News Release

Oct. 5 , 2006

PNM Gets Approval for Natural Gas Plant Expansion

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

Albuquerque: PNM will expand an existing power plant and dedicate it to serving the growing power needs of New Mexico customers, while enhancing the facility’s environmental performance.

Located in Doña Ana County, Afton Generating Station is currently capable of generating up to 141 megawatts (MW) of electricity. With PRC approval of PNM’s plan to bring the facility into its utility generating fleet to serve PNM ratepayers, the company will expand Afton to a more efficient combined-cycle facility capable of generating 235 MW.

The added capacity, expected to be operational in mid-2007, will significantly contribute to PNM’s ability to reliably meet projections of New Mexico’s future demand. The PRC vote gives approval to an agreement submitted last November by PRC staff, the Attorney General’s Office, two consumer groups and PNM to cap the cost of the expansion project at $187.6 million. If the cost of the project exceeds the estimated $187.6 million, PNM will not seek to recover the additional cost through rates.

“This is a good deal for our ratepayers because it leverages an existing power plant, reducing the cost of needed generation and enhancing its environmental performance,” said Hugh Smith, senior vice president of Energy Resources. “Expanding Afton allows us to take advantage of an existing facility built before construction costs dramatically increased, compared with building an entirely new facility from scratch.”

After its expansion, Afton will have additional environmental benefits of operating with reduced emissions and reduced water usage.

The expanded Afton Generating Station will use combined-cycle technology, allowing more efficient generation. PNM will incorporate hybrid-cooling technology that will use air in addition to water to help cool the plant. Afton will consume less water per megawatt than any other natural gas or coal plant in the PNM generating fleet. The expanded plant will also feature state-of-the-art technology to reduce emissions of nitrogen oxides.

As part of the agreement PNM also has committed to propose innovative measures to meet future demand, including demand-side management to reduce energy consumption during peak demand periods, assessing renewable energy alternatives, and promoting energy efficiency with its customers.

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 West. 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.