News Release

Nov. 7, 2003

PNM Proposes To Delay Residential Gas
Delivery Rate Increase Until April 2004

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

Santa Fe: PNM today submitted a new plan to the state Public Regulation Commission (PRC) to delay increasing delivery rates for its residential natural gas customers until April 2004.

Under the plan, delivery rates for small business customers would increase immediately, from an average $227.15 to $237.72, or $10.57 per month. New residential rates would not go into effect until next April. At that time, the average residential monthly bill would increase from $44.03 to $47.23, or by $3.20 per month.

The plan is designed to address commissioner concerns about high winter natural gas prices and a previous plan's different percentage increases for residential and small business customers. If adopted, PNM would forego $10.8 million in revenues that it would have collected under the original settlement agreement submitted to regulators in June.

"We believe this new proposal fully addresses concerns expressed by the commissioners about previous rate increase proposals," said PNM Senior Vice President Bill Real. "With a delayed implementation date, no deferral recovery, and other compromises, we believe the proposal is fair, just and reasonable in every respect."

Real said the company lost 12 cents per share on its gas utility operations during the third quarter of this year. "It is difficult for PNM to carry such a huge asset with little or no return," Real said, adding that PNM has invested $300 million in gas infrastructure since 1991. PNM customers today pay less for delivery charges than they did at that time.

The plan, valued for PNM at $9.2 million for 2004 and $20 million for subsequent years, has the support of PRC staff and an industrial users group. In January, PNM proposed a $37 million rate increase. Most recently, it submitted a revised $20 million plan that was rejected by state regulators earlier this week. PNM's submission today is part of a motion for rehearing before the PRC.

The plan also includes another option for PRC consideration: substantially increasing PNM funding to the PNM Good Neighbor Fund if the company is allowed to defer and recoup collection of the residential rate increase. With prices expected to remain high into the future, PNM is committing to additional customer education on natural gas prices as well as proposing the creation of a task force to look at innovative ways to protect customers against such prices.