PNM Resources Utility Seeks Increase in Natural Gas Delivery Fees; Proposal Would Add $20.7 Million Annually, Increase Residential Bills 4.7 Percent.

ALBUQUERQUE, N.M. -- PNM Resources' (NYSE: PNM) largest utility, PNM, today asked regulators to approve a new natural gas rate structure that would improve the recovery of routine operational costs by increasing delivery charges.

Filed with the New Mexico Public Regulation Commission, the new rate structure is designed to better capture costs for the maintenance and expansion of the natural gas transmission and distribution system, even during times of reduced consumption. The proposed new rates would increase annual revenues by $20.7 million and impact only delivery fees. Those fees are separate from the cost of natural gas, which makes up nearly 70 percent of winter bills.

Jeff Sterba, PNM Resources chairman, president and CEO, said a growing natural gas system and rising costs for steel and fuel are the catalysts for the proposed rates.

"The cost of one our basic building blocks - steel pipe - has increased 110 percent in just three years while the cost of fueling our vehicles has increased more than 80 percent," Sterba said.

Since it last requested a gas delivery rate increase in 2003, PNM has added 31,300 new natural gas customers and invested more than $110 million in natural gas infrastructure. Sterba said new pipeline safety requirements, the company's commitment to maintaining its record of safety and reliability, and the state's notable economic growth all require continued investment in new pipe, replacement pipe and monitoring and control technology.

The proposed rate increase, which needs PRC approval, would be effective April 2007 and impact PNM's 481,000 natural gas customers in more than 100 New Mexico communities. The average PNM residential gas bill would increase about 4.7 percent, while most business bills would increase 2.7 percent. If the new rates are approved, PNM total residential gas bills will remain below the average when compared to residential bills of customers living in the Southwest and West.

The proposed rates include a return on equity of 11 percent, based on a rate base of $400.8 million and a revenue requirement of $160.9 million. PNM's last gas rate case was filed in 2003 and ultimately approved by regulators in 2004, increasing rates and charges by $22 million. The 2003 case had an imputed return on equity of 10.25 percent.

The structure of the proposed rates also includes a line item that provides a true-up mechanism to appropriately recover operational costs when system-wide gas consumption is lower or higher than what is designed in the rates.

Background

PNM Resources is an energy holding company based in Albuquerque, N.M., with consolidated operating revenues of $2.1 billion. Through its utility and energy service subsidiaries, PNM Resources supplies electricity to 748,500 homes and businesses in New Mexico and Texas and natural gas to 481,000 customers in New Mexico. Its utility subsidiaries are PNM and Texas-New Mexico Power. Other subsidiaries include First Choice Power, a deregulated competitive retail electric provider in Texas, and Avistar, an energy research and development company. The company has generation resources of approximately 2,840 megawatts and sells power on the wholesale market throughout the Southwest. For more information, visit PNMResources.com.