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

                                 MD&A FOR PNMR

                               EXECUTIVE SUMMARY
Overview and Strategy

PNMR is a holding company with two regulated utilities serving approximately
809,000 residential, commercial, and industrial customers and end-users of
electricity in New Mexico and Texas. PNMR's electric utilities are PNM and TNMP.
PNMR strives to create a clean and bright energy future for customers,
communities, and shareholders. PNMR's strategy and decision-making are focused
on safely providing reliable, affordable, and environmentally responsible power
built on a foundation of Environmental, Social and Governance (ESG) principles.

Recent Developments


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. 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. The
proposed Merger has been unanimously approved by the Boards of Directors of
PNMR, Avangrid and Merger Sub and approved by PNMR shareholders at the Special
Meeting of Shareholders held on February 12, 2021.

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; however, either PNMR or Avangrid
could extend the End Date to April 20, 2022 if all conditions to closing have
been satisfied other than the obtaining of all required regulatory approvals. As
discussed below, on December 8, 2021, the NMPRC issued an order rejecting the
stipulation agreement relating to the Merger. In light of the NMPRC ruling, on
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.

The Merger is subject to certain regulatory approvals, including from the NMPRC.
The Joint Applicants (PNMR and Avangrid) to the NMPRC application and a number
of intervening parties had entered into an amended stipulation and agreement in
the Joint Application for approval of Merger pending before the NMPRC. An
evidentiary hearing was held in August 2021. On November 1, 2021, a
Certification of Stipulation was issued by the hearing examiner, which
recommended against approval of the amended stipulation. On December 8, 2021,
the NMPRC issued an order adopting the Certification of Stipulation, rejecting
the amended stipulation reached by the parties. On January 3, 2022, PNMR and
Avangrid filed a notice of appeal with the NM Supreme Court. On February 2,
2022, PNMR and Avangrid filed a statement of issues outlining the argument for
appeal. On April 7, 2022, PNMR and Avangrid filed their Brief in Chief with the
NM Supreme Court. Answer briefs are due from the NMPRC on June 13, 2022, and
response briefs are due July 6, 2022.

With respect to other regulatory proceedings related to the Merger, in 2021 PNMR
received clearances for the Merger from the FTC under the HSR Act, CFIUS, the
FCC, FERC, the PUCT, and the NRC. As a result of the delay in closing of the
Merger due to the need to obtain NMPRC approval, PNMR and Avangrid were required
to make a new filing under the HSR Act and request extensions of approvals
previously received from the FCC and NRC. On February 9, 2022, the request for
extension was filed with the NRC. On February 24, 2022, the requests for a
180-day extension were granted by the FCC. PNMR and Avangrid expect to make a
new filing under the HSR Act later in 2022. No additional approvals are required
from CFIUS, FERC or the PUCT.

Consummation of the Merger remains subject to the satisfaction or waiver of
certain customary closing conditions, including, without limitation, the absence
of any material adverse effect on PNMR, the receipt of required regulatory
approval from the NMPRC, and the agreements relating to the divestiture of Four
Corners being in full force and effect and all applicable
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regulatory filings associated therewith being made. The agreement relating to
the divestiture of Four Corners has been entered into and is in full effect and
related filings have been made with the NMPRC.

Financial and Business Objectives
PNMR is focused on achieving three key financial objectives:

• Earn allowed returns on regulated companies • Deliver earnings and dividend growth at or above the industry average • Maintain investment-grade credit ratings

In line 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

Earn permitted returns on regulated companies

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

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

Additional information about the rate filings is provided in Note 17 of the Notes to the Consolidated Financial Statements in the 2021 Annual Reports on Form 10-K.

State regulations

The tariffs charged to customers by PNM and TNMP are subject to the traditional tariff regulation of the NMPRC, FERCand the PUCT.

2020 Decoupling Petition - On May 28, 2020, PNM filed a petition for approval of
a rate adjustment mechanism that would decouple the rates of its residential and
small power rate classes. Decoupling is a rate design principle that severs the
link between the recovery of fixed costs of the utility through volumetric
charges. If approved, customer bills would not be impacted until January 1,
2022. On October 2, 2020, PNM requested an order to vacate the public hearing
and stay the proceeding until the NMPRC decides whether to entertain a petition
to issue a declaratory order resolving the issues raised in the motions to
dismiss. On October 7, 2020, the hearing examiner approved PNM's request to stay
the proceeding and vacate the public hearing and on October 30, 2020 PNM filed a
petition for declaratory order asking the NMPRC to issue an order finding that
full revenue decoupling is authorized by the EUEA. On March 17, 2021, the NMPRC
issued an order granting PNM's petition for declaratory order which commences a
proceeding to address petitions. Oral arguments were made on July 15, 2021. On
January 14, 2022, the hearing examiner issued a recommended decision
recommending the NMPRC find that the EUEA does not mandate the NMPRC to
authorize or approve a full decoupling mechanism, defining full decoupling as
limited to energy efficiency and load management measures and programs. The
recommended decision also states that a utility may request approval of a rate
adjustment mechanism to remove regulatory disincentives to energy efficiency and
load management measures and programs through a stand-alone petition, as part of
the utility's triennial energy efficiency application or a general rate case and
that PNM is not otherwise precluded from petitioning for a rate adjustment
mechanism prior to its next general rate case. Finally, the recommended decision
stated that the EUEA does not permit the NMPRC to reduce a utility's ROE based
on approval of a disincentive removal mechanism founded on removing regulatory
disincentives to energy efficiency and load management measures and programs.
The recommended decision does not specifically prohibit a downward adjustment to
a utility's capital structure, based on approval of a disincentive removal
mechanism. On April 27, 2022, the NMPRC issued an order adopting the recommended
decision in its entirety. See Note 12. PNM cannot predict the outcome of this

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
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recovery of the undepreciated investments in a future rate case. 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. In addition,
PNM sought NMPRC approval for a 150 MW solar PPA combined with a 40 MW battery
storage agreement, and a stand-alone 100 MW battery storage agreement to replace
the Leased Interest. To ensure system reliability and load needs are met in
2023, when a majority of the leases expire, PNM also requested NMPRC approval
for a 300 MW solar PPA combined with a 150 MW battery storage agreement. On
August 25, 2021, the NMPRC issued an order confirming PNM requires no further
NMPRC authority to abandon the PVNGS Leased Interest and to sell and transfer
the PNM-owned assets and nuclear fuel supply associated with the Leased Interest
to SRP. The order bifurcated the issue of approval of the two PPAs and three
battery storage agreements into a separate docket so it may proceed
expeditiously and deferred a ruling on the other issues. On February 16, 2022,
the NMPRC approved the two PPAs and three battery storage agreements. On April
15, 2022, PNM made a compliance filing with the NMPRC in which it updated the
NMPRC on the status of the PPAs and the battery storage agreements listed above.
It has been determined that the projects will not be in commercial operation in
time for the 2023 summer peak. PNM is conferring with project developers and is
unable to predict the outcome of this matter. For additional information on
PNM's Leased Interest and the associated abandonment application see Note 12 and
Note 13.

Advanced Metering - Currently, TNMP has approximately 262,000 advanced meters
across its service territory. Beginning in 2019, the majority of costs
associated with TNMP's AMS program are being recovered through base rates. On
July 14, 2021, TNMP filed a request with the PUCT to consider and approve its
final reconciliation of the costs spent on the deployment of AMS from April 1,
2018 through December 31, 2018 of $9.0 million, and approve appropriate carrying
charges until full collection. On February 10, 2022, the PUCT approved
substantially all costs included in TNMP's AMS reconciliation application. On
October 2, 2020, TNMP filed an application with the PUCT for authorization to
implement necessary technological upgrades of approximately $46 million to its
AMS program by November 2022. On January 14, 2021, the PUCT approved TNMP's
application. TNMP will seek recovery of the investment associated with the
upgrade in a future general rate proceeding or DCOS filing.

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

FERC regulations

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. The formula includes updating cost of service components, including
investment in plant and operating expenses, based on information contained in
PNM's annual financial report filed with FERC, as well as including projected
transmission capital projects to be placed into service in the following year.
The projections included are subject to true-up. Certain items, including
changes to return on equity and depreciation rates, require a separate filing to
be made with FERC before being included in the formula rate.

In May 2019, PNM filed an application with FERC requesting approval to purchase
and provide transmission service on the Western Spirit Line. All necessary
approvals were obtained. In December 2021, PNM completed the purchase of the
Western Spirit Line and service under related transmission service agreements
was initiated using an incremental rate that is separate from the formula rate
mechanism described above.

Deliver earnings and dividend growth at or above the industry average

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

PNMR targets a dividend payout ratio in the 50% to 60% range of its ongoing
earnings. PNMR expects to provide at or above industry-average dividend growth
in the near-term. The Board will continue to evaluate the dividend on an annual
basis, considering sustainability and growth, capital planning, and industry

Under the terms of the Merger Agreement, PNMR has agreed not to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its equity securities, or make any
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actual, constructive or deemed distribution in respect of any equity securities
(except (i) PNMR may continue the declaration and payment of planned regular
quarterly cash dividends on PNMR common stock for each quarterly period ended
after the date of the Merger Agreement, which for any fiscal quarter in 2022
shall not exceed $0.3475, with usual record and payment dates in accordance with
past dividend practice, and (ii) for any cash dividend or cash distribution by a
wholly-owned subsidiary of PNMR to PNMR or another wholly-owned subsidiary of

The Board approved the following increases in the indicated annual common stock

                         Approval Date        Percent Increase

                       December 2020                6.5%
                       December 2021                6.1%

Maintain 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. On February 10, 2022, Moody's downgraded TNMP's issuer
rating from A3 to Baa1 and changed the outlook from negative to stable. See the
subheading Liquidity included in the full discussion of Liquidity and Capital
Resources below for the specific credit ratings for PNMR, PNM, and TNMP. All of
the credit ratings issued by both Moody's and S&P on the Company's debt continue
to be investment grade.

Business Focus

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

Safe, reliable and Affordable power

Safety is the first priority of our business and a core value of the Company.
PNMR utilizes a Safety Management System to provide clear direction, objectives
and targets for managing safety performance and minimizing risks and empowers
employees to "Be the Reason Everyone Goes Home Safe".

PNMR measures reliability and benchmark performance of PNM and TNMP against
other utilities using industry-standard metrics, including System Average
Interruption Duration Index ("SAIDI") and System Average Interruption Frequency
Index ("SAIFI"). PNM's and TNMP's investment plans include projects designed to
support reliability and reduce the amount of time customers are without power.

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

The Company continues to closely monitor developments and has taken and
continues to take steps to mitigate the potential risks related to the COVID-19
pandemic. The Company has assessed and updated its existing business continuity
plans in response to the impacts of the pandemic through crisis team meetings
and working with other utilities and operators. It has identified its critical
workforce, staged backups and limited access to control rooms and critical
assets. The Company has worked to protect the safety of its employees using a
number of measures, including minimizing exposure to other employees and the
public and supporting flexible arrangements for all applicable job functions.
The Company is also working with its suppliers to manage the impacts to its
supply chain and remains focused on the integrity of its information systems and
other technology systems used to run its business. However, the Company cannot
predict the extent or duration of the ongoing COVID-19 pandemic, its effects on
the global, national or local economy, or on the Company's financial position,
results of operations, and cash flows. The Company will continue to monitor
developments related to COVID-19 and will remain focused on protecting the
health and safety of its customers, employees, contractors, and other
stakeholders, and on its objective to provide safe, reliable, affordable and
environmentally responsible power. As discussed in Note 12, both PNM and TNMP
suspended disconnecting certain customers for past due bills, waived late fees
during the pandemic, and have been provided regulatory mechanisms to recover
these and other costs resulting from COVID-19. See additional discussion below
regarding the Company's customer, community, and stakeholder engagement in
response to COVID-19.


————————————————– ——————————



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. In addition, the EIM facilitates greater
integration of renewable resources through the aggregation of flexible resources
by capturing diversity benefits from the expanding geographic footprint and the
expanded potential uses for those resources. PNM completed a cost-benefit
analysis, which indicated participation in the EIM would provide substantial
benefits to retail customers. In 2018, PNM filed an application with the NMPRC
requesting, among other things, to recover initial capital investments and
authorization to establish a regulatory asset to recover other expenses that
would be incurred in order to join the EIM. The NMPRC approved the establishment
of a regulatory asset but deferred certain rate making issues, including but not
limited to issues related to implementation and ongoing EIM costs and savings,
the prudence and reasonableness of costs to be included in the regulatory asset,
and the period over which costs would be charged to customers until PNM's next
general rate case filing. PNM has experienced an aggregate of $15.8 million in
cost savings to customers through participation in the EIM, $3.3 million of
which has occurred in the three months ended March 31, 2022.

Utility plant and strategic investments

Utility Plant Investments - During the 2020 and 2021 periods, PNM and TNMP
together invested $1.6 billion in utility plant, including substations, power
plants, nuclear fuel, and transmission and distribution systems. New Mexico's
clean energy future depends on a reliable, resilient, secure grid to deliver an
evolving mix of energy resources to customers. PNM has launched a capital
initiative, which emphasizes new investments in its transmission and
distribution infrastructure with three primary objectives: delivering clean
energy, enhancing customer satisfaction and increasing grid resilience. Projects
are aimed at advancing the infrastructure beyond its original architecture to a
more flexible and redundant system accommodating growing amounts of intermittent
and distributed generation resources and integrating evolving technologies that
provide long-term customer value. See the subheading Capital Requirements
included in the full discussion of Liquidity and Capital Resources below for
additional discussion of the Company's projected capital requirements.

Strategic Investments - In 2017, PNMR Development and AEP OnSite Partners
created NMRD to pursue the acquisition, development, and ownership of renewable
energy generation projects, primarily in the state of New Mexico. Abundant
renewable resources, large tracts of affordable land, and strong government and
community support make New Mexico a favorable location for renewable generation.
New Mexico ranks third in the Nation for energy potential from solar power
according to the Nebraska Department of Energy & Energy Sun Index and ranks
third in the Nation for land-based wind capacity according to the U.S. Office of
Energy Efficiency and Renewable Energy. PNMR Development and AEP OnSite Partners
each have a 50% ownership interest in NMRD. Through NMRD, PNMR anticipates being
able to provide additional renewable generation solutions to customers within
and surrounding its regulated jurisdictions through partnering with a subsidiary
of one of the United States' largest electric utilities. As of March 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. In addition, PNM's February
8, 2021 application with the NMPRC for approval to service the Meta data center
includes construction of a 50 MW solar facility owned by NMRD, which is expected
to be operational in 2023. NMRD actively explores opportunities for additional
renewable projects, including large-scale projects to serve future data centers
and other customer needs.

Integrated Resource Plan

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

NMPRC rules required PNM to file its 2020 IRP in July 2020. In April 2020, the
NMPRC approved PNM's request to extend the deadline to file its 2020 IRP until
six months after the NMPRC issues a final order approving replacement resources
in PNM's SJGS Abandonment Application. On January 29, 2021, PNM filed its 2020
IRP. The plan focuses on a carbon-free electricity portfolio by 2040 that would
eliminate coal at the end of 2024. This includes replacing the power from San
Juan with a mix of approved carbon-free resources and the plan to exit Four
Corners at the end of 2024. The plan highlights the need for additional
investments in a diverse set of resources, including renewables to supply
carbon-free power, energy storage to balance supply and demand, and efficiency
and other demand-side resources to mitigate load growth. See additional
discussion regarding PNM's 2020 IRP filing in Note 12.

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

• Develop strategies to deliver reliable and affordable power while transitioning to a 100% emission-free generation portfolio by 2040 • Prepare the PNM system to meet from New Mexico increase renewable energy needs in the most cost-effective way possible • Increase participation in energy efficiency

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. 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 Environmental Officer. The Chief
Environmental Officer is responsible for developing and implementing the
Company's business strategy and positions on environmental and sustainability
policy issues and is charged with establishing organization-wide policies,
strategies, goals, objectives and programs that advance sustainability and
ensure compliance with regulations. The role serves as the Company's primary
contact with various regulatory and stakeholder agencies on environmental
matters. In addition, the role leads environmental justice work, incorporating
impacts to tribal, worker and affected communities and advance ESG reporting.

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. The partnership demonstrates
PNMR's commitment to ESG principles and its support of projects that further its
emissions-free generation goals and plans for a reliable, resilient, and secure
grid to deliver New Mexico's clean energy future.

The energy transition law (“LTA”)

On June 14, 2019, Senate Bill 489, known as the ETA, became effective. The ETA
amends the REA and requires utilities operating in New Mexico to have renewable
portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100%
zero-carbon energy by 2045. The ETA also amends sections of the REA to allow for
the recovery of undepreciated investments and decommissioning costs related to
qualifying EGUs that the NMPRC has required be removed from retail
jurisdictional rates, provided replacement resources to be included in retail
rates have lower or zero-carbon emissions. The ETA provides for a transition
from fossil-fueled generating resources to renewable and other carbon-free
resources by allowing utilities to issue securitized bonds, or "energy
transition bonds," related to the retirement of certain coal-fired generating
facilities to qualified investors. See additional discussion of the ETA in Note
11 and in Note 16 of the Notes to Consolidated Financial Statements in the 2021
Annual Reports on Form 10-K.

PNM expects the ETA will have a significant impact on PNM's future generation
portfolio, including PNM's planned retirement of SJGS in 2022 and the planned
Four Corners exit in 2024. PNM cannot predict the full impact of the ETA on
potential future generating resource abandonment and replacement filings with
the NMPRC.

SJGS Abandonment Application - As discussed in Note 12, on July 1, 2019, PNM
filed a Consolidated Application for the Abandonment and Replacement of SJGS and
Related Securitized Financing Pursuant to the ETA (the "SJGS Abandonment
Application"). The SJGS Abandonment Application sought NMPRC approval to retire
PNM's share of SJGS in mid-2022, and for approval of replacement resources and
the issuance of approximately $361 million of Securitized Bonds as provided by
the ETA. The application included several replacement resource scenarios
including PNM's recommended replacement scenario, which is consistent with PNM's
goal of having a 100% emissions-free generating portfolio by 2040 and would have
provided cost savings to customers while preserving system reliability.

The NMPRC issued an order requiring the SJGS Abandonment Application be
considered in two proceedings: one addressing SJGS abandonment and related
financing and the other addressing replacement resources but did not
definitively indicate if the abandonment and financing proceedings would be
evaluated under the requirements of the ETA. After several requests for
clarification and legal challenges, in January 2020, the NM Supreme Court ruled
the NMPRC is required to apply the ETA to all aspects of PNM's SJGS Abandonment
Application, and that any previous NMPRC orders inconsistent with their ruling
should be vacated.

In February 2020, the hearing examiners issued two recommended decisions
recommending approval of PNM's proposed abandonment of SJGS, subject to approval
of the separate replacement resources proceeding, and approval of PNM's proposed
financing order to issue Securitized Bonds.  The hearing examiners recommended,
among other things, that PNM be authorized to abandon SJGS by June 30, 2022, to
issue Securitized Bonds of up to $361 million, and to establish the Energy
Transition Charge. The hearing examiners recommended an interim rate rider
adjustment upon the start date of the Energy
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Transition Charge to provide immediate credits to customers for the full value
of PNM's revenue requirement related to SJGS until those reductions are
reflected in base rates. In addition, the hearing examiners recommended PNM be
granted authority to establish regulatory assets to recover costs that PNM will
pay prior to the issuance of the Securitized Bonds, including costs associated
with the bond issuances as well as for severances, job training, and economic
development funds. On April 1, 2020, the NMPRC unanimously approved the hearing
examiners' recommended decisions regarding the abandonment of SJGS and the
Securitized Bonds. On April 10, 2020, CFRE and NEE filed a notice of appeal with
the NM Supreme Court of the NMPRC's approval of PNM's request to issue
securitized financing under the ETA. On January 10, 2022, the NM Supreme Court
issued its decision rejecting CFRE's and NEE's constitutional challenges to the
ETA and affirmed the NMPRC's final order.

On June 24, 2020, the hearing examiners issued a second recommended decision on
PNM's request for approval of replacement resources that addressed the entire
portfolio of replacement resources. On July 29, 2020, the NMPRC issued an order
approving resource selection criteria identified in the ETA that include PPA's
for 650 MW of solar and 300 MW of battery storage. Throughout 2021 and
continuing into 2022, PNM provided notices of delays and status updates to the
NMPRC for the approved SJGS replacement resource projects. All four project
developers have notified PNM that completion of the projects will be delayed and
no longer available for the 2022 summer peak and some may also not be available
for the 2023 summer peak. The delays in the SJGS replacement resources, coupled
with the abandonment of SJGS Units 1 and 4, present a risk that PNM will have
insufficient operational resources to meet the 2022 summer peak to reliably
serve its customers. PNM entered into three agreements to purchase power from
third parties in the second half of 2021 to minimize potential impacts to
customers and on February 17, 2022, PNM provided a notice and request with the
NMPRC that PNM had obtained agreement from the SJGS owners and WSJ LLC to extend
operation of Unit 4 until September 30, 2022. SJGS Unit 4 is expected to provide
327 MW of capacity and improve PNM's projected system reserve margin to meet the
2022 summer peak. However, given the most recent force majeure notice described
in Note 11, PNM does not know whether reduced levels of coal inventory may
continue until normal conditions recur in the longwall panel or whether the
period of non-normal conditions will impact full load operations through the
remainder of the CSA and the projected system reserve margin for the 2022 summer
peak. On February 23, 2022, the NMPRC issued an order finding that PNM did not
require NMPRC approval to extend operation of SJGS Unit 4 for an additional
three-month period. On March 24, 2022 FERC accepted the amended San Juan Project
Participation Agreement, effectively extending the operations of SJGS Unit 4
through September 30, 2022.

On February 28, 2022, WRA and CCAE filed a Joint Motion for Order to Show Cause
and Enforce Financing Order and Supporting Brief, which requests that the NMPRC
order PNM to show cause why its rates should not be reduced at the time SJGS is
abandoned, and to otherwise enforce the NMPRC's April 1, 2020 final order. On
March 14, 2022, PNM filed its response to the Joint Motion to Show Cause
refuting the movants' claims that the ETA and April 1, 2020 Financing Order
require energy transition bonds be issued at the time of abandonment and that
rates be reduced upon abandonment as not being legally supportable. The movants'
filed joint replies on March 24, 2022. In response, on March 30, 2022, the NMPRC
issued an Order appointing hearing examiners to conduct a hearing, if necessary,
and to issue a recommended decision to address the issues raised by the motion.
The Order also states that the hearing examiners should endeavor to issue a
recommended decision with sufficient time for consideration of exceptions and
for the NMPRC to be able to take action prior to June 30, 2022. PNM filed
testimony on April 20, 2022 and a hearing is scheduled to begin on May 23, 2022.
PNM cannot predict the outcome of this matter.

See additional discussion of ETA and San Juan’s request for abandonment of PNM in notes 11 and 12.

Four Corners Abandonment Application - 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. As ordered by
the hearing examiner in the case, PNM filed an amended application and testimony
on March 15, 2021. The amended application provided additional information to
support PNM's request, provided background on the NMPRC's consideration of the
prudence of PNM's investment in Four Corners in the NM 2016 Rate Case and
explained how the proposed sale and abandonment provides a net public benefit.
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. See
additional discussion of the ETA and PNM's Four Corners Abandonment Application
in Notes 11 and 12.

PNM enhanced its plan to exit Four Corners and emphasized its ESG strategy to
reduce carbon emissions on March 12, 2021 with an announcement for additional
plans for seasonal operations at Four Corners beginning in the fall of 2023,
subject to the necessary approvals. The solution for seasonal operations ensures
the plant will be available to serve each owners' customer needs during times of
peak energy use while minimizing operations during periods of low demand. This
approach results in an estimated annual 20 to 25 percent reduction in carbon
emissions at the plant and retains jobs and royalty payments for the Navajo

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PNM Solar Direct

In 2019, PNM filed an application with the NMPRC for approval of a program under
which qualified governmental and large commercial customers could participate in
a voluntary renewable energy procurement program. PNM proposed to recover costs
of the program directly from subscribing customers through a rate rider. Under
the rider, PNM would procure renewable energy from 50 MW of solar-PV facilities
under a 15-year PPA. PNM had fully subscribed the entire output of the 50 MW
facilities at the time of the filing. In March 2020, the hearing examiner issued
a recommended decision recommending approval of PNM's application that was
subsequently approved by the NMPRC. These facilities are expected to begin
commercial operations in the second quarter of 2022.

The community solar law

On June 18, 2021, Senate Bill 84, known as the Community Solar Act, became
effective. 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 NMPRC is charged with
administering the Community Solar Act program, establishing a total maximum
capacity of 200 MW community solar facilities (applicable until November 2024)
and allocating proportionally to the New Mexico electric investor-owned
utilities and participating cooperatives. As required under the Community Solar
Act, the NMPRC opened a docket on May 12, 2021, to adopt rules to establish a
community solar program no later than April 1, 2022. On March 30, 2022, the
NMPRC issued an Order that adopted a rule on the administration of the Community
Solar Act program. The rule requires utilities to file proposed community solar
tariffs with the NMPRC within 60 days from the publication of the rule. See Note

Electric Vehicles

PNMR is building upon its ESG goal of 100% emissions-free generation by 2040
with plans for additional emissions reductions through the electrification of
its vehicle fleet. Growing the number of electric vehicles within the Company's
fleet will benefit the environment and lower fuel costs furthering the
commitment to ESG principles. Under the commitment, existing fleet vehicles will
be replaced as they are retired with an increasing percentage of electric
vehicles. The new goals call for 25% of all light duty fleet purchases to be
electric by 2025 and 50% to be electric by 2030.

To demonstrate PNMR's commitment to increase the electrification of vehicles in
its service territory, PNM filed a TEP with the NMPRC on December 18, 2020. The
TEP supports customer adoption of electric vehicles by focusing on addressing
the barriers to electric vehicle adoption and encourage use. PNM's proposed
program budget will be dedicated to low and moderate income customers by
providing rebates to both residential and non-residential customers towards the
purchase of chargers and/or behind-the-meter infrastructure. On November 10,
2021, the NMPRC issued a final order approving PNM's TEP. See Note 12.

In December 2021, PNM announced that it will be joining the National Electric
Highway Coalition, which plans to build fast-charging ports along major U.S.
travel corridors. The coalition, with approximately 50 investor-owned electric
companies is committed to providing electric vehicle (EV) fast charging ports
that will allow the public to drive EVs with confidence throughout the country's
major roadways by the end of 2023.

Other environmental issues

Four Corners may be required to comply with environmental rules that affect
coal-fired generating units, including regional haze rules and the ETA. 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
the CAA Section 111(d). On January 19, 2021, the DC Circuit issued an opinion
vacating and remanding the ACE Rule, holding that it was based on a
misconstruction of Section 111(d) of the Clean Air Act, but stayed its mandate
for vacatur of the repeal of the Clean Power Plan to ensure that the
now-outdated rule would not become effective. The U.S. Supreme Court granted
four petitions for certiorari seeking review of the DC Circuit's decision, and
oral arguments in the case were held on February 28, 2022. A decision is
expected in June 2022. In addition, on January 27, 2021, President Biden signed
an executive order requiring a review of environmental regulations issued under
the Trump Administration, which will include a review of the ACE rule.

Renewable energy

PNM's renewable procurement strategy includes utility-owned solar capacity, as
well as solar, wind and geothermal energy purchased under PPAs. As of March 31,
2022, PNM has 158 MW of utility-owned solar capacity in operation. In addition,
PNM purchases power from a customer-owned distributed solar generation program
that had an installed capacity of 211.8 MW at March 31, 2022. PNM also owns the
500 KW PNM Prosperity Energy Storage Project. The project was one of the first
combinations of battery storage and solar-PV energy in the nation and involved
extensive research and development of advanced grid concepts. The facility also
was the nation's first solar storage facility fully integrated into a utility's
power grid.
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PNM also purchases the output from New Mexico Wind, a 200 MW wind facility, and
the output of Red Mesa Wind, an existing 102 MW wind energy center. PNM's 2020
renewable energy procurement plan was approved by the NMPRC in January 2020 and
includes a PPA to procure 140 MW of renewable energy and RECs from La Joya Wind
II that became operational in June 2021. The NMPRC approved the portfolio to
replace the planned retirement of SJGS resulting in PNM executing solar PPAs of
650 MW combined with 300 MW of battery storage agreements. In addition, the
PVNGS Leased Interest Abandonment Application approved by the NMPRC includes
solar PPAs of 450 MW combined with 290 MW of battery storage agreements. 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 San Juan Abandonment Application in Notes 11 and 12

As discussed in Strategic Investments above, PNM is currently purchasing the
output of 130 MW of solar capacity from NMRD that is used to serve the Meta data
center which includes two 25-year PPAs to purchase renewable energy and RECs
from an aggregate of approximately 100 MW of capacity from two solar-PV
facilities constructed by NMRD to supply power to Meta, Inc. The first 50 MW of
these facilities began commercial operations in November 2019 and the second 50
MW facility began commercial operations in July 2020. Additionally, PNM has
entered into three separate 25-year PPAs to purchase renewable energy and RECs
to be used by PNM to supply additional renewable power to the Meta data center.
These PPAs include the purchase of power and RECs from a 50 MW wind project,
which was placed in commercial operation in November 2018, a 166 MW wind project
which became operational in February 2021, and a 50 MW solar-PV project expected
to be operational in 2022. In addition, the NMPRC issued an order that will
allow PNM to service the Meta data center for an additional 190 MW of solar PPA
combined with 50 MW of battery storage and a 50 MW solar PPA expected to be
operational in 2023. See Note 12.

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

Energetic efficiency

Energy efficiency plays a significant role in helping to keep customers'
electricity costs low while meeting their energy needs and is one of the
Company's approaches to supporting environmentally responsible power. PNM's and
TNMP's energy efficiency and load management portfolios continue to achieve
robust results. In 2021, incremental energy saved as a result of new
participation in PNM's portfolio of energy efficiency programs was 107 GWh. This
is equivalent to the annual consumption of approximately 12,689 homes in PNM's
service territory. PNM's load management and annual energy efficiency programs
also help lower peak demand requirements. In 2021, TNMP's incremental energy
saved as a result of new participation in TNMP's energy efficiency programs is
estimated to be approximately 19 GWh. This is equivalent to the annual
consumption of approximately 2,469 homes in TNMP's service territory. TNMP's
High-Performance Homes residential new construction energy efficiency program
was honored for the sixth year in a row by ENERGY STAR. This recognition
includes the program's fourth straight Partner of the Year Sustained Excellence
Award. For information on PNM's and TNMP's energy efficiency filing with the
NMPRC and PUCT see Note 12.

Water conservation and solid waste reduction

PNM continues its efforts to reduce the amount of fresh water used to make
electricity (about 35% more efficient than in 2007). Continued growth in PNM's
fleet of solar and wind energy sources, energy efficiency programs, and
innovative uses of gray water and air-cooling technology have contributed to
this reduction. Water usage has continued to decline as PNM has substituted less
fresh-water-intensive generation resources to replace SJGS Units 2 and 3
starting in 2018, as water consumption at that plant has been reduced by
approximately 50%. As the Company moves forward with its mission to achieve 100%
carbon-free generation by 2040, it expects that more significant water savings
will be gained. PNM has set a goal to reduce freshwater use 80% by 2035 and 90%
by 2040 from 2005 levels. Focusing on responsible stewardship of New Mexico's
scarce water resources improves PNM's water-resilience in the face of persistent
drought and ever-increasing demands for water to spur the growth of New Mexico's

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 2021, 18 of the Company's 23 facilities met the solid
waste diversion goal of a 65% diversion rate. The Company expects to continue to
do well in this area in the future.

Customer, stakeholder and community engagement

Another key element of the Company's commitment to ESG principles is fostering
relationships with its customers, stakeholders, and communities. The Company
strives to deliver a superior customer experience. Through outreach,
collaboration, and various community-oriented programs, the Company has
demonstrated a commitment to building productive relationships with
stakeholders, including customers, community partners, regulators, intervenors,
legislators, and shareholders. In December 2021, PNMR was named, for the second
consecutive year, to Newsweek's list of America's Most Responsible
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Companies highlighting companies in areas of ESG. 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. As a result, PNM continues to experience steady
performance in customer satisfaction in both the J.D. Power Electric Utility
Residential Customer Satisfaction StudySM and its own proprietary relationship
surveys. In the 2021 fourth quarter J.D. Power overall customer satisfaction
results, PNM outperformed the West Midsize industry average by one point.

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

With reliability being the primary role of a transmission and distribution
service provider in Texas' deregulated market, TNMP continues to focus on
keeping end-users updated about interruptions and to encourage consumer
preparation when severe weather is forecasted. In the third quarter of 2021,
TNMP provided a 30-person team in support of another utility that experienced
significant damage to their transmission and distribution system as a result of
Hurricane Ida. TNMP has been honored by the Edison Electric Institute four times
since 2012 for its assistance to out-of-state utilities affected by hurricanes.
TNMP has also been honored twice for hurricane response in its own territory.

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

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

During the three years ending December 31, 2021, corporate giving contributed
$10.4 million to civic, educational, environmental, low income, and economic
development organizations. PNMR recognizes its responsibility to support
programs and organizations that enrich the quality of life across its service
territories and seeks opportunities to further demonstrate its commitment in
these areas as needs arise. In response to COVID-19 community needs, PNMR
donated to an Emergency Action Fund in partnership with key local agencies to
benefit approximately ninety nonprofits and small businesses facing challenges
due to lack of technology, shifting service needs, and cancelled fundraising
events. Additionally, employee teams have supported first responders and other
front-line workers through the delivery of food and other supplies often
procured from local businesses struggling during stay-at-home orders. PNM also
donated to the Pueblo Relief Fund and delivered personal protective supplies to
pueblo areas and tribal nations throughout New Mexico. While its service
territory does not include the Navajo Nation, PNM's operations include
generating facilities and employees in this region that has been
disproportionately affected by the pandemic. In response, employee teams focused
efforts to this region and also provided available supplies of personal
protective equipment. PNM has also collaborated with the Navajo Tribal Utility
Authority Wireless ("NTUAW") to set up wireless "hot spots" throughout the
Navajo Nation in areas without internet access to assist first responders and
support continued education opportunities amidst school closures. These actions
supplement PNM's continued support for the Navajo Nation. The PNM Navajo Nation
Workforce Training Scholarship Program provides support for Navajo tribal
members and encourages the pursuit of education and training in existing and
emerging jobs in the communities in which they live. In 2019, PNM invested an
additional $500,000 into this scholarship program to further assist in the
development and education of the Navajo Nation workforce. PNM has invested in
paid summer college engineering internship programs for American Indian students
available in the greater Albuquerque area, established the PNM Pueblo Education
Scholarship Endowment to invest in higher education for Native American Indian
students, and supported the Coalition to Stop Violence Against Native Women. PNM
also continues to partner in the Light up Navajo project, piloted in 2019 and
modeled after mutual aid to connect homes without electricity to the power grid.
In a more active role in 2021, PNM also partnered with key local organizations
to initiate funding for programs focused on diversity, equity, and inclusion.

Another important outreach program is tailored for low-income customers and
includes the PNM Good Neighbor Fund to provide customer assistance with their
electric utility bills. COVID-19 has increased the needs of these customers
along with customers who may not otherwise need to seek assistance. In addition
to the suspension of residential customer disconnections
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from April 2020 through August 2021 and the expansion of customer payment plans,
PNM responded with increased communications through media outlets and customer
outreach to connect customers with nonprofit community service providers
offering financial assistance, food, clothing, medical programs, and services
for seniors. As a result of these communication efforts, 4,147 families in need
received emergency assistance through the PNM Good Neighbor Fund during 2021.
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 efforts, the ERAP has paid
over $6 million in customer arrears since the launch of the program in March

Additionally, as a part of corporate giving, on October 1, 2020, PNM introduced
$2.0 million in funding for new COVID Customer Relief Programs to support
income-qualified residential customers and small business customers who have
been impacted by the financial challenges created by COVID-19 and have past due
electric bills. Qualified customers that pay a portion of their past-due balance
can receive assistance toward their remaining balance.

Volunteerism is also an important facet of employee culture, keeping our
communities safer, stronger, smarter and more vibrant. In 2021, new programs
were launched to provide employees with COVID-safe projects through virtual,
hybrid, and limited group gatherings. Employees and nonprofits remained
resilient, creative, and innovative and responded to community need and
selflessly gave their time and talents to organizations throughout New Mexico
and Texas completing 8,741 volunteer hours with nonprofits and other community
organizations. Volunteers also participate in a company-wide annual Day of
Service at nonprofits across New Mexico and Texas along with participation on a
variety of nonprofit boards and independent volunteer activities throughout the
year. In addition, the Company facilitated employee and customer Earth Day
cleanups across PNM's service territory resulting in over 2,200 gallons of trash

In addition to the extensive engagement both PNM and TNMP have with nonprofit
organizations in their communities, the PNM Resources Foundation provides nearly
$1.6 million in grant funding each year across New Mexico and Texas. These
grants help nonprofits innovate or sustain programs to grow and develop
business, develop and implement environmental programs, and provide educational
opportunities. Beginning in 2020, the PNM Resources Foundation is funding grants
with a three-year focus on decreasing homelessness, increasing access to
affordable housing, reducing carbon emissions, and increasing community safety
with an emphasis on COVID-19 programs. As part of this emphasis, $0.5 million is
awarded annually to nonprofits in New Mexico and Texas to assist with work being
done on the front lines of the pandemic for community safety, with a focus on
helping senior citizens and people currently experiencing homelessness during
the shelter-in-place directives. The PNM Resources Foundation continued to
expand its matching donation program to offer 2-to-1 matching on employee
donations made to social justice nonprofits and increased the annual amount of
matching donations available to each of its employees. PNM Resources Foundation
awarded $0.3 million of additional grants to non-profits supporting TNMP
communities following the winter storm in February 2021.

Economic factors

PNM - In the three months ended March 31, 2022, PNM experienced a decrease in
weather normalized residential load of 5.0%, more than offset by an increase in
weather normalized commercial load of 5.4% compared to 2021, largely returning
to pre-COVID-19 levels. In addition, PNM experienced an increase in industrial
load of 8.1%.

TNMP - In the three months ended March 31, 2022, TNMP experienced an increase in
volumetric weather normalized retail load of 1.2% compared to 2021. Weather
normalized demand-based load, excluding retail transmission consumers increased
3.1% in the three months ended March 31, 2022 compared to 2021.

Although the Company has experienced signs of recovery from state restrictions
related to COVID-19, it is unable to determine the duration or final impacts
from COVID-19 as discussed in more detail in Item 1A Risk Factors of the 2021
Annual Report on Form 10-K. The Company is also 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. The Company has not experienced, nor does it expect
significant negative impacts to customer usage at PNM and TNMP resulting from
these economic impacts. However, if current economic conditions worsen, the
Company may be required to implement additional measures such as reducing or
delaying operating and maintenance expenses and planned capital expenditures.

Operating results

Net earnings attributable to PNMR were $16.0 million, or $0.19 per diluted share
in the three months ended March 31, 2022 compared to $17.6 million, or $0.20 per
diluted share in 2021. Among other things, earnings in the three months ended
March 31, 2022 benefited from higher weather normalized retail load at PNM,
higher volumetric and demand-based load at TNMP, colder weather conditions at
PNM and TNMP, higher transmission margin at PNM and TNMP, higher distribution
rates at TNMP, lower plant maintenance costs at PNM, AMS carrying charges at
TNMP, lower interest expense at Corporate and Other, and lower costs related to
the Merger at Corporate and Other. These increases were offset by decreased
performance on
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PNM's NDT and coal mine reclamation investment securities, increased operational
and maintenance expense, including higher employee related and outside service
expense at PNM and TNMP, increased depreciation and property taxes at PNM and
TNMP due to increased plant in service, and higher interest charges at PNM and
TNMP. Additional information on factors impacting results of operations for each
segment is discussed below under Results of Operations.

Cash and capital resources

PNMR and PNM have revolving credit facilities with capacities of $300.0 million
and $400.0 million that currently expire in October 2023. Both facilities
provide for short-term borrowings and letters of credit and can be extended
through October 2024, subject to approval by a majority of the lenders. In
addition, PNM has a $40.0 million revolving credit facility with banks having a
significant presence in New Mexico that expires in December 2022, and TNMP has a
$75.0 million revolving credit facility, which expires in September 2024 and
contains two one-year extension options, subject to approval by a majority of
the lenders. Total availability for PNMR on a consolidated basis was $705.5
million at April 21, 2022. The Company utilizes these credit facilities and cash
flows from operations to provide funds for both construction and operational
expenditures. PNMR also has intercompany loan agreements with each of its

PNMR projects that its consolidated capital requirements, consisting of
construction expenditures and dividends, will total $4.8 billion for 2022 -
2026, including amounts expended through March 31, 2022. These construction
expenditures include expenditures for PNM's capital initiative that includes
investments in transmission and distribution infrastructure to deliver clean
energy, enhance customer satisfaction, and increase grid resilience.

In order to fund the capital expenditures necessary to meet growth that balances earnings objectives, credit metrics and liquidity needs, the Company has entered into a number of other financing arrangements. A complete listing of current funding arrangements is provided in Notes 9 and 7 of the Notes to the Consolidated Financial Statements of the 2021 Annual Reports on Form 10-K.

After considering the effects of these financings and the Company's short-term
liquidity position as of April 21, 2022, the Company has consolidated maturities
of long-term and short-term debt aggregating approximately $285.6 million
through April 2023. 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 2022-2026 period. The Company
currently believes that its internal cash generation, existing credit
arrangements, and access to public and private capital markets will provide
sufficient resources to meet the Company's capital requirements for at least the
next twelve months. As of March 31, 2022 and April 21, 2022, the Company was in
compliance with its debt covenants.

                             RESULTS OF OPERATIONS

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

The summary of net profit attributable to PNMR is as follows:

                                                                Three Months Ended March
                                                                                2022                 2021               Change
                                                                                  (In millions, except per share amounts)
Net earnings attributable to PNMR                                          

$16.0 $17.6 $(1.6)
Diluted average ordinary shares and ordinary equivalents

                                86.2                86.1                0.1
Net earnings attributable to PNMR per diluted share                        

$0.19 $0.20 $(0.01)

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

                                                  Three Months Ended
                                                    March 31, 2022
                                                     (In millions)
                    PNM                          $             (14.2)
                    TNMP                                         6.4

                    Corporate and Other                          6.3
                    Net change                   $              (1.6)


————————————————– ——————————


Information regarding the factors impacting PNMR’s operating results by segment is presented below.

Segment Information

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


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

The following table summarizes PNM’s operating results:

                                                          Three Months Ended March
                                                                          2022                2021               Change
                                                                                          (In millions)
Electric operating revenues                                           $    338.7          $    271.2          $     67.5
Cost of energy                                                             138.8                88.9                49.9
   Utility margin                                                          199.9               182.3                17.6
Operating expenses                                                         109.1               107.3                 1.8
Depreciation and amortization                                               45.8                41.9                 3.9
   Operating income                                                         45.0                33.1                11.9
Other income (deductions)                                                  (22.1)                4.8               (26.9)
Interest charges                                                           (14.6)              (12.9)               (1.7)
   Segment earnings before income taxes                                      8.4                25.0               (16.6)
Income (taxes)                                                              (0.8)               (2.8)                2.0
Valencia non-controlling interest                                           (3.1)               (3.5)                0.4
 Preferred stock dividend requirements                                      (0.1)               (0.1)                  -
Segment earnings                                                      $      4.3          $     18.5          $    (14.2)

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

                                                              Three Months Ended March 31,
                                                                                            2022                   2021                     Change
                                                                                                       (Gigawatt hours, except customers)
Residential                                                                                   795.3                  828.2                          (4.0) %
Commercial                                                                                    795.7                  752.4                           5.8
Industrial                                                                                    410.9                  380.0                           8.1
Public authority                                                                               45.0                   47.4                          (5.1)
Economy energy service (1)                                                                    133.5                  129.1                           3.4

Other sales for resale (2)                                                                  1,900.8                  746.4                         154.7
                                                                                            4,081.2                2,883.5                          41.5  %
Average retail customers (thousands)                                                          542.0                  538.8                           0.6  %

(1) PNM purchases energy for a large customer on the customer's behalf and
delivers the energy to the customer's location through PNM's transmission
system. PNM charges the customer for the cost of the energy as a direct pass
through to the customer with only a minor impact in utility margin resulting
from providing ancillary services.
(2) Increase in other sales for resale is the result of participation in the EIM
beginning in April 2021.

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Operating Results - Three Months Ended March 31, 2022, compared to 2021

The following table summarizes the significant changes in the utility margin:

                                                                                               Three Months
                                                                                              March 31, 2022
Utility margin:                                                                               (In millions)

               Retail customer usage/load - Weather normalized retail KWh sales
               increased 5.4% for commercial customers, 8.1% for industrial
               customers, partially offset by decreased sales to


               customers of 5.0%                                                            $           0.3
               Weather - Colder weather in 2022; heating degree days were 

4.8% higher

               in 2022                                                                                  1.1

               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                                          17.1

               Rate riders - Includes renewable energy, FPPAC, and energy efficiency
               riders                                                                                  (3.1)
               Unregulated margin - Higher sales and lower cost of energy associated
               with 65 MW of SJGS Unit 4                                                                2.4
               Other                                                                                   (0.2)
               Net Change                                                                   $          17.6

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

                                                                                           Three Months
                                                                                          March 31, 2022
Operating expenses:                                                                       (In millions)

                 Lower plant maintenance costs at SJGS, Four Corners, PVNGS, and
                 gas-fired plants                                                       $          (3.5)

                 Higher property taxes due to increases in utility plant in
                 service including the Western Spirit Line                                          0.7
                 Higher employee related, outside services, and vegetation
                 management expenses                                                                4.1

                 Other                                                                              0.5
                 Net Change                                                             $           1.8

Depreciation and amortization:

                   Increased utility plant in service including the Western Spirit
                   Line                                                                  $       3.5

                   Other                                                                         0.4
                   Net Change                                                            $       3.9

Other income (deductions):

                   Decreased performance on investment securities in the NDT and
                   coal mine reclamation trusts                                           $     (27.5)

                   Other                                                                          0.6
                   Net Change                                                             $     (26.9)


————————————————– ——————————

  Table of Contents
                                                                        Three Months
                                                                       March 31, 2022
    Interest charges:                                                   (In millions)

                Issuance of $150.0 million SUNs in December 2021      $          (1.0)

                Refinancing of $160.0 million SUNs in July 2021                   1.0
                Higher interest on term loans                                    (0.1)
                Higher interest on remarketed PCRBs                              (0.1)
                Interest on transmission customer deposits                       (1.2)
                Other                                                            (0.3)
                Net Change                                            $          (1.7)

    Income (taxes):

                Lower segment earnings before income taxes                      $ 4.1
                Lower amortization of federal excess deferred income taxes       (1.4)

                Other                                                            (0.7)
                Net Change                                                      $ 2.0


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

The following table summarizes TNMP’s operating results:

                                                       Three Months Ended March 31,
                                                                                   2022         2021       Change
                                                                                           (In millions)
 Electric operating revenues                                                     $ 105.4      $ 93.5      $ 11.9
 Cost of energy                                                                     29.6        26.5         3.1
 Utility margin                                                                     75.8        67.0         8.8
 Operating expenses                                                                 27.9        27.8         0.1
 Depreciation and amortization                                                      23.6        22.2         1.4
 Operating income                                                                   24.2        17.0         7.2
 Other income                                                                        2.1         1.1         1.0
 Interest charges                                                                   (9.2)       (8.5)       (0.7)
 Segment earnings before income taxes                                               17.2         9.6         7.6
 Income (taxes)                                                                     (2.2)       (0.9)       (1.3)
 Segment earnings                                                                $  15.1      $  8.7      $  6.4


————————————————– ——————————

Table of Contents The following table shows total sales, including weather impacts, by retail rate consumer category and average number of consumers:

                                                                Three Months Ended March 31,
                                                                                              2022                  2021                     Change

Volumetric load (1) (GWh)                                                                       698.0                 676.0                           3.3  %
Demand-based load (2) (MW)                                                                    5,652.4               5,116.8                          10.5  %
Average retail consumers (thousands) (3)                                                        266.3                 261.5                           1.8  %

(1) Volumetric load consumers are billed on KWh usage.
(2) Demand-based load includes consumers billed on monthly KW peak and also
includes retail transmission customers that are primarily billed under TNMP's
rate riders.
(3) TNMP provides transmission and distribution services to REPs that provide
electric service to their customers in TNMP's service territories. The number of
consumers above represents the customers of these REPs. Under TECA, consumers in
Texas have the ability to choose any REP to provide energy.

Results of operations – Quarters ended March 31, 2022compared to 2021

The following table summarizes the significant changes in the utility margin:

                                                                                                   Three Months
                                                                                                  March 31, 2022
Utility margin:                                                                                   (In millions)

               Transmission rate relief - Transmission cost of service rate increases in
               March 2021, September 2021, and March 2022                                       $           4.4
               Distribution rate relief - Distribution cost of service rate increase in
               September 2021                                                                               3.2
               Volumetric-based consumer usage/load - Weather normalized KWh sales
               increased 1.2%; the number of volumetric consumers increased 3.5%                            0.4
               Demand-based consumer usage/load - Weather normalized

MW on demand

               sales for large commercial and industrial consumers

excluding retail

               transmission consumers increased 3.1%                                                        0.2
               Weather - Colder weather in 2022; heating degree days were 

8.5% higher in

               2022                                                                                         0.4
               Rate Riders and other- Impacts of rate riders, including the 


               cost recovery factor, energy efficiency rider, and rate case expense
               rider, which are offset in operating expenses                                                0.2

               Net Change                                                                       $           8.8

The following tables summarize the main factors of variation in operating expenses, depreciation, other income (deductions), interest expenses and income taxes:

                                                                                                Three Months
                                                                                               March 31, 2022
Operating expenses:                                                                            (In millions)

                 Higher employee related and outside service expenses, partially
                 offset by lower vegetation management expenses                              $           1.1

                 Higher property taxes due to increased utility plant in service                         0.1
                 Higher capitalization of administrative and general and other
                 expenses due to higher construction expenditures in 2022                               (0.8)

                 Lower energy efficiency expense and rate case amortization which are
                 offset in utility margin                                                               (0.2)
                 Other                                                                                  (0.1)
                 Net Change                                                                  $           0.1


————————————————– ——————————

  Table of Contents
                                                                     Three Months
                                                                    March 31, 2022
       Depreciation and amortization:                                (In millions)

                         Increased utility plant in service        $           1.6

                         Other                                                (0.2)
                         Net Change                                $           1.4

          Other income:

                      AMS Reconciliation carrying charges (Note 12)       $ 1.2
                      Other                                                (0.2)

                      Net Change                                          $ 1.0

     Interest charges:

                 Issuance of $65.0 million first mortgage bonds in 2021      $ (0.4)
                 Other                                                         (0.3)

                 Net Change                                                  $ (0.7)

          Income (taxes):

                      Higher segment earnings before income taxes       $ (1.6)
                      Other                                                0.3
                      Net Change                                        $ (1.3)

Corporate and Other

The table below summarizes the results of corporate and other operations:

                                                     Three Months Ended March 31,
                                                                                  2022        2021       Change
                                                                                         (In millions)
  Electric operating revenues                                                   $    -      $    -      $    -
  Cost of energy                                                                     -           -           -
    Utility margin                                                                   -           -           -
  Operating expenses                                                              (5.1)        1.2        (6.3)
  Depreciation and amortization                                                    6.3         5.7         0.6
    Operating income (loss)                                                       (1.2)       (6.9)        5.7
  Other income (deductions)                                                       (0.2)       (0.4)        0.2
  Interest charges                                                                (2.5)       (4.5)        2.0
  Segment (loss) before income taxes                                              (3.9)      (11.8)        7.9
  Income (taxes) benefit                                                           0.5         2.1        (1.6)
  Segment (loss)                                                                $ (3.4)     $ (9.7)     $  6.3

Corporate and Other operating expenses shown above are net of amounts allocated
to PNM and TNMP under shared services agreements. The amounts allocated include
certain expenses shown as depreciation and amortization and other income
(deductions) in the table above. The change in operating expense includes a
decrease of $5.7 million in costs related to the Merger that were not allocated
to PNM or TNMP. Substantially all depreciation and amortization expense is
offset in operating expenses as a result of allocation of these costs to other
business segments.

  Table of Contents
Operating Results - Three Months Ended March 31, 2022 compared to 2021
The following tables summarize the primary drivers for changes in other income
(deductions), interest charges, and income taxes:
                                                                           Three Months
                                                                          March 31, 2022
 Other income (deductions):                                                (In millions)
                   Higher equity method investment income from NMRD      $           0.1
                   Other                                                             0.1

                   Net Change                                            $           0.2

            Interest charges:

                        Lower interest on short-term borrowings        $ 0.2

                        Repayment of PNMR 2018 SUNs in March 2021        2.0
                        Higher interest on term loans                   (0.2)
                        Net Change                                     $ 2.0

Income (taxes) benefits:

                 Impact of difference in effective tax rates used by PNMR and its
                 subsidiaries in the calculation of income taxes in interim
                 periods                                                                 $       0.9
                 Lower segment loss before income taxes                                         (2.0)
                 Lower non-deductible Merger related costs                                       0.5
                 Lower investment tax credit amortization                                       (0.6)
                 Other                                                                          (0.4)
                 Net Change                                                              $      (1.6)

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