News Release

May 30 , 2006

Growing System, Rising Cost of Materials Prompt PNM
to Seek Modest Increase in Natural Gas Delivery Rates

Click to enlarge: steel pipe, fleet fuel, other vital products far outpace PNM delivery fees

Click to enlarge: estimated annual average gas total cost comparison by city

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Albuquerque: Citing a growing natural gas system and rising steel, fuel and other costs, PNM today asked state regulators for a modest increase to basic delivery fees for its 481,000 natural gas customers in New Mexico.

PNM is asking permission to increase residential delivery fees by $3.08 per month, which would add 4.7 percent to the average monthly bill of $65.21 beginning April 2007. Delivery fees for most businesses would rise $8.54 per month, adding 2.7 percent to the average monthly bill of $313.43. A public hearing will be held sometime later this year.

While not part of this rate filing, natural gas cost comprises nearly 70 percent of the average monthly winter bill, fluctuates monthly based on market conditions and is not regulated. By law, PNM does not add profit to the cost of natural gas.

"We understand the pain customers feel at the pump because we see it in our everyday business operations," said PNM Chairman, President and CEO Jeff Sterba. "The cost of fueling our fleet vehicles has increased more than 80 percent in just three years. Additionally, the cost of one our basic building blocks — steel pipe — has increased 110 percent. Despite our best efforts at cost control, these kinds of cost pressures require us to file for a modest increase to our fees beginning next spring."

Current PNM natural gas delivery bills are lower than average when compared to bills of customers elsewhere in the West and Southwest. They will remain below average even with PNM’s proposed delivery rate increase (see attachment for regional bill comparison).

Sterba said PNM employees have increased their productivity and worked hard to increase the utility’s efficiency in order to keep gas delivery fee increases well below the rate of inflation. PNM delivery fees have increased just once since 1994. For the average residential customer, monthly delivery charges have gone up only 6 percent, to $19.81 from $18.66, in the past 12 years. During that same time, the consumer price index has risen by more than 28 percent.

Economic growth requires continual investment in safety and reliability

Since it last requested a gas delivery rate increase, which was in 2003, PNM has added 31,300 new customers and invested more than $110 million in natural gas infrastructure. Sterba said new pipeline safety requirements, the company’s commitment to maintaining its record of safety and reliability, and the state’s notable economic growth all require continued investment in new pipe, replacement pipe and state-of-the-art monitoring and control technology.

Important system investments made by PNM since 2003 include:

• Adding 28 miles of new gas transmission line to reinforce the system that serves 225,000 customers in Albuquerque;
• Extension of a gas transmission line in Santa Fe to serve growing demand in the Rancho Viejo and Eldorado areas;
• Use of high-tech equipment to internally inspect more 110 miles of existing gas transmission line for potential defects; and
• Replacement of about 100 miles of older steel pipe to increase system safety and reliability.

Major planned investments for the next few years total more than $200 million and include:

• High-tech internal inspection of more than 25 miles of gas transmission lines;
• Replacement of 50 miles of older steel pipe throughout New Mexico;
• Doubling the size of a critical gas transmission line that serves growing communities on Albuquerque’s West Side; and
• Construction of 18 miles of new transmission line in northern New Mexico to strengthen the system that serves Santa Fe, Española and Taos.

PNM continues push for energy efficiency

While new energy efficiency proposals are not part of today’s PRC filing, Sterba said PNM is committed to expanding its energy efficiency efforts. A gas energy efficiency program for residential customers was launched in February. The program offers customers rebates on certain home efficiency products and contractor-provided services. PNM will propose to expand the program by the end of this year, Sterba said.

PNM is a subsidiary of PNM Resources, an energy holding company based in Albuquerque, N.M. PNM provides electric utility service to 426,000 customers and natural gas service to 481,000 customers in New Mexico. The company also sells power on the wholesale market in the Southwest. PNM Resources stock is traded primarily on the NYSE under the symbol PNM. For more information, see the company's Web site at PNM.com.