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EXHIBIT 10.132

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE APPLICATION OF
)
PUBLIC SERVICE COMPANY OF NEW MEXICO
)
FOR APPROVAL OF A CERTIFICATE OF
)
PUBLIC CONVENIENCE AND NECESSITY FOR
)
A 141 MW COMBUSTION TURBINE UNIT AND
) Case No. 05-00275-UT
THE CONVERSION OF THAT UNIT TO A 272 MW
)
COMBINED CYCLE GENERATOR.
)
 
)
PUBLIC SERVICE COMPANY OF NEW MEXICO,
)
 
)
Applicant.
)
 
)

STIPULATION
 
Public Service Company of New Mexico (“PNM”); the Staff of the Utility Division
(“Staff”) of the New Mexico Public Regulation Commission (“NMPRC” or
“Commission”); the New Mexico Industrial Energy Consumers (“NMIEC”), Patricia
Madrid, the Attorney General of the State of New Mexico (the “AG”) and the
Coalition for Clean Affordable Energy (collectively the “Signatories”), through
their undersigned authorized representatives, agree and stipulate as follows:
 
INTRODUCTION
 
1.  On July 6, 2005, PNM filed an Application with the Commission seeking
authorization to (a) operate as public utility plant the existing gas-fired
combustion turbine located near Afton, in Dona Anna County, New Mexico (the
“Afton CT”) which PNM is currently operating as a merchant plant; (b) convert
the Afton CT to a gas-fired combined cycle generator (the “Afton CC”) that would
expand the capacity of the plant and allow it to serve all jurisdictional
customers on PNM’s system (collectively the Afton CT and Afton CC are referred
 

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to as the “Afton Facility”); and (c) include in rate base in PNM’s next electric
rate case the depreciated net book value of the Afton CT and the actual cost up
to $141.8 million for the Afton CC conversion. PNM’s Application requested a
total value for the Afton Facility of $211.6 million to be included in rates.
 
2.  The Signatories have arrived at this Stipulation which they believe is fair,
just and reasonable, and agree that the construction and operation of the Afton
Facility, pursuant to this Stipulation, is required by the public convenience
and necessity. In addition to the Signatories, Western Water and Power
Production Limited; City of Albuquerque; Regents of the University of New
Mexico; Natural Resources Defense Council; Community Action New Mexico; El Paso
Electric Company; National Nuclear Security Agency; Energy, Minerals & Natural
Resources Department of the State of New Mexico; and People’s Energy Resources
Company intervened in the proceeding and participated, from time to time, in
settlement discussions.
 
STIPULATION
 
3.  The Signatories stipulate that PNM’s Application should be approved as
provided herein and PNM should be authorized to (a) operate as a public utility
the Afton CT; (b) convert the Afton CT to the Afton CC, a gas-fired combined
cycle generator of approximately 235 MW capacity; (c) include in rate base in
PNM’s next electric general rate case the cost of the Afton Facility as agreed
to herein, provided the Afton Facility is in service within eighteen (18) months
of the Commission’s order approving this Stipulation or December 31, 2007,
whichever is earlier; (d) in the event the deadlines in (c) are not met, PNM
will only be permitted to recover in rates the net book value of the Afton
Facility in an electric general rate case subsequent to Afton Facility’s
in-service date; and (e) receive all other approvals and authorizations as may
be required under the New Mexico Public Utility Act for the issuance of a
certificate of public convenience and necessity for the Afton Facility on the
following terms and conditions:
 
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4.  The Afton Facility book value for ratemaking in PNM’s 2007 rate case shall
be the lower of the actual cost of the Afton Facility or $187.6 million.* In
subsequent rate cases, this amount will be adjusted to reflect additional
depreciation and ADIT from the in-service date of the Afton Facility.
 
5.  Allocation of the Afton Facility costs is 50% to TNMP customers and 50% to
PNM customers, until rates equalize in the 2010 to 2015 timeframe as specified
in the Commission’s Final Order in NMPRC Case No. 04-00315-UT.
 
6.  In future rate cases, PNM will work with the Signatories towards the goal of
avoiding reinstatement of a fuel adjustment clause. To mitigate risk associated
with gas cost volatility for gas-fired electric generation, the Signatories will
support PNM’s recovery in base rates of the reasonable costs of prudently
hedging its gas requirements and otherwise mitigating its gas cost risks.
 
7.  PNM will propose in its next general rate case Application interruptible
rates and a new inverted block rate to absorb any residential rate increase. If
it is demonstrated that the proposed rate increase to residential customers in
that case is too great to place entirely in the third block, it will file a
supporting study and propose an alternative that encourages less consumption.
PNM will preserve the structure, but not necessarily the rates, of its
Incremental Interruptible Power Rate for customers currently on that tariff.
 

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 * The $187.6 million is exclusive of Accumulated Deferred Income Taxes
(“ADIT”). ADIT will be treated for regulatory purposes consistent with past rate
proceedings.
 
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8.  PNM shall conduct a feasibility study of Algodones, Person and other load
side sites for future jurisdictional generation, by the earlier of 90 days after
any filing requesting additional jurisdictional generation or December 31, 2006.
 
9.  Prior to the anticipated Reeves’ retirement and/or repowering, but with
sufficient time for reasonable alternatives to be implemented, PNM will
demonstrate the economic benefit to ratepayers of Reeves’ retirement and/or
repowering.
 
10.     The entirety of transmission costs associated with the Afton Facility
shall be $2.9 million per year for customers in areas served by TNMP and $3.0
million for PNM customers through December 31, 2010. In addition, PNM will not
seek more than $2.9 million in the Afton Facility transmission costs in any TNMP
rate case filed before December 31, 2010. After 2010, the Afton Facility
transmission costs will be allocated 50% to customers in areas served by TNMP
and 50% to PNM customers until rates are combined between the two customer
groups.
 
11.  In the future, PNM will file any applications to include merchant plant in
ratebase at least 36 months prior to the date requested for inclusion in
ratebase, unless all signatories agree otherwise.
 
12.  Recognizing the importance of environmental, energy efficiency and
renewable energy concerns to PNM’s facility planning process, in the analysis
undertaken to prepare PNM’s 2007 Electric Supply Plan to be filed on February 1,
2007 pursuant to the Case 3137 Stipulation, PNM commits to incorporate
Integrated Resource Planning principles including:
 

a)  
demand side management options for reducing energy and peak load,
 

b)  
an assessment of renewable energy alternatives, and
 

c)  
an environmental risk analysis.

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In addition, PNM will also incorporate Integrated Resource Planning principles
in its distribution and transmission planning processes.
 
13.  By January 31, 2007, PNM will file at the Commission an application to
initiate comprehensive electric energy efficiency programs, which will take into
account the results of the electric energy efficiency potential study and the
appliance saturation study that PNM will undertake during 2006 pursuant to the
Stipulation in NMPRC Case No. 05-00261-UT.
 
14.  PNM will undertake a third-party engineering study to evaluate the
potential at the Afton facility for boiler feedwater pre-heating using renewable
energy generation facilities that could be constructed at or in reasonable
proximity to the generation station; however, this commitment does not
constitute a requirement that PNM would need to acquire additional land and
permits solely for the purpose of reserving the potential for future renewable
energy boiler feedwater pre-heating facilities.
 
15.  Except as specifically stated in the language of this Stipulation, the
provisions of this Stipulation have no precedential effect and the Parties do
not waive rights they may have in any other pending or future proceeding and
will not be deemed to have approved, accepted, agreed to or consented to the
application of any concept, principle, theory or method in any future
proceeding.
 
16.  A Final Order issued by the Commission approving this Stipulation will not
constitute a bar to further litigation of issues raised in pleadings and
testimony or any issues which could have been raised or any other matters which
have not been specifically addressed by this Stipulation. In accordance with
17 NMAC 1.2.23.4, by approving this Stipulation, the Commission is neither
granting any approval nor creating any precedent regarding any principle or
issue in this or any other proceeding.
 
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17.  This Stipulation reflects a negotiated settlement, and if the Stipulation
is not executed or is not adopted in its entirety by the Commission, without
additions or deletions, the Stipulation will be void and any statement made or
positions taken by the Parties during the course of these negotiations will not
be admissible before any regulatory agency or court. The Stipulation contains
the full intent and understanding of the entire agreement of the Parties and no
implication should be drawn on any matter not addressed in the Stipulation.
There are not and have not been, any representations, warranties or agreements
other than those specifically set forth above.
 
18.  This Stipulation may be executed in a number of counterparts including by
telefax, each of which will be deemed to be an original and all of which will
constitute one and the same agreement.
 
Respectfully submitted this 30th day of November, 2005.
Patrick Ortiz
Gary Boyle
Alvarado Square, MS 2822
Albuquerque, NM 87158-2822
(505) 241-2896
(505) 241-2368 (fax
portiz@pnm.com

WHITE, KOCH, KELLY & McCARTHY, P.A.

By: /s/ Benjamin Phillips 
BENJAMIN PHILLIPS
REBECCA DEMPSEY
433 Paseo de Peralta
Santa Fe, NM 87501
Phone: (505) 982-4374
Fax: (505) 984-8631
phillips@wkkm.com
rdempsey@wkkm.com

Attorneys for PNM

 

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UTILITY DIVISION STAFF OF THE
NEW MEXICO PUBLIC REGULATION
COMMISSION
 
By: /s/ Dahl Harris  
DAHL HARRIS
Staff Counsel
223 East Palace
Santa Fe, NM 87502-2013
Phone: (505) 827-7479
Fax: (505) 927-6916

NEW MEXICO INDUSTRIAL ENERGY
CONSUMERS.
 
By: /s/ Steve S. Michel 
STEVEN S. MICHEL
134A Martinez Street
Santa Fe, NM 87501
Phone: (505) 989-1450
Fax: (505) 989-8731
stevensmichel@msn.com 

PATRICIA MADRID, ATTORNEY GENERAL OF THE STATE OF NEW MEXICO
 
By: Telephonically approved 11/30/05 BP 
JEFF TAYLOR
Assistant Attorney General
Post Office Drawer 1508
Santa Fe, NM 87504-1508
Phone: (505) 827-6000
Fax: (505) 827-5826

COALITION FOR CLEAN AFFORDABLE ENERGY

Susan Innis
Western Resource Advocates
2260 Baseline Rd., Suite 200
Boulder, CO 80302

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BELIN & SUGARMAN
 
By: /s/ Alletta Belin
ALLETTA BELIN
618 Paseo de Peralta
Santa Fe, New Mexico 87501
Phone: (505) 983-8936
Fax: (505) 983-0036
belin@bs-law.com

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