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ITEM 1.	BUSINESS

•	Earning authorized returns on its regulated businesses

•	Delivering above industry-average earnings and dividend growth

•	Maintaining solid investment grade credit ratings

•	PNMR: www.pnmresources.com

•	PNM: www.pnm.com

•	TNMP: www.tnmp.com

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•	Corporate Governance Principles

•	Code of Ethics (Do the Right Thing – Principles of Business Conduct)

•	Charters of the Audit and Ethics Committee, Nominating and Governance Committee, Compensation and Human Resources Committee, and Finance Committee

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•	PVNGS Decommissioning Funding

•	Nuclear Spent Fuel and Waste Disposal

•	Environmental Matters under the caption “The Clean Air Act”

•	Four Corners Coal Mine

•	WEG v. OSM NEPA Lawsuit

•	Navajo Nation Environmental Issues

•	Cooling Water Intake Structures

•	Effluent Limitation Guidelines

•	Santa Fe Generating Station

•	Environmental Matters under the caption “Coal Combustion Byproducts Waste Disposal”

•	Hazardous Air Pollutants (“HAPs”) Rulemaking

•	Environmental Matters under the caption “Coal Supply”

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•	The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions, including the pending application for a retail rate increase before the NMPRC and other impacts of federal or state regulatory and judicial actions

•	State and federal regulation or legislation relating to environmental matters, the resultant costs of compliance, and other impacts on the operations and economic viability of PNM’s generating plants

•	Physical and operational risks related to climate change and potential financial risks resulting from climate change litigation and legislative and regulatory efforts to limit GHG, including the Clean Power Plan

•	Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects resulting from the scheduled expiration of the operational agreements for SJGS and Four Corners, as well as the fuel supply agreement for SJGS, including the 2018 required NMPRC filing to determine the extent to which SJGS should continue serving PNM’s retail customers

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

•	The ability of the Company to successfully forecast and manage its operating and capital expenditures

•	Uncertainty surrounding counterparty credit risk, including financial support provided to facilitate the new coal supply and ownership restructuring at SJGS, as well as obligations to provide additional collateral in support of required reclamation bonds

•	Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines supplying certain power plants, as well as the ability to recover those costs from customers

•	The performance of generating units, transmission systems, and distribution systems, which could be negatively affected by operational issues, fuel quality, unplanned outages, extreme weather conditions, terrorism, cybersecurity breaches, and other catastrophic events

•	Variability of prices and volatility and liquidity in the wholesale power and natural gas markets

•	Changes in price and availability of fuel and water supplies, including the ability of the mines supplying coal to PNM’s coal-fired generating units and the companies involved in supplying nuclear fuel to provide adequate quantities of fuel

•	The risks associated with completion of generation, transmission, distribution, and other projects

•	State and federal regulatory, legislative, and judicial decisions and actions on ratemaking, tax, and other matters

•	Regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties

•	The Company’s ability to access the financial markets, including disruptions in the credit markets, actions by ratings agencies, and fluctuations in interest rates

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

•	The risk that FERC rulemakings may negatively impact the operation of PNM’s transmission system

•	The impacts of decreases in the values of marketable equity securities maintained to provide for decommissioning, reclamation, pension benefits, and other postretirement benefits

•	Employee workforce factors, including issues arising out of collective bargaining agreements and labor negotiations with union employees

•	The effectiveness of risk management regarding commodity transactions and counterparty risk

•	The outcome of legal proceedings, including the extent of insurance coverage

•	Changes in applicable accounting principles or policies

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•	New asset construction related to generation, transmission, and distribution systems necessary to provide electric service, including costs of generation capacity to replace the early retirement of SJGS Units 2 and 3 as part of compliance with the regional haze provisions of the CAA (Note 16)

•	Environmental compliance expenditures

•	The regulatory mandate to acquire power from renewable resources

•	Increased regulation related to nuclear safety

•	Increased interest costs to finance capital investments

•	Depreciation

•	Changing customer behaviors, including increased emphasis on energy efficiency measures and utilization of alternative sources of power

•	Adverse economic conditions

•	Reductions in costs of energy efficient technology

•	Reduced new sources of demand

•	Unpredictable weather patterns

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•	Rates charged by PNM and TNMP

•	Rates charged by REPs utilizing TNMP’s facilities to deliver power

•	Energy efficiency initiatives

•	Availability and cost of alternative sources of power

•	National, regional, or local economic conditions

•	Federally-mandated base closures or significant curtailment of the activities at the bases or national laboratories

•	Closure of industrial facilities or significant curtailment of their activities

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•	The ability to obtain adequate supplies of nuclear fuel and water

•	The ability to dispose of spent nuclear fuel

•	Decommissioning of the plant

•	Securing the facilities against possible terrorist attacks

•	Unscheduled outages due to equipment failures

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•	The extent to which cash flows will support dividends

•	The Company’s financial circumstances and performance

•	NMPRC’s and PUCT’s decisions in various regulatory cases currently pending and which may be docketed in the future

•	Conditions imposed by the NMPRC or PUCT

•	The effect of federal regulatory decisions and legislative acts

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•	Economic conditions in the United States and in the Company’s service areas

•	Future growth plans and the related capital requirements

•	Other business considerations

•	An economic recession

•	Declines in the health of the banking sector generally, or the failure of specific banks who are parties to the Company’s credit facilities

•	Deterioration in the overall health of the utility industry

•	The bankruptcy of an unrelated energy company

•	War, terrorist or cybersecurity attacks, or threatened attacks

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•	Authorization for the Board to issue PNMR’s preferred stock in series and to fix rights and preferences of the series (including, among other things, voting rights and preferences with respect to dividends and other matters)

•	Advance notice procedures with respect to any proposal other than those adopted or recommended by the Board

•	Provisions specifying that only a majority of the Board, the chairman of the Board, the chief executive officer, or holders of at least one-tenth of all of PNMR’s shares entitled to vote may call a special meeting of stockholders

ITEM 1B.	UNRESOLVED STAFF COMMENTS

ITEM 2.	PROPERTIES

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ITEM 3.	LEGAL PROCEEDINGS

•	The Clean Air Act – Regional Haze – SJGS

•	The Clean Air Act – Regional Haze – Four Corners

•	The Clean Air Act – Citizen Suit Under the Clean Air Act

•	The Clean Air Act – Four Corners Clean Air Act Lawsuit

•	Four Corners Coal Mine

•	WEG v. OSM NEPA Lawsuit

•	Navajo Nation Environmental Issues

•	Santa Fe Generating Station

•	Continuous Highwall Mining Royalty Rate

•	Four Corners Severance Tax Assessment

•	PVNGS Water Supply Litigation

•	San Juan River Adjudication

•	Rights-of-Way Matter

•	Complaint Against Southwestern Public Service Company

•	Navajo Nations Allottee Matters

•	PNM – New Mexico General Rate Case

•	PNM – Proceeding Regarding Definition of Future Test Year

•	PNM – Renewable Portfolio Standard

•	PNM – Renewable Energy Rider

•	PNM – Energy Efficiency and Load Management

•	PNM – FPPAC Continuation Application

•	PNM – Integrated Resource Plan

•	PNM – San Juan Generating Station Units 2 and 3 Retirement

•	PNM – Application for Certificate of Convenience and Necessity

•	PNM – Transmission Rate Case

•	PNM – Formula Transmission Rate Case

•	PNM – Firm-Requirements Wholesale Customers – Navopache Electric Cooperative, Inc.

•	TNMP – Advanced Meter System Deployment

•	TNMP – Energy Efficiency

•	TNMP – Transmission Cost of Service Rates

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ITEM 4.	MINE SAFETY DISCLOSURES

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ITEM 5.	MARKET FOR PNMR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

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ITEM 6.	SELECTED FINANCIAL DATA

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Notes:	The MWh reported above for TNMP include 836,599 for 2011, used by consumers who chose First Choice as their REP. These MWh are also included in the First Choice MWh sales.

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Notes:	The consumers reported above for TNMP include 64,732 consumers for 2011, who chose First Choice as their REP. These TNMP customers are also included in the First Choice customers.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	Earning authorized returns on regulated businesses

•	Delivering above industry-average earnings and dividend growth

•	Maintaining solid investment grade credit ratings

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

•	Delivering a superior customer experience

•	Environmental leadership in their business operations

•	Supporting the communities in their service territories

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•	Developing strategies to meet regional haze rules at the coal-fired SJGS as cost-effectively as possible while providing broad environmental benefits that also demonstrate progress in addressing new federal regulations for CO2 emissions from existing power plants

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

•	Increasing energy efficiency participation

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•	Retire SJGS Units 2 and 3 (PNM’s current ownership interest totals 418 MW) at December 31, 2017 and recover, over 20 years, 50% (currently estimated to be approximately $127.6 million) of their undepreciated net book value at that date and earn a regulated return on those costs

•	Be granted a CCN for 132 MW in SJGS Unit 4, with an initial book value of zero, plus SNCR costs and whatever portion of BDT costs the NMPRC determines to be reasonable and prudent to be allowed for recovery in rates

•	Be granted a CCN for 134 MW of PVNGS Unit 3 with an initial rate base value equal to the book value as of December 31, 2017 (estimated to be approximately $150 million)

•	Be authorized to acquire 65 MW of SJGS Unit 4 as merchant utility plant, which would not be included in rates charged to retail customers

•	Accelerate recovery of SNCR costs on SJGS Units 1 and 4 so that the costs are fully recovered by July 1, 2022 (cost recovery for PNM’s BDT project on those units will be determined in PNM’s next general rate case)

•	Make a NMPRC filing in 2018 to determine the extent that SJGS should continue serving PNM’s customers’ needs after mid-2022

•	Retire one MWh of RECs that include a zero-CO2 emission attribute beginning January 1, 2020 for every MWh produced by 197 MW of coal-fired generation from PNM’s ownership share of SJGS (the cost of these RECs would be capped at $7.0 million per year and recovered in rates)

•	Not recover approximately $20 million of increased operations and maintenance expenses and other costs incurred in connection with CAA compliance

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•	The $165.7 million pre-tax write-off recorded for regulatory disallowances and restructuring costs due to agreements among the owners of SJGS necessary to bring SJGS into compliance with the CAA and PNM’s related regulatory proceedings (Note 16)

•	Lower retail load at PNM, partially offset by higher retail load at TNMP

•	Rate increases for PNM and TNMP – additional information about these rate increases is provided in Note 17

•	Weather

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•	Reduced rent payments upon renewal of leases for PVNGS Unit 1

•	A refund of amounts previously paid under the FERC tariff for gas transportation agreements and settlement of a complaint filed at FERC against SPS Note 16)

•	Net unrealized gains and losses on mark-to-market economic hedges for sales and fuel costs not recoverable under PNM’s FPPAC

•	Changes in other income (deductions), primarily related to gains and losses on available-for-sale securities, a third-party pre-treatment process for coal at SJGS, and equity AFUDC

•	Increased income tax expense due to impairments of state tax credit, state net operating loss, and charitable contribution carryforwards, as well as a tax rate change in New Mexico Note 11

•	Fluctuations in prices for sales of power from PVNGS Unit 3

•	Other factors impacting results of operation for each segment are discussed under Results of Operations below

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(1)

PNM purchases energy for a major 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 no impact to PNM’s margin so there is only a minor impact in margin resulting from providing ancillary services. Although KWh sales to this customer increased in 2015, revenue decreased due to lower market prices.

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•	PNM’s weather normalized retail KWh sales were 1.4% lower in 2015 compared to 2014, primarily resulting from a sluggish economy in New Mexico, particularly in the Albuquerque metropolitan area, which has lagged the nation in economic recovery

•	Warmer summer weather and colder winter weather increased revenue in 2015; cooling degree days were 5.7% higher and heating degree days were 2.9% higher in 2015 than in 2014

•	The June 29, 2014 expiration of PNM’s contract with Gallup, its second largest wholesale generation customer, reduced revenues, cost of energy, and margin; these decreases were partially offset by an increase in off-system sales and lower fuel expenses that would have otherwise been used to serve Gallup

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In January 2015, PNM increased the rate charged under the renewable rider to include PNM-owned solar facilities completed in 2014; cost of energy, which reflects the purchase of RECs and renewable power under PPAs increased in 2015, primarily due to the addition of Red Mesa Wind; increases in revenues and margin for PNM’s renewable rider are partially offset by increases in operating expenses and depreciation

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In 2015, PNM negotiated new gas transportation agreements with EPNG, resulting in the refund of previously paid gas fixed-transportation costs under the EPNG FERC tariff and establishing new reduced rates through October 31, 2022; this refund decreased the cost of energy and increased margin $4.0 million in 2015; the newly established rates are anticipated to decrease gas transportation costs approximately $0.8 million on an annual basis

•	2015 pre-tax write-off of $165.7 million associated with the BART determination and the ownership restructuring of SJGS discussed in Note 16

•	Higher plant maintenance costs of $8.9 million primarily at SJGS and PVNGS

•	Higher employee medical expenses of $4.6 million, primarily due to unfavorable claims experience, including an unusually high number of large dollar claims

•	Higher costs associated with exploring alternative fuel supply for SJGS of $2.2 million

•	Higher energy efficiency rider program costs and renewable rider costs of $2.3 million and $0.4 million, which are offset in revenues

•	Lower rentals of $16.0 million related to renewal of the PVNGS Unit 1 leases (See Note 7) on January 15, 2015

•	Lower costs of $2.1 million associate with the termination of the EIP lease on April 1, 2015

•	Higher pre-tax gains, net of impairments, of $5.5 million on available-for-sale securities, reflecting performance of the NDT and the trust for coal mine reclamation, partially offset by higher fees and taxes on the NDT of $2.0 million

•	Higher income of $4.0 million from refined coal (a third-party pre-treatment process, which began November 2014) at SJGS

•	Higher equity AFUDC of $5.0 million due to increased levels of construction

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•	PNM’s weather normalized retail KWh sales were 1.7% lower in 2014 compared to 2013, primarily due to New Mexico’s sluggish economy

•	Milder weather decreased revenue in 2014; cooling degree days were 7.4% lower and heating degree days were 12.7% lower in 2014 than in 2013

•	The expiration of PNM’s contract with Gallup on June 29, 2014 reduced revenues, cost of energy, and margin; these decreases were partially offset by an increase in off-system sales and lower fuel expenses that would have otherwise been used to serve Gallup; a new wholesale contract with the Jicarilla Apache Nation increased revenues and margin in 2014 by $1.0 million

•	In January 2014, PNM increased the rate charged under the renewable rider to include PNM-owned solar facilities completed in 2013; cost of energy reflects increased purchase of RECs and renewable power under PPAs; increases in revenues and margin for PNM’s renewable rider are partially offset by increases in operating expenses and depreciation

•	Higher market prices combined with higher available generation associated with PVNGS Unit 3 increased unregulated revenues by $5.3 million in 2014; gas imbalance settlements in 2014, which did not occur in 2013, lowered cost of energy $2.1 million

•	PNM recorded a $10.5 million regulatory disallowance of the FPPAC under-collected balance in 2013, which did not occur in 2014 (See Note 17)

•	PNM made contributions of $3.3 million in 2013 to the PNM Resources Foundation and Good Neighbor Fund, which did not occur in 2014

•	Lower labor and employee benefit costs of $2.4 million and $0.6 million

•	Higher capitalization of administrative and general expenses, which decreases operating expenses, of $2.7 million due to higher capital spending in 2014.

•	Increase plant maintenance costs of $6.1 million, primarily at Four Corners, PVNGS, and PNM’s natural gas plants

•	Higher energy efficiency rider program costs and higher renewable rider costs of $3.2 million and $0.4 million, which are offset in revenue.

•	Higher property taxes of $2.4 million due to increased plant in service and higher assessed values

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(1)	TNMP provides transmission and distribution services to REPs that provide electric service to 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.

(1)	The 2014 and 2013 GWh amounts reflect a reclassification of 18.9 GWh and 21.7 GWh from industrial to commercial to be consistent with the current year presentation.

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•	The Texas economy has fared better than the national average in job growth and unemployment growth, increasing weather normalized retail KWh sales 2.6% in 2015; the weather normalized load impacts are primarily related to the residential class

•	Weather had minimal impacts on margin as heating degree days were 12.2% lower and cooling degree days were 6.4% higher than in 2014; due to the climate in TNMP’s service territories, variances in cooling degree days have a much larger impact than variances in heating degree days

•	Changes in costs charged by third-party transmission providers are deferred and recovered through a transmission cost recovery factor; higher third party transmission costs of energy resulted in, and are offset by, TNMP rate increases for the recovery of these costs

•	Increased employee medical expenses of $2.4 million, due primarily to unfavorable claims experience, including an unusually high number of large dollar claims

•	Increased property taxes of $1.4 million, due primarily to increases in utility plant in service and higher assessed values

•	Higher operating expenses of $1.1 million associated with the AMS deployment, which are recovered through the AMS surcharge

•	Higher capitalization of administrative and general expenses of $0.9 million decreased operating expenses due to the mix of transmission and distribution construction expenditures

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•	A strong Texas economy helped increase weather normalized retail KWh sales 3.2% in 2014, primarily related to the commercial class

•	Milder weather in the summer decreased revenues as cooling degree days were 2.2% lower and heating degree days were 2.0% higher than in 2014

•	Higher costs charged by third-party transmission providers, which are deferred and recovered through a transmission cost recovery factor

•	Changes in AMS and Hurricane Ike surcharge revenues are offset in operating expenses and depreciation and amortization

•	Higher capitalization of administrative and general expenses, which decreases operating expenses, of $2.9 million due higher capital spending in 2014

•	Lower employee healthcare costs of $2.1 million primarily due to lower claims experience

•	2013 write-off of $0.5 million in costs incurred in an effort to securitize the remaining CTC costs

•	2013 contributions to the PNM Resources Foundation of $0.7 million

•	Lower energy efficiency program expenses of $0.3 million and lower rate case expense amortization of $0.7 million

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•	Increase due to the $4.0 million contribution in 2013 to the PNM Resources Foundation and financial support to the PNM Good Neighbor Fund, which were allocated to PNM and TNMP reducing operating expenses as discussed above

•	Increase due to 2013 losses of $3.3 million on the repurchase of $23.8 million of PNMR’s 9.25% senior unsecured notes (Note 6)

•	Increase due to $3.6 million lower amortization related to corporate investments that became fully amortized in 2013

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•	Ability to earn a fair return on equity

•	Results of operations

•	Ability to obtain required regulatory approvals

•	Conditions in the financial markets

•	Credit ratings

•	Upgrading generation resources, including expenditures for compliance with environmental requirements and for renewable energy resources

•	Expanding the electric transmission and distribution systems

•	Purchasing nuclear fuel

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(a)	Represents total long-term debt, excluding unamortized discounts, premiums, and issuance costs (Note 6); does not include NM Capital’s $125.0 million BTMU Term Loan Agreement entered into on February 1, 2016 and TNMP’s $60.0 million of 3.53% first mortgage bonds issued on February 10, 2016, as discussed above

(b)	Represents interest payments during the period

(c)	The operating lease amounts include payments under the PVNGS leases through the expiration of the leases, including renewal periods for leases for which PNM has renewed; the amounts in the above table are net of amounts returned to PNM in 2016 as payments on its investments in related PVNGS lessor notes; see Off-Balance Sheet Arrangements above, Investments in Note 1, Note 7, and Note 9

(d)	Represents only certain minimum payments that may be required under the coal contracts in effect on December 31, 2015 if no deliveries are made; under the CSA to supply coal to SJGS, which became effective at 11:59 PM on January 31, 2016, the minimum payments increased by between $76 million and $96 million per year in 2016 through 2020 and by a total of $84 million for 2021 through 2032

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(e)	Includes funding of trusts for post-term reclamation related to the mines serving SJGS and Four Corners (Note 16)

(f)	These obligations represent funding based on the current rate of return on investments

(g)	The Company only forecasts funding for its pension and retiree medical plans for the next five years

(h)

Represents forecasted construction expenditures, including nuclear fuel, under which substantial commitments have been made (Note 14); the Company only forecasts capital expenditures for the next five years; the construction expenditures include the purchase of the assets underlying three of the PVNGS Unit 2 leases at the expiration of those leases on January 15, 2016 for $163.3 million; see Capital Requirements above and Note 7

(i)

PNMR is unable to reasonably estimate the timing of liability for uncertain income tax positions (Note 11) in individual years due to uncertainties in the timing of the effective settlement of tax positions and, therefore, PNMR’s liability of $6.5 million is not reflected in this table; amounts PNM is obligated to pay Valencia are not included above since Valencia is consolidated by PNM in accordance with GAAP, as discussed in Note 9; no amounts are included above for the New Mexico Wind, Lightning Dock Geothermal, and Red Mesa Wind PPAs since there are no minimum payments required under those agreements

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ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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(1)	The rating “Investment Grade” is for counterparties, or a guarantor, with a minimum S&P rating of BBB- or Moody’s rating of Baa3. The category “Internal Ratings – Investment Grade” includes those counterparties that are internally rated as investment grade in accordance with the guidelines established in the Company’s credit policy.

(2)

The Credit Risk Exposure is the gross credit exposure, including long-term contracts (other than firm-requirements wholesale customers), forward sales, and short-term sales. The exposure captures the amounts from receivables/payables for realized transactions, delivered and unbilled revenues, and mark-to-market gains/losses. Gross exposures can be offset according to legally enforceable netting arrangements but are not reduced by posted credit collateral. At December 31, 2015, PNMR and PNM held $0.1 million of cash collateral to offset their credit exposure.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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(1)	Summary of the Business and Significant Accounting Policies

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(2)	Segment Information

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(3)	Related Party Transactions

(4)	Regulatory Assets and Liabilities

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(5)	Stockholders’ Equity

(6)	Financing

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(7)	Lease Commitments

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(8)	Fair Value of Derivative and Other Financial Instruments

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(1)	See Note 6 for an explanation of the adjustments made to the December 31, 2014 carrying value of long-term debt in order to conform to current-year presentation.

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(9)	Variable Interest Entities

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(10)	Earnings and Dividends Per Share

(1)	Excludes out-of-the-money options for 2,100 shares of common stock at December 31, 2015. See Note 13.

(11)	Income Taxes

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(12)	Pension and Other Postretirement Benefits

•	Maximize the return on assets, commensurate with the risk that the Corporate Investment Committee deems appropriate to meet the obligations of the pension plans and OPEB plans, minimize the volatility of expense, and account for contingencies

•	Transition asset mix over time to a higher proportion of high quality fixed income investments as the plans’ funded statuses improve

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(13)	Stock-Based Compensation

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(14)	Construction Program and Jointly-Owned Electric Generating Plants

(1)

As discussed in Note 16, the NMPRC has approved the shutdown of SJGS Units 2 and 3 as of December 31, 2017. At December 31, 2015, PNM’s carrying value for its current ownership share of SJGS Units 2 and 3 included plant in service of $468.2 million, accumulated depreciation and amortization of $193.3 million, and construction work in progress of $2.2 million for a net undepreciated net book value of $277.1 million, which amounts are included in the table above. At December 31, 2015, PNM recorded a regulatory disallowance of $127.6 million representing its estimate of the portion of the December 31, 2017 net book value of SJGS Units 2 and 3 that will not be recovered from ratepayers, which is reflected as a reduction of plant in service on the Consolidated Balance Sheets.

(2)	Includes interest in PVNGS Unit 3, interest in common facilities for all PVNGS units, and owned interests in PVNGS Units 1 and 2.

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(15)	Asset Retirement Obligations

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(1)

Based on studies to estimate the amount and timing of future ARO expenditures. PNM has an ARO for PVNGS that includes the obligations for nuclear decommissioning of that facility. In 2013, a new decommissioning study for PVNGS was implemented reflecting updated cash flow estimates, including the extended operating licenses. The new study resulted in an increase of $0.5 million to the ARO. In addition, a new decommissioning study for SJGS was implemented in 2013, resulting in a $2.5 million increase to the ARO.

(2)

Based on studies to estimate the amount and timing of future ARO expenditures. PNM has an ARO for Four Corners that includes obligations for decommissioning of that facility. In 2015, a new decommissioning study for Four Corners was implemented reflecting updated cash flow estimates. The new study resulted in an increase of $1.0 million to the ARO. In addition, a new decommissioning study for SJGS was implemented in 2015, resulting in a $1.2 million decrease to the ARO.

(16)	Commitments and Contingencies

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•	Permission to retire SJGS Units 2 and 3 at December 31, 2017 and to recover over 20 years their net book value at that date along with a regulated return on those costs

•	A CCN to include PNM’s ownership of PVNGS Unit 3, amounting to 134 MW, as a resource to serve New Mexico retail customers at a proposed value of $2,500 per KW, effective January 1, 2018

•	An order allowing cost recovery for PNM’s share of the installation of SNCR and BDT equipment to comply with NAAQS requirements on SJGS Units 1 and 4, not to exceed a total cost of $82 million

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•	PNM will retire SJGS Units 2 and 3 (PNM’s current ownership interest totals 418 MW) at December 31, 2017 and recover, over 20 years, 50% of their undepreciated net book value at that date and earn a regulated return on those costs

•	PNM will be granted an unconditional CCN for 132 MW in SJGS Unit 4, with an initial book value of zero, plus the costs of SNCR and other capital additions

•	PNM will be granted a CCN for 134 MW of PVNGS Unit 3 with an initial rate base value equal to the book value as of December 31, 2017, including transmission assets associated with PVNGS Unit 3, (estimated to be approximately $150 million)

•	No later than December 31, 2018, and before entering into a binding agreement for post-2022 coal supply for SJGS, PNM will file its position and supporting testimony in an NMPRC case to determine the extent to which SJGS should continue serving PNM’s retail customers’ needs after mid-2022; all parties agree to support this case being decided within six months

•	PNM will be authorized to acquire 65 MW of SJGS Unit 4 as excluded utility plant; PNM and PNMR commit that no further coal-fired merchant plant will be acquired at any time by PNM, PNMR, or any PNM affiliate; PNM is not precluded from seeking a CCN to include the 65 MW or other coal capacity in rate base

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Beginning January 1, 2020, for every MWh produced by 197 MW of coal-fired generation from PNM’s ownership share of SJGS, PNM will acquire and retire one MWh of RECs or allowances that include a zero-CO2 emission attribute compliant with EPA’s Clean Power Plan; this REC retirement is in addition to what is required to meet the RPS; the cost of these RECs are to be capped at $7.0 million per year and will be recovered in rates; PNM should purchase EPA-compliant RECs from New Mexico renewable generation unless those RECs are more costly

•	PNM will accelerate recovery of SNCR costs on SJGS Units 1 and 4 so that the costs are fully recovered by July 1, 2022; cost recovery for PNM’s BDT project on those units will be determined in PNM’s next general rate case consistent with the Certification of Stipulation

•	Not recover approximately $20 million of other costs incurred in connection with CAA compliance

•	PNM’s 2014 IRP docket will be closed without other NMPRC action

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(17)	Regulatory and Rate Matters

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2013 plan – Construction of 20 MW of PNM-owned solar PV facilities, at a cost of $48.9 million; wind and solar REC purchases in 2013; a PPA for the output of the Lightning Dock Geothermal facility; and an additional procurement of 1.5 MW of PNM-owned solar PV facilities to supply the energy sold under PNM’s voluntary renewable energy tariff. The plan enabled PNM to comply with the statutory RPS in 2013, but required a variance from the NMPRC’s diversity requirements in 2013 while the proposed geothermal facilities were being constructed. The geothermal facility began providing power to PNM in January 2014. The current output of the facility is 4 MW and future expansion may result in up to 9 MW of generation capacity.

•	2014 plan – 50,000 MWh of wind generated RECs in 2014; construction of 23 MW of PNM-owned solar PV facilities at a cost of $46.5 million; a 20-year PPA for the output of Red Mesa Wind, an existing wind generator having an aggregate capacity of 102 MW, beginning January 1, 2015 at a first year cost estimated to be $5.8 million; and the purchase of 120,000 MWh of wind RECs in 2015.

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2015 plan – Construction of 40 MW of PNM-owned solar PV facilities at a cost of $79.3 million. The proposed 40 MW solar facilities are identified as being a cost-effective resource in PNM’s application to retire SJGS Units 2 and 3 (Note 16). Under a stipulated settlement, the costs of the 40 MW of solar would be recovered in base rates rather than through PNM’s renewable energy rider and have been included in rates requested in the New Mexico General Rate Case discussed above.

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(18)	Accumulated Other Comprehensive Income (Loss)

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.	CONTROLS AND PROCEDURES

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ITEM 9B.	OTHER INFORMATION

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

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