News Release

June 23, 2003

PNM Water Contract With Jicarilla Apache Nation Finalized

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NEWS MEDIA CONTACT Susan Sponar Telephone: (505) 241-2768

Albuquerque: PNM announced today that a contract to purchase water from the Jicarilla Apache Nation for use at the San Juan Generating Station (SJGS) has received final approval by the U.S. Bureau of Reclamation (BOR) and the U.S. Fish and Wildlife Service. The one-year contract, with a two-year renewal clause, will allow SJGS access to an additional 8,300 acre-feet (AF) of Navajo Reservoir water should the current supply be curtailed due to a severe shortage.

"PNM is proud to be part of several initiatives, including this agreement, where water rights owners and users establish priorities and negotiate agreements prior to shortages becoming a serious issue," said Pat Goodman, vice president of power production at PNM. "We feel that this contract provides us with a solid contingency plan in a shortage scenario."

In addition to securing the Jicarilla contract, PNM, along with 12 other major water users along the San Juan River, developed and endorsed recommendations and principles to voluntarily take water shortages should a shortage occur. Early in the season, the shortage was estimated to be potentially as high as 30 percent at Navajo Reservoir. PNM’s contract with the Jicarillas will be used as part of the shortage sharing defined in these principles.

As part of the shortage sharing agreement, PNM, Arizona Public Service Co., which operates the Four Corners Power Plant, and BHP Billiton, who owns and operates the Navajo, San Juan and La Plata Mines, will also pay into a mitigation fund to assist any regional irrigators who voluntarily take water shortages. The New Mexico State Engineer and the BOR have accepted these recommendations and principles.

Having this contingency water source in place ensures that PNM can operate the plant at full capacity, especially during summer months when electricity usage is at its peak, and continue its positive economic impact on the region. SJGS provides about 58 percent of the power for PNM customers and contributes significantly to the region’s employment base, taxes, natural resource royalties and economy.

SJGS uses an average of 22,000 AF of water a year. The plant has rights to 24,200 AF per year – 16,200 AF from the Navajo Reservoir through a BOR contract and 8,000 AF in native stream flow from the San Juan River through a contract with BHP Billiton.

On average, SJGS requires about ¾ of a gallon of water to produce one kilowatt-hour. The plant has a water conservation plan in effect, which results in only 6 percent of the total water consumed being discharged to on-site evaporation ponds. Through a series of complex processes, water is reused, some as much as 10 times, before it is ultimately evaporated.

In addition to securing short-term solutions on water issues, PNM has been exploring long-term solutions to reduce the amount of water used to produce power, including participating in the ZeroNet initiative with Los Alamos National Laboratory and the Electric Power Research Institute; adding renewable resources such as the New Mexico Wind Energy Center; and researching the option of using produced wastewater from regional oil and gas producers.

PNM is the principal subsidiary of PNM Resources, an energy holding company based in Albuquerque. PNM provides electric utility service to 387,000 customers and natural gas service to 450,000 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.