash Flows From Investing Activities:
Additions to utility plant and non-utility plant	(148,000)	(124,376)
Net cash flows from investing activities	(148,000)	(124,376)
Cash Flows From Financing Activities:
Revolving credit facilities borrowings (repayments), net	(2,400)	37,500
Short-term borrowings (repayments) – affiliate, net	0	1,500
Long-term borrowings	110,000	225,000
Repayment of long-term debt	0	(172,302)
Dividends paid	(18,439)	(14,811)
Transmission interconnection and security deposit arrangements	1,402	0
Debt issuance costs and other, net	(1,975)	(1,667)
Net cash flows from financing activities	89,082	75,220
Change in Cash, Restricted Cash, and Equivalents	(769)	0
Cash, Restricted Cash, and Equivalents at Beginning of Period	1,000	0
Cash, Restricted Cash, and Equivalents at End of Period	231	0
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	13,465	16,342
Income taxes paid (refunded), net	(131)	615
Supplemental schedule of noncash investing activities:
(Increase) decrease in accrued plant additions	$ 1,816	$ 12,182

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 2,823	$ 3,833	$ 4,226	$ 2,122
Accounts receivable, net of allowance for credit losses	96,209	85,889
Unbilled revenues	70,480	57,416
Other receivables	10,349	12,165
Materials, supplies, and fuel stock	69,676	77,929
Regulatory assets	21,574	7,373
Income taxes receivable	4,494	4,933
Other current assets	51,279	44,472
Total current assets	326,884	294,010
Other Property and Investments:
Investment securities	389,452	388,832
Equity investment in NMRD	84,037	65,159
Other investments	336	356
Non-utility property, net	19,679	12,459
Total other property and investments	493,504	466,806
Utility Plant:
Plant in service, held for future use, and to be abandoned	8,030,505	7,918,601
Less accumulated depreciation and amortization	2,773,434	2,713,503
Net plant in service and plant held for future use	5,257,071	5,205,098
Construction work in progress	309,513	161,106
Nuclear fuel, net of accumulated amortization	101,994	99,805
Net utility plant	5,668,578	5,466,009
Deferred Charges and Other Assets:
Regulatory assets	582,586	556,930
Goodwill	278,297	278,297	278,297
Operating lease right-of-use assets, net of accumulated amortization	118,140	131,212
Other deferred charges	106,478	105,510
Total deferred charges and other assets	1,085,501	1,071,949
Assets	7,574,467	7,298,774	7,048,667
Current Liabilities:
Short-term debt	252,549	185,100
Current installments of long-term debt	779,372	490,268
Accounts payable	75,933	103,118
Customer deposits	10,004	10,585
Accrued interest and taxes	60,807	76,815
Regulatory liabilities	3,659	505
Operating lease liabilities	26,744	29,068
Dividends declared	132	24,625
Other current liabilities	56,574	47,397
Total current liabilities	1,265,774	967,481
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	2,437,246	2,517,449
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	647,883	626,058
Regulatory liabilities	867,953	866,243
Asset retirement obligations	181,805	181,962
Accrued pension liability and postretirement benefit cost	87,248	95,037
Operating lease liabilities	91,320	105,512
Other deferred credits	227,282	185,753
Total deferred credits and other liabilities	2,103,491	2,060,565
Total liabilities	5,806,511	5,545,495
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock of Subsidiary without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)	11,529	11,529
Company common stockholders’ equity:
Common stock	1,143,822	1,150,552
Accumulated other comprehensive income (loss), net of income taxes	(92,581)	(99,377)
Retained earnings	645,259	627,523
Total stockholders' equity	1,696,500	1,678,698
Non-controlling interest in Valencia	59,927	63,052
Total equity	1,756,427	1,741,750	1,674,740	1,752,594
Total liabilities and stockholders' equity	7,574,467	7,298,774
PNM
Current Assets:
Cash and cash equivalents	946	1,001	2,239	85
Accounts receivable, net of allowance for credit losses	66,618	60,447
Unbilled revenues	58,592	46,602
Other receivables	9,459	11,039
Affiliate receivables	8,941	8,825
Materials, supplies, and fuel stock	63,452	72,225
Regulatory assets	17,722	7,373
Income taxes receivable	15,448	15,122
Other current assets	40,114	36,561
Total current assets	281,292	259,195
Other Property and Investments:
Investment securities	389,452	388,832
Other investments	158	178
Non-utility property, net	7,587	4,470
Total other property and investments	397,197	393,480
Utility Plant:
Plant in service, held for future use, and to be abandoned	5,807,772	5,753,267
Less accumulated depreciation and amortization	2,112,706	2,076,291
Net plant in service and plant held for future use	3,695,066	3,676,976
Construction work in progress	175,076	108,787
Nuclear fuel, net of accumulated amortization	101,994	99,805
Net utility plant	3,972,136	3,885,568
Deferred Charges and Other Assets:
Regulatory assets	471,696	435,467
Goodwill	51,632	51,632
Operating lease right-of-use assets, net of accumulated amortization	109,042	120,585
Other deferred charges	94,427	97,064
Total deferred charges and other assets	726,797	704,748
Assets	5,377,422	5,242,991
Current Liabilities:
Short-term debt	87,055	58,000
Current installments of long-term debt	189,921	350,268
Accounts payable	52,418	66,746
Affiliate payables	15,708	12,524
Customer deposits	10,004	10,585
Accrued interest and taxes	34,439	43,617
Regulatory liabilities	2,741	371
Operating lease liabilities	24,039	25,927
Dividends declared	132	132
Other current liabilities	31,051	25,066
Total current liabilities	447,508	593,236
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	1,656,684	1,397,752
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	540,434	521,990
Regulatory liabilities	676,454	683,398
Asset retirement obligations	180,888	181,081
Accrued pension liability and postretirement benefit cost	80,715	87,838
Operating lease liabilities	85,028	97,992
Other deferred credits	191,984	155,744
Total deferred credits and other liabilities	1,755,503	1,728,043
Total liabilities	3,859,695	3,719,031
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock of Subsidiary without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)	11,529	11,529
Company common stockholders’ equity:
Common stock	1,264,918	1,264,918
Accumulated other comprehensive income (loss), net of income taxes	(90,992)	(99,055)
Retained earnings	272,345	283,516
Total stockholders' equity	1,446,271	1,449,379
Non-controlling interest in Valencia	59,927	63,052
Total equity	1,506,198	1,512,431	1,402,493	1,461,571
Total liabilities and stockholders' equity	5,377,422	5,242,991
Texas-New Mexico Power Company
Current Assets:
Cash and cash equivalents	231	1,000	0	0
Accounts receivable, net of allowance for credit losses	29,591	25,442
Unbilled revenues	11,888	10,814
Other receivables	2,512	2,713
Materials, supplies, and fuel stock	6,224	5,704
Regulatory assets	3,852	0
Other current assets	2,135	1,280
Total current assets	56,433	46,953
Other Property and Investments:
Other investments	178	178
Non-utility property, net	10,814	6,684
Total other property and investments	10,992	6,862
Utility Plant:
Plant in service, held for future use, and to be abandoned	1,971,908	1,919,256
Less accumulated depreciation and amortization	530,230	516,795
Net plant in service and plant held for future use	1,441,678	1,402,461
Construction work in progress	124,383	42,554
Net utility plant	1,566,061	1,445,015
Deferred Charges and Other Assets:
Regulatory assets	110,890	121,463
Goodwill	226,665	226,665
Operating lease right-of-use assets, net of accumulated amortization	8,535	9,954
Other deferred charges	6,145	3,527
Total deferred charges and other assets	352,235	361,609
Assets	1,985,721	1,860,439
Current Liabilities:
Short-term debt	13,094	15,000
Accounts payable	16,674	20,598
Affiliate payables	7,020	5,419
Accrued interest and taxes	42,961	42,068
Regulatory liabilities	918	134
Operating lease liabilities	2,428	2,753
Other current liabilities	5,823	3,565
Total current liabilities	88,918	89,537
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	780,561	670,691
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	139,855	140,151
Regulatory liabilities	191,499	182,845
Asset retirement obligations	917	881
Accrued pension liability and postretirement benefit cost	6,533	7,199
Operating lease liabilities	5,897	7,039
Other deferred credits	12,087	7,469
Total deferred credits and other liabilities	356,788	345,584
Total liabilities	1,226,267	1,105,812
Commitments and Contingencies (Note 11)
Company common stockholders’ equity:
Common stock	64	64
Paid-in-capital	614,166	614,166
Retained earnings	145,224	140,397
Total stockholders' equity	759,454	754,627	$ 678,647	$ 674,093
Total liabilities and stockholders' equity	$ 1,985,721	$ 1,860,439

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Allowance for uncollectible accounts	$ 1,911	$ 1,163
Accumulated depreciation, nuclear fuel	$ 41,140	$ 42,354
Cumulative preferred stock of subsidiary, stated value (in dollars per share)	$ 100	$ 100
Cumulative preferred stock of subsidiary, shares authorized (in shares)	10,000,000	10,000,000
Cumulative preferred stock of subsidiary, shares issued (in shares)	115,293	115,293
Cumulative preferred stock of subsidiary, shares outstanding (in shares)	115,293	115,293
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	120,000,000	120,000,000
Common stock, shares issued (in shares)	79,653,624	79,653,624
Common stock, shares outstanding (in shares)	79,653,624	79,653,624
PNM
Allowance for uncollectible accounts	$ 1,911	$ 1,163
Accumulated depreciation, nuclear fuel	$ 41,140	$ 42,354
Cumulative preferred stock, stated value (in dollars per share)	$ 100	$ 100
Cumulative preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Cumulative preferred stock, shares issued (in shares)	115,293	115,293
Cumulative preferred stock, shares outstanding (in shares)	115,293	115,293
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	39,117,799	39,117,799
Common stock, shares outstanding (in shares)	39,117,799	39,117,799
Texas-New Mexico Power Company
Common stock, par value (in dollars per share)	$ 10	$ 10
Common stock, shares authorized (in shares)	12,000,000	12,000,000
Common stock, shares issued (in shares)	6,358	6,358
Common stock, shares outstanding (in shares)	6,358	6,358

Condensed Consolidated Statements of Changes in Equity - USD ($)	Total	Total PNMR Common Stockholders’ Equity	Common Stock	AOCI	Retained Earnings	Non- controlling Interest in Valencia	PNM	PNM Total PNMR Common Stockholders’ Equity	PNM Common Stock	PNM AOCI	PNM Retained Earnings	PNM Non- controlling Interest in Valencia	Texas-New Mexico Power Company	Texas-New Mexico Power Company Common Stock	Texas-New Mexico Power Company Paid-in Capital	Texas-New Mexico Power Company Retained Earnings
Beginning balance at Dec. 31, 2018	$ 1,752,594,000	$ 1,688,382,000	$ 1,153,113,000	$ (108,684,000)	$ 643,953,000	$ 64,212,000	$ 1,461,571,000	$ 1,397,359,000	$ 1,264,918,000	$ (110,422,000)	$ 242,863,000	$ 64,212,000
Beginning balance TNMP at Dec. 31, 2018													$ 674,093,000	$ 64,000	$ 534,166,000	$ 139,863,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings before subsidiary preferred stock dividends	(50,622,000)	(56,950,000)			(56,950,000)	6,328,000	(61,340,000)	(67,668,000)			(67,668,000)	6,328,000
Net earnings							(67,668,000)						19,365,000			19,365,000
Total other comprehensive income	8,502,000	8,502,000		8,502,000			10,474,000	10,474,000		10,474,000
Subsidiary preferred stock dividends	(264,000)	(264,000)			(264,000)
Dividends declared on preferred stock							(264,000)	(264,000)			(264,000)
Dividends declared on common stock	(23,099,000)	(23,099,000)			(23,099,000)		0						(14,811,000)			(14,811,000)
Proceeds from stock option exercise	943,000	943,000	943,000
Awards of common stock	(9,892,000)	(9,892,000)	(9,892,000)
Stock based compensation expense	4,526,000	4,526,000	4,526,000
Valencia’s transactions with its owner	(7,948,000)					(7,948,000)	(7,948,000)					(7,948,000)
Ending balance at Jun. 30, 2019	1,674,740,000	1,612,148,000	1,148,690,000	(100,182,000)	563,640,000	62,592,000	1,402,493,000	1,339,901,000	1,264,918,000	(99,948,000)	174,931,000	62,592,000
Ending balance TNMP at Jun. 30, 2019													678,647,000	64,000	534,166,000	144,417,000
Beginning balance at Mar. 31, 2019	1,747,458,000	1,684,679,000	1,148,364,000	(103,239,000)	639,554,000	62,779,000	1,485,307,000	1,422,528,000	1,264,918,000	(104,265,000)	261,875,000	62,779,000
Beginning balance TNMP at Mar. 31, 2019													667,478,000	64,000	534,166,000	133,248,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings before subsidiary preferred stock dividends	(72,283,000)	(75,782,000)			(75,782,000)	3,499,000	(83,313,000)	(86,812,000)			(86,812,000)	3,499,000
Net earnings							(86,812,000)						15,267,000			15,267,000
Total other comprehensive income	3,057,000	3,057,000		3,057,000			4,317,000	4,317,000		4,317,000
Subsidiary preferred stock dividends	(132,000)
Dividends declared on preferred stock							(132,000)	(132,000)			(132,000)
Dividends declared on common stock	(132,000)	(132,000)			(132,000)		0						(4,098,000)			(4,098,000)
Proceeds from stock option exercise	13,000	13,000	13,000
Awards of common stock	(956,000)	(956,000)	(956,000)
Stock based compensation expense	1,269,000	1,269,000	1,269,000
Valencia’s transactions with its owner	(3,686,000)					(3,686,000)	(3,686,000)					(3,686,000)
Ending balance at Jun. 30, 2019	1,674,740,000	1,612,148,000	1,148,690,000	(100,182,000)	563,640,000	62,592,000	1,402,493,000	1,339,901,000	1,264,918,000	(99,948,000)	174,931,000	62,592,000
Ending balance TNMP at Jun. 30, 2019													678,647,000	64,000	534,166,000	144,417,000
Beginning balance at Dec. 31, 2019	1,741,750,000	1,678,698,000	1,150,552,000	(99,377,000)	627,523,000	63,052,000	1,512,431,000	1,449,379,000	1,264,918,000	(99,055,000)	283,516,000	63,052,000
Beginning balance TNMP at Dec. 31, 2019	1,678,698,000						1,449,379,000						754,627,000	64,000	614,166,000	140,397,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings before subsidiary preferred stock dividends	50,162,000	42,493,000			42,493,000	7,669,000	37,416,000	29,747,000			29,747,000	7,669,000
Net earnings							29,747,000						23,266,000			23,266,000
Total other comprehensive income	6,796,000	6,796,000		6,796,000			8,063,000	8,063,000		8,063,000
Subsidiary preferred stock dividends	(264,000)	(264,000)			(264,000)
Dividends declared on preferred stock							(264,000)	(264,000)			(264,000)
Dividends declared on common stock	(24,493,000)	(24,493,000)			(24,493,000)		(40,654,000)	(40,654,000)			(40,654,000)		(18,439,000)			(18,439,000)
Proceeds from stock option exercise	24,000	24,000	24,000
Awards of common stock	(11,984,000)	(11,984,000)	(11,984,000)
Stock based compensation expense	5,230,000	5,230,000	5,230,000
Valencia’s transactions with its owner	(10,794,000)					(10,794,000)	(10,794,000)					(10,794,000)
Ending balance at Jun. 30, 2020	1,756,427,000	1,696,500,000	1,143,822,000	(92,581,000)	645,259,000	59,927,000	1,506,198,000	1,446,271,000	1,264,918,000	(90,992,000)	272,345,000	59,927,000
Ending balance TNMP at Jun. 30, 2020	1,696,500,000						1,446,271,000						759,454,000	64,000	614,166,000	145,224,000
Beginning balance at Mar. 31, 2020	1,687,569,000	1,627,222,000	1,142,879,000	(103,427,000)	587,770,000	60,347,000	1,450,484,000	1,390,137,000	1,264,918,000	(101,586,000)	226,805,000	60,347,000
Beginning balance TNMP at Mar. 31, 2020													750,372,000	64,000	614,166,000	136,142,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings before subsidiary preferred stock dividends	61,561,000	57,621,000			57,621,000	3,940,000	49,612,000	45,672,000			45,672,000	3,940,000
Net earnings							45,672,000						16,174,000			16,174,000
Total other comprehensive income	10,846,000	10,846,000		10,846,000			10,594,000	10,594,000		10,594,000
Subsidiary preferred stock dividends	(132,000)	(132,000)			(132,000)
Dividends declared on preferred stock							(132,000)	(132,000)			(132,000)
Dividends declared on common stock							(40,700,000)						(7,092,000)			(7,092,000)
Awards of common stock	(486,000)	(486,000)	(486,000)
Stock based compensation expense	1,429,000	1,429,000	1,429,000
Valencia’s transactions with its owner	(4,360,000)					(4,360,000)	(4,360,000)					(4,360,000)
Ending balance at Jun. 30, 2020	1,756,427,000	$ 1,696,500,000	$ 1,143,822,000	$ (92,581,000)	$ 645,259,000	$ 59,927,000	1,506,198,000	$ 1,446,271,000	$ 1,264,918,000	$ (90,992,000)	$ 272,345,000	$ 59,927,000
Ending balance TNMP at Jun. 30, 2020	$ 1,696,500,000						$ 1,446,271,000						$ 759,454,000	$ 64,000	$ 614,166,000	$ 145,224,000

Significant Accounting Policies and Responsibility for Financial Statements	6 Months Ended
	Jun. 30, 2020
Accounting Policies [Abstract]
Significant Accounting Policies and Responsibility for Financial Statements	Significant Accounting Policies and Responsibility for Financial Statements Financial Statement Preparation In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at June 30, 2020 and December 31, 2019, and the consolidated results of operations and comprehensive income for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year. The Notes to Condensed Consolidated Financial Statements include disclosures for PNMR, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. Certain amounts in the 2019 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2020 financial statement presentation. These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual audited Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to PNMR’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2019 Annual Reports on Form 10-K. GAAP defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events as required by GAAP. Principles of Consolidation The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates Valencia. See Note 6. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants. The agreements for the jointly-owned plants provide that if an owner were to default on its payment obligations, the non-defaulting owners would be responsible for their proportionate share of the obligations of the defaulting owner. In exchange, the non-defaulting owners would be entitled to their proportionate share of the generating capacity of the defaulting owner. There have been no such payment defaults under any of the agreements for the jointly-owned plants. PNMR shared services’ expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost and are reflected as general and administrative expenses in the business segments. Other significant intercompany transactions between PNMR, PNM, and TNMP include interest and income tax sharing payments, as well as equity transactions, and interconnection billings. See Note 15. All intercompany transactions and balances have been eliminated. Dividends on Common Stock Dividends on PNMR’s common stock are declared by the Board. The timing of the declaration of dividends is dependent on the timing of meetings and other actions of the Board. This has historically resulted in dividends attributable to the second quarter of each year being declared through actions of the Board during the third quarter of the year. The Board declared dividends on common stock considered to be for the second quarter of $0.3075 per share in July 2020 and $0.2900 per share in July 2019, which are reflected as being in the second quarter within "Dividends Declared per Common Share" on the PNMR Condensed Consolidated Statements of Earnings. PNM paid cash dividends on its common stock to PNMR of $40.7 million in the three and six months ended June 30, 2020 that were declared in the three months ended March 31, 2020. PNM did not pay cash dividends on its common stock to PNMR in the three and sixth months ended June 30, 2019. TNMP declared and paid cash dividends on its common stock to PNMR of $7.1 million and $18.4 million in the three and six months ended June 30, 2020 and paid $4.1 million and $14.8 million in the three and six months ended June 30, 2019. New Accounting Pronouncements Information concerning recently issued accounting pronouncements that have not been adopted by the Company is presented below. The Company does not expect difficulty in adopting these standards by their required effective dates. Accounting Standards Update 2018-14 – Compensation – Retirement Benefits – Defined Benefit Plans (Topic 715) Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued ASU 2018-14 to improve benefit plan sponsors’ disclosures for defined benefit pension and other post-employment benefit plans. ASU 2018-14 removes the requirement to disclose the amounts in other comprehensive income expected to be recognized as benefit cost over the next fiscal year and the requirement to disclose the impact of a one-percentage-point change in the assumed health care cost trend rate; clarifies the disclosure requirements for plans with assets that are less than their projected benefit, or accumulated benefit obligation; and requires significant gains and losses affecting benefit obligations during the period be disclosed. ASU 2018-14 is effective for the Company on December 31, 2020, although early adoption is permitted, and requires retrospective application. As discussed in Note 11 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and in Note 10, PNM and TNMP maintain qualified defined benefit, other postretirement benefit plans providing medical and dental benefits, and executive retirement programs. The Company is in the process of evaluating the requirements of ASU 2018-14 but does not anticipate these changes will have a significant impact on the Company’s defined benefit and other postretirement benefit plan disclosures. Accounting Standards Update 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12 as part of its initiative to reduce complexity in accounting standards. The amendments in ASU 2019-12 simplify accounting for income taxes by removing several accounting exceptions to accounting for income taxes. ASU 2019-12 also eliminates or simplifies other income tax accounting requirements, including a requirement that entities recognize franchise tax (or similar tax) that is partially based on income as an income-based tax. ASU 2019-12 is effective for the Company beginning on January 1, 2021 and allows for early adoption. ASU 2019-12 is to be applied prospectively or retrospectively in the period of adoption depending on the type of amendment. The Company is in the process of analyzing the impacts of this new standard.

Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

PNM

TNMP

Corporate and Other

PNMR SEGMENT INFORMATION


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2020
Electric operating revenues	$	260,788	$	96,861	$	—	$	357,649
Cost of energy	67,884		25,979		—		93,863
Utility margin	192,904		70,882		—		263,786
Other operating expenses	101,557		25,339		(4,282)		122,614
Depreciation and amortization	41,763		22,368		5,891		70,022
Operating income (loss)	49,584		23,175		(1,609)		71,150
Interest income	3,147		—		(76)		3,071
Other income (deductions)	20,954		1,963		(214)		22,703
Interest charges	(19,178)		(7,361)		(4,549)		(31,088)
Segment earnings (loss) before income taxes	54,507		17,777		(6,448)		65,836
Income taxes (benefit)	4,895		1,603		(2,223)		4,275
Segment earnings (loss)	49,612		16,174		(4,225)		61,561
Valencia non-controlling interest	(3,940)		—		—		(3,940)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	45,540	$	16,174	$	(4,225)	$	57,489

Six Months Ended June 30, 2020
Electric operating revenues	$	508,921	$	182,350	$	—	$	691,271
Cost of energy	142,408		50,165		—		192,573
Utility margin	366,513		132,185		—		498,698
Other operating expenses	200,113		50,461		(9,759)		240,815
Depreciation and amortization	83,212		44,204		11,579		138,995
Operating income (loss)	83,188		37,520		(1,820)		118,888
Interest income	6,643		—		(149)		6,494
Other income (deductions)	(13,072)		2,524		(755)		(11,303)
Interest charges	(36,807)		(14,533)		(10,182)		(61,522)
Segment earnings (loss) before income taxes	39,952		25,511		(12,906)		52,557
Income taxes (benefit)	2,536		2,245		(2,386)		2,395
Segment earnings (loss)	37,416		23,266		(10,520)		50,162
Valencia non-controlling interest	(7,669)		—		—		(7,669)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	29,483	$	23,266	$	(10,520)	$	42,229

At June 30, 2020:
Total Assets	$	5,377,422	$	1,985,721	$	211,324	$	7,574,467
Goodwill	$	51,632	$	226,665	$	—	$	278,297


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2019
Electric operating revenues	$	238,219	$	92,009	$	—	$	330,228
Cost of energy	58,866		24,916		—		83,782
Utility margin	179,353		67,093		—		246,446
Other operating expenses	255,519		24,013		(5,536)		273,996
Depreciation and amortization	39,811		20,502		5,752		66,065
Operating income (loss)	(115,977)		22,578		(216)		(93,615)
Interest income	3,530		—		(70)		3,460
Other income (deductions)	4,179		731		(78)		4,832
Interest charges	(18,526)		(6,560)		(4,705)		(29,791)
Segment earnings (loss) before income taxes	(126,794)		16,749		(5,069)		(115,114)
Income taxes (benefit)	(43,481)		1,482		(832)		(42,831)
Segment earnings (loss)	(83,313)		15,267		(4,237)		(72,283)
Valencia non-controlling interest	(3,499)		—		—		(3,499)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	(86,944)	$	15,267	$	(4,237)	$	(75,914)

Three Months Ended June 30, 2019
Electric operating revenues	$	507,536	$	172,336	$	—	$	679,872
Cost of energy	158,204		47,204		—		205,408
Utility margin	349,332		125,132		—		474,464
Other operating expenses	361,981		49,253		(11,299)		399,935
Depreciation and amortization	79,036		40,716		11,669		131,421
Operating income (loss)	(91,685)		35,163		(370)		(56,892)
Interest income	7,187		—		(139)		7,048
Other income (deductions)	18,536		1,317		(814)		19,039
Interest charges	(36,886)		(15,361)		(9,178)		(61,425)
Segment earnings (loss) before income taxes	(102,848)		21,119		(10,501)		(92,230)
Income taxes (benefit)	(41,508)		1,754		(1,854)		(41,608)
Segment earnings (loss)	(61,340)		19,365		(8,647)		(50,622)
Valencia non-controlling interest	(6,328)		—		—		(6,328)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	(67,932)	$	19,365	$	(8,647)	$	(57,214)

At June 30, 2019:
Total Assets	$	5,105,090	$	1,768,831	$	174,746	$	7,048,667
Goodwill	$	51,632	$	226,665	$	—	$	278,297

Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Information regarding accumulated other comprehensive income (loss) for the six months ended June 30, 2020 and 2019 is as follows:


	Accumulated Other Comprehensive Income (Loss)
	PNM											Corporate and Other		PNMR Consolidated
	Unrealized Gains on Available-for-Sale Debt Securities		Pension Liability Adjustment					Fair Value Adjustment for Cash Flow Hedges


							Total						Total

	(In thousands)


Balance at December 31, 2019	$	10,638	$	(109,693)	$	(99,055)		$	(322)	$	(99,377)
Amounts reclassified from AOCI (pre-tax)	(3,059)		4,150		1,091			(500)		591
Income tax impact of amounts reclassified	777		(1,054)		(277)			127		(150)
Other OCI changes (pre-tax)	9,717		—		9,717			(1,198)		8,519
Income tax impact of other OCI changes	(2,468)		—		(2,468)			304		(2,164)
Net after-tax change	4,967		3,096		8,063			(1,267)		6,796
Balance at June 30, 2020	$	15,605	$	(106,597)	$	(90,992)		$	(1,589)	$	(92,581)











Balance at December 31, 2018	$	1,939	$	(112,361)	$	(110,422)	$	1,738	$	(108,684)
Amounts reclassified from AOCI (pre-tax)	(5,601)		3,702		(1,899)		525		(1,374)
Income tax impact of amounts reclassified	1,423		(940)		483		(133)		350
Other OCI changes (pre-tax)	15,938		—		15,938		(3,169)		12,769
Income tax impact of other OCI changes	(4,048)		—		(4,048)		805		(3,243)
Net after-tax change	7,712		2,762		10,474		(1,972)		8,502
Balance at June 30, 2019	$	9,651	$	(109,599)	$	(99,948)	$	(234)	$	(100,182)

Earnings Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands, except per share amounts)
Net Earnings (Loss) Attributable to PNMR	$	57,489	$	(75,914)	$	42,229	$	(57,214)
Average Number of Common Shares:
Outstanding during period	79,654		79,654		79,654		79,654
Vested awards of restricted stock	186		263		202		251
Average Shares – Basic	79,840		79,917		79,856		79,905
Dilutive Effect of Common Stock Equivalents:
PNMR 2020 Forward Equity Sale Agreements	—		—		86		—
Restricted stock	36		—		37		—
Average Shares – Diluted⁽¹⁾	79,876		79,917		79,979		79,905

Net Earnings (Loss) Per Share of Common Stock:
Basic	$	0.72	$	(0.95)	$	0.53	$	(0.72)
Diluted	$	0.72	$	(0.95)	$	0.53	$	(0.72)

Electric Operating Revenues

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Electric Operating Revenues

PNMR is an investor-owned holding company with two regulated utilities providing electricity and electric services in New Mexico and Texas. PNMR’s electric utilities are PNM and TNMP.

Additional information concerning electric operating revenue is contained in Note 4 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

Accounts Receivable and Allowance for Credit Losses

Disaggregation of Revenues


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2020	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	109,090	$	37,302	$	146,392
Commercial	93,364		28,106		121,470
Industrial	20,373		6,857		27,230
Public authority	4,907		1,419		6,326
Economy energy service	3,278		—		3,278
Transmission	14,097		20,238		34,335
Miscellaneous	3,042		1,002		4,044
Total revenues from contracts with customers	248,151		94,924		343,075
Alternative revenue programs	2,529		1,937		4,466
Other electric operating revenues	10,108		—		10,108
Total Electric Operating Revenues	$	260,788	$	96,861	$	357,649


Six Months Ended June 30, 2020
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	211,899	$	69,200	$	281,099
Commercial	179,713		56,791		236,504
Industrial	39,838		13,390		53,228
Public authority	9,254		2,842		12,096
Economy energy service	8,531		—		8,531
Transmission	28,264		38,250		66,514
Miscellaneous	6,410		1,675		8,085
Total revenues from contracts with customers	483,909		182,148		666,057
Alternative revenue programs	4,690		202		4,892
Other electric operating revenues	20,322		—		20,322
Total Electric Operating Revenues	$	508,921	$	182,350	$	691,271


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2019	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	86,328	$	33,640	$	119,968
Commercial	98,968		28,058		127,026
Industrial	15,329		5,295		20,624
Public authority	4,596		1,391		5,987
Economy energy service	6,024		—		6,024
Transmission	14,342		17,585		31,927
Miscellaneous	2,474		887		3,361
Total revenues from contracts with customers	228,061		86,856		314,917
Alternative revenue programs	691		5,153		5,844
Other electric operating revenues	9,467		—		9,467
Total Electric Operating Revenues	$	238,219	$	92,009	$	330,228

Three Months Ended June 30, 2019
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	193,629	$	64,072	$	257,701
Commercial	184,201		55,487		239,688
Industrial	30,076		10,911		40,987
Public authority	9,307		2,764		12,071
Economy energy service	12,946		—		12,946
Transmission	27,727		31,589		59,316
Miscellaneous	6,116		1,789		7,905
Total revenues from contracts with customers	464,002		166,612		630,614
Alternative revenue programs	756		5,724		6,480
Other electric operating revenues	42,778		—		42,778
Total Electric Operating Revenues	$	507,536	$	172,336	$	679,872

Contract Balances

Variable Interest Entities

6 Months Ended

Jun. 30, 2020

Variable Interest Entities [Abstract]

Variable Interest Entities

Valencia

Summarized financial information for Valencia is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	5,495	$	5,177	$	10,848	$	10,129
Operating expenses	1,555		1,678		3,179		3,801
Earnings attributable to non-controlling interest	$	3,940	$	3,499	$	7,669	$	6,328


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	3,393	$	5,094
Net property, plant, and equipment	57,163		58,581
Total assets	60,556		63,675
Current liabilities	629		623
Owners’ equity – non-controlling interest	$	59,927	$	63,052

Westmoreland San Juan Mining, LLC

Fair Value of Derivative and Other Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value of Derivative and Other Financial Instruments [Abstract]

Fair Value of Derivative and Other Financial Instruments

Energy Related Derivative Contracts

Overview

Commodity Risk

Accounting for Derivatives

Commodity Derivatives


	Economic Hedges
	June 30, 2020		December 31, 2019
	(In thousands)
Other current assets	$	1,096	$	1,089
Other deferred charges	1,004		1,507
	2,100		2,596

Other current liabilities	(1,096)		(1,089)
Other deferred credits	(1,004)		(1,507)
	(2,100)		(2,596)
Net	$	—	$	—

PNM has no open energy or gas commodity volume positions at June 30, 2020 or December 31, 2019.

Non-Derivative Financial Instruments

Gains and losses recognized on the Condensed Consolidated Statements of Earnings related to investment securities in the NDT and reclamation trusts are presented in the following table:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Equity securities:
Net gains (losses) from equity securities sold	$	5,356	$	2,774	$	4,041	$	4,161
Net gains (losses) from equity securities still held	13,377		303		(5,554)		9,905
Total net gains (losses) on equity securities	18,733		3,077		(1,513)		14,066
Available-for-sale debt securities:


Net gains (losses) on debt securities	2,887		1,522		(9,716)		4,547
Net gains (losses) on investment securities	$	21,620	$	4,599	$	(11,229)	$	18,613


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Proceeds from sales	$	205,296	$	159,551	$	354,651	$	234,011
Gross realized gains	$	11,262	$	10,906	$	17,087	$	15,095
Gross realized (losses)	$	(7,002)	$	(5,802)	$	(14,037)	$	(8,972)

At June 30, 2020, the available-for-sale debt securities held by PNM, had the following final maturities:


	Fair Value
	(In thousands)
Within 1 year	$	22,402
After 1 year through 5 years	83,549
After 5 years through 10 years	82,539
After 10 years through 15 years	14,192
After 15 years through 20 years	10,791
After 20 years	40,010
	$	253,483

Fair Value Disclosures


			GAAP Fair Value Hierarchy
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unrealized Gains
	(In thousands)
June 30, 2020
Cash and cash equivalents	$	11,496	$	11,496	$	—
Equity securities:
Corporate stocks, common	65,664		65,664		—
Corporate stocks, preferred	8,498		2,770		5,728
Mutual funds and other	50,311		50,311		—
Available-for-sale debt securities:
U.S. government	47,190		29,315		17,875		$	1,497
International government	13,734		—		13,734		1,630
Municipals	47,392		—		47,392		2,179
Corporate and other	145,167		464		144,703		15,616
	$	389,452	$	160,020	$	229,432	$	20,922







December 31, 2019

Cash and cash equivalents	$	15,606	$	15,606	$	—
Equity securities:
Corporate stocks, common	64,527		64,527		—
Corporate stocks, preferred	9,033		2,212		6,821
Mutual funds and other	49,848		49,786		62
Available-for-sale debt securities:
U.S. government	48,439		31,389		17,050		$	535
International government	15,292		—		15,292		1,193
Municipals	46,642		—		46,642		1,768
Corporate and other	139,445		187		139,258		10,801
	$	388,832	$	163,707	$	225,125	$	14,297



	Carrying Amount		Fair Value
June 30, 2020	(In thousands)
PNMR	$	3,216,618	$	3,343,648


PNM	$	1,846,605	$	1,951,768


TNMP	$	780,561	$	797,604


December 31, 2019
PNMR	$	3,007,717	$	3,142,704


PNM	$	1,748,020	$	1,795,149


TNMP	$	670,691	$	753,317

The carrying amount and fair value of the Company’s other investments presented on the Condensed Consolidated Balance Sheets are not material and not shown in the above table.

Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:


	Six Months Ended June 30,
Restricted Shares and Performance Based Shares	2020			2019
Expected quarterly dividends per share	$	0.3075		$	0.2900
Risk-free interest rate	0.72		%	2.47		%

Market-Based Shares
Dividend yield	2.51		%	2.59		%
Expected volatility	19.41			19.55
Risk-free interest rate	0.72			2.51

The following table summarizes activity in restricted stock awards, including performance-based and market-based shares, and stock options, for the six months ended June 30, 2020:


	Restricted Stock				Stock Options
	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2019	161,542	$	38.21	2,000	$	12.22
Granted	246,029	36.73		—	—
Exercised	(238,054)	34.86		(2,000)	12.22
Forfeited	(1,456)	41.32		—	—

Outstanding at June 30, 2020	168,061	$	40.77	—	$	—

The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares, and stock options:


	Six Months Ended June 30,
Restricted Stock	2020		2019
Weighted-average grant date fair value	$	36.73	$	37.92
Total fair value of restricted shares that vested (in thousands)	$	11,740	$	6,227

Stock Options


Total intrinsic value of options exercised (in thousands)	$	84	$	2,617

Financing

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Financing

FinancingThe Company’s financing strategy includes both short-term and long-term borrowings. The Company utilizes short-term revolving credit facilities, as well as cash flows from operations, to provide funds for both construction and operating expenditures. Depending on market and other conditions, the Company will periodically sell long-term debt or enter into term loan arrangements and use the proceeds to reduce borrowings under the revolving credit facilities or refinance other debt. Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the PNMR and PNMR Development agreements this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities and term loans generally also contain customary covenants, events of default, cross-

Financing Activities

Information concerning the funding dates, maturities and interest rates on the TNMP 2020 Bonds issued in April and July 2020 are as follows:


Funding Date	Maturity Date	Principal Amount		Interest Rate
		(In millions)
April 24, 2020	April 24, 2030	$	85.0	2.73	%
April 24, 2020	April 24, 2050	25.0		3.36
		110.0

July 15, 2020	July 15, 2035	25.0		2.93
July 15, 2020	July 15, 2050	50.0		3.36
		$	185.0

Information concerning the funding dates, mandatory tender dates, and interest rates on the PNM 2020 Fixed Rate PCRBs are as follows:


Funding Date	Mandatory Tender Date	Principal Amount		Interest Rate
		(In millions)
July 22, 2020	June 1, 2022	$	36.0	1.05	%
July 22, 2020	June 1, 2022	11.5		1.20
July 22, 2020	June 1, 2023	130.0		1.10
July 22, 2020	June 1, 2024	125.0		1.15
		$	302.5

Short-term Debt and Liquidity

Short-term debt outstanding consists of:


	June 30,		December 31,
Short-term Debt	2020		2019
	(In thousands)
PNM:
PNM Revolving Credit Facility⁽¹⁾	$	47,055	$	48,000
PNM 2017 New Mexico Credit Facility	40,000		10,000
	87,055		58,000
TNMP:
TNMP Revolving Credit Facility	12,600		15,000
TNMP Electricity Relief ERCOT loan (Note 12)	494		—
	13,094		15,000

PNMR Revolving Credit Facility	152,400		112,100



	$	252,549	$	185,100

⁽¹⁾ Outstanding amount as of June 30, 2020 excludes $100.3 million considered long-term debt as discussed above.

Pension and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2020

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

PNM Plans

The following table presents the components of the PNM Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	10	$	13	$	—	$	—
Interest cost	4,985		6,294		613		829		122		162
Expected return on plan assets	(7,363)		(8,527)		(1,387)		(1,318)		—		—
Amortization of net (gain) loss	4,465		3,880		87		169		101		79
Amortization of prior service cost	(138)		(241)		—		(99)		—		—
Net Periodic Benefit Cost (Income)	$	1,949	$	1,406	$	(677)	$	(406)	$	223	$	241






	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	20	$	26	$	—	$	—
Interest cost	9,971		12,587		1,227		1,658		244		324
Expected return on plan assets	(14,726)		(17,051)		(2,774)		(2,636)		—		—
Amortization of net (gain) loss	8,930		7,759		174		338		201		158
Amortization of prior service cost	(277)		(483)		—		(198)		—		—
Net Periodic Benefit Cost (Income)	$	3,898	$	2,812	$	(1,353)	$	(812)	$	445	$	482

TNMP Plans

The following table presents the components of the TNMP Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	12	$	13	$	—	$	—
Interest cost	544		672		93		113		6		8
Expected return on plan assets	(821)		(967)		(135)		(129)		—		—
Amortization of net (gain) loss	315		235		(80)		(110)		6		4
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	38	$	(60)	$	(110)	$	(113)	$	12	$	12








	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	23	$	26	$	—	$	—
Interest cost	1,088		1,344		187		226		11		16
Expected return on plan assets	(1,642)		(1,934)		(268)		(258)		—		—
Amortization of net (gain) loss	629		470		(162)		(220)		12		8
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	75	$	(120)	$	(220)	$	(226)	$	23	$	24

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Overview There are various claims and lawsuits pending against the Company. In addition, the Company is subject to federal, state, and local environmental laws and regulations and periodically participates in the investigation and remediation of various sites. In addition, the Company periodically enters into financial commitments in connection with its business operations. Also, the Company is involved in various legal and regulatory proceedings in the normal course of its business. See Note 12. It is not possible at this time for the Company to determine fully the effect of all litigation and other legal and regulatory proceedings on its financial position, results of operations, or cash flows. With respect to some of the items listed below, the Company has determined that a loss is not probable or that, to the extent probable, cannot be reasonably estimated. In some cases, the Company is not able to predict with any degree of certainty the range of possible loss that could be incurred. The Company assesses legal and regulatory matters based on current information and makes judgments concerning their potential outcome, giving due consideration to the nature of the claim, the amount and nature of any damages sought, and the probability of success. Such judgments are made with the understanding that the outcome of any litigation, investigation, or other legal proceeding is inherently uncertain. In accordance with GAAP, the Company records liabilities for matters where it is probable a loss has been incurred and the amount of loss is reasonably estimable. The actual outcomes of the items listed below could ultimately differ from the judgments made and the differences could be material. The Company cannot make any assurances that the amount of reserves or potential insurance coverage will be sufficient to cover the cash obligations that might be incurred as a result of litigation or regulatory proceedings. Except as otherwise disclosed, the Company does not expect that any known lawsuits, environmental costs, and commitments will have a material effect on its financial condition, results of operations, or cash flows. Additional information concerning commitments and contingencies is contained in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. Commitments and Contingencies Related to the Environment Nuclear Spent Fuel and Waste Disposal Nuclear power plant operators are required to enter into spent fuel disposal contracts with the DOE that require the DOE to accept and dispose of all spent nuclear fuel and other high-level radioactive wastes generated by domestic power reactors. Although the Nuclear Waste Policy Act required the DOE to develop a permanent repository for the storage and disposal of spent nuclear fuel by 1998, the DOE announced that it would not be able to open the repository by 1998 and sought to excuse its performance of these requirements. In November 1997, the DC Circuit issued a decision preventing the DOE from excusing its own delay but refused to order the DOE to begin accepting spent nuclear fuel. Based on this decision and the DOE’s delay, a number of utilities, including APS (on behalf of itself and the other PVNGS owners, including PNM), filed damages actions against the DOE in the Court of Federal Claims. The lawsuits filed by APS alleged that damages were incurred due to DOE’s continuing failure to remove spent nuclear fuel and high-level waste from PVNGS. In August 2014, APS and the DOE entered into a settlement agreement that establishes a process for the payment of claims for costs incurred through December 31, 2019. Under the settlement agreement, APS must submit claims annually for payment of allowable costs. PNM records estimated claims on a quarterly basis. The benefit from the claims is passed through to customers under the FPPAC to the extent applicable to NMPRC regulated operations. In July 2020, APS accepted the DOE's extension of the settlement agreement for recovery of costs incurred through December 31, 2022. PNM estimates that it will incur approximately $59.6 million (in 2019 dollars) for its share of the costs related to the on-site interim storage of spent nuclear fuel at PVNGS during the term of the operating licenses. PNM accrues these costs as a component of fuel expense as the nuclear fuel is consumed. At June 30, 2020 and December 31, 2019, PNM had a liability for interim storage costs of $13.0 million and $12.7 million, which is included in other deferred credits. PVNGS has sufficient capacity at its on-site Independent Spent Fuel Storage Installation (“ISFSI”) to store all of the nuclear fuel that will be irradiated during the initial operating license period, which ends in December 2027. Additionally, PVNGS has sufficient capacity at its on-site ISFSI to store a portion of the fuel that will be irradiated during the period of extended operation, which ends in November 2047. If uncertainties regarding the U.S. government’s obligation to accept and store spent fuel are not favorably resolved, APS will evaluate alternative storage solutions that may obviate the need to expand the ISFSI to accommodate all of the fuel that will be irradiated during the period of extended operation. The Clean Air Act Regional Haze In 1999, EPA developed a regional haze program and regional haze rules under the CAA. The rule directs each of the 50 states to address regional haze. Pursuant to the CAA, states have the primary role to regulate visibility requirements by promulgating SIPs. States are required to establish goals for improving visibility in national parks and wilderness areas (also known as Class I areas) and to develop long-term strategies for reducing emissions of air pollutants that cause visibility impairment in their own states and for preventing degradation in other states. States must establish a series of interim goals to ensure continued progress by adopting a new SIP every ten years. In the first SIP planning period, states were required to conduct BART determinations for certain covered facilities, including utility boilers, built between 1962 and 1977 that have the potential to emit more than 250 tons per year of visibility impairing pollution. If it was demonstrated that the emissions from these sources caused or contributed to visibility impairment in any Class I area, then BART must have been installed by the beginning of 2018. For all future SIP planning periods, states must evaluate whether additional emissions reduction measures may be needed to continue making reasonable progress toward natural visibility conditions. On January 10, 2017, EPA published in the Federal Register revisions to the regional haze rule. EPA also provided a companion draft guidance document for public comment. The new rule delayed the due date for the next cycle of SIPs from 2019 to 2021, altered the planning process that states must employ in determining whether to impose “reasonable progress” emission reduction measures, and gave new authority to federal land managers to seek additional emission reduction measures outside of the states’ planning process. Finally, the rule made several procedural changes to the regional haze program, including changes to the schedule and process for states to file 5-year progress reports. EPA’s new rule was challenged by numerous parties. On January 19, 2018, EPA filed a motion to hold the case in abeyance in light of several letters issued by EPA on January 17, 2018 to grant various petitions for reconsideration of the 2017 rule revisions. EPA’s decision to revisit the 2017 rule is not a determination on the merits of the issues raised in the petitions. On December 20, 2018, EPA released a new guidance document on tracking visibility progress for the second planning period. EPA is allowing states discretion to develop SIPs that may differ from EPA’s guidance as long as they are consistent with the CAA and other applicable regulations. On August 20, 2019, EPA finalized the draft guidance that was released in 2016 as a companion to the regional haze rule revisions. The final guidance differs from the draft in several ways. For example, the final guidance recognizes that sources already subject to BART may not need to be re-evaluated under the full four-factor analysis whereas the draft guidance encouraged states to evaluate all sources regardless of whether they were previously subject to BART. In addition, the final guidance recognizes that states may consider both visibility benefits and the cost of different control options when applying the four-factor analysis whereas the draft guidance recommended states require any control measures identified to be reasonable after considering the four-factor analysis alone. SIPs for the second compliance period are due in July 2021. NMED is currently preparing its SIP for the second compliance period and has notified PNM that it will not require a regional haze four-factor analysis for SJGS since PNM will retire its share of SJGS in 2022. PNM cannot predict the outcome of these matters with respect to Four Corners. Four Corners Four Corners Federal Agency Lawsuit – On April 20, 2016, several environmental groups filed a lawsuit against OSM and other federal agencies in the U.S. District Court for the District of Arizona in connection with their issuance of the approvals that extended the life of Four Corners and the adjacent mine. The lawsuit alleges that these federal agencies violated both the ESA and NEPA in providing the federal approvals necessary to extend operations at Four Corners and the adjacent mine past July 6, 2016. The court granted an APS motion to intervene in the litigation. NTEC, the current owner of the mine providing coal to Four Corners, filed a motion to intervene for the limited purpose of seeking dismissal of the lawsuit based on NTEC’s tribal sovereign immunity. The court granted NTEC’s motion and dismissed the case with prejudice, terminating the proceedings. In November 2017, the environmental group plaintiffs filed a Notice of Appeal of the dismissal in the U.S. Court of Appeals for the Ninth Circuit, and the court granted their subsequent motion to expedite the appeal. The Ninth Circuit issued a decision affirming the District Court’s dismissal of the case. In September 2019, the environmental groups filed a motion for reconsideration, which was denied in December 2019. On March 24, 2020, the environmental groups filed a petition for writ of certiorari in the U.S. Supreme Court seeking review of the Ninth Circuit's decision. The Supreme Court denied the petition on June 29, 2020, making the decision of the Ninth Circuit to affirm the District Courts dismissal of the case final. This matter is now complete. Carbon Dioxide Emissions On August 3, 2015, EPA established standards to limit CO₂ emissions from power plants. EPA took three separate but related actions in which it: (1) established the Carbon Pollution Standards for new, modified, and reconstructed power plants; (2) established the Clean Power Plan to set standards for carbon emission reductions from existing power plants; and (3) released a proposed federal plan associated with the final Clean Power Plan. The Clean Power Plan was published on October 23, 2015. Multiple states, utilities, and trade groups filed petitions for review in the DC Circuit to challenge both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources. Numerous parties also simultaneously filed motions to stay the Clean Power Plan during the litigation. On January 21, 2016, the DC Circuit denied petitions to stay the Clean Power Plan, but 29 states and state agencies successfully petitioned the US Supreme Court for a stay, which was granted on February 9, 2016. The decision meant that the Clean Power Plan was not in effect and neither states nor sources were obliged to comply with its requirements. With the US Supreme Court stay in place, the DC Circuit heard oral arguments on the merits of the Clean Power Plan on September 27, 2016 in front of a ten judge en banc panel. However, before the DC Circuit could issue an opinion, the Trump Administration asked that the case be held in abeyance while the rule was being re-evaluated, which was granted. In addition, the DC Circuit issued a similar order in connection with a motion filed by EPA to hold cases challenging the NSPS in abeyance. On September 17, 2019, the DC Circuit issued an order that granted motions by various petitioners, including industry groups and EPA, to dismiss cases challenging the Clean Power Plan as moot due to EPA's issuance of the Affordable Clean Energy rule, which repealed the Clean Power Plan. On March 28, 2017, President Trump issued an Executive Order on Energy Independence. The order put forth two general policies: promote clean and safe development of energy resources, while avoiding regulatory burdens, and ensure electricity is affordable, reliable, safe, secure, and clean. The order directed the EPA Administrator to review and, if appropriate and consistent with law, suspend, revise, or rescind (1) the Clean Power Plan, (2) the New Source Performance Standards (“NSPS”) for GHG from new, reconstructed, or modified electric generating units, (3) the Proposed Clean Power Plan Model Trading Rules, and (4) the Legal Memorandum supporting the Clean Power Plan. In response to the Executive Order, EPA filed a petition with the DC Circuit requesting the cases challenging the Clean Power Plan be held in abeyance until after the conclusion of EPA’s review and any subsequent rulemaking, which was granted. In addition, the DC Circuit issued a similar order in connection with a motion filed by EPA to hold cases challenging the NSPS in abeyance. On September 17, 2019, the DC Circuit issued an order that granted motions by various petitioners, including industry groups and EPA, to dismiss the cases challenging the Clean Power Plan as moot due to EPA’s issuance of the Affordable Clean Energy rule. EPA’s efforts to replace the Clean Power Plan with the Affordable Clean Energy rule began on October 10, 2017, when EPA issued a NOPR proposing to repeal the Clean Power Plan and filed its status report with the court requesting the case be held in abeyance until the completion of the rulemaking on the proposed repeal. The NOPR proposed a legal interpretation concluding that the Clean Power Plan exceeded EPA’s statutory authority. On August 31, 2018, EPA published a proposed rule, known as the Affordable Clean Energy rule, to replace the Clean Power Plan. On June 19, 2019, EPA released the final version of the Affordable Clean Energy rule. EPA takes three actions in the final rule: (1) repealing of the Clean Power Plan; (2) promulgating the Affordable Clean Energy rule; and (3) revising the implementing regulations for all emission guidelines issued under Clean Air Act Section 111(d), which, among other things, extends the deadline for state plans and the timing for EPA's approval process. The final rule is very similar to the August 2018 proposed rule. EPA set the Best System of Emissions Reduction (“BSER”) for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” that can be applied inside the fence-line. Rather than setting a specific numerical standard of performance, EPA’s rule directs states to determine which of the candidate technologies to apply to each coal-fired unit and establish standards of performance based on the degree of emission reduction achievable based on the application of BSER. The final rule requires states to submit a plan to EPA by July 8, 2022 and then EPA has one year to approve the plan. If states do not submit a plan or their submitted plan is not acceptable, EPA will have two years to develop a federal plan. The Affordable Clean Energy rule is not expected to impact SJGS since EPA’s final approval of a state SIP would occur after PNM retires its share of SJGS in 2022. Since the Navajo Nation does not have primacy over its air quality program, EPA would be the regulatory authority responsible for implementing the Affordable Clean Energy rule on the Navajo Nation. PNM is unable to predict the potential financial or operational impacts on Four Corners. While corresponding NSR reform regulations were proposed as part of the proposed Affordable Clean Energy rule, the final rule did not include such reform measures. EPA has indicated that it plans to finalize the proposed NSR reform in 2020. Unrelated to the Affordable Clean Energy rule, EPA issued a proposed rule on August 1, 2019 to clarify one aspect of the pre-construction review process for evaluating whether the NSR permitting program would apply to a proposed project at an existing source of emissions. The proposed rule clarifies that both emissions increases and decreases resulting from a project are to be considered in determining whether the proposed project will result in an increase in air emissions. On December 20, 2018, EPA published in the Federal Register a proposed rule that would revise the Carbon Pollution Standards rule published in October 2015 for new, reconstructed, or modified coal-fired EGUs. The proposed rule would revise the standards for new coal-fired EGUs based on the revised BSER as the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units), instead of partial carbon capture and sequestration. As a result, the proposed rule contains less stringent CO₂ emission performance standards for new units. EPA has also proposed revisions to the standards for reconstructed and modified fossil-fueled power plants to align with the proposed standards for new units. EPA is not proposing any changes nor reopening the standards of performance for newly constructed or reconstructed stationary combustion turbines. A final rule is expected in 2020. PNM’s review of the GHG emission reductions standards under the Affordable Clean Energy rule and the revised proposed Carbon Pollution Standards rule is ongoing. The Affordable Clean Energy rule has been challenged by several parties and may be impacted by further litigation. PNM cannot predict the impact these standards may have on its operations or a range of the potential costs of compliance, if any. National Ambient Air Quality Standards (“NAAQS”) The CAA requires EPA to set NAAQS for pollutants reasonably anticipated to endanger public health or welfare. EPA has set NAAQS for certain pollutants, including NOx, SO₂,ozone, and particulate matter. In 2010, EPA updated the primary NOx and SO₂ NAAQS to include a 1-hour standard while retaining the annual standards for NOx and SO₂and the 24-hour SO₂ standard. EPA also updated the final particulate matter standard in 2012 and updated the ozone standard in 2015. NOx Standard – On April 18, 2018, EPA published the final rule to retain the current primary health-based NOx standards of which NO₂is the constituent of greatest concern and is the indicator for the primary NAAQS. EPA concluded that the current 1-hour and annual primary NO₂ standards are requisite to protect public health with an adequate margin of safety. The rule became effective on May 18, 2018. SO₂ Standard – On May 13, 2014, EPA released the draft data requirements rule for the 1-hour SO₂ NAAQS, which directs state and tribal air agencies to characterize current air quality in areas with large SO₂ sources to identify maximum 1- hour SO₂ concentrations. This characterization requires areas be designated as attainment, nonattainment, or unclassifiable for compliance with the 1-hour SO₂ NAAQS. On August 11, 2015, EPA released the Data Requirements Rule for SO₂, telling states how to model or monitor to determine attainment or nonattainment with the new 1-hour SO₂ NAAQS. On June 3, 2016, NMED notified PNM that air quality modeling results indicated that SJGS was in compliance with the standard. In January 2017, NMED submitted its formal modeling report regarding attainment status to EPA. The modeling indicated that no area in New Mexico exceeds the 1-hour SO₂ standard. NMED submitted the first annual report for SJGS as required by the Data Requirements Rule in June 2018. That report recommended that no further modeling was warranted due to decreased SO₂emissions. NMED submitted the second and third annual modeling report to EPA in July 2019 and July 2020. Those reports retained the recommendation that no further modeling is needed at this time and is subject to EPA review. On February 25, 2019, EPA announced its final decision to retain without changes the primary health-based NAAQS for SO₂. Specifically, EPA will retain the current 1-hour standard for SO₂, which is 75 parts per billion, based on the 3-year average of the 99th percentile of daily maximum 1-hour SO₂ concentrations. SO₂ is the most prevalent SO₂ compound and is used as the indicator for the primary SO₂ NAAQS. On May 14, 2015, PNM received an amendment to its NSR air permit for SJGS, which reflects the revised state implementation plan for regional haze BART and required the installation of SNCRs. The revised permit also required the reduction of SO₂ emissions to 0.10 pound per MMBTU on SJGS Units 1 and 4 and the installation of BDT equipment modifications for the purpose of reducing fugitive emissions, including NOx, SO_2, and particulate matter. These reductions help SJGS meet the NAAQS for these constituents. The BDT equipment modifications were installed at the same time as the SNCRs, in order to most efficiently and cost effectively conduct construction activities at SJGS. See a discussion of the regulatory treatment of BDT in Note 12. Ozone Standard – On October 1, 2015, EPA finalized the new ozone NAAQS and lowered both the primary and secondary 8-hour standard from 75 to 70 parts per billion. With ozone standards becoming more stringent, fossil-fueled generation units will come under increasing pressure to reduce emissions of NOx and volatile organic compounds since these are the pollutants that form ground-level ozone. On July 13, 2020, EPA proposed to retain the existing ozone NAAQS based on a review of the full body of currently available scientific evidence and exposure/risk information, but that proposal has not yet been published in the Federal Register, and EPA is unlikely to finalize the proposal until after the next presidential election. On November 10, 2015, EPA proposed a rule revising its Exceptional Events Rule, which outlines the requirements for excluding air quality data (including ozone data) from regulatory decisions if the data is affected by events outside an area’s control. The proposed rule is important in light of the more stringent ozone NAAQS final rule since western states like New Mexico and Arizona are subject to elevated background ozone transport from natural local sources, such as wildfires and stratospheric inversions, and transported via winds from distant sources in other regions or countries. EPA finalized the rule on October 3, 2016 and released related guidance in 2018 and 2019 to help implement its new exceptional events policy. During 2017 and 2018, EPA released rules establishing area designations for ozone. In those rules, San Juan County, New Mexico, where SJGS and Four Corners are located, is designated as attainment/unclassifiable and only a small area in Doña Ana County, New Mexico is designated as marginal non-attainment. Although Afton is located in Doña Ana County, it is not located within the small area designated as nonattainment for the 2015 ozone standard. The final rule also establishes the timing of attainment dates for each non-attainment area classification, which are marginal, moderate, serious, severe, or extreme. The rule became effective May 8, 2018. Attainment plans for nonattainment areas are due in August 2021. NMED has responsibility for bringing the small area in Doña Ana County designated as marginal/non-attainment for ozone into compliance and will look at all sources of NOx and volatile organic compounds. On November 22, 2019, EPA issued findings that several states, including New Mexico, had failed to submit SIPs for the 8-hour ozone NAAQS. In response, in December 2019, NMED published the Public Review Draft of the New Mexico 2013 NAAQS Good Neighbor SIP that outlines the strategies and emissions control measures that are expected to improve air quality in the area by May 8, 2021. These strategies and measures would aim to reduce the amount of NOx and volatile organic compounds emitted to the atmosphere and will rely upon current or upcoming federal rules, new or revised state rules, and other programs. Comments or requests for a public hearing were required by January 21, 2020. PNM does not believe there will be material impacts to its facilities as a result of NMED’s non-attainment designation of the small area within Doña Ana County. Until EPA approves attainment designations for the Navajo Nation and releases a proposal to implement the revised ozone NAAQS, PNM is unable to predict what impact the adoption of these standards may have on Four Corners. PNM cannot predict the outcome of this matter. PM Standard – On January 30, 2020, EPA published in the Federal Register a notice announcing the availability of its final Policy Assessment for the Review of the National Ambient Air Quality Standards for Particulate Matter (the "Final PA"). The final assessment was prepared as part of the review of the primary and secondary PM NAAQS. In the assessment, EPA recommend lowering the primary annual PM2.5 standard to between 8 µg/m3 and 10 µg/m3. However, on April 30, 2020, EPA published a proposed rule to retain the current standards for PM due to uncertainties in the data relied upon in the Final PA. EPA accepted comments on the proposed rule through June 29, 2020. EPA anticipates issuing a final rulemaking in late 2020. PNM cannot predict the outcome of this matter or whether it will have a material impact on its financial position, results of operations, or cash flows. Navajo Nation Environmental Issues Four Corners is located on the Navajo Nation and is held under easements granted by the federal government, as well as agreements with the Navajo Nation which grant each of the owners the right to operate on the site. The Navajo Acts purport to give the Navajo Nation Environmental Protection Agency authority to promulgate regulations covering air quality, drinking water, and pesticide activities, including those activities that occur at Four Corners. In October 1995, the Four Corners participants filed a lawsuit in the District Court of the Navajo Nation challenging the applicability of the Navajo Acts to Four Corners. In May 2005, APS and the Navajo Nation signed an agreement resolving the dispute regarding the Navajo Nation’s authority to adopt operating permit regulations under the Navajo Nation Air Pollution Prevention and Control Act. As a result of this agreement, APS sought, and the court granted, dismissal of the pending litigation in the Navajo Nation Supreme Court and the Navajo Nation District Court, to the extent the claims relate to the CAA. The agreement does not address or resolve any dispute relating to other aspects of the Navajo Acts. PNM cannot currently predict the outcome of these matters or the range of their potential impacts. Cooling Water Intake Structures In 2014, EPA issued a rule establishing national standards for certain cooling water intake structures at existing power plants and other facilities under the Clean Water Act to protect fish and other aquatic organisms by minimizing impingement mortality (the capture of aquatic wildlife on intake structures or against screens) and entrainment mortality (the capture of fish or shellfish in water flow entering and passing through intake structures). To minimize impingement mortality, the rule provides operators of facilities, such as SJGS and Four Corners, seven options for meeting Best Technology Available (“BTA”) standards for reducing impingement. SJGS has a closed-cycle recirculating cooling system, which is a listed BTA and may also qualify for the “de minimis rate of impingement” based on the design of the intake structure. The permitting authority must establish the BTA for entrainment on a site-specific basis, taking into consideration an array of factors, including endangered species and social costs and benefits. Affected sources must submit source water baseline characterization data to the permitting authority to assist in the determination. Compliance deadlines under the rule are tied to permit renewal and will be subject to a schedule of compliance established by the permitting authority. The rule is not clear as to how it applies and what the compliance timelines are for facilities like SJGS that have a cooling water intake structure and only a multi-sector general stormwater permit. However, EPA has indicated that it is contemplating a December 31, 2023 compliance deadline. PNM is working with EPA regarding this issue and does not expect material changes as a result of any requirements that may be imposed upon SJGS, particularly given the NMPRC's April 1, 2020 approval for PNM to retire its share of SJGS by June 2022. On May 23, 2018, several environmental groups sued EPA Region IX in the U.S. Court of Appeals for the Ninth Circuit Court over EPA’s failure to timely reissue the Four Corners NPDES permit. The petitioners asked the court to issue a writ of mandamus compelling EPA Region IX to take final action on the pending NPDES permit by a reasonable date. EPA subsequently reissued the NPDES permit on June 12, 2018. The permit did not contain conditions related to the cooling water intake structure rule as EPA determined that the facility has achieved BTA for both impingement and entrainment by operating a closed-cycle recirculation system. On July 16, 2018, several environmental groups filed a petition for review with EPA’s Environmental Appeals Board concerning the reissued permit. The environmental groups alleged that the permit was reissued in contravention of several requirements under the Clean Water Act and did not contain required provisions concerning certain revised effluent limitation guidelines, existing-source regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities. On December 19, 2018, EPA withdrew the Four Corners NPDES permit in order to examine issues raised by the environmental groups. Withdrawal of the permit moots the appeal pending before the Environmental Appeals Board. EPA’s Environmental Appeals Board thereafter dismissed the environmental groups’ appeal. EPA issued an updated NPDES permit on September 30, 2019. The permit has been stayed pending an appeal filed by several environmental groups on November 1, 2019 to EPA's Environmental Appeals Board. Oral argument on this appeal has been scheduled for September 3, 2020. PNM cannot predict the outcome of this matter or whether it will have a material impact on PNM’s financial position, results of operations or cash flows. Effluent Limitation Guidelines On June 7, 2013, EPA published proposed revised wastewater effluent limitation guidelines establishing technology-based wastewater discharge limitations for fossil fuel-fired electric power plants. EPA’s proposal offered numerous options that target metals and other pollutants in wastewater streams originating from fly ash and bottom ash handling activities, scrubber activities, and non-chemical metal cleaning waste operations. All proposed alternatives establish a “zero discharge” effluent limit for all pollutants in fly ash transport water. Requirements governing bottom ash transport water differ depending on which alternative EPA ultimately chooses and could range from effluent limits based on Best Available Technology Economically Achievable to “zero discharge” effluent limits. EPA signed the final Steam Electric Effluent Guidelines rule on September 30, 2015. The final rule, which became effective on January 4, 2016, phases in the new, more stringent requirements in the form of effluent limits for arsenic, mercury, selenium, and nitrogen for wastewater discharged from wet scrubber systems and zero discharge of pollutants in ash transport water that must be incorporated into plants’ NPDES permits. Each plant must comply between 2018 and 2023 depending on when it needs a new or revised NPDES permit. The Effluent Limitations Guidelines rule was challenged in the U.S. Court of Appeals for the Fifth Circuit by numerous parties. On April 12, 2017, EPA signed a notice indicating its intent to reconsider portions of the rule, and on August 22, 2017, the Fifth Circuit issued an order severing the issues under reconsideration and holding the case in abeyance as to those issues. However, the court allowed challenges to other portions of the rule to proceed. On April 12, 2019, the Fifth Circuit granted those challenges and issued an opinion vacating several portions of the rule, specifically those related to legacy wastewater and leachate, for which the court deemed the standards selected by EPA arbitrary and capricious. On September 18, 2017, EPA published a final rule for postponement of certain compliance dates. The rule postponed the earliest date on which compliance with the effluent limitation guidelines for these waste streams would be required from November 1, 2018 until November 1, 2020. Although the new deadlines were challenged in court, the Fifth Circuit rejected those challenges on August 28, 2019. On November 22, 2019, EPA published a proposed rule revising the original Effluent Limitation Guidelines while maintaining the compliance dates. Comments were due January 21, 2020. Because SJGS is zero discharge for wastewater and is not required to hold a NPDES permit, it is expected that minimal to no requirements will be imposed. Reeves Station, a PNM-owned gas-fired generating station, discharges cooling tower blowdown to a publicly owned treatment plant and holds an NPDES permit. It is expected that minimal to no requirements will be imposed at Reeves Station. EPA reissued an NPDES permit for Four Corners on June 12, 2018. Since that time, the NPDES permit at Four Corners has been subject to various challenges by environmental groups. See Cooling Water Intake Structures above for additional discussion of Four Corners' current NPDES permit. Four Corners may be required to change equipment and operating practices affecting boilers and ash handling systems, as well as change its waste disposal techniques during the next NPDES permit renewal in 2023. PNM is unable to predict the outcome of these matters or a range of the potential costs of compliance. Santa Fe Generating Station PNM and NMED are parties to agreements under which PNM has installed a remediation system to treat water from a City of Santa Fe municipal supply well and an extraction well to address gasoline contamination in the groundwater at the site of PNM’s former Santa Fe Generating Station and service center. A 2008 NMED site inspection report states that neither the source nor extent of contamination at the site has been determined and that the source may not be the former Santa Fe Generating Station. During 2013 and 2014, PNM and NMED collected additional samples that showed elevated concentrations of nitrate and volatile organic compounds in some of the monitoring wells at the site. In addition, one monitoring well contained free-phase hydrocarbon products. PNM collected a sample of the product for “fingerprint” analysis. The results of this analysis indicated the product was a mixture of older and newer fuels. The presence of newer fuels in the sample suggests the hydrocarbon product likely originated from off-site sources. In December 2015, PNM and NMED entered into a memorandum of understanding to address changing groundwater conditions at the site under which PNM agreed to continue hydrocarbon investigation under the supervision of NMED. Qualified costs are eligible for payment through the New Mexico Corrective Action Fund (“CAF”), which is administered by the NMED Petroleum Storage Tank Bureau. In March 2019, PNM received notice from NMED that an abatement plan for the site is required to address concentrations of previously identified compounds, unrelated to those discussed above, found in the groundwater. NMED approved PNM’s abatement plan proposal, which covers field work and reporting. Field work related to the investigation under both the CAF and abatement plan requirements was completed in October 2019. Activities and findings associated with the field work were presented in two separate reports and released to stakeholders in early 2020. The reports’ conclusions support PNM’s contention that off-site sources have impacted, and are continuing to impact, the local groundwater in the vicinity of the former Santa Fe Generating Station. The City of Santa Fe has stopped operating its well at the site, which is needed for PNM’s groundwater remediation system to operate. As a result, PNM has stopped performing remediation activities at the site. However, PNM’s monitoring and other abatement activities at the site are ongoing and will continue until the groundwater meets applicable federal and state standards or until the NMED determines remediation is not required, whichever is earlier. PNM is not able to assess the duration of this project or estimate the impact on its obligations if PNM is required to resume groundwater remediation activities at the site. PNM is unable to predict the outcome of these matters. Coal Combustion Residuals Waste Disposal CCRs consisting of fly ash, bottom ash, and gypsum generated from coal combustion and emission control equipment at SJGS are currently disposed of in the surface mine pits adjacent to the plant. SJGS does not operate any CCR impoundments or landfills. The NMMMD currently regulates mine reclamation activities at the San Juan mine, including placement of CCRs in the surface mine pits, with federal oversight by the OSM. APS disposes of CCRs in ponds and dry storage areas at Four Corners. Ash management at Four Corners is regulated by EPA and the New Mexico State Engineer’s Office. EPA’s final coal ash rule, which became effective on October 19, 2015, included a non-hazardous waste determination for coal ash. The rule was promulgated under Subtitle D of RCRA and sets minimum criteria for existing and new CCR landfills and surface impoundments. On December 16, 2016, the Water Infrastructure Improvements for the Nation Act (the “WIIN Act”) was signed into law to address critical water infrastructure needs in the U.S. and contains a number of provisions related to the CCR rules. Among other things, the WIIN Act allows, but does not require, states to develop and submit CCR permit programs for EPA approval, provides flexibility for states to incorporate EPA’s final rule for CCRs or develop other criteria that are at least as protective as EPA’s final rule, and requires EPA to approve state permit programs within 180 days of submission by the state. Because states are not required to implement their own CCR permit programs, EPA will implement the permit program in states that choose not to implement a program, subject to Congressional funding. Until permit programs are in effect, EPA has authority to directly enforce the CCR rule. For facilities located within the boundaries of Native American reservations, such as the Navajo Nation where Four Corners is located, EPA is required to develop a federal permit program regardless of appropriated funds. There is no timeline for establishing either state or federal permitting programs. On July 30, 2018, EPA published a rule that constitutes “Phase One, Part One” of its ongoing reconsideration and revision of the April 17, 2015 coal ash rule. The final rule includes two types of revisions. The first revision extended the deadline to allow EGUs with unlined impoundments or that fail to meet the uppermost aquifer requirement to continue to receive coal ash until October 31, 2020. The rule also authorized a “Participating State Director” or EPA to approve suspension of groundwater monitoring and to issue certifications related to the location restrictions, design criteria, groundwater monitoring, remedy selection and implementation. The revisions also modify groundwater protection standards for certain constituents, which include cobalt, molybdenum, lithium, and lead without a maximum contamination level. EPA intends to issue multiple proposed rulemakings with a final rule expected in 2020 that will include the following: (1) deadlines for unlined surface impoundments to cease receiving waste; (2) a “Phase Two” rule to address amendments to the national minimum criteria; and (3) rulemaking for alternative demonstration for unlined surface impoundments with a request for comment on inclusion of legacy units. On August 14, 2019, the “Phase Two” proposed rule was published in the Federal Register with comments due on October 15, 2019. This rule proposes revisions to reporting and accessibility to public information, the definition of CCR piles, the definition of beneficial use, and the requirements for management of CCR piles. A final rule is expected in mid to late 2020. On November 4, 2019, EPA proposed a change to the CCR rule that, subject to EPA authorization for each facility, would allow facilities that have committed to cease burning coal in the near-term to qualify for alternative closure. CCR disposal units at such plants could continue operating even though they would otherwise have been subject to forced closure. On December 2, 2019, EPA published the proposed Part A CCR rule requiring a new date of August 31, 2020 for companies to initiate closure of unlined CCR impoundments and changing the classification of compacted soil-lined or clay-lined surface impoundments from “lined” to “unlined”. On February 20, 2020, EPA published a proposed rule establishing a federal permitting program for the handling of CCR within the boundaries of Native American reservations and in states without their own federally authorized state programs. Permits for units within the boundaries of Native American reservations would be due 18 months after the effective date of the rule. The deadline to provide comments was extended to July 19, 2020. The final rule is expected in 2020. PNM cannot predict the outcome of EPA’s rule making activity or the outcome of any related litigation, and whether or how such a ruling would affect operations at Four Corners. The CCR rule does not cover mine placement of coal ash. OSM is expected to publish a proposed rule covering mine placement in the future and will likely be influenced by EPA’s rule and the determination by EPA that CCRs are non-hazardous. PNM cannot predict the outcome of OSM’s proposed rulemaking regarding CCR regulation, including mine placement of CCRs, or whether OSM’s actions will have a material impact on PNM’s operations, financial position, or cash flows. Based upon the requirements of the final rule, PNM conducted a CCR assessment at SJGS and made minor modifications at the plant to ensure that there are no facilities that would be considered impoundments or landfills under the rule. PNM would seek recovery from its ratepayers of all CCR costs for retail jurisdictional assets that are ultimately incurred. PNM does not expect the rule to have a material impact on operations, financial position, or cash flows. As indicated above, CCRs at Four Corners are currently disposed of in ash ponds and dry storage areas. The CCR rule requires ongoing, phased groundwater monitoring. Utilities that own or operate CCR disposal units, such as those at Four Corners were required to collect sufficient groundwater sampling data to initiate a detection monitoring program. Four Corners completed the analysis for its CCR disposal units, which identified several units that will need corrective action or will need to cease operations and initiate closure by October 31, 2020 under current regulations. As part of this assessment, Four Corners will continue to gather additional groundwater data and perform remedial evaluations. At this time, PNM does not anticipate its share of the cost to complete these corrective actions, to close the CCR disposal units, or to gather and perform remedial evaluations on groundwater at Four Corners will have a significant impact on its operations, financial position, or cash flows. Other Commitments and Contingencies Coal Supply SJGS The coal requirements for SJGS are supplied by WSJ LLC. WSJ LLC holds certain federal, state, and private coal leases. In addition to coal delivered to meet the current needs of SJGS, PNM has prepaid the current San Juan mine owner and operator, WSJ LLC, for certain coal mined but not yet delivered to the plant site. At both June 30, 2020 and December 31, 2019, prepayments for coal, which are included in other current assets, amounted to $26.3 million. Additional information concerning the coal supply for SJGS is contained in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. In conjunction with the activities undertaken to comply with the CAA for SJGS, PNM and the other owners of SJGS evaluated alternatives for the supply of coal to SJGS. On July 1, 2015, PNM and Westmoreland entered into a new coal supply agreement (the “SJGS CSA”), pursuant to which Westmoreland, through its indirectly wholly-owned subsidiary SJCC, agreed to supply all of the coal requirements of SJGS through June 30, 2022. PNM and Westmoreland also entered into agreements under which CCR disposal and mine reclamation services for SJGS would be provided. As discussed in Note 6, with the closing of the sale of the assets of SJCC on March 15, 2019, WSJ LLC assumed the rights and obligations of SJCC under the SJGS CSA and the agreements for CCR disposal and mine reclamation services. Pricing under the SJGS CSA is primarily fixed, with adjustments to reflect changes in general inflation. The pricing structure takes into account that WSJ LLC has been paid for coal mined but not delivered. PNM had the option to extend the SJGS CSA, subject to negotiation of the term of the extension and compensation to the miner. In 2018, PNM, Los Alamos, UAMPS, and Tucson provided notice of their intent to exit SJGS in 2022 and Farmington gave notice that it wishes to continue SJGS operations and to extend the terms of both agreements. On November 30, 2018, PNM provided notice to Westmoreland that PNM does not intend to extend the term of the SJGS CSA or to negotiate a new coal supply agreement for SJGS, which will result in the current agreement expiring on its own terms on June 30, 2022. See additional discussion of PNM’s SJGS Abandonment Application in Note 12. In connection with certain mining permits relating to the operation of the San Juan mine, the San Juan mine owner was required to post reclamation bonds of $118.7 million with the NMMMD. In order to facilitate the posting of reclamation bonds by sureties on behalf of the San Juan mine owner, PNMR entered into letter of credit arrangements with a bank under which letters of credit aggregating $30.3 million have been issued. In May 2020, JPMorgan Chase Bank N.A. gave notice that it would not extend the letters of credit, which expire on October 21, 2020. PNMR is currently pursuing a replacement agreement. As discussed in Note 6, on March 15, 2019, the assets owned by SJCC were sold to WSJ LLC, a subsidiary of Westmoreland Mining Holdings, LLC. Under the sale agreement, WSJ LLC assumed the rights and obligations of SJCC, including obligations to PNMR under the outstanding letters of credit. Four Corners APS purchases all of Four Corners’ coal requirements from NTEC, an entity owned by the Navajo Nation, under a coal supply contract (the “Four Corners CSA”) that expires in 2031. The coal comes from reserves located within the Navajo Nation. NTEC has contracted with Bisti Fuels Company, LLC, a subsidiary of The North American Coal Corporation, for management and operation of the mine. The contract provides for pricing adjustments over its term based on economic indices. PNM's share of the coal costs is being recovered through the FPPAC. See additional discussion of the Four Corners CSA in Note 17 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. Coal Mine Reclamation As indicated under Coal Combustion Residuals Waste Disposal above, SJGS currently disposes of CCRs in the surface mine pits adjacent to the plant and Four Corners disposes of CCRs in ponds and dry storage areas. As discussed in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, in conjunction with the proposed shutdown of SJGS Units 2 and 3 to comply with the BART requirements of the CAA, periodic updates to the coal mine reclamation study were requested by the SJGS participants. These updates have generally increased PNM's share of the estimated cost of mine reclamation and have included adjustments to reflect the December 2017 shutdown of SJGS Units 2 and 3, the terms of the reclamation services agreement with WSJ LLC, and changes to reflect the requirements of the 2015 San Juan mine permit plan. In December 2018, PNM remeasured its liability for coal mine reclamation for the mine that serves SJGS to reflect that reclamation activities may occur beginning in 2022, rather than in 2053 as previously anticipated. This estimate resulted in an increase in overall reclamation costs of $39.2 million due to an increase in the amount of fill dirt required to remediate the mine areas and the timing of activities necessary to reclaim the mine that serves SJGS. The increase includes costs for both the underground and surface mines that serve SJGS. PNM recovers from retail customers reclamation costs associated with the underground mine. However, the NMPRC has capped the amount that can be collected from retail customers for final reclamation of the surface mines at $100.0 million. As a result, PNM recorded $9.4 million of the increase in the liability related to the underground mine in regulatory assets on the Condensed Consolidated Balance Sheets and received recovery for such costs in its SJGS Abandonment Application. See Note 12. PNM’s estimate of the costs necessary to reclaim the mine that serves SJGS is subject to many assumptions, including the timing of reclamation, generally accepted practices at the time reclamation activities occur, and then current inflation and discount rates. PNM cannot predict the ultimate cost to reclaim the mine that serves SJGS and would seek to recover all costs related to reclaiming the underground mine from its customers but could be exposed to additional loss related to surface mine reclamation. A draft coal mine reclamation study for the mine that serves Four Corners was issued in July 2019. The study reflected operation of the mine through 2031, the term of the Four Corners CSA. In June 2019, the draft study resulted in a net decrease in PNM’s share of the coal mine reclamation obligation of $0.3 million, which was primarily driven by lower overhead costs offset by an increase driven by a reduction in the discount rate used by PNM to measure the liability. In September 2019, the study was finalized and included the same assumptions used in the draft study with limited modifications. PNM updated its liability using the final study and to reflect the appropriate discount rates, which had decreased since PNM’s prior measurement. These updates resulted in an increase to PNM’s share of the coal mine reclamation obligation for the mine that serves Four Corners of $1.1 million during the three months ended September 30, 2019. Based on the most recent estimates and PNM’s ownership share of SJGS, PNM’s remaining payments as of June 30, 2020 for mine reclamation, in future dollars, are estimated to be $90.6 million for the surface mines at both SJGS and Four Corners and $40.0 million for the underground mine at SJGS. At June 30, 2020 and December 31, 2019, liabilities, in current dollars, of $69.9 million and $70.3 million for surface mine reclamation and $26.4 million and $25.3 million for underground mine reclamation were recorded in other deferred credits. Under the terms of the SJGS CSA, PNM and the other SJGS owners are obligated to compensate WSJ LLC for all reclamation costs associated with the supply of coal from the San Juan mine. The SJGS owners entered into a reclamation trust funds agreement to provide funding to compensate WSJ LLC for post-term reclamation obligations. As discussed in Note 16 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K, as part of the restructuring of SJGS ownership the SJGS owners negotiated the terms of an amended agreement to fund post-term reclamation obligations under the CSA. The trust funds agreement requires each owner to enter into an individual trust agreement with a financial institution as trustee, create an irrevocable reclamation trust, and periodically deposit funds into the reclamation trust for the owner’s share of the mine reclamation obligation. Deposits, which are based on funding curves, must be made on an annual basis. As part of the restructuring of SJGS ownership discussed above, the SJGS participants agreed to adjusted interim trust funding levels. PNM funded $5.5 million in December 2019. Based on PNM’s reclamation trust fund balance at June 30, 2020, the current funding curves indicate PNM’s required contributions to its reclamation trust fund would be $8.8 million in 2020, $10.9 million in 2021, and $11.7 million in 2022. Under the Four Corners CSA, which became effective on July 7, 2016, PNM is required to fund its ownership share of estimated final reclamation costs in annual installments into an irrevocable escrow account solely dedicated to the final reclamation cost of the surface mine at Four Corners. PNM contributed $2.1 million in July 2019 and anticipates providing additional funding of $1.9 million in each of the years from 2020 through 2024. If future estimates increase the liability for surface mine reclamation, the excess would be expensed at that time. The impacts of changes in New Mexico state law as a result of the enactment of the ETA and regulatory determinations made by the NMPRC may also affect PNM’s financial position, results of operations, and cash flows. See additional discussion regarding PNM’s SJGS Abandonment Application in Note 12. PNM is currently unable to determine the outcome of these matters or the range of possible impacts. Continuous Highwall Mining Royalty Rate In August 2013, the DOI Bureau of Land Management (“BLM”) issued a proposed rulemaking that would retroactively apply the surface mining royalty rate of 12.5% to continuous highwall mining (“CHM”). Comments regarding the rulemaking were due on October 11, 2013 and PNM submitted comments in opposition to the proposed rule. There is no legal deadline for adoption of the final rule. SJCC, as former owner and operator of San Juan mine, utilized the CHM technique from 2000 to 2003, and with the approval of the Farmington, New Mexico Field Office of BLM to reclassify the final highwall as underground reserves, applied the 8.0% underground mining royalty rate to coal mined using CHM and sold to SJGS. In March 2001, SJCC learned that the DOI Minerals Management Service (“MMS”) disagreed with the application of the underground royalty rate to CHM. In August 2006, SJCC and MMS entered into an agreement tolling the statute of limitations on any administrative action to recover unpaid royalties until BLM issued a final, non-appealable determination as to the proper rate for CHM-mined coal. The proposed BLM rulemaking has the potential to terminate the tolling provision of the settlement agreement. Underpaid royalties of approximately $5 million for SJGS would become due if the proposed BLM rule is adopted as proposed. PNM’s share of any amount that is ultimately paid would be approximately 46.3%, none of which would be passed through PNM’s FPPAC. PNM is unable to predict the outcome of this matter. PVNGS Liability and Insurance Matters Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act, which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan. In accordance with this act, the PVNGS participants are insured against public liability exposure for a nuclear incident up to $13.9 billion per occurrence. PVNGS maintains the maximum available nuclear liability insurance in the amount of $450 million, which is provided by American Nuclear Insurers. The remaining $13.5 billion is provided through a mandatory industry-wide retrospective assessment program. If losses at any nuclear power plant covered by the program exceed the accumulated funds, PNM could be assessed retrospective premium adjustments. Based on PNM’s 10.2% interest in each of the three PVNGS units, PNM’s maximum potential retrospective premium assessment per incident for all three units is $42.1 million, with a maximum annual payment limitation of $6.2 million, to be adjusted periodically for inflation. The PVNGS participants maintain insurance for damage to, and decontamination of, property at PVNGS in the aggregate amount of $2.8 billion, a substantial portion of which must first be applied to stabilization and decontamination. These coverages are provided by Nuclear Electric Insurance Limited (“NEIL”). The primary policy offered by NEIL contains a sublimit of $2.25 billion for non-nuclear property damage. If NEIL’s losses in any policy year exceed accumulated funds, PNM is subject to retrospective premium adjustments of $5.4 million for each retrospective premium assessment declared by NEIL’s Board of Directors due to losses. The insurance coverages discussed in this and the previous paragraph are subject to certain policy conditions, sublimits, and exclusions. PVNGS Decommissioning Liability PNM is responsible for all decommissioning obligations related to its entire interest in PVNGS, including portions under lease both during and after termination of the leases. PNM records its share of the PVNGS decommissioning obligation as an ARO on its Condensed Consolidated Balances Sheet. Studies on the decommissioning costs of PVNGS are performed periodically and revisions to the ARO liability are recorded. In May 2020, a new decommissioning cost study was completed, which required PNM to remeasure its PVNGS decommissioning ARO. The new study resulted in a decrease to PNM’s share of the nuclear decommissioning obligation of $6.4 million as of June 30, 2020. Additional information concerning the Company's PVNGS ARO is contained in Note 15 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. Water Supply Because of New Mexico’s arid climate and periodic drought conditions, there is concern in New Mexico about the use of water, including that used for power generation. Although PNM does not believe that its operations will be materially affected by drought conditions at this time, it cannot forecast long-term weather patterns. Public policy, local, state and federal regulations, and litigation regarding water could also impact PNM operations. To help mitigate these risks, PNM has secured permanent groundwater rights for the existing plants at Reeves Station, Rio Bravo, Afton, Luna, Lordsburg, and La Luz. Water availability is not an issue for these plants at this time. However, prolonged drought, ESA activities, and a federal lawsuit by the State of Texas (suing the State of New Mexico over water deliveries) could pose a threat of reduced water availability for these plants. For SJGS and Four Corners, PNM and APS have negotiated an agreement with senior water rights holders (tribes, municipalities, and agricultural interests) in the San Juan basin to mutually share the impacts of water shortages through 2021. In April 2010, APS signed an agreement on behalf of the PVNGS participants with five cities to provide cooling water essential to power production at PVNGS for 40 years. PVNGS Water Supply Litigation In 1986, an action commenced regarding the rights of APS and the other PVNGS participants to the use of groundwater and effluent at PVNGS. APS filed claims that dispute the court’s jurisdiction over PVNGS’ groundwater rights and their contractual rights to effluent relating to PVNGS and, alternatively, seek confirmation of those rights. In 1999, the Arizona Supreme Court issued a decision finding that certain groundwater rights may be available to the federal government and Native American tribes. In addition, the Arizona Supreme Court issued a decision in 2000 affirming the lower court’s criteria for resolving groundwater claims. Litigation on these issues has continued in the trial court. No trial dates have been set in these matters. PNM does not expect that this litigation will have a material impact on its results of operation, financial position, or cash flows. San Juan River Adjudication In 1975, the State of New Mexico filed an action in NM District Court to adjudicate all water rights in the San Juan River Stream System, including water used at Four Corners and SJGS. PNM was made a defendant in the litigation in 1976. In March 2009, then President Obama signed legislation confirming a 2005 settlement with the Navajo Nation. Under the terms of the settlement agreement, the Navajo Nation’s water rights would be settled and finally determined by entry by the court of two proposed adjudication decrees. The court issued an order in August 2013 finding that no evidentiary hearing was warranted in the Navajo Nation proceeding and, on November 1, 2013, issued a Partial Final Judgment and Decree of the Water Rights of the Navajo Nation approving the proposed settlement with the Navajo Nation. A number of parties subsequently appealed to the New Mexico Court of Appeals. PNM entered its appearance in the appellate case and supported the settlement agreement in the NM District Court. On April 3, 2018, the New Mexico Court of Appeals issued an order affirming the decision of the NM District Court. Several parties filed motions requesting a rehearing with the New Mexico Court of Appeals seeking clarification of the order, which were denied. The State of New Mexico and various other appellants filed a writ of certiorari with the NM Supreme Court. The NM Supreme Court granted the State of New Mexico’s petition and denied the other parties’ requests. The issues regarding the Navajo Nation settlement have been briefed and are awaiting a decision by the NM Supreme Court. Adjudication of non-Indian water rights is ongoing. PNM is participating in this proceeding since PNM’s water rights in the San Juan Basin may be affected by the rights recognized in the settlement agreement and adjudicated to the Navajo Nation, which comprise a significant portion of water available from sources on the San Juan River and in the San Juan Basin and which have priority in times of shortages. PNM is unable to predict the ultimate outcome of this matter or estimate the amount or range of potential loss and cannot determine the effect, if any, of any water rights adjudication on the present arrangements for water at SJGS and Four Corners. Final resolution of the case cannot be expected for several years. An agreement reached with the Navajo Nation in 1985, however, provides that if Four Corners loses a portion of its rights in the adjudication, the Navajo Nation will provide, for an agreed upon cost, sufficient water from its allocation to offset the loss. Rights-of-Way Matter On January 28, 2014, the County Commission of Bernalillo County, New Mexico passed an ordinance requiring utilities to enter into a use agreement and pay a yet-to-be-determined fee as a condition to installing, maintaining, and operating facilities on county rights-of-way. The fee is purported to compensate the county for costs of administering and maintaining the rights-of-way, as well as for capital improvements. After extensive challenges to the validity of the ordinance, the utilities filed a writ of certiorari with the NM Supreme Court, which was denied. The utilities and Bernalillo County had reached a standstill agreement whereby the county would not take any enforcement action against the utilities pursuant to the ordinance during the pendency of then pending litigation, but not including any period for appeal of a judgment, or upon 30 days written notice by either the county or the utilities of their intention to terminate the agreement. After court-ordered settlement discussions, PNM and Bernalillo County executed a franchise fee agreement with a term of 15 years. Under the agreement, PNM will pay franchise fees to the county at an amount similar to those paid by PNM in other jurisdictions. PNM will recover the cost of the franchise fees as a direct pass-through to customers located in Bernalillo County. The agreement is subject to approval by the New Mexico Second District Court in Bernalillo County. PNM cannot predict the outcome of this matter. Navajo Nation Allottee Matters In September 2012, 43 landowners filed a notice of appeal with the Bureau of Indian Affairs (“BIA”) appealing a March 2011 decision of the BIA Regional Director regarding renewal of a right-of-way for a PNM transmission line. The landowners claim to be allottees, members of the Navajo Nation, who pursuant to the Dawes Act of 1887, were allotted ownership in land carved out of the Navajo Nation and allege that PNM is a rights-of-way grantee with rights-of-way across the allotted lands and are either in trespass or have paid insufficient fees for the grant of rights-of-way or both. The allottees generally allege that they were not paid fair market value for the right-of-way, that they were denied the opportunity to make a showing as to their view of fair market value, and thus denied due process. The allottees filed a motion to dismiss their appeal with prejudice, which was granted in April 2014. Subsequent to the dismissal, PNM received a letter from counsel on behalf of what appears to be a subset of the 43 landowner allottees involved in the appeal, notifying PNM that the specified allottees were revoking their consents for renewal of right of way on six specific allotments. On January 22, 2015, PNM received a letter from the BIA Regional Director identifying ten allotments with rights-of-way renewals that were previously contested. The letter indicated that the renewals were not approved by the BIA because the previous consent obtained by PNM was later revoked, prior to BIA approval, by the majority owners of the allotments. It is the BIA Regional Director’s position that PNM must re-obtain consent from these landowners. On July 13, 2015, PNM filed a condemnation action in the NM District Court regarding the approximately 15.49 acres of land at issue. On September 18, 2015, the allottees filed a separate complaint against PNM for federal trespass. On December 1, 2015, the court ruled that PNM could not condemn two of the five allotments at issue based on the Navajo Nation’s fractional interest in the land. PNM filed a motion for reconsideration of this ruling, which was denied. On March 31, 2016, the Tenth Circuit granted PNM’s petition to appeal the December 1, 2015 ruling. Both matters have been consolidated. Oral argument before the Tenth Circuit was heard on January 17, 2017. On May 26, 2017, the Tenth Circuit affirmed the district court. On July 8, 2017, PNM filed a Motion for Reconsideration en banc with the Tenth Circuit, which was denied. The NM District Court stayed the case based on the Navajo Nation’s acquisition of interests in two additional allotments and the unresolved ownership of the fifth allotment due to the owner’s death. On November 20, 2017, PNM filed its petition for writ of certiorari with the US Supreme Court, which was denied. The underlying litigation continues in the NM District Court. On March 27, 2019, several individual allottees filed a motion for partial summary judgment on the issue of trespass. The Court held a hearing on the motion on June 18, 2019 and took the motion under advisement. Mediation on the matter is ongoing and parties are continuing to discuss a potential settlement. PNM cannot predict the outcome of these matters.

Regulatory and Rate Matters

6 Months Ended

Jun. 30, 2020

Regulated Operations [Abstract]

Regulatory and Rate Matters

PNM

New Mexico General Rate Cases

New Mexico 2015 General Rate Case (“NM 2015 Rate Case”)

PNM’s interests in PVNGS, including the 64.1 MW of PVNGS Unit 2 that PNM repurchased in January 2016 pursuant to the terms of the initial sales-leaseback transactions.

•Recovery of annual rent expenses associated with the 114.6 MW of capacity under the extended leases

New Mexico 2016 General Rate Case (“NM 2016 Rate Case”)

•A ROE of 9.575%

•Returning to customers over a three-year period the benefit of the reduction in the New Mexico corporate income tax rate to the extent attributable to PNM’s retail operations (Note 14)

•Disallowing PNM’s ability to collect an equity return on certain investments aggregating $148.1 million at Four Corners, but allowing recovery with a debt-only return

•An agreement to not implement non-fuel base rate changes, other than changes related to PNM’s rate riders, with an effective date prior to January 1, 2020

•A requirement to consider the prudency of PNM’s decision to continue its participation in Four Corners in PNM's next general rate case filing

Renewable Portfolio Standard

Included in PNM’s approved procurement plans are the following renewable energy resources:

•157 MW of PNM-owned solar-PV facilities

•A PPA through 2044 for the output of New Mexico Wind, having a current aggregate capacity of 204 MW, and a PPA through 2035 for the output of Red Mesa Wind, having an aggregate capacity of 102 MW

•A PPA through 2040 for 140 MW of output from La Joya Wind, which is expected to be operational by December 31, 2020

•A PPA through 2042 for the output of the Lightning Dock Geothermal facility with a current capacity of 15 MW

•Solar distributed generation, aggregating 138.6 MW at June 30, 2020, owned by customers or third parties from whom PNM purchases any net excess output and RECs

Renewable Energy Rider

Energy Efficiency and Load Management

Program Costs and Incentives/Disincentives

Integrated Resource Plans

2017 IRP

2020 IRP

SJGS Abandonment Application

Joint Petition to Investigate PNM’s Option to Purchase Assets Underlying Certain Leases in PVNGS

PNM Solar Direct

examiner's recommended decision was approved by the NMPRC on March 25, 2020. These facilities are expected to begin commercial operations on March 31, 2021. This matter is now concluded.

COVID-19 Regulatory Matters

2020 Decoupling Petition

Audit of PNM’s Compliance with OATT and Financial Reporting

TNMP

TNMP 2018 Rate Case

Recovery of TNMP Rate Case Costs

Transmission Cost of Service Rates

The following sets forth TNMP’s recent interim transmission cost rate increases:


Effective Date	Approved Increase in Rate Base		Annual Increase in Revenue
	(In millions)










March 21, 2019	$	111.8	$	14.3
September 19, 2019	21.9		3.3
March 27, 2020	59.2		7.8

Periodic Distribution Rate Adjustment

Energy Efficiency

COVID-19 Electricity Relief Program

Competition Transition Charge Final Reconciliation

Lease Commitments

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Lease Commitments

Lease CommitmentsThe Company leases office buildings, vehicles, and other equipment. In addition, PNM leases interests in PVNGS Units 1 and 2 and certain rights-of-way agreements are classified as leases. All of the Company's leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease

See additional discussion of the Company's leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

PVNGS

Land Easements and Rights-of-Ways

agreements of $0.9 million and $1.9 million in the three and six months ended June 30, 2020, and $0.9 million and $1.9 million in the three and six months ended June 30, 2019.

Fleet Vehicles and Equipment

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating leases:
Operating lease assets, net of amortization	$	109,042	$	8,535	$	118,140	$	120,585	$	9,954	$	131,212
Current portion of operating lease liabilities	24,039		2,428		26,744		25,927		2,753		29,068
Long-term portion of operating lease liabilities	85,028		5,897		91,320		97,992		7,039		105,512


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Financing leases:
Non-utility property	$	8,561	$	9,712	$	18,540	$	4,857	$	4,910	$	10,028
Accumulated depreciation	(1,070)		(1,137)		(2,267)		(482)		(466)		(973)
Non-utility property, net	7,491		8,575		16,273		4,375		4,444		9,055

Other current liabilities	1,512		1,623		3,203		722		850		1,637
Other deferred credits	5,699		6,958		12,800		3,333		3,597		7,102

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2020 is presented below:



	PNM		TNMP		PNMR Consolidated
Weighted average remaining lease term (years):
Operating leases	6.10		3.85		5.93
Financing leases	4.94		5.48		5.21

Weighted average discount rate:
Operating leases	3.90	%	4.00	%	3.91	%
Financing leases	3.12	%	3.26	%	3.19	%

Information for the components of lease expense is as follows:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,847	$	746	$	7,658	$	13,740	$	1,521	$	15,393
Amounts capitalized	(247)		(602)		(849)		(538)		(1,237)		(1,774)
Total operating lease expense	$	6,600	$	144	$	6,809	$	13,202	$	284	$	13,619
Financing lease cost:
Amortization of right-of-use assets	341		382		741		588		672		1,294
Interest on lease liabilities	52		68		121		97		124		224
Amounts capitalized	(226)		(369)		(594)		(401)		(653)		(1,053)
Total financing lease expense	167		81		268		284		143		465

Variable lease expense	63		—		63		95		—		95
Short-term lease expense	75		1		75		160		1		161
Total lease expense for the period	$	6,905	$	226	$	7,215	$	13,741	$	428	$	14,340


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,803	$	815	$	7,692	$	14,386	$	1,713	$	16,312
Amounts capitalized	(344)		(662)		(1,006)		(696)		(1,319)		(2,015)
Total operating lease expense	$	6,459	$	153	$	6,686	$	13,690	$	394	$	14,297
Financing lease cost:
Amortization of right-of-use assets	77		81		158		143		139		282
Interest on lease liabilities	14		17		31		30		34		64
Amounts capitalized	(41)		(38)		(79)		(82)		(75)		(157)
Total financing lease expense	50		60		110		91		98		189

Variable lease expense	32		—		32		32		—		32
Short-term lease expense	75		2		101		149		5		195
Total lease expense for the period	$	6,616	$	215	$	6,929	$	13,962	$	497	$	14,713

Supplemental cash flow information related to the Company’s leases is as follows:


	Six Months Ended June 30 ,										Six Months Ended June 30 ,
	2020										2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,511	$	331	$	17,125	$	16,704	$	529	$	17,494
Operating cash flows from financing leases	36		20		59		18		20		38
Finance cash flows from financing leases	207		120		360		54		76		130

Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—	$	—	$	143,816	$	12,942	$	157,440
Financing leases	3,703		4,802		8,513		2,516		2,305		4,821

Future expected lease payments are shown below:


	As of June 30, 2020
	PNM						TNMP						PNMR Consolidated
	Financing		Operating		Financing		Operating		Financing		Operating
	(In thousands)
Remainder of 2020	$	862	$	9,979	$	944	$	1,437	$	1,842	$	11,686
2021	1,688		26,576		1,845		2,448		3,606		29,316
2022	1,642		26,266		1,766		1,996		3,480		28,473
2023	1,587		17,735		1,617		1,508		3,241		19,423
2024	985		7,908		1,379		877		2,364		8,833
Later years	1,019		34,466		1,791		765		2,811		35,489
Total minimum lease payments	7,783		122,930		9,342		9,031		17,344		133,220
Less: Imputed interest	572		13,863		761		705		1,340		15,167
Lease liabilities as of June 30, 2020	$	7,211	$	109,067	$	8,581	$	8,326	$	16,004	$	118,053

Lease Commitments

See additional discussion of the Company's leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K.

PVNGS

Land Easements and Rights-of-Ways

agreements of $0.9 million and $1.9 million in the three and six months ended June 30, 2020, and $0.9 million and $1.9 million in the three and six months ended June 30, 2019.

Fleet Vehicles and Equipment

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating leases:
Operating lease assets, net of amortization	$	109,042	$	8,535	$	118,140	$	120,585	$	9,954	$	131,212
Current portion of operating lease liabilities	24,039		2,428		26,744		25,927		2,753		29,068
Long-term portion of operating lease liabilities	85,028		5,897		91,320		97,992		7,039		105,512


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Financing leases:
Non-utility property	$	8,561	$	9,712	$	18,540	$	4,857	$	4,910	$	10,028
Accumulated depreciation	(1,070)		(1,137)		(2,267)		(482)		(466)		(973)
Non-utility property, net	7,491		8,575		16,273		4,375		4,444		9,055

Other current liabilities	1,512		1,623		3,203		722		850		1,637
Other deferred credits	5,699		6,958		12,800		3,333		3,597		7,102

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2020 is presented below:



	PNM		TNMP		PNMR Consolidated
Weighted average remaining lease term (years):
Operating leases	6.10		3.85		5.93
Financing leases	4.94		5.48		5.21

Weighted average discount rate:
Operating leases	3.90	%	4.00	%	3.91	%
Financing leases	3.12	%	3.26	%	3.19	%

Information for the components of lease expense is as follows:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,847	$	746	$	7,658	$	13,740	$	1,521	$	15,393
Amounts capitalized	(247)		(602)		(849)		(538)		(1,237)		(1,774)
Total operating lease expense	$	6,600	$	144	$	6,809	$	13,202	$	284	$	13,619
Financing lease cost:
Amortization of right-of-use assets	341		382		741		588		672		1,294
Interest on lease liabilities	52		68		121		97		124		224
Amounts capitalized	(226)		(369)		(594)		(401)		(653)		(1,053)
Total financing lease expense	167		81		268		284		143		465

Variable lease expense	63		—		63		95		—		95
Short-term lease expense	75		1		75		160		1		161
Total lease expense for the period	$	6,905	$	226	$	7,215	$	13,741	$	428	$	14,340


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,803	$	815	$	7,692	$	14,386	$	1,713	$	16,312
Amounts capitalized	(344)		(662)		(1,006)		(696)		(1,319)		(2,015)
Total operating lease expense	$	6,459	$	153	$	6,686	$	13,690	$	394	$	14,297
Financing lease cost:
Amortization of right-of-use assets	77		81		158		143		139		282
Interest on lease liabilities	14		17		31		30		34		64
Amounts capitalized	(41)		(38)		(79)		(82)		(75)		(157)
Total financing lease expense	50		60		110		91		98		189

Variable lease expense	32		—		32		32		—		32
Short-term lease expense	75		2		101		149		5		195
Total lease expense for the period	$	6,616	$	215	$	6,929	$	13,962	$	497	$	14,713

Supplemental cash flow information related to the Company’s leases is as follows:


	Six Months Ended June 30 ,										Six Months Ended June 30 ,
	2020										2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,511	$	331	$	17,125	$	16,704	$	529	$	17,494
Operating cash flows from financing leases	36		20		59		18		20		38
Finance cash flows from financing leases	207		120		360		54		76		130

Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—	$	—	$	143,816	$	12,942	$	157,440
Financing leases	3,703		4,802		8,513		2,516		2,305		4,821

Future expected lease payments are shown below:


	As of June 30, 2020
	PNM						TNMP						PNMR Consolidated
	Financing		Operating		Financing		Operating		Financing		Operating
	(In thousands)
Remainder of 2020	$	862	$	9,979	$	944	$	1,437	$	1,842	$	11,686
2021	1,688		26,576		1,845		2,448		3,606		29,316
2022	1,642		26,266		1,766		1,996		3,480		28,473
2023	1,587		17,735		1,617		1,508		3,241		19,423
2024	985		7,908		1,379		877		2,364		8,833
Later years	1,019		34,466		1,791		765		2,811		35,489
Total minimum lease payments	7,783		122,930		9,342		9,031		17,344		133,220
Less: Imputed interest	572		13,863		761		705		1,340		15,167
Lease liabilities as of June 30, 2020	$	7,211	$	109,067	$	8,581	$	8,326	$	16,004	$	118,053

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesIn December 2017, comprehensive changes in United States federal income taxes were enacted through legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made many significant modifications to the tax laws, including reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Tax Act also eliminated federal bonus depreciation for utilities, limited interest deductibility for non-utility businesses and limited the deductibility of officer compensation. During 2019, the IRS issued proposed regulations related to certain officer compensation and proposed regulations on interest deductibility that provide a 10% “de minimis” exception that allows entities with predominantly regulated activities to fully deduct interest expenses. In addition, the IRS issued proposed regulations interpreting Tax Act amendments to depreciation provisions of the IRC that allow the Company to claim a bonus depreciation deduction on certain construction projects placed in service subsequent to the third quarter of 2017. See additional discussion of the impacts of the Tax Act in Note 18 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. Among other things, the CARES Act includes tax provisions that generally loosen restrictions on NOL utilization and business interest deductions, and accelerate refunds of previously generated alternative minimum tax credits. In addition, the CARES Act includes a temporary provision allowing businesses to defer payments to the government for some payroll taxes. The CARES Act provisions related to NOL utilization and business interest deductions are not applicable for the Company however, in June 2020, the Company applied for $5.2 million of accelerated refunds of previously generated alternative minimum tax credits and is deferring payments of certain payroll taxes. Beginning February 2018, PNM’s NM 2016 Rate Case reflects the reduction in the federal corporate income tax rate, including amortization of excess deferred federal and state income taxes. In accordance with the order in that case, PNM is returning the protected portion of excess deferred federal income taxes to customers over the average remaining life of plant in service as of December 31, 2017, the unprotected portion of excess deferred federal income taxes to customers over a period of approximately twenty-three years, and excess deferred state income taxes to customers over a period of three years. The approved settlement in the TNMP 2018 Rate Case includes a reduction in customer rates to reflect the impacts of the Tax Act beginning on January 1, 2019. PNMR, PNM, and TNMP will amortize federal and state excess deferred income taxes of $30.6 million, $21.6 million, and $9.0 million in 2020. See additional discussion of PNM’s NM 2016 Rate Case and TNMP’s 2018 Rate Case in Note 12. As required under GAAP, the Company makes an estimate of its anticipated effective tax rate for the year as of the end of each quarterly period within its fiscal year. In interim periods, income tax expense is calculated by applying the anticipated annual effective tax rate to year-to-date earnings before income taxes. GAAP also provides that certain unusual or infrequently occurring items, including excess tax benefits related to stock awards, be excluded from the estimated annual effective tax rate calculation. At June 30, 2020, PNMR, PNM, and TNMP estimated their effective income tax rates for the year ended December 31, 2020 would be 6.21%, 8.73%, and 9.23%. The primary difference between the statutory income tax rates and the effective tax rates is the effect of the reduction in income tax expense resulting from the amortization of excess deferred federal and state income taxes ordered by the NMPRC in PNM’s NM 2016 Rate Case and the amortization of excess deferred federal income taxes as ordered by the PUCT in TNMP’s 2018 Rate Case. During the three and six months ended June 30, 2020, income tax expense calculated by applying the expected annual effective income tax rate to earnings before income taxes was further reduced by excess tax benefits related to stock awards of zero and $0.4 million for PNMR, of which zero and $0.3 million was allocated to PNM and zero and $0.1 million was allocated to TNMP.

Related Party Transactions

6 Months Ended

Jun. 30, 2020

Related Party Transactions

Related Party TransactionsPNMR, PNM, TNMP, and NMRD are considered related parties as defined under GAAP, as is PNMR Services Company, a wholly-owned subsidiary of PNMR that provides corporate services to PNMR and its subsidiaries in accordance with shared services agreements. These services are billed at cost on a monthly basis to the business units. In addition, PNMR provides construction and operations and maintenance services to NMRD, a 50% owned subsidiary of PNMR Development. PNM purchases renewable energy from certain NMRD-owned facilities at a fixed price per MWh of energy produced. PNM also provides interconnection services to PNMR Development and NMRD. See Note 16 for additional discussion of NMRD.

The table below summarizes the nature and amount of related party transactions of PNMR, PNM, TNMP, and NMRD:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Services billings:
PNMR to PNM	$	24,521	$	22,925	$	46,644	$	49,751
PNMR to TNMP	9,703		8,385		18,430		18,443
PNM to TNMP	113		114		189		189
TNMP to PNMR	35		36		70		71

PNMR to NMRD	49		54		125		95
Renewable energy purchases:
PNM from NMRD	2,404		949		3,923		1,574
Interconnection billings:
PNM to NMRD	130		—		350		—
PNM to PNMR	—		—		—		—
Interest billings:
PNMR to PNM	6		972		6		1,905
PNM to PNMR	77		77		158		149
PNMR to TNMP	1		10		2		42
Income tax sharing payments:
PNMR to PNM	—		—		—		—
TNMP to PNMR	—		—		—		—

Equity Method Investment

6 Months Ended

Jun. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure

Equity Method Investment

In the six months ended June 30, 2020 and 2019, PNMR Development made cash contributions of $18.3 million and $13.3 million to NMRD to be used primarily for its construction activities.

PNMR presents its share of net earnings from NMRD in other income on the Condensed Consolidated Statements of Earnings. Summarized financial information for NMRD is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	2,641	$	1,103	$	4,308	$	1,828
Operating expenses	1,472		655		3,052		1,451
Net earnings	$	1,169	$	448	$	1,256	$	377


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	5,672	$	7,187
Net property, plant, and equipment	163,629		132,772
Non-current assets	1,214		—
Total assets	170,515		139,959
Current liabilities	2,073		9,640
Non-current liabilities	368		—
Owners’ equity	$	168,074	$	130,319

Goodwill	6 Months Ended
Goodwill	Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	Goodwill The excess purchase price over the fair value of the assets acquired and the liabilities assumed by PNMR for its 2005 acquisition of TNP was recorded as goodwill and was pushed down to the businesses acquired. In 2007, the TNMP assets that were included in its New Mexico operations, including goodwill, were transferred to PNM. PNMR’s reporting units that currently have goodwill are PNM and TNMP. GAAP requires the Company to evaluate its goodwill for impairment annually at the reporting unit level or more frequently if circumstances indicate that the goodwill may be impaired. Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each reporting unit. GAAP provides that in certain circumstances an entity may perform a qualitative analysis to conclude that the goodwill of a reporting unit is not impaired. Under a qualitative assessment an entity considers macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events affecting a reporting unit, as well as whether a sustained decrease (both absolute and relative to its peers) in share price has occurred. An entity considers the extent to which each of the adverse events and circumstances identified could affect the comparison of a reporting unit’s fair value with its carrying amount. An entity places more weight on the events and circumstances that most affect a reporting unit’s fair value or the carrying amount of its net assets. An entity also considers positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity evaluates, on the basis of the weight of evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative analysis is not required if, after assessing events and circumstances, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. In other circumstances, an entity may perform a quantitative analysis to reach the conclusion regarding impairment with respect to a reporting unit. An entity may choose to perform a quantitative analysis without performing a qualitative analysis and may perform a qualitative analysis for certain reporting units, but a quantitative analysis for others. The first step of the quantitative impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill. If as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, GAAP currently requires the entity to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded. The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount. This exercise would require the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit. Any remaining fair value would be the implied fair value of goodwill on the testing date. To the extent the recorded amount of goodwill of a reporting unit exceeds the implied fair value determined in step two, an impairment loss would be reflected in results of operations. PNMR periodically updates its quantitative analysis for both PNM and TNMP. The use of a quantitative approach in a given period is not necessarily an indication that a potential impairment has been identified under a qualitative approach. When PNMR performs a quantitative analysis for PNM or TNMP, a discounted cash flow methodology is primarily used to estimate the fair value of the reporting unit. This analysis requires significant judgments, including estimations of future cash flows, which is dependent on internal forecasts, estimations of long-term growth rates for the business, and determination of appropriate weighted average cost of capital for the reporting unit. Changes in these estimates and assumptions could materially affect the determination of fair value and the conclusion of impairment. When PNMR performs a qualitative or quantitative analysis for PNM or TNMP, PNMR considers market and macroeconomic factors including changes in growth rates, changes in the WACC, and changes in discount rates. PNMR also evaluates its stock price relative to historical performance, industry peers, and to major market indices, including an evaluation of PNMR’s market capitalization relative to the carrying value of its reporting units. For its annual evaluations performed as of April 1, 2019, PNMR performed qualitative analyses for both the PNM and TNMP reporting units. In addition to the typical considerations discussed above, the qualitative analysis considered changes in the Company’s expectations of future financial performance since the April 1, 2018 quantitative analysis performed for PNM, as well as the quantitative analysis performed for TNMP at April 1, 2016 and the previous qualitative analyses through April 1, 2018. This analysis considered Company specific events such as the potential impacts of legal and regulatory matters discussed in Note 11 and Note 12, including potential outcomes in PNM’s SJGS Abandonment Application, the impacts of the NM Supreme Court’s decision in the appeal of the NM 2015 Rate Case, and other potential impacts of changes in PNM’s resource needs based on PNM’s 2017 IRP. Based on an evaluation of these and other factors, PNMR determined it was not more likely than not that the April 1, 2019 carrying values of PNM or TNMP exceeded their fair values. For its annual evaluations performed as of April 1, 2020, PNMR performed a qualitative analysis for the PNM reporting unit and a quantitative analysis for the TNMP reporting unit. In addition to the typical considerations discussed above, the qualitative analysis considered changes in PNM’s expectations of future financial performance since the April 1, 2018 quantitative analysis performed for PNM, as well as the previous qualitative analyses through April 1, 2019. The April 1, 2018 quantitative evaluations indicated the fair value of the PNM reporting unit, which has goodwill of $51.6 million, exceeded its carrying value by approximately 19%. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2020 carrying value of PNM exceeded its fair value. Using the methods and considerations discussed above, the 2020 quantitative analysis indicated the fair value of the TNMP reporting unit, which has goodwill of $226.7 million, exceeded its carrying value by approximately 38%. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2020 carrying value of TNMP exceed its fair value. Since the April 1, 2020 annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below their carrying values.

Significant Accounting Policies and Responsibility for Financial Statements (Policies)	6 Months Ended
	Jun. 30, 2020
Accounting Policies [Abstract]
Principles of Consolidation	The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates Valencia. See Note 6. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants. The agreements for the jointly-owned plants provide that if an owner were to default on its payment obligations, the non-defaulting owners would be responsible for their proportionate share of the obligations of the defaulting owner. In exchange, the non-defaulting owners would be entitled to their proportionate share of the generating capacity of the defaulting owner. There have been no such payment defaults under any of the agreements for the jointly-owned plants.PNMR shared services’ expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost and are reflected as general and administrative expenses in the business segments. Other significant intercompany transactions between PNMR, PNM, and TNMP include interest and income tax sharing payments, as well as equity transactions, and interconnection billings. See Note 15. All intercompany transactions and balances have been eliminated.
New Accounting Pronouncements	Information concerning recently issued accounting pronouncements that have not been adopted by the Company is presented below. The Company does not expect difficulty in adopting these standards by their required effective dates. Accounting Standards Update 2018-14 – Compensation – Retirement Benefits – Defined Benefit Plans (Topic 715) Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued ASU 2018-14 to improve benefit plan sponsors’ disclosures for defined benefit pension and other post-employment benefit plans. ASU 2018-14 removes the requirement to disclose the amounts in other comprehensive income expected to be recognized as benefit cost over the next fiscal year and the requirement to disclose the impact of a one-percentage-point change in the assumed health care cost trend rate; clarifies the disclosure requirements for plans with assets that are less than their projected benefit, or accumulated benefit obligation; and requires significant gains and losses affecting benefit obligations during the period be disclosed. ASU 2018-14 is effective for the Company on December 31, 2020, although early adoption is permitted, and requires retrospective application. As discussed in Note 11 of the Notes to the Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and in Note 10, PNM and TNMP maintain qualified defined benefit, other postretirement benefit plans providing medical and dental benefits, and executive retirement programs. The Company is in the process of evaluating the requirements of ASU 2018-14 but does not anticipate these changes will have a significant impact on the Company’s defined benefit and other postretirement benefit plan disclosures. Accounting Standards Update 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12 as part of its initiative to reduce complexity in accounting standards. The amendments in ASU 2019-12 simplify accounting for income taxes by removing several accounting exceptions to accounting for income taxes. ASU 2019-12 also eliminates or simplifies other income tax accounting requirements, including a requirement that entities recognize franchise tax (or similar tax) that is partially based on income as an income-based tax. ASU 2019-12 is effective for the Company beginning on January 1, 2021 and allows for early adoption. ASU 2019-12 is to be applied prospectively or retrospectively in the period of adoption depending on the type of amendment. The Company is in the process of analyzing the impacts of this new standard. GAAP requires that all excess tax benefits and deficiencies be recorded to tax expense and classified as operating cash flows when used to reduce income taxes payable. See Note 14.

Segment Information (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Summary of Financial Information by Segment

PNMR SEGMENT INFORMATION


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2020
Electric operating revenues	$	260,788	$	96,861	$	—	$	357,649
Cost of energy	67,884		25,979		—		93,863
Utility margin	192,904		70,882		—		263,786
Other operating expenses	101,557		25,339		(4,282)		122,614
Depreciation and amortization	41,763		22,368		5,891		70,022
Operating income (loss)	49,584		23,175		(1,609)		71,150
Interest income	3,147		—		(76)		3,071
Other income (deductions)	20,954		1,963		(214)		22,703
Interest charges	(19,178)		(7,361)		(4,549)		(31,088)
Segment earnings (loss) before income taxes	54,507		17,777		(6,448)		65,836
Income taxes (benefit)	4,895		1,603		(2,223)		4,275
Segment earnings (loss)	49,612		16,174		(4,225)		61,561
Valencia non-controlling interest	(3,940)		—		—		(3,940)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	45,540	$	16,174	$	(4,225)	$	57,489

Six Months Ended June 30, 2020
Electric operating revenues	$	508,921	$	182,350	$	—	$	691,271
Cost of energy	142,408		50,165		—		192,573
Utility margin	366,513		132,185		—		498,698
Other operating expenses	200,113		50,461		(9,759)		240,815
Depreciation and amortization	83,212		44,204		11,579		138,995
Operating income (loss)	83,188		37,520		(1,820)		118,888
Interest income	6,643		—		(149)		6,494
Other income (deductions)	(13,072)		2,524		(755)		(11,303)
Interest charges	(36,807)		(14,533)		(10,182)		(61,522)
Segment earnings (loss) before income taxes	39,952		25,511		(12,906)		52,557
Income taxes (benefit)	2,536		2,245		(2,386)		2,395
Segment earnings (loss)	37,416		23,266		(10,520)		50,162
Valencia non-controlling interest	(7,669)		—		—		(7,669)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	29,483	$	23,266	$	(10,520)	$	42,229

At June 30, 2020:
Total Assets	$	5,377,422	$	1,985,721	$	211,324	$	7,574,467
Goodwill	$	51,632	$	226,665	$	—	$	278,297


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)
Three Months Ended June 30, 2019
Electric operating revenues	$	238,219	$	92,009	$	—	$	330,228
Cost of energy	58,866		24,916		—		83,782
Utility margin	179,353		67,093		—		246,446
Other operating expenses	255,519		24,013		(5,536)		273,996
Depreciation and amortization	39,811		20,502		5,752		66,065
Operating income (loss)	(115,977)		22,578		(216)		(93,615)
Interest income	3,530		—		(70)		3,460
Other income (deductions)	4,179		731		(78)		4,832
Interest charges	(18,526)		(6,560)		(4,705)		(29,791)
Segment earnings (loss) before income taxes	(126,794)		16,749		(5,069)		(115,114)
Income taxes (benefit)	(43,481)		1,482		(832)		(42,831)
Segment earnings (loss)	(83,313)		15,267		(4,237)		(72,283)
Valencia non-controlling interest	(3,499)		—		—		(3,499)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	(86,944)	$	15,267	$	(4,237)	$	(75,914)

Three Months Ended June 30, 2019
Electric operating revenues	$	507,536	$	172,336	$	—	$	679,872
Cost of energy	158,204		47,204		—		205,408
Utility margin	349,332		125,132		—		474,464
Other operating expenses	361,981		49,253		(11,299)		399,935
Depreciation and amortization	79,036		40,716		11,669		131,421
Operating income (loss)	(91,685)		35,163		(370)		(56,892)
Interest income	7,187		—		(139)		7,048
Other income (deductions)	18,536		1,317		(814)		19,039
Interest charges	(36,886)		(15,361)		(9,178)		(61,425)
Segment earnings (loss) before income taxes	(102,848)		21,119		(10,501)		(92,230)
Income taxes (benefit)	(41,508)		1,754		(1,854)		(41,608)
Segment earnings (loss)	(61,340)		19,365		(8,647)		(50,622)
Valencia non-controlling interest	(6,328)		—		—		(6,328)
Subsidiary preferred stock dividends	(264)		—		—		(264)
Segment earnings (loss) attributable to PNMR	$	(67,932)	$	19,365	$	(8,647)	$	(57,214)

At June 30, 2019:
Total Assets	$	5,105,090	$	1,768,831	$	174,746	$	7,048,667
Goodwill	$	51,632	$	226,665	$	—	$	278,297

Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

Information regarding accumulated other comprehensive income (loss) for the six months ended June 30, 2020 and 2019 is as follows:


	Accumulated Other Comprehensive Income (Loss)
	PNM											Corporate and Other		PNMR Consolidated
	Unrealized Gains on Available-for-Sale Debt Securities		Pension Liability Adjustment					Fair Value Adjustment for Cash Flow Hedges


							Total						Total

	(In thousands)


Balance at December 31, 2019	$	10,638	$	(109,693)	$	(99,055)		$	(322)	$	(99,377)
Amounts reclassified from AOCI (pre-tax)	(3,059)		4,150		1,091			(500)		591
Income tax impact of amounts reclassified	777		(1,054)		(277)			127		(150)
Other OCI changes (pre-tax)	9,717		—		9,717			(1,198)		8,519
Income tax impact of other OCI changes	(2,468)		—		(2,468)			304		(2,164)
Net after-tax change	4,967		3,096		8,063			(1,267)		6,796
Balance at June 30, 2020	$	15,605	$	(106,597)	$	(90,992)		$	(1,589)	$	(92,581)











Balance at December 31, 2018	$	1,939	$	(112,361)	$	(110,422)	$	1,738	$	(108,684)
Amounts reclassified from AOCI (pre-tax)	(5,601)		3,702		(1,899)		525		(1,374)
Income tax impact of amounts reclassified	1,423		(940)		483		(133)		350
Other OCI changes (pre-tax)	15,938		—		15,938		(3,169)		12,769
Income tax impact of other OCI changes	(4,048)		—		(4,048)		805		(3,243)
Net after-tax change	7,712		2,762		10,474		(1,972)		8,502
Balance at June 30, 2019	$	9,651	$	(109,599)	$	(99,948)	$	(234)	$	(100,182)

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Computation of Earnings Per Share

Information regarding the computation of earnings per share is as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands, except per share amounts)
Net Earnings (Loss) Attributable to PNMR	$	57,489	$	(75,914)	$	42,229	$	(57,214)
Average Number of Common Shares:
Outstanding during period	79,654		79,654		79,654		79,654
Vested awards of restricted stock	186		263		202		251
Average Shares – Basic	79,840		79,917		79,856		79,905
Dilutive Effect of Common Stock Equivalents:
PNMR 2020 Forward Equity Sale Agreements	—		—		86		—
Restricted stock	36		—		37		—
Average Shares – Diluted⁽¹⁾	79,876		79,917		79,979		79,905

Net Earnings (Loss) Per Share of Common Stock:
Basic	$	0.72	$	(0.95)	$	0.53	$	(0.72)
Diluted	$	0.72	$	(0.95)	$	0.53	$	(0.72)

Electric Operating Revenues (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2020	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	109,090	$	37,302	$	146,392
Commercial	93,364		28,106		121,470
Industrial	20,373		6,857		27,230
Public authority	4,907		1,419		6,326
Economy energy service	3,278		—		3,278
Transmission	14,097		20,238		34,335
Miscellaneous	3,042		1,002		4,044
Total revenues from contracts with customers	248,151		94,924		343,075
Alternative revenue programs	2,529		1,937		4,466
Other electric operating revenues	10,108		—		10,108
Total Electric Operating Revenues	$	260,788	$	96,861	$	357,649


Six Months Ended June 30, 2020
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	211,899	$	69,200	$	281,099
Commercial	179,713		56,791		236,504
Industrial	39,838		13,390		53,228
Public authority	9,254		2,842		12,096
Economy energy service	8,531		—		8,531
Transmission	28,264		38,250		66,514
Miscellaneous	6,410		1,675		8,085
Total revenues from contracts with customers	483,909		182,148		666,057
Alternative revenue programs	4,690		202		4,892
Other electric operating revenues	20,322		—		20,322
Total Electric Operating Revenues	$	508,921	$	182,350	$	691,271


	PNM		TNMP		PNMR Consolidated
Three Months Ended June 30, 2019	(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	86,328	$	33,640	$	119,968
Commercial	98,968		28,058		127,026
Industrial	15,329		5,295		20,624
Public authority	4,596		1,391		5,987
Economy energy service	6,024		—		6,024
Transmission	14,342		17,585		31,927
Miscellaneous	2,474		887		3,361
Total revenues from contracts with customers	228,061		86,856		314,917
Alternative revenue programs	691		5,153		5,844
Other electric operating revenues	9,467		—		9,467
Total Electric Operating Revenues	$	238,219	$	92,009	$	330,228

Three Months Ended June 30, 2019
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	193,629	$	64,072	$	257,701
Commercial	184,201		55,487		239,688
Industrial	30,076		10,911		40,987
Public authority	9,307		2,764		12,071
Economy energy service	12,946		—		12,946
Transmission	27,727		31,589		59,316
Miscellaneous	6,116		1,789		7,905
Total revenues from contracts with customers	464,002		166,612		630,614
Alternative revenue programs	756		5,724		6,480
Other electric operating revenues	42,778		—		42,778
Total Electric Operating Revenues	$	507,536	$	172,336	$	679,872

Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2020

Variable Interest Entities [Abstract]

Summarized Financial Information

Summarized financial information for Valencia is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	5,495	$	5,177	$	10,848	$	10,129
Operating expenses	1,555		1,678		3,179		3,801
Earnings attributable to non-controlling interest	$	3,940	$	3,499	$	7,669	$	6,328


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	3,393	$	5,094
Net property, plant, and equipment	57,163		58,581
Total assets	60,556		63,675
Current liabilities	629		623
Owners’ equity – non-controlling interest	$	59,927	$	63,052

Fair Value of Derivative and Other Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value of Derivative and Other Financial Instruments [Abstract]

Summary of Derivatives


	Economic Hedges
	June 30, 2020		December 31, 2019
	(In thousands)
Other current assets	$	1,096	$	1,089
Other deferred charges	1,004		1,507
	2,100		2,596

Other current liabilities	(1,096)		(1,089)
Other deferred credits	(1,004)		(1,507)
	(2,100)		(2,596)
Net	$	—	$	—

Schedule of Gross Realized Gains and Losses

Gains and losses recognized on the Condensed Consolidated Statements of Earnings related to investment securities in the NDT and reclamation trusts are presented in the following table:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Equity securities:
Net gains (losses) from equity securities sold	$	5,356	$	2,774	$	4,041	$	4,161
Net gains (losses) from equity securities still held	13,377		303		(5,554)		9,905
Total net gains (losses) on equity securities	18,733		3,077		(1,513)		14,066
Available-for-sale debt securities:


Net gains (losses) on debt securities	2,887		1,522		(9,716)		4,547
Net gains (losses) on investment securities	$	21,620	$	4,599	$	(11,229)	$	18,613


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Proceeds from sales	$	205,296	$	159,551	$	354,651	$	234,011
Gross realized gains	$	11,262	$	10,906	$	17,087	$	15,095
Gross realized (losses)	$	(7,002)	$	(5,802)	$	(14,037)	$	(8,972)

Investments Classified by Contractual Maturity Date

At June 30, 2020, the available-for-sale debt securities held by PNM, had the following final maturities:


	Fair Value
	(In thousands)
Within 1 year	$	22,402
After 1 year through 5 years	83,549
After 5 years through 10 years	82,539
After 10 years through 15 years	14,192
After 15 years through 20 years	10,791
After 20 years	40,010
	$	253,483

Schedule of Investments


			GAAP Fair Value Hierarchy
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unrealized Gains
	(In thousands)
June 30, 2020
Cash and cash equivalents	$	11,496	$	11,496	$	—
Equity securities:
Corporate stocks, common	65,664		65,664		—
Corporate stocks, preferred	8,498		2,770		5,728
Mutual funds and other	50,311		50,311		—
Available-for-sale debt securities:
U.S. government	47,190		29,315		17,875		$	1,497
International government	13,734		—		13,734		1,630
Municipals	47,392		—		47,392		2,179
Corporate and other	145,167		464		144,703		15,616
	$	389,452	$	160,020	$	229,432	$	20,922







December 31, 2019

Cash and cash equivalents	$	15,606	$	15,606	$	—
Equity securities:
Corporate stocks, common	64,527		64,527		—
Corporate stocks, preferred	9,033		2,212		6,821
Mutual funds and other	49,848		49,786		62
Available-for-sale debt securities:
U.S. government	48,439		31,389		17,050		$	535
International government	15,292		—		15,292		1,193
Municipals	46,642		—		46,642		1,768
Corporate and other	139,445		187		139,258		10,801
	$	388,832	$	163,707	$	225,125	$	14,297

Schedule of Carrying Amount and Fair Value of Items Not Recorded at Fair Value



	Carrying Amount		Fair Value
June 30, 2020	(In thousands)
PNMR	$	3,216,618	$	3,343,648


PNM	$	1,846,605	$	1,951,768


TNMP	$	780,561	$	797,604


December 31, 2019
PNMR	$	3,007,717	$	3,142,704


PNM	$	1,748,020	$	1,795,149


TNMP	$	670,691	$	753,317

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Summary of Activity

The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:


	Six Months Ended June 30,
Restricted Shares and Performance Based Shares	2020			2019
Expected quarterly dividends per share	$	0.3075		$	0.2900
Risk-free interest rate	0.72		%	2.47		%

Market-Based Shares
Dividend yield	2.51		%	2.59		%
Expected volatility	19.41			19.55
Risk-free interest rate	0.72			2.51

The following table summarizes activity in restricted stock awards, including performance-based and market-based shares, and stock options, for the six months ended June 30, 2020:


	Restricted Stock				Stock Options
	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2019	161,542	$	38.21	2,000	$	12.22
Granted	246,029	36.73		—	—
Exercised	(238,054)	34.86		(2,000)	12.22
Forfeited	(1,456)	41.32		—	—

Outstanding at June 30, 2020	168,061	$	40.77	—	$	—

The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares, and stock options:


	Six Months Ended June 30,
Restricted Stock	2020		2019
Weighted-average grant date fair value	$	36.73	$	37.92
Total fair value of restricted shares that vested (in thousands)	$	11,740	$	6,227

Stock Options


Total intrinsic value of options exercised (in thousands)	$	84	$	2,617

Financing (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Information concerning the funding dates, maturities and interest rates on the TNMP 2020 Bonds issued in April and July 2020 are as follows:


Funding Date	Maturity Date	Principal Amount		Interest Rate
		(In millions)
April 24, 2020	April 24, 2030	$	85.0	2.73	%
April 24, 2020	April 24, 2050	25.0		3.36
		110.0

July 15, 2020	July 15, 2035	25.0		2.93
July 15, 2020	July 15, 2050	50.0		3.36
		$	185.0

Information concerning the funding dates, mandatory tender dates, and interest rates on the PNM 2020 Fixed Rate PCRBs are as follows:


Funding Date	Mandatory Tender Date	Principal Amount		Interest Rate
		(In millions)
July 22, 2020	June 1, 2022	$	36.0	1.05	%
July 22, 2020	June 1, 2022	11.5		1.20
July 22, 2020	June 1, 2023	130.0		1.10
July 22, 2020	June 1, 2024	125.0		1.15
		$	302.5

Schedule of Short-term Debt

Short-term debt outstanding consists of:


	June 30,		December 31,
Short-term Debt	2020		2019
	(In thousands)
PNM:
PNM Revolving Credit Facility⁽¹⁾	$	47,055	$	48,000
PNM 2017 New Mexico Credit Facility	40,000		10,000
	87,055		58,000
TNMP:
TNMP Revolving Credit Facility	12,600		15,000
TNMP Electricity Relief ERCOT loan (Note 12)	494		—
	13,094		15,000

PNMR Revolving Credit Facility	152,400		112,100



	$	252,549	$	185,100

⁽¹⁾ Outstanding amount as of June 30, 2020 excludes $100.3 million considered long-term debt as discussed above.

Pension and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2020

Retirement Benefits [Abstract]

Schedule of Net Benefit Costs

The following table presents the components of the PNM Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	10	$	13	$	—	$	—
Interest cost	4,985		6,294		613		829		122		162
Expected return on plan assets	(7,363)		(8,527)		(1,387)		(1,318)		—		—
Amortization of net (gain) loss	4,465		3,880		87		169		101		79
Amortization of prior service cost	(138)		(241)		—		(99)		—		—
Net Periodic Benefit Cost (Income)	$	1,949	$	1,406	$	(677)	$	(406)	$	223	$	241






	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	20	$	26	$	—	$	—
Interest cost	9,971		12,587		1,227		1,658		244		324
Expected return on plan assets	(14,726)		(17,051)		(2,774)		(2,636)		—		—
Amortization of net (gain) loss	8,930		7,759		174		338		201		158
Amortization of prior service cost	(277)		(483)		—		(198)		—		—
Net Periodic Benefit Cost (Income)	$	3,898	$	2,812	$	(1,353)	$	(812)	$	445	$	482

The following table presents the components of the TNMP Plans’ net periodic benefit cost:


	Three Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	12	$	13	$	—	$	—
Interest cost	544		672		93		113		6		8
Expected return on plan assets	(821)		(967)		(135)		(129)		—		—
Amortization of net (gain) loss	315		235		(80)		(110)		6		4
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	38	$	(60)	$	(110)	$	(113)	$	12	$	12








	Six Months Ended June 30,
	Pension Plan						OPEB Plan						Executive Retirement Program
	2020		2019		2020		2019		2020		2019
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	—	$	—	$	23	$	26	$	—	$	—
Interest cost	1,088		1,344		187		226		11		16
Expected return on plan assets	(1,642)		(1,934)		(268)		(258)		—		—
Amortization of net (gain) loss	629		470		(162)		(220)		12		8
Amortization of prior service cost	—		—		—		—		—		—
Net Periodic Benefit Cost (Income)	$	75	$	(120)	$	(220)	$	(226)	$	23	$	24

Regulatory and Rate Matters (Tables)

6 Months Ended

Jun. 30, 2020

Regulated Operations [Abstract]

Schedule of Rate Increases for Transmission Costs

The following sets forth TNMP’s recent interim transmission cost rate increases:


Effective Date	Approved Increase in Rate Base		Annual Increase in Revenue
	(In millions)










March 21, 2019	$	111.8	$	14.3
September 19, 2019	21.9		3.3
March 27, 2020	59.2		7.8

Lease Commitments (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Assets and Liabilities, Lessee

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating leases:
Operating lease assets, net of amortization	$	109,042	$	8,535	$	118,140	$	120,585	$	9,954	$	131,212
Current portion of operating lease liabilities	24,039		2,428		26,744		25,927		2,753		29,068
Long-term portion of operating lease liabilities	85,028		5,897		91,320		97,992		7,039		105,512

Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:


	June 30, 2020										December 31, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Financing leases:
Non-utility property	$	8,561	$	9,712	$	18,540	$	4,857	$	4,910	$	10,028
Accumulated depreciation	(1,070)		(1,137)		(2,267)		(482)		(466)		(973)
Non-utility property, net	7,491		8,575		16,273		4,375		4,444		9,055

Other current liabilities	1,512		1,623		3,203		722		850		1,637
Other deferred credits	5,699		6,958		12,800		3,333		3,597		7,102

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2020 is presented below:



	PNM		TNMP		PNMR Consolidated
Weighted average remaining lease term (years):
Operating leases	6.10		3.85		5.93
Financing leases	4.94		5.48		5.21

Weighted average discount rate:
Operating leases	3.90	%	4.00	%	3.91	%
Financing leases	3.12	%	3.26	%	3.19	%

Lease, Cost

Information for the components of lease expense is as follows:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,847	$	746	$	7,658	$	13,740	$	1,521	$	15,393
Amounts capitalized	(247)		(602)		(849)		(538)		(1,237)		(1,774)
Total operating lease expense	$	6,600	$	144	$	6,809	$	13,202	$	284	$	13,619
Financing lease cost:
Amortization of right-of-use assets	341		382		741		588		672		1,294
Interest on lease liabilities	52		68		121		97		124		224
Amounts capitalized	(226)		(369)		(594)		(401)		(653)		(1,053)
Total financing lease expense	167		81		268		284		143		465

Variable lease expense	63		—		63		95		—		95
Short-term lease expense	75		1		75		160		1		161
Total lease expense for the period	$	6,905	$	226	$	7,215	$	13,741	$	428	$	14,340


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Operating lease cost:	$	6,803	$	815	$	7,692	$	14,386	$	1,713	$	16,312
Amounts capitalized	(344)		(662)		(1,006)		(696)		(1,319)		(2,015)
Total operating lease expense	$	6,459	$	153	$	6,686	$	13,690	$	394	$	14,297
Financing lease cost:
Amortization of right-of-use assets	77		81		158		143		139		282
Interest on lease liabilities	14		17		31		30		34		64
Amounts capitalized	(41)		(38)		(79)		(82)		(75)		(157)
Total financing lease expense	50		60		110		91		98		189

Variable lease expense	32		—		32		32		—		32
Short-term lease expense	75		2		101		149		5		195
Total lease expense for the period	$	6,616	$	215	$	6,929	$	13,962	$	497	$	14,713

Schedule of Leases, Supplemental Cash Flows

Supplemental cash flow information related to the Company’s leases is as follows:


	Six Months Ended June 30 ,										Six Months Ended June 30 ,
	2020										2019
	PNM		TNMP		PNMR Consolidated		PNM		TNMP		PNMR Consolidated
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	16,511	$	331	$	17,125	$	16,704	$	529	$	17,494
Operating cash flows from financing leases	36		20		59		18		20		38
Finance cash flows from financing leases	207		120		360		54		76		130

Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	—	$	—	$	143,816	$	12,942	$	157,440
Financing leases	3,703		4,802		8,513		2,516		2,305		4,821

Lessee, Operating Lease, Liability, Maturity

Future expected lease payments are shown below:


	As of June 30, 2020
	PNM						TNMP						PNMR Consolidated
	Financing		Operating		Financing		Operating		Financing		Operating
	(In thousands)
Remainder of 2020	$	862	$	9,979	$	944	$	1,437	$	1,842	$	11,686
2021	1,688		26,576		1,845		2,448		3,606		29,316
2022	1,642		26,266		1,766		1,996		3,480		28,473
2023	1,587		17,735		1,617		1,508		3,241		19,423
2024	985		7,908		1,379		877		2,364		8,833
Later years	1,019		34,466		1,791		765		2,811		35,489
Total minimum lease payments	7,783		122,930		9,342		9,031		17,344		133,220
Less: Imputed interest	572		13,863		761		705		1,340		15,167
Lease liabilities as of June 30, 2020	$	7,211	$	109,067	$	8,581	$	8,326	$	16,004	$	118,053

Finance Lease, Liability, Maturity

Future expected lease payments are shown below:


	As of June 30, 2020
	PNM						TNMP						PNMR Consolidated
	Financing		Operating		Financing		Operating		Financing		Operating
	(In thousands)
Remainder of 2020	$	862	$	9,979	$	944	$	1,437	$	1,842	$	11,686
2021	1,688		26,576		1,845		2,448		3,606		29,316
2022	1,642		26,266		1,766		1,996		3,480		28,473
2023	1,587		17,735		1,617		1,508		3,241		19,423
2024	985		7,908		1,379		877		2,364		8,833
Later years	1,019		34,466		1,791		765		2,811		35,489
Total minimum lease payments	7,783		122,930		9,342		9,031		17,344		133,220
Less: Imputed interest	572		13,863		761		705		1,340		15,167
Lease liabilities as of June 30, 2020	$	7,211	$	109,067	$	8,581	$	8,326	$	16,004	$	118,053

Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of Related Party Transactions

The table below summarizes the nature and amount of related party transactions of PNMR, PNM, TNMP, and NMRD:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(In thousands)
Services billings:
PNMR to PNM	$	24,521	$	22,925	$	46,644	$	49,751
PNMR to TNMP	9,703		8,385		18,430		18,443
PNM to TNMP	113		114		189		189
TNMP to PNMR	35		36		70		71

PNMR to NMRD	49		54		125		95
Renewable energy purchases:
PNM from NMRD	2,404		949		3,923		1,574
Interconnection billings:
PNM to NMRD	130		—		350		—
PNM to PNMR	—		—		—		—
Interest billings:
PNMR to PNM	6		972		6		1,905
PNM to PNMR	77		77		158		149
PNMR to TNMP	1		10		2		42
Income tax sharing payments:
PNMR to PNM	—		—		—		—
TNMP to PNMR	—		—		—		—

Equity Method Investment (Tables)

6 Months Ended

Jun. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Marketable Securities

Summarized financial information for NMRD is as follows:


	Results of Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating revenues	$	2,641	$	1,103	$	4,308	$	1,828
Operating expenses	1,472		655		3,052		1,451
Net earnings	$	1,169	$	448	$	1,256	$	377


	Financial Position
	June 30,		December 31,
	2020		2019
	(In thousands)
Current assets	$	5,672	$	7,187
Net property, plant, and equipment	163,629		132,772
Non-current assets	1,214		—
Total assets	170,515		139,959
Current liabilities	2,073		9,640
Non-current liabilities	368		—
Owners’ equity	$	168,074	$	130,319

Significant Accounting Policies and Responsibility for Financial Statements (Details) - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Business Acquisition [Line Items]
Payment defaults under agreements			$ 0		$ 0
Dividends declared per common share (dollars per share)		$ 0.2900	$ 0.308	$ 0.290	$ 0.615	$ 0.580
Dividends declared on common stock				$ 132,000	$ 24,493,000	$ 23,099,000
Subsequent event
Business Acquisition [Line Items]
Dividends declared per common share (dollars per share)	$ 0.3075
PNM
Business Acquisition [Line Items]
Dividends declared on common stock			$ 40,700,000	0	40,654,000	0
Texas-New Mexico Power Company
Business Acquisition [Line Items]
Dividends declared on common stock			$ 7,092,000	$ 4,098,000	$ 18,439,000	$ 14,811,000

Segment Information - Summarized Financial Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) segment	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments \| segment			1
Segment Reporting Information, Profit (Loss) [Abstract]
Electric operating revenues	$ 357,649	$ 330,228	$ 691,271	$ 679,872
Other operating expenses	122,614	273,996	240,815	399,935
Depreciation and amortization	70,022	66,065	138,995	131,421
Operating income (loss)	71,150	(93,615)	118,888	(56,892)
Interest income	3,071	3,460	6,494	7,048
Other income (deductions)	22,703	4,832	(11,303)	19,039
Interest charges	(31,088)	(29,791)	(61,522)	(61,425)
Earnings (Loss) before Income Taxes	65,836	(115,114)	52,557	(92,230)
Income taxes (benefit)	4,275	(42,831)	2,395	(41,608)
Net Earnings (Loss)	61,561	(72,283)	50,162	(50,622)
Valencia non-controlling interest	(3,940)	(3,499)	(7,669)	(6,328)
Subsidiary preferred stock dividends	(132)	(132)	(264)	(264)
Net Earnings (Loss) Available for PNM Common Stock	57,489	(75,914)	42,229	(57,214)
Total Assets	7,574,467	7,048,667	7,574,467	7,048,667	$ 7,298,774
Goodwill	278,297	278,297	278,297	278,297	$ 278,297
PNM
Segment Reporting Information, Profit (Loss) [Abstract]
Other operating expenses	101,557	255,519	200,113	361,981
Depreciation and amortization	41,763	39,811	83,212	79,036
Operating income (loss)	49,584	(115,977)	83,188	(91,685)
Interest income	3,147	3,530	6,643	7,187
Other income (deductions)	20,954	4,179	(13,072)	18,536
Interest charges	(19,178)	(18,526)	(36,807)	(36,886)
Earnings (Loss) before Income Taxes	54,507	(126,794)	39,952	(102,848)
Income taxes (benefit)	4,895	(43,481)	2,536	(41,508)
Net Earnings (Loss)	49,612	(83,313)	37,416	(61,340)
Valencia non-controlling interest	(3,940)	(3,499)	(7,669)	(6,328)
Subsidiary preferred stock dividends	(132)	(132)	(264)	(264)
Net Earnings (Loss) Available for PNM Common Stock	45,540	(86,944)	29,483	(67,932)
Total Assets	5,377,422	5,105,090	5,377,422	5,105,090
Goodwill	51,632	51,632	51,632	51,632
TNMP
Segment Reporting Information, Profit (Loss) [Abstract]
Other operating expenses	25,339	24,013	50,461	49,253
Depreciation and amortization	22,368	20,502	44,204	40,716
Operating income (loss)	23,175	22,578	37,520	35,163
Interest income	0	0	0	0
Other income (deductions)	1,963	731	2,524	1,317
Interest charges	(7,361)	(6,560)	(14,533)	(15,361)
Earnings (Loss) before Income Taxes	17,777	16,749	25,511	21,119
Income taxes (benefit)	1,603	1,482	2,245	1,754
Net Earnings (Loss)	16,174	15,267	23,266	19,365
Valencia non-controlling interest	0	0	0	0
Subsidiary preferred stock dividends	0	0	0	0
Net Earnings (Loss) Available for PNM Common Stock	16,174	15,267	23,266	19,365
Total Assets	1,985,721	1,768,831	1,985,721	1,768,831
Goodwill	226,665	226,665	226,665	226,665
Corporate and Other
Segment Reporting Information, Profit (Loss) [Abstract]
Other operating expenses	(4,282)	(5,536)	(9,759)	(11,299)
Depreciation and amortization	5,891	5,752	11,579	11,669
Operating income (loss)	(1,609)	(216)	(1,820)	(370)
Interest income	(76)	(70)	(149)	(139)
Other income (deductions)	(214)	(78)	(755)	(814)
Interest charges	(4,549)	(4,705)	(10,182)	(9,178)
Earnings (Loss) before Income Taxes	(6,448)	(5,069)	(12,906)	(10,501)
Income taxes (benefit)	(2,223)	(832)	(2,386)	(1,854)
Net Earnings (Loss)	(4,225)	(4,237)	(10,520)	(8,647)
Valencia non-controlling interest	0	0	0	0
Subsidiary preferred stock dividends	0	0	0	0
Net Earnings (Loss) Available for PNM Common Stock	(4,225)	(4,237)	(10,520)	(8,647)
Total Assets	211,324	174,746	211,324	174,746
Goodwill	0	0	0	0
Cost of energy
Segment Reporting Information, Profit (Loss) [Abstract]
Electric operating revenues	357,649	330,228	691,271	679,872
Cost of energy	93,863	83,782	192,573	205,408
Utility margin	263,786	246,446	498,698	474,464
Cost of energy \| PNM
Segment Reporting Information, Profit (Loss) [Abstract]
Electric operating revenues	260,788	238,219	508,921	507,536
Cost of energy	67,884	58,866	142,408	158,204
Utility margin	192,904	179,353	366,513	349,332
Cost of energy \| TNMP
Segment Reporting Information, Profit (Loss) [Abstract]
Electric operating revenues	96,861	92,009	182,350	172,336
Cost of energy	25,979	24,916	50,165	47,204
Utility margin	70,882	67,093	132,185	125,132
Cost of energy \| Corporate and Other
Segment Reporting Information, Profit (Loss) [Abstract]
Electric operating revenues	0	0	0	0
Cost of energy	0	0	0	0
Utility margin	$ 0	$ 0	$ 0	$ 0

Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance	$ 1,687,569	$ 1,747,458	$ 1,741,750	$ 1,752,594
Total Other Comprehensive Income	10,846	3,057	6,796	8,502
Ending balance	1,756,427	1,674,740	1,756,427	1,674,740
Total
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance	(103,427)	(103,239)	(99,377)	(108,684)
Amounts reclassified from AOCI (pre-tax)			591	(1,374)
Income tax impact of amounts reclassified			(150)	350
Other OCI changes (pre-tax)			8,519	12,769
Income tax impact of other OCI changes			(2,164)	(3,243)
Total Other Comprehensive Income	10,846	3,057	6,796	8,502
Ending balance	(92,581)	(100,182)	(92,581)	(100,182)
Fair Value Adjustment for Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(322)	1,738
Amounts reclassified from AOCI (pre-tax)			(500)	525
Income tax impact of amounts reclassified			127	(133)
Other OCI changes (pre-tax)			(1,198)	(3,169)
Income tax impact of other OCI changes			304	805
Total Other Comprehensive Income			(1,267)	(1,972)
Ending balance	(1,589)	(234)	(1,589)	(234)
PNM
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance	1,450,484	1,485,307	1,512,431	1,461,571
Total Other Comprehensive Income	10,594	4,317	8,063	10,474
Ending balance	1,506,198	1,402,493	1,506,198	1,402,493
PNM \| Total
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance	(101,586)	(104,265)	(99,055)	(110,422)
Amounts reclassified from AOCI (pre-tax)			1,091	(1,899)
Income tax impact of amounts reclassified			(277)	483
Other OCI changes (pre-tax)			9,717	15,938
Income tax impact of other OCI changes			(2,468)	(4,048)
Total Other Comprehensive Income	10,594	4,317	8,063	10,474
Ending balance	(90,992)	(99,948)	(90,992)	(99,948)
PNM \| Unrealized Gains on Available-for-Sale Securities
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			10,638	1,939
Amounts reclassified from AOCI (pre-tax)			(3,059)	(5,601)
Income tax impact of amounts reclassified			777	1,423
Other OCI changes (pre-tax)			9,717	15,938
Income tax impact of other OCI changes			(2,468)	(4,048)
Total Other Comprehensive Income			4,967	7,712
Ending balance	15,605	9,651	15,605	9,651
PNM \| Pension Liability Adjustment
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(109,693)	(112,361)
Amounts reclassified from AOCI (pre-tax)			4,150	3,702
Income tax impact of amounts reclassified			(1,054)	(940)
Total Other Comprehensive Income			3,096	2,762
Ending balance	$ (106,597)	$ (109,599)	$ (106,597)	$ (109,599)

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Net Earnings (Loss) Attributable to PNMR	$ 57,489	$ (75,914)	$ 42,229	$ (57,214)
Average Number of Common Shares:
Outstanding during period (in shares)	79,654	79,654	79,654	79,654
Vested awards of restricted stock (in shares)	186	263	202	251
Average Shares – Basic (in shares)	79,840	79,917	79,856	79,905
Dilutive Effect of Common Stock Equivalents:
PNMR 2020 Forward Equity Sale Agreements (in shares)	0	0	86	0
Restricted stock (in shares)	36	0	37	0
Average Shares – Diluted (in shares)	79,876	79,917	79,979	79,905
Net Earnings (Loss) Per Share of Common Stock:
Basic (in dollars per share)	$ 0.72	$ (0.95)	$ 0.53	$ (0.72)
Diluted (in dollars per share)	$ 0.72	$ (0.95)	$ 0.53	$ (0.72)

Electric Operating Revenues - Narrative (Details)	3 Months Ended	6 Months Ended
Electric Operating Revenues - Narrative (Details)	Jun. 30, 2020 USD ($) utility	Jun. 30, 2020 USD ($) utility	Dec. 31, 2019 USD ($)
Disaggregation of Revenue [Line Items]
Number of regulated utilities \| utility	2	2
Accounts receivable, allowance for credit loss, period increase (decrease)	$ 400,000	$ 700,000
Contract assets	0	0	$ 0
PNM
Disaggregation of Revenue [Line Items]
Accounts receivable	$ 65,200,000	$ 65,200,000	$ 59,300,000

Electric Operating Revenues - Disaggregation of revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	$ 343,075	$ 314,917	$ 666,057	$ 630,614
Alternative revenue programs	4,466	5,844	4,892	6,480
Other electric operating revenue	10,108	9,467	20,322	42,778
Revenues	357,649	330,228	691,271	679,872
PNM
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	248,151	228,061	483,909	464,002
Alternative revenue programs	2,529	691	4,690	756
Other electric operating revenue	10,108	9,467	20,322	42,778
Revenues	260,788	238,219	508,921	507,536
TNMP
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	94,924	86,856	182,148	166,612
Alternative revenue programs	1,937	5,153	202	5,724
Other electric operating revenue	0	0	0	0
Revenues	96,861	92,009	182,350	172,336
Cost of energy
Disaggregation of Revenue [Line Items]
Revenues	357,649	330,228	691,271	679,872
Cost of energy \| Residential
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	146,392	119,968	281,099	257,701
Cost of energy \| Commercial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	121,470	127,026	236,504	239,688
Cost of energy \| Industrial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	27,230	20,624	53,228	40,987
Cost of energy \| Public authority
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	6,326	5,987	12,096	12,071
Cost of energy \| Economy energy service
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	3,278	6,024	8,531	12,946
Cost of energy \| PNM \| Residential
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	109,090	86,328	211,899	193,629
Cost of energy \| PNM \| Commercial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	93,364	98,968	179,713	184,201
Cost of energy \| PNM \| Industrial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	20,373	15,329	39,838	30,076
Cost of energy \| PNM \| Public authority
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	4,907	4,596	9,254	9,307
Cost of energy \| PNM \| Economy energy service
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	3,278	6,024	8,531	12,946
Cost of energy \| TNMP \| Residential
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	37,302	33,640	69,200	64,072
Cost of energy \| TNMP \| Commercial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	28,106	28,058	56,791	55,487
Cost of energy \| TNMP \| Industrial
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	6,857	5,295	13,390	10,911
Cost of energy \| TNMP \| Public authority
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	1,419	1,391	2,842	2,764
Cost of energy \| TNMP \| Economy energy service
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	0	0	0	0
Transmission
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	34,335	31,927	66,514	59,316
Transmission \| PNM
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	14,097	14,342	28,264	27,727
Transmission \| TNMP
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	20,238	17,585	38,250	31,589
Miscellaneous
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	4,044	3,361	8,085	7,905
Miscellaneous \| PNM
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	3,042	2,474	6,410	6,116
Miscellaneous \| TNMP
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	$ 1,002	$ 887	$ 1,675	$ 1,789

Variable Interest Entities (Details) $ in Thousands	3 Months Ended		6 Months Ended
Variable Interest Entities (Details) $ in Thousands	Jun. 30, 2020 USD ($) MW	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) MW	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jan. 31, 2016 USD ($)
Results of Operations
Operating revenues	$ 357,649	$ 330,228	$ 691,271	$ 679,872
Operating expenses	286,499	423,843	572,383	736,764
Earnings attributable to non-controlling interest	3,940	3,499	7,669	6,328
Financial Position
Current assets	326,884		326,884		$ 294,010
Assets	7,574,467	7,048,667	7,574,467	7,048,667	7,298,774
Current liabilities	1,265,774		1,265,774		967,481
Owners’ equity – non-controlling interest	59,927		59,927		63,052
PNM
Results of Operations
Operating revenues	260,788	238,219	508,921	507,536
Operating expenses	211,204	354,196	425,733	599,221
Earnings attributable to non-controlling interest	3,940	3,499	7,669	6,328
Financial Position
Current assets	281,292		281,292		259,195
Assets	5,377,422		5,377,422		5,242,991
Current liabilities	447,508		447,508		593,236
Owners’ equity – non-controlling interest	59,927		59,927		63,052
PNM \| Valencia
Variable Interest Entity [Line Items]
Payment for fixed costs	5,000	5,000	10,000	9,900
Payment for variable costs	500	200	$ 900	300
Long-term contract option to purchase, ownership percentage (up to)			50.00%
Long-term contract option to purchase, purchase price - percentage of adjusted NBV			50.00%
Long-term contract option to purchase, purchase price - percentage of FMV			50.00%
Results of Operations
Operating revenues	5,495	5,177	$ 10,848	10,129
Operating expenses	1,555	1,678	3,179	3,801
Earnings attributable to non-controlling interest	3,940	$ 3,499	7,669	$ 6,328
Financial Position
Current assets	3,393		3,393		5,094
Net property, plant, and equipment	57,163		57,163		58,581
Assets	60,556		60,556		63,675
Current liabilities	629		629		623
Owners’ equity – non-controlling interest	$ 59,927		$ 59,927		$ 63,052
PNM \| Purchased through May 2028 \| Valencia
Variable Interest Entity [Line Items]
Number of megawatts purchased (in megawatts) \| MW	158		158
NM Capital \| San Juan Generating Station \| Coal supply
Variable Interest Entity [Line Items]
Cash used to support bank letter or credit arrangement	$ 30,300		$ 30,300			$ 30,300

Fair Value of Derivative and Other Financial Instruments - Overview and Commodity Derivatives (Details)	Jun. 30, 2020 USD ($) MW	Dec. 31, 2019 USD ($)
Derivatives, Fair Value [Line Items]
Obligations to return cash		$ 900,000
PNM
Derivatives, Fair Value [Line Items]
Expected exposure to market risk (in megawatts) \| MW	65
Power to be sold to third party (in megawatts) \| MW	36
Amounts recognized for right to reclaim cash	$ 0	0
Cash collateral under margin arrangements		500,000
PNM \| Designated as Hedging Instrument \| Commodity derivatives
Derivatives, Fair Value [Line Items]
Other current assets	1,096,000	1,089,000
Other deferred charges	1,004,000	1,507,000
Derivative asset	2,100,000	2,596,000
Other current liabilities	(1,096,000)	(1,089,000)
Other deferred credits	(1,004,000)	(1,507,000)
Derivative liability	(2,100,000)	(2,596,000)
Net	0	0
PNM \| Designated as Hedging Instrument \| Commodity derivatives \| Fuel and purchased power costs
Derivatives, Fair Value [Line Items]
Other current assets	$ 0	$ 0
Tri-State \| PNM
Derivatives, Fair Value [Line Items]
Power to be sold to third party (in megawatts) \| MW	100

Fair Value of Derivative and Other Financial Instruments - Statement of Earnings Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
PNM \| Designated as Hedging Instrument \| Commodity derivatives \| Cost of energy
Derivative Instruments, Gain (Loss) [Line Items]
Total gain	$ 0.1	$ 0.1	$ 0.1	$ 0.1

Fair Value of Derivative and Other Financial Instruments - Margin, Notional Amounts and Credit Rating (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2020 USD ($) MMBTU	Dec. 31, 2019 USD ($) MMBTU
Derivative [Line Items]
Contract in a liability position \| $	$ 0	$ 0
PNM \| Commodity derivatives \| Fair value hedging
Derivative [Line Items]
Economic Hedges (in mmbtu and mwh) \| MMBTU	0	0

Fair Value of Derivative and Other Financial Instruments - Available for Sale Securities (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Debt securities, available-for-sale, unrealized loss position	$ 0		$ 0
Other than temporary impairments			0
PNM
Debt Securities, Available-for-sale [Line Items]
(Increase)/decrease in other than temporary losses of available-for-sale securities, net portion recognized in earnings	4,000,000.0	$ (800,000)	(8,700,000)	$ 2,600,000
Proceeds from sales	205,296,000	159,551,000	354,651,000	234,011,000
Gross realized gains	11,262,000	10,906,000	17,087,000	15,095,000
Gross realized (losses)	(7,002,000)	$ (5,802,000)	(14,037,000)	$ (8,972,000)
Recurring \| PNM
Debt Securities, Available-for-sale [Line Items]
Available-for-sale debt securities	389,452,000		389,452,000		$ 388,832,000
Nuclear Decommissioning Trust \| Recurring \| PNM
Debt Securities, Available-for-sale [Line Items]
Available-for-sale debt securities	335,500,000		335,500,000		336,000,000.0
Mine Reclamation Trust \| Recurring \| PNM
Debt Securities, Available-for-sale [Line Items]
Available-for-sale debt securities	$ 53,900,000		$ 53,900,000		$ 52,800,000

Fair Value of Derivative and Other Financial Instruments - Investments in NDT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Equity securities:
Net gains (losses) from equity securities sold	$ 5,356	$ 2,774	$ 4,041	$ 4,161
Net gains (losses) from equity securities still held	13,377	303	(5,554)	9,905
Total net gains (losses) on equity securities	18,733	3,077	(1,513)	14,066
Available-for-sale debt securities:
Net gains (losses) on debt securities	2,887	1,522	(9,716)	4,547
Net gains (losses) on investment securities	$ 21,620	$ 4,599	$ (11,229)	$ 18,613

Fair Value of Derivative and Other Financial Instruments - Maturities of Debt Securities (Details) - PNMR and PNM $ in Thousands	Jun. 30, 2020 USD ($)
Available-for-Sale
Within 1 year	$ 22,402
After 1 year through 5 years	83,549
After 5 years through 10 years	82,539
After 10 years through 15 years	14,192
After 15 years through 20 years	10,791
After 20 years	40,010
Available-for-sale debt securities	$ 253,483

Fair Value of Derivative and Other Financial Instruments - Items Recorded and Presented by Level of Hierarchy (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	$ 3,343,648	$ 3,142,704
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	3,216,618	3,007,717
PNM
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	1,951,768	1,795,149
PNM \| Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	1,846,605	1,748,020
TNMP
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	797,604	753,317
TNMP \| Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
PNMR	780,561	670,691
Recurring \| PNM
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	389,452	388,832
Investments, unrealized gain	20,922	14,297
Recurring \| PNM \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	160,020	163,707
Recurring \| PNM \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	229,432	225,125
Recurring \| PNM \| Cash and cash equivalents
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	11,496	15,606
Recurring \| PNM \| Cash and cash equivalents \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	11,496	15,606
Recurring \| PNM \| Cash and cash equivalents \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Recurring \| PNM \| Corporate stocks, common
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	65,664	64,527
Recurring \| PNM \| Corporate stocks, common \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	65,664	64,527
Recurring \| PNM \| Corporate stocks, common \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	0	0
Recurring \| PNM \| Corporate stocks, preferred
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	8,498	9,033
Recurring \| PNM \| Corporate stocks, preferred \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	2,770	2,212
Recurring \| PNM \| Corporate stocks, preferred \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	5,728	6,821
Recurring \| PNM \| Mutual funds and other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	50,311	49,848
Recurring \| PNM \| Mutual funds and other \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	50,311	49,786
Recurring \| PNM \| Mutual funds and other \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	0	62
Recurring \| PNM \| Corporate stocks, common
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, unrealized gain
Recurring \| PNM \| Corporate stocks, preferred
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, unrealized gain
Recurring \| PNM \| Mutual funds and other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, unrealized gain
Recurring \| PNM \| U.S. government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	47,190	48,439
Investments, unrealized gain	1,497	535
Recurring \| PNM \| U.S. government \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	29,315	31,389
Recurring \| PNM \| U.S. government \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	17,875	17,050
Recurring \| PNM \| International government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	13,734	15,292
Investments, unrealized gain	1,630	1,193
Recurring \| PNM \| International government \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	0	0
Recurring \| PNM \| International government \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	13,734	15,292
Recurring \| PNM \| Municipals
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	47,392	46,642
Investments, unrealized gain	2,179	1,768
Recurring \| PNM \| Municipals \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	0	0
Recurring \| PNM \| Municipals \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	47,392	46,642
Recurring \| PNM \| Corporate and other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	145,167	139,445
Investments, unrealized gain	15,616	10,801
Recurring \| PNM \| Corporate and other \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	464	187
Recurring \| PNM \| Corporate and other \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	$ 144,703	$ 139,258

Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended		114 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Dec. 31, 2019	Feb. 28, 2018	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)	0		0
Stock Options, Shares
Outstanding at beginning of period (in shares)	2,000
Granted (in shares)	0		0
Exercised (in shares)	(2,000)
Forfeited (in shares)	0
Outstanding at end of period (in shares)	0		0
Stock Options, Weighted- Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 12.22
Granted (in dollars per share)	0
Exercised (in dollars per share)	12.22
Forfeited (in dollars per share)	0
Outstanding at end of period (in dollars per share)	$ 0		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Total intrinsic value of options exercised	$ 84	$ 2,617
Chairman, President, and Chief Executive Officer \| Common Stock \| Achieves a specific performance target by the end of 2019 and she remains an employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares received if achieves specified improvement in total shareholders return (in shares)				35,906		53,859
Chairman, President, and Chief Executive Officer \| Common Stock \| Achieves a specific performance target by the end of 2017 and she remains an employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares received if achieves specified improvement in total shareholders return (in shares)					17,953
Restricted Shares and Performance Based Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized expense related to stock awards	$ 6,100		$ 6,100
Period of time stock expense is expected to be recognized	1 year 9 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Expected quarterly dividends per share (in dollars per share)	$ 0.3075	$ 0.2900
Risk-free interest rate	0.72%	2.47%
Restricted Stock
Restricted Stock, Shares
Outstanding at beginning of period (in shares)	161,542
Granted (in shares)	246,029
Exercised (in shares)	(238,054)
Forfeited (in shares)	(1,456)
Outstanding at end of period (in shares)	168,061		168,061
Restricted Stock, Weighted- Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)	$ 38.21
Granted (in dollars per share)	36.73	$ 37.92
Exercised (in dollars per share)	34.86
Forfeited (in dollars per share)	41.32
Outstanding at end of period (in dollars per share)	40.77		$ 40.77
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Weighted-average grant date fair value (in dollars per share)	$ 36.73	$ 37.92
Total fair value of restricted shares that vested	$ 11,740	$ 6,227
Performance Shares \| Executive
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares awarded in year one (in shares)	150,543		150,543
Maximum number of shares awarded in year two (in shares)	142,080		142,080
Maximum number of shares awarded in year three (in shares)	142,047		142,047
Performance period	3 years
Performance Shares \| Executive \| Achieved performance target for 2017 through 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares awarded in year one (in shares)	122,277		122,277
Market-Based Shares
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk-free interest rate	0.72%	2.51%
Dividend yield	2.51%	2.59%
Expected volatility	19.41%	19.55%
Performance Equity Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Vesting rate	100.00%
Performance Equity Plan \| Non-employee Members of the Board of Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year

Financing - Financing Activities (Details)										6 Months Ended
Financing - Financing Activities (Details)	Jun. 22, 2020 USD ($)	Apr. 30, 2020 USD ($)	Apr. 24, 2020 USD ($) bond_series	Apr. 15, 2020 USD ($)	Apr. 01, 2020 USD ($)	Jan. 08, 2020 $ / shares shares	Jan. 07, 2020 shares	Jan. 01, 2020	Jul. 01, 2019 USD ($)	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019	Jul. 24, 2020	Jul. 15, 2020 USD ($)	Jun. 01, 2020 USD ($)	Dec. 31, 2019 USD ($) shares	Oct. 21, 2016 USD ($)
Debt Instrument [Line Items]
Common stock, shares issued (in shares) \| shares										79,653,624					79,653,624
PNMR 2020 Forward Equity Sales Agreement
Debt Instrument [Line Items]
Common stock, shares issued (in shares) \| shares							6,200,000
Sale of stock, price per share (in dollars per share) \| $ / shares						$ 47.21
Over-Allotment Option
Debt Instrument [Line Items]
Number of shares issued in transaction (in shares) \| shares						800,000	800,000
PNMR 2018 Two Year Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 50,000,000.0
Variable interest rate										0.98%
Term loans										$ 50,000,000.0
Term of loan										2 years
PNMR 2019 Term Loan
Debt Instrument [Line Items]
Variable interest rate										1.14%
PNMR Development Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 90,000,000.0
PNM
Debt Instrument [Line Items]
Common stock, shares issued (in shares) \| shares										39,117,799					39,117,799
PNM \| PNM 2019 40 Million Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 40,000,000.0
Variable interest rate										0.84%
PNM \| Maximum
Debt Instrument [Line Items]
Maturity term over which financings require regulator approval (more than)										18 months
Texas-New Mexico Power Company
Debt Instrument [Line Items]
Common stock, shares issued (in shares) \| shares										6,358					6,358
Line of credit
Debt Instrument [Line Items]
Ratio of debt to capital (less than or equal to)										65.00%	70.00%
Line of credit \| PNM \| PNM Revolving Credit Facility
Debt Instrument [Line Items]
Repayments of debt		$ 100,000,000.0
Letter of credit \| PNMR \| JPM LOC Facility
Debt Instrument [Line Items]
Aggregate principal amount																$ 30,300,000
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement
Debt Instrument [Line Items]
Ratio of debt to capital (less than or equal to)			65.00%
Aggregate principal amount			$ 185,000,000.0
Series of bond issuance \| bond_series			4
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement \| Subsequent event
Debt Instrument [Line Items]
Aggregate principal amount													$ 185,000,000.0
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 1 and 2
Debt Instrument [Line Items]
Aggregate principal amount			$ 110,000,000.0
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 1
Debt Instrument [Line Items]
Aggregate principal amount			$ 85,000,000.0
Stated interest rate			2.73%
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 2
Debt Instrument [Line Items]
Aggregate principal amount			$ 25,000,000.0
Stated interest rate			3.36%
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 3 and 4 \| Subsequent event
Debt Instrument [Line Items]
Aggregate principal amount													75,000,000.0
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 3 \| Subsequent event
Debt Instrument [Line Items]
Aggregate principal amount													$ 25,000,000.0
Stated interest rate													2.93%
Mortgage Bonds \| Texas-New Mexico Power Company \| TNMP 2020 Bond Purchase Agreement, Bond Series 4 \| Subsequent event
Debt Instrument [Line Items]
Aggregate principal amount													$ 50,000,000.0
Stated interest rate													3.36%
Medium-term Notes \| PNM \| PNM 2020 250 Million Term Loan
Debt Instrument [Line Items]
Aggregate principal amount				$ 250,000,000.0
Variable interest rate										2.70%
Medium-term Notes \| PNM \| PNM 2019 Term Loan
Debt Instrument [Line Items]
Repayments of debt				$ 250,000,000.0
Senior Unsecured Notes
Debt Instrument [Line Items]
Aggregate principal amount										$ 300,000,000.0
Senior Notes \| Senior Unsecured Notes, 3.21% Series A, due April 2030
Debt Instrument [Line Items]
Aggregate principal amount		$ 150,000,000.0
Stated interest rate		3.21%
Senior Notes \| Senior Unsecured Notes, 3.57% Series B, due April 2039
Debt Instrument [Line Items]
Aggregate principal amount		$ 50,000,000.0
Stated interest rate		3.57%
Senior Notes \| PNM
Debt Instrument [Line Items]
Ratio of debt to capital (less than or equal to)		65.00%
Aggregate principal amount		$ 200,000,000.0
Senior Notes \| PNM \| PNM 2020 250 Million Term Loan
Debt Instrument [Line Items]
Repayments of debt		$ 100,000,000.0
Bonds
Debt Instrument [Line Items]
Aggregate principal amount										302,500,000
Repayments of debt	$ 302,500,000
Bonds \| City of Farmington, New Mexico
Debt Instrument [Line Items]
Aggregate principal amount														$ 266,500,000
Bonds \| Pollution Control Revenue Bonds
Debt Instrument [Line Items]
Aggregate principal amount										100,300,000
Term loans															$ 100,300,000
Bonds \| Pollution Control Revenue Bonds \| Subsequent event
Debt Instrument [Line Items]
Stated interest rate												0.47%
Bonds \| Pollution Control Revenue Bonds, Due 2040
Debt Instrument [Line Items]
Term loans															40,000,000.0
Bonds \| Pollution Control Revenue Bonds, Due 2043, Series 1
Debt Instrument [Line Items]
Term loans															39,300,000
Bonds \| Pollution Control Revenue Bonds, Due 2043, Series 2
Debt Instrument [Line Items]
Term loans															21,000,000.0
Bonds \| Pollution Control Revenue Bonds, 5.90%, Callable \| City of Farmington, New Mexico
Debt Instrument [Line Items]
Aggregate principal amount										$ 255,000,000.0					$ 255,000,000.0
Stated interest rate										5.90%					5.90%
Bonds \| Pollution Control Revenue Bonds, 6.25%, Callable \| Maricopa County, Arizona Pollution Control Corporation
Debt Instrument [Line Items]
Aggregate principal amount										$ 36,000,000.0					$ 36,000,000.0
Stated interest rate															6.25%
Debt instrument, redemption price, percentage								101.00%
Bonds \| Pollution Control Revenue Bonds, 6.25%, Callable \| City of Farmington, New Mexico
Debt Instrument [Line Items]
Aggregate principal amount										$ 11,500,000					$ 11,500,000
Stated interest rate										6.25%					6.25%
Bonds \| Pollution Control Revenue Bonds, 1.05 Percent Due 2022
Debt Instrument [Line Items]
Aggregate principal amount										$ 36,000,000.0
Stated interest rate										1.05%
Bonds \| Pollution Control Revenue Bonds, 1.20 Percent Due 2022
Debt Instrument [Line Items]
Aggregate principal amount										$ 11,500,000
Stated interest rate										1.20%
Bonds \| Pollution Control Revenue Bonds, 1.10 Percent Due 2023
Debt Instrument [Line Items]
Aggregate principal amount										$ 130,000,000.0
Stated interest rate										1.10%
Bonds \| Pollution Control Revenue Bonds, 1.15 Percent Due 2024
Debt Instrument [Line Items]
Aggregate principal amount										$ 125,000,000.0
Stated interest rate										1.15%
Term loan agreement with banks \| PNM \| PNM 2020 250 Million Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 150,000,000.0
Term loan agreement with banks \| PNM \| PNM 2019 Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 150,000,000.0
Term loan agreement with banks \| PNM \| PNM 2020 Term Loan
Debt Instrument [Line Items]
Variable interest rate										2.70%
Term loan agreement with banks \| Texas-New Mexico Power Company \| PNMR Development Term Loan
Debt Instrument [Line Items]
Aggregate principal amount										$ 90,000,000.0
Variable interest rate										0.98%
San Juan Generating Station \| PNM
Debt Instrument [Line Items]
Request issuance of energy transition bonds					$ 361,000,000				$ 361,000,000

Financing - Short-term Debt and Liquidity (Details)	6 Months Ended	12 Months Ended
Financing - Short-term Debt and Liquidity (Details)	Jun. 30, 2020 USD ($)	Dec. 31, 2017 USD ($) derivative	Jul. 24, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jul. 22, 2019 USD ($)	Jul. 21, 2019 USD ($)
Short-term Debt [Line Items]
Financing capacity					$ 50,000,000.0	$ 40,000,000.0
Short-term debt	$ 252,549,000			$ 185,100,000
Letters of credit outstanding	4,600,000
Senior Unsecured Notes
Short-term Debt [Line Items]
Aggregate principal amount	300,000,000.0
Bonds
Short-term Debt [Line Items]
Aggregate principal amount	302,500,000
Pollution Control Revenue Bonds \| Bonds
Short-term Debt [Line Items]
Aggregate principal amount	100,300,000
Long-term debt				100,300,000
Variable Rate Short-Term Debt
Short-term Debt [Line Items]
Term of derivatives		4 years
Aggregate principal amount		$ 50,000,000.0
PNMR Development Term Loan
Short-term Debt [Line Items]
Aggregate principal amount	90,000,000.0
PNMR 2018 Two Year Term Loan
Short-term Debt [Line Items]
Aggregate principal amount	50,000,000.0
Long-term debt	$ 50,000,000.0
Term of loan	2 years
PNMR Revolving Credit Facility \| PNMR
Short-term Debt [Line Items]
Line of credit facility, interest rate at period end	1.68%
PNM
Short-term Debt [Line Items]
Short-term debt	$ 87,055,000			58,000,000
Letters of credit outstanding	2,200,000
PNM \| Lines of credit
Short-term Debt [Line Items]
NMPRC approved credit facility	40,000,000.0
Short-term debt	40,000,000			10,000,000
PNM \| PNM 2019 Term Loan \| Term loan agreement with banks
Short-term Debt [Line Items]
Aggregate principal amount	150,000,000.0
PNM \| PNM 2019 40 Million Term Loan
Short-term Debt [Line Items]
Aggregate principal amount	40,000,000.0
PNM \| PNM 2020 250 Million Term Loan \| Term loan agreement with banks
Short-term Debt [Line Items]
Aggregate principal amount	$ 150,000,000.0
PNM \| PNM Revolving Credit Facility
Short-term Debt [Line Items]
Line of credit facility, interest rate at period end	1.43%
PNM \| PNM 2017 New Mexico Credit Facility
Short-term Debt [Line Items]
Line of credit facility, interest rate at period end	1.44%
PNM \| PNMR Development Revolving Credit Facility
Short-term Debt [Line Items]
Letters of credit outstanding	$ 0
TNMP
Short-term Debt [Line Items]
Short-term debt	13,094,000			15,000,000
Letters of credit outstanding	100,000
TNMP \| PNMR Development Term Loan \| Term loan agreement with banks
Short-term Debt [Line Items]
Aggregate principal amount	$ 90,000,000.0
TNMP \| TNMP Revolving Credit Facility
Short-term Debt [Line Items]
Line of credit facility, interest rate at period end	0.91%
Revolving credit facility
Short-term Debt [Line Items]
Financing capacity	$ 300,000,000.0
Short-term debt	152,400,000			112,100,000
Revolving credit facility \| PNM
Short-term Debt [Line Items]
Financing capacity	400,000,000.0
Short-term debt	47,055,000			48,000,000
Revolving credit facility \| TNMP
Short-term Debt [Line Items]
Financing capacity	75,000,000.0
Short-term debt	12,600,000			15,000,000
Revolving credit facility \| TNMP \| First mortgage bonds
Short-term Debt [Line Items]
Collateral amount	75,000,000.0
Bonds \| TNMP
Short-term Debt [Line Items]
Short-term debt	494,000			0
Interest rate contract
Short-term Debt [Line Items]
Number of derivatives \| derivative		3
Interest rate 1 \| Variable Rate Short-Term Debt
Short-term Debt [Line Items]
Fixed interest rate		1.926%
Interest rate 2 \| Variable Rate Short-Term Debt
Short-term Debt [Line Items]
Fixed interest rate		1.823%
Interest rate 3 \| Variable Rate Short-Term Debt
Short-term Debt [Line Items]
Fixed interest rate		1.629%
Interest rate 3 \| Level 2 \| Cash Flow Hedge
Short-term Debt [Line Items]
Current derivative liability	$ 2,100,000			$ 400,000
Subsequent event
Short-term Debt [Line Items]
Remaining borrowing capacity			$ 609,300,000
Subsequent event \| PNMR
Short-term Debt [Line Items]
Remaining borrowing capacity			153,500,000
Consolidated invested cash			900,000
Subsequent event \| PNM
Short-term Debt [Line Items]
Remaining borrowing capacity			343,900,000
Consolidated invested cash			0
Subsequent event \| PNM \| Lines of credit
Short-term Debt [Line Items]
Remaining borrowing capacity			0
Subsequent event \| TNMP
Short-term Debt [Line Items]
Remaining borrowing capacity			74,900,000
Consolidated invested cash			63,500,000
Subsequent event \| PNMR Development
Short-term Debt [Line Items]
Remaining borrowing capacity			$ 37,000,000.0

Pension and Other Postretirement Benefit Plans (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
PNM \| Pension Plan
Components of Net Periodic Benefit Cost
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	4,985,000	6,294,000	9,971,000	12,587,000
Expected return on plan assets	(7,363,000)	(8,527,000)	(14,726,000)	(17,051,000)
Amortization of net (gain) loss	4,465,000	3,880,000	8,930,000	7,759,000
Amortization of prior service cost	(138,000)	(241,000)	(277,000)	(483,000)
Net Periodic Benefit Cost (Income)	1,949,000	1,406,000	3,898,000	2,812,000
Contributions by employer			0	0
Expected employer contributions, remainder of fiscal year	0		0
Estimated employer contributions in next fiscal year	0		0
Expected employer contributions in year 3	4,600,000		4,600,000
Expected employer contributions in year 4	19,100,000		19,100,000
Expected employer contributions in year 5	19,000,000.0		$ 19,000,000.0
PNM \| Pension Plan \| Minimum
Components of Net Periodic Benefit Cost
Assumptions used calculating net periodic benefit cost, discount rate			3.40%
PNM \| Pension Plan \| Maximum
Components of Net Periodic Benefit Cost
Assumptions used calculating net periodic benefit cost, discount rate			3.50%
PNM \| OPEB Plan
Components of Net Periodic Benefit Cost
Service cost	10,000	13,000	$ 20,000	26,000
Interest cost	613,000	829,000	1,227,000	1,658,000
Expected return on plan assets	(1,387,000)	(1,318,000)	(2,774,000)	(2,636,000)
Amortization of net (gain) loss	87,000	169,000	174,000	338,000
Amortization of prior service cost	0	(99,000)	0	(198,000)
Net Periodic Benefit Cost (Income)	(677,000)	(406,000)	(1,353,000)	(812,000)
Contributions by employer			0	0
Disbursements by employer	1,000,000.0	700,000	2,100,000	1,500,000
Expected employer disbursements in year 2 through 5	13,500,000		13,500,000
Total expected employer disbursements for remainder of fiscal year	3,700,000		3,700,000
PNM \| Executive Retirement Program
Components of Net Periodic Benefit Cost
Service cost	0	0	0	0
Interest cost	122,000	162,000	244,000	324,000
Expected return on plan assets	0	0	0	0
Amortization of net (gain) loss	101,000	79,000	201,000	158,000
Amortization of prior service cost	0	0	0	0
Net Periodic Benefit Cost (Income)	223,000	241,000	445,000	482,000
Disbursements by employer	300,000	400,000	800,000	700,000
Expected employer disbursements in year 2 through 5	5,400,000		5,400,000
Total expected employer disbursements for remainder of fiscal year	1,500,000		1,500,000
TNMP \| Pension Plan
Components of Net Periodic Benefit Cost
Service cost	0	0	0	0
Interest cost	544,000	672,000	1,088,000	1,344,000
Expected return on plan assets	(821,000)	(967,000)	(1,642,000)	(1,934,000)
Amortization of net (gain) loss	315,000	235,000	629,000	470,000
Amortization of prior service cost	0	0	0	0
Net Periodic Benefit Cost (Income)	38,000	(60,000)	75,000	(120,000)
Contributions by employer			0	0
Expected employer contributions in year 4	1,100,000		1,100,000
Expected employer contributions in year 5	2,800,000		2,800,000
Estimated employer contributions remainder of fiscal year through year three	0		$ 0
TNMP \| Pension Plan \| Minimum
Components of Net Periodic Benefit Cost
Assumptions used calculating net periodic benefit cost, discount rate			3.40%
TNMP \| Pension Plan \| Maximum
Components of Net Periodic Benefit Cost
Assumptions used calculating net periodic benefit cost, discount rate			3.50%
TNMP \| OPEB Plan
Components of Net Periodic Benefit Cost
Service cost	12,000	13,000	$ 23,000	26,000
Interest cost	93,000	113,000	187,000	226,000
Expected return on plan assets	(135,000)	(129,000)	(268,000)	(258,000)
Amortization of net (gain) loss	(80,000)	(110,000)	(162,000)	(220,000)
Amortization of prior service cost	0	0	0	0
Net Periodic Benefit Cost (Income)	(110,000)	(113,000)	(220,000)	(226,000)
Disbursements by employer	200,000	100,000	300,000	200,000
Estimated employer contributions for remainder of fiscal year through year 5	0		0
TNMP \| Executive Retirement Program
Components of Net Periodic Benefit Cost
Service cost	0	0	0	0
Interest cost	6,000	8,000	11,000	16,000
Expected return on plan assets	0	0	0	0
Amortization of net (gain) loss	6,000	4,000	12,000	8,000
Amortization of prior service cost	0	0	0	0
Net Periodic Benefit Cost (Income)	12,000	12,000	23,000	24,000
Expected employer disbursements in year 2 through 5	300,000		300,000
Total expected employer disbursements for remainder of fiscal year	100,000		100,000
TNMP \| Executive Retirement Program \| Maximum
Components of Net Periodic Benefit Cost
Disbursements by employer	$ 0	$ 0	$ 0	$ 0

Commitments and Contingencies - Nuclear Spent Fuel and Waste Disposal (Details) - PNM - Nuclear spent fuel and waste disposal - Palo Verde Nuclear Generating Station - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Public Utilities, Commitments And Contingencies [Line Items]
Estimate of possible loss	$ 59.6
Other deferred credits
Public Utilities, Commitments And Contingencies [Line Items]
Loss contingency accrual	$ 13.0	$ 12.7

Commitments and Contingencies - The Clean Air Act (Details)	6 Months Ended
	Jun. 30, 2020 option T	Feb. 25, 2019 parts_per_billion	Feb. 09, 2016 state	Dec. 31, 2015 parts_per_billion	Oct. 01, 2015 parts_per_billion	May 14, 2015 lb_PER_MMBTU	Dec. 31, 1999 state
Public Utilities, Commitments And Contingencies [Line Items]
Number of options for meeting BTA standards \| option	7
Clean Air Act related to regional haze
Public Utilities, Commitments And Contingencies [Line Items]
Number of states to address regional haze (in states)							50
Potential to emit tons per year of visibility impairing pollution (in tons, more than) \| T	250
Clean Power Plan
Public Utilities, Commitments And Contingencies [Line Items]
Number of states that filed a petition against the Clean Power Plan			29
Maximum \| PNM \| San Juan Generating Station and Four Corners
Public Utilities, Commitments And Contingencies [Line Items]
Government standard emission limit (in ozone parts per million) \| parts_per_billion		75		75	70
San Juan Generating Station \| PNM \| National Ambient Air Quality Standards
Public Utilities, Commitments And Contingencies [Line Items]
Revised SO2 emissions (in pounds per MMBTU) \| lb_PER_MMBTU						0.10

Commitments and Contingencies - Coal Supply (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2020	Jan. 31, 2016
Public Utilities, Commitments And Contingencies [Line Items]
Other current assets	$ 44,472		$ 44,472		$ 51,279
PNM
Public Utilities, Commitments And Contingencies [Line Items]
Other current assets	36,561		36,561		40,114
PNM \| Loss on long-term purchase commitment \| Surface
Public Utilities, Commitments And Contingencies [Line Items]
Final reclamation, capped amount to be collected				$ 100,000
Loss contingency accrual	70,300		70,300		69,900
PNM \| Loss on long-term purchase commitment \| Underground
Public Utilities, Commitments And Contingencies [Line Items]
Loss contingency accrual	25,300		25,300		26,400
PNM \| Loss on long-term purchase commitment \| San Juan Generating Station \| Surface
Public Utilities, Commitments And Contingencies [Line Items]
Estimate of possible loss					90,600
PNM \| Loss on long-term purchase commitment \| San Juan Generating Station \| Underground
Public Utilities, Commitments And Contingencies [Line Items]
Estimate of possible loss					40,000
Coal supply \| PNM \| San Juan Generating Station
Public Utilities, Commitments And Contingencies [Line Items]
Other current assets	26,300		26,300		26,300
Coal supply \| NM Capital \| San Juan Generating Station
Public Utilities, Commitments And Contingencies [Line Items]
Requirement to post reclamation bonds					118,700
Cash used to support bank letter or credit arrangement					30,300	$ 30,300
Increase in coal mine decommissioning liability \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Regulatory disallowance, additional amount recorded		$ 300	$ 1,100
Increase in coal mine decommissioning liability \| PNM \| Underground and Surface
Public Utilities, Commitments And Contingencies [Line Items]
Regulatory disallowance, additional amount recorded				39,200
Increase in coal mine decommissioning liability \| PNM \| Underground
Public Utilities, Commitments And Contingencies [Line Items]
Regulatory disallowance, additional amount recorded				$ 9,400
Mine Reclamation Trust \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Required contribution to reclamation trust, current fiscal year					8,800
Reclamation trust funding, year 2					10,900
Reclamation trust funding, year 3					11,700
Four Corners CSA \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Other commitment, due in first year					2,100
Other commitment, due in second year					1,900
Other commitment, due in third year					1,900
Other commitment, due in fourth year					1,900
Other commitment, due in fifth year					$ 1,900
San Juan Generating Station \| Loss on long-term purchase commitment \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Annual funding post-term reclamation trust	$ 5,500

Commitments and Contingencies - Royalty Rates, Tax Assessment, Insurance and Other Matters (Details)	1 Months Ended		6 Months Ended
	Sep. 30, 2012 landowner	Apr. 30, 2010 city	Jun. 30, 2020 USD ($) generating_unit	Dec. 01, 2015 Allotment_Parcel	Jul. 13, 2015 a	Jan. 22, 2015 Allotment_Parcel	Aug. 31, 2013
Continuous highwall mining \| San Juan Generating Station
Public Utilities, Commitments And Contingencies [Line Items]
Proposed retroactive surface mining royalty rate							12.50%
Surface mining royalty rate applied			8.00%
Estimated underpaid surface mining royalties under proposed rate change			$ 5,000,000
PNM's share estimated underpaid surface mining royalties under proposed rate change			46.30%
PNM
Public Utilities, Commitments And Contingencies [Line Items]
Franchise fee agreement term			15 years
PNM \| Navajo Nation Allottee Matters
Public Utilities, Commitments And Contingencies [Line Items]
Number of landowners involved in the appeal \| landowner	43
Number of allotments where landowners are revoking rights of way renewal consents (in allotment parcels) \| Allotment_Parcel				2		10
Area of land (in acres) \| a					15.49
Number of allotment parcels at issue that are not to be condemned \| Allotment_Parcel				2
Number of allotment parcels at issue \| Allotment_Parcel				5
PNM \| Palo Verde Nuclear Generating Station
Public Utilities, Commitments And Contingencies [Line Items]
Number of cities to provide cooling water \| city		5
Term of agreement for cooling water		40 years
PNM \| Palo Verde Nuclear Generating Station \| Nuclear plant
Public Utilities, Commitments And Contingencies [Line Items]
Ownership percentage in nuclear reactor			10.20%
Number of units \| generating_unit			3
Maximum potential assessment per incident			$ 42,100,000
Annual payment limitation related to incident			6,200,000
Aggregate amount of all risk insurance			2,800,000,000
Maximum amount under Nuclear Electric Insurance Limited			5,400,000
Asset retirement obligation, revision of estimate			6,400,000
PNM \| Maximum \| Palo Verde Nuclear Generating Station \| Nuclear plant
Public Utilities, Commitments And Contingencies [Line Items]
Liability insurance coverage			13,900,000,000
Liability insurance coverage sublimit			2,250,000,000
Commercial providers \| PNM \| Palo Verde Nuclear Generating Station \| Nuclear plant
Public Utilities, Commitments And Contingencies [Line Items]
Liability insurance coverage			450,000,000
Industry Wide Retrospective Assessment Program \| PNM \| Palo Verde Nuclear Generating Station \| Nuclear plant
Public Utilities, Commitments And Contingencies [Line Items]
Liability insurance coverage			$ 13,500,000,000
Pending litigation
Public Utilities, Commitments And Contingencies [Line Items]
Written notification to terminate agreement, minimum period of time required			30 days

Regulatory and Rate Matters - PNM (Details)										1 Months Ended	3 Months Ended				6 Months Ended		12 Months Ended
Regulatory and Rate Matters - PNM (Details)	Jun. 01, 2020 USD ($)	May 28, 2020 USD ($)	Apr. 15, 2020 USD ($) MMBTU meter	Feb. 01, 2018	Jan. 10, 2018 USD ($)	Jul. 03, 2017	Dec. 07, 2016 USD ($)	Sep. 28, 2016 USD ($) lease MW	Aug. 27, 2015 USD ($)	Aug. 31, 2016 USD ($) lease MW	Jun. 30, 2020 USD ($) MW	Sep. 30, 2019	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Jun. 30, 2020 USD ($) MW	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) GWh	Dec. 31, 2017	Mar. 27, 2020 MW	May 16, 2019 MW	Sep. 30, 2016 MW	Jan. 31, 2016 MW
Public Utilities, Commitments And Contingencies [Line Items]
Income taxes (benefit)											$ (4,275,000)		$ 42,831,000		$ (2,395,000)	$ 41,608,000
Regulatory disallowances and restructuring costs											$ 0		149,254,000		$ 0	150,599,000
Percent of non-fuel revenue requirement change implemented				50.00%
Excess return on jurisdictional equity that would require refund											0.50%				0.50%
PNM
Public Utilities, Commitments And Contingencies [Line Items]
Income taxes (benefit)											$ (4,895,000)		43,481,000		$ (2,536,000)	41,508,000
Regulatory disallowances and restructuring costs											$ 0		149,254,000		$ 0	150,599,000
Solar generation capacity (in megawatts) \| MW																			300
Action plan, covered period						4 years
2015 Electric Rate Case \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Requested rate increase (decrease)									$ 123,500,000
Requested rate increase (decrease) of non-fuel revenue									$ 121,700,000
Approved rate increase (decrease)								$ 61,200,000
Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts of Solar PV facilities \| MW											157				157
Current output in the geothermal facility (in megawatts) \| MW											15				15
Solar generation capacity (in megawatts) \| MW											138.6				138.6
Energy Efficiency and Load Management Program \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Energy efficiency and load management programs targeted energy savings (in Gigawatts) \| MMBTU			80
Program costs related to energy efficiency, in year two			$ 31,400,000
Program costs related to energy efficiency, in year three			31,000,000.0
Program costs related to energy efficiency, in year four			$ 29,600,000
Number of AMI meters to be installed \| meter			5,000
Program costs related to meter installation			$ 2,900,000
Integrated Resource Plan, 2011 \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Frequency of IRP filings															3 years
Planning period covered of IRP															20 years
Integrated Resource Plan, 2017 \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Planning period covered of IRP						20 years
Integrated Resource Plan, 2020 \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Planning period covered of IRP												20 years
NMPRC
Public Utilities, Commitments And Contingencies [Line Items]
Requested rate increase (decrease)							$ 99,200,000
Requested return on equity							10.125%
Period of time for proposed return to customers the benefit of the reduction in New Mexico's corporate income tax rate																		3 years
Action plan, covered period															4 years
NMPRC \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Requested rate increase (decrease)					$ 10,300,000
Requested return on equity					9.575%
Period of time for proposed return to customers the benefit of the reduction in New Mexico's corporate income tax rate					3 years
Proposed revision to rider that will allow for recovery																	$ 49,600,000
NMPRC \| Renewable Energy Rider \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Proposed revision to rider that will allow for recovery	$ 67,800,000
Revenue from renewable energy rider, year two															$ 58,900,000
Recorded revenues from renewable rider											$ 15,200,000		$ 12,800,000		$ 30,300,000	25,500,000
NMPRC \| Renewable Energy Rider, Sky Blue Energy Program \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Proposed revision to rider that will allow for recovery	$ 2,300,000
Required Percentage by 2011 \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Required percentage of renewable energy in portfolio to electric sales											10.00%				10.00%
Required Percentage by 2015 \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Required percentage of renewable energy in portfolio to electric sales											15.00%				15.00%
Required Percentage by 2020 \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Required percentage of renewable energy in portfolio to electric sales											20.00%				20.00%
Minimum \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Profit incentive sliding scale multiplier			0.071														0.071
Energy efficiency and load management programs targeted energy savings (in Gigawatts) \| MMBTU			80
Maximum \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Reasonable cost threshold in megawatts per hour											$ 60				$ 60
Palo Verde Nuclear Generating Station, Unit 2 Leases \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts purchased (in megawatts) \| MW								64.1		64.1											64.1	64.1
Number of megawatts nuclear generation (in megawatts) \| MW								114.6		114.6										114.6	114.6
Number of leases under which assets were purchased \| lease								3		3
Public utilities, aggregate annual rent expense										$ 18,100,000
Palo Verde Nuclear Generating Station, Unit 2 Leases \| 2015 Electric Rate Case \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Hearing examiner's proposed disallowance of recovery										$ 163,300,000
Initial rate base value								$ 83,700,000
Disallowance of the recovery undepreciated costs of capitalized leasehold improvements								$ 43,800,000
Pre-tax regulatory disallowance														$ 19,700,000
New Mexico Wind \| Renewable Portfolio Standard 2014 \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts for wind energy \| MW															204
Red Mesa Wind \| Renewable Portfolio Standard 2014 \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts for wind energy \| MW															102
La Joya Wind \| Renewable Portfolio Standard \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts for wind energy \| MW															140
Four Corners
Public Utilities, Commitments And Contingencies [Line Items]
Regulatory disallowances and restructuring costs					$ 47,600,000
Regulatory disallowance					$ 148,100,000
New Mexico 2015 Rate Case \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Pre-tax impairment of investments														$ 1,300,000		$ 150,600,000
Undepreciated capitalized improvements											$ 39,700,000				$ 39,700,000
New Mexico 2015 Rate Case \| Palo Verde Nuclear Generating Station, Unit 2 Leases \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Number of megawatts purchased (in megawatts) \| MW											64.1				64.1					64.1
Portion of purchase price															$ 73,200,000
Income taxes (benefit)															45,700,000
Leaseholds and Leasehold Improvements \| New Mexico 2015 Rate Case \| Palo Verde Nuclear Generating Station, Unit 1 and 4 Leases \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Undepreciated capitalized improvements											$ 37,700,000				$ 37,700,000
Disincentives and Incentives Added \| 2017 Energy Efficiency and Load Management Program \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Energy efficiency and load management programs profit incentive, minimum																	$ 1,800,000
Energy efficiency and load management programs targeted energy savings (in Gigawatts) \| GWh																	59
Energy efficiency and load management programs additional incentive targeted energy savings (in Gigawatts) \| GWh																	68
Disincentives and Incentives Added \| 2019 Energy Efficiency and Load Management Program \| PNM
Public Utilities, Commitments And Contingencies [Line Items]
Energy efficiency and load management programs profit incentive, minimum		$ 500,000

Regulatory and Rate Matters - SJGS Abandonment Application (Details) $ in Thousands					3 Months Ended	6 Months Ended
	Apr. 01, 2020 USD ($)	Jul. 10, 2019	Jul. 01, 2019 USD ($) scenario MW	May 31, 2019 MW	Jun. 30, 2020 USD ($) MW	Jun. 30, 2020 USD ($) MW	Jun. 30, 2019 USD ($)	Jun. 24, 2020 MW	Mar. 31, 2020 USD ($)	Mar. 27, 2020 MMBTU MW	Feb. 21, 2020 USD ($)
Public Utilities, General Disclosures [Line Items]
Increase (decrease) in allowance for equity funds used during construction \| $						$ 3,475	$ 4,158
NMPRC
Public Utilities, General Disclosures [Line Items]
Deadline extension period to issue abandonment and financing order		9 months
Deadline extension period to issue replacement resources order		15 months
COVID-19
Public Utilities, General Disclosures [Line Items]
Deferred incremental costs \| $					$ 1,300	$ 1,300
PNM Solar Direct
Public Utilities, General Disclosures [Line Items]
Solar generation capacity (in megawatts)				50
Power purchase agreement term				15 years
Replacement Resource Portfolio Two \| Hearing Examiners Approach Two
Public Utilities, General Disclosures [Line Items]
Number of megawatts for natural gas facility (in Megawatts)								200
Replacement Resource Portfolio Four \| Hearing Examiners Approach One
Public Utilities, General Disclosures [Line Items]
Number of megawatts for demand response (in Megawatts)								24
Required Percentage by 2020 \| Energy Transition Act \| Electric-Generation Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Renewable energy, percentage					0.20	0.20
Required Percentage by 2025 \| Energy Transition Act \| Electric-Generation Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Renewable energy, percentage					0.40	0.40
Required Percentage by 2030 \| Energy Transition Act \| Electric-Generation Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Renewable energy, percentage					0.50	0.50
Required Percentage by 2040 \| Energy Transition Act \| Electric-Generation Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Renewable energy, percentage					0.80	0.80
Required Percentage by 2045 \| Energy Transition Act \| Electric-Generation Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Renewable energy, percentage					1	1
PNM
Public Utilities, General Disclosures [Line Items]
Number of megawatts in battery storage facilities (in megawatts)										40
Solar generation capacity (in megawatts)										300
Solar generation capacity, power purchase agreements (in Megawatts) \| MMBTU										20
Increase (decrease) in allowance for equity funds used during construction \| $						$ 2,399	$ 3,456
PNM \| Audit Of PNM’s Compliance With OATT And Financial Reporting
Public Utilities, General Disclosures [Line Items]
Interest expense, debt \| $						1,900
Increase (decrease) in allowance for equity funds used during construction \| $					$ 100	$ 100
PNM \| Renewable Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Solar generation capacity (in megawatts)					138.6	138.6
PNM \| PNM Solar Direct
Public Utilities, General Disclosures [Line Items]
Solar generation capacity (in megawatts)										50
PNM \| Replacement Resource Portfolio One \| Hearing Examiners Approach One
Public Utilities, General Disclosures [Line Items]
Number of megawatts in battery storage facilities (in megawatts)								150
Solar generation capacity (in megawatts)								300
PNM \| Replacement Resource Portfolio Two \| Hearing Examiners Approach One
Public Utilities, General Disclosures [Line Items]
Number of megawatts in battery storage facilities (in megawatts)								20
Solar generation capacity (in megawatts)								50
PNM \| Replacement Resource Portfolio Three \| Hearing Examiners Approach One
Public Utilities, General Disclosures [Line Items]
Number of megawatts in battery storage facilities (in megawatts)								100
Solar generation capacity (in megawatts)								200
PNM \| Replacement Resource Portfolio Four \| Hearing Examiners Approach One
Public Utilities, General Disclosures [Line Items]
Number of megawatts in battery storage facilities (in megawatts)								30
Solar generation capacity (in megawatts)								100
PNM \| Required Percentage by 2011 \| Renewable Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Required percentage of renewable energy in portfolio to electric sales					10.00%	10.00%
PNM \| Required Percentage by 2015 \| Renewable Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Required percentage of renewable energy in portfolio to electric sales					15.00%	15.00%
PNM \| Required Percentage by 2020 \| Renewable Portfolio Standard
Public Utilities, General Disclosures [Line Items]
Required percentage of renewable energy in portfolio to electric sales					20.00%	20.00%
San Juan Generating Station \| Other deferred credits
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $					$ 38,100	$ 38,100
San Juan Generating Station \| Employee Severance
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $									$ 9,400
San Juan Generating Station \| PNM
Public Utilities, General Disclosures [Line Items]
Number of megawatts in natural gas-fired peaking plant (in megawatts)			280
Number of megawatts in battery storage facilities (in megawatts)			70
Solar generation capacity (in megawatts)			350
Number of megawatts in battery storage facilities, replacement resource scenario (in megawatts)			60
Number of replacement resource scenarios \| scenario			3
Request issuance of energy transition bonds \| $	$ 361,000		$ 361,000
Forecasted undepreciated investment \| $			283,000								$ 361,000
Plant decommissioning and coal mine reclamation costs \| $			28,600
Upfront financing costs \| $			9,600
Severance costs \| $			20,000
Proceeds from securitization bonds \| $			$ 19,800
San Juan Generating Station \| PNM \| Other deferred credits
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $					$ 36,800	$ 36,800
San Juan Generating Station \| PNM \| Employee Severance
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $									8,100
San Juan Generating Station \| PNM \| Other Restructuring
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $									8,900
San Juan Generating Station \| PNM \| Economic Development and Workforce Training Costs
Public Utilities, General Disclosures [Line Items]
Restructuring reserve \| $									$ 19,800

Regulatory and Rate Matters - TNMP Narrative (Details) - TNMP $ in Millions					1 Months Ended		12 Months Ended
	Jun. 26, 2020 USD ($)	Apr. 14, 2020 USD ($)	Dec. 20, 2018 USD ($)	May 30, 2018 USD ($)	Oct. 31, 2019 USD ($)	Aug. 31, 2019 USD ($)	Dec. 31, 2017 USD ($)	Jul. 27, 2020 USD ($)	Jun. 30, 2020 USD ($)	May 29, 2020 USD ($)	Mar. 30, 2020 MWh	Mar. 01, 2020 USD ($)	Dec. 31, 2019 USD ($)
Public Utilities, Commitments And Contingencies [Line Items]
Net regulatory liability							$ 37.8
Annual distribution revenue requirement	$ 14.3
Energy efficiency cost recovery, requested change amount										$ 5.9		$ 5.9
Energy efficiency cost recovery, requested bonus										$ 1.0		$ 0.8
Rider charge from electricity relief program (per MWh) \| MWh											0.33
Proceeds from short-term debt		$ 0.5
COVID-19
Public Utilities, Commitments And Contingencies [Line Items]
Regulatory liability									$ 0.4
Other COVID-19 related costs									$ 0.3
Forecast
Public Utilities, Commitments And Contingencies [Line Items]
Energy efficiency cost recovery, requested bonus								$ 1.0
2018 TNMP Rate Case
Public Utilities, Commitments And Contingencies [Line Items]
Requested rate increase (decrease)			$ 10.0	$ 25.9
Requested return on equity			9.65%	10.50%
Requested cost of debt			6.44%	7.20%
Requested debt capital structure			55.00%	50.00%
Requested equity capital structure			45.00%	50.00%
Investments excluded from rate request			$ 10.6
Refund of federal income tax rates period							5 years
Recovery of costs incurred					$ 3.3	$ 3.8
Recovery costs collection period						3 years
Write off of regulatory disallowance													$ 0.5

Regulatory and Rate Matters - Transmission Cost of Service Rates (Details) - TNMP - USD ($) $ in Millions	Jul. 24, 2020	Apr. 06, 2020	Mar. 27, 2020	Sep. 19, 2019	Mar. 21, 2019
Public Utilities, General Disclosures [Line Items]
Requested increase in annual distribution revenue		$ 14.7
Incremental distribution investments		$ 149.2
PUCT
Public Utilities, General Disclosures [Line Items]
Approved Increase in Rate Base			$ 59.2	$ 21.9	$ 111.8
Annual Increase in Revenue			$ 7.8	$ 3.3	$ 14.3
PUCT \| Forecast
Public Utilities, General Disclosures [Line Items]
Approved Increase in Rate Base	$ 10.8
Annual Increase in Revenue	$ 2.0

Lease Commitments - Narrative (Details) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
Lease Commitments - Narrative (Details) $ in Millions	Apr. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jan. 16, 2016 lease	Jan. 15, 2015 lease
Operating Leased Assets [Line Items]
Operating lease, payments to lessor upon occurrence of certain events		$ 154.5		$ 154.5
Unamortized cost, right-of-way lease payments		58.8		58.8		$ 60.2
Operating lease, right-of-use assets, amortization expense		0.9	$ 0.9	1.9	$ 1.9
Operating leases, capitalized financing costs, investing activities				1.8	2.0
Finance leases, capitalized financing costs, investing activities				1.1	0.2
Lessee, operating lease, unguaranteed residual value		24.8		24.8
PNM
Operating Leased Assets [Line Items]
Operating leases, capitalized financing costs, investing activities				0.5	0.7
Finance leases, capitalized financing costs, investing activities				0.4	0.1
Lessee, operating lease, unguaranteed residual value		10.1		10.1
PNM \| Palo Verde Nuclear Generating Station, Unit 1 and 4 Leases
Operating Leased Assets [Line Items]
Number of leases, expiring \| lease								4
Number of leases under which lease term was extended \| lease								4
Annual lease payments during renewal period				16.5
PNM \| Palo Verde Nuclear Generating Station, Unit 2 Leases
Operating Leased Assets [Line Items]
Number of leases, expiring \| lease							4
Number of leases under which lease term was extended \| lease							1
Annual lease payments during renewal period				1.6
PNM \| Navajo Nation
Operating Leased Assets [Line Items]
Annual lease payments				6.0
Right-of-way lease payments	$ 7.1
TNMP
Operating Leased Assets [Line Items]
Operating leases, capitalized financing costs, investing activities				1.2	1.3
Finance leases, capitalized financing costs, investing activities				0.7	$ 0.1
Lessee, operating lease, unguaranteed residual value		14.7		14.7
Equipment
Operating Leased Assets [Line Items]
Operating lease, residual value of leased asset		2.0		2.0
Equipment \| PNM
Operating Leased Assets [Line Items]
Operating lease, residual value of leased asset		0.7		0.7
Equipment \| TNMP
Operating Leased Assets [Line Items]
Operating lease, residual value of leased asset		$ 1.3		$ 1.3

Lease Commitments - Operating Lease Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Operating leases:
Operating lease assets, net of amortization	$ 118,140	$ 131,212
Current portion of operating lease liabilities	26,744	29,068
Long-term portion of operating lease liabilities	91,320	105,512
PNM
Operating leases:
Operating lease assets, net of amortization	109,042	120,585
Current portion of operating lease liabilities	24,039	25,927
Long-term portion of operating lease liabilities	85,028	97,992
TNMP
Operating leases:
Operating lease assets, net of amortization	8,535	9,954
Current portion of operating lease liabilities	2,428	2,753
Long-term portion of operating lease liabilities	$ 5,897	$ 7,039

Lease Commitments - Finance Lease Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financing leases:
Non-utility property	$ 18,540	$ 10,028
Accumulated depreciation	(2,267)	(973)
Non-utility property, net	16,273	9,055
Other current liabilities	3,203	1,637
Other deferred credits	12,800	7,102
PNM
Financing leases:
Non-utility property	8,561	4,857
Accumulated depreciation	(1,070)	(482)
Non-utility property, net	7,491	4,375
Other current liabilities	1,512	722
Other deferred credits	5,699	3,333
TNMP
Financing leases:
Non-utility property	9,712	4,910
Accumulated depreciation	(1,137)	(466)
Non-utility property, net	8,575	4,444
Other current liabilities	1,623	850
Other deferred credits	$ 6,958	$ 3,597

Lease Commitments - Schedule of Weighted Average Remaining Lease Terms and Discount Rates (Details)	Jun. 30, 2020
Weighted average remaining lease term (years):
Operating leases	5 years 11 months 4 days
Financing leases	5 years 2 months 15 days
Weighted average discount rate:
Operating leases	3.91%
Financing leases	3.19%
PNM
Weighted average remaining lease term (years):
Operating leases	6 years 1 month 6 days
Financing leases	4 years 11 months 8 days
Weighted average discount rate:
Operating leases	3.90%
Financing leases	3.12%
TNMP
Weighted average remaining lease term (years):
Operating leases	3 years 10 months 6 days
Financing leases	5 years 5 months 23 days
Weighted average discount rate:
Operating leases	4.00%
Financing leases	3.26%

Lease Commitments - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lease, Cost [Line Items]
Operating lease cost:	$ 7,658	$ 7,692	$ 15,393	$ 16,312
Amounts capitalized	(849)	(1,006)	(1,774)	(2,015)
Total operating lease expense	6,809	6,686	13,619	14,297
Financing lease cost:
Amortization of right-of-use assets	741	158	1,294	282
Interest on lease liabilities	121	31	224	64
Amounts capitalized	(594)	(79)	(1,053)	(157)
Total financing lease expense	268	110	465	189
Variable lease expense	63	32	95	32
Short-term lease expense	75	101	161	195
Total lease expense for the period	7,215	6,929	14,340	14,713
PNM
Lease, Cost [Line Items]
Operating lease cost:	6,847	6,803	13,740	14,386
Amounts capitalized	(247)	(344)	(538)	(696)
Total operating lease expense	6,600	6,459	13,202	13,690
Financing lease cost:
Amortization of right-of-use assets	341	77	588	143
Interest on lease liabilities	52	14	97	30
Amounts capitalized	(226)	(41)	(401)	(82)
Total financing lease expense	167	50	284	91
Variable lease expense	63	32	95	32
Short-term lease expense	75	75	160	149
Total lease expense for the period	6,905	6,616	13,741	13,962
TNMP
Lease, Cost [Line Items]
Operating lease cost:	746	815	1,521	1,713
Amounts capitalized	(602)	(662)	(1,237)	(1,319)
Total operating lease expense	144	153	284	394
Financing lease cost:
Amortization of right-of-use assets	382	81	672	139
Interest on lease liabilities	68	17	124	34
Amounts capitalized	(369)	(38)	(653)	(75)
Total financing lease expense	81	60	143	98
Variable lease expense	0	0	0	0
Short-term lease expense	1	2	1	5
Total lease expense for the period	$ 226	$ 215	$ 428	$ 497

Lease Commitments - Schedule of Supplemental Cash Flows Related to Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 17,125	$ 17,494
Operating cash flows from financing leases	59	38
Finance cash flows from financing leases	360	130
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	0	157,440
Financing leases	8,513	4,821
PNM
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	16,511	16,704
Operating cash flows from financing leases	36	18
Finance cash flows from financing leases	207	54
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	0	143,816
Financing leases	3,703	2,516
TNMP
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	331	529
Operating cash flows from financing leases	20	20
Finance cash flows from financing leases	120	76
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases	0	12,942
Financing leases	$ 4,802	$ 2,305

Lease Commitments - Schedule of Future Expected Lease Payments (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Financing
Remainder of 2020	$ 1,842
2021	3,606
2022	3,480
2023	3,241
2024	2,364
Later years	2,811
Total minimum lease payments	17,344
Less: Imputed interest	1,340
Lease liabilities as of June 30, 2020	16,004
Operating
Remainder of 2020	11,686
2021	29,316
2022	28,473
2023	19,423
2024	8,833
Later years	35,489
Total minimum lease payments	133,220
Less: Imputed interest	15,167
Lease liabilities as of June 30, 2020	118,053
PNM
Financing
Remainder of 2020	862
2021	1,688
2022	1,642
2023	1,587
2024	985
Later years	1,019
Total minimum lease payments	7,783
Less: Imputed interest	572
Lease liabilities as of June 30, 2020	7,211
Operating
Remainder of 2020	9,979
2021	26,576
2022	26,266
2023	17,735
2024	7,908
Later years	34,466
Total minimum lease payments	122,930
Less: Imputed interest	13,863
Lease liabilities as of June 30, 2020	109,067
TNMP
Financing
Remainder of 2020	944
2021	1,845
2022	1,766
2023	1,617
2024	1,379
Later years	1,791
Total minimum lease payments	9,342
Less: Imputed interest	761
Lease liabilities as of June 30, 2020	8,581
Operating
Remainder of 2020	1,437
2021	2,448
2022	1,996
2023	1,508
2024	877
Later years	765
Total minimum lease payments	9,031
Less: Imputed interest	705
Lease liabilities as of June 30, 2020	$ 8,326

Income Taxes (Details) - USD ($)		3 Months Ended	6 Months Ended	12 Months Ended
Income Taxes (Details) - USD ($)	Jan. 10, 2018	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2017
Income Tax Contingency [Line Items]
Accelerated refund application amount of AMT tax, CARES act		$ 5,200,000	$ 5,200,000
Deferred federal, state and local, income tax expense (benefit)			$ 30,600,000
Effective tax rate			6.21%
Tax benefits related to stock awards		0	$ 400,000
PNM
Income Tax Contingency [Line Items]
Deferred federal, state and local, income tax expense (benefit)			$ 21,600,000
Effective tax rate			8.73%
Tax benefits related to stock awards		0	$ 300,000
TNMP
Income Tax Contingency [Line Items]
Deferred federal, state and local, income tax expense (benefit)			$ 9,000,000.0
Effective tax rate			9.23%
Tax benefits related to stock awards		$ 0	$ 100,000
NMPRC
Income Tax Contingency [Line Items]
Period of time for proposed return to customers the benefit of the reduction in federal corporate income tax rate				23 years
Period of time for proposed return to customers the benefit of the reduction in New Mexico's corporate income tax rate				3 years
NMPRC \| PNM
Income Tax Contingency [Line Items]
Period of time for proposed return to customers the benefit of the reduction in New Mexico's corporate income tax rate	3 years

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Related Party Transaction [Line Items]
Ownership percentage	50.00%		50.00%
Services billings: \| PNMR to PNM
Related Party Transaction [Line Items]
Amount of related party transaction	$ 24,521	$ 22,925	$ 46,644	$ 49,751
Services billings: \| PNMR to TNMP
Related Party Transaction [Line Items]
Amount of related party transaction	9,703	8,385	18,430	18,443
Services billings: \| PNM to TNMP
Related Party Transaction [Line Items]
Amount of related party transaction	113	114	189	189
Services billings: \| TNMP to PNMR
Related Party Transaction [Line Items]
Amount of related party transaction	35	36	70	71
Services billings: \| PNMR to NMRD
Related Party Transaction [Line Items]
Amount of related party transaction	49	54	125	95
Renewable energy purchases: \| PNM from NMRD
Related Party Transaction [Line Items]
Amount of related party transaction	2,404	949	3,923	1,574
Interconnection billings: \| PNM from NMRD
Related Party Transaction [Line Items]
Amount of related party transaction	130	0	350	0
Interconnection billings: \| PNM to PNMR
Related Party Transaction [Line Items]
Amount of related party transaction	0	0	0	0
Interest billings: \| PNMR to PNM
Related Party Transaction [Line Items]
Amount of related party transaction	6	972	6	1,905
Interest billings: \| PNMR to TNMP
Related Party Transaction [Line Items]
Amount of related party transaction	1	10	2	42
Interest billings: \| PNM to PNMR
Related Party Transaction [Line Items]
Amount of related party transaction	77	77	158	149
Income tax sharing payments: \| PNMR to PNM
Related Party Transaction [Line Items]
Amount of related party transaction	0	0	0	0
Income tax sharing payments: \| TNMP to PNMR
Related Party Transaction [Line Items]
Amount of related party transaction	$ 0	$ 0	$ 0	$ 0

Equity Method Investment (Details) - NMRD $ in Millions	6 Months Ended
Equity Method Investment (Details) - NMRD $ in Millions	Jun. 30, 2020 USD ($) MW	Jun. 30, 2019 USD ($)
Business Acquisition [Line Items]
Renewable energy capacity in operating (in mw) \| MW	85.1
PNMR Development
Business Acquisition [Line Items]
Ownership percentage	50.00%
Contribution to construction activities \| $	$ 18.3	$ 13.3

Equity Method Investment - Summarized Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Income Statement [Abstract]
Revenues	$ 357,649	$ 330,228	$ 691,271	$ 679,872
Balance Sheet Related Disclosures [Abstract]
Construction work in progress	309,513		309,513		$ 161,106
Assets	7,574,467	7,048,667	7,574,467	7,048,667	7,298,774
Total stockholders' equity	1,696,500		1,696,500		1,678,698
NMRD
Income Statement [Abstract]
Revenues	2,641	1,103	4,308	1,828
Operating Expenses	1,472	655	3,052	1,451
Net Earnings (Loss) Attributable to PNMR	1,169	$ 448	1,256	$ 377
Balance Sheet Related Disclosures [Abstract]
Cash	5,672		5,672		7,187
Construction work in progress	163,629		163,629		132,772
Assets, Noncurrent	1,214		1,214		0
Assets	170,515		170,515		139,959
Accounts Payable	2,073		2,073		9,640
Liabilities, Noncurrent	368		368		0
Total stockholders' equity	$ 168,074		$ 168,074		$ 130,319

Goodwill (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Apr. 01, 2018
Goodwill [Line Items]
Goodwill	$ 278,297	$ 278,297	$ 278,297
PNM
Goodwill [Line Items]
Goodwill	51,632	51,632		$ 51,600
Goodwill fair value exceeded by its carrying value				19.00%
TNMP
Goodwill [Line Items]
Goodwill	$ 226,665	$ 226,665		$ 226,700
Goodwill fair value exceeded by its carrying value				38.00%