PNM RESOURCES INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations for PNMR is presented on a combined basis, including
certain information applicable to PNM and TNMP. The MD&A for PNM and TNMP is
presented as permitted by Form 10-Q General Instruction H(2). This report uses
the term "Company" when discussing matters of common applicability to PNMR, PNM,
and TNMP. A reference to a "Note" in this Item 2 refers to the accompanying
Notes to Condensed Consolidated Financial Statements (Unaudited) included in
Item 1, unless otherwise specified. Certain of the tables below may not appear
visually accurate due to rounding.

                                 MD&A FOR PNMR

                               EXECUTIVE SUMMARY
Overview and Strategy

PNMR is a holding company with two regulated utilities serving approximately
813,000 residential, commercial, and industrial customers and end-users of
electricity in New Mexico and Texas. PNMR's electric utilities are PNM and TNMP.
PNMR strives to create a clean and bright energy future for customers,
communities, and shareholders. PNMR's strategy and decision-making are focused
on safely providing reliable, affordable, and environmentally responsible power
built on a foundation of Environmental, Social and Governance (ESG) principles.

Recent Developments

Merger

On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger
Agreement pursuant to which Merger Sub will merge with and into PNMR, with PNMR
surviving the Merger as a wholly-owned subsidiary of Avangrid. Pursuant to the
Merger Agreement, each issued and outstanding share of PNMR common stock at the
Effective Time will be converted into the right to receive $50.30 in cash. The
proposed Merger has been unanimously approved by the Boards of Directors of
PNMR, Avangrid and Merger Sub and approved by PNMR shareholders at the Special
Meeting of Shareholders held on February 12, 2021.

The Merger Agreement provided that it may be terminated by each of PNMR and
Avangrid under certain circumstances, including if the Effective Time shall not
have occurred by the January 20, 2022 End Date; however, either PNMR or Avangrid
could extend the End Date to April 20, 2022 if all conditions to closing have
been satisfied other than the obtaining of all required regulatory approvals. As
discussed below, on December 8, 2021, the NMPRC issued an order rejecting the
stipulation agreement relating to the Merger. In light of the NMPRC ruling, on
January 3, 2022, PNMR, Avangrid and Merger Sub entered into an Amendment to the
Merger Agreement pursuant to which PNMR and Avangrid agreed to extend the End
Date to April 20, 2023.

The Merger is subject to certain regulatory approvals, including from the NMPRC.
The Joint Applicants to the NMPRC application and a number of intervening
parties had entered into an amended stipulation and agreement in the Joint
Application for approval of Merger pending before the NMPRC. An evidentiary
hearing was held in August 2021. On November 1, 2021, a Certification of
Stipulation was issued by the hearing examiner, which recommended against
approval of the amended stipulation. On December 8, 2021, the NMPRC issued an
order adopting the Certification of Stipulation, rejecting the amended
stipulation reached by the parties. On January 3, 2022, PNMR and Avangrid filed
a notice of appeal with the NM Supreme Court. On February 2, 2022, PNMR and
Avangrid filed a statement of issues outlining the argument for appeal. On April
7, 2022, PNMR and Avangrid filed their Brief in Chief with the NM Supreme Court.
Answer briefs from the NMPRC were filed on June 14, 2022, and response briefs
were filed on August 5, 2022.

With respect to other regulatory proceedings related to the Merger, in 2021 PNMR
received clearances for the Merger from the FTC under the HSR Act, CFIUS, the
FCC, FERC, the PUCT, and the NRC. As a result of the delay in closing of the
Merger due to the need to obtain NMPRC approval, PNMR and Avangrid were required
to make a new filing under the HSR Act and request extensions of approvals
previously received from the FCC and NRC. On February 9, 2022, the request for
extension was filed with the NRC and an order granting a one-year extension was
received on May 10, 2022. On February 24, 2022, and August 10, 2022, the
requests for a 180-day extension were granted by the FCC. PNMR and Avangrid
expect to make a new filing under the HSR Act later in 2022. No additional
approvals are required from CFIUS, FERC or the PUCT.

Consummation of the Merger remains subject to the satisfaction or waiver of
certain customary closing conditions, including, without limitation, the absence
of any material adverse effect on PNMR, the receipt of required regulatory
approval from the NMPRC, and the agreements relating to the divestiture of Four
Corners being in full force and effect and all applicable
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regulatory filings associated therewith being made. The agreement relating to
the divestiture of Four Corners has been entered into and is in full effect and
related filings have been made with the NMPRC.

Retirement of SJGS

After nearly half a century of reliable service and several years of planning
towards its retirement, the last unit of the coal-fired SJGS has been removed
from service, as PNM achieves significant progress towards its ESG goals for
reducing carbon emissions from its generation portfolio. The four-unit,
coal-fired SJGS, whose first unit was brought online in 1973, was reduced to two
units at the end of 2017 with the retirement of Units 2 and 3. Unit 1 was
retired in June 2022, and Unit 4 was retired in September 2022. Coal-fired
generation now comprises less than 10% of resource portfolio capacity for PNM.
Carbon-free generation comprises 55% of the company's 2.7-gigawatt capacity
serving New Mexico customers, with additional renewable resources under
development for implementation in the coming years. The Company previously
published emissions goals for 2025 including a 60% reduction of carbon emissions
from owned generation facilities based on 2005 levels. The retirement of SJGS
achieves this interim goal and places the company in position to reach its
industry-leading goal to completely eliminate carbon emissions from its
generation portfolio by 2040.

Grid Modernization Application

On October 3, 2022, in compliance with New Mexico Statute, PNM filed its Grid
Modernization Application with the NMPRC. The projects included in the Grid
Modernization Application improve customers' ability to customize their use of
energy and ensure that customers, including low-income customers, are a top
priority and will benefit consistent with the Grid Modernization Statute. PNM's
proposal to modernize its electricity grid through infrastructure and technology
improvements also increases the efficiency, reliability, resilience, and
security of PNM's electric system. PNM's application seeks approval of grid
modernization investments of approximately $344 million for the first six years
of a broader 11-year strategy. PNM's application requested NMPRC approval by
July 1, 2023 for PNM's Grid Modernization plan in addition to approval of PNM's
proposed Grid Modernization Rider by September 1, 2023. The proposed Grid
Modernization Rider would recover capital costs, operating expenses, and taxes
associated with the investments included in the Grid Modernization Application.
See Note 12.

Financial and Business Objectives
PNMR is focused on achieving three key financial objectives:

•Earning authorized returns on regulated businesses •Delivering at or above industry-average earnings and dividend growth •Maintaining investment grade credit ratings

In conjunction with these objectives, PNM and TNMP are dedicated to:

•Maintaining strong employee safety, plant performance, and system reliability
•Delivering a superior customer experience
•Demonstrating environmental stewardship in business operations, including
transitioning to an emissions-free generating portfolio by 2040
•Supporting the communities in their service territories

Earning Authorized Returns on Regulated Businesses

PNMR's success in accomplishing its financial objectives is highly dependent on
two key factors: fair and timely regulatory treatment for its utilities and the
utilities' strong operating performance. The Company has multiple strategies to
achieve favorable regulatory treatment, all of which have as their foundation a
focus on the basics: safety, operational excellence, and customer satisfaction,
while engaging stakeholders to build productive relationships. Both PNM and TNMP
seek cost recovery for their investments through general rate cases, periodic
cost of service filings, and various rate riders. PNM anticipates filing a
general rate case with the NMPRC by the end of 2022.

Fair and timely rate treatment from regulators is crucial to PNM and TNMP in
earning their allowed returns and critical for PNMR to achieve its financial
objectives. PNMR believes that earning allowed returns is viewed positively by
credit rating agencies and that improvements in the Company's ratings could
lower costs to utility customers.

The rates PNM and TNMP charge customers are subject to traditional rate
regulation by the NMPRC, FERC, and the PUCT. Additional information about rate
filings is provided in Note 17 of the Notes to Consolidated Financial Statements
in the 2021 Annual Reports on Form 10-K.


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The Energy Transition Act ("ETA")

On June 14, 2019, Senate Bill 489, known as the ETA, became effective. The ETA
amends the REA and requires utilities operating in New Mexico to have renewable
portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100%
zero-carbon energy by 2045. The ETA also amends sections of the REA to allow for
the recovery of undepreciated investments and decommissioning costs related to
qualifying EGUs that the NMPRC has required be removed from retail
jurisdictional rates, provided replacement resources to be included in retail
rates have lower or zero-carbon emissions. The ETA provides for a transition
from fossil-fueled generating resources to renewable and other carbon-free
resources by allowing utilities to issue Securitized Bonds, or "energy
transition bonds," related to the retirement of certain coal-fired generating
facilities to qualified investors. See additional discussion of the ETA in Note
11 and in Note 16 of the Notes to Consolidated Financial Statements in the 2021
Annual Reports on Form 10-K.

PNM expects the ETA will have a significant impact on PNM's future generation
portfolio, including PNM's retirement of SJGS in 2022 and the planned Four
Corners exit in 2024 (subject to regulatory approval). PNM cannot predict the
full impact of the ETA on potential future generating resource abandonment and
replacement filings with the NMPRC.

State Regulation

SJGS Abandonment Application - As discussed in Note 12, on July 1, 2019, PNM
filed a Consolidated Application for the Abandonment and Replacement of SJGS and
Related Securitized Financing Pursuant to the ETA (the "SJGS Abandonment
Application"). The SJGS Abandonment Application sought NMPRC approval to retire
PNM's share of SJGS in mid-2022, and for approval of replacement resources and
the issuance of approximately $361 million of Securitized Bonds as provided by
the ETA. The application included several replacement resource scenarios
including PNM's recommended replacement scenario, which is consistent with PNM's
goal of having a 100% emissions-free generating portfolio by 2040 and would have
provided cost savings to customers while preserving system reliability.

The NMPRC issued an order requiring the SJGS Abandonment Application be
considered in two proceedings: one addressing SJGS abandonment and related
financing and the other addressing replacement resources but did not
definitively indicate if the abandonment and financing proceedings would be
evaluated under the requirements of the ETA. After several requests for
clarification and legal challenges, in January 2020, the NM Supreme Court ruled
the NMPRC is required to apply the ETA to all aspects of PNM's SJGS Abandonment
Application, and that any previous NMPRC orders inconsistent with their ruling
should be vacated.

In February 2020, the hearing examiners issued two recommended decisions
recommending approval of PNM's proposed abandonment of SJGS, subject to approval
of the separate replacement resources proceeding, and approval of PNM's proposed
financing order to issue Securitized Bonds.  The hearing examiners recommended,
among other things, that PNM be authorized to abandon SJGS by June 30, 2022, to
issue Securitized Bonds of up to $361 million, and to establish the Energy
Transition Charge. The hearing examiners recommended an interim rate rider
adjustment upon the start date of the Energy Transition Charge to provide
immediate credits to customers for the full value of PNM's revenue requirement
related to SJGS until those reductions are reflected in base rates. In addition,
the hearing examiners recommended PNM be granted authority to establish
regulatory assets to recover costs that PNM will pay prior to the issuance of
the Securitized Bonds, including costs associated with the bond issuances as
well as for severances, job training, and economic development funds. On April
1, 2020, the NMPRC unanimously approved the hearing examiners' recommended
decisions regarding the abandonment of SJGS and the Securitized Bonds. On April
10, 2020, CFRE and NEE filed a notice of appeal with the NM Supreme Court of the
NMPRC's approval of PNM's request to issue securitized financing under the ETA.
On January 10, 2022, the NM Supreme Court issued its decision rejecting CFRE's
and NEE's constitutional challenges to the ETA and affirmed the NMPRC's final
order.

On June 24, 2020, the hearing examiners issued a second recommended decision on
PNM's request for approval of replacement resources that addressed the entire
portfolio of replacement resources. On July 29, 2020, the NMPRC issued an order
approving resource selection criteria identified in the ETA that include PPA's
for 650 MW of solar and 300 MW of battery storage. On October 14, 2022, PNM
filed a motion for approval of amendments on the 200 MW solar PPA combined with
the 100 MW battery storage agreement, as well as a letter agreement with the
project developer providing payments to PNM for delay damages. The amendments
included price increases on both the solar PPA and battery storage agreement and
the commercial operation date extension to May 2024. No party filed objections
and the amendments were deemed approved.

On February 28, 2022, WRA and CCAE filed a joint motion for order to show cause
and enforce financing order and supporting brief, which requests that the NMPRC
order PNM to show cause why its rates should not be reduced at the time SJGS is
abandoned, and to otherwise enforce the NMPRC's April 1, 2020 final order. On
March 14, 2022, PNM filed its response to the joint motion to show cause
refuting the movants' claims that the ETA and April 1, 2020 financing order
require Securitized Bonds be issued at the time of abandonment and that rates be
reduced upon abandonment as not being legally supportable. In response, on March
30, 2022, the NMPRC issued an order appointing hearing examiners to conduct a
hearing,
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if necessary, and to issue a recommended decision to address the issues raised
by the motion. PNM filed testimony on April 20, 2022 and a hearing was held on
May 23, 2022.

On June 17, 2022, the hearing examiners issued a recommended decision requesting the NMPRC issue an order that would require PNM to:

•Revise its rates to remove all of the costs of SJGS Unit 1 by issuing rate
credits of $21.1 million on an annual basis, to customers by July 1, 2022
•Revise its rates again, to remove all costs of SJGS Unit 1, Unit 4, and common
facilities by increasing the rate credits to $98.3 million on an annual basis,
by October 1, 2022
•Transfer payments due and owing to the Indian Affairs Fund, Economic
Development Assistance Fund, and the Displaced Workers Assistance Fund within 30
days of the abandonment of SJGS Unit 1
•Include (in its next rate case application) an explanation and defense of the
prudence in the timing of the issuance of Securitized Bonds beyond the
abandonment dates and what actions were taken to protect customers from interest
rate increases occurring as well as the continued marketability of the
Securitized Bonds issued

On June 29, 2022, the NMPRC issued its final order adopting and approving the
recommended decision in its entirety with certain additions. The additions to
the final order include requirements for PNM file a report no later than October
15, 2022, that contains a record of all of its costs incurred in the show cause
proceeding so that the prudence of those costs will be known and be subject to
review in PNM's future rate case and that the prudency review shall include a
compliance filing to enable a review of the prudence of PNM's decision to delay
bond issuance beyond the dates of the SJGS abandonment. On June 29, 2022, PNM
filed an Emergency Motion and Supporting Brief for Stay with the NMPRC ("PNM's
NMPRC Emergency Motion"). On June 30, 2022, PNM filed a Notice of Appeal and an
Emergency Motion for Partial Interim Stay of the NMPRC's Final Order with the NM
Supreme Court ("PNM's NM Supreme Court Emergency Motion"). On July 1, 2022, the
NMPRC filed a motion at the NM Supreme Court claiming that the ordering
paragraph in the June 29, 2022 final order only required PNM to file an advice
notice by July 1, 2022, but not to implement a credit until 30 days afterwards.
In its motion, the NMPRC requested that the court not immediately order the
interim stay of the final order, as requested in PNM's NM Supreme Court
Emergency Motion, and instead issue an order setting out a briefing schedule for
the NMPRC to respond and potential parties to file responses. On July 6, 2022,
PNM filed a response to the NMPRC's July 1, 2022 motion at the NM Supreme Court
stating that the urgency of a stay through the NM Supreme Court is still viable
based on whether the NMPRC takes longer than 30 days to consider PNM's NMPRC
Emergency Motion. On July 21, 2022, the NMPRC adopted an order denying PNM's
NMPRC Emergency Motion. Subsequently, on July 25, 2022, PNM filed another
emergency motion seeking an immediate and ongoing stay from the NM Supreme Court
for the pendency of the appeal. On July 28, 2022, PNM made payments totaling
$19.8 million to the Indian Affairs Fund, Economic Development Assistance Fund,
and the Displaced Workers Assistance Fund. PNM began issuing rate credits
effective July 31, 2022. On August 1, 2022, PNM filed its statement of issues
with the NM Supreme Court. On September 2, 2022, the NM Supreme Court issued an
order granting PNM's July 25, 2022 motion for partial stay, and as a result PNM
suspended issuing rate credits. On October 14, 2022, PNM made its required
compliance filing under the NMPRC's June 29, 2022, final order. On November 1,
2022, the NM Supreme Court issued an order continuing the partial stay of the
rate credits during the pendency of the appeal. See additional discussion of
PNM's San Juan Abandonment Application in Notes 11 and 12.

Four Corners Abandonment Application - On January 8, 2021, PNM filed the Four
Corners Abandonment Application, which seeks NMPRC approval to exit PNM's 13%
share of Four Corners as of December 31, 2024, and issuance of approximately
$300 million of Securitized Bonds as provided by the ETA. As ordered by the
hearing examiner in the case, PNM filed an amended application and testimony on
March 15, 2021. The amended application provided additional information to
support PNM's request, provided background on the NMPRC's consideration of the
prudence of PNM's investment in Four Corners in the NM 2016 Rate Case and
explained how the proposed sale and abandonment provides a net public benefit.
On December 15, 2021, the NMPRC issued a final order denying approval of the
Four Corners Abandonment Application and the corresponding request for issuance
of securitized financing. On December 22, 2021, PNM filed a notice of appeal
with the NM Supreme Court of the NMPRC decision to deny the application. See
additional discussion of the ETA and PNM's Four Corners Abandonment Application
in Notes 11 and 12.

PNM enhanced its plan to exit Four Corners and emphasized its ESG strategy to
reduce carbon emissions on March 12, 2021 with an announcement for additional
plans allowing for seasonal operations at Four Corners beginning in the fall of
2023, subject to the necessary approvals. The solution for seasonal operations
ensures the plant will be available to serve each owners' customer needs during
times of peak energy use while minimizing operations during periods of low
demand. This approach would result in an estimated annual 20 to 25 percent
reduction in carbon emissions at the plant and retains jobs and royalty payments
for the Navajo Nation.

PVNGS Leased Interest Abandonment Application - On April 2, 2021, PNM filed the
PVNGS Leased Interest Abandonment Application. In the application PNM requested
NMPRC authorization to decertify and abandon its Leased Interest and to create
regulatory assets for the associated remaining undepreciated investments with
consideration of cost recovery of the undepreciated investments in a future rate
case. PNM also sought NMPRC approval to sell and transfer the
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PNM-owned assets and nuclear fuel supply associated with the Leased Interest to
SRP, which will be acquiring the Leased Interest from the lessors upon
termination of the existing leases. In addition, PNM sought NMPRC approval for a
150 MW solar PPA combined with a 40 MW battery storage agreement, and a
stand-alone 100 MW battery storage agreement to replace the Leased Interest. To
ensure system reliability and load needs are met in 2023, when a majority of the
leases expire, PNM also requested NMPRC approval for a 300 MW solar PPA combined
with a 150 MW battery storage agreement. On August 25, 2021, the NMPRC issued an
order confirming PNM requires no further NMPRC authority to abandon the PVNGS
Leased Interest and to sell and transfer the PNM-owned assets and nuclear fuel
supply associated with the Leased Interest to SRP. The order bifurcated the
issue of approval of the two PPAs and three battery storage agreements into a
separate docket so it may proceed expeditiously and deferred a ruling on the
other issues. On February 16, 2022, the NMPRC approved the two PPAs and three
battery storage agreements. On April 15, 2022, PNM made a compliance filing with
the NMPRC in which it updated the NMPRC on the status of the PPAs and the
battery storage agreements listed above. On June 16, 2022, PNM made a second
compliance filing on the status of PPAs and battery storage agreements notifying
the NMPRC that none of the developers of the two PPAs and three battery storage
agreements have moved forward under the terms of the agreements approved by the
NMPRC on February 16, 2022, and none of the replacement resource projects would
be operational in 2023. All five projects will have significant delays and price
increases as evidenced in the current alternative offers from the developers.
PNM entered into amendments to the 300 MW solar PPA combined with a 150 MW
battery storage agreement and proposed those amendments to the NMPRC for
approval in a filing with the NMPRC on June 24, 2022. PNM determined the terms
offered by the 150 MW solar PPA combined with a 40 MW battery storage agreement
and the stand-alone 100 MW battery storage agreement are not satisfactory in
comparison with other potential projects that might be utilized instead, and PNM
did not support the proposed amendments to those agreements in the June 24, 2022
filing. No party filed objections following PNM's June 24, 2022 filing and
pursuant to the NMPRC's February 16, 2022 order, the 300 MW solar PPA combined
with 150 MW battery storage agreement and the decision not to proceed with the
other agreements, are deemed approved. On September 2, 2022, PNM entered into
amendments to the 150 MW battery storage agreement to increase the capacity to
300 MW and proposed those amendments to the NMPRC for approval. No party filed
objections following PNM's September 2, 2022 filing, and the 300 MW solar
battery storage agreement was deemed approved. PNM anticipates these facilities
will be in service in 2024. PNM continues to pursue additional resources to
replace the PVNGS leases that will be abandoned in 2023 and 2024. For additional
information on PNM's Leased Interest and the associated abandonment application
see Note 12 and Note 13.

Summer Peak Resource Adequacy - Throughout 2021 and continuing into 2022, PNM
provided notices of delays and status updates to the NMPRC for the approved SJGS
replacement resource projects. All four project developers have notified PNM
that completion of the projects will be delayed and no longer available for the
2022 summer peak and some may also not be available for the 2023 summer peak.
The delays in the SJGS replacement resources, coupled with the abandonment of
SJGS Units 1 and 4, presented a risk that PNM would have insufficient
operational resources to meet the 2022 summer peak to reliably serve its
customers. PNM entered into three agreements to purchase power from third
parties to minimize potential impacts to customers and on February 17, 2022, PNM
provided a notice and request with the NMPRC that PNM had obtained agreement
from the SJGS owners and WSJ LLC to extend operation of Unit 4 until September
30, 2022. SJGS Unit 4 provided 327 MW of capacity and, along with the three
agreements to purchase power, improved PNM's projected system reserve margin to
meet the 2022 summer peak. On February 23, 2022, the NMPRC issued an order
finding that PNM did not require NMPRC approval to extend operation of SJGS Unit
4 for an additional three-month period. On March 24, 2022 FERC accepted the
amended San Juan Project Participation Agreement, effectively extending the
operations of SJGS Unit 4 through September 30, 2022. While PNM experienced a
new system peak retail load of 2,071 MW on July 19, 2022, PNM's generation
resources performed sufficiently with no significant challenges to resource
adequacy during the 2022 summer peak season.

PNM faces similar concerns in the summer of 2023 as a result of continued delays
in the SJGS replacement resources as well as delays in replacement resources for
the PVNGS leased capacity that expires in January 2023. As discussed above, PNM
has made a number of compliance filings with the NMPRC on the status of the
PVNGS leased capacity interest replacement resources. In the third quarter, PNM
entered into agreements totaling 125 MW of firm power purchases for June through
September 2023, 35 MW from Four Corners for summer 2023, and the purchase of 40
MW of firm capacity at PVNGS for all twelve months of 2023, providing PNM with a
projected system reserve margin with a range of 9.5% to 4.9% for the 2023 summer
peak period. PNM continues to evaluate other potential firm power agreements
with various providers, as well as all potential short-term resource options to
address these resource adequacy concerns. PNM is unable to predict the outcome
of this matter. See Note 12.

2020 Decoupling Petition - On May 28, 2020, PNM filed a petition for approval of
a rate adjustment mechanism that would decouple the rates of its residential and
small power rate classes. Decoupling is a rate design principle that severs the
link between the recovery of fixed costs of the utility through volumetric
charges. On October 2, 2020, PNM requested an order to vacate the public hearing
and stay the proceeding until the NMPRC decides whether to entertain a petition
to issue a declaratory order resolving the issues raised in the motions to
dismiss. On October 7, 2020, the hearing examiner approved PNM's request to stay
the proceeding and vacate the public hearing and on October 30, 2020 PNM filed a
petition for declaratory order asking the NMPRC to issue an order finding that
full revenue decoupling is authorized by the EUEA. On March 17, 2021, the NMPRC
issued an order granting PNM's petition for declaratory order, commencing a
proceeding to address petitions. On January 14, 2022, the hearing examiner
issued a recommended decision recommending the NMPRC find that the EUEA does not
mandate the NMPRC to authorize or approve a full decoupling mechanism, defining
full decoupling as
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limited to energy efficiency and load management measures and programs. The
recommended decision also states that a utility may request approval of a rate
adjustment mechanism to remove regulatory disincentives to energy efficiency and
load management measures and programs through a stand-alone petition, as part of
the utility's triennial energy efficiency application or a general rate case and
that PNM is not otherwise precluded from petitioning for a rate adjustment
mechanism prior to its next general rate case. Finally, the recommended decision
stated that the EUEA does not permit the NMPRC to reduce a utility's ROE based
on approval of a disincentive removal mechanism founded on removing regulatory
disincentives to energy efficiency and load management measures and programs.
The recommended decision does not specifically prohibit a downward adjustment to
a utility's capital structure, based on approval of a disincentive removal
mechanism. On April 27, 2022, the NMPRC issued an order adopting the recommended
decision in its entirety. On May 24, 2022, PNM filed a notice of appeal with the
NM Supreme Court. On June 23, 2022, PNM filed its Statement of Issues with the
NM Supreme Court. On September 6, 2022, PNM and other parties filed Briefs in
Chief with the NM Supreme Court. On October 21, 2022, NEE filed Answer Briefs
with the NM Supreme Court. See Note 12. PNM cannot predict the outcome of this
matter.

PNM Solar Direct - In 2019, PNM filed an application with the NMPRC for approval
of a program under which qualified governmental and large commercial customers
could participate in a voluntary renewable energy procurement program. PNM
proposed to recover costs of the program directly from subscribing customers
through a rate rider. Under the rider, PNM would procure renewable energy from
50 MW of solar-PV facilities under a 15-year PPA. PNM had fully subscribed the
entire output of the 50 MW facilities at the time of the filing. In March 2020,
the hearing examiner issued a recommended decision recommending approval of
PNM's application that was subsequently approved by the NMPRC. These facilities
began commercial operations in the second quarter of 2022.

The Community Solar Act - On June 18, 2021, Senate Bill 84, known as the
Community Solar Act, became effective. The Community Solar Act establishes a
program that allows for the development of community solar facilities and
provides customers of a qualifying utility with the option of accessing solar
energy produced by a community solar facility in accordance with the Community
Solar Act. The NMPRC is charged with administering the Community Solar Act
program, establishing a total maximum capacity of 200 MW community solar
facilities (applicable until November 2024) and allocating proportionally to the
New Mexico electric investor-owned utilities and participating cooperatives. As
required under the Community Solar Act, on March 30, 2022, the NMPRC issued an
order that adopted a rule on the administration of the Community Solar Act
program. The rule requires utilities to file proposed community solar tariffs
with the NMPRC within 60 days from the publication of the rule. A number of
motions for rehearing and requests for clarification were filed between April 7
and May 2, 2022. On May 18, 2022, the NMPRC issued an order partially granting
motions for rehearing, reconsideration and clarification and staying
implementation pending further rulemaking. On June 16, 2022, PNM requested
clarification related to the existing interconnection queue, which would not
delay implementation of the Community Solar Act program. On July 12, 2022, the
NMPRC provided notice of publication of its final rule in the New Mexico
Register, starting the 60-day clock for utilities to file their proposed
community solar tariffs, forms and other relevant agreements. On September 14,
2022, PNM filed Community Solar tariffs. On October 12, 2022, the NMPRC issued
an order to suspend PNM's and two other investor-owned utilities tariffs and
required the utilities to file information Staff has identified as necessary for
a complete evaluation of the tariffs but did not appoint a hearing examiner or
schedule a public hearing. Another investor-owned utility has filed an appeal
with the NM Supreme Court seeking review of the NMPRC's decisions. PNM cannot
predict the outcome of the pending matters. See Note 12.

Advanced Metering - Currently, TNMP has approximately 257,000 advanced meters
across its service territory. Beginning in 2019, the majority of costs
associated with TNMP's AMS program are being recovered through base rates. On
July 14, 2021, TNMP filed a request with the PUCT to consider and approve its
final reconciliation of the costs spent on the deployment of AMS from April 1,
2018 through December 31, 2018 of $9.0 million, and approve appropriate carrying
charges until full collection. The PUCT approved substantially all costs on
February 10, 2022. On October 2, 2020, TNMP filed an application with the PUCT
for authorization to implement necessary technological upgrades of approximately
$46 million to its AMS program by the first quarter of 2023, which the PUCT
approved on January 14, 2021. TNMP will seek recovery of the investment
associated with the upgrade in a future general rate proceeding or DCOS filing.
PNM's Grid Modernization Application includes proposals for installation and
deployment of advanced metering infrastructure investments. See Note 12.

Rate Riders and Interim Rate Relief - The PUCT has approved mechanisms that
allow TNMP to recover capital invested in transmission and distribution projects
without having to file a general rate case. The PUCT also approved rate riders
that allow TNMP to recover amounts related to energy efficiency and third-party
transmission costs. The NMPRC has approved PNM recovering fuel costs through the
FPPAC, as well as rate riders for renewable energy, energy efficiency and the
TEP. These mechanisms allow for more timely recovery of investments.

FERC Regulation

Rates PNM charges wholesale transmission customers are subject to traditional
rate regulation by FERC. Rates charged to wholesale electric transmission
customers, other than customers on the Western Spirit Line described below, are
based on a formula rate mechanism pursuant to which rates for wholesale
transmission service are calculated annually in accordance with an approved
formula. The formula includes updating cost of service components, including
investment in plant and operating
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expenses, based on information contained in PNM's annual financial report filed
with FERC, as well as including projected transmission capital projects to be
placed into service in the following year. The projections included are subject
to true-up. Certain items, including changes to return on equity and
depreciation rates, require a separate filing to be made with FERC before being
included in the formula rate.

In May 2019, PNM filed an application with FERC requesting approval to purchase
and provide transmission service on the Western Spirit Line. All necessary
approvals were obtained. In December 2021, PNM completed the purchase of the
Western Spirit Line and service under related transmission service agreements
was initiated using an incremental rate that is separate from the formula rate
mechanism described above.

Delivering At or Above Industry-Average Earnings and Dividend Growth

PNMR's financial objective to deliver at or above industry-average earnings and
dividend growth enables investors to realize the value of their investment in
the Company's business. Earnings growth is based on ongoing earnings, which is a
non-GAAP financial measure that excludes from GAAP earnings certain
non-recurring, infrequent, and other items that are not indicative of
fundamental changes in the earnings capacity of the Company's operations. PNMR
uses ongoing earnings to evaluate the operations of the Company and to establish
goals, including those used for certain aspects of incentive compensation, for
management and employees.

PNMR targets a dividend payout ratio in the 50% to 60% range of its ongoing
earnings. PNMR expects to provide at or above industry-average dividend growth
in the near-term. The Board will continue to evaluate the dividend on an annual
basis, considering sustainability and growth, capital planning, and industry
standards.

Under the terms of the Merger Agreement, PNMR has agreed not to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its equity securities, or make any
other actual, constructive or deemed distribution in respect of any equity
securities (except (i) PNMR may continue the declaration and payment of planned
regular quarterly cash dividends on PNMR common stock for each quarterly period
ended after the date of the Merger Agreement, which for any fiscal quarter in
2022 shall not exceed $0.3475, with usual record and payment dates in accordance
with past dividend practice, and (ii) for any cash dividend or cash distribution
by a wholly-owned subsidiary of PNMR to PNMR or another wholly-owned subsidiary
of PNMR).

The Board approved the following increases in the indicated annual common stock
dividend:

                         Approval Date        Percent Increase

                       December 2020                6.5%
                       December 2021                6.1%

Maintaining Investment Grade Credit Ratings

The Company is committed to maintaining investment grade credit ratings in order
to reduce the cost of debt financing and to help ensure access to credit
markets, when required. On February 10, 2022, Moody's downgraded TNMP's issuer
rating from A3 to Baa1 and changed the outlook from negative to stable. See the
subheading Liquidity included in the full discussion of Liquidity and Capital
Resources below for the specific credit ratings for PNMR, PNM, and TNMP. All of
the credit ratings issued by both Moody's and S&P on the Company's debt continue
to be investment grade.

Business Focus

To achieve its business objectives, focus is directed in key areas: Safe,
Reliable and Affordable Power; Utility Plant and Strategic Investments;
Environmentally Responsible Power; and Customer, Stakeholders, and Community
Engagement. The Company works closely with its stakeholders to ensure that
resource plans and infrastructure investments benefit from robust public
dialogue and balance the diverse needs of our communities. Equally important is
the focus of PNMR's utilities on customer satisfaction and community engagement.

Safe, Reliable, and Affordable Power

Safety is the first priority of our business and a core value of the Company.
PNMR utilizes a Safety Management System to provide clear direction, objectives
and targets for managing safety performance and minimizing risks and empowers
employees to "Be the Reason Everyone Goes Home Safe".

PNMR measures reliability and benchmark performance of PNM and TNMP against
other utilities using industry-standard metrics, including System Average
Interruption Duration Index ("SAIDI") and System Average Interruption Frequency
Index ("SAIFI"). PNM's and TNMP's investment plans include projects designed to
support reliability and reduce
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the amount of time customers are without power.

PNMR and its utilities are aware of the important roles they play in enhancing
economic vitality in their service territories. Management believes that
maintaining strong and modern electric infrastructure is critical to ensuring
reliability and supporting economic growth. When contemplating expanding or
relocating their operations, businesses consider energy affordability and
reliability to be important factors. PNM and TNMP strive to balance service
affordability with infrastructure investment to maintain a high level of
electric reliability and to deliver a safe and superior customer experience.
Investing in PNM's and TNMP's infrastructure is critical to ensuring reliability
and meeting future energy needs. Both utilities have long-established records of
providing customers with safe and reliable electric service.

The Company continues to closely monitor developments and has taken and
continues to take steps to mitigate the potential risks related to the COVID-19
pandemic. The Company has assessed and updated its existing business continuity
plans in response to the impacts of the pandemic through crisis team meetings
and working with other utilities and operators. The Company has worked to
protect the safety of its employees using a number of measures, including
minimizing exposure to other employees and the public and supporting flexible
arrangements for all applicable job functions. The Company is also working with
its suppliers to manage the impacts to its supply chain and remains focused on
the integrity of its information systems and other technology systems used to
run its business. However, the Company cannot predict the extent or duration of
the ongoing COVID-19 pandemic, its effects on the global, national or local
economy, or on the Company's financial position, results of operations, and cash
flows. The Company will continue to monitor developments related to COVID-19 and
will remain focused on protecting the health and safety of its customers,
employees, contractors, and other stakeholders, and on its objective to provide
safe, reliable, affordable and environmentally responsible power. As discussed
in Note 12, both PNM and TNMP suspended disconnecting certain customers for past
due bills, waived late fees during the pandemic, and have been provided
regulatory mechanisms to recover these and other costs resulting from COVID-19.
See additional discussion below regarding the Company's customer, community, and
stakeholder engagement in response to COVID-19.

EIM

On April 1, 2021, PNM joined and began participating in the EIM. The EIM is a
real-time wholesale energy trading market operated by the CAISO that enables
participating electric utilities to buy and sell energy. The EIM aggregates the
variability of electricity generation and load for multiple balancing authority
areas and utility jurisdictions. In addition, the EIM facilitates greater
integration of renewable resources through the aggregation of flexible resources
by capturing diversity benefits from the expanding geographic footprint and the
expanded potential uses for those resources. PNM completed a cost-benefit
analysis, which indicated participation in the EIM would provide substantial
benefits to retail customers. In 2018, PNM filed an application with the NMPRC
requesting, among other things, to recover initial capital investments and
authorization to establish a regulatory asset to recover other expenses that
would be incurred in order to join the EIM. The NMPRC approved the establishment
of a regulatory asset but deferred certain rate making issues, including but not
limited to issues related to implementation and ongoing EIM costs and savings,
the prudence and reasonableness of costs to be included in the regulatory asset,
and the period over which costs would be charged to customers until PNM's next
general rate case filing. PNM has experienced an aggregate of $35.6 million in
cost savings to customers through participation in the EIM, which includes $16.6
million and $23.0 million occurring in the three and nine months ended September
30, 2022. PNM passes the cost savings through to customers under PNM's FPPAC.

Utility Plant and Strategic Investments

Utility Plant Investments - During the 2020 and 2021 periods, PNM and TNMP
together invested $1.6 billion in utility plant, including substations, power
plants, nuclear fuel, and transmission and distribution systems. New Mexico's
clean energy future depends on a reliable, resilient, secure grid to deliver an
evolving mix of energy resources to customers. PNM has launched a capital
initiative, which emphasizes new investments in its transmission and
distribution infrastructure with three primary objectives: delivering clean
energy, enhancing customer satisfaction and increasing grid resilience. Projects
are aimed at advancing the infrastructure beyond its original architecture to a
more flexible and redundant system accommodating growing amounts of intermittent
and distributed generation resources and integrating evolving technologies that
provide long-term customer value. In addition, projects included in the Grid
Modernization Application improve customers' ability to customize their use of
energy and modernize its electricity grid through infrastructure and technology
improvements. See the subheading Capital Requirements included in the full
discussion of Liquidity and Capital Resources below for additional discussion of
the Company's projected capital requirements.

Strategic Investments - In 2017, PNMR Development and AEP OnSite Partners
created NMRD to pursue the acquisition, development, and ownership of renewable
energy generation projects, primarily in the state of New Mexico. Abundant
renewable resources, large tracts of affordable land, and strong government and
community support make New Mexico a favorable location for renewable generation.
New Mexico ranks third in the Nation for energy potential from solar power
according to the Nebraska Department of Energy & Energy Sun Index and ranks
third in the Nation for land-based wind capacity according to the U.S. Office of
Energy Efficiency and Renewable Energy. PNMR Development and AEP OnSite Partners
each have a 50% ownership interest in NMRD. Through NMRD, PNMR anticipates being
able to provide additional renewable generation solutions to customers within
and surrounding its regulated jurisdictions through partnering with a
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subsidiary of one of the United States' largest electric utilities. As of
September 30, 2022, NMRD's renewable energy capacity in operation was 135.1 MW,
which includes 130 MW of solar-PV facilities to supply energy to the Meta data
center located within PNM's service territory, 1.9 MW to supply energy to
Columbus Electric Cooperative located in southwest New Mexico, 2.0 MW to supply
energy to the Central New Mexico Electric Cooperative, and 1.2 MW of solar-PV
facilities to supply energy to the City of Rio Rancho, New Mexico. In addition,
the NMPRC approved PNM to enter into a 50 MW solar PPA to service the Meta data
center, which will be owned by NMRD.

Integrated Resource Plan

NMPRC rules require that investor-owned utilities file an IRP every three years.
The IRP is required to cover a 20-year planning period and contain an action
plan covering the first four years of that period. On September 14, 2022 and
November 2, 2022, the NMPRC adopted revisions to the IRP Rule. The revisions
revamp and modernize the planning process to accommodate increased stakeholder
involvement. See additional discussion of the NMPRC adopted revision to the IRP
rule in Note 12.

NMPRC rules required PNM to file its 2020 IRP in July 2020. In April 2020, the
NMPRC approved PNM's request to extend the deadline to file its 2020 IRP until
six months after the NMPRC issues a final order approving replacement resources
in PNM's SJGS Abandonment Application. On January 29, 2021, PNM filed its 2020
IRP. The plan focuses on a carbon-free electricity portfolio by 2040 that would
eliminate coal at the end of 2024. This includes replacing the power from San
Juan with a mix of approved carbon-free resources and the plan to exit Four
Corners at the end of 2024 (subject to regulatory approval). The plan highlights
the need for additional investments in a diverse set of resources, including
renewables to supply carbon-free power, energy storage to balance supply and
demand, and efficiency and other demand-side resources to mitigate load growth.
See additional discussion regarding PNM's 2020 IRP filing in Note 12.

In the second quarter of 2022, PNM initiated its 2023 IRP process which will
cover the 20-year planning period from 2023 through 2043. Consistent with
historical practice, PNM will seek public input from interested parties as part
of this process. PNM expects to issue a draft of its IRP by March 2023 and to
submit its final 2023 IRP to the NMPRC by July 2023.

Environmentally Responsible Power PNMR has a long-standing record of environmental stewardship. PNM's environmental focus is in three key areas:

•Developing strategies to provide reliable and affordable power while transitioning to a 100% emissions-free generating portfolio by 2040 •Preparing PNM's system to meet New Mexico's increasing renewable energy requirements as cost-effectively as possible •Increasing energy efficiency participation

PNMR's corporate website (www.pnmresources.com) includes a dedicated section
providing key environmental and other sustainability information related to
PNM's and TNMP's operations and other information that collectively demonstrates
the Company's commitment to ESG principles. This information highlights plans
for PNM to be coal-free by 2024 (subject to regulatory approval) and to achieve
an emissions-free generating portfolio by 2040.

In February 2022, PNM named its first Chief Sustainability Officer. The Chief
Sustainability Officer is responsible for developing and implementing the
Company's business strategy and positions on environmental and sustainability
policy issues and is charged with establishing organization-wide policies,
strategies, goals, objectives and programs that advance sustainability and
ensure compliance with regulations. The role serves as the primary contact with
various regulatory and stakeholder agencies on environmental matters. In
addition, the role leads environmental justice work, incorporating impacts to
tribal, worker and affected communities and advance ESG reporting.

On September 21, 2020, PNM announced an agreement to partner with Sandia
National Laboratories in research and development projects focused on energy
resiliency, clean energy, and national security. The partnership demonstrates
PNMR's commitment to ESG principles and its support of projects that further its
emissions-free generation goals and plans for a reliable, resilient, and secure
grid to deliver New Mexico's clean energy future. PNM also recently joined the
Electric Power Research Institute ("EPRI") Climate READi (REsilience and
ADaptation) Initiative, a three-year initiative to develop a comprehensive and
consistent approach to physical climate risk and facilitate the analysis and
application of appropriate climate data among all stakeholders to enhance the
planning, design and operation of a resilient power system.

The Infrastructure Investment and Jobs Act (IIJA), also commonly known as the
Bipartisan Infrastructure Law ("BIL"), was signed into law on November 15, 2021.
This Act represents a "once-in-a-generation" investment designed to modernize
and upgrade America's infrastructure. The BIL includes historic investments to
upgrade the transmission and distribution systems to improve reliability and
resilience, and to facilitate the deployment of more affordable and cleaner
energy across the country. In addition to the recent filing of its Grid
Modernization Application with the NMPRC, the Company is currently
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monitoring the release of grant opportunities by the U.S. Department of Energy
and the State Energy, Minerals and Natural Resources Department, to determine if
it will apply for funding to supplement the investment in the Grid Modernization
Application.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022
(the "IRA") into law. The IRA will provide significant benefits for PNMR and its
customers by extending and enhancing clean energy incentives such as the
investment tax credit and production tax credit. As the Company continues its
transition away from carbon emitting sources, these credits will reduce the cost
of renewable investments. In addition, the IRA includes a new production tax
credit for existing nuclear facilities that is expected to create an added
benefit for PNM's ownership in the carbon-free PVNGS. Other IRA provisions will
encourage transportation electrification with new electric vehicle credits and
added incentives in vehicle charging infrastructure.

Electric Vehicles

PNMR is building upon its ESG goal of 100% emissions-free generation by 2040
with plans for additional emissions reductions through the electrification of
its vehicle fleet. Growing the number of electric vehicles within the Company's
fleet will benefit the environment and lower fuel costs furthering the
commitment to ESG principles. Under the commitment, existing fleet vehicles will
be replaced as they are retired with an increasing percentage of electric
vehicles. The new goals call for 25% of all light duty fleet purchases to be
electric by 2025 and 50% to be electric by 2030.

To demonstrate PNMR's commitment to increase the electrification of vehicles in
its service territory, PNM filed a TEP with the NMPRC on December 18, 2020. The
TEP supports customer adoption of electric vehicles by focusing on addressing
the barriers to electric vehicle adoption and encourage use. PNM's proposed
program budget will be dedicated to low and moderate income customers by
providing rebates to both residential and non-residential customers towards the
purchase of chargers and/or behind-the-meter infrastructure. On November 10,
2021, the NMPRC issued a final order approving PNM's TEP. See Note 12.

In December 2021, PNM announced that it will be joining the National Electric
Highway Coalition, which plans to build fast-charging ports along major U.S.
travel corridors. The coalition, with approximately 50 investor-owned electric
companies is committed to providing electric vehicle (EV) fast charging ports
that will allow the public to drive EVs with confidence throughout the country's
major roadways by the end of 2023.

Other Environmental Matters

Four Corners may be required to comply with environmental rules that affect
coal-fired generating units, including regional haze rules and the ETA. On June
19, 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and
revised the implementing regulations for all emission guidelines issued under
the CAA Section 111(d). On January 19, 2021, the DC Circuit issued an opinion
vacating and remanding the ACE Rule, holding that it was based on a
misconstruction of Section 111(d) of the CAA, but stayed its mandate for vacatur
of the repeal of the Clean Power Plan to ensure that the now-outdated rule would
not become effective. On January 27, 2021, President Biden signed an executive
order requiring a review of environmental regulations issued under the Trump
Administration, which will include a review of the ACE Rule. The U.S. Supreme
Court granted four petitions for certiorari seeking review of the DC Circuit's
decision, and oral arguments in the case were held on February 28, 2022 and on
June 30, 2022, the US Supreme Court ruled in the case. Their ruling states that
EPA overstepped its authority under the Clean Power Plan by requiring generation
shifting. Relying upon the Major Question Doctrine, the US Supreme Court found
no clear statement in the CAA that would authorize EPA to force the power sector
to shift from coal-fired power plants to gas-fired power plants and renewable
energy resources. The ruling has an impact on EPA's current drafting of a new
rule to replace the ACE Rule, which is expected to be published in March 2023.

Renewable Energy

PNM's renewable procurements include utility-owned solar capacity, as well as
solar, wind and geothermal energy purchased under PPAs. As of September 30,
2022, PNM has 158 MW of utility-owned solar capacity in operation. In addition,
PNM purchases energy from a customer-owned distributed solar generation program
that had an installed capacity of 228.5 MW at September 30, 2022. PNM also owns
the 500 KW PNM Prosperity Energy Storage Project. The project was one of the
first combinations of battery storage and solar-PV energy in the nation and
involved extensive research and development of advanced grid concepts. The
facility also was the nation's first solar storage facility fully integrated
into a utility's power grid. PNM also purchases the output from New Mexico Wind,
a 200 MW wind facility, and the output of Red Mesa Wind, an existing 102 MW wind
energy center. PNM's 2020 renewable energy procurement plan was approved by the
NMPRC in January 2020 and includes a PPA to procure 140 MW of renewable energy
and RECs from La Joya Wind II that became operational in June 2021. Under the
Solar Direct program discussed above, PNM procures renewable energy from 50 MW
of solar-PV facilities under a 15-year PPA. The NMPRC approved the portfolio to
replace the retirement of SJGS resulting in PNM executing solar PPAs of 650 MW
combined with 300 MW of battery storage agreements. In addition, the PVNGS
Leased Interest Abandonment Application approved by the NMPRC includes a 300 MW
solar PPA combined with a 300 MW
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battery storage agreement. The majority of these renewable resources are key
means for PNM to meet the RPS and related regulations that require PNM to
achieve prescribed levels of energy sales from renewable sources, including
those set by the recently enacted ETA, without exceeding cost requirements. See
additional discussion of the ETA and PNM's Abandonment Applications in Notes 11
and 12.

As discussed in Strategic Investments above, PNM is currently purchasing the
output of 130 MW of solar capacity from NMRD that is used to serve the Meta data
center which includes two 25-year PPAs to purchase renewable energy and RECs
from an aggregate of approximately 100 MW of capacity from two solar-PV
facilities constructed by NMRD to supply power to Meta, Inc. Additionally, PNM
has entered into three separate 25-year PPAs to purchase renewable energy and
RECs to be used by PNM to supply additional renewable power to the Meta data
center. These PPAs include the purchase of power and RECs from two wind projects
totaling 216 MW and a 50 MW solar-PV project which began commercial operations
in June 2022. In addition, the NMPRC issued an order that will allow PNM to
service the Meta data center for an additional 190 MW of solar PPA combined with
50 MW of battery storage and a 50 MW solar PPA.

PNM will continue to procure renewable resources while balancing the impact to
customers' electricity costs in order to meet New Mexico's escalating RPS and
carbon-free resource requirements.

Energy Efficiency

Energy efficiency plays a significant role in helping to keep customers'
electricity costs low while meeting their energy needs and is one of the
Company's approaches to supporting environmentally responsible power. PNM's and
TNMP's energy efficiency and load management portfolios continue to achieve
robust results. In 2021, incremental energy saved as a result of new
participation in PNM's portfolio of energy efficiency programs was 107 GWh. This
is equivalent to the annual consumption of approximately 12,689 homes in PNM's
service territory. PNM's load management and annual energy efficiency programs
also help lower peak demand requirements. In 2021, TNMP's incremental energy
saved as a result of new participation in TNMP's energy efficiency programs is
estimated to be approximately 19 GWh. This is equivalent to the annual
consumption of approximately 2,469 homes in TNMP's service territory. TNMP's
High-Performance Homes residential new construction energy efficiency program
was honored for the sixth year in a row by ENERGY STAR. This recognition
includes the program's fourth straight Partner of the Year Sustained Excellence
Award. For information on PNM's and TNMP's energy efficiency filing with the
NMPRC and PUCT see Note 12.

Water Conservation and Solid Waste Reduction

PNM continues its efforts to reduce the amount of fresh water used to make
electricity (about 35% more efficient than in 2007). Continued growth in PNM's
fleet of solar and wind energy sources, energy efficiency programs, and
innovative uses of gray water and air-cooling technology have contributed to
this reduction. Water usage has continued to decline as PNM has substituted less
fresh-water-intensive generation resources to replace SJGS Units 2 and 3
starting in 2018, as water consumption at that plant has been reduced by
approximately 50%. As the Company moves forward with its mission to achieve 100%
carbon-free generation by 2040, it expects that more significant water savings
will be gained. Shutting down SJGS in 2022 and exiting Four Corners in 2024
(subject to regulatory approval) will allow the Company to reach our goals for
reduced freshwater use by 80% by 2035 and 90% by 2040 from 2005 levels. Focusing
on responsible stewardship of New Mexico's scarce water resources improves PNM's
water-resilience in the face of persistent drought and ever-increasing demands
for water to spur the growth of New Mexico's economy.

In addition to the above areas of focus, the Company is working to reduce the
amount of solid waste going to landfills through increased recycling and
reduction of waste. In 2021, 18 of the Company's 23 facilities met the solid
waste diversion goal of a 65% diversion rate. The Company expects to continue to
do well in this area in the future.

Customer, Stakeholder, and Community Engagement

Another key element of the Company's commitment to ESG principles is fostering
relationships with its customers, stakeholders, and communities. The Company
strives to deliver a superior customer experience. Through outreach,
collaboration, and various community-oriented programs, the Company has
demonstrated a commitment to building productive relationships with
stakeholders, including customers, community partners, regulators, intervenors,
legislators, and shareholders. In the third quarter of 2022, PNM made payments
of $19.8 million to promote economic development in areas impacted by the
retirement of SJGS. In December 2021, PNMR was named, for the second consecutive
year, to Newsweek's list of America's Most Responsible Companies highlighting
companies in areas of ESG. PNM continues to focus its efforts to enhance the
customer experience through customer service improvements, including enhanced
customer service engagement options, strategic customer outreach, and improved
communications. These efforts are supported by market research to understand the
varying needs of customers, identifying and establishing valued services and
programs, and proactively communicating and engaging with customers. In the 2021
fourth quarter J.D. Power overall customer satisfaction results, PNM
outperformed the West Midsize industry average by one point. In 2022, PNM and
the utility industry as a whole, have experienced a decline in
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customer satisfaction as measured by J.D. Power. However, PNM remains focused on
continuously improving its customers' experience at every touchpoint and placing
greater focus on customer assistance through economic uncertainty.

The Company has leveraged a number of communications channels and strategic
content to better serve and engage its many stakeholders. PNM's website
www.pnm.com, provides the details of major regulatory filings, including general
rate requests, as well as the background on PNM's efforts to maintain
reliability, keep prices affordable, and protect the environment. The Company's
website is also a resource for information about PNM's operations and community
outreach efforts, including plans for building a sustainable energy future for
New Mexico and to transition to an emissions-free generating portfolio by 2040.
PNM has also leveraged social media in communications with customers on various
topics such as education, outage alerts, safety, customer service, and PNM's
community partnerships in philanthropic projects. As discussed above, PNMR's
corporate website, www.pnmresources.com, includes a dedicated section providing
additional information regarding the Company's commitment to ESG principles and
other sustainability efforts.

With reliability being the primary role of a transmission and distribution
service provider in Texas' deregulated market, TNMP continues to focus on
keeping end-users updated about interruptions and to encourage consumer
preparation when severe weather is forecasted. In both 2021 and 2022, TNMP
provided 30-person teams in support of other utilities that experienced
significant damage to their transmission and distribution system as a result of
Hurricane Ida and Hurricane Ian. TNMP has been honored by the Edison Electric
Institute four times since 2012 for its assistance to out-of-state utilities
affected by hurricanes. TNMP has also been honored twice for hurricane response
in its own territory.

Local relationships and one-on-one communications remain two of the most
valuable ways both PNM and TNMP connect with their stakeholders. Both companies
maintain long-standing relationships with governmental representatives and key
electricity consumers to ensure that these stakeholders are updated on Company
investments and initiatives. Key electricity consumers also have dedicated
Company contacts that support their important service needs.

Another demonstration of the Company's commitment to ESG principles is the
Company's tradition of supporting the communities it serves in New Mexico and
Texas. This support extends beyond corporate giving and financial donations from
the PNM Resources Foundation to also include collaborations on community
projects, customer low-income assistance programs, and employee volunteerism.

During the three years ending December 31, 2021, corporate giving contributed
$10.4 million to civic, educational, environmental, low income, and economic
development organizations. In 2022, corporate giving will maintain this
strategic focus and will continue to highlight corporate citizenship through
active involvement with sponsorships demonstrating PNM's commitment to the
community. In addition, emergency relief funds in 2022 supported non-profits
providing response to the fires in northern and southern New Mexico. PNMR
recognizes its responsibility to support programs and organizations that enrich
the quality of life across its service territories and seeks opportunities to
further demonstrate its commitment in these areas as needs arise. In response to
COVID-19 community needs, PNMR donated to an Emergency Action Fund in
partnership with key local agencies to benefit approximately ninety nonprofits
and small businesses facing challenges due to lack of technology, shifting
service needs, and cancelled fundraising events. While its service territory
does not include the Navajo Nation, PNM's operations include generating
facilities and employees in this region. The PNM Navajo Nation Workforce
Training Scholarship Program provides support for Navajo tribal members and
encourages the pursuit of education and training in existing and emerging jobs
in the communities in which they live. In 2019, PNM invested an additional
$500,000 into this scholarship program to further assist in the development and
education of the Navajo Nation workforce. PNM has invested in paid summer
college engineering internship programs for American Indian students available
in the greater Albuquerque area, established the PNM Pueblo Education
Scholarship Endowment to invest in higher education for Native American Indian
students, and supported the Coalition to Stop Violence Against Native Women. PNM
also continues to partner in the Light up Navajo project, piloted in 2019 and
modeled after mutual aid to connect homes without electricity to the power grid.
PNM has also partnered with key local organizations to initiate funding for
programs focused on diversity, equity, and inclusion.

Another important outreach program is tailored for low-income customers and
includes the PNM Good Neighbor Fund to provide customer assistance with their
electric utility bills. COVID-19 has increased the needs of these customers
along with customers who may not otherwise need to seek assistance. In addition
to the suspension of residential customer disconnections from April 2020 through
August 2021 and the expansion of customer payment plans, PNM responded with
increased communications through media outlets and customer outreach to connect
customers with nonprofit community service providers offering financial
assistance, food, clothing, medical programs, and services for seniors. As a
result of these communication efforts, 4,147 families in need received emergency
assistance through the PNM Good Neighbor Fund during 2021. Additionally, PNM has
worked closely with the New Mexico Department of Finance and Administration to
implement strategies ensuring customers receive rent benefits, including utility
bill assistance, from the Emergency Rental Assistance Program ("ERAP"). As a
result of these efforts, the ERAP has paid over $6.0 million in customer arrears
since the launch of the program in March 2021. In the nine months ended
September 30, 2022, the PNM Good Neighbor Fund has awarded approximately 2,922
families with a combined $0.5 million.

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Additionally, as a part of corporate giving, on October 1, 2020, PNM introduced
$2.0 million in funding for the COVID Customer Relief Programs which support
income-qualified residential customers and small business customers who have
been impacted by the financial challenges created by COVID-19 and have past due
electric bills. Qualified customers that pay a portion of their past-due balance
can receive assistance toward their remaining balance. In the nine months ended
September 30, 2022, the COVID Customer Relief Programs have provided $0.4
million in assistance to 2,506 families through 14 events.

Volunteerism is also an important facet of employee culture, keeping our
communities safer, stronger, smarter and more vibrant. The Company continues to
provide employees with COVID-safe projects through virtual, hybrid, and limited
group gatherings. Employees and nonprofits remained resilient, creative, and
innovative and responded to community need and selflessly gave their time and
talents to organizations throughout New Mexico and Texas completing 8,741
volunteer hours with nonprofits and other community organizations. Volunteers
also participate in a company-wide annual Day of Service at nonprofits across
New Mexico and Texas along with participation on a variety of nonprofit boards
and independent volunteer activities throughout the year. In addition, the
Company facilitated employee and customer Earth Day cleanups across PNM's
service territory resulting in over 2,200 gallons of trash collected.

In addition to the extensive engagement both PNM and TNMP have with nonprofit
organizations in their communities, the PNM Resources Foundation provides nearly
$1.4 million in grant funding each year across New Mexico and Texas. These
grants help nonprofits innovate or sustain programs to grow and develop their
mission, develop and implement environmental programs, and provide educational
opportunities. Beginning in 2020 and ending in 2022, the PNM Resources
Foundation is funding grants with a three-year focus on decreasing homelessness,
increasing access to affordable housing, reducing carbon emissions, and
increasing community safety. The PNM Resources Foundation continued to expand
its matching donation program and increased the annual amount of matching
donations available to each of its employees. PNM Resources Foundation awarded
additional grants to non-profits providing relief for the fires in northern and
southern New Mexico in the first half of 2022. The PNM Resources Foundation also
approved an increase to the amount awarded to employees, through the employee
crisis management fund, who have been affected by the wildfires. The maximum
amount was increased from $2,500 to $5,000 under a declared emergency such as
was done during Hurricane Harvey in Texas. In December 2021, the PNM Resources
Foundation was nominated for the Albuquerque Business First 2022 Philanthropy
Award.

Economic Factors

PNM - In the three and nine months ended September 30, 2022, PNM experienced a
decrease of 1.9% and 1.2% in weather normalized residential load. Weather
normalized commercial load experienced an increase of 3.1% and 2.5% compared to
2021. In addition, PNM experienced an increase in industrial load of 7.9% and
4.4% compared to 2021.

TNMP - In the three and nine months ended September 30, 2022, TNMP experienced
an increase of 2.1% and 2.8% in volumetric weather normalized retail load
compared to 2021. Weather normalized demand-based load, excluding retail
transmission consumers increased 20.9% and 11.7% in the three and nine months
ended September 30, 2022 compared to 2021.

Although the Company has experienced signs of recovery from state restrictions
related to COVID-19, it is unable to determine the duration or final impacts
from COVID-19 as discussed in more detail in Item 1A Risk Factors of the 2021
Annual Report on Form 10-K. The Company is also closely monitoring the impacts
on the capital markets of other macroeconomic conditions, including actions by
the Federal Reserve to address inflationary concerns or other market conditions,
and geopolitical activity. The Company has not experienced, nor does it expect
significant negative impacts to customer usage at PNM and TNMP resulting from
these economic impacts. However, if current economic conditions worsen, the
Company may be required to implement additional measures such as reducing or
delaying operating and maintenance expenses and planned capital expenditures.

Results of Operations

Net earnings attributable to PNMR were $153.8 million, or $1.78 per diluted
share in the nine months ended September 30, 2022 compared to $184.6 million, or
$2.14 per diluted share in 2021. Among other things, earnings in the nine months
ended September 30, 2022 benefited from higher transmission margin at PNM and
TNMP, higher volumetric and demand-based load at TNMP, warmer weather at PNM and
TNMP, higher distribution rates at TNMP, higher unregulated margin at PNM, AMS
carrying charges at TNMP, and lower costs related to the Merger at Corporate and
Other. These increases were more than offset by decreased performance on PNM's
NDT and coal mine reclamation investment securities, lower weather normalized
retail load at PNM, increased operational and maintenance expense, including
higher plant maintenance costs at PNM, higher employee related expense at PNM
and TNMP, increased depreciation and property taxes at PNM and TNMP due to
increased plant in service, and higher interest charges at PNM, TNMP and
Corporate and Other. Additional information on factors impacting results of
operations for each segment is discussed below under Results of Operations.


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Liquidity and Capital Resources

PNMR and PNM have revolving credit facilities with capacities of $300.0 million
and $400.0 million that currently expire in October 2024, with two one-year
extensions options that, if exercised, would extend the maturity to October
2026, subject to approval by a majority of the lenders. Both facilities provide
for short-term borrowings and letters of credit. In addition, PNM has a $40.0
million revolving credit facility with banks having a significant presence in
New Mexico that expires in May 2026, and TNMP has a $100.0 million revolving
credit facility, which expires in September 2024 with two one-year extension
options that, if exercised, would extend the maturity to September 2026, subject
to approval by a majority of the lenders. Total availability for PNMR on a
consolidated basis was $777.7 million at October 21, 2022. The Company utilizes
these credit facilities and cash flows from operations to provide funds for both
construction and operational expenditures. PNMR also has intercompany loan
agreements with each of its subsidiaries.

PNMR projects that its consolidated capital requirements, consisting of
construction expenditures and dividends, will total $5.2 billion for 2022 -
2026, including amounts expended through September 30, 2022. These construction
expenditures include expenditures for PNM's capital initiative that includes
investments in transmission and distribution infrastructure to deliver clean
energy, enhance customer satisfaction, and increase grid resilience.
Construction expenditures also include investments proposed in PNM Grid
Modernization Application.

To fund capital spending requirements to meet growth that balances earnings goals, credit metrics and liquidity needs, the Company has entered into a number of other financing arrangements. A complete listing of current financing arrangements is contained in Note 9 and Note 7 of the Notes to Consolidated Financial Statements in the 2021 Annual Reports on Form 10-K.

After considering the effects of these financings and the Company's short-term
liquidity position as of October 21, 2022, the Company has consolidated
maturities of long-term and short-term debt aggregating approximately $243.9
million through August 2023. In addition to internal cash generation, the
Company anticipates that it will be necessary to obtain additional long-term
financing in the form of debt refinancing, new debt issuances, and/or new equity
in order to fund its capital requirements during the 2022-2026 period. The
Company currently believes that its internal cash generation, existing credit
arrangements, and access to public and private capital markets will provide
sufficient resources to meet the Company's capital requirements for at least the
next twelve months. As of September 30, 2022 and October 21, 2022, the Company
was in compliance with its debt covenants.

                             RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto. Trends and
contingencies of a material nature are discussed to the extent known. Refer also
to Disclosure Regarding Forward Looking Statements and to Part II, Item 1A. Risk
Factors.

A summary of net earnings attributable to PNMR is as follows:

                                             Three Months Ended September 30,                        Nine Months Ended September 30,
                                          2022                2021            Change              2022               2021            Change
                                                                     (In millions, except per share amounts)
Net earnings attributable to PNMR    $      122.4          $ 113.3          $   9.1          $     153.8          $ 184.6          $ (30.8)
Average diluted common and common
equivalent shares                            86.1             86.1                -                 86.2             86.1              0.1
Net earnings attributable to PNMR
per diluted share                    $       1.42          $  1.32          $  0.10          $      1.78          $  2.14          $ (0.36)

The components of the change in net earnings attributable to PNMR are:

                                    Three Months Ended      Nine Months Ended
                                    September 30, 2022      September 30, 2022
                                                  (In millions)
            PNM                    $             10.6      $            (51.2)
            TNMP                                  3.5                    20.2

            Corporate and Other                  (5.0)                    0.2
            Net change             $              9.1      $            (30.8)

Information regarding the factors impacting PNMR's operating results by segment are set forth below.

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Segment Information

The following discussion is based on the segment methodology that PNMR's
management uses for making operating decisions and assessing performance of its
various business activities. See Note 2 for more information on PNMR's operating
segments.

PNM

Non-GAAP Financial Measures

PNM defines utility margin as electric operating revenues less cost of energy,
which consists primarily of fuel and purchase power costs. PNM believes that
utility margin provides a more meaningful basis for evaluating operations than
electric operating revenues since substantially all fuel and purchase power
costs are offset in revenues as those costs are passed through to customers
under PNM's FPPAC. Utility margin is not a financial measure required to be
presented and is considered a non-GAAP measure. PNM does not intend for utility
margin to represent any financial measure as defined by GAAP however, the
calculation of utility margin, as presented, most closely compares to gross
margin as defined by GAAP. Reconciliations between utility margin and gross
margin are presented below.

                                      Three Months Ended September 30,                         Nine Months Ended September 30,
                                   2022                2021            Change              2022                2021            Change
                                                                            (In millions)

Gross margin                  $      201.6          $ 176.7          $  24.9          $      421.3          $ 378.4          $  42.9

Energy production costs               34.5             32.4              2.1                 110.5            106.7              3.8
Transmission and distribution
costs                                 12.5             12.8             (0.3)                 37.7             34.9              2.8
Depreciation and amortization         45.4             42.7              2.7                 137.1            127.1             10.0
Utility margin                $      294.0          $ 264.6          $  29.4          $      706.7          $ 647.1          $  59.6

The following table summarizes the operating results for PNM:

                                          Three Months Ended September 30,                            Nine Months Ended September 30,
                                       2022                2021            Change                 2022                   2021             Change
                                                                                   (In millions)
Electric operating revenues       $      597.3          $ 435.5          $ 161.8          $    1,312.8               $ 1,030.7          $ 282.1
Cost of energy                           303.4            170.9            132.5                 606.1                   383.6            222.5
   Utility margin                        294.0            264.6             29.4                 706.7                   647.1             59.6
Operating expenses                       108.7            107.4              1.3                 335.2                   320.6             14.6
Depreciation and amortization             45.4             42.7              2.7                 137.1                   127.1             10.0
   Operating income                      139.9            114.6             25.3                 234.4                   199.4             35.0
Other income (deductions)                (10.6)             4.7            (15.3)                (71.2)                   24.1            (95.3)
Interest charges                         (15.5)           (12.5)            (3.0)                (44.6)                  (38.4)            (6.2)
   Segment earnings before income
taxes                                    113.9            106.8              7.1                 118.6                   185.0            (66.4)
Income (taxes)                           (12.1)           (15.5)             3.4                 (11.8)                  (26.2)            14.4
Valencia non-controlling interest         (4.2)            (4.2)               -                 (10.9)                  (11.6)             0.7
 Preferred stock dividend
requirements                              (0.1)            (0.1)               -                  (0.4)                   (0.4)               -
Segment earnings                  $       97.5          $  86.9          $  10.6          $       95.6               $   146.8          $ (51.2)




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The following table shows total GWh sales, including the impacts of weather, by
customer class and average number of customers:
                                               Three Months Ended September 30,                                      Nine Months Ended September 30,
                                                                               Percentage                                                            Percentage
                                      2022                  2021                 Change                    2022                  2021                  Change
                                                                                 (Gigawatt hours, except customers)
Residential                              993.0              994.9                      (0.2) %              2,557.4             2,577.1                      (0.8) %
Commercial                             1,089.8            1,048.1                       4.0                 2,778.8             2,701.8                       2.8
Industrial                               462.8              413.5                      11.9                 1,300.0             1,189.5                       9.3
Public authority                          66.5               67.9                      (2.1)                  165.6               172.6                      (4.1)
Economy energy service (1)               137.4              123.4                      11.3                   402.6               365.5                      10.2

Other sales for resale (2)             2,254.1            1,592.5                      41.5                 5,999.9             3,958.4                      51.6
                                       5,003.6            4,240.3                      18.0  %             13,204.3            10,964.9                      20.4  %
Average retail customers
(thousands)                              544.1              540.6                       0.6  %                543.1               539.8                       0.6  %



(1) PNM purchases energy for a large customer on the customer's behalf and
delivers the energy to the customer's location through PNM's transmission
system. PNM charges the customer for the cost of the energy as a direct pass
through to the customer with only a minor impact in utility margin resulting
from providing ancillary services.
(2) Increase in other sales for resale is the result of participation in the EIM
beginning in April 2021.

Operating Results - Three Months Ended September 30, 2022, compared to 2021

The following table summarizes the significant changes to gross margin:

                                                                                                     Three Months
                                                                                                         Ended
                                                                                                  September 30, 2022
                                                                                                        Change
Gross margin:                                                                                        (In millions)

               Utility margin (see below)                                                        $             29.4
               Depreciation and amortization (see below)                                                       (2.7)
               Higher plant maintenance costs at PVNGS and Four Corners, 

partially offset

               by lower costs at SJGS and gas-fired plants                                                     (1.2)
               Lower employee related and vegetation management expenses, 

partially offset

               by higher outside service expenses                                                               0.9
               Higher transmission line maintenance and rights-of-way 

expense including

               for the Western Spirit Line                                                                     (1.0)
               Other                                                                                           (0.5)
               Net Change                                                                        $             24.9

The following table summarizes the significant changes to utility margin:

                                                                                                Three Months
                                                                                                    Ended
                                                                                             September 30, 2022
                                                                                                   Change
Utility margin:                                                                                 (In millions)

               Retail customer usage/load - Weather normalized retail KWh sales
               increased 3.1% for commercial customers and 7.9% for industrial
               customers which was offset by decreased sales to residential customers
               of 1.9%                                                                      $                -
               Weather - Warmer weather in the third quarter of 2022                                       2.8
               Unregulated margin - Increased revenues driven by a higher price,
               partially offset by higher cost of energy associated with 65 MW of
               SJGS Unit 4                                                                                 7.0
               Transmission - Increase primarily due to higher revenues from the
               addition of new customers including on the Western Spirit Line, higher
               formula transmission rates, and higher volumes                                             19.2

               Rate riders - Includes renewable energy, FPPAC, and energy efficiency
               riders                                                                                      1.2
               Rate credits - NMPRC ordered rate credits (See Note 12)                                    (1.2)
               Other                                                                                       0.4
               Net Change                                                                   $             29.4


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The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:

                                                                                              Three Months
                                                                                                 Ended
                                                                                           September 30, 2022
                                                                                                 Change
Operating expenses:                                                                          (In millions)

                 Higher plant maintenance costs at PVNGS and Four Corners,
                 partially offset by lower costs at SJGS and gas-fired plants            $               1.2

                 Lower property taxes due to favorable settlement of 2022 property
                 values partially offset by increases in utility plant in service
                 including the Western Spirit Line                                                      (1.1)
                 Higher employee related and outside service expenses, partially
                 offset by lower vegetation management expenses                                          4.0
                 Higher transmission rights of way expense including for the
                 Western Spirit Line                                                                     0.4
                 2021 regulatory disallowance resulting from the PVNGS Leased
                 Interest Abandonment Application (Note 12)                                             (1.3)
                 Higher regulatory disallowance due to change in estimated
                 write-offs associated with SJGS BART determination and ownership
                 restructuring                                                                           0.3
                 2021 non-retail credit loss                                                            (0.8)
                 Decreased costs associated with the accelerated recovery of SNCRs
                 on SJGS Units 1 and 4                                                                  (1.0)
                 Other                                                                                  (0.4)
                 Net Change                                                              $               1.3

Depreciation and amortization:

                   Increased utility plant in service including the Western Spirit
                   Line                                                                  $       2.6

                   Other                                                                         0.1
                   Net Change                                                            $       2.7


Other income (deductions):

                   Decreased performance on investment securities in the NDT and
                   coal mine reclamation trusts                                           $     (17.7)
                   Lower trust expenses and higher interest income related to
                   investment securities in the NDT and coal mine reclamation
                   trusts                                                                            0.8
                   Lower charitable donations in 2022                                                0.2
                   Carrying charges on payments under the ETA for SJGS made in
                   advance of the Energy Transition Bonds (Note 12)                                  0.4
                   Higher non-service pension costs                                               1.1
                   Other                                                                         (0.1)
                   Net Change                                                             $     (15.3)


Interest charges:

               Issuance of $150.0 million SUNs in December 2021                             $      (1.0)

               Refinancing of $160.0 million SUNs in July 2021                                      0.2
               Higher interest on Term Loans                                                       (0.9)
               Higher interest on remarketed PCRBs                                                 (0.1)
               Interest on transmission customer deposits including the Western
               Spirit Transmission Line                                                            (1.0)
               Other                                                                               (0.2)
               Net Change                                                                   $      (3.0)


 Income (taxes) benefits:

                Higher segment earnings before income taxes                       $ (1.8)
                Higher amortization of federal excess deferred income taxes          4.4

                Other                                                                0.8
                Net Change                                                        $  3.4



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Operating Results - Nine Months Ended September 30, 2022 compared to 2021

The following table summarizes the significant changes to gross margin:

                                                                                                      Nine Months
                                                                                                         Ended
                                                                                                  September 30, 2022
                                                                                                        Change
Gross margin:                                                                                        (In millions)

               Utility margin (see below)                                                        $             59.6
               Depreciation and amortization (see below)                                                      (10.0)
               Higher plant maintenance costs at PVNGS and gas fired 

plants, partially

               offset by lower costs at SJGS and Four Corners                                                  (3.5)
               Higher outside service expenses, partially offset by lower 

employee related

               and vegetation management expenses                                                              (0.4)
               Higher transmission line maintenance and rights-of-way 

expense including

               for the Western Spirit Line                                                                     (2.4)
               Other                                                                                           (0.4)
               Net Change                                                                        $             42.9

The following table summarizes the significant changes to utility margin:

                                                                                                 Nine Months
                                                                                                    Ended
                                                                                             September 30, 2022
                                                                                                   Change
Utility margin:                                                                                 (In millions)

               Retail customer usage/load -Weather normalized retail KWh sales
               decreased 1.2% for residential customers, partially offset by
               increased sales of 2.5% to commercial customers and 4.4% to industrial
               customers                                                                    $             (0.6)
               Weather - Cooler weather in the first quarter and warmer weather in
               the third quarter was partially offset by milder weather in the second
               quarter                                                                                     2.2
               Transmission - Increase primarily due to higher revenues from the
               addition of new customers including on the Western Spirit Line, higher
               formula transmission rates, and higher volumes                                             51.4

               Rate riders - Includes renewable energy, FPPAC, and energy efficiency
               riders                                                                                     (2.3)

               Unregulated margin - Increased revenues driven by a higher price and
               lower cost of energy associated with 65 MW of SJGS Unit 4                                   9.4
               Rate credits - NMPRC ordered rate credits (See Note 12)                                    (1.2)
               Other                                                                                       0.7
               Net Change                                                                   $             59.6




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The following tables summarize the primary drivers for changes in operating
expenses, depreciation and amortization, other income (deductions), interest
charges, and income taxes:
                                                                                              Nine Months
                                                                                                 Ended
                                                                                          September 30, 2022
                                                                                                Change
Operating expenses:                                                                          (In millions)

                 Higher plant maintenance costs at PVNGS and gas fired plants,
                 partially offset by lower costs at SJGS and Four Corners                $              3.5

                 Higher property taxes due to increases in utility plant in
                 service including the Western Spirit Line partially offset by
                 favorable settlement property values                                                   1.6

                 Higher employee related and outside service expenses, partially
                 offset by lower vegetation management expenses                                         9.9
                 Higher transmission rights of way expense including for the
                 Western Spirit Line                                                                    1.0
                 2021 regulatory disallowance resulting from the PVNGS Leased
                 Interest Abandonment Application (Note 12)                                            (1.3)

                 Higher regulatory disallowance due to change in estimated
                 write-offs associated with SJGS BART determination and ownership
                 restructuring                                                                             1.7
                 Decreased costs associated with the accelerated recovery of SNCRs
                 on SJGS Units 1 and 4                                                                 (1.4)
                 2021 non-retail credit loss                                                           (0.8)
                 Other                                                                                  0.4
                 Net Change                                                              $             14.6

Depreciation and amortization:

                   Increased utility plant in service including the Western Spirit
                   Line                                                                  $       9.4
                   Other                                                                         0.6
                   Net Change                                                            $      10.0


Other income (deductions):

                   Decreased performance on investment securities in the NDT and
                   coal mine reclamation trusts                                           $    (100.2)
                   Lower trust expenses partially offset by lower interest income
                   related to investment securities in the NDT and coal mine
                   reclamation trusts                                                             0.8
                   Lower charitable donations in 2022                                             0.7
                   Carrying charges on payments under the ETA for SJGS made in
                   advance of the Energy Transition Bonds (Note 12)                                  0.4
                   Higher non-service pension costs                                               2.4
                   Other                                                                          0.6
                   Net Change                                                             $     (95.3)


Interest charges:

               Issuance of $150.0 million SUNs in Dec 2021                                  $      (3.1)
               Refinancing of $160.0 million SUNs in July 2021                                      2.2
               Higher interest on Term Loans                                                       (1.2)
               Higher interest on remarketed PCRBs                                                 (0.4)
               Interest on transmission customer deposits including the Western
               Spirit Transmission Line                                                            (3.3)
               Other                                                                               (0.4)
               Net Change                                                                   $      (6.2)

Income (taxes) benefits:

                Lower segment earnings before income taxes                        $ 16.7
                Lower amortization of federal excess deferred income taxes          (1.8)
                Other                                                               (0.5)

                Net Change                                                        $ 14.4



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TNMP

Non-GAAP Financial Measures

TNMP defines utility margin as electric operating revenues less cost of energy,
which consists of costs charged by third-party transmission providers. TNMP
believes that utility margin provides a more meaningful basis for evaluating
operations than electric operating revenues since all third-party transmission
costs are passed on to consumers through a transmission cost recovery factor.
Utility margin is not a financial measure required to be presented and is
considered a non-GAAP measure. TNMP does not intend for utility margin to
represent any financial measure as defined by GAAP however, the calculation of
utility margin, as presented, most closely compares to gross margin as defined
by GAAP. Reconciliations between utility margin and gross margin are presented
below.

                                        Three Months Ended September 30,                         Nine Months Ended September 30,
                                     2022                2021            Change              2022                2021            Change
                                                                             (In millions)

Gross margin                   $        67.6          $  60.4          $   7.2          $      172.3          $ 142.3          $  30.0

Transmission and distribution
costs                                    9.0              7.2              1.8                  23.5             21.3              2.2
Depreciation and amortization           25.0             23.0              2.0                  72.9             67.7              5.2
Utility margin                 $       101.6          $  90.6          $  11.0          $      268.7          $ 231.2          $  37.5

The following table summarizes the operating results for TNMP:

                                        Three Months Ended September 30,                         Nine Months Ended September 30,
                                     2022                2021            Change              2022                2021            Change
                                                                              (In millions)
Electric operating revenues     $      132.6          $ 119.0          $  13.6          $      360.9          $ 315.1          $  45.8
Cost of energy                          31.0             28.5              2.5                  92.2             83.9              8.3
Utility margin                         101.6             90.6             11.0                 268.7            231.2             37.5
Operating expenses                      32.8             28.7              4.1                  89.7             83.0              6.7
Depreciation and amortization           25.0             23.0              2.0                  72.9             67.7              5.2
Operating income                        43.8             38.8              5.0                 106.1             80.6             25.5
Other income                             2.4              1.1              1.3                   5.7              3.3              2.4
Interest charges                        (9.9)            (8.4)            (1.5)                (28.0)           (25.2)            (2.8)
Segment earnings before income
taxes                                   36.4             31.6              4.8                  83.8             58.7             25.1
Income (taxes)                          (4.9)            (3.6)            (1.3)                (11.3)            (6.3)            (5.0)
Segment earnings                $       31.4          $  27.9          $   3.5          $       72.5          $  52.3          $  20.2

The following table shows total sales, including the impacts of weather, by retail tariff consumer class and average number of consumers:

                                               Three Months Ended September 30,                                       Nine Months Ended September 30,
                                                                                Percentage                                                            Percentage
                                      2022                  2021                  Change                    2022                  2021                  Change

Volumetric load (1) (GWh)              1,107.5             1,024.4                       8.1  %              2,688.7             2,439.9                      10.2  %
Demand-based load (2) (MW)             5,961.5             5,469.7                       9.0  %             17,749.4            15,896.2                      11.7  %
Average retail consumers
(thousands) (3)                          268.5               264.1                       1.7  %                267.3               262.9                       1.7  %



(1) Volumetric load consumers are billed on KWh usage.
(2) Demand-based load includes consumers billed on monthly KW peak and also
includes retail transmission customers that are primarily billed under TNMP's
rate riders.
(3) TNMP provides transmission and distribution services to REPs that provide
electric service to their customers in TNMP's service territories. The number of
consumers above represents the customers of these REPs. Under TECA, consumers in
Texas have the ability to choose any REP to provide energy.


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Operating Results - Three Months Ended September 30, 2022, compared to 2021

The following table summarizes the significant changes to gross margin:

                                                                                                      Three Months
                                                                                                          Ended
                                                                                                   September 30, 2022
                                                                                                         Change
Gross margin:                                                                                         (In millions)

               Utility margin (see below)                                                         $             11.0
               Depreciation and amortization (see below)                                                        (2.0)
               Higher employee related, outside services expenses, and vegetation
               management expenses, excluding administrative costs                                              (1.7)
               Other                                                                                            (0.1)
               Net Change                                                                         $              7.2

The following table summarizes the significant changes to utility margin:

                                                                                                    Three Months
                                                                                                        Ended
                                                                                                 September 30, 2022
                                                                                                       Change
Utility margin:                                                                                     (In millions)

               Transmission rate relief - Transmission cost of service rate increases in
               September 2021, March 2022 and September 2022                                    $              4.8
               Distribution rate relief - Distribution cost of service rate increases in
               September 2021 and September 2022                                                               3.5
               Volumetric-based consumer usage/load - Weather normalized KWh sales
               increased 2.1%; the number of volumetric consumers increased 2.0%                               0.8
               Demand-based consumer usage/load - Weather normalized

demand-based MW

               sales for large commercial and industrial consumers

excluding retail

               transmission consumers increased 20.9% primarily due to new 

cryptocurrency

               loads                                                                                           2.4
               Weather - Warmer weather in the third quarter of 2022                                           2.3
               Rate Riders and other- Impacts of rate riders, including the

transmission

               cost recovery factor, energy efficiency rider, and rate case 

expense

               rider, which are partially offset in operating expenses and 

depreciation

               and amortization                                                                               (2.8)

               Net Change                                                                       $             11.0

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:

                                                                                                  Three Months
                                                                                                     Ended
                                                                                               September 30, 2022
                                                                                                     Change
Operating expenses:                                                                              (In millions)

                 Higher employee related, outside services expenses, and vegetation
                 management expenses                                                         $               3.4

                 Higher property taxes due to increased utility plant in service                             1.0
                 Higher capitalization of administrative and general and other
                 expenses due to higher construction expenditures in 2022                                   (1.3)

                 Higher energy efficiency expense and rate case

amortization which are

                 offset in utility margin                                                                    0.3
                 Other                                                                                       0.7
                 Net Change                                                                  $               4.1


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                                                                                               Three Months
                                                                                                  Ended
                                                                                            September 30, 2022
                                                                                                  Change
Depreciation and amortization:                                                                (In millions)

                   Increased utility plant in service                                     $               2.1

                   Decreased amortization related to rate riders offset in utility
                   margin and other                                                                      (0.1)
                   Net Change                                                             $               2.0


       Other income (deductions):

                         Higher CIAC                                         $ 0.6
                         Higher Equity AFUDC                                   0.4
                         AMS Reconciliation carrying charges (Note 12)         0.1
                         Other                                                 0.2

                         Net Change                                          $ 1.3


     Interest charges:

                 Issuance of $65.0 million first mortgage bonds in 2021      $ (0.2)
                 Issuance of $65.0 million first mortgage bonds in 2022        (0.7)
                 Issuance of $95.0 million first mortgage bonds in 2022        (0.6)

                 Net Change                                                  $ (1.5)


        Income (taxes) benefits:

                       Higher segment earnings before income taxes        $ (1.4)
                       Other                                                 0.1
                       Net Change                                         $ (1.3)

Operating Results - Nine Months Ended September 30, 2022 compared to 2021

The following table summarizes the significant changes to gross margin:

                                                                                                       Nine Months
                                                                                                          Ended
                                                                                                   September 30, 2022
                                                                                                         Change
Gross margin:                                                                                         (In millions)

               Utility margin (see below)                                                         $             37.5
               Depreciation and amortization (see below)                                                        (5.2)
               Higher employee related, outside services expenses, and vegetation
               management expenses, excluding administrative costs                                              (1.9)
               Other                                                                                            (0.4)
               Net Change                                                                         $             30.0



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The following table summarizes the significant changes to utility margin:

                                                                                                     Nine Months
                                                                                                        Ended
                                                                                                 September 30, 2022
                                                                                                       Change
Utility margin:                                                                                     (In millions)

               Transmission rate relief/load - Transmission cost of service rate
               increases in March 2021, September 2021, March 2022, and September 2022          $             14.8
               Distribution rate relief - Distribution cost of service rate 

increases in

September 2021 and September 2022                                                              10.9
               Volumetric-based consumer usage/load - Weather normalized KWh sales
               increased 2.8%; the number of volumetric consumers increased 2.8%                               2.2
               Demand-based consumer usage/load - Weather normalized

demand-based MW

               sales for large commercial and industrial consumers

excluding retail

               transmission consumers increased 11.7% primarily due to new 

cryptocurrency

               loads                                                                                           4.5
               Weather - Cooler weather in the first quarter and warmer 

weather in the

               second and third quarters                                                                       6.0
               Rate Riders and other- Impacts of rate riders, including the 

transmission

               cost recovery factor, energy efficiency rider, and rate case 

expense

               rider, which are partially offset in operating expenses and 

depreciation

               and amortization                                                                               (0.9)

               Net Change                                                                       $             37.5



The following tables summarize the primary drivers for changes in operating
expenses, depreciation and amortization, other income (deductions), interest
charges, and income taxes:
                                                                                              Nine Months
                                                                                                 Ended
                                                                                           September 30, 2022
                                                                                                 Change
Operating expenses:                                                                          (In millions)

                 Higher employee related, outside services expenses, and
                 vegetation management expenses                                          $               5.0
                 Higher property taxes due to increased utility plant in service                         2.9
                 Higher capitalization of administrative and general and other
                 expenses due to higher construction expenditures                                       (2.6)
                 Higher energy efficiency expense and rate case

amortization which

                 are offset in utility margin                                                            0.4

                 Other                                                                                   1.0
                 Net Change                                                              $               6.7

Depreciation and amortization:

                   Increased utility plant in service                                     $       5.5

                   Decreased amortization related to rate riders offset in utility
                   margin and other and other                                                    (0.3)
                   Net Change                                                             $       5.2


       Other income (deductions):

                         AMS Reconciliation carrying charges (Note 12)      $ 1.4
                         Higher CIAC                                          0.7
                         Higher Equity AFUDC                                  0.2
                         Other                                                0.1
                         Net Change                                         $ 2.4


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                                                                                             Nine Months
                                                                                                Ended
                                                                                         September 30, 2022
                                                                                               Change
Interest charges:                                                                           (In millions)

               Issuance of $65.0 million first mortgage bonds in 2021                   $             (1.0)
               Issuance of $65.0 million first mortgage bonds in 2022                                 (1.0)
               Issuance of $95.0 million first mortgage bonds in 2022                                 (0.6)
               Other                                                                                  (0.2)
               Net Change                                                               $             (2.8)


        Income (taxes) benefits:

                       Higher segment earnings before income taxes        $ (5.6)

                       Other                                                 0.6
                       Net Change                                         $ (5.0)



Corporate and Other

The table below summarizes the operating results for Corporate and Other:

                                        Three Months Ended September 30,                        Nine Months Ended September 30,
                                     2022               2021            Change              2022                2021            Change
                                                                              (In millions)
Electric operating revenues     $         -          $     -          $     -          $          -          $     -          $      -
Cost of energy                            -                -                -                     -                -                 -
  Utility margin                          -                -                -                     -                -                 -
Operating expenses                     (5.3)            (4.1)            (1.2)                (15.8)            (6.4)             (9.4)
Depreciation and amortization           6.2              5.7              0.5                  19.1             17.2               1.9
  Operating income (loss)              (1.0)            (1.7)             0.7                  (3.2)           (10.9)              7.7
Other income                            0.1                -              0.1                   0.2                -               0.2
Interest charges                       (9.2)            (2.3)            (6.9)                (17.4)            (9.7)             (7.7)
Segment (loss) before income
taxes                                 (10.1)            (4.0)            (6.1)                (20.4)           (20.5)              0.1
Income (taxes) benefit                  3.6              2.5              1.1                   6.0              6.0                 -
Segment (loss)                  $      (6.5)         $  (1.5)         $  (5.0)         $      (14.3)         $ (14.5)         $    0.2



Corporate and Other operating expenses shown above are net of amounts allocated
to PNM and TNMP under shared services agreements. The amounts allocated include
certain expenses shown as depreciation and amortization and other income
(deductions) in the table above. The changes in operating expense for the three
and nine months ended September 30, 2022 include decreases of $1.0 million and
$8.2 million in costs related to the Merger that were not allocated to PNM or
TNMP. Substantially all depreciation and amortization expense is offset in
operating expenses as a result of allocation of these costs to other business
segments.

Operating Results - Three Months Ended September 30, 2022 compared to 2021 The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:

                                                                                                Three Months
                                                                                                   Ended
                                                                                             September 30, 2022
                                                                                                   Change
Other income (deductions):                                                                     (In millions)

                   Decrease in donations and other contributions                           $               0.2
                   Lower equity method investment income from NMRD                                        (0.1)

                   Net Change                                                              $               0.1


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                                                                     Three Months
                                                                        Ended
                                                                  September 30, 2022
                                                                        Change
     Interest charges:                                              (In millions)

                 Higher interest on term loans                   $             (6.6)
                 Higher interest on short-term borrowings                      (0.3)

                 Net Change                                      $             (6.9)


Income (taxes) benefits:

                 Impact of difference in effective tax rates used by PNMR and its
                 subsidiaries in the calculation of income taxes in interim
                 periods                                                                 $      (0.3)
                 Higher segment loss before income taxes                                         1.5
                 Lower non-deductible Merger related costs                                       0.1
                 Higher investment tax credit amortization                                       0.1
                 Higher state income tax effective rate                                         (0.4)
                 Other                                                                           0.1
                 Net Change                                                              $       1.1

Operating Results - Nine Months Ended September 30, 2022 compared to 2021 The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:

                                                                                                Nine Months
                                                                                                   Ended
                                                                                             September 30, 2022
                                                                                                   Change
Other income (deductions):                                                                     (In millions)

                   Higher equity method investment income from NMRD                        $               0.1

                   Decrease in donations and other contributions                                           0.1
                   Net Change                                                              $               0.2


             Interest charges:

                         Higher interest on term loans                $ (9.8)
                         Lower interest on short-term borrowings         0.1

                         Repayment of PNMR 2018 SUNs                     2.0

                         Net Change                                   $ (7.7)


Income (taxes) benefits:

                 Impact of difference in effective tax rates used by PNMR and its
                 subsidiaries in the calculation of income taxes in interim
                 periods                                                                 $       0.9
                 Lower non-deductible merger related costs                                       0.8

                 Lower investment tax credit amortization                                       (0.8)
                 Higher state income tax effective rate                                         (0.9)
                 Net Change                                                              $         -



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