TNMP RATE REQUEST ADDRESSES
RISING COSTS, CONTINUED RELIABILITY

TNMP today filed with the Public Utility Commission of Texas for its first rate increase in more than five years. The increase is needed to offset the rising costs of doing business and position the company to continue to invest in electric reliability.

TNMP is a transmission and distribution service provider that delivers power to about 226,000 customers on behalf of 59 retail electric providers in Texas. TNMP's rates primarily cover the use of the transmission and distribution wires and meter reading services, which represent about 18.6 percent of a typical bill.

If approved, the new rates would increase the average monthly transmission and distribution portion of the bill to $35.31, from $30.36, for a residential customer using 1,000 kilowatt hours per month. Small commercial customers, defined as those who have electric demand of less than five kilowatts, would see an increase to $34, from $20, for 400 kilowatt hours per month average usage. These new rates would more accurately reflect the costs associated with serving each of these different rate classes.

"We believe this is a fair and reasonable request of state regulators and our customers, considering the rising cost of fuel, poles, wire and other basic construction materials," said Neal Walker, vice president for Texas Operations. "We continue to be committed to running our business as efficiently as possible."

TNMP's current rates largely are based on costs from more than five years ago and have actually decreased by an average of 9.3 percent since that time. The rate reduction was the result of the sale of TNMP to Albuquerque, N.M.-based PNM Resources in 2005.

Meanwhile, the costs of typical TNMP construction and other items increased by an average of 15 percent during 2007 alone, Walker said. In addition, international demand for raw materials and finished transmission and distribution system components continues to inflate these costs beyond budgeted amounts. Many projects also are affected by an increase in costs related to permits and inspections, traffic control and environmental compliance.

Walker said TNMP expects to invest $243.6 million through 2011 on new and upgraded transmission and distribution systems, including $54 million in 2008, to maintain the high level of electric reliability that its customers expect. TNMP has maintained a consistent level of reliability over the past five years, falling well below the state's average for the frequency and length of power outages.

In its request to the PUC, TNMP also is asking for permission to implement a catastrophe reserve fund similar to those approved for AEP and CenterPoint. According to Walker, a catastrophe reserve will provide for reasonable and necessary reconstruction costs associated with natural catastrophes, such as hurricanes, tropical storms and acts of terrorism. "In order to provide reliable service and maintain a safe environment for customers, we must have the ability to respond quickly to these disasters in a cost-effective manner," he said.

The PUC is expected to make a decision on the rate increase by next August. Because TNMP rates are collected through the bills customers receive from their REP, many customers served by TNMP may not see the increase in rates until they renew existing contracts with their REP – and then only after PUC approval.

Texas-New Mexico Power Company provides community-based electric delivery service to approximately 226,000 customers in Texas. It is an indirectly owned subsidiary of PNM Resources.