News Release

July 7, 2005

Federal Regulators Say PNM Wholesale Dealings Above Board

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

Albuquerque: The Federal Energy Regulatory Commission yesterday issued its order dismissing PNM, a utility subsidiary of PNM Resources (NYSE: PNM), from its investigation into alleged misconduct by power companies during the 18-month California energy crisis.

The latest ruling clears PNM in the remaining investigation by federal regulators into possible trading practices and partnerships allegedly designed to manipulate the wholesale energy market during the 2000-2001 California energy crisis. Federal regulators previously dismissed charges against PNM alleging that PNM engaged in market-gaming practices during the crisis, and cleared PNM of so-called anomalous bidding practices for wholesale California energy prices during the same period.

"We have cooperated fully with the FERC in its investigations. Its rulings are consistent with what we have said all along: PNM has the highest business ethics standards and our energy marketing activity is no exception," said Jeff Sterba, PNM Resources chairman, president and CEO.

In its order dismissing PNM from any further investigation, the FERC agreed with trial staff's assessment that there is no evidence that PNM either (1) engaged in a Gaming Practice that violated the CAISO (California Independent System Operator) or PX (California Power Exchange) tariffs ... or (2) shared any unjust profits earned by PNM's counterparties that may have conducted Gaming Practices, and found "that PNM did not engage in prohibited gaming practices ..."

The FERC ruling comes on the heels of lawsuit filed by the California Attorney General that alleges PNM, in concert with Powerex, a Canadian energy trading company, used manipulative practices to inflate electricity prices in California in 2000 and 2001 in violation of antitrust laws. The case has since been moved to federal court.

Both PNM and Powerex have requested the California Attorney General's lawsuit be dismissed. Federal courts have consistently ruled that cities and states, such as California, alleging unlawful pricing for wholesale electricity prices must pursue these types of charges at the FERC. Furthermore, the U.S. Supreme Court recently refused to disturb a federal court of appeals decision that the determination whether wholesale electric rates are unreasonable under the Federal Power Act falls under the exclusive jurisdiction of the FERC.

Yesterday's FERC order also resulted in acceptance of a settlement between PNM and FERC staff regarding certain wholesale trading services. FERC staff maintained that certain of PNM's wholesale trading services should have been provided pursuant to PNM's transmission tariff, which is on file at FERC. PNM maintained that it provided these services according to its market-based rate tariff, which is also on file at FERC.

To achieve regulatory certainty with FERC staff, PNM agreed to pay a lump sum of $1 million to settle the tariff issue, and agreed not to offer those trading services without first filing an amendment to its transmission tariff at FERC, or otherwise request approval for providing such services via its market based rate tariff. The FERC accepted the settlement and stated in its order that the parking and lending issues were beyond the scope of the matters that were under investigation.

Background: PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with consolidated operating revenues of $2.3 billion. Through its utility and energy service subsidiaries, PNM Resources supplies electricity to 725,000 homes and businesses in New Mexico and Texas and natural gas to 471,000 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. PNM Resources and its subsidiaries also sell power on the wholesale market in the West.