News Release

Feb. 27, 2003

Market Conditions Driven by Extreme Weather, War Fears
Will Keep PNM Customer Gas Bills High in March

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Albuquerque: Gas bills for PNM customers in March will look like January and February gas bills, an unusual development resulting from near record-high prices for natural gas on the wholesale market.

Extreme weather in the eastern United States, along with concerns over what a war might do to the nation's energy supply, have combined to create "tight supplies and extraordinary volatility in the wholesale natural gas market," according to PNM Vice President Melvin Christopher.

"As a result, when PNM goes out on the market to buy gas for basic customer needs these days, we are paying two to five times more than we paid just one year ago," Christopher said. "Passing these costs along to customers — and we do this without markup — will produce gas bills in March that, unfortunately, look a lot like winter bills."

The average PNM customer is expected to use 108 therms of gas in March, compared to the February average of 132 therms. The March price for gas is 67.67 cents per therm, which will produce an average PNM customer gas bill of $104.42. This is a slight drop from the February average bill of $105.55 and right at the January average bill of $104.22. The average bill from March 2001, when gas prices did reach record highs, was $113.69.

Assistance for customers still available

Christopher urged customers having trouble paying their gas bills to contact PNM regarding the PNM Good Neighbor Fund or state government regarding the Low Income Home Energy Assistance Program (LIHEAP).

LIHEAP, administered by the Income Support Division of the state's Department of Human Services, helps qualifying, low-income families pay their heating bills. Applications are available at any Department of Human Services field office or online. More information is available by calling (800) 283-4465.

The PNM Good Neighbor Fund helps low-income families, elderly and disabled customers pay their energy bills. It is funded by the generous contributions of PNM customers and employees — and funds donated are matched dollar-for-dollar by PNM shareholders. The program is administered in most communities by the Salvation Army.

More information on the PNM Good Neighbor Fund is available by calling PNM customer service at 246-5700 in the Albuquerque metropolitan area. Customers outside of the area can refer to their monthly PNM bill for the correct telephone number to call.

PNM monitoring gas market conditions

Christopher said PNM's expert gas buyers monitor market conditions every hour of the day to get the best price for PNM customers — and that customers do see some benefit from their proximity to two important natural gas fields, the San Juan Basin in northwestern New Mexico and the Permian basin in west Texas. This serves to reduce overall transportation costs of moving the gas from production sites into customers' homes and businesses.

Four major factors are driving wholesale market conditions right now, he said. These are:

• Weather. Although January temperatures in Albuquerque were the warmest since records have been kept (starting in 1893), cold weather in the Northeast (average of two to six degrees below normal for December through February) drove up demand, with a corresponding rise in prices. Although temperatures are expected to moderate later this week, they are still predicted to be below normal in the Midwest and Northeast (source: National Weather Service, EarthSat, NOAA)
• Fear of war. The threat of war has created uncertainty in the energy sector and concern over how a war might affect the nation's energy supply, including crude oil and natural gas.
• Tight supplies of natural gas. U.S. production of natural gas was down 2.3 percent in 2002 from 2001 levels. Even though there are 767 rigs operating in February compared to 647 a year ago, they are not keeping up with demand (source: DOE, Baker Hughes).
• Storage: While storage levels are within the range considered to be normal, as of last week they were about 43 percent below levels from the same time last year and 27 percent below the five-year average. As cold temperatures continue, and if prices remain high, storage could be drawn down further, which will serve as a signal to sellers and buyers of higher prices for the injection period (source: AGA).

PNM is the principal subsidiary of PNM Resources, an energy holding company based in Albuquerque. PNM provides natural gas service to 441,000 gas customers and electric utility service to 378,000 customers in New Mexico. The company also sells power on the wholesale market in the Western U.S. PNM Resources stock is traded primarily on the NYSE under the symbol PNM.