News Release

Oct. 10, 2002

PNM To Cut Electric Rates in 2003 and 2005

PNM NEWS News releases Financial news Contact PNM

NEWS MEDIA CONTACT Frederick Bermudez Telephone: (505) 241-4831 Pager: (505) 235-9706

Albuquerque: Electric rates for PNM customers would be lowered 6.5 percent over the next three years if state regulators endorse a comprehensive agreement that includes two rate decreases, PNM announced today.

If approved, these rate reductions would be the third and fourth in a string of rate cuts by PNM over the last eight years. PNM has not had an electric rate increase in more than 17 years, while lowering residential rates by more than 17 percent since 1994.

A stipulated agreement between PNM and several parties that traditionally participate in rate-making procedures was filed today with state regulators. The agreement addresses numerous issues, including a plan to reduce rates and support a repeal of New Mexico's competitive electricity law. The stipulated agreement must be approved by the state Public Regulation Commission (PRC).

If approved, PNM's electric customers would see rates cut by 4 percent beginning Sept. 1, 2003. Consumers will see another 2.5 percent decrease beginning Sept. 1, 2005. The new rates would be reflected in October bills of both years.

The rates — which would be among the lowest in the Southwest — would remain in effect until Jan. 1, 2008. Combined, the proposed rate reductions would reduce the average residential monthly bill by $2.78 per month, based on 500 kilowatt-hours.

"These reductions would put PNM rates at 1982 levels," said PNM Chairman, President and CEO Jeff Sterba. "We will continue to work efficiently while maintaining our solid performance in reliability and customer service."

The filing is a result of an agreement struck after nearly one year of open meetings between PNM and the parties, including the Attorney General's Office, the PRC staff, the City of Albuquerque, large business customers and the University of New Mexico.

The 2003 reduction would be the third rate cut for PNM’s electric customers in nine years. In 1994, PNM reduced rates by $30 million — or an average of 6 percent. Five years later, customers received an additional 6.7 percent cut — or $34 million reduction.

The stipulated agreement also addresses several other issues aside from consumer rates. According to the filing, PNM will:

• Actively support repeal of the 1999 retail electric restructuring law
• Provide sufficient generation resources to meet the growing needs of its New Mexico customers
• Be allowed to file a voluntary "green tariff" for customers who want to support the development of renewable energy.

In addition, the agreement identifies the specifics of the PRC's oversight regarding the construction of merchant generation plants.

Regarding the repeal of retail electric restructuring, Sterba said PNM has long supported giving customers a choice of power suppliers, but recent problems in California show the possible risks today for residential and small business customers outweigh any tangible benefits.