Exhibit
10.7





THIRD
AMENDMENT


TO
THE


PNM
RESOURCES, INC.


EXECUTIVE
SPENDING ACCOUNT PLAN




Effective
as of January 1, 1980, Public Service Company of New Mexico (“PNM”) adopted
the Amended and Restated Medical Reimbursement Plan of Public Service Company of
New Mexico (the “MERP”).  Sponsorship of the MERP was subsequently
transferred from PNM to PNM Resources, Inc. (the “Company”) on November 30,
2002.  Effective January 1, 2002, the Company established the
Executive Spending Account (the “ESA”).  Effective December 1,
2002, the Company merged the MERP with and into the ESA and named the combined
program the “PNM Resources, Inc. Executive Spending Account Plan” (the
“Plan”).  The Plan has been amended and restated on two occasions,
with the most recent restatement being effective, generally, as of
January 1, 2004.  The Plan was subsequently amended on two
occasions.  The purpose of this Third Amendment is to satisfy the
requirements of Section 409A of the Internal Revenue Code of 1986 (the
“Code”).  Section 409A of the Code became applicable to the Plan as of
January 1, 2005.  The Plan has been and shall continue to be
administered in good faith compliance with the requirements of Section 409A from
January 1, 2005 through December 31, 2008.




1.  This
Third Amendment shall be effective as of January 1, 2009.




2.  This
Third Amendment amends only the provisions of the Plan as set forth herein, and
those provisions not expressly amended by this Third Amendment shall continue in
full force and effect.




3.  The
definition of “Paycheck Year” in Article 2 (Defined Terms) of the
Plan is hereby amended and restated in its entirety to read as
follows:









Paycheck
      Year:
            The
      Paycheck Year is the calendar year.




4.  Article 4
(Eligibility and
Participation Requirements) of the Plan is hereby amended by the addition
of the following new section to the end thereof:




Section
    409A
            The
      Company believes that payments pursuant to
this


Compliance:
            Plan
      are subject to Section 409A of the Code and that payments made from this
      Plan are made on a specified date in compliance with Treas. Reg. Section
      1.409A-3(i)(1)(iv).




To assure
compliance with the requirements of Section 409A and avoid adverse tax
consequences to the Participant, the amount of Covered Expenses reimbursed
during one taxable year may not affect the Covered Expenses eligible for
reimbursement in any other taxable year.  In addition, all
reimbursements of Covered Expenses shall be made on or before the last day of
the calendar year following the calendar year in which the expense was incurred
and the right to reimbursement for such Covered Expenses will not be subject to
liquidation or exchange for another benefit.




Under no
circumstances may the time or schedule of any payment made or benefit provided
pursuant to this Plan be accelerated or subject to a further deferral except as
otherwise permitted or required pursuant to regulations and other guidance
issued pursuant to Section 409A of the Code.




No
Participant has any right to make any election regarding the time or form of any
payment due under this Plan.




This Plan
shall be operated in compliance with Section 409A and each provision of
this Plan shall be interpreted, to the extent possible, to comply with
Section 409A.




5.  The
Section “Reimbursement Requests” of Article 7 (Claims Procedures) is
hereby amended and restated in its entirety to read as follows:




Reimbursement
            The
      Benefits Department is responsible for evaluating




2


Requests:
            all
      reimbursement requests under the Plan.  You must submit all
      reimbursement requests to the Benefits Department in accordance with its
      procedures; provided, however, that each December (or more frequently if
      you request), the Benefits Department will calculate the insurance
      deductions that have been taken from your pay during the Paycheck Year,
      and will submit these for reimbursement on your
  behalf.




Reimbursement
requests should be submitted as soon as possible after the underlying expense is
“incurred,” although, for repetitive expenses, you may want to submit your
request when you have other expenses, or at some fixed interval, such as every
three or six months.  See the definition “Covered Expense” to
determine when an expense is incurred.  Please keep in mind that to be
reimbursed, an expense must be submitted for reimbursement no later than the end
of the Paycheck Year following the Paycheck Year in which the expense was
incurred.




In order
to count against the Benefit Limit for a given Paycheck Year, a properly
documented reimbursement request must be sent to the Benefits Department on or
before the last day of such Paycheck Year.  Notwithstanding the
foregoing, if you terminate employment during a Paycheck Year, any Covered
Expenses that you incur before your participation in the Plan terminates will be
eligible for reimbursement provided the expense is submitted for reimbursement
no later than the end of the Paycheck Year following the Paycheck Year in which
the expense was incurred.  Such expenses will count against your
Benefit Limit for the year in which your participation in the Plan
terminated.  The expenses reimbursed under the Plan will be taxable
income to you for the calendar year in which you receive the reimbursement,
rather than the calendar year in which the underlying expense is
incurred.




To
facilitate recordkeeping and reimbursements, expenses submitted at least 3 days
before pay period end will be processed and reimbursed during that same payroll
period.  Expenses submitted after such deadline will be processed and
paid during the following payroll period.




3


If a
reimbursement request is for medical care, you must first submit the claim for
payment to your Medical Insurance, and submit a copy of the resulting
explanation of benefits (“EOB”) to the Benefits Department as documentation of
the expense.  On all reimbursement requests, be sure to include the
name of the provider, the nature of the service rendered, and your name on the
receipt or invoice.  If the claim is in the category of health (other
than for prescription drugs), the ICD-9 code assigned by the provider will
suffice in place of the nature of the service rendered.  Cancelled checks and credit card
receipts cannot be used as the sole documentation of an expense submitted for
reimbursement.




IN
WITNESS WHEREOF, the Company has caused this Third Amendment to be executed as
of this 21st
day of November,
2008.




PNM
RESOURCES, INC.






By: /s/ Alice A.
Cobb


Its:
SVP, Chief
Administrative Officer


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