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What changed in TXNM ENERGY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TXNM ENERGY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+453 added−554 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in TXNM ENERGY INC's 2023 10-K

453 paragraphs added · 554 removed · 343 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

66 edited+17 added−28 removed60 unchanged
Biggest changeThese factors, which are neither presented in order of importance nor weighted, include: • The expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction • The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement • The risk that the parties may not be able to satisfy the conditions to the proposed Merger in a timely manner or at all • The risk that the proposed Merger could have an adverse effect on the ability of PNMR to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally • The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions, including the outcome of the 2024 Rate Change, prudence of PNM’s undepreciated investments in Four Corners and recovery of PNM’s investments and other costs associated with that plant, revisions to its rates to remove SJGS by issuing rate credits prior to issuing Securitized Bonds and the establishment of the Energy Transition Charge, 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 2024 Rate Change, other regulatory proceedings, or resulting from potential mid-term or long-term impacts related to COVID-19 • Uncertainty relating to PNM’s decision to return the leased generating capacity in PVNGS Units 1 and 2 at the expiration of their lease terms in 2023 and 2024, including future regulatory outcomes relating to the ratemaking treatment • Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects, including the changes in PNM’s generation entitlement share for PVNGS following termination of the leases in 2023 and 2024, and the proposed exit from Four Corners • Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines, as well as the ability to recover those costs from customers, including the potential impacts of current and future regulatory proceedings including the 2024 Rate Change • 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, and other changes in supply and demand • Uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner • The Company’s ability to maintain its debt and access the financial markets in order to provide financing to repay or refinance debt as it comes due and for ongoing operations and construction expenditures, including disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates resulting from any negative impacts from the 2024 Rate Change or other regulatory proceedings, economic impacts of COVID-19, actions by the Federal Reserve, geopolitical activity, or the entry into the Merger Agreement • The risks associated with the cost and completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, the ability of counterparties to meet their obligations under certain arrangements (including renewable energy resources, and approved PPAs related to replacement resources for facilities to be retired or for which the leases will terminate), and supply chain or other outside support services that may be disrupted • 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 chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, terrorism, cybersecurity breaches, and other catastrophic events, including the impacts of COVID-19, as well as 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 interpretation of changes in tax laws, the Inflation Reduction Act of 2022, the Infrastructure Investment and Jobs Act, and other matters A - 11 Table of Contents • Risks related to climate change, including potential financial and reputational risks resulting from increased stakeholder scrutiny related to climate change, litigation, legislative and regulatory efforts to limit GHG, including the impacts of the 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 mine supplying coal to Four Corners 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 actions by the Federal Reserve to address inflationary concerns, international developments and the impacts of COVID-19 • 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 For information about the risks associated with the use of derivative financial instruments see Part II, Item 7A.
Biggest changeThese factors, which are neither presented in order of importance nor weighted, include: • The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions 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 regulatory proceedings • Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects, including the potential exit from Four Corners • Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines, as well as the ability to recover those costs from customers, including the potential impacts of current and future 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, and other changes in supply and demand • Uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner • The Company’s ability to maintain its debt and access the financial markets in order to repay or refinance debt as it comes due and for ongoing operations and construction expenditures due to disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates resulting from any negative impacts from regulatory proceedings, actions by the Federal Reserve or geopolitical activity • The risks associated with the cost and completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, the ability of counterparties to meet their obligations under certain arrangements (including renewable energy resources, approved PPAs and battery storage agreements related to replacement resources for facilities retired or for which the leases terminated), and supply chain or other outside support services that may be disrupted • 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 chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, terrorism, cybersecurity breaches, and other catastrophic events, including 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 beyond the extent of insurance coverage • 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 A - 11 Table of Contents • State and federal regulatory, legislative, executive, and judicial decisions and actions on ratemaking, and taxes, including guidance related to the interpretation of changes in tax laws, the Inflation Reduction Act of 2022, the Infrastructure Investment and Jobs Act, and other matters • Risks related to climate change, including potential financial and reputational risks resulting from increased stakeholder scrutiny related to climate change, litigation, legislative and regulatory efforts to limit GHG, including the impacts of the 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, including the impacts to transmission margins • Changes in price and availability of fuel and water supplies, including the ability of the mine supplying coal to Four Corners 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 actions by the Federal Reserve to address inflationary concerns, and international developments • 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 reclamation and decommissioning 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 For information about the risks associated with the use of derivative financial instruments see Part II, Item 7A.
On January 1, 2019, TNMP implemented a PUCT order in TNMP’s 2018 Rate Case 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. The increase reflects the reduction in the federal corporate income tax rate to 21%.
On January 1, 2019, TNMP implemented a PUCT order in TNMP’s 2018 Rate Case 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. The increase reflects the reduction in the federal corporate income tax rate to 21.0%.
Also available on the Company’s website at https://www.pnmresources.com/esg-commitment/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.
Also available on the Company’s website at https://www.pnmresources.com/esg-commitment/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; Supplier Code of 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 1. BUSINESS THE COMPANY Overview PNMR is an investor-owned holding company with two regulated utilities serving approximately 815,000 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.
ITEM 1. BUSINESS THE COMPANY Overview PNMR is an investor-owned holding company with two regulated utilities serving approximately 824,000 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.
Participants will not receive information that was not requested and can unsubscribe at any time. Our corporate websites are: • PNMR: www.pnmresources.com • PNM: www.pnm.com • TNMP: www.tnmp.com PNMR’s corporate website includes a dedicated section providing key environmental and other sustainability information related to PNM’s and TNMP’s operations and other information that collectively demonstrates the Company’s commitment to ESG principles.
Participants will not receive information unless requested and can unsubscribe at any time. Our corporate websites are: • PNMR: www.pnmresources.com • PNM: www.pnm.com • TNMP: www.tnmp.com PNMR’s corporate website includes a dedicated section providing key environmental and other sustainability information related to PNM’s and TNMP’s operations and other information that collectively demonstrates the Company’s commitment to ESG principles.
In June 2021, APS and the owners of Four Corners entered into agreements to operate Four Corners seasonally beginning in Fall 2023, subject to the necessary approvals including PNM’s Four Corners Abandonment Application at the NMPRC. Under seasonal operations, a single unit will remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages.
In June 2021, APS and the owners of Four Corners entered into agreements to operate Four Corners seasonally beginning in Fall 2023, subject to the necessary approvals including PNM’s Four Corners Abandonment Application at the NMPRC. Under seasonal operations, a single unit would remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages.
In addition, Note 16 contains information related to the following matters, incorporated in this item by reference: • PVNGS Decommissioning Funding • Nuclear Spent Fuel and Waste Disposal • The Energy Transition Act • Environmental Matters under the caption “The Clean Air Act” • Cooling Water Intake Structures • Effluent Limitation Guidelines • Santa Fe Generating Station • Environmental Matters under the caption “Coal Combustion Residuals Waste Disposal” COMPETITION Regulated utilities are generally not subject to competition from other utilities in areas that are under the jurisdiction of state regulatory commissions.
In addition, Note 16 contains information related to the following matters, incorporated in this item by reference: • PVNGS Decommissioning Funding • Nuclear Spent Fuel and Waste Disposal • The Energy Transition Act • Environmental Matters under the caption “The Clean Air Act” • Cooling Water Intake Structures • Effluent Limitation Guidelines A - 9 Table of Contents • Santa Fe Generating Station • Environmental Matters under the caption “Coal Combustion Residuals Waste Disposal” COMPETITION Regulated utilities are generally not subject to competition from other utilities in areas that are under the jurisdiction of state regulatory commissions.
The largest retail electric customer served by PNM accounted for 3.6% of its revenues for the year ended December 31, 2022. Other services provided by PNM include wholesale transmission services to third parties.
The largest retail electric customer served by PNM accounted for 3.6% of its retail electric revenues for the year ended December 31, 2023 and 2022. Other services provided by PNM include wholesale transmission services to third parties.
On April 5, 2021, PNM and SRP entered into an Asset Purchase and Sale Agreement, pursuant to which PNM agreed to sell to SRP certain PNM-owned assets and nuclear fuel necessary to the ongoing operation and maintenance of leased capacity in PVNGS Unit 1 and Unit 2, which SRP has agreed to acquire from the lessors upon termination of the existing leases.
In 2021, PNM and SRP entered into an Asset Purchase and Sale Agreement, pursuant to which PNM agreed to sell to SRP certain PNM-owned assets and nuclear fuel necessary to the ongoing operation and maintenance of leased capacity in PVNGS Unit 1 and Unit 2, which SRP has agreed to acquire from the lessors upon termination of the existing leases.
The second portion of its service territory includes the area along the Texas Gulf Coast between Houston and Galveston, and the third portion includes areas of far west Texas between Midland and El Paso. TNMP owns 992 miles of electric transmission lines that interconnect with other utilities in Texas.
The second portion of its service territory includes the area along the Texas Gulf Coast between Houston and Galveston, and the third portion includes areas of far west Texas between Midland and El Paso. TNMP owns 1,026 miles of electric transmission lines that interconnect with other utilities in Texas.
WEBSITES The PNMR website 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.
A - 1 Table of Contents WEBSITES The PNMR website 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.
The NMPRC has also approved riders designed to allow PNM to bill and collect substantially all fuel and purchased power costs, costs of approved energy efficiency initiatives, and costs associated with enhancing transportation electrification in New Mexico.
See Note 17. The NMPRC has also approved riders designed to allow PNM to bill and collect substantially all fuel and purchased power costs, costs of approved energy efficiency initiatives, and costs associated with enhancing transportation electrification in New Mexico.
As of December 31, 2022, PNM had 325 employees in its power plant and operations areas that are currently covered by a collective bargaining agreement with the IBEW Local 611 that is in effect through April 30, 2023.
As of December 31, 2023, PNM had 333 employees in its power plant and operations areas that are currently covered by a collective bargaining agreement with the IBEW Local 611 that is in effect through April 30, 2026.
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.
These renewable resources are key 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 ETA, without exceeding cost requirements.
Additional needed supplies are covered through existing inventories or spot market transactions. For conversion services, 100% are contracted through 2025 and an average of 90% through 2030. Additional needed conversion services are covered through existing inventories or spot market transactions. For enrichment services, 80% is contracted through 2026. For fuel assembly fabrication 100% is contracted through 2027.
Additional needed supplies are covered through existing inventories or spot market transactions. For conversion services, 100% are contracted through 2026 and an average of 80% through 2028. Additional needed conversion services are covered through existing inventories or spot market transactions. For enrichment services, 80% is contracted through 2026. For fuel assembly fabrication 100% is contracted through 2027.
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. See Notes 16 and 17 for additional information on rate cases and other regulatory matters.
A - 4 Table of Contents 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. See Notes 16 and 17 for additional information on rate cases and other regulatory matters.
A - 4 Table of Contents There has been a significant increase in interconnection requests and cryptocurrency mining applications on the TNMP system, which has necessitated new transmission stations, upgrades at existing stations, and transmission line capacity upgrades.
There has been a significant increase in interconnection requests and cryptocurrency mining applications on the TNMP system, which has necessitated new transmission stations, upgrades at existing stations, and transmission line capacity upgrades.
The PUCT approved interim adjustments to TNMP’s transmission rates of $14.1 million in March 2021, $6.3 million in September 2021, $14.2 million in March 2022, and $5.3 million in September 2022. On January 23, 2023, TNMP filed an application to further update its transmission rates, which would increase revenues by $19.4 million annually. The application is pending before the PUCT.
The PUCT approved interim adjustments to TNMP’s transmission rates of $14.2 million in March 2022, $5.3 million in September 2022, $19.4 million in May 2023, and $4.2 million in September 2023. On January 25, 2024, TNMP filed an application to further update its transmission rates, which would increase revenues by $13.1 million annually. The application is pending before the PUCT.
A - 10 Table of Contents 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.
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.
If PNM’s earned return on jurisdictional equity in a calendar year, adjusted for weather and other items not representative of normal operation, exceeds the NMPRC-approved rate by 0.5%, the rider provides that PNM would refund the excess to customers during the following year. PNM slightly exceeded the limitation in 2022 but not in 2021. See Note 17.
If PNM’s earned return on jurisdictional equity in a calendar year, adjusted for weather and other items not representative of normal operation, exceeds the NMPRC-approved rate by 0.5%, the rider provides that PNM would refund the excess to customers during the following year. PNM slightly exceeded the limitation in 2022 and does not expect to exceed the limitation in 2023.
The proposed transaction between PNM and SRP received all necessary approvals, and in January 2023, the Unit 1 leases expired and PNM relinquished the associated 7.9% entitlement share of the power and energy generated by Unit 1. The remaining Unit 2 lease will expire in January 2024.
The proposed transaction between PNM and SRP received all necessary approvals, and in January 2023, the Unit 1 leases expired and PNM relinquished the associated 7.9% entitlement share of the power and energy generated by Unit 1.
Merger On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger Agreement pursuant to which Merger Sub will merge with and into PNMR, with PNMR surviving the Merger as a wholly-owned subsidiary of Avangrid.
Merger On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger Agreement pursuant to which Merger Sub would have merged with and into PNMR, with PNMR surviving the Merger as a wholly-owned subsidiary of Avangrid.
Additional information about rate filings is provided in Operations and Regulation below and in Note 17. PNMR’s common stock trades on the New York Stock Exchange under the symbol PNM. PNMR was incorporated in the State of New Mexico in 2000. Other Information These filings for PNMR, PNM, and TNMP include disclosures for each entity.
Additional information about rate filings is provided in Operations and Regulation below and in Note 17. PNMR’s common stock trades on the New York Stock Exchange under the symbol PNM. PNMR was incorporated in the State of New Mexico in 2000.
Renewable Energy The REA was enacted to encourage the development of renewable energy in New Mexico. The ETA amended 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 amended the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045.
This information highlights plans for PNM to be coal-free by 2024 (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-K.
This information highlights plans for PNM to have an emissions-free generating portfolio by 2040. The contents of these websites are not a part of this Form 10-K.
See Note 16 for additional information about PNM’s coal supply arrangements. See Note 17 for additional information about PNM’s SJGS Abandonment Application, PNM’s Four Corners Abandonment Application, and PNM’s IRP, which all focus on a carbon-free electricity portfolio by 2040 that would eliminate coal at the end of 2024.
See Note 16 for additional information about PNM’s coal supply arrangements. See Note 17 for additional information about PNM’s SJGS Abandonment Application, PNM’s Four Corners Abandonment Application, and PNM’s IRP, which all focus on a carbon-free electricity portfolio by 2040.
FUEL PNM The percentages (on the basis of KWh) of PNM’s generation of electricity, including Valencia, fueled by coal, nuclear fuel, and gas and oil, and the average costs to PNM of those fuels per MMBTU were as follows: Coal Nuclear Gas Percent of Generation Average Cost Percent of Generation Average Cost Percent of Generation Average Cost 2022 36.7 % $ 2.97 35.4 % $ 0.73 23.9 % $ 7.61 2021 44.3 % $ 3.02 34.8 % $ 0.68 16.8 % $ 6.02 In both 2022 and 2021, 4.1% of PNM’s generation was from utility-owned solar, which has no fuel cost.
FUEL PNM The percentages (on the basis of KWh) of PNM’s generation of electricity, including Valencia, fueled by coal, nuclear fuel, and gas and oil, and the average costs to PNM of those fuels per MMBTU were as follows: Coal Nuclear Gas Percent of Generation Average Cost Percent of Generation Average Cost Percent of Generation Average Cost 2023 12.8 % $ 4.19 32.3 % $ 0.73 49.9 % $ 3.42 2022 36.7 2.97 35.4 0.73 23.9 7.61 In 2023 and 2022, 5.0% and 4.1% of PNM’s generation was from utility-owned solar, which has no fuel cost.
A - 8 Table of Contents Nuclear Fuel and Waste PNM is one of several participants in PVNGS. The PVNGS participants are continually identifying their future nuclear fuel resource needs and negotiating arrangements to fill those needs. The PVNGS participants have contracted for 100% of PVNGS’s requirements for uranium concentrates through 2025 and an average of 61% through 2030.
Nuclear Fuel and Waste PNM is one of several participants in PVNGS. The PVNGS participants are continually identifying their future nuclear fuel resource needs and negotiating arrangements to fill those needs. The PVNGS participants have contracted for 100% of PVNGS’s requirements for uranium concentrates through 2026 and an average of 60% through 2028.
For its volumetric load consumers billed on KWh usage, TNMP experienced an increase in weather normalized retail KWh sales of 2.4% in 2022 and a decrease of 0.8% in 2021. For its weather normalized demand-based load, excluding retail transmission consumers, TNMP experienced an increase of 17.3% in 2022 and an increase of 1.8% in 2021.
For its volumetric load consumers billed on KWh usage, TNMP was flat in its weather normalized retail KWh sales in 2023 and experienced an increase of 2.4% in 2022. For its weather normalized demand-based load, excluding retail transmission consumers, TNMP experienced an increase of 14.1% in 2023 and an increase of 17.3% in 2022.
As of December 31, 2022, 109 active REPs receive transmission and distribution services from TNMP. In 2022, the two largest REPs accounted for 27% and 20% of TNMP’s operating revenues. No other consumer accounted for more than 10% of revenues. TNMP holds long-term, non-exclusive franchise agreements for its electric transmission and distribution services.
As of December 31, 2023, 116 active REPs receive transmission and distribution services from TNMP. In 2023, the three largest REPs accounted for 25%, 19%, and 11% of TNMP’s operating revenues. No other consumer accounted for more than 10% of revenues. TNMP holds long-term, non-exclusive franchise agreements for its electric transmission and distribution services.
Our 1,537 employees include 34% represented by a bargaining unit, 28% women, 53% minorities, 14% identified as disabled, and 8% veterans. Our diversity goal at the Company is for our workforce to mirror the communities we serve.
Our 1,635 employees include 33% represented by a bargaining unit, 28% women, 55% minorities, 15% identified as disabled, and 9% veterans. Our diversity goal at the Company is for our workforce to mirror the communities we serve.
A - 5 Table of Contents PNM’s capacity in electric generating facilities, which are owned, leased, or under PPAs, in commercial operation as of December 31, 2022 is: Generation Percent of Capacity Generation Type Name Location (MW) Capacity Coal Four Corners Fruitland, New Mexico 200 7.5 % Gas Reeves Station Albuquerque, New Mexico 146 5.6 % Gas Afton (combined cycle) La Mesa, New Mexico 235 8.8 % Gas Lordsburg Lordsburg, New Mexico 85 3.2 % Gas Luna (combined cycle) Deming, New Mexico 190 7.1 % Gas/Oil Rio Bravo Albuquerque, New Mexico 149 5.6 % Gas Valencia Belen, New Mexico 155 5.8 % Gas La Luz Belen, New Mexico 41 1.5 % Gas-fired resources 1,001 37.6 % Nuclear PVNGS Wintersburg, Arizona 402 1 15.1 % Solar PNM-owned solar Twenty-four sites in New Mexico 158 6.0 % Solar NMRD-owned solar Los Lunas, New Mexico 130 4.9 % Solar Solar Direct Rio Arriba County, New Mexico 50 1.9 % Solar Route 66 Cibola County, New Mexico 50 1.9 % Wind New Mexico Wind House, New Mexico 200 7.5 % Wind Red Mesa Wind Seboyeta, New Mexico 102 3.8 % Wind Casa Mesa Wind House, New Mexico 50 1.9 % Wind La Joya Wind I Torrance, New Mexico 166 6.2 % Wind La Joya Wind II Torrance, New Mexico 140 5.3 % Geothermal Lightning Dock Geothermal Lordsburg, New Mexico 11 0.4 % Renewable resources 1,057 39.8 % 2,660 100.0 % 1 Represents 10.2% of the power and energy generated by PVNGS.
A - 5 Table of Contents PNM’s capacity in electric generating facilities, which are owned, leased, under PPAs or battery storage agreements, in commercial operation as of December 31, 2023 is: Generation Percent of Capacity Generation Type Name Location (MW) Capacity Solar PNM-owned solar Twenty sites in New Mexico 158 5.7 % Solar NMRD-owned solar Los Lunas, New Mexico 180 6.5 Solar Solar Direct Rio Arriba County, New Mexico 50 1.8 Solar Route 66 Cibola County, New Mexico 50 1.8 Wind New Mexico Wind House, New Mexico 200 7.2 Wind Red Mesa Wind Seboyeta, New Mexico 102 3.7 Wind Casa Mesa Wind House, New Mexico 50 1.8 Wind La Joya Wind I Torrance, New Mexico 166 6.0 Wind La Joya Wind II Torrance, New Mexico 140 5.0 Geothermal Lightning Dock Geothermal Lordsburg, New Mexico 11 0.4 Battery Storage Arroyo McKinley County, New Mexico 150 5.4 Battery Storage Jicarilla Rio Arriba County, New Mexico 20 0.7 Renewable resources 1,277 46.0 Gas Reeves Station Albuquerque, New Mexico 146 5.2 Gas Afton (combined cycle) La Mesa, New Mexico 235 8.5 Gas Lordsburg Lordsburg, New Mexico 85 3.1 Gas Luna (combined cycle) Deming, New Mexico 190 6.8 Gas/Oil Rio Bravo Albuquerque, New Mexico 149 5.4 Gas Valencia Belen, New Mexico 155 5.6 Gas La Luz Belen, New Mexico 41 1.5 Gas-fired resources 1,001 36.1 Nuclear PVNGS Wintersburg, Arizona 298 1 10.7 Coal Four Corners Fruitland, New Mexico 200 7.2 2,776 100.0 % 1 In January 2024, leased capacity of 10 MW in PVNGS Unit 2 expired and the rights to the capacity were acquired by SRP from the lessors.
Transparency, collaboration, and innovation create both individual and organizational focus on achieving key results. Aligned with the core value of safety, we continued an in-depth safety culture initiative with training and actionable plans integrated into leadership development. In addition, we incorporate mental and physical well-being into our culture through a robust employee wellness program.
Aligned with the core value of safety, we continued an in-depth safety culture initiative with training and actionable plans integrated into leadership development. In addition, we incorporate mental and physical well-being into our culture through a robust employee wellness program.
Due to locally available natural gas, the utilization of locally available coal deposits, and the generally adequate supply of nuclear fuel, PNM believes that adequate sources of fuel are available for its generating stations into the foreseeable future. See Sources of Power – PNM – Renewables for information concerning the cost of purchased power.
Due to locally available natural gas, the utilization of locally available coal deposits, and the generally adequate supply of nuclear fuel, PNM believes that adequate sources of fuel are available for its generating stations into the foreseeable future. PNM recovers substantially all of its fuel and purchased power costs through the FPPAC.
PNM also earns revenues from its electric retail operations in its service areas that do not require franchise agreements. PNM owns 3,428 miles of electric transmission lines that interconnect with other utilities in New Mexico, Arizona, Colorado, Texas, and Utah. New Mexico is frequently characterized by its high potential for solar and wind capacity.
PNM owns 3,428 miles of electric transmission lines that interconnect with other utilities in New Mexico, Arizona, Colorado, Texas, and Utah. New Mexico is frequently characterized by its high potential for solar and wind capacity.
A - 6 Table of Contents PNM owns 100% of Reeves, Afton, Rio Bravo, Lordsburg, and La Luz and one-third of Luna. The remaining interests in Luna are owned equally by Tucson and Samchully Power & Utilities 1, LLC. PNM is also entitled to the entire output of Valencia under a PPA.
The remaining interests in Luna are owned equally by Tucson and Samchully Power & Utilities 1, LLC. PNM is also entitled to the entire output of Valencia under a PPA. Reeves, Lordsburg, Rio Bravo, La Luz, and Valencia are used primarily for peaking power and transmission support.
Nuclear Plant PNM is participating in the three units of PVNGS with APS (the operating agent), SRP, EPE, SCE, SCPPA, and the Department of Water and Power of the City of Los Angeles.
As discussed in Note 10, Valencia is a variable interest entity and is consolidated by PNM. Nuclear Plant PNM is participating in the three units of PVNGS with APS (the operating agent), SRP, EPE, SCE, SCPPA, and the Department of Water and Power of the City of Los Angeles.
The system peak demands for retail customers are as follows: System Peak Demands 2022 2021 2020 (Megawatts) Summer 2,139 1,968 1,974 Winter 1,526 1,518 1,460 PNM holds long-term, non-exclusive franchise agreements for its electric retail operations, with varying expiration dates. These franchise agreements allow the utility to access public rights-of-way for placement of its electric facilities.
The system peak demands for retail customers are as follows: System Peak Demands 2023 2022 2021 (Megawatts) Summer 2,162 2,139 1,968 Winter 1,545 1,526 1,518 A - 2 Table of Contents PNM holds long-term, non-exclusive franchise agreements for its electric retail operations, with varying expiration dates.
See Nuclear Plant above and Note 8 regarding PNM’s actions related to these leases. It is possible that other participants in the joint projects have circumstances and objectives that have changed from those existing at the time of becoming participants.
It is possible that other participants in the joint projects have circumstances and objectives that have changed from those existing at the time of becoming participants.
Employees The following table sets forth the number of employees of PNMR, PNM, and TNMP as of December 31, 2022: PNMR PNM TNMP Corporate (1) 419 — — PNM 751 751 — TNMP 367 — 367 Total 1,537 751 367 (1) Represents employees of PNMR Services Company.
A - 10 Table of Contents Employees The following table sets forth the number of employees of PNMR, PNM, and TNMP as of December 31, 2023: PNMR PNM TNMP Corporate (1) 435 — — PNM 810 810 — TNMP 390 — 390 Total 1,635 810 390 (1) Represents employees of PNMR Services Company.
PNM also engages in activities to optimize its existing jurisdictional assets and long-term power agreements through spot market, hour-ahead, day-ahead, week-ahead, and other sales of excess generation not required to fulfill retail load and contractual commitments. These activities have significantly increased Electric operating revenues and are passed on to customers under PNM’s FPPAC with no impact to net earnings.
PNM began participating in the EIM in 2021 which has generated cost savings that are passed through to customers in PNM’s FPPAC. PNM also engages in activities to optimize its existing jurisdictional assets and long-term power agreements through spot market, hour-ahead, day-ahead, week-ahead, and other sales of excess generation not required to fulfill retail load and contractual commitments.
PNM is subject to competition from regional utilities and merchant power suppliers with similar opportunities to generate and sell energy at market-based prices and larger trading entities that do not own or operate generating assets.
PNM is subject to competition from regional utilities and merchant power suppliers with similar opportunities to generate and sell energy at market-based prices and larger trading entities that do not own or operate generating assets. HUMAN CAPITAL RESOURCES PNM Resources depends on over 1,600 dedicated employees to deliver outstanding customer service and transform into an emissions-free generation future.
A - 2 Table of Contents Weather-normalized retail electric KWh sales increased by 1.5% in 2022 and by 0.3% in 2021.
Weather-normalized retail electric KWh sales decreased by 1.0% in 2023 and increased by 1.5% in 2022.
The NMPRC has approved plans for PNM to procure energy and RECs from additional solar-PV renewable resources totaling 1,090 MW to serve retail customers and a data center located in PNM’s service territory, including the portfolio to replace SJGS with solar PPAs of 550 MW combined with 270 MW of battery storage agreements.
The NMPRC has approved plans for PNM to procure energy and RECs from additional renewable resources to serve retail customers and a data center located in PNM’s service territory, including the portfolio to replace SJGS and the PVNGS Leased Interest Abandonment Application.
These units are jointly owned with APS, SRP, Tucson, and NTEC, and are operated by APS. PNM had no ownership interest in Four Corners Units 1, 2, or 3, which were shut down by APS in 2013. The Four Corners plant site is located on land within the Navajo Nation and is subject to an easement from the federal government.
Four Corners Units 4 and 5 are 13% owned by PNM. These units are jointly owned with APS, SRP, Tucson, and NTEC, and are operated by APS. PNM had no ownership interest in Four Corners Units 1, 2, or 3, which were shut down by APS in 2013.
APS, on behalf of the Four Corners participants, negotiated amendments to extend the owners’ right to operate the plant on the site to July 2041.
The Four Corners plant site is located on land within the Navajo Nation and is subject to an easement from the federal government. APS, on behalf of the Four Corners participants, negotiated amendments to extend the owners’ right to operate the plant on the site to July 2041.
Regulatory Activities NMPRC Regulated Retail Rate Proceedings The rates PNM charges retail customers are subject to traditional rate regulation by the NMPRC. In December 2022, PNM filed the 2024 Rate Change with the NMPRC. The application proposes an increase of $63.8 million in base non-fuel revenues.
In December 2022, PNM filed the 2024 Rate Change with the NMPRC. The application proposed an increase of $63.8 million in base non-fuel revenues.
In January 2023, PNM and IBEW Local 611 agreed to a successor collective bargaining agreement effective May 1, 2023 through April 30, 2026. As of December 31, 2022, TNMP had 193 employees represented by IBEW Local 66 covered by a collective bargaining agreement that is in effect through August 31, 2024.
As of December 31, 2023, TNMP had 207 employees represented by IBEW Local 66 covered by a collective bargaining agreement that is in effect through August 31, 2027.
The Merger Agreement provided that it may be terminated by each of PNMR and Avangrid under certain circumstances, including if the Effective Time shall not have occurred by the January 20, 2022 End Date. On December 8, 2021, the NMPRC issued an order rejecting the stipulation agreement relating to the Merger.
The Merger Agreement provided that it may be terminated by each of PNMR and Avangrid if the Effective Time shall not have occurred by the December 31, 2023 End Date. On December 31, 2023, Avangrid informed PNMR that it was terminating the Merger Agreement effective as of December 31, 2023.
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.
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. The Energy Transition Act (“ETA”) The ETA became effective in 2019. As discussed below, the ETA amends the REA and requires utilities operating in New Mexico to provide 100% zero-carbon energy by 2045.
The requested increase is based on a calendar year 2024 FTY and the request reflects an ROE of 10.25%. The requested change primarily reflects investments in transmission and distribution infrastructure, largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources including the retirement of the SJGS and expiration of leased capacity from PVNGS.
The requested change primarily reflected investments in transmission and distribution infrastructure, largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources including the retirement of the SJGS and expiration of leased capacity from PVNGS. The request also included updated depreciation rates for natural gas plants to align with the Company’s 2040 carbon-free portfolio goal.
PNM's application seeks approval of grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. See Note 17. PNM has a NMPRC-approved rate rider to collect costs for renewable energy procurements that are not otherwise being collected in rates.
PNM has a NMPRC-approved rate rider to collect costs for renewable energy procurements that are not otherwise being collected in rates.
Proceeds from the energy transition bonds must be used to provide utility service to customers and for other costs as defined by the ETA. On January 29, 2020, the NM Supreme Court issued a ruling requiring the NMPRC apply the ETA to all aspects of PNM’s SJGS Abandonment Application.
Proceeds from the energy transition bonds must be used to provide utility service to customers and for other costs as defined by the ETA. In 2020, the NMPRC unanimously approved the hearing examiners’ recommended decisions regarding the abandonment of SJGS and the related securitized financing under the ETA.
Franchise agreements have expired in some areas PNM serves. Because PNM remains obligated under New Mexico state law to provide service to customers in these areas, the expirations should not have a material adverse impact. The Albuquerque and Rio Rancho metropolitan areas accounted for 31.7% and 5.5% of PNM’s 2022 revenues and no other franchise area represents more than 5%.
These franchise agreements allow the utility to access public rights-of-way for placement of its electric facilities. To the extent franchise agreements expire in some areas PNM serves, PNM remains obligated under New Mexico state law to provide service to customers in these areas, and therefore, the expirations should not have a material adverse impact.
These services are charged and billed at cost on a monthly basis to the business units. The activities of PNMR Development and NMRD are also included in Corporate and Other. SOURCES OF POWER PNM Generation Capacity As of December 31, 2022, the total net generation capacity of facilities owned or leased by PNM was 1,606 MW.
PNMR Services Company provides corporate services through shared services agreements to PNMR and all of PNMR’s business units, including PNM and TNMP. These services are charged and billed at cost on a monthly basis to the business units. The activities of PNMR Development and NMRD are also included in Corporate and Other.
See Notes 16 and 17 for information on other PVNGS matters including the PVNGS Leased Interest Abandonment Application and Note 8 for additional information concerning the PVNGS leases. Renewables At December 31, 2022, PNM owns 158 MW of solar facilities in commercial operation.
The remaining Unit 2 lease expired in January 2024 and PNM relinquished the associated 0.8% entitlement share of the power and energy generated by Unit 2. See Notes 16 and 17 for information on other PVNGS matters including the PVNGS Leased Interest Abandonment Application and Note 8 for additional information concerning the PVNGS leases.
Currently, PNM has ownership interests of 2.3% in Unit 1, 9.4% in Unit 2, and 10.2% in Unit 3 and has leasehold interests of 0.8% in Unit 2. The lease payments for the leased portions of PVNGS are recovered through retail rates approved by the NMPRC.
Currently, PNM has ownership interests of 2.3% in Unit 1, 9.4% in Unit 2, and 10.2% in Unit 3.
PNM continues to evaluate opportunities that benefit customers and is exploring opportunities with the expectation of reliably achieving incrementally greater cost savings and using the region’s increasing renewable resources more efficiently. PNM supports efforts in the Western United States to expand regional market opportunities by participating in day-ahead market design initiatives and discussions on Regional Transmission Organization formation.
These activities have significantly increased electric operating revenues and are passed on to customers under PNM’s FPPAC with no impact to net earnings. PNM continues to evaluate opportunities that benefit customers and is exploring opportunities with the expectation of reliably achieving incrementally greater cost savings and using the region’s increasing renewable resources more efficiently.
If adjusted for these plans, the table above would reflect the percentage of generation capacity from fossil-fueled resources of 28.2%, from nuclear resources of 6.8%, and from renewable and battery storage resources of 65.0%. In addition, PNM also has a customer distributed solar generation program that represented 239.1 MW at December 31, 2022.
If adjusted for these approved plans, the table above would reflect the percentage of generation capacity from fossil-fueled resources of 27.0%, from nuclear resources of 6.5%, and from renewable resources of 66.5%.
The PUCT approved interim adjustments to TNMP’s distribution revenue requirement of $13.5 million in September 2021 and $6.8 million in September 2022. The PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs.
The PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs. Corporate and Other The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and the activities of PNMR Services Company.
In addition, the other unit will be operational throughout the summer season when customer demand is the highest. PNM filed the Four Corners Abandonment Application, which sought NMPRC approval to exit PNM’s 13% share of Four Corners as of December 31, 2024. See Note 17.
PNM filed the Four Corners Abandonment Application, which sought NMPRC approval to exit PNM’s 13% share of Four Corners as of December 31, 2024, which was denied by the NMPRC. See Note 17. PNM owns 100% of Reeves, Afton, Rio Bravo, Lordsburg, and La Luz and one-third of Luna.
Plant Operating Statistics Equivalent availability of PNM’s major base-load generating stations was: Plant Operator 2022 2021 SJGS PNM 82.1% 74.2% Four Corners APS 83.2% 66.1% PVNGS APS 90.7% 91.7% Joint Projects SJGS, PVNGS, Four Corners, and Luna are joint projects each owned or leased by several different entities.
A - 7 Table of Contents Purchased Power A summary of purchased power, excluding Valencia, is as follows: Year Ended December 31, 2023 2022 Purchased under long-term PPAs MWh 3,047,505 3,179,472 Cost per MWh $ 28.94 $ 37.45 Other purchased power Total MWh 4,639,342 5,645,918 Cost per MWh $ 80.97 $ 67.15 Plant Operating Statistics Equivalent availability of PNM’s major base-load generating stations was: Plant Operator 2023 2022 Four Corners APS 61.2% 83.2% PVNGS APS 91.4 90.7 Joint Projects SJGS, PVNGS, Four Corners, and Luna are joint projects each owned or leased by several different entities.
The request also includes updated depreciation rates for natural gas plants to align with the Company’s 2040 carbon-free portfolio goal. See Note 17. In October 2022, PNM filed its Grid Modernization Application with the NMPRC. PNM’s proposal to modernize its electricity grid through infrastructure and technology improvements increases the efficiency, reliability, resilience, and security of PNM’s electric system.
PNM’s proposal to modernize its electricity grid through infrastructure and technology improvements increases the efficiency, reliability, resilience, and security of PNM’s electric system. PNM’s application seeks approval of grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. See Note 17.
The coal supply arrangement for Four Corners runs through July 6, 2031 and provides for pricing adjustments over its term based on economic indices. In connection with the proposed exit of Four Corners, PNM would make payments totaling $75.0 million to NTEC for relief from its obligations under the coal supply agreement for Four Corners after December 31, 2024.
A - 8 Table of Contents Coal Substantially all of PNM’s coal costs are passed on to PNM’s customers under the FPPAC. Four Corners obtains its coal requirements from a mine near the plant. The coal supply arrangement for Four Corners runs through July 6, 2031 and provides for pricing adjustments over its term based on economic indices.
A - 9 Table of Contents HUMAN CAPITAL RESOURCES PNM Resources depends on over 1,500 dedicated employees to deliver outstanding customer service and transform into an emissions-free generation future. Culture Our diverse and inclusive workforce make the Company successful through our core values of safety, caring, and integrity. Our culture fosters an accountability and behavioral mindset to sustain shared purpose.
Culture Our diverse and inclusive workforce makes the Company successful through our core values of safety, caring, and integrity. Our culture fosters an accountability and behavioral mindset to sustain shared purpose. Transparency, collaboration, and innovation create both individual and organizational focus on achieving key results.
On December 22, 2021, PNM filed a Notice of Appeal with the NM Supreme Court of the NMPRC decision to deny the application. The ETA has and will have a significant impact on PNM’s future generation portfolio, including PNM’s retirement of SJGS in 2022 and the planned Four Corners exit in 2024 (subject to regulatory approval).
On December 22, 2021, PNM filed a Notice of Appeal with the NM Supreme Court of the NMPRC decision to deny the application. On July 6, 2023, the NM Supreme Court issued a decision concluding that the NMPRC reasonably and lawfully denied PNM’s application for abandonment, determining that PNM did not meet its burden in challenging the NMPRC’s final order.
Removed
Pursuant to the Merger Agreement, each issued and outstanding share of PNMR common stock at the Effective Time will be converted into the right to receive $50.30 in cash.
Added
On August 25, 2023, PNM formed PNM Energy Transition Bond Company I, LLC (“ETBC I”), a wholly-owned special purpose subsidiary for the limited purpose of purchasing, owning, and administering energy transition property, issuing Securitized Bonds, and performing related activities. Other Information These filings for PNMR, PNM, and TNMP include disclosures for each entity.
Removed
The proposed Merger has been unanimously approved by the Boards of Directors of PNMR, Avangrid, and Merger Sub and approved by PNMR shareholders at a special meeting of shareholders held on February 12, 2021.
Added
The Albuquerque, Rio Rancho, and Santa Fe metropolitan areas accounted for 41.6%, 7.4% and 5.9% of PNM’s 2023 revenues and no other franchise area represents more than 5%. PNM also earns revenues from its electric retail operations in its service areas that do not require franchise agreements.
Removed
In light of the NMPRC ruling, on A - 1 Table of Contents January 3, 2022, PNMR, Avangrid and Merger Sub entered into an Amendment to the Merger Agreement pursuant to which PNMR and Avangrid agreed to extend the End Date to April 20, 2023. For additional discussion regarding the Merger see Note 22.
Added
PNM supports efforts in the Western United States to expand regional market opportunities by participating in day-ahead market design initiatives and discussions on Regional Transmission Organization formation. Regulatory Activities NMPRC Regulated Retail Rate Proceedings The rates PNM charges retail customers are subject to traditional rate regulation by the NMPRC.
Removed
In 2021, PNM invested approximately $285 million for the expansion of PNM’s transmission system reflecting the purchase of the Western Spirit Line to provide additional service to transmit power from these generation resources to customers in New Mexico and California.
Added
On December 8, 2023, the hearing examiners in the case issued a RD. The RD proposed an increase in non-fuel revenues of $6.1 million compared to the $63.8 million increase requested by PNM.
Removed
Services under related transmission agreements were initiated using an incremental rate in December 2021, which significantly increased revenue in 2022 compared to 2021. See Note 4. PNM began participating in the EIM on April 1, 2021 which has generated cost savings that are passed through to customers in PNM’s FPPAC.
Added
Major components of the difference in the increase in non-fuel revenues proposed in the RD, included: • A ROE of 9.26% compared to the 10.25% requested by PNM • Finding of prudency regarding PNM’s decision to remain in Four Corners and a remedy for the prudency to be a disallowance to PNM’s total Four Corners net book value by $84.8 million • Approval of $51.3 million of PNM’s requested $96.3 million regulatory asset for PVNGS undepreciated investments, but disallowance of a return on the remaining $45.0 million or any CWIP associated with it • Recommended capital structure of 49.61% equity, 50.10% debt, and 0.29% preferred stock On January 3, 2024, the NMPRC issued a final order largely adopting the RD.
Removed
As PNM transitions its system to achieve 100% carbon emission-free generation, PNM is faced with resource adequacy concerns in the summer peak periods to reliably service its customers. See Note 17 for further discussion on summer peak resource adequacy.
Added
The most notable difference in the final order is with regards to PVNGS. The final order requires that the regulatory liability associated with leased capacity at PVNGS after the Unit 1 lease expired on January 15, 2023, be returned to ratepayers over two years through a separate rate rider.
Removed
In December 2021, PNM completed the purchase of the Western Spirit Line and service under related transmission agreements was initiated using an incremental rate that is separate from the formula rate mechanism described above. The Energy Transition Act (“ETA”) The ETA became effective on June 14, 2019.
Added
In addition, the NMPRC had modifications that included approval of accelerated depreciation for specific gas plants, approval of PNM’s TOD pilot program, and ordered PNM to update the remedy associated with Four Corners. See Note 17. In October 2022, PNM filed its Grid Modernization Application with the NMPRC.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePNM and TNMP have large networks of electric transmission and distribution facilities. Weather conditions in the U.S. Southwest region and Texas vary and could contribute to wildfires in or near PNM’s and TNMP’s service territories. PNM and TNMP take proactive steps to mitigate wildfire risk.
Biggest changeThese factors could negatively impact results of operations and cash flows. The impact of wildfires could negatively affect PNM’s and TNMP’s results of operations. PNM and TNMP have large networks of electric transmission and distribution facilities. Weather conditions including severe drought, high winds, and the natural desert vegetation in the U.S.
Although there is uncertainty about the timing and form of the implementation of EPA’s regulations regarding climate change, CCRs, power plant emissions, changes to the ambient air quality standards, and other environmental issues, the promulgation and implementation of such regulations could have a material impact on operations.
Although there is uncertainty about the timing and form of the implementation of EPA’s regulations regarding GHG emissions, climate change, CCRs, power plant emissions, changes to the ambient air quality standards, and other environmental issues, the promulgation and implementation of such regulations could have a material impact on operations.
In December 2022, PNM filed the 2024 Rate Change that include investments in transmission and distribution infrastructure for the six years between 2019 through 2024 as primary drivers of PNM’s identified revenue deficiency and a request for an ROE of 10.25%. The revenue deficiency is largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources.
In December 2022, PNM filed the 2024 Rate Change that included investments in transmission and distribution infrastructure for the six years between 2019 through 2024 as primary drivers of PNM’s identified revenue deficiency and a request for an ROE of 10.25%. The revenue deficiency is largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources.
In the regular course of business, the utilities handle a range of sensitive security and customer information. PNM and TNMP are subject to the rules of various agencies and the laws of various states, concerning safeguarding and maintaining the confidentiality of this information. Cyber-attacks regularly occur, and generally are unsuccessful.
In the regular course of business, the utilities handle a range of sensitive security and customer information. PNM and TNMP are subject to the rules of various agencies and the laws of various states, related to safeguarding and maintaining the confidentiality of this information. Cyber-attacks regularly occur, and generally are unsuccessful.
These risks are in three main areas, including 1) risk of completion A - 17 Table of Contents of replacement resources prior to planned generation unit retirements, 2) increasing levels of renewable generation presenting risks of uncertainty and variability that will be further compounded as neighboring systems transition towards increasing levels of renewable resources, and 3) risks for mitigating possible resource volatility through a shrinking energy market.
These risks are in three main areas, including 1) risk of completion of replacement resources prior to planned generation unit retirements, 2) increasing levels of renewable generation presenting risks of uncertainty and variability that will be further compounded as neighboring systems transition towards increasing levels of renewable resources, and 3) risks for mitigating possible resource volatility through a shrinking energy market.
Under the Biden Administration, EPA and other federal agencies will seek to expand climate change regulations and work to aggressively reduce GHG emissions. Many state agencies, environmental advocacy groups, and other organizations will continue to focus on decarbonization with enhanced attention on GHG from fossil-fueled generation facilities. See discussion above and Note 17, regarding PNM’s abandonment applications and the ETA.
Under the Biden Administration, EPA and other federal agencies have sought to expand climate change regulations and work to aggressively reduce GHG emissions. Many state agencies, environmental advocacy groups, and other organizations will continue to focus on decarbonization with enhanced attention on GHG from fossil-fueled generation facilities. See discussion above and Note 17, regarding PNM’s abandonment applications and the ETA.
The NMPRC has established a cap on the amount of costs for the final reclamation of the surface coal mines that may be recovered from customers. PNM records estimated liabilities for its share of the legal obligations for decommissioning and reclamation. These estimates include many assumptions about future events and are inherently imprecise.
The NMPRC has established a cap on the amount of costs for the final reclamation of the surface coal mines that may be recovered from customers. PNM records estimated liabilities for its share of the legal obligations for decommissioning and reclamation. These estimates include many A - 15 Table of Contents assumptions about future events and are inherently imprecise.
A breach of the Company’s information systems could also lead to the loss and destruction of confidential and proprietary data, personally identifiable information, trade secrets, intellectual property and supplier data, and could disrupt business operations which could harm the Company’s reputation and financial results, as well as potential increased regulatory oversight, litigation, fines, and other remedial action.
A breach of the Company’s information systems could also lead to the loss and destruction of confidential and proprietary data, personally identifiable information, trade secrets, intellectual property and supplier data, and could disrupt A - 16 Table of Contents business operations which could harm the Company’s reputation and financial results, as well as potential increased regulatory oversight, litigation, fines, and other remedial action.
Economic conditions also impact the supply and/or cost of commodities and materials needed to construct or acquire utility assets or make necessary repairs. The operating results of PNMR and its operating subsidiaries are seasonal and are affected by weather conditions, including regional drought. Electric generation, transmission, and distribution are generally seasonal businesses that vary with the demand for power.
Economic conditions also impact the supply and/or cost of commodities and materials needed to construct or acquire utility assets or make necessary repairs. The operating results of PNMR and its operating subsidiaries are seasonal and are affected by weather conditions. Electric generation, transmission, and distribution are generally seasonal businesses that vary with the demand for power.
PNM generates power at central station power plants to achieve economies of scale and produce power at a cost that A - 15 Table of Contents is competitive with rates established through the regulatory process. There are distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines, and solar cells, which have become increasingly cost competitive.
PNM generates power at central station power plants to achieve economies of scale and produce power at a cost that is competitive with rates established through the regulatory process. There are distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines, and solar cells, which have become increasingly cost competitive.
A - 16 Table of Contents The utility industry in which the Company operates is a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure, some of which are deemed to be critical infrastructure under NERC guidelines. Certain of the Company’s systems are interconnected with external networks.
The utility industry in which the Company operates is a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure, some of which are deemed to be critical infrastructure under NERC guidelines. Certain of the Company’s systems are interconnected with external networks.
PNM currently depends on fossil-fueled generation for 45.1% of its electricity. As discussed under Climate Change Issues, this type of generation could be subject to future EPA or state regulations requiring GHG reductions. The anticipated expansion of federal and state regulations could result in additional operating restrictions on facilities and increased generation and compliance costs.
PNM currently depends on fossil-fueled generation for 43.3% of its electricity. As discussed under Climate Change Issues, this type of generation could be subject to future EPA or state regulations requiring GHG reductions. The anticipated expansion of federal and state regulations could result in additional operating restrictions on facilities and increased generation and compliance costs.
Failure to comply with any applicable rules, regulations or decisions may lead to customer refunds, fines, penalties, and other payments, which could materially and adversely affect the results of operations and financial condition of PNMR and its subsidiaries. Operational Risks Customer electricity usage could be reduced by increases in prices charged and other factors.
Failure to comply with any applicable rules, regulations or decisions may lead to customer refunds, fines, penalties, and other payments, which could materially and adversely affect the results of operations and financial condition of PNMR and its subsidiaries. A - 14 Table of Contents Operational Risks Customer electricity usage could be reduced by increases in prices charged and other factors.
SIPs for the second planning period were due in July 2021, which deadline NMED was unable to meet. NMED is currently preparing its next regional haze SIP and has notified PNM that it will not be required to submit a regional haze four-factor analysis for SJGS since PNM retired its share of SJGS in 2022.
Deadlines for SIPs for the second planning period were in July 2021 which NMED was unable to meet. NMED is currently preparing its next regional haze SIP and notified PNM that it will not be required to submit a regional haze four-factor analysis for SJGS since PNM retired its share of SJGS in 2022.
A - 12 Table of Contents The combination of costs increasing relatively rapidly and the technologies and behaviors that are reducing energy consumption places upward pressure on the per unit prices that must be charged to recover costs. This upward pressure on unit prices could result in additional efforts by customers to reduce consumption through alternative measures.
The combination of costs increasing relatively rapidly and the technologies and behaviors that are reducing energy consumption places upward pressure on the per unit prices that must be charged to recover costs. This upward pressure on unit prices could result in additional efforts by customers to reduce consumption through alternative measures.
Further, the ability of PNMR to declare dividends depends upon the extent to which cash flows will support dividends, the Company’s financial circumstances and performance, economic conditions in the U.S. and in the Company’s service areas, future growth plans and the related capital requirements, and other business considerations.
Further, the ability of PNMR to declare dividends depends upon the extent to which cash flows will support dividends, the Company’s financial circumstances and performance, economic conditions in the U.S. and in the Company’s service areas, A - 19 Table of Contents future growth plans and the related capital requirements, and other business considerations.
Following acceptance of the statement of need and action plan, a utility will provide the NMPRC and intervenors drafts of the request for proposals (“RFP”) and a timeline for issuing, receiving, evaluating, and ranking bids.
Following acceptance of the statement of need and action plan, a utility will provide the NMPRC and intervenors drafts of the request for proposals (“RFP”) and a timeline for issuing, A - 17 Table of Contents receiving, evaluating, and ranking bids.
General economic conditions of the nation and/or specific areas can affect the Company’s customers and suppliers. Economic recession or downturn may result in decreased consumption by customers and increased bad debt expense, and could also negatively impact suppliers, all of which could negatively affect the Company.
A - 18 Table of Contents General economic conditions of the nation and/or specific areas can affect the Company’s customers and suppliers. Economic recession or downturn may result in decreased consumption by customers and increased bad debt expense, and could also negatively impact suppliers, all of which could negatively affect the Company.
The supply chain impacts of COVID-19, high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting 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.
Supply chain issues, high inflation, actions by the Federal Reserve to address inflationary concerns and other market conditions, geopolitical activity and the resulting 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.
PUCT approval is required for changes to the ownership of TNMP or its parent and certain other transactions relating to TNMP. Certain acquisitions of PNMR’s outstanding voting securities also require FERC approval. A - 23 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
PUCT approval is required for changes to the ownership of TNMP or its parent and certain other transactions relating to TNMP. Certain acquisitions of PNMR’s outstanding voting securities also require FERC approval. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
However, despite steps the Company may take to detect, mitigate and/or eliminate threats and respond to security incidents, the techniques used by those who wish to obtain unauthorized access, and possibly disable or sabotage systems and/or abscond with information and data, change frequently and the Company may not be able to protect against all such actions.
However, despite steps the Company may take to detect, mitigate, and/or eliminate threats and respond to security incidents, the techniques used by those who wish to obtain unauthorized access, and possibly disable or sabotage systems and/or abscond with information and data, change frequently and continue to evolve with the use of artificial intelligence and the Company may not be able to protect against all such actions.
CCRs from the operation of SJGS were used in the reclamation of a surface coal mine. These CCRs consist of fly ash, bottom ash, and gypsum.
A - 13 Table of Contents CCRs from the operation of SJGS were used in the reclamation of a surface coal mine. These CCRs consist of fly ash, bottom ash, and gypsum.
In general, the Company relies on its short-term credit facilities as the initial source to finance construction expenditures. This results in increased borrowings under the facilities over time. The Company is currently projecting total construction expenditures for the years 2023-2027 to be $4.6 billion.
In general, the Company relies on its short-term credit facilities as the initial source to finance construction expenditures. This results in increased borrowings under the facilities over time. The Company is currently projecting total construction expenditures for the years 2024-2028 to be $6.1 billion.
Continued supply chain issues that were initially experienced during the COVID-19 pandemic, high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting A - 18 Table of Contents 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.
Continued supply chain issues were initially experienced during high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting 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 rates PNM charges its customers are regulated by the NMPRC and FERC. TNMP is regulated by the PUCT. The Company is in a period requiring significant capital investment and is projecting total construction expenditures for the years 2023-2027 to be $4.6 billion.
The rates PNM charges its customers are regulated by the NMPRC and FERC. TNMP is regulated by the PUCT. The Company is in a period requiring significant capital investment and is projecting total construction expenditures for the years 2024-2028 to be $6.1 billion.
Without timely cost recovery, including recovery of undepreciated investments and other costs associated with abandoning generation facilities, and the opportunity to earn a fair return on capital investments, PNMR’s liquidity and results of operations could be negatively impacted. Further, PNM and TNMP are in a period of significant capital expenditures.
Without timely cost recovery, including recovery of undepreciated investments and the opportunity to earn a fair return on capital investments, PNMR’s liquidity and results of operations could be negatively impacted. Further, PNM and TNMP are in a period of significant capital expenditures.
The NMPRC will then appoint an Independent Monitor (“IM”) to oversee the RFP process, which allows for parties and the IM to comment on the RFP consistency with the IRP, after which the utility issues the RFP. On November 2, 2022, the NMPRC adopted an amended IRP Rule.
The NMPRC will then appoint an Independent Monitor (“IM”) to oversee the RFP process, which allows for parties and the IM to comment on the RFP consistency with the IRP, after which the utility issues the RFP.
Following the transfer of the PVNGS Unit 1 Leased Interest to SRP in January 2023, PNM currently has a 7.6% undivided interest in PVNGS, including leased interest in Unit 2 still held until its expiration in January 2024. PVNGS represented 15.1% of PNM’s total generating capacity as of December 31, 2022.
Following the transfer of the PVNGS Unit 1 Leased Interest to SRP in January 2023 and the expiration of the leased interest in Unit 2 in January 2024, PNM currently has a 7.3% undivided interest in PVNGS. PVNGS represented 10.7% of PNM’s total generating capacity as of December 31, 2023.
Additionally, PNMR’s financing agreements generally include a covenant to maintain a debt-to-capitalization ratio that does not exceed 70%, and PNM and TNMP’s financing arrangements generally include a covenant to maintain debt-to-capitalization ratios that do not exceed 65%.
PNM is permitted to pay dividends to PNMR from prior equity contributions made by PNMR. Additionally, PNMR’s financing agreements generally include a covenant to maintain a debt-to-capitalization ratio that does not exceed 70%, and PNM and TNMP’s financing arrangements generally include a covenant to maintain debt-to-capitalization ratios that do not exceed 65%.
PNMR may suffer reputational harm, which may cause its stock price to decrease or cause certain investors and financial institutions not to purchase the Company’s debt securities or otherwise provide the Company with A - 14 Table of Contents capital or credit on favorable terms, which may cause the cost of capital to increase.
Environmental noncompliance could also result in reputational harm, which may cause stock price decreases or cause certain investors and financial institutions not to purchase the Company’s debt securities or otherwise provide the Company with capital or credit on favorable terms, which may cause the cost of capital to increase.
However, wildfire risk is always present and PNM and TNMP could be held liable for damages incurred as a result of wildfires caused, or allegedly caused, by their transmission and distribution systems.
Southwest region and Texas could contribute to wildfires in or near PNM’s and TNMP’s service territories. PNM and TNMP take proactive steps to mitigate wildfire risk. However, wildfire risk is always present and PNM and TNMP could be held liable for damages incurred as a result of wildfires caused, or allegedly caused, by their transmission and distribution systems.
Those few events that are successful do not generally result in significant or consequential business impacts.
To date, those few events that were successful did not result in significant or consequential business impacts.
Likewise, if the NMPRC does not authorize appropriate recovery of any undepreciated generating resources at the time those resources cease to be used to provide service to New Mexico ratepayers, including required future investments, and does not authorize recovery of the costs of obtaining power to replace those resources, PNM’s financial position, results of operations, and cash flows could be negatively impacted.
If the NMPRC does not authorize appropriate recovery of any of the costs discussed above, including undepreciated generating resources at the A - 12 Table of Contents time those resources are removed from service and fails to authorize recovery of the costs of obtaining power to replace those resources, PNM’s financial position, results of operations, and cash flows could be negatively impacted.
Tax laws and regulations may also negatively impact the relative value of some resource investments over others, making those investments less competitive.
Increases in tax rates may not be immediately recoverable through PNM’s and TNMP’s regulated rates, reducing earnings. Tax laws and regulations may also negatively impact the relative value of some resource investments over others, making those investments less competitive.
In addition, a change in GAAP required that all changes in the fair value of equity securities recorded on the Company’s balance sheet be reflected in earnings, which results in increased volatility in earnings.
In addition, a change in GAAP required that all changes in the fair value of equity securities recorded on the Company’s balance sheet be reflected in earnings, which results in increased volatility in earnings. Impairments of goodwill and long-lived assets of PNMR, PNM, and TNMP could adversely affect the Company’s business, financial position, liquidity, and results of operations.
The impacts and implementation of U.S. tax reform legislation may negatively impact PNMR’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows. Changes in tax laws may negatively impact PNMR’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows.
Significant impairments could adversely affect the Company’s business, financial position, liquidity, and results of operations. A - 20 Table of Contents The impacts and implementation of U.S. tax reform legislation may negatively impact PNMR’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows.
Long-lived assets are also assessed whenever indicators of impairment exist. Factors that affect the long-term value of these assets, including treatment by regulators in ratemaking proceedings, as well as other economic and market conditions, could result in impairments. Significant impairments could adversely affect the Company’s business, financial position, liquidity, and results of operations.
The Company annually evaluates recorded goodwill for impairment. See Note 1 and the Critical Accounting Policies and Estimates section of MD&A. Long-lived assets are also assessed whenever indicators of impairment exist. Factors that affect the long-term value of these assets, including treatment by regulators in ratemaking proceedings, as well as other economic and market conditions, could result in impairments.
The Company possesses tax credits and other carryforwards, the value of which could be diminished by new laws or the Company’s ability to timely utilize them. Increases in tax rates may not be immediately recoverable through PNM’s and TNMP’s regulated rates, reducing earnings.
Changes in tax laws may negatively impact PNMR’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows. The Company possesses tax credits and other carryforwards, the value of which could be diminished by new laws or the Company’s ability to timely utilize them.
PNM’s recent retirement of SJGS and the abandonment application for Four Corners will increase PNM’s dependency on other generation resources, including renewable resources, gas-fired facilities, and PVNGS, and will reduce PNM’s flexibility in managing those resources.
The Company’s financial performance depends on the successful operation of PNM’s generation assets, as well as the transmission and distribution systems of PNM and TNMP. PNM’s retirement of SJGS and the potential retirement of Four Corners will increase PNM’s dependency on other generation resources, including renewable resources, gas-fired facilities, and PVNGS, and will reduce PNM’s flexibility in managing those resources.
Adverse developments from these factors could have a negative impact on the business, financial condition, results of operations, and cash flows of PNM and PNMR.
PNMR has counterparty credit risk in connection with financial support that was provided to facilitate the coal supply arrangement for SJGS. Adverse developments from these factors could have a negative impact on the business, financial condition, results of operations, and cash flows of PNM and PNMR.
The NMPRC has placed certain restrictions on the ability of PNM to pay dividends to PNMR, including that PNM cannot pay dividends that cause its debt rating to fall below investment grade.
The NMPRC has placed certain restrictions on the ability of PNM to pay dividends to PNMR, including that PNM cannot pay dividends that cause its debt rating to fall below investment grade. The NMPRC has also restricted PNM from paying dividends in any year, as determined on a rolling four-quarter basis, in excess of net earnings without prior NMPRC approval.
However, prolonged delays in replacement resources for SJGS, PVNGS, availability of existing resources and increased costs for purchasing capacity may negatively impact the results of operations and cash flows. See Note 17. On May 26, 2021, the NMPRC opened a docket initiating a rulemaking in order to streamline IRP proceedings and allow NMPRC oversight of utility resource procurement practices.
Prolonged delays in replacement resources for SJGS, PVNGS, availability of existing resources, and increased costs for purchasing capacity may negatively impact the results of operations and cash flows. See Note 17. In 2022, the NMPRC adopted revisions to the IRP Rule that revamp and modernize the planning process to accommodate increased stakeholder involvement.
An adverse outcome in the 2024 Rate Change could negatively impact PNM’s financial position, results of operation, and cash flows. See Note 17. PNM currently recovers the cost of fuel for its generation facilities through its FPPAC. In December 2013, a new fifteen-year coal supply contract for Four Corners beginning in July 2016 was executed.
This adverse outcome in the 2024 Rate Change could negatively impact PNM’s financial position, results of operation, and cash flows. See Note 17.
Throughout 2021 and 2022, PNM provided notices of delays and status updates to the NMPRC for the approved SJGS and PVNGS replacement resource projects. As a result of these delays the SJGS replacement resources were not available for the 2022 summer peak load period.
As a result of construction delays, most of the SJGS replacement resources were not available for the 2022 and 2023 summer peak load periods. If these delays continue, PNM’s existing resources, including available reserves, may be insufficient for 2024 summer peak load reliability.
Removed
On January 8, 2021, PNM filed the Four Corners Abandonment Application, which seeks NMPRC approval to exit PNM’s 13% share of Four Corners as of December 31, 2024, and issuance of approximately $300 million of energy transition bonds as provided by the ETA.
Added
On January 3, 2024, the NMPRC issued a final order increasing non-fuel rates by a fraction of what was requested in the application and approving an ROE of 9.26%. The final order also provided for specific disallowances of PNM’s undepreciated investments in Four Corners and PVNGS.
Removed
On December 15, 2021, the NMPRC issued a final order denying approval of the Four Corners Abandonment Application and the corresponding request for issuance of securitized financing. On December 22, 2021, PNM filed a Notice of Appeal with the NM Supreme Court of the NMPRC decision to deny the application.
Added
In February 2024, EPA proposed to impose a federal implementation plan on New Mexico to address the interstate transport of ozone and its precursors, referred to by EPA as the “good neighbor” rule.
Removed
See additional discussion of the ETA and PNM’s Four Corners Abandonment Application in Notes 16 and 17. On April 2, 2021, PNM filed an application with the NMPRC requesting approval for the decertification and abandonment of 114 MW of leased PVNGS capacity, sale and transfer of related assets, and approval to procure new resources (“PVNGS Leased Interest Abandonment Application”).
Added
If finalized as proposed, compliance with the rule would require specified fossil fuel-fired generating resources to participate in an ozone-season NOx emission allowance trading program that will limit total NOx emissions from all affected units within the state of New Mexico.
Removed
On August 25, 2021, the NMPRC issued an order granting dismissal of PNM's requests for approval to abandon and decertify the Leased Interest; dismissal of PNM's request for approval to sell and transfer the related assets; and dismissal of PNM's request to create regulatory assets for the associated remaining undepreciated investments, but does not preclude PNM seeking recovery of the costs in a general rate case.
Removed
On November 18, 2022, the NMPRC issued an accounting order requiring PNM to establish a regulatory liability to track and account for, upon termination of the PVNGS leases, all costs currently borne by ratepayers associated with those leases during pendency of the 2024 Rate Change, subject to a determination of ratemaking treatment.
Removed
In addition, PNM may establish a regulatory asset account to record undepreciated investment for improvements to the Unit 1 and Unit 2 Leased Interests upon termination of the leases, and to record differences in the proceeds from SRP for the sale of the PVNGS Leased Assets and the actual book value for which recovery of these costs will be determined in the 2024 Rate Change.
Removed
In the 2024 Rate Change, PNM must also address unresolved issues including whether PNM’s decision to renew the five leases and repurchase 64.1 MW of PVNGS Unit 2 capacity exposed ratepayers to additional financial liability beyond that to which they would otherwise have been exposed, and whether PNM should be denied recovery of future decommissioning expenses as a remedy for imprudence.
Removed
PNM is unable to predict the outcome of this matter. See additional discussion of PNM’s PVNGS Leased Interest Abandonment Application in Note 17. An adverse decision regarding PNM’s ability to recover certain PVNGS decommissioning costs and recovery of undepreciated investments at PVNGS and Four Corners, could negatively impact PNM’s financial position, results of operations, and cash flows.
Removed
The inability to operate generation resources prior to their planned retirement dates, or the NMPRC’s denial, modification or delay of PNM’s applications for replacement resources, would require PNM to obtain power from other sources in order to serve the needs of its customers.
Removed
There can be no assurance the NMPRC will allow PNM to recover undepreciated investments in retired facilities through rates charged to customers, that adequate sources of replacement power would be available, that adequate transmission capabilities would be available to bring that power into PNM’s service territory, or whether the cost of obtaining those resources would be economical.
Removed
Any such events would negatively impact PNM’s financial position, results of operations, and cash flows unless the NMPRC authorized the collection from customers of any un-recovered costs related to the retired facilities, as well as costs of obtaining replacement power.
Removed
The Four Corners contract provides for pricing adjustments over its terms based on economic indices. PNM will be relieved of its obligations under the coal supply agreement after December 31, 2024, pending a successful appeal at the NM Supreme Court of its Four Corners Abandonment A - 13 Table of Contents Application discussed in Note 17.
Removed
Although PNM believes substantially all costs under the coal supply arrangement would continue to be recovered through the FPPAC, there can be no assurance that full recovery will continue to be allowed. PNMR has counterparty credit risk in connection with financial support that was provided to facilitate the coal supply arrangement for SJGS.
Removed
The Company’s financial performance depends on the successful operation of PNM’s generation assets, as well as the transmission and distribution systems of PNM and TNMP.
Removed
If these delays continue, PNM's existing resources, including available reserves, may be insufficient for 2023 summer peak load reliability. PNM has entered into agreements to purchase power from third parties to minimize potential impacts to customers during the 2023 summer peak load period.
Removed
On September 14, 2022, the NMPRC adopted revisions to the IRP Rule. The final order revamps and modernizes the planning process to accommodate increased stakeholder involvement.
Removed
These factors could negatively impact results of operations and cash flows. A - 19 Table of Contents As discussed in Note 16, in February 2021, Texas experienced a severe winter storm delivering the coldest temperatures in 100 years for many parts of the state.
Removed
ERCOT declared its highest state of emergency, an Emergency Energy Alert Level 3, due to exceptionally high electric demand exceeding supply amid the arctic temperatures. Ultimately, the ERCOT market was not able to deliver sufficient generation load to the grid resulting in significant, statewide outages as ERCOT directed transmission operators to curtail thousands of firm load megawatts.
Removed
In response to the severe winter weather, the Governor of Texas issued a Declaration of a State of Disaster for all counties in Texas. Additionally, to assist in the recovery from the emergency conditions, the PUCT issued an order that placed a temporary moratorium on customer disconnections due to non-payment for transmission and distribution utilities that ended in June 2021.
Removed
Consequently, the duration of the severe winter storm and high energy costs posed a financial hardship to REPs in the ERCOT region. The Texas Attorney General issued civil investigation demands to ERCOT and 11 power companies in Texas related to power outages, emergency plans, energy pricing and other factors associated with the severe weather storm.
Removed
While TNMP has regulatory authorization to defer bad debt expense from REPs to a regulatory asset and seek recovery in a future general rate case, it intends to fully cooperate with all regulatory directives and inquiries made by the PUCT, the Texas Attorney General, and any other regulatory agencies.
Removed
Various market participants, including TNMP, have been named as defendants in lawsuits relating to the February 2021 winter weather power outages. As a transmission and distribution utility operating during that weather event, TNMP could be named in additional suits. The impact of wildfires could negatively affect PNM’s and TNMP’s results of operations.
Removed
Risks Relating to the Proposed Merger with Avangrid There is no assurance when or if the proposed Merger will be completed. Completion of the proposed Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including regulatory approval and other customary closing conditions.
Removed
There can be no assurance that the conditions to completion of the proposed Merger will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the proposed Merger.
Removed
In particular, as discussed in more detail below, the NMPRC issued a negative ruling on the merger in December 2021 and in January 2022 PNMR filed a notice of appeal with the New Mexico Supreme Court. At this time PNMR and Avangrid amended the Merger Agreement to extend the End Date to April 20, 2023.
Removed
It is not possible at this time to predict if or when the merger will receive the required approval from the NMPRC.
Removed
In addition, each of Avangrid and PNMR may unilaterally terminate the Merger Agreement under certain circumstances, and Avangrid and PNMR may agree at any time to terminate the Merger Agreement, even though PNMR shareholders have already approved the Merger Agreement. Avangrid and PNMR may be unable to obtain the regulatory approvals required to complete the proposed Merger.
Removed
In addition to other conditions set forth in the Merger Agreement, completion of the proposed Merger is conditioned upon the receipt of various state and U.S. federal regulatory approvals, including, but not limited to, approval by NMPRC, PUCT, FERC, NRC and the FCC.
Removed
Avangrid and PNMR have made various filings and submissions and will pursue all required consents, orders and approvals in accordance with the Merger Agreement. In March 2021, PNMR and Avangrid received FCC approval of the transfer of operating licenses related to the Merger. In April 2021, FERC issued an order authorizing the Merger.
Removed
In May 2021, the PUCT issued an order authorizing the Merger and the NRC approved the Merger. On December 8, 2021 the NMPRC issued an order rejecting the amended stipulation reached by the parties, see Note 22.
Removed
On January 3, 2022, PNMR and Avangrid filed a notice of appeal with the NM Supreme Court, and PNM filed its Statement of Issues with the NM Supreme Court on February 2, 2022.
Removed
In light of the NMPRC December 8, 2021 ruling, on January 3, 2022, PNMR, Avangrid and Merger Sub entered into an Amendment to the Merger Agreement pursuant to which PNMR and Avangrid each agreed to extend the End Date to April 20, 2023.
Removed
As a result of the delay in closing the Merger due to the need to obtain NMPRC approval, PNMR and Avangrid will be required to make a new filing under the HSR Act and requested extensions of the previously granted approvals from the FCC and NRC. No additional filings will be required with CFIUS, FERC or the PUCT.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePNM owns and leases interests in PVNGS Units 1 and 2 and related property, communication, office and other equipment, office space, vehicles, and real estate. PNM also owns service and office facilities throughout its service territory. See Note 8 for additional information concerning leases. TNMP TNMP’s facilities consist primarily of transmission and distribution facilities located in its service areas.
Biggest changePNM owns and leases communication, office and other equipment, office space, A - 22 Table of Contents vehicles, and real estate. PNM also owns service and office facilities throughout its service territory. See Note 8 for additional information concerning leases. TNMP TNMP’s facilities consist primarily of transmission and distribution facilities located in its service areas.
TNMP also owns and leases vehicles, service facilities, and office locations throughout its service territory. As of December 31, 2022, TNMP owned 992 miles of overhead electric transmission lines, 7,319 miles of overhead distribution lines, 1,433 miles of underground distribution lines, and 128 substations. Substantially all of TNMP’s property is pledged to secure its first mortgage bonds. See Note 7.
TNMP also owns and leases vehicles, service facilities, and office locations throughout its service territory. As of December 31, 2023, TNMP owned 1,026 miles of overhead electric transmission lines, 7,328 miles of overhead distribution lines, 1,516 miles of underground distribution lines, and 128 substations. Substantially all of TNMP’s property is pledged to secure its first mortgage bonds. See Note 7.
As of December 31, 2022, PNM owned, or jointly owned, 3,428 miles of electric transmission lines, 5,767 miles of distribution overhead lines, 6,057 miles of underground distribution lines (excluding street lighting), and 250 substations. PNM’s electric transmission and distribution lines are generally located within easements and rights-of-way on public, private, and Native American lands.
As of December 31, 2023, PNM owned, or jointly owned, 3,428 miles of electric transmission lines, 5,768 miles of distribution overhead lines, 6,098 miles of underground distribution lines (excluding street lighting), and 251 substations. PNM’s electric transmission and distribution lines are generally located within easements and rights-of-way on public, private, and Native American lands.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNote 16 • Cooling Water Intake Structures • Santa Fe Generating Station • Texas Winter Storm Note 17 • PNMR– Merger Regulatory Proceedings • PNM – 2024 Rate Change • PNM – 2020 Decoupling • PNM – FPPAC Continuation Application • PNM – Integrated Resource Plan • PNM – SJGS Abandonment Application • PNM – Four Corners Abandonment Application • PNM – Grid Modernization Application • PNM – Community Solar Act • PNM – FERC Order 864 • TNMP – Transmission Cost of Service Rates • TNMP – Periodic Distribution Rate Adjustment
Biggest changeNote 16 • Cooling Water Intake Structures • Santa Fe Generating Station Note 17 • PNM – 2020 Decoupling • PNM – Integrated Resource Plan • PNM – Grid Modernization Application • PNM – Community Solar Act • TNMP – Transmission Cost of Service Rates • TNMP – Periodic Distribution Rate Adjustment

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeTarry 52 President and Chief Operating Officer May 2022 Senior Vice President and Chief Financial Officer January 2020 Vice President, Controller and Treasurer September 2018 Vice President, Finance and Controller February 2017 E. A. Eden 56 Senior Vice President, Chief Financial Officer and Treasurer May 2022 Vice President and Treasurer February 2021 P. V.
Biggest changeCollawn 65 Chairman and Chief Executive Officer May 2022 Chairman, President, and Chief Executive Officer January 2012 J. D. Tarry 53 President and Chief Operating Officer May 2022 Senior Vice President and Chief Financial Officer January 2020 Vice President, Controller and Treasurer September 2018 E. A.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. A - 24 Table of Contents SUPPLEMENTAL ITEM – INFORMATION ABOUT EXECUTIVE OFFICERS OF PNM RESOURCES, INC. All officers are elected annually by the Board of PNMR.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. SUPPLEMENTAL ITEM – INFORMATION ABOUT EXECUTIVE OFFICERS OF PNM RESOURCES, INC. All officers are elected annually by the Board of PNMR. Executive officers, their ages as of February 16, 2024 and offices held with PNMR for the past five years are as follows: Name Age Office Initial Effective Date P. K.
Removed
Executive officers, their ages as of February 17, 2023 and offices held with PNMR for the past five years are as follows: Name Age Office Initial Effective Date P. K. Collawn 64 Chairman and Chief Executive Officer May 2022 Chairman, President, and Chief Executive Officer January 2012 J. D.
Added
Eden 57 Senior Vice President, Chief Financial Officer and Treasurer May 2022 Vice President and Treasurer February 2021 P. V. Apodaca 72 Senior Vice President, General Counsel, and Secretary January 2010 A - 23 Table of Contents PART II
Removed
Apodaca 71 Senior Vice President, General Counsel, and Secretary January 2010 R. N. Darnell 65 Senior Vice President, Public Policy January 2012 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn February 2022, the Board increased the quarterly dividend from $0.3275 to $0.3475 per share, which was attributable to the fourth quarter of 2021. In December 2022, the Board increased the quarterly dividend from $0.3475 to $0.3675 per share.
Biggest changeIn December 2022, the Board increased the quarterly dividend from $0.3475 to $0.3675 per share. In December 2023, the Board increased the quarterly dividend from $0.3675 to $0.3875 per share.
PNMR targets a long-term dividend payout ratio of 55% of 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 targets a long-term dividend payout ratio of 5% of ongoing earnings per share growth, 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.
Quarterly cash dividends were paid on PNM’s outstanding cumulative preferred stock at the stated rates during 2022 and 2021. PNMR and TNMP do not have any preferred stock outstanding. Sales of Unregistered Securities None.
Quarterly cash dividends were paid on PNM’s outstanding cumulative preferred stock at the stated rates during 2023 and 2022. PNMR and TNMP do not have any preferred stock outstanding. Sales of Unregistered Securities None. ITEM 6. [RESERVED]
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. On February 17, 2023, there were 7,232 holders of record of PNMR’s common stock. All of the outstanding common stock of PNM and TNMP is held by PNMR.
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. On February 16, 2024, there were 6,941 holders of record of PNMR’s common stock. All of the outstanding common stock of PNM and TNMP is held by PNMR.
The Board declared dividends on common stock considered to be for the second quarter of $0.3475 per share in August 2022 and $0.3275 per share in July 2021. The Board declared dividends on common stock considered to be for the third quarter of $0.3475 per share in September 2022 and $0.3275 per share in September 2021.
The Board declared dividends on common stock considered to be for the second quarter of $0.3675 per share in August 2023 and $0.3475 per share in August 2022. The Board declared dividends on common stock considered to be for the third quarter of $0.3675 per share in September 2023 and $0.3475 per share in September 2022.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Preferred Stock As of December 31, 2022, PNM has 115,293 shares of cumulative preferred stock outstanding. PNM is not aware of any active trading market for its cumulative preferred stock.
See Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Preferred Stock As of December 31, 2023, PNM has 115,293 shares of cumulative preferred stock outstanding. PNM is not aware of any active trading market for its cumulative preferred stock.
All of PNM’s and TNMP’s common stock is owned by PNMR and is not listed for trading on any stock exchange. See Note 6 for a discussion on limitations on the payments of dividends and the payment of future dividends, as well as dividends paid by PNM and TNMP. See Part III, Item 12.
There have been no issuer purchases of equity securities. All of PNM’s and TNMP’s common stock is owned by PNMR and is not listed for trading on any stock exchange. See Note 6 for a discussion on limitations on the payments of dividends and the payment of future dividends, as well as dividends paid by PNM and TNMP.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating results – 2022 compared to 2021 The following table summarizes the significant changes to gross margin: Year Ended December 31, 2022 Change Gross margin: (In millions) Utility margin (see below) $ 72.6 Depreciation and amortization (see below) (10.4) Higher plant maintenance costs at gas fired plants and PVNGS, partially offset by lower costs at Four Corners and the retirement of SJGS (2.0) Higher employee related and outside service expenses, excluding administrative costs (6.6) Higher transmission line maintenance and rights-of-way expense including for the Western Spirit Line (3.9) Other 0.6 Net Change $ 50.3 A - 39 Table of Contents The following table summarizes the significant changes to utility margin: Year Ended December 31, 2022 Change Utility margin: (In millions) Retail customer usage/load – Weather normalized retail KWh sales increased 2.4% for commercial customers and 6.5% for industrial customers, which was partially offset by decreased sales to residential customers of 0.7% $ 4.1 Weather – Cooler winter weather and warmer summer weather in 2022; heating degree days were 20.8% higher and cooling degree days were 3.3% higher in 2022 7.1 Transmission – Increase primarily due to higher revenues from the addition of new customers including on the Western Spirit Line, higher formula transmission rates, and higher volumes 65.2 Unregulated margin – Increased revenues driven by a higher price and lower cost of energy associated with 65MW of SJGS Unit 4 8.5 Rate credits – NMPRC ordered rate credits, removing all costs of SJGS Unit 1 from rates (See Note 17) (1.2) FERC ordered time-value refunds (See Note 17) (8.1) Other (3.0) Net Change $ 72.6 The following tables summarize the primary drivers for operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Year Ended December 31, 2022 Change Operating expenses: (In millions) Higher plant maintenance costs at gas fired plants and PVNGS, partially offset by lower costs at Four Corners and the retirement of SJGS $ 2.0 Higher property taxes due to increases in utility plant in service including the Western Spirit Line partially offset by favorable settlement of property values 2.1 Higher employee related and outside service expenses 18.3 Higher transmission line maintenance and rights-of-way expense including for the Western Spirit Line 3.9 2021 non-retail credit loss (1.0) 2021 regulatory disallowance resulting from the PVNGS Leased Interest Abandonment Application (Note 17) (1.3) Higher regulatory disallowance due to change in estimated write-offs associated with SJGS BART determination and ownership restructuring 0.9 Decreased costs associated with the accelerated recovery of SNCRs on SJGS Units 1 and 4 (2.5) Other (0.3) Net Change $ 22.1 Depreciation and amortization: Increased utility plant in service including the Western Spirit Line $ 13.7 Lower depreciation due to the retirement of SJGS (3.9) Other 0.6 Net Change $ 10.4 A - 40 Table of Contents Year Ended December 31, 2022 Change Other income (deductions): (In millions) Decreased performance on investment securities in the NDT and coal mine reclamation trusts $ (95.2) Lower non-service pension costs 1.5 Lower trust expenses partially offset by lower interest income related to investment securities in the NDT and coal mine reclamation trusts 1.0 Lower charitable contributions in 2022 1.7 Carrying charges on payments under the ETA for SJGS made in advance of the Energy Transition Bonds (Note 17) 0.7 Other (0.3) Net Change $ (90.6) Interest charges: Refinancing of $160.0 million of SUNs in July 2021 2.3 Issuance of $150.0 million of SUNs in December 2021 (3.8) Higher interest on term loans (3.6) Interest on transmission customer deposits including the Western Spirit Transmission Line (4.3) Other (0.3) Net Change $ (9.7) Income (taxes): Lower segment earnings before income taxes $ 15.2 Higher non-deductible compensation (1.4) Lower amortization of federal excess deferred income taxes (Note 18) (0.7) Adjustments for the closure of SJGS (3.5) Other (1.8) Net Change $ 7.8 TNMP Non-GAAP Financial Measures TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers.
Biggest changeOperating results – 2023 compared to 2022 The following table summarizes the significant changes to gross margin: Year Ended December 31, 2023 Change Gross margin: (In millions) Utility margin (see below) $ (162.5) Depreciation and amortization (see below) 3.2 Lower plant maintenance costs primarily due to the retirement of SJGS, the disposition of the PVNGS Unit 1 Leased Interest, and lower costs at gas fired plants partially offset by higher costs at Four Corners and the remaining interests in PVNGS 57.3 Higher employee related, outside services, and vegetation management expenses, excluding administrative costs (4.6) Other (0.4) Net Change $ (107.0) A - 37 Table of Contents The following table summarizes the significant changes to utility margin: Year Ended December 31, 2023 Change Utility margin: (In millions) Retail customer usage/load – Weather normalized retail KWh sales decreased 1.0% for residential customers and 4.6% for industrial customers, which was partially offset by increased sales to commercial customers of 0.2% $ (0.9) Weather – Primarily due to hotter weather in the third quarter of 2023 8.8 Transmission – Increase in revenues primarily due to higher market prices and higher volumes partially offset by the FERC Order 864 Settlement (Note 17) 4.7 Unregulated margin – Decreases due to the retirement of SJGS Unit 4 in 2022 (10.3) Capacity arrangements – New agreements in 2023, including battery storage (11.8) Rate refunds – SJGS abandonment settlement agreement partially offset by NMPRC ordered rate refunds in 2022 (Note 17) (127.5) 2024 Rate Change – PVNGS Unit 1 Leased Interest regulatory liability (Note 17) (38.4) FERC ordered time-value refunds in 2022 (Note 17) 8.1 Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, and transportation electrification riders 4.8 Net Change $ (162.5) The following tables summarize the primary drivers for operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Year Ended December 31, 2023 Change Operating expenses: (In millions) Lower plant maintenance and administrative costs primarily due to the retirement of SJGS, the disposition of the PVNGS Unit 1 Leased Interest, and lower costs at Four Corners and gas fired plants partially offset by higher costs related to the remaining interests in PVNGS $ (58.5) Higher employee related, outside services, and vegetation management expenses 6.3 Higher regulatory disallowances and restructuring costs, primarily resulting from the 2024 Rate Change (Note 17) 69.9 Other 1.3 Net Change $ 19.0 Depreciation and amortization: Increased utility plant in service $ 6.8 Lower depreciation due to the retirement of SJGS (8.0) Lower depreciation due to the disposition of the PVNGS Unit 1 Leased Interest (3.0) Other 1.0 Net Change $ (3.2) Other income (deductions): Increased performance on investment securities in the NDT and coal mine reclamation trusts $ 97.6 Higher interest income and lower trust expenses related to investment securities in the NDT, coal mine reclamation and SJGS decommissioning trusts 4.8 Other 1.2 Net Change $ 103.6 A - 38 Table of Contents Year Ended December 31, 2023 Change Interest charges: (In millions) Higher interest on term loan $ (7.4) Higher interest on short-term borrowings (8.3) Issuance of SUNs in April 2023 (7.6) Higher interest on transmission interconnections and other customer deposit arrangements (4.3) Interest related to ETBC I issuance of Securitized Bonds in November 2023 (2.5) Higher debt AFUDC 5.8 Other (1.2) Net Change $ (25.5) Income (taxes): Lower segment earnings before income taxes $ 26.3 Higher tax credits in 2023 5.4 Lower amortization of federal excess deferred income taxes (Note 18) (0.2) Impacts of the closure of SJGS in 2022 3.5 Lower uncertain tax positions 1.1 Other (0.1) Net Change $ 36.0 TNMP Non-GAAP Financial Measures TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers.
Similarly, 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.
Similarly, 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 emissions. PNM has several programs underway to reduce or offset GHG emissions from its generation resource portfolio, thereby reducing its exposure to climate change regulation.
On October 28, 2022, the rule was passed which adopts new carbon emission standards for new and existing coal-fired power plants. 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 October 28, 2022, the rule was passed which adopts new carbon emission standards for new and existing coal-fired power plants. In 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.
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 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.
Additionally, 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 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.
Within 30 days of the executive order, agency heads submitted to the United States Office of Management and Budget ("OMB") a preliminary list of those actions being considered for suspension, revision or rescission that would be completed by December 31, 2021, and would be subject to OMB review.
Within 30 days of the executive order, agency heads submitted to the United States Office of Management and Budget (“OMB”) a preliminary list of those actions being considered for suspension, revision or rescission that would be completed by December 31, 2021, and would be subject to OMB review.
On January 20, 2021, President Biden signed an executive order “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” which instructs agency heads to review all Trump Administration actions for inconsistency with the Biden Administration’s policy “to listen to the science; to improve public health and protect our environment; to ensure access to clean air and water; to limit exposure to dangerous chemicals and pesticides; to hold polluters accountable, including those who disproportionately harm communities of color and low-income communities; to reduce greenhouse gas emissions; to bolster resilience to the impacts of climate change; to restore and expand our national treasures and monuments; and to prioritize both environmental justice and the creation of the well-paying union jobs necessary to deliver on these goals.” Agency heads were directed to consider suspending, revising or rescinding any action that is inconsistent with the stated policy.
In 2021, President Biden signed an executive order “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” which instructs agency heads to review all Trump Administration actions for inconsistency with the Biden Administration’s policy “to listen to the science; to improve public health and protect our environment; to ensure access to clean air and water; to limit exposure to dangerous chemicals and pesticides; to hold polluters accountable, including those who disproportionately harm communities of color and low-income communities; to reduce greenhouse gas emissions; to bolster resilience to the impacts of climate change; to restore and expand our national treasures and monuments; and to prioritize both environmental justice and the creation of the well-paying union jobs necessary to deliver on these goals.” Agency heads were directed to consider suspending, revising or rescinding any action that is inconsistent with the stated policy.
MD&A FOR PNMR EXECUTIVE SUMMARY Overview and Strategy PNMR is a holding company with two regulated utilities serving approximately 815,000 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.
MD&A FOR PNMR EXECUTIVE SUMMARY Overview and Strategy PNMR is a holding company with two regulated utilities serving approximately 824,000 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.
NDC of 50% to 52% carbon emissions reduction by 2030 and the Biden Administration’s goal of net-zero carbon emissions economy-wide by 2050. On April 1, 2020, the NMPRC approved PNM’s application to retire its share of SJGS in 2022. PNM filed for abandonment of Four Corners on January 8, 2021. See Note 17.
INDC of 50% to 52% carbon emissions reduction by 2030 and the Biden Administration’s goal of net-zero carbon emissions economy-wide by 2050. On April 1, 2020, the NMPRC approved PNM’s application to retire its share of SJGS in 2022. PNM filed for abandonment of Four Corners on January 8, 2021. See Note 17.
The Board approved the following increases in the indicated annual common stock dividend: Approval Date Percent Increase February 2022 6.1 % December 2022 5.8 % 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.
The Board approved the following increases in the indicated annual common stock dividend: Approval Date Percent Increase February 2022 6.1 % December 2022 5.8 December 2023 5.4 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.
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.
A - 25 Table of Contents 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 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.
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 and the issuance of Securitized Bonds in Note 7.
No impairments were indicated in the Company’s annual goodwill testing, which was performed as of April 1, 2022. Since the annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below the carrying values. The annual testing was based on certain critical estimates and assumptions.
No impairments were indicated in the Company’s annual goodwill testing, which was performed as of April 1, 2023. Since the annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below the carrying values. The annual testing was based on certain critical estimates and assumptions.
FERC Regulation Rates PNM charges wholesale transmission customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line described below, are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula.
FERC Regulation Rates PNM charges wholesale transmission customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line, 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 IRP is required to cover a 20-year planning period and contain an action plan covering the first four years of that period. On September 14, 2022 and November 2, 2022, the NMPRC adopted revisions to the IRP Rule. The revisions revamp and modernize the planning process to accommodate increased stakeholder involvement.
The IRP is required to cover a 20-year planning period and contain an action plan covering the first three years of that period. On September 14, 2022 and November 2, 2022, the NMPRC adopted revisions to the IRP Rule. The revisions revamp and modernize the planning process to accommodate increased stakeholder involvement.
The MD&A for PNM and TNMP is presented as permitted by Form 10-K General Instruction I (2) as amended by the FAST Act. For additional information related to the earliest of the two years presented please refer to the Company’s 2021 Annual Report on Form 10-K.
The MD&A for PNM and TNMP is presented as permitted by Form 10-K General Instruction I (2) as amended by the FAST Act. For additional information related to the earliest of the two years presented please refer to the Company’s 2022 Annual Report on Form 10-K.
Based on the analysis performed for the PNM and TNMP reporting units in 2022, the Company concluded that there were no changes that were reasonably likely to cause the fair value of the reporting units to be less than their carrying value and determined that there was no impairment of goodwill.
Based on the analysis performed for the PNM and TNMP reporting units in 2023, the Company concluded that there were no changes that were reasonably likely to cause the fair value of the reporting units to be less than their carrying value and determined that there was no impairment of goodwill.
On June 19, 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and revised the implementing regulations for all emission guidelines issued under CAA Section 111(d). EPA set the BSER for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” to be applied inside the fence-line of an individual facility.
In 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and revised the implementing regulations for all emission guidelines issued under CAA Section 111(d). EPA set the BSER for existing coal-fired power plants as heat rate efficiency improvements based on a range of “candidate technologies” to be applied inside the fence-line of an individual facility.
While the Company has not conducted an independent 2 Degree Scenario analysis, our 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.
While the Company has not conducted an independent 2 Degree Scenario analysis, our commitment to becoming 100% A - 53 Table of Contents 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.
A 10% increase in the estimates of future decommissioning costs at current price levels would have increased the ARO liability by $10.0 million at December 31, 2022. PNM recognizes an expense and a corresponding liability for ultimate decommissioning of PVNGS. See Note 17 for information concerning NMPRC’s order to address the recovery of decommissioning costs in a future proceeding.
A 10% increase in the estimates of future decommissioning costs at current price levels would have increased the ARO liability by $15.0 million at December 31, 2023. PNM recognizes an expense and a corresponding liability for ultimate decommissioning of PVNGS. See Note 17 for information concerning NMPRC’s order to address the recovery of decommissioning costs in a future proceeding.
During the year ended December 31, 2022, 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.
During the year ended December 31, 2023, 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.
Impairment testing may be performed based on either a qualitative analysis or quantitative analysis. Note 19 contains information on the impairment testing performed by the Company on goodwill. For 2022, the Company utilized a qualitative analysis for both the PNM and TNMP reporting units.
Impairment testing may be performed based on either a qualitative analysis or quantitative analysis. Note 19 contains information on the impairment testing performed by the Company on goodwill. For 2023, the Company utilized a qualitative analysis for both the PNM and TNMP reporting units.
Nuclear decommissioning costs are based on estimates of the costs for removing all radioactive and other structures at PVNGS. AROs, including nuclear decommissioning costs, are discussed in Note 15. Nuclear decommissioning costs represent approximately 68% of PNM’s ARO liability.
Nuclear decommissioning costs are based on estimates of the costs for removing all radioactive and other structures at PVNGS. AROs, including nuclear decommissioning costs, are discussed in Note 15. Nuclear decommissioning costs represent approximately 72% of PNM’s ARO liability.
The ability of PNMR to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to be able to pay dividends to PNMR. See Note 6 for a discussion of regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.
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. See Note 6 for a discussion of regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.
The 2030 goal joins President Biden’s other climate goals which include a carbon pollution-free power sector by 2035 and a net-zero emissions economy by no later than 2050. On August 16, 2022, President Biden signed the IRA providing nearly $370 billion in climate action over the next decade.
The 2030 goal joins President Biden’s other climate goals which include a carbon pollution-free power sector by 2035 and a net-zero emissions economy by no later than 2050. In 2022, President Biden signed the IRA providing nearly $370 billion in climate action over the next decade.
To fund capital spending requirements to meet growth that balances earnings goals, credit metrics and liquidity needs, the Company entered into a number of other financing arrangements in 2022. For further discussion on these financing arrangements see Liquidity and Capital Resources discussion below as well as Note 7.
To fund capital spending requirements to meet growth that balances earnings goals, credit metrics and liquidity needs, the Company has entered into a number of other financing arrangements. For further discussion on these financing arrangements see Liquidity and Capital Resources discussion below as well as Note 7.
The formula includes updating cost of service components, including investment in plant and operating A - 30 Table of Contents 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.
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.
On September 21, 2020, PNM announced an agreement to partner with Sandia National Laboratories in research and development projects focused on energy resiliency, clean energy, and national security.
In 2020, PNM announced an agreement to partner with Sandia National Laboratories in research and development projects focused on energy resiliency, clean energy, and national security.
Substantially all depreciation and amortization expense is offset in operating expenses as a result of allocation of these costs to other business segments.
Substantially all depreciation and amortization expense are offset in operating expenses as a result of allocation of these costs to other business segments.
These agreements contain contingent requirements that A - 50 Table of Contents require PNM to provide security if the credit rating on its debt falls below investment grade. The Company believes its financing arrangements are sufficient to meet the requirements of the contingent provisions. No conditions have occurred that would result in any of the above contingent provisions being implemented.
These agreements contain contingent requirements that require PNM to provide security if the credit rating on its debt falls below investment grade. The Company believes its financing arrangements are sufficient to meet the requirements of the contingent provisions. No conditions have occurred that would result in any of the above contingent provisions being implemented.
Decommissioning costs are based on site-specific estimates, which are updated periodically and involve numerous judgments and assumptions, including estimates of A - 57 Table of Contents future decommissioning costs at current price levels, inflation rates, and discount rates. Changes in these estimates could significantly impact PNMR’s and PNM’s financial position, results of operations, and cash flows.
Decommissioning costs are based on site-specific estimates, which are updated periodically and involve numerous judgments and assumptions, including estimates of future decommissioning costs at current price levels, inflation rates, and discount rates. Changes in these estimates could significantly impact PNMR’s and PNM’s financial position, results of operations, and cash flows.
See Note 17. 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.
See Note 17. 2020 Decoupling Petition – In 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.
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 2023-2027 period.
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 2024-2028 period.
The amounts allocated include certain expenses shown as depreciation and amortization and other income (deductions) in the table above. The change in operating expenses includes a decrease of $10.5 million in costs related to the Merger that were not allocated to PNM or TNMP.
The amounts allocated include certain expenses shown as depreciation and amortization and other income (deductions) in the table above. The change in operating expenses includes a decrease of $0.8 million in costs related to the Merger that were not allocated to PNM or TNMP.
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 INDCs.
In 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 INDCs.
Interest on long-term debt Interest accrues on long-term debt agreements, at fixed rates, with the passage of time and is typically paid semi-annually in accordance with the terms of the debt agreement.
Interest on long-term debt, excluding Securitized Bonds Interest accrues on long-term debt agreements, at fixed rates, with the passage of time, and is typically paid semi-annually in accordance with the terms of the debt agreement.
A - 47 Table of Contents Other Material Cash Requirements In addition to the cash requirements for construction requirements and long-term debt discussed above, the Company has other material cash requirements related to long-term contractual obligations including minimum lease payments (Note 8), coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant decommissioning (Note 16), and pension and retiree medical contributions (Note 11).
Other Material Cash Requirements In addition to the cash requirements for construction requirements and long-term debt discussed above, the Company has other material cash requirements related to long-term contractual obligations including minimum lease payments (Note 8), coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant decommissioning (Note 16), and pension and retiree medical contributions (Note 11).
These estimates are subject to change due to underlying variables, including changes in PNM's generation portfolio, supplier's ability to meet contractual in-service dates and complex relationships between several factors. See additional discussion of these resources in Notes 16 and 17. PNM also has a customer distributed solar generation program that represented 239.1 MW at December 31, 2022.
These estimates are subject to change due to underlying variables, including changes in PNM’s generation portfolio, supplier’s ability to meet contractual in-service dates and complex relationships between several factors. See additional discussion of these resources in Notes 16 and 17. PNM also has a customer distributed solar generation program that represented 281.6 MW at December 31, 2023.
A - 56 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with GAAP requires management to apply accounting policies and to make estimates and judgments that best provide the framework to report the results of operations and financial position for PNMR, PNM, and TNMP.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with GAAP requires management to apply accounting policies and to make estimates and judgments that best provide the framework to report the results of operations and financial position for PNMR, PNM, and TNMP.
Based on its current evaluation, the Company believes that future recovery of its regulatory assets is probable. Impairments Tangible long-lived assets are evaluated for impairment when events and circumstances indicate that the assets might be impaired.
Based on its current evaluation, the Company believes that future recovery of its regulatory assets is probable. A - 54 Table of Contents Impairments Tangible long-lived assets are evaluated for impairment when events and circumstances indicate that the assets might be impaired.
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 2023 - 2027 period. This could include new debt and/or equity issuances.
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 2024 – 2028 period. This could include new debt and/or equity issuances.
As a result of these communication efforts, 3,488 families in need received emergency assistance through the PNM Good Neighbor Fund during 2022. Additionally, PNM has worked closely with the New Mexico Department of Finance and Administration to implement strategies ensuring customers receive rent benefits, including utility bill assistance, from the Emergency Rental Assistance Program (“ERAP”).
As a result of these communication efforts, 6,769 families in need received emergency assistance through the PNM Good Neighbor Fund during 2023. Additionally, PNM has worked closely with the New Mexico Department of Finance and Administration to implement strategies ensuring customers receive rent benefits, including utility bill assistance, from the Emergency Rental Assistance Program (“ERAP”).
The Company currently believes it has adequate liquidity but cannot predict the extent or duration of the COVID-19 outbreak, the effects of any of these macroeconomic conditions 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.
The Company currently believes it has adequate liquidity but cannot predict the effects of any of these macroeconomic conditions 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.
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. See additional discussion of the ETA and PNM’s Abandonment Applications in Notes 16 and 17.
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 ETA, without exceeding cost requirements. For additional discussion of the ETA, PNM’s Abandonment Applications, and 2026 Resource Application see Notes 16 and 17.
As of December 31, 2022, NMRD’s renewable energy capacity in operation was 135.1 MW, which includes 130 MW of solar-PV facilities to supply energy to the Meta 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.
As of December 31, 2023, NMRD’s renewable energy capacity in operation was 185.1 MW, which includes 180 MW of solar-PV facilities to supply energy to the Meta 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 requested increase is based on a calendar year 2024 FTY and reflects an ROE of 10.25%. The requested change primarily reflects investments in transmission and distribution infrastructure, largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources including the retirement of the SJGS and expiration of leased capacity from PVNGS.
The requested increase was based on a calendar year 2024 FTY and reflected an ROE of 10.25%, investments in transmission and distribution infrastructure, largely offset by cost reductions resulting from PNM’s transition to lower-cost, clean generation resources including the retirement of the SJGS and expiration of leased capacity from PVNGS.
Within 90 days of the executive order, agency heads submitted to OMB an updated list of such actions that would be completed by December 31, 2025. EPA is reconsidering the ACE Rule pursuant to this executive order. Federal Legislation President Biden has indicated that climate change is a top priority for his administration.
Within 90 days of the executive order, agency heads submitted to OMB an updated list of such actions that would be completed by December 31, 2025. Federal Legislation President Biden has indicated that climate change is a top priority for his administration.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the "IRA") into law. The IRA will provide significant benefits for PNMR and its customers by extending and enhancing clean energy incentives such as the investment tax credit and production tax credit.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law. The IRA provides benefits for PNMR and its customers by extending and enhancing clean energy incentives such as the investment tax credit and production tax credit.
December 31, PNMR 2022 2021 PNMR common equity 34.9 % 36.9 % Preferred stock of subsidiary 0.2 0.2 Long-term debt 64.9 62.9 Total capitalization 100.0 % 100.0 % PNM PNM common equity 48.7 % 50.9 % Preferred stock 0.3 0.3 Long-term debt 51.0 48.8 Total capitalization 100.0 % 100.0 % TNMP Common equity 50.6 % 50.6 % Long-term debt 49.4 49.4 Total capitalization 100.0 % 100.0 % 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.
December 31, PNMR 2023 2022 PNMR common equity 34.1 % 34.9 % Preferred stock of subsidiary 0.2 0.2 Long-term debt 65.7 64.9 Total capitalization 100.0 % 100.0 % PNM PNM common equity 46.2 % 48.7 % Preferred stock 0.3 0.3 Long-term debt 53.5 51.0 Total capitalization 100.0 % 100.0 % TNMP Common equity 49.5 % 50.6 % Long-term debt 50.5 49.4 Total capitalization 100.0 % 100.0 % 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.
On December 15, 2021, the NMPRC denied approval of the Four Corners Abandonment Application and the corresponding request for issuance of securitized financing. On December 22, 2021, PNM filed a notice of appeal with the NM Supreme Court of the NMPRC decision to deny the application.
On December 15, 2021, the NMPRC issued a final order denying approval of the Four Corners Abandonment Application and the corresponding request for issuance of securitized financing. On December 22, 2021, PNM filed a notice of appeal with the NM Supreme Court of the NMPRC decision to deny the application.
PNM’s load management and annual energy efficiency programs also help lower peak demand requirements. In 2022, TNMP’s incremental energy saved as a result of new participation in TNMP’s energy efficiency programs is estimated to be approximately 15 GWh. This is equivalent to the annual consumption of approximately 2,082 homes in TNMP’s service territory.
PNM’s load management and annual energy efficiency programs also help lower peak demand requirements. In 2023, TNMP’s incremental energy saved as a result of new participation in TNMP’s energy efficiency programs is estimated to be approximately 17 GWh. This is equivalent to the annual consumption of approximately 2,297 homes in TNMP’s service territory.
A 10% increase in the estimates of future reclamation costs at current price levels would have increased the mine reclamation liability by $10.2 million at December 31, 2022. PNM considers the contemporaneous reclamation costs part of the cost of its delivered coal costs.
A 10% increase in the estimates of future reclamation costs at current price levels would have increased the mine reclamation liability by $14.5 million at December 31, 2023. PNM considers the contemporaneous reclamation costs part of the cost of its delivered coal costs.
In 2022, PNM and the electric utility industry as a whole, have experienced a decline in customer satisfaction as measured by J.D. Power. However, PNM remains focused on continuously improving its customers' experience at every touchpoint and placing greater focus on customer assistance through economic uncertainty.
In 2023, PNM and the electric utility industry as a whole, continued to experience a decline in customer satisfaction as measured by J.D. Power. However, PNM remains focused on continuously improving its customers’ experience at every touchpoint and placing greater focus on customer assistance through economic uncertainty.
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. A - 58 Table of Contents
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.
The ETA has and will have a significant impact on PNM’s future generation portfolio, including PNM’s retirement of SJGS in 2022 and the planned Four Corners exit in 2024 (subject to regulatory approval). PNM cannot predict the full impact of the ETA on potential future generating resource abandonment and replacement filings with the NMPRC.
The ETA has and will have a significant impact on PNM’s future generation portfolio, including PNM’s retirement of SJGS in 2022 and the exit of Four Corners. PNM cannot predict the full impact of the ETA on potential future generating resource abandonment and replacement filings with the NMPRC.
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.
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 7.
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 operating lease obligations as debt.
A - 48 Table of Contents 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 operating lease obligations as debt.
PNM also sought NMPRC approval to sell and transfer the PNM-owned assets and nuclear fuel supply associated with the Leased Interest to SRP, which will be acquiring the Leased Interest from the lessors upon termination of the existing leases.
PNM also sought NMPRC approval to sell and transfer the PNM-owned assets and nuclear fuel supply associated with the Leased Interest to SRP, which acquired the Leased Interest from the lessors upon termination of the leases.
On April 1, 2020, the NMPRC issued an order which authorized PNM to abandon SJGS by June 30, 2022, to issue Securitized Bonds of up to $361 million, and to establish the Energy Transition Charge.
In 2020, the NMPRC issued an order which authorized PNM to abandon SJGS by June 30, 2022, to issue Securitized Bonds of up to $361 million, and to establish the Energy Transition Charge upon issuance of the Securitized Bonds.
EIM On April 1, 2021, PNM joined and began participating in the EIM. The EIM is a real-time wholesale energy trading market operated by the CAISO that enables participating electric utilities to buy and sell energy. The EIM aggregates the variability of electricity generation and load for multiple balancing authority areas and utility jurisdictions.
PNM participates in the EIM, a real-time wholesale energy trading market operated by the CAISO that enables participating electric utilities to buy and sell energy. The EIM aggregates the variability of electricity generation and load for multiple balancing authority areas and utility jurisdictions.
A - 55 Table of Contents PNM has calculated GHG reductions that would result from scenarios that assume PNM’s retirement of its share of the SJGS in 2022 and would exit from Four Corners in either 2024 or 2031 and PNM has set a goal to have a 100% emissions-free generating portfolio by 2040.
PNM has calculated GHG reductions that would result from scenarios that assume PNM’s retirement of its share of the SJGS in 2022 and exiting Four Corners by 2031 and PNM has set a goal to have a 100% emissions-free generating portfolio by 2040.
In the application PNM requested NMPRC authorization to decertify and abandon its Leased Interest and to create regulatory assets for the associated remaining undepreciated investments with consideration of cost recovery of the undepreciated investments in a future rate case.
PVNGS Leased Interest Abandonment Application - On April 2, 2021, PNM filed the PVNGS Leased Interest Abandonment Application. In the application PNM requested NMPRC authorization to decertify and abandon its Leased Interest and to create regulatory assets for the associated remaining undepreciated investments with consideration of cost recovery of the undepreciated investments in a future rate case.
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. Transmission Issues At any given time, FERC has various notices of inquiry and rulemaking dockets related to transmission issues pending.
PNM’s assessment process is evolving and is too speculative at this time for a meaningful prediction of the long-term financial impact. Transmission Issues At any given time, FERC has various notices of inquiry and rulemaking dockets related to transmission issues pending.
The NMPRC order also states that in its general rate case PNM must address unresolved issues including whether PNM’s decision to renew the five leases and the repurchase of 64.1 MW in PVNGS Unit 2 capacity exposed ratepayers to additional financial liability beyond that to which they would otherwise would have been exposed, and whether PNM should be denied recovery of future decommissioning expenses as a remedy for imprudence.
In the 2024 Rate Change, PNM also addressed unresolved issues including whether PNM’s decision to renew the five leases and the repurchase of 64.1 MW in PVNGS Unit 2 capacity exposed ratepayers to additional financial liability beyond that to which they would have been exposed, and whether PNM should be denied recovery of future decommissioning expenses as a remedy for imprudence.
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 The Company is continuing to closely monitor developments and is taking steps to mitigate supply chain risks related to COVID-19 and other impacts on the capital markets of other macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity.
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 The Company is closely monitoring the impacts on the capital markets of other macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity.
On December 2, 2022, PNM filed an appeal with the NM Supreme Court of the NMPRC’s final order which adopted revisions to the IRP Rule. See additional discussion of the NMPRC adopted revision to the IRP Rule in Note 17.
On December 2, 2022, PNM filed an appeal with the NM Supreme Court of the NMPRC’s final order which adopted revisions to the IRP Rule. The NM Supreme Court has scheduled oral arguments for May 13, 2024. See additional discussion of the NMPRC adopted revision to the IRP Rule in Note 17.
After considering the effects of these financings and the Company’s short-term liquidity position as of February 17, 2023, the Company has consolidated maturities of long-term and short-term debt aggregating $499.5 million in the period from January 1, 2023 through February 28, 2024.
After considering the effects of these financings and the Company’s short-term liquidity position as of February 16, 2024, the Company has consolidated maturities of long-term and short-term debt aggregating $658.0 million in the period from January 1, 2024 through February 28, 2025.
These facilities began commercial operations in the second quarter of 2022. The Community Solar Act - The Community Solar Act establishes a program that allows for the development of community solar facilities and provides customers of a qualifying utility with the option of accessing solar energy produced by a community solar facility in accordance with the Community Solar Act.
The Community Solar Act - The Community Solar Act establishes a program that allows for the development of community solar facilities and provides customers of a qualifying utility with the option of accessing solar energy produced by a community solar facility in accordance with the Community Solar Act.
Results of Operations Net earnings attributable to PNMR were $169.5 million, or $1.97 per diluted share in the year ended December 31, 2022 compared to $195.8 million, or $2.27 per diluted share in 2021.
Results of Operations Net earnings attributable to PNMR were $87.8 million, or $1.02 per diluted share in the year ended December 31, 2023 compared to $169.5 million, or $1.97 per diluted share in 2022.
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.
State Regulation SJGS Abandonment Application – In July 2019, PNM filed the SJGS Abandonment Application with the NMPRC. 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.
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 2022, 15 of the Company’s 22 facilities met the solid waste diversion goal of a 65% diversion rate.
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 2023, 20 of the Company’s 21 facilities met or exceeded the solid waste diversion goal of a 65% diversion rate.
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 in separate cases, and the challengers successfully petitioned the US Supreme Court for a stay of the Clean Power Plan.
Multiple states, utilities, and trade groups challenged both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources in separate cases, and the challengers successfully petitioned the US Supreme Court for a stay of the Clean Power Plan.
In addition, PNM may establish a regulatory asset account to record undepreciated investment for improvements to the Unit 1 and Unit 2 Leased Interests upon termination of the leases, and to record cost differences in the proceeds from SRP for the sale of the PVNGS Leased Assets and the actual book value for which recovery of these costs will be determined in the 2024 Rate Change.
In addition, PNM may establish a regulatory asset account to record undepreciated investment for improvements to the Unit 1 and Unit 2 Leased Interests upon termination of the leases, and to record cost differences in the proceeds from SRP for the sale of the PVNGS Leased Assets and the actual book value.
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.
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 grid modernization technologies, and replacement resources.
Pension and Other Postretirement Benefits The Company maintains qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs.
A - 55 Table of Contents Pension and Other Postretirement Benefits The Company maintains qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs.
PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In 2022, incremental energy saved as a result of A - 34 Table of Contents new participation in PNM’s portfolio of energy efficiency programs was 104 GWh. This is equivalent to the annual consumption of approximately 14,935 homes in PNM’s service territory.
PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In 2023, incremental energy saved as a result of A - 32 Table of Contents new participation in PNM’s portfolio of energy efficiency programs is estimated to be 101 GWh. This is equivalent to the annual consumption of approximately 14,500 homes in PNM’s service territory.
In cases where there is no authority, courts need not defer to the agency's statutory interpretation. The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agency's authority may be limited based upon similar reasoning.
In cases where there is no clear statement of authority, courts need not defer to the A - 51 Table of Contents agency’s statutory interpretation on “major questions.” The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agency’s authority may be limited based upon similar reasoning.
A summary of net earnings attributable to PNMR is as follows: Year Ended December 31, Change 2022 2021 2022/2021 (In millions, except per share amounts) Net earnings attributable to PNMR $ 169.5 $ 195.8 $ (26.3) Average diluted common and common equivalent shares 86.2 86.1 0.1 Net earnings attributable to PNMR per diluted share $ 1.97 $ 2.27 $ (0.30) The components of the changes in net earnings attributable to PNMR by segment are: Change 2022/2021 (In millions) PNM $ (52.1) TNMP 28.4 Corporate and Other (2.5) Net change $ (26.3) Information regarding the factors impacting PNMR’s operating results by segment are set forth below.
A summary of net earnings attributable to PNMR is as follows: Year Ended December 31, Change 2023 2022 2023/2022 (In millions, except per share amounts) Net earnings attributable to PNMR $ 87.8 $ 169.5 $ (81.8) Average diluted common and common equivalent shares 86.4 86.2 0.2 Net earnings attributable to PNMR per diluted share $ 1.02 $ 1.97 $ (0.95) The components of the changes in net earnings attributable to PNMR by segment are: Change 2023/2022 (In millions) PNM $ (67.7) TNMP 2.6 Corporate and Other (16.7) Net change $ (81.8) Information regarding the factors impacting PNMR’s operating results by segment are set forth below.
This information highlights plans for PNM to be coal-free by 2024 (subject to regulatory approval) and to achieve an emissions-free generating portfolio by 2040. In February 2022 PNM named its first Chief Sustainability Officer.
This information highlights plans for PNM to be coal-free no later than 2031 and to achieve an emissions-free generating portfolio by 2040. In February 2022, PNM named its first Chief Sustainability Officer.
Recent Developments Merger On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger Agreement pursuant to which Merger Sub will merge with and into PNMR, with PNMR surviving the Merger as a wholly-owned subsidiary of Avangrid.
A - 24 Table of Contents Recent Developments Merger On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger Agreement pursuant to which Merger Sub would have merged with and into PNMR, with PNMR surviving the Merger as a wholly-owned subsidiary of Avangrid.
Greenhouse Gas Emissions Exposures In 2021, GHG associated with PNM’s interests in its fossil-fueled generating plants included approximately 5.5 million metric tons of CO 2 , which comprises the vast majority of PNM’s GHG.
A - 49 Table of Contents Greenhouse Gas Emissions Exposures In 2022, GHG emissions associated with PNM’s interests in its fossil-fueled generating plants included approximately 4.8 million metric tons of CO 2 , which comprises the vast majority of PNM’s GHG emissions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt February 17, 2023, 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 6.16 % $ 50,100 $ 300,000 PNM Revolving Credit Facility 5.90 142,300 400,000 PNM New Mexico Credit Facility 5.86 25,000 40,000 TNMP Revolving Credit Facility 5.54 97,100 100,000 $ 314,500 $ 840,000 Long-term Debt: PNMR 2021 Delayed-Draw Term Loan 5.59 % $ 1,000,000 PNM 2021 Term Loan 5.41 225,000 $ 1,225,000 The investments held by PNM in trusts for decommissioning, reclamation, pension benefits, and other post-employment benefits had an estimated fair value of $898.1 million at December 31, 2022, of which 43.4% were fixed-rate debt securities that subject PNM to risk of loss of fair value with increases in market interest rates.
Biggest changeAt February 16, 2024, 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 6.92 % $ 126,200 $ 300,000 PNM Revolving Credit Facility 6.67 121,300 400,000 PNM New Mexico Credit Facility 6.69 30,000 40,000 TNMP Revolving Credit Facility 6.30 100,000 100,000 $ 377,500 $ 840,000 Long-term Debt: PNMR 2021 Delayed-Draw Term Loan 6.38 % $ 500,000 PNMR 2023 Term Loan 6.78 500,000 $ 1,000,000 The investments held by PNM in trusts for decommissioning, reclamation, pension benefits, and other post-employment benefits had an estimated fair value of $925.5 million at December 31, 2023, of which 39.4% were fixed-rate debt securities that subject PNM to risk of loss of fair value with increases in market interest rates.
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 December 31, 2022, PNMR held $0.2 million of cash collateral to offset its credit exposure.
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 December 31, 2023, PNMR held $0.2 million of cash collateral to offset its credit exposure.
Equity Market Risk The investments held by PNM in trusts for decommissioning and reclamation and trusts established for PNM’s and TNMP’s pension and post-employment benefits plans include certain equity securities at December 31, 2022. These equity securities expose PNM and TNMP to losses in fair value should the market values of the underlying securities decline.
Equity Market Risk The investments held by PNM in trusts for decommissioning and reclamation and trusts established for PNM’s and TNMP’s pension and post-employment benefits plans include certain equity securities at December 31, 2023. These equity securities expose PNM and TNMP to losses in fair value should the market values of the underlying securities decline.
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.
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 A - 56 Table of Contents 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.
During the years ended December 31, 2022 and 2021, the Company had no commodity derivative instruments designated as cash flow hedging instruments. Commodity contracts that meet the definition of a derivative, are recorded at fair value on the Consolidated Balance Sheets.
During the years ended December 31, 2023 and 2022, the Company had no commodity derivative instruments designated as cash flow hedging instruments. Commodity contracts that meet the definition of a derivative, are recorded at fair value on the Consolidated Balance Sheets.
All of the fair values as of December 31, 2022 were determined based on prices provided by external sources other than actively quoted market prices. The net mark-to-market amounts will settle by the end of 2023.
All of the fair values as of December 31, 2023 were determined based on prices provided by external sources other than actively quoted market prices. The net mark-to-market amounts will settle by the end of 2024.
There is risk associated with these funds due to the nature of the strategies and techniques and the use of investments that do not have readily determinable fair values. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $6.8 million for PNM and $0.5 million for TNMP. A - 61 Table of Contents
There is risk associated with these funds due to the nature of the strategies and techniques and the use of investments that do not have readily determinable fair values. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $6.5 million for PNM and $0.5 million for TNMP. A - 58 Table of Contents
The Company periodically makes plans to reduce its variable interest rate exposures through various instruments including fixed rate debt and equity hedging arrangements like those executed by PNMR in May, September and October 2022, and otherwise expects that it will be able to extend or replace variable rate debt under similar terms and conditions prior to their expirations.
The Company periodically makes plans to reduce its variable interest rate exposures through various instruments including fixed rate debt and equity hedging arrangements like those executed by PNMR in 2022 and 2023, and otherwise expects that it will be able to extend or replace variable rate debt under similar terms and conditions prior to their expirations.
If interest rates were to increase by 50 basis points from their levels at December 31, 2022, the decrease in the fair value of the fixed-rate securities would be 5.5%, or $1.3 million.
If interest rates were to increase by 50 basis points from their levels at December 31, 2023, the decrease in the fair value of the fixed-rate securities would be 1.5%, or $5.5 million.
PNM and TNMP earnings are exposed to adverse changes in market interest rates when long-term debt must be refinanced, repriced or redeemed. PNMR’s debt and revolving credit facilities of PNM and TNMP are exposed to interest rate risk to the extent variable interest rates continue to rise.
PNM and TNMP earnings are exposed to adverse changes in market interest rates when long- A - 57 Table of Contents term debt must be refinanced, repriced or redeemed. PNMR’s debt and revolving credit facilities of PNM and TNMP are exposed to interest rate risk to the extent variable interest rates continue to rise.
Alternatives Investment Risk As of December 31, 2022, PNM and TNMP had 7.6% and 10.3% of its pension assets invested in the alternative asset class. Alternative investments include investments in hedge funds, real estate funds, and private equity funds.
Alternatives Investment Risk As of December 31, 2023, PNM and TNMP had 7.1% and 10.6% of its pension assets invested in the alternative asset class. Alternative investments include investments in hedge funds, real estate funds, and private equity funds.
Net credit risk for the Company’s largest counterparty as of December 31, 2022 was $44.9 million. Other investments have no significant counterparty credit risk. Interest Rate Risk The majority of the PNM’s and TNMP’s long-term debt is fixed-rate debt, which does not expose earnings to adverse changes in market interest rates.
Net credit risk for the Company’s largest counterparty as of December 31, 2023 was $1.7 million. Other investments have no significant counterparty credit risk. Interest Rate Risk The majority of the PNM’s and TNMP’s long-term debt is fixed-rate debt, which does not expose earnings to adverse changes in market interest rates.
If interest rates were to increase by 50 basis points from their levels at December 31, 2022, the decrease in the fair value of the fixed-rate securities would be 6.5%, or $25.3 million.
If interest rates were to increase by 50 basis points from their levels at December 31, 2023, the decrease in the fair value of the fixed-rate securities would be 5.2%, or $1.2 million.
The securities held by TNMP in trusts for pension and other post-employment benefits had an estimated fair value of $52.8 million at December 31, 2022, of which 44.2% were fixed-rate debt securities that subject TNMP to risk of loss A - 60 Table of Contents of fair value with movements in market interest rates.
The securities held by TNMP in trusts for pension and other post-employment benefits had an estimated fair value of $49.5 million at December 31, 2023, of which 45.8% were fixed-rate debt securities that subject TNMP to risk of loss of fair value with movements in market interest rates.
Equity securities comprised 39.6% and 42.9% of the securities held by the various PNM and TNMP trusts as of December 31, 2022. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $35.6 million for PNM and $2.3 million for TNMP.
Equity securities comprised 39.2% and 40.8% of the securities held by the various PNM and TNMP trusts as of December 31, 2023. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $36.3 million for PNM and $2.0 million for TNMP.
During the years ended December 31, 2022 and 2021, the effects of mark-to-market commodity derivative instruments had no impact to PNM's net earnings and $9.4 million and $1.6 million of fair value losses have been recorded as a regulatory asset.
During the years ended December 31, 2023 and 2022, the effects of mark-to-market commodity derivative instruments had no impact to PNM’s net earnings and $10.2 million of fair value gains and $7.8 million of fair value losses have been recorded as a regulatory asset.
A - 59 Table of Contents Schedule of Credit Risk Exposure December 31, 2022 Rating (1) Credit Risk Exposure (2) Number of Counter-parties >10% Net Exposure of Counter-parties >10% (Dollars in thousands) External ratings: Investment grade $ 52,014 1 $ 44,945 Non-investment grade — — — Split ratings — — — Internal ratings: Investment grade 1,848 — — Non-investment grade — — — Total $ 53,862 $ 44,945 (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.
Schedule of Credit Risk Exposure December 31, 2023 Rating (1) Credit Risk Exposure (2) Number of Counter-parties >10% Net Exposure of Counter-parties >10% (Dollars in thousands) External ratings: Investment grade $ 3,486 2 $ 2,902 Non-investment grade — — — Split ratings — — — Internal ratings: Investment grade 197 — — Non-investment grade — — — Total $ 3,683 $ 2,902 (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.
Removed
Unusually cold weather in February 2021 resulted in higher than expected natural gas and purchased power costs. PNM mitigated the impacts from the cold weather by securing gas supplies in advance, engaging in market purchases when lower prices were available, and adjusting plant operation of its gas units to minimize reliance on higher-priced gas supplies.
Removed
PNM estimates the impact of the cold weather conditions in the first quarter of 2021 resulted in approximately $20 million of additional natural gas costs and approximately $8 million in additional purchased power costs. These fuel increases are passed through to customers under the FPPAC.

Other TXNM 10-K year-over-year comparisons