| CommissionFile Number |   | Name of Registrant, State of Incorporation,Address and Telephone Number                                                   |   | I.R.S. EmployerIdentification No. |
|-----------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                  |   |                                                                                                                      |   |                              |
|  002-97230       |   | Texas-New Mexico Power Company(A Texas Corporation)577 N. Garden Ridge Blvd.Lewisville, TX  75067(972) 420-4189 |   | 75-0204070                        |

| Texas-New Mexico Power Company (“TNMP”) | YES       | NO  ü |
|-----------------------------------------------------|------------------------------------|----------------------|

| TNMP | YES   ü | NO      |
|------|-----------------------------|-----------------------------|

|   | Large accelerated filer |   | Accelerated filer |   | Non-accelerated filer |   | Smaller Reporting Company |
|--------|-------------------------|--------|-------------------|--------|-----------------------|--------|---------------------------|
| TNMP   |               |   |         |   | ü                |   |                 |

| TNMP | 9,615 |
|------|-------|

----

----

|                                                                                    |      INDEX   |       |
|-----------------------------------------------------------------------------------------|----------------------------------|------------|
|                                                                                    |                             |  Page |
|  GLOSSARY                                                                     |                             |  A-2  |
|                                                                                    |      PART II |       |
| ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |                             |  B-1  |
| ITEM 9A.   CONTROLS AND PROCEDURES                                            |                             |  C-1  |
|                                                                                    |     PART IV       |       |
| ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES            |                             |  D-1  |
|                                                                                    | SIGNATURES                       |  E-1  |
|                                                                                    |                             |       |
|                                                                                    |                             |       |

----

GLOSSARY 

| Definitions:  |                                                                                                               |   |
|---------------|--------------------------------------------------------------------------------------------------------------------|--------|
| Afton         | Afton Generating Station                                                                                           |   |
| AG            | New Mexico Attorney General                                                                                        |   |
| ALJ           | Administrative Law Judge                                                                                           |   |
| Altura        | Optim Energy Twin Oaks, LP; formerly known as Altura Power L.P.                                                    |   |
| Altura Cogen  | Optim Energy Altura Cogen, LLC; formerly known as Altura Cogen, LLC (the CoGen Lyondell Power Generation Facility) |   |
| AOCI          | Accumulated Other Comprehensive Income                                                                             |   |
| APS           | Arizona Public Service Company, which is the operator and a co-owner of PVNGS and Four Corners                |   |
| APB           | Accounting Principles Board                                                                                        |   |
| APBO          | Accumulated Postretirement Benefit Obligation                                                                      |   |
| ARO           | Asset Retirement Obligation                                                                                        |   |
| Avistar       | Avistar, Inc., a wholly-owned subsidiary of PNMR                                                                   |   |
| BART          | Best Available Retrofit Technology                                                                                 |   |
| BLM           | Bureau of Land Management                                                                                          |   |
| Board         | Board of Directors of PNMR                                                                                         |   |
| BTU           | British Thermal Unit                                                                                               |   |
| CAIR          | Clean Air Interstate Rule                                                                                          |   |
| Cal PX        | California Power Exchange                                                                                          |   |
| Cal ISO       | California Independent System Operator                                                                             |   |
| Cascade       | Cascade Investment, L.L.C.                                                                                         |   |
| Continental   | Continental Energy Systems, L.L.C.                                                                                 |   |
| Constellation | Constellation Energy Commodities Group, Inc.                                                                       |   |
| CRHC          | Cap Rock Holding Corporation, a subsidiary of Continental                                                          |   |
| CTC           | Competition Transition Charge                                                                                      |   |
| Decatherm     | Million BTUs                                                                                                       |   |
| Delta         | Delta-Person Limited Partnership                                                                                   |   |
| DOE           | Department of Energy                                                                                               |   |
| ECJV          | ECJV Holdings, LLC                                                                                                 |   |
| EEI           | Edison Electric Institute                                                                                          |   |
| EIP           | Eastern Interconnection Project                                                                                    |   |
| EITF          | Emerging Issues Task Force                                                                                         |   |
| EnergyCo      | EnergyCo, LLC, a limited liability corporation, owned 50% by each of PNMR and ECJV; now known as Optim Energy      |   |
| EPA           | United States Environmental Protection Agency                                                                      |   |
| EPE           | El Paso Electric                                                                                                   |   |
| ERCOT         | Electric Reliability Council of Texas                                                                              |   |
| ESPP          | Employee Stock Purchase Plan                                                                                       |   |
| FASB          | Financial Accounting Standards Board                                                                               |   |
| FERC          | Federal Energy Regulatory Commission                                                                               |   |
| FCPSP         | First Choice Power Special Purpose, L.P.                                                                           |   |
| FIN           | FASB Interpretation Number                                                                                         |   |
| FIP           | Federal Implementation Plan                                                                                        |   |
| First Choice  | First Choice Power, L. P. and Subsidiaries                                                                         |   |
| Four Corners  | Four Corners Power Plant                                                                                           |   |
| FPL           | FPL Energy New Mexico Wind, LLC                                                                                    |   |
| FPPAC         | Fuel and Purchased Power Adjustment Clause                                                                         |   |
| GAAP          | Generally Accepted Accounting Principles in the United States of America                                           |   |
| GEaR          | Gross Earnings at Risk                                                                                             |   |
| GHG           | Greenhouse Gas Emissions                                                                                           |   |
| GWh           | Gigawatt hours                                                                                                     |   |
| IBEW          | International Brotherhood of Electrical Workers, Local 611                                                         |   |
| IRS           | Internal Revenue Service                                                                                           |   |
| ISO           | Independent System Operator                                                                                        |   |
| KWh           | Kilowatt Hour                                                                                                      |   |

----

| LBB                     | Lehman Brothers Bank, FSB, a subsidiary of LBH                                                                                         |   |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
| LBCS                    | Lehman Brothers Commodity Services, a subsidiary of LBH                                                                                |   |
| LBH                     | Lehman Brothers Holdings Inc.                                                                                                          |   |
| LCC                     | Lyondell Chemical Company                                                                                                              |   |
| LIBOR                   | London Interbank Offered Rate                                                                                                          |   |
| Lordsburg               | Lordsburg Generating Station                                                                                                           |   |
| Luna                    | Luna Energy Facility                                                                                                                   |   |
| MD&A                | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                            |   |
| Moody’s           | Moody’s Investor Services, Inc.                                                                                                  |   |
| MW                      | Megawatt                                                                                                                               |   |
| MWh                     | Megawatt Hour                                                                                                                          |   |
| Navajo Acts             | Navajo Nation Air Pollution Prevention and Control Act, the Navajo Nation Safe Drinking Water Act, and the Navajo Nation Pesticide Act |   |
| NDT                     | Nuclear Decommissioning Trusts for PVNGS                                                                                               |   |
| Ninth Circuit           | United States Court of Appeals for the Ninth Circuit                                                                                   |   |
| NMGC                    | New Mexico Gas Company, a subsidiary of Continental                                                                                    |   |
| NMED                    | New Mexico Environment Department                                                                                                      |   |
| NMPRC                   | New Mexico Public Regulation Commission                                                                                                |   |
| NOPR                    | Notice of Proposed Rulemaking                                                                                                          |   |
| NOX                     | Nitrogen Oxides                                                                                                                        |   |
| NOI                     | Notice of Inquiry                                                                                                                      |   |
| NRC                     | United States Nuclear Regulatory Commission                                                                                            |   |
| NSPS                    | New Source Performance Standards                                                                                                       |   |
| NSR                     | New Source Review                                                                                                                      |   |
| NYMEX                   | New York Mercantile Exchange                                                                                                           |   |
| OASIS                   | Open Access Same Time Information System                                                                                               |   |
| OATT                    | Open Access Transmission Tariff                                                                                                        |   |
| O&M                 | Operations and Maintenance                                                                                                             |   |
| OPEB                    | Other Post Employment Benefits                                                                                                         |   |
| Optim Energy            | Optim Energy, LLC, a limited liability corporation, owned 50% by each of PNMR and ECJV; formerly known as EnergyCo                     |   |
| PBO                     | Projected Benefit Obligation                                                                                                           |   |
| PCRBs                   | Pollution Control Revenue Bonds                                                                                                        |   |
| PGAC                    | Purchased Gas Adjustment Clause                                                                                                        |   |
| PG&E                | Pacific Gas and Electric Co.                                                                                                           |   |
| PM                      | Particulate Matter                                                                                                                     |   |
| PNM                     | Public Service Company of New Mexico and Subsidiaries                                                                                  |   |
| PNM Facility            | PNM’s $400 Million Unsecured Revolving Credit Facility                                                                           |   |
| PNMR                    | PNM Resources, Inc. and Subsidiaries                                                                                                   |   |
| PNMR Facility           | PNMR’s $600 Million Unsecured Revolving Credit Facility                                                                          |   |
| PPA                     | Power Purchase Agreement                                                                                                               |   |
| PRP                     | Potential Responsible Party                                                                                                            |   |
| PSA                     | Power Supply Agreement                                                                                                                 |   |
| PSD                     | Prevention of Significant Deterioration                                                                                                |   |
| PUCT                    | Public Utility Commission of Texas                                                                                                     |   |
| PVNGS                   | Palo Verde Nuclear Generating Station                                                                                                  |   |
| Pyramid                 | Tri-State Pyramid Unit 4                                                                                                               |   |
| RCRA                    | Resource Conservation and Recovery Act                                                                                                 |   |
| REC                     | Renewable Energy Certificates                                                                                                          |   |
| REP                     | Retail Electricity Provider                                                                                                            |   |
| RFP                     | Request for Proposal                                                                                                                   |   |
| Reimbursement Agreement | PNM’s $100 Million Letter of Credit Facility                                                                                     |   |
| RMC                     | Risk Management Committee                                                                                                              |   |
| RTO                     | Regional Transmission Organization                                                                                                     |   |
| SCE                     | Southern Cal Edison Company                                                                                                            |   |
| SCPPA                   | Southern California Public Power Authority                                                                                             |   |
| SDG&E               | San Diego Gas and Electric Company                                                                                                     |   |
| SEC                     | United States Securities and Exchange Commission                                                                                       |   |

----

| SFAS                 | FASB Statement of Financial Accounting Standards                   |   |
|----------------------|--------------------------------------------------------------------|--------|
| SJCC                 | San Juan Coal Company                                              |   |
| SJGS                 | San Juan Generating Station                                        |   |
| SOAH                 | State Office of Administrative Hearings                            |   |
| SO2                  | Sulfur Dioxide                                                     |   |
| SPS                  | Southwestern Public Service Company                                |   |
| SRP                  | Salt River Project                                                 |   |
| S&P              | Standard and Poor’s Ratings Services                         |   |
| TCEQ                 | Texas Commission of Environmental Quality                          |   |
| TECA                 | Texas Electric Choice Act                                          |   |
| Term Loan Agreement  | PNM’s $300 Million Unsecured Delayed Draw Term Loan Facility |   |
| TNMP Bridge Facility | TNMP’s $100 Million Bridge Term Loan Credit Agreement        |   |
| TNMP Facility        | TNMP’s $200 Million Unsecured Revolving Credit Facility      |   |
| Throughput           | Volumes of gas delivered, whether or not owned                     |   |
| TNMP                 | Texas-New Mexico Power Company and Subsidiaries                    |   |
| TNP                  | TNP Enterprises, Inc. and Subsidiaries                             |   |
| Tri-State            | Tri-State Generation and Transmission Association, Inc.            |   |
| Tucson               | Tucson Electric Power Company                                      |   |
| Twin Oaks            | Assets of Twin Oaks Power, L.P. and Twin Oaks Power III, L.P.      |   |
| UAMPS                | Utah Associated Municipal Power System                             |   |
| USFS                 | United States Forest Service                                       |   |
| Valencia             | Valencia Energy Facility                                           |   |
| VaR                  | Value at Risk                                                      |   |
| WSPP                 | Western Systems Power Pool                                         |   |
|                 |                                                               |   |
|                 |                                                               |   |
| Accounting Pronouncements (as amended and interpreted): |
|---------------------------------------------------------|
|                                                    |   |
| APB 25                                                  | Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” |
| EITF 02-3                                               | EITF Issue No. 02-3 “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities” |
| EITF 03-11                                              | EITF Issue No. 03-11 “Reporting Realized Gains and Losses on Derivative Instruments that are Subject to FASB Statement No. 133 and Not Held for Trading Purposes” |
| EITF 03-13                                              | EITF Issue No. 03-13 “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations“ |
| FIN 46R                                                 | FIN 46R “Consolidation of Variable Interest Entities an Interpretation of ARB No. 51” |
| FIN 47                                                  | FIN No. 47 “Accounting for Conditional Asset Retirement Obligations an Interpretation of FASB Statement No. 143” |
| FIN 48                                                  | FIN No. 48 “Accounting for Uncertainty in Income Taxes” |
| FSP FIN 39-1                                            | FSP FIN No. 39-1 “Amendment of FASB Interpretation No. 39” |
| FSP FAS 157-3                                           | FSP FAS No. 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” |
| SFAS 5                                                  | SFAS No. 5 “Accounting for Contingencies” |
| SFAS 34                                                 | SFAS No. 34 “Capitalization of Interest Cost” |
| SFAS 57                                                 | SFAS No. 57 “Related Party Disclosures” |
| SFAS 71                                                 | SFAS No. 71 “Accounting for Effects of Certain Types of Regulation” |
| SFAS 87                                                 | SFAS No. 87 “Employers' Accounting for Pensions” |
| SFAS 106                                                | SFAS No. 106 “Employers' Accounting for Postretirement Benefits Other Than Pensions” |
| SFAS 109                                                | SFAS No. 109 “Accounting for Income Taxes” |
| SFAS 112                                                | SFAS No. 112 “Employers’ Accounting for Postemployment Benefits – an amendment of FASB Statements No. 5 and 43” |
| SFAS 115                                                | SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” |
| SFAS 123R                                               | SFAS No. 123R “Share Based Payment” |
| SFAS 128                                                | SFAS No. 128 “Earnings per Share” |
| SFAS 131                                                | SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information” |
| SFAS 133                                                | SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” |
| SFAS 141                                                | SFAS No. 141 “Business Combinations” |
| SFAS 142                                                | SFAS No. 142 “Goodwill and Other Intangible Assets” |

----

| SFAS 143 | SFAS No. 143 “Accounting for Asset Retirement Obligations”                                                                                                        |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SFAS 144 | SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”                                                                                     |
| SFAS 154 | SFAS No. 154 “Accounting Changes and Error Corrections”                                                                                                           |
| SFAS 157 | SFAS No. 157 “Fair Value Measurements”                                                                                                                            |
| SFAS 158 | SFAS No. 158 “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” |
| SFAS 159 | SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”                      |

----

| PART II |
|---------|

| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|---------|---------------------------------------------|

|                                                                                  | Page   |
|---------------------------------------------------------------------------------------|--------|
|                                                                                  |   |
|                                                                                  |   |
| Management’s Annual Report on Internal Control Over Financial Reporting         | B-2    |
| Report of Independent Registered Public Accounting Firm                               | B-3    |
| Financial Statements:                                                                 |   |
| Texas-New Mexico Power Company and Subsidiaries                                       |   |
| Consolidated Statements of Earnings (Loss)                                            | B-4    |
| Consolidated Balance Sheets                                                           | B-5    |
| Consolidated Statements of Cash Flows                                                 | B-7    |
| Consolidated Statements of Changes in Common Stockholder’s Equity               | B-9    |
| Consolidated Statements of Comprehensive Income (Loss)                                | B-10   |
|         Notes to Consolidated Financial Statements | B-11   |
| Supplementary Data:                                                                   |   |
| Report of Independent Registered Public Accounting Firm on Schedule                   | B-39   |
| Schedule II Valuation and Qualifying Accounts                                         | B-40   |

----

----

----

|                                         |   | Year Ended December 31, |    |
|----------------------------------------------|--------|-------------------------|---------|
|                                         |   | 2008                    |    |   | 2007 |   |   | 2006 |   |
|                                         |   | (In thousands)          |    |
|                                         |   |                    |    |   |   |   |   |   |   |
| Electric Operating Revenues                  |   | $                       | 190,282 |   |   | $ | 180,421 |   |   | $ | 157,869 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Operating Expenses:                          |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cost of energy sold                          |   |                    | 32,671  |   |   |   | 29,529 |   |   |   | 27,613 |   |
| Administrative and general                   |   |                    | 27,354  |   |   |   | 29,113 |   |   |   | 26,733 |   |
| Impairment of goodwill                       |   |                    | 34,456  |   |   |   | - |   |   |   | - |   |
| Depreciation and amortization                |   |                    | 38,695  |   |   |   | 30,401 |   |   |   | 25,557 |   |
| Transmission and distribution costs          |   |                    | 21,069  |   |   |   | 18,616 |   |   |   | 16,450 |   |
| Taxes, other than income taxes               |   |                    | 18,587  |   |   |   | 20,092 |   |   |   | 23,249 |   |
| Total operating expenses                     |   |                    | 172,832 |   |   |   | 127,751 |   |   |   | 119,602 |   |
| Operating income                             |   |                    | 17,450  |   |   |   | 52,670 |   |   |   | 38,267 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Other Income and Deductions:                 |   |                    |    |   |   |   |   |   |   |   |   |   |
| Interest income                              |   |                    | 63      |   |   |   | 85 |   |   |   | 922 |   |
| Other income                                 |   |                    | 3,333   |   |   |   | 1,615 |   |   |   | 790 |   |
| Carrying charges on regulatory assets        |   |                    | -       |   |   |   | - |   |   |   | 6,993 |   |
| Other deductions                             |   |                    | (171    | ) |   |   | (147 | ) |   |   | (155 | ) |
| Net other income (deductions)                |   |                    | 3,225   |   |   |   | 1,553 |   |   |   | 8,550 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Interest Charges:                            |   |                    |    |   |   |   |   |   |   |   |   |   |
| Interest on long-term debt                   |   |                    | 12,416  |   |   |   | 22,364 |   |   |   | 25,728 |   |
| Other interest charges                       |   |                    | 5,924   |   |   |   | 2,804 |   |   |   | 3,184 |   |
| Net interest charges                         |   |                    | 18,340  |   |   |   | 25,168 |   |   |   | 28,912 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Earnings Before Income Taxes                 |   |                    | 2,335   |   |   |   | 29,055 |   |   |   | 17,905 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Income Taxes                                 |   |                    | 11,128  |   |   |   | 10,647 |   |   |   | 5,787 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Earnings (Loss) from Continuing Operations   |   |                    | (8,793  | ) |   |   | 18,408 |   |   |   | 12,118 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Discontinued Operations, net of Income Taxes |   |                    |    |   |   |   |   |   |   |   |   |   |
| of $0, $0, and $1,548                        |   |                    | -       |   |   |   | - |   |   |   | 3,581 |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
|                                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net Earnings (Loss)                          |   | $                       | (8,793  | ) |   | $ | 18,408 |   |   | $ | 15,699 |   |

----

|                                                  |   | December 31,   |    |
|-------------------------------------------------------|--------|----------------|---------|
|                                                  |   | 2008           |    |   | 2007 |   |
|                                                  |   | (In thousands) |    |
| ASSETS                                                |   |           |    |   |   |   |
| Current Assets:                                       |   |           |    |   |   |   |
| Cash and cash equivalents                             |   | $              | 124     |   |   | $ | 187 |   |
| Special deposits                                      |   |           | 50      |   |   |   | 50 |   |
| Accounts receivable                                   |   |           | 11,457  |   |   |   | 8,789 |   |
| Unbilled revenues                                     |   |           | 6,421   |   |   |   | 4,392 |   |
| Other receivables                                     |   |           | 480     |   |   |   | 1,063 |   |
| Affiliate accounts receivable                         |   |           | 7,110   |   |   |   | 8,005 |   |
| Materials and supplies                                |   |           | 1,625   |   |   |   | 1,425 |   |
| Income taxes receivable                               |   |           | 9       |   |   |   | 881 |   |
| Other current assets                                  |   |           | 958     |   |   |   | 501 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Total current assets                                  |   |           | 28,234  |   |   |   | 25,293 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Other Property and Investments:                       |   |           |    |   |   |   |   |   |
| Other investments                                     |   |           | 550     |   |   |   | 554 |   |
| Non-utility property                                  |   |           | 2,111   |   |   |   | 2,111 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Total other property and investments                  |   |           | 2,661   |   |   |   | 2,665 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Utility Plant:                                        |   |           |    |   |   |   |   |   |
| Electric plant in service                             |   |           | 815,588 |   |   |   | 781,355 |   |
| Common plant in service and plant held for future use |   |           | 488     |   |   |   | 488 |   |
|                                                  |   |           | 816,076 |   |   |   | 781,843 |   |
| Less accumulated depreciation and amortization        |   |           | 291,228 |   |   |   | 274,128 |   |
|                                                  |   |           | 524,848 |   |   |   | 507,715 |   |
| Construction work in progress                         |   |           | 30,948  |   |   |   | 22,493 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Net utility plant                                     |   |           | 555,796 |   |   |   | 530,208 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Deferred Charges and Other Assets:                    |   |           |    |   |   |   |   |   |
| Regulatory assets                                     |   |           | 134,660 |   |   |   | 133,154 |   |
| Goodwill                                              |   |           | 226,665 |   |   |   | 261,121 |   |
| Pension asset                                         |   |           | -       |   |   |   | 14,919 |   |
| Other deferred charges                                |   |           | 23,982  |   |   |   | 5,432 |   |
|                                                  |   |           |    |   |   |   |   |   |
| Total deferred charges and other assets               |   |           | 385,307 |   |   |   | 414,626 |   |
|                                                  |   |           |    |   |   |   |   |   |
|                                                  |   | $              | 971,998 |   |   | $ | 972,792 |   |

----

|                                                                   |   | December 31,                             |    |
|------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                   |   | 2008                                     |    |   | 2007 |   |
|                                                                   |   | (In thousands, except share information) |    |
| LIABILITIES AND STOCKHOLDER’S EQUITY                             |   |                                     |    |   |   |   |
| Current Liabilities:                                                   |   |                                     |    |   |   |   |
|    Short-term debt                                      |   | $                                        | 150,000 |   |   | $ | - |   |
| Short-term debt – affiliate                                      |   |                                     | 14,100  |   |   |   | 3,404 |   |
| Current installments of long-term debt                                 |   |                                     | 167,690 |   |   |   | 148,882 |   |
| Accounts payable                                                       |   |                                     | 11,846  |   |   |   | 5,666 |   |
| Affiliate accounts payable                                             |   |                                     | 1,238   |   |   |   | 3,456 |   |
| Accrued interest and taxes                                             |   |                                     | 35,118  |   |   |   | 35,204 |   |
| Other current liabilities                                              |   |                                     | 3,111   |   |   |   | 1,785 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Total current liabilities                                              |   |                                     | 383,103 |   |   |   | 198,397 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Long-term Debt                                                         |   |                                     | -       |   |   |   | 167,609 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Deferred Credits and Other Liabilities:                                |   |                                     |    |   |   |   |   |   |
| Accumulated deferred income taxes                                      |   |                                     | 111,193 |   |   |   | 120,274 |   |
| Accumulated deferred investment tax credits                            |   |                                     | -       |   |   |   | 191 |   |
| Regulatory liabilities                                                 |   |                                     | 35,028  |   |   |   | 46,590 |   |
| Asset retirement obligations                                           |   |                                     | 711     |   |   |   | 662 |   |
| Accrued pension liability and postretirement benefit cost              |   |                                     | 16,453  |   |   |   | 3,922 |   |
| Other deferred credits                                                 |   |                                     | 1,820   |   |   |   | 1,699 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Total deferred credits and other liabilities                           |   |                                     | 165,205 |   |   |   | 173,338 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Total liabilities                                                      |   |                                     | 548,308 |   |   |   | 539,344 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Commitments and Contingencies (See Note 16)                            |   |                                     |    |   |   |   |   |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Common Stockholder’s Equity:                                     |   |                                     |    |   |   |   |   |   |
| Common stock outstanding ($10 par value, 12,000,000 shares authorized: |   |                                     |    |   |   |   |   |   |
| issued and outstanding 6,358 shares)                                   |   |                                     | 64      |   |   |   | 64 |   |
| Paid-in-capital                                                        |   |                                     | 427,320 |   |   |   | 427,320 |   |
| Accumulated other comprehensive income, net of income tax              |   |                                     | (142    | ) |   |   | 823 |   |
| Retained earnings (deficit)                                            |   |                                     | (3,552  | ) |   |   | 5,241 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
| Total common stockholder’s equity                                |   |                                     | 423,690 |   |   |   | 433,448 |   |
|                                                                   |   |                                     |    |   |   |   |   |   |
|                                                                   |   | $                                        | 971,998 |   |   | $ | 972,792 |   |

----

|                                            |   | Year Ended December 31, |    |
|-------------------------------------------------|--------|-------------------------|---------|
|                                            |   | 2008                    |    |   | 2007 |   |   | 2006 |   |
|                                            |   | (In thousands)          |    |
| Cash Flows From Operating Activities:           |   |                    |    |   |   |   |   |   |   |
| Net earnings (loss)                             |   | $                       | (8,793  | ) |   | $ | 18,408 |   |   | $ | 15,699 |   |
| Adjustments to reconcile net earnings (loss) to |   |                    |    |   |   |   |   |   |   |   |   |   |
| net cash flows from operating activities:       |   |                    |    |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                   |   |                    | 42,418  |   |   |   | 35,383 |   |   |   | 33,194 |   |
| Impairment of goodwill                          |   |                    | 34,456  |   |   |   | - |   |   |   | - |   |
| Deferred income tax expense (benefit)           |   |                    | (7,714  | ) |   |   | (8,727 | ) |   |   | 4,055 |   |
| Other, net                                      |   |                    | (2,649  | ) |   |   | (2,931 | ) |   |   | (13,615 | ) |
| Changes in certain assets and liabilities:      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Accounts receivable and unbilled revenues       |   |                    | (4,697  | ) |   |   | (10,092 | ) |   |   | 408 |   |
| Materials and supplies                          |   |                    | (200    | ) |   |   | (46 | ) |   |   | (31 | ) |
| Other current assets                            |   |                    | 449     |   |   |   | 3,565 |   |   |   | 1,758 |   |
| Other assets                                    |   |                    | (33,434 | ) |   |   | (257 | ) |   |   | (6,443 | ) |
| Accounts payable                                |   |                    | 6,181   |   |   |   | (2,844 | ) |   |   | 4,431 |   |
| Accrued interest and taxes                      |   |                    | 938     |   |   |   | 52,924 |   |   |   | (4,554 | ) |
| Other current liabilities                       |   |                    | 1       |   |   |   | (13,706 | ) |   |   | 17,912 |   |
| Other liabilities                               |   |                    | 14,639  |   |   |   | (461 | ) |   |   | (19,025 | ) |
| Net cash flows from operating activities        |   |                    | 41,595  |   |   |   | 71,216 |   |   |   | 33,789 |   |
|                                            |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash Flows From Investing Activities:           |   |                    |    |   |   |   |   |   |   |   |   |   |
| Utility plant additions                         |   |                    | (51,116 | ) |   |   | (42,725 | ) |   |   | (47,659 | ) |
| Other, net                                      |   |                    | -       |   |   |   | - |   |   |   | 93 |   |
| Net cash flows from investing activities        |   |                    | (51,116 | ) |   |   | (42,725 | ) |   |   | (47,566 | ) |

----

|                                                                                                                                                                                                                                                                          |   | Year Ended December 31, |     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|----------|
|                                                                                                                                                                                                                                                                          |   | 2008                    |     |   | 2007 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                          |   | (In thousands)          |     |
| Cash Flow From Financing Activities:                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |
| Short-term borrowings                                                                                                                                                                                                                                                         |   |                    | 150,000  |   |   |   | - |   |   |   | - |   |
| Short-term borrowings (repayments), net- affiliate                                                                                                                                                                                                                            |   |                    | 10,696   |   |   |   | 3,404 |   |   |   | - |   |
| Repayment of long-term debt                                                                                                                                                                                                                                                   |   |                    | (148,935 | ) |   |   | (100,500 | ) |   |   | - |   |
| Equity contribution by parent                                                                                                                                                                                                                                                 |   |                    | -        |   |   |   | 101,249 |   |   |   | - |   |
| Dividends paid                                                                                                                                                                                                                                                                |   |                    | -        |   |   |   | (35,000 | ) |   |   | - |   |
| Other, net                                                                                                                                                                                                                                                                    |   |                    | (2,303   | ) |   |   | 1 |   |   |   | 91 |   |
| Net cash flows from financing activities                                                                                                                                                                                                                                      |   |                    | 9,458    |   |   |   | (30,846 | ) |   |   | 91 |   |
|                                                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |   |   |   |
| Change in Cash and Cash Equivalents                                                                                                                                                                                                                                           |   |                    | (63      | ) |   |   | (2,355 | ) |   |   | (13,686 | ) |
| Cash and Cash Equivalents at Beginning of Period                                                                                                                                                                                                                              |   |                    | 187      |   |   |   | 2,542 |   |   |   | 16,228 |   |
| Cash and Cash Equivalents at End of Period                                                                                                                                                                                                                                    |   | $                       | 124      |   |   | $ | 187 |   |   | $ | 2,542 |   |
|                                                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |   |   |   |
| Supplemental Cash Flow Disclosures:                                                                                                                                                                                                                                           |   |                    |     |   |   |   |   |   |   |   |   |   |
| Interest paid, net of capitalized interest                                                                                                                                                                                                                                    |   |                    | 17,246   |   |   | $ | 23,625 |   |   | $ | 25,573 |   |
| Income taxes paid, (refunded) net                                                                                                                                                                                                                                             |   | $                       | 16,613   |   |   | $ | (15,529 | ) |   | $ | 7,003 |   |
|                                                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |   |   |   |
| Supplemental schedule of noncash investing and financing activities:                                                                                                                                                                                                          |   |
| As of January 1, 2007, TNMP transferred its New Mexico operational assets and liabilities to PNMR through a redemption of TNMP’s common stock. PNMR contemporaneously contributed the TNMP New Mexico operational assets and liabilities to PNM. See Note 23. |   |
| Current assets                                                                                                                                                                                                                                                                |   |                    |     |   |   | $ | 15,444 |   |   |   |   |   |
| Other property and investments                                                                                                                                                                                                                                                |   |                    |     |   |   |   | 10 |   |   |   |   |   |
| Utility plant, net                                                                                                                                                                                                                                                            |   |                    |     |   |   |   | 96,468 |   |   |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                      |   |                    |     |   |   |   | 102,775 |   |   |   |   |   |
| Deferred charges                                                                                                                                                                                                                                                              |   |                    |     |   |   |   | 1,377 |   |   |   |   |   |
| Total assets transferred to PNM                                                                                                                                                                                                                                               |   |                    |     |   |   |   | 216,074 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                                                                                                                                                           |   |                    |     |   |   |   | 17,313 |   |   |   |   |   |
| Long-term debt                                                                                                                                                                                                                                                                |   |                    |     |   |   |   | 1,065 |   |   |   |   |   |
| Deferred credits and other liabilities                                                                                                                                                                                                                                        |   |                    |     |   |   |   | 30,673 |   |   |   |   |   |
| Total liabilities transferred to PNM                                                                                                                                                                                                                                          |   |                    |     |   |   |   | 49,051 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                          |   |                    |     |   |   |   |   |   |   |   |   |   |
| Net assets transferred – common stock redeemed                                                                                                                                                                                                                          |   |                    |     |   |   | $ | 167,023 |   |   |   |   |   |

----

|                                    |   |         |   |   |      |   |   | Accumulated                  |   |   |          |   |   | Total     |   |
|-----------------------------------------|--------|--------------|--------|--------|-----------|--------|--------|------------------------------|--------|--------|---------------|--------|--------|-----------|--------|
|                                    |   | Common Stock |   |   |      |   |   | Other                        |   |   | Retained      |   |   | Common    |   |
|                                    |   | Number of    |   |   | Aggregate |   |   | Paid-in                      |   |   | Comprehensive |   |   | Earnings  |   |   | Stockholder’s |   |
|                                    |   | Shares       |   |   | Value     |   |   | Capital                      |   |   | Income        |   |   | (Deficit) |   |   | Equity |   |
|                                    |   |         |   |   |      |   |   |  (Dollars in thousands) |   |   |          |   |   |      |   |
| Balance at December 31, 2005            |   |         | 9,615  |   |      | $      | 96     |                         |   | $      | 494,287       |   |   | $         | (29    | ) |   | $ | 5,450 |   |   | $ | 499,804 |   |
| Net earnings                            |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | -      |   |   |   | 15,699 |   |   |   | 15,699 |   |
| Total other comprehensive income (loss) |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | (13    | ) |   |   | - |   |   |   | (13 | ) |
| SFAS 158 transition adjustment          |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | 604    |   |   |   | - |   |   |   | 604 |   |
| Income taxes on goodwill adjustment     |   |         | -      |   |      |   | -      |                         |   |   | (1,475        | )      |   |      | -      |   |   |   | - |   |   |   | (1,475 | ) |
| Balance at December 31, 2006            |   |         | 9,615  |   |      |   | 96     |                         |   |   | 492,812       |   |   |      | 562    |   |   |   | 21,149 |   |   |   | 514,619 |   |
| Redemption of common stock              |   |         | (3,257 | )      |      |   | (32    | )                            |   |   | (166,991      | )      |   |      | -      |   |   |   | - |   |   |   | (167,023 | ) |
| Equity contribution from parent         |   |         | -      |   |      |   | -      |                         |   |   | 101,249       |   |   |      | -      |   |   |   | - |   |   |   | 101,249 |   |
| Adoption of FIN 48                      |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | -      |   |   |   | 684 |   |   |   | 684 |   |
| Income taxes on goodwill adjustment     |   |         | -      |   |      |   | -      |                         |   |   | 250           |   |   |      | -      |   |   |   | - |   |   |   | 250 |   |
| Net earnings                            |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | -      |   |   |   | 18,408 |   |   |   | 18,408 |   |
| Total other comprehensive income        |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | 261    |   |   |   | - |   |   |   | 261 |   |
| Dividends on common stock               |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | -      |   |   |   | (35,000 | ) |   |   | (35,000 | ) |
| Balance at December 31, 2007            |   |         | 6,358  |   |      |   | 64     |                         |   |   | 427,320       |   |   |      | 823    |   |   |   | 5,241 |   |   |   | 433,448 |   |
| Net earnings (loss)                     |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | -      |   |   |   | (8,793 | ) |   |   | (8,793 | ) |
| Total other comprehensive income (loss) |   |         | -      |   |      |   | -      |                         |   |   | -             |   |   |      | (965   | ) |   |   | - |   |   |   | (965 | ) |
| Balance at December 31, 2008            |   |         | 6,358  |   |      | $      | 64     |                         |   | $      | 427,320       |   |   | $         | (142   | ) |   | $ | (3,552 | ) |   | $ | 423,690 |   |

----

|                                                         |   | Year Ended December 31, |   |
|--------------------------------------------------------------|--------|-------------------------|--------|
|                                                         |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                         |   | (In thousands)          |   |
|                                                         |   |                    |   |   |   |   |   |   |   |
| Net Earnings (Loss)                                          |   | $                       | (8,793 | ) |   | $ | 18,408 |   |   | $ | 15,699 |   |
| Other Comprehensive Income (Loss):                           |   |                    |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |                    |   |   |   |   |   |   |   |   |   |   |
| Pension liability adjustment                                 |   |                    |   |   |   |   |   |   |   |   |   |   |
| net of income tax (expense) benefit of $520, $(161), and $8, |   |                    | (965   | ) |   |   | 261 |   |   |   | (13 | ) |
|                                                         |   |                    |   |   |   |   |   |   |   |   |   |   |
| Total Other Comprehensive Income (Loss)                      |   |                    | (965   | ) |   |   | 261 |   |   |   | (13 | ) |
|                                                         |   |                    |   |   |   |   |   |   |   |   |   |   |
| Comprehensive Income (Loss)                                  |   | $                       | (9,758 | ) |   | $ | 18,669 |   |   | $ | 15,686 |   |

----

| (1) | Summary of the Business and Significant Accounting Policies |
|-----|-------------------------------------------------------------|

----

|                   |   | TNMP           |   |
|------------------------|--------|----------------|--------|
|                   |   | 2008           |   |   | 2007 |   |
|                   |   | (In thousands) |   |
| Materials and supplies |   | $              | 1,625  |   |   | $ | 1,425 |   |

----

|                            |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |   |   |
| TNMP                            |   |   |   |   |   |   |   |   |   |
| Electric plant and common plant |   |   | 3.44   | %      |   |   | 3.48   | %      |   |   | 3.53 | % |

----

| (2)   | [omitted because not applicable] |
|-----------------|----------------------------------|

| (3)   | Segment Information |
|-----------------|---------------------|

| (4) | Regulatory Assets and Liabilities |
|-----|-----------------------------------|

----

|                         |   | December 31,   |    |
|------------------------------|--------|----------------|---------|
|                         |   | 2008           |    |   | 2007 |   |
|                         |   | (In thousands) |    |
| Assets:                      |   |           |    |   |   |   |
| Non-Current:                 |   |           |    |   |   |   |
| Stranded costs               |   | $              | 112,008 |   |   | $ | 123,864 |   |
| Deferred income taxes        |   |           | 4,665   |   |   |   | 5,162 |   |
| Pension and OPEB             |   |           | 16,003  |   |   |   | 28 |   |
| Loss on reacquired debt      |   |           | -       |   |   |   | 434 |   |
| Rate case expense            |   |           | 1,984   |   |   |   | 3,666 |   |
| Total regulatory assets      |   | $              | 134,660 |   |   | $ | 133,154 |   |
|                         |   |           |    |   |   |   |   |   |
| Liabilities:                 |   |           |    |   |   |   |   |   |
| Non-Current:                 |   |           |    |   |   |   |   |   |
| Cost of removal              |   | $              | (31,345 | ) |   | $ | (30,057 | ) |
| Energy efficiency credit     |   |           | (2,106  | ) |   |   | (2,214 | ) |
| Pension and OPEB             |   |           | (1,577  | ) |   |   | (14,319 | ) |
| Total regulatory liabilities |   | $              | (35,028 | ) |   | $ | (46,590 | ) |

| (5) | Stockholder’s Equity |
|-----|----------------------------|

----

| (6) | Financing |
|-----|-----------|

----

|                                                    |   | December 31,   |    |   | December 31, |   |
|---------------------------------------------------------|--------|----------------|---------|--------|--------------|--------|
| Short-term Debt                                         |   | 2008           |    |   | 2007         |   |
|                                                    |   | (In thousands) |    |
|                                                    |   |           |    |   |         |   |
| TNMP                                                    |   |           |    |   |         |   |
|      Revolving credit facility |   | $              | 150,000 |   |         |   | - |   |
|      Bridge facility           |   |           | -       |   |         |   | - |   |
|                                                    |   |           |    |   |         |   |   |   |
|                                                    |   | $              | 150,000 |   |         | $      | - |   |

|                                                                 |   | December 31,   |    |
|----------------------------------------------------------------------|--------|----------------|---------|
| Long-term Debt                                                       |   | 2008           |    |   | 2007 |   |
|                                                                 |   | (In thousands) |    |
| TNMP Debt                                                            |   |           |    |   |   |   |
| Senior Notes:                                                        |   |           |    |   |   |   |
|      6.125% due 2008                        |   | $              | -       |   |   | $ | 148,935 |   |
|      6.25% due 2009                         |   |           | 167,690 |   |   |   | 167,690 |   |
|      Other, including unamortized discounts |   |           | -       |   |   |   | (134 | ) |
|                                                                 |   |           | 167,690 |   |   |   | 316,491 |   |
| Less current maturities                                              |   |           | 167,690 |   |   |   | 148,882 |   |
|                                                                 |   |           |    |   |   |   |   |   |
|                                                                 |   | $              | -       |   |   | $ | 167,609 |   |

| (7) | Lease Commitments |
|-----|-------------------|

|   |   | TNMP           |   |
|--------|--------|----------------|--------|
|   |   | (In thousands) |   |
|   |   |           |   |
| 2008   |   | $              | 2,121  |   |
| 2007   |   | $              | 3,233  |   |
| 2006   |   | $              | 1,408  |   |

----

|                                           |   | TNMP           |   |
|------------------------------------------------|--------|----------------|--------|
|                                           |   | (In thousands) |   |
|                                           |   |           |   |
| 2009                                           |   | $              | 1,639  |   |
| 2010                                           |   |           | 1,633  |   |
| 2011                                           |   |           | 1,633  |   |
| 2012                                           |   |           | 1,633  |   |
| 2013                                           |   |           | 1,631  |   |
| Later years                                    |   |           | -      |   |
|                                           |   |           | 8,169  |   |
| Future payments under non-cancelable subleases |   |           | -      |   |
| Total minimum lease payments                   |   | $              | 8,169  |   |

| (8) | Fair Value of Financial Instruments |
|-----|-------------------------------------|

|           | December 31, 2008          |   | December 31, 2007    |
|----------------|----------------------------|--------|----------------------|
|           | Carrying                   |   |                 |   | Carrying |   |   |
|           | Amount                     |   | Fair Value           |   | Amount |   | Fair Value |
|           | (In thousands)             |
| TNMP           |                       |   |                 |   |   |   |   |
| Long-term debt | $   167,690 |   | $  167,690 |   | $   316,491 |   | $   319,714 |

| (9) | [omitted because not applicable] |
|-----|----------------------------------|

| (10) | [omitted because not applicable] |
|------|----------------------------------|

----

| (11) | Income Taxes |
|------|--------------|

|                                   |   | Year Ended December 31, |    |
|----------------------------------------|--------|-------------------------|---------|
|                                   |   | 2008                    |    |   | 2007 |   |   | 2006 |   |
|                                   |   | (In thousands)          |    |
|                                   |   |                    |    |   |   |   |   |   |   |
| Current federal income tax             |   | $                       | 17,233  |   |   | $ | 18,716 |   |   | $ | 1,532 |   |
| Current state income tax               |   |                    | 1,609   |   |   |   | 973 |   |   |   | 411 |   |
| Deferred federal income tax            |   |                    | 11,285  |   |   |   | (9,162 | ) |   |   | 5,013 |   |
| Deferred state income tax              |   |                    | (18,808 | ) |   |   | 538 |   |   |   | (462 | ) |
| Amortization of accumulated investment |   |                    |    |   |   |   |   |   |   |   |   |   |
| tax credits                            |   |                    | (191    | ) |   |   | (418 | ) |   |   | (707 | ) |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Total income taxes                     |   | $                       | 11,128  |   |   | $ | 10,647 |   |   | $ | 5,787 |   |

|                                                  |   | Year Ended December 31, |   |
|-------------------------------------------------------|--------|------------------------------|--------|
|                                                  |   | 2008                         |   |   | 2007 |   |   | 2006 |   |
|                                                  |   | (In thousands)               |   |
|                                                  |   |                         |   |   |   |   |   |   |   |
| Federal income tax at statutory rates                 |   | $                            | 817    |   |   | $ | 10,169 |   |   | $ | 6,267 |   |
| Impairment of goodwill                                |   |                         | 12,059 |   |   |   | - |   |   |   | - |   |
| Investment tax credits                                |   |                         | (191   | ) |   |   | (418 | ) |   |   | (707 | ) |
| Reversal of deferred income taxes accrued             |   |                         |   |   |   |   |   |   |   |   |   |   |
| at prior tax rates                                    |   |                         | (141   | ) |   |   | (141 | ) |   |   | (216 | ) |
| Allowance for funds used during construction          |   |                         | (10    | ) |   |   | (45 | ) |   |   | (94 | ) |
| State income tax                                      |   |                         | 1,045  |   |   |   | 985 |   |   |   | 387 |   |
| Texas margin tax and related deferred tax adjustments |   |                         | (2,494 | ) |   |   | - |   |   |   | - |   |
| Other                                                 |   |                         | 43     |   |   |   | 97 |   |   |   | 150 |   |
|                                                  |   |                         |   |   |   |   |   |   |   |   |   |   |
| Total income taxes                                    |   | $                            | 11,128 |   |   | $ | 10,647 |   |   | $ | 5,787 |   |
|                                                  |   |                         |   |   |   |   |   |   |   |   |   |   |
| Effective tax rate                                    |   |                         | 476.65 | % |   |   | 36.64 | % |   |   | 32.32 | % |

----

|                                                                         |   | December 31,   |     |
|------------------------------------------------------------------------------|--------|----------------|----------|
|                                                                         |   | 2008           |     |   | 2007 |   |
|                                                                         |   | (In thousands) |     |
| Deferred Tax Assets:                                                         |   |           |     |   |   |   |
|      Regulatory liabilities related to income taxes |   | $              | 7,105    |   |   | $ | 8,556 |   |
|      Deferred Tax Assets – other              |   |           | 29,043   |   |   |   | 8,091 |   |
| Total deferred tax assets                                                    |   |           | 36,148   |   |   |   | 16,647 |   |
|                                                                         |   |           |     |   |   |   |   |   |
| Deferred Tax Liabilities:                                                    |   |           |     |   |   |   |   |   |
| Depreciation and plant related                                               |   |           | (94,682  | ) |   |   | (74,638 | ) |
| Stranded costs                                                               |   |           | (39,203  | ) |   |   | (47,197 | ) |
| Regulatory assets related to income taxes                                    |   |           | (11,765  | ) |   |   | (15,086 | ) |
| Other                                                                        |   |           | (1,691   | ) |   |   | (191 | ) |
| Total deferred tax liabilities                                               |   |           | (147,341 | ) |   |   | (137,112 | ) |
| Net accumulated deferred income tax liabilities                              |   | $              | (111,193 | ) |   | $ | (120,465 | ) |

|                                                                          |   | Year Ended        |   |
|-------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                          |   | December 31, 2008 |   |
|                                                                          |   | (In thousands)    |   |
|                                                                          |   |              |   |
| Net change in deferred income tax liability per above table                   |   | $                 | (9,272 | ) |
| Change in tax effects of income tax related regulatory assets and liabilities |   |              | (112   | ) |
| Tax effect of excess pension liability                                        |   |              | 520    |   |
| FIN48 adjustments                                                             |   |              | 541    |   |
| Other                                                                         |   |              | 609    |   |
| Deferred income tax (benefit)                                                 |   | $                 | (7,714 | ) |

----

|                                             |   | TNMP           |   |
|--------------------------------------------------|--------|----------------|--------|
|                                             |   | (In thousands) |   |
|                                             |   |           |   |
| Balance at January 1, 2007                       |   | $              | -      |   |
| Additions based on tax positions related to 2007 |   |           | -      |   |
| Reductions for tax positions of prior years      |   |           | -      |   |
| Settlements                                      |   |           | -      |   |
| Balance at December 31, 2007                     |   |           | -      |   |
| Additions based on tax positions related to 2008 |   |           | 541    |   |
| Reductions for tax positions of prior years      |   |           | -      |   |
| Settlements                                      |   |           | -      |   |
| Balance at December 31, 2008                     |   | $              | 541    |   |

----

| ·   | Maximize the return on assets, commensurate with the risk that the Corporate Investment Committee deems appropriate to:  meet the obligations of the pension plans and other postretirement benefits plans; minimize the volatility of expense; and account for contingencies; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Generate a rate of return for the total portfolio that equals or exceeds the actuarial investment rate assumption. |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

|                                                 |   | TNMP Plan               |    |
|------------------------------------------------------|--------|-------------------------|---------|
|                                                 |   | Year Ended December 31, |    |
|                                                 |   | 2008                    |    |   | 2007 |   |
|                                                 |   | (In thousands)          |    |
|                                                 |   |                    |    |   |   |   |
| PBO at beginning of year                             |   | $                       | 66,619  |   |   | $ | 72,963 |   |
|    Service cost                       |   |                    | -       |   |   |   | - |   |
|    Interest cost                      |   |                    | 4,243   |   |   |   | 4,229 |   |
|    Actuarial (gain) loss              |   |                    | 279     |   |   |   | (2,821 | ) |
|    Benefits paid                      |   |                    | (7,113  | ) |   |   | (7,752 | ) |
| PBO at end of year                                   |   |                    | 64,028  |   |   |   | 66,619 |   |
| Fair value of plan assets at beginning of year       |   |                    | 81,538  |   |   |   | 81,816 |   |
| Actual return on plan assets                         |   |                    | (21,001 | ) |   |   | 7,474 |   |
| Benefits paid                                        |   |                    | (7,113  | ) |   |   | (7,752 | ) |
| Fair value of plan assets at end of year             |   |                    | 53,424  |   |   |   | 81,538 |   |
| Funded status-asset (liability) for pension benefits |   | $                       | (10,604 | ) |   | $ | 14,919 |   |

----

|                                                                                  |   | TNMP Plan                 |    |
|---------------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                                  |   | December 31, 2008         |    |
|                                                                                  |   | Net actuarial (gain) loss |    |
|                                                                                  |   | (In thousands)            |    |
|                                                                                  |   |                      |    |
| Amounts in AOCI not yet recognized in net periodic cost (income) at beginning of year |   | $                         | (1,087  | ) |
| Experience loss (gain)                                                                |   |                      | 27,915  |   |
| Regulatory asset (liability) adjustment                                               |   |                      | (26,542 | ) |
| Amortization recognized in net periodic cost                                          |   |                      | 8       |   |
| Amounts in AOCI not yet recognized in net periodic cost (income) at end of year       |   | $                         | 294     |   |
|                                                                                  |   |                      |    |   |
| Amortization expected to be recognized in AOCI in 2009                                |   | $                         | -       |   |

|                                                             |   | Year Ended December 31, |   |
|------------------------------------------------------------------|--------|-------------------------|--------|
|                                                             |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                             |   | (In thousands)          |   |
| TNMP Plan                                                        |   |                    |   |   |   |   |   |   |   |
| Service cost                                                     |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |
| Interest cost                                                    |   |                    | 4,243  |   |   |   | 4,229 |   |   |   | 4,339 |   |
| Long-term rate of return on plan assets                          |   |                    | (6,635 | ) |   |   | (6,840 | ) |   |   | (7,018 | ) |
| Amortization of net (gain) loss                                  |   |                    | (146   | ) |   |   | (7 | ) |   |   | - |   |
| Amortization of prior service cost                               |   |                    | -      |   |   |   | - |   |   |   | - |   |
|      Net periodic benefit (income) cost |   | $                       | (2,538 | ) |   | $ | (2,618 | ) |   | $ | (2,679 | ) |

|                                                       |   | Year Ended December 31, |   |
|------------------------------------------------------------|--------|-------------------------|--------|
|                                                       |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                       |   |                    |   |   |   |   |   |   |   |
| TNMP Plan                                                  |   |                    |   |   |   |   |   |   |   |
| Discount rate for determining projected benefit obligation |   |                    |   |   |   |   |   |   |   |
|  at December 31                                       |   |                    | 7.25   | % |   |   | 6.72 | % |   |   | 6.10 | % |
| Discount rate for determining net periodic cost (income)   |   |                    | 6.72   | % |   |   | 6.10 | % |   |   | 5.75 | % |
| Long-term rate of return on plan assets                    |   |                    | 8.50   | % |   |   | 8.75 | % |   |   | 9.00 | % |
| Rate of compensation increase                              |   |                    | N/A    |   |   |   | N/A |   |   |   | N/A |   |

----

|                    |   | TNMP Plan    |   |
|-------------------------|--------|--------------|--------|
|                    |   | December 31, |   |
|                    |   | 2008         |   |   | 2007 |   |
|                    |   |         |   |   |   |   |
| Equity securities       |   |         | 42     | % |   |   | 50 | % |
| Fixed income            |   |         | 23     | % |   |   | 23 | % |
| Alternative investments |   |         | 35     | % |   |   | 27 | % |
|                    |   |         | 100    | % |   |   | 100 | % |

|                    |   | TNMP   |   |
|-------------------------|--------|--------|--------|
|                    |   | Plan   |   |
|                    |   |   |   |
| Equity securities       |   |   | 57.5   | % |
| Fixed income            |   |   | 22.5   | % |
| Alternative investments |   |   | 20.0   | % |
|                    |   |   | 100    | % |

|                    |   | TNMP           |   |
|-------------------------|--------|----------------|--------|
|                    |   | Plan           |   |
|                    |   | (In thousands) |   |
|                    |   |           |   |
| 2009                    |   | $              | 6,786  |   |
| 2010                    |   | $              | 6,458  |   |
| 2011                    |   | $              | 6,466  |   |
| 2012                    |   | $              | 6,508  |   |
| 2013                    |   | $              | 6,005  |   |
| Years 2014 – 2018 |   | $              | 27,943 |   |

----

|                                           |   | TNMP Plan               |   |
|------------------------------------------------|--------|-------------------------|--------|
|                                           |   | Year Ended December 31, |   |
|                                           |   | 2008                    |   |   | 2007 |   |
|                                           |   | (In thousands)          |   |
|                                           |   |                    |   |   |   |   |
| APBO at beginning of year                      |   | $                       | 10,779 |   |   | $ | 11,197 |   |
| Service cost                                   |   |                    | 284    |   |   |   | 394 |   |
| Interest cost                                  |   |                    | 715    |   |   |   | 661 |   |
| Participant contributions                      |   |                    | 348    |   |   |   | 160 |   |
| Actuarial (gain) loss                          |   |                    | (869   | ) |   |   | (1,180 | ) |
| Benefits paid                                  |   |                    | (692   | ) |   |   | (453 | ) |
| APBO at end of year                            |   |                    | 10,565 |   |   |   | 10,779 |   |
| Fair value of plan assets at beginning of year |   |                    | 7,907  |   |   |   | 7,162 |   |
|    Actual return on plan assets |   |                    | (2,299 | ) |   |   | 661 |   |
|    Employer contributions       |   |                    | 428    |   |   |   | 377 |   |
|    Participant contributions    |   |                    | 348    |   |   |   | 160 |   |
|    Benefits paid                |   |                    | (692   | ) |   |   | (453 | ) |
| Fair value of plan assets at end of year       |   |                    | 5,692  |   |   |   | 7,907 |   |
| Funded status-APBO net (liability)             |   | $                       | (4,873 | ) |   | $ | (2,872 | ) |

|                                                                                 |   | TNMP Plan            |   |
|--------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                 |   | December 31, 2008    |   |
|                                                                                 |   | Prior service cost   |   |   | Net actuarial (gain)/loss |   |
|                                                                                 |   |  (In thousands) |   |
|                                                                                 |   |                 |   |   |   |   |
| Amount in AOCI not yet recognized in net periodic cost (income) at beginning of year |   | $                    | 18     |   |   | $ | (196 | ) |
| Experience loss (gain)                                                               |   |                 | -      |   |   |   | 1,916 |   |
| Regulatory asset (liability) adjustment                                              |   |                 | -      |   |   |   | (1,822 | ) |
| Amortization recognized in net periodic cost                                         |   |                 | (3     | ) |   |   | 13 |   |
| Amounts in AOCI not yet recognized in net periodic cost (income) at end of year      |   | $                    | 15     |   |   | $ | (89 | ) |
|                                                                                 |   |                 |   |   |   |   |   |   |
| Amortization expected to be recognized in AOCI in 2009                               |   | $                    | (3     | ) |   | $ | 13 |   |

----

|                                                    |   | Year Ended December 31, |   |
|---------------------------------------------------------|--------|-------------------------|--------|
|                                                    |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                    |   | (In thousands)          |   |
| TNMP Plan                                               |   |                    |   |   |   |   |   |   |   |
| Service cost                                            |   | $                       | 284    |   |   | $ | 394 |   |   | $ | 424 |   |
| Interest cost                                           |   |                    | 716    |   |   |   | 661 |   |   |   | 710 |   |
| Long-term rate of return on plan assets                 |   |                    | (486   | ) |   |   | (456 | ) |   |   | (456 | ) |
| Amortization of prior service cost and regulatory asset |   |                    | 60     |   |   |   | 60 |   |   |   | 60 |   |
| Amortization of net (gain) loss and regulatory asset    |   |                    | (271   | ) |   |   | (156 | ) |   |   | - |   |
|      Net periodic benefit cost |   | $                       | 303    |   |   | $ | 503 |   |   | $ | 738 |   |

|                                                      |   | Year Ended December 31, |   |
|-----------------------------------------------------------|--------|-------------------------|--------|
|                                                      |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
| TNMP Plan                                                 |   |                    |   |   |   |   |   |   |   |
| Discount rate for determining accumulated postretirement  |   |                    |   |   |   |   |   |   |   |
|    benefit obligation at December 31       |   |                    | 7.25   | % |   |   | 6.91 | % |   |   | 6.10 | % |
| Discount rate for determining postretirement benefit cost |   |                    | 6.91   | % |   |   | 6.10 | % |   |   | 5.75 | % |
| Long-term rate of return on plan assets                   |   |                    | 6.50   | % |   |   | 6.70 | % |   |   | 6.90 | % |
| Rate of compensation increase                             |   |                    | N/A    |   |   |   | N/A |   |   |   | N/A |   |

|              |   | TNMP Plan    |   |
|-------------------|--------|--------------|--------|
|              |   | December 31, |   |
|              |   | 2008         |   |   | 2007 |   |
|              |   |         |   |   |   |   |
| Equity securities |   |         | 58     | % |   |   | 71 | % |
| Debt securities   |   |         | 42     | % |   |   | 29 | % |
|              |   |         | 100    | % |   |   | 100 | % |

----

|                    |   | TNMP           |   |
|-------------------------|--------|----------------|--------|
|                    |   | Plan           |   |
|                    |   | (In thousands) |   |
|                    |   |           |   |
| 2009                    |   | $              | 916    |   |
| 2010                    |   | $              | 895    |   |
| 2011                    |   | $              | 905    |   |
| 2012                    |   | $              | 894    |   |
| 2013                    |   | $              | 888    |   |
| Years 2014 – 2018 |   | $              | 4,693  |   |

|                                         |           | TNMP Plan              |
|----------------------------------------------|----------------|------------------------|
|                                         |           | Year EndedDecember 31, |
|                                         |           | 2008                   |   |   | 2007 |
|                                         | (In thousands) |                   |   |
|                                         |           |                   |   |   |   |
| PBO at beginning of year                     |           | $                      | 1,199 |   |   | $ | 1,325 |   |
| Service cost                                 |           |                   | - |   |   |   | - |   |
| Interest cost                                |           |                   | 75 |   |   |   | 76 |   |
| Actuarial gain                               |           |                   | 14 |   |   |   | (39 | ) |
| Benefits paid                                |           |                   | (163 | ) |   |   | (163 | ) |
| PBO at end of year-funded status (liability) |           | $                      | (1,125 | ) |   | $ | (1,199 | ) |

----

|                                                                                 |   | TNMP Plan          |   |
|--------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                 |   | December 31, 2008  |   |
|                                                                                 |   | Net actuarial loss |   |
|                                                                                 |   | (In thousands)     |   |
|                                                                                 |   |               |   |
| Amount in AOCI not yet recognized in net periodic cost (income) at beginning of year |   | $                  | -      |   |
| Experience loss (gain)                                                               |   |               | (14    | ) |
| Regulatory asset (liability) adjustment                                              |   |               | 14     |   |
| Amortization recognized in net periodic cost                                         |   |               | -      |   |
| Amount in AOCI not yet recognized in net periodic cost (income) at end of year       |   | $                  | -      |   |
|                                                                                 |   |               |   |   |
| Amortization expected to be recognized in AOCI in 2009                               |   | $                  | -      |   |

|                                                    |   | Pension Benefits        |   |
|---------------------------------------------------------|--------|-------------------------|--------|
|                                                    |   | Year Ended December 31, |   |
|                                                    |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                    |   | (In thousands)          |   |
| TNMP Plan                                               |   |                    |   |   |   |   |   |   |   |
| Service cost                                            |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |
| Interest cost                                           |   |                    | 75     |   |   |   | 76 |   |   |   | 76 |   |
| Amortization of actuarial loss                          |   |                    | -      |   |   |   | - |   |   |   | - |   |
| Amortization of prior service cost                      |   |                    | -      |   |   |   | - |   |   |   | - |   |
|      Net periodic benefit cost |   | $                       | 75     |   |   | $ | 76 |   |   | $ | 76 |   |

|                                                       |   | Year Ended December 31, |   |
|------------------------------------------------------------|--------|-------------------------|--------|
|                                                       |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                       |   |                    |   |   |   |   |   |   |   |
| TNMP Plan                                                  |   |                    |   |   |   |   |   |   |   |
| Discount rate for determining projected benefit obligation |   |                    |   |   |   |   |   |   |   |
| at December 31                                             |   |                    | 7.25   | % |   |   | 6.72 | % |   |   | 6.10 | % |
| Discount rate for determining net periodic cost            |   |                    | 6.72   | % |   |   | 6.10 | % |   |   | 5.75 | % |
| Long-term rate of return on plan assets                    |   |                    | N/A    |   |   |   | N/A |   |   |   | N/A |   |
| Rate of compensation increase                              |   |                    | N/A    |   |   |   | N/A |   |   |   | N/A |   |

----

|                    |   | TNMP           |   |
|-------------------------|--------|----------------|--------|
|                    |   | Plan           |   |
|                    |   | (In thousands) |   |
|                    |   |           |   |
| 2009                    |   | $              | 154    |   |
| 2010                    |   | $              | 146    |   |
| 2011                    |   | $              | 137    |   |
| 2012                    |   | $              | 129    |   |
| 2013                    |   | $              | 120    |   |
| Years 2014 – 2018 |   | $              | 489    |   |

----

|                     |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                     |   |   |   |   |   |   |   |   |   |
| Dividend yield           |   |   | 6.99   | %      |   |   | 3.02   | %      |   |   | 3.33 | % |
| Expected volatility      |   |   | 28.33  | %      |   |   | 18.68  | %      |   |   | 21.70 | % |
| Risk-free interest rates |   |   | 2.69   | %      |   |   | 4.72   | %      |   |   | 4.37 | % |
| Expected life (years)    |   |   | 4.2    |   |   |   | 4.2    |   |   |   | 4.1 |   |

|                                   |   | 2008  |   | 2007  |   | 2006  |
|----------------------------------------|--------|-------|--------|-------|--------|-------|
| Expected quarterly dividends per share |   | $0.23 |   | $0.23 |   | $0.20 |
| Risk-free interest rate                |   | 2.93% |   | 4.71% |   | 4.64% |

----

|  (14) | Construction Program |
|------------|----------------------|

|   |          | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012 |   |   | 2013 |   |   | Total  |   |
|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|------|--------|--------|--------|--------|
|   | (In millions) |   |   |   |   |
| TNMP   |          | $      | 61.6   |   |   | $      | 79.7   |   |   | $      | 79.1 |   |   | $    | 64.4   |   |   | $      | 54.1 |   |   | $ | 338.9 |   |

|  (15) | Asset Retirement Obligations |
|------------|------------------------------|

|                                                         |   | TNMP           |   |
|--------------------------------------------------------------|--------|----------------|--------|
|                                                         |   | (In thousands) |   |
|                                                         |   |           |   |
| Liability at December 31, 2005                               |   | $              | 639    |   |
| Liabilities incurred                                         |   |           | -      |   |
| Liabilities settled                                          |   |           | (7     | ) |
| Accretion expense                                            |   |           | 54     |   |
| Liability at December 31, 2006                               |   |           | 686    |   |
| Liabilities incurred                                         |   |           | -      |   |
| Liabilities settled                                          |   |           | (8     | ) |
| Accretion expense                                            |   |           | 52     |   |
| Asset transferred with TNMP New Mexico asset transfer to PNM |   |           | (68    | ) |
| Liability at December 31, 2007                               |   |           | 662    |   |
| Liabilities incurred                                         |   |           | -      |   |
| Liabilities settled                                          |   |           | (7     | ) |
| Accretion expense                                            |   |           | 56     |   |
| Liability at December 31, 2008                               |   | $              | 711    |   |

|  (16) | Commitments and Contingencies |
|------------|-------------------------------|

----

| (17) | Regulatory and Rate Matters |
|------|-----------------------------|

----

| (18) | Environmental Issues |
|------|----------------------|

|   | TNMP                 |
|--------|----------------------|
|   | December 31,         |
|   | 2008                 |   | 2007 |
|   |  (In thousands) |   |
|   |                 |   |   |   |
|   | $  -       |   | $ - |   |

|   |   | Year Ended December 31, |   |
|--------|--------|-------------------------|--------|
|   |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|   |   | (In thousands)          |   |
|   |   |                    |   |   |   |   |   |   |   |
| TNMP   |   | $                       | -      |   |   | $ | - |   |   | $ | 246 |   |

----

| (19) | Accumulated Other Comprehensive Income |
|------|----------------------------------------|

|                         |   |           |   |   |       |   |   | Mark-to-     |   |   |          |   |
|------------------------------|--------|----------------|--------|--------|------------|--------|--------|--------------|--------|--------|---------------|--------|
|                         |   | Unrealized     |   |   |       |   |   | market for   |   |   | Accumulated   |   |
|                         |   | gain (loss)    |   |   | Pension    |   |   | cash-flow    |   |   | other         |   |
|                         |   | on             |   |   | liability  |   |   | hedge        |   |   | comprehensive |   |
|                         |   | securities     |   |   | adjustment |   |   | transactions |   |   | income (loss) |   |
|                         |   | (In thousands) |   |
| TNMP                         |   |           |   |   |       |   |   |         |   |   |          |   |
| Balance at December 31, 2007 |   | $              | -      |   |       | $      | 823    |         |   | $      | -             |   |   | $ | 823 |   |
| Balance at December 31, 2008 |   | $              | -      |   |       | $      | (142   | )            |   | $      | -             |   |   | $ | (142 | ) |

| (20) | Related Party Transactions |
|------|----------------------------|

----

|                                                                  |   | Year Ended December 31, |   |
|-----------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                  |   | 2008                    |   |   | 2007 |   |   | 2006 |   |
|                                                                  |   |                    |   |   | (In thousands) |   |   |   |   |
|                                                                  |   |                    |   |   |   |   |   |   |   |
| Electricity, transmission and distribution related services billings: |   |                    |   |   |   |   |   |   |   |
| PNM to TNMP                                                           |   | $                       | -      |   |   | $ | 126 |   |   | $ | 50,817 |   |
| TNMP to PNMR                                                          |   |                    | 55,214 |   |   |   | 69,731 |   |   |   | 68,555 |   |
|                                                                  |   |                    |   |   |   |   |   |   |   |   |   |   |
| Services billings:                                                    |   |                    |   |   |   |   |   |   |   |   |   |   |
| PNMR to TNMP                                                          |   |                    | 19,043 |   |   |   | 18,302 |   |   |   | 24,637 |   |
| PNM to TNMP                                                           |   |                    | 1,672  |   |   |   | 261 |   |   |   | 554 |   |
|                                                                  |   |                    |   |   |   |   |   |   |   |   |   |   |
| PNMR Services capital expenditures fees:                              |   |                    |   |   |   |   |   |   |   |   |   |   |
| TNMP to PNMR                                                          |   |                    | -      |   |   |   | 18 |   |   |   | 5,281 |   |
|                                                                  |   |                    |   |   |   |   |   |   |   |   |   |   |
| Income tax sharing payments:                                          |   |                    |   |   |   |   |   |   |   |   |   |   |
| TNMP to PNMR                                                          |   |                    | 15,079 |   |   |   | - |   |   |   | 7,001 |   |
| PNMR to TNMP                                                          |   |                    | -      |   |   |   | (15,529 | ) |   |   | - |   |
|                                                                  |   |                    |   |   |   |   |   |   |   |   |   |   |
| Interest payments:                                                    |   |                    |   |   |   |   |   |   |   |   |   |   |
| TNMP to PNMR                                                          |   |                    | 133    |   |   |   | 1,165 |   |   |   | - |   |

| (21) | New Accounting Pronouncements |
|------|-------------------------------|

----

| (23) | Discontinued Operations |
|------|-------------------------|

|                                                    |   | Year Ended     |
|---------------------------------------------------------|--------|----------------|
|                                                    |   | December 31,   |
|                                                    |   | 2006           |
|                                                    |   | (In thousands) |
|                                                    |   |           |
| Operating revenues                                      |   | $              | 99,121 |   |
| Operating expenses and other income                     |   |           | 93,992 |   |
| Earnings from discontinued operations before income tax |   |           | 5,129 |   |
| Income tax expense                                      |   |           | 1,548 |   |
| Earnings from discontinued operations                   |   | $              | 3,581 |   |

----

|                                    |   | January 1,     |    |
|-----------------------------------------|--------|----------------|---------|
|                                    |   | 2007           |    |
|                                    |   | (In thousands) |    |
| Current assets                          |   | $              | 15,444  |   |
| Other property and investments          |   |           | 10      |   |
| Utility plant, net                      |   |           | 96,468  |   |
| Goodwill                                |   |           | 102,775 |   |
| Deferred charges                        |   |           | 1,377   |   |
| Total assets transferred to PNM         |   |           | 216,074 |   |
|                                    |   |           |    |   |
| Current liabilities                     |   |           | 17,313  |   |
| Long-term debt                          |   |           | 1,065   |   |
| Deferred credits and other liabilities  |   |           | 30,673  |   |
| Total liabilities transferred to PNM    |   |           | 49,051  |   |
|                                    |   |           |    |   |
| Net assets transferred between entities |   | $              | 167,023 |   |

| (24) | Business Improvement Plan |
|------|---------------------------|

| (25) | Goodwill; Impairments |
|------|-----------------------|

----

|                            |   | TNMP Electric        |     |
|---------------------------------|--------|----------------------|----------|
|                            |   |  (In thousands) |     |
|                            |   |                 |     |
| Balance as of December 31, 2005 |   | $                    | 367,245  |   |
| Adjustments during 2006         |   |                 | (3,481   | ) |
| Balance as of December 31, 2006 |   |                 | 363,764  |   |
| Adjustments during 2007         |   |                 | (102,643 | ) |
| Balance as of December 31, 2007 |   |                 | 261,121  |   |
| Impairments                     |   |                 | (34,456  | ) |
| Balance as of December 31, 2008 |   | $                    | 226,665  |   |

|  (26) | Quarterly Operating Results (Unaudited) |
|------------|-----------------------------------------|

|                    |   |                                     |   |   | Quarter Ended |   |    |         |   |
|-------------------------|--------|------------------------------------------|--------|--------|---------------|--------|---------|--------------|--------|
|                    |   | March 31                                 |   |   | June 30       |   |    | September 30 |   |   | December 31 |   |
|                    |   | (In thousands, except per share amounts) |   |
| TNMP                    |   |                                     |   |   |          |   |    |         |   |   |   |   |
| 2008                    |   |                                     |   |   |          |   |    |         |   |   |   |   |
| Operating revenues      |   | $                                        | 42,228 |   |          | $      | 47,118  |         |   | $ | 51,097 |   |   | $ | 49,839 |   |
| Operating income (loss) |   |                                     | 10,583 |   |          |   | (21,563 | )            |   |   | 15,506 |   |   |   | 12,924 |   |
| Net earnings (loss)     |   |                                     | 3,730  |   |          |   | (28,753 | )            |   |   | 8,093 |   |   |   | 8,137 |   |
| 2007                    |   |                                     |   |   |          |   |    |         |   |   |   |   |   |   |   |   |
| Operating revenues      |   |                                     | 40,928 |   |          |   | 43,536  |         |   |   | 52,680 |   |   |   | 43,277 |   |
| Operating Income        |   |                                     | 8,107  |   |          |   | 11,555  |         |   |   | 21,062 |   |   |   | 11,946 |   |
| Net earnings            |   |                                     | 938    |   |          |   | 4,234   |         |   |   | 10,228 |   |   |   | 3,008 |   |
|                    |   |                                     |   |   |          |   |    |         |   |   |   |   |   |   |   |   |

----

----

|                             |   |         |   |   | Additions      |   |   | Deductions |   |   |       |   |
|----------------------------------|--------|--------------|--------|--------|----------------|--------|--------|------------|--------|--------|------------|--------|
|                             |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |
|                             |   | Balance at   |   |   | Charged to     |   |   | Charged to |   |   |       |   |   |   |   |
|                             |   | beginning of |   |   | costs and      |   |   | other      |   |   |       |   |   | Balance at |   |
| Description                      |   | year         |   |   | expenses       |   |   | accounts   |   |   | Write-offs |   |   | end of year |   |
|                             |   |         |   |   | (In thousands) |   |   |       |   |
| Allowance for doubtful accounts, |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |
| year ended December 31:          |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |
|                             |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |
| 2006                             |   | $            | 100    |   |           | $      | 25     |       |   | $      | -          |   |   | $ | 94 |   |   | $ | 31 |   |
|                             |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |
| 2007                             |   | $            | 31     |   |           | $      | 3      |       |   | $      | -          |   |   | $ | 34 |   |   | $ | - |   |
|                             |   |         |   |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |
| 2008                             |   | $            | -      |   |           | $      | 144    |       |   | $      | -          |   |   | $ | 144 |   |   | $ | - |   |

----

| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---------|--------------------------------------------------------------------------------------|

| ITEM 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

----

|   | PART IV |
|--------|---------|

| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
|----------|-----------------------------------------|

|   | (a) - 1. | See Index to Financial Statements under Item 8. |
|--------|----------|-------------------------------------------------|

|   | (a) - 2. | Financial Statement Schedules for the years 2008, 2007, and 2006 are omitted for the reason that they are not required or the information is otherwise supplied under Item 8. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ExhibitNo. |   | Description                                                                                     |
|------------|--------|-------------------------------------------------------------------------------------------------|
|       |   |                                                                                            |
| 23.3       | TNMP   | Consent of Deloitte & Touche LLP for Texas-New Mexico Power Company                         |
|       |   |                                                                                            |
| 31.5       | TNMP   | Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|       |   |                                                                                            |
| 31.6       | TNMP   | Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|       |   |                                                                                            |

----

|                              |   | TEXAS-NEW MEXICO POWER COMPANY |
|-----------------------------------|--------|--------------------------------|
|                              |   | (Registrant)                   |
|                              |   |                           |
| Date:  January 15, 2010 | By     | /s/ Thomas G. Sategna     |
|                              |   | Thomas G. Sategna         |
|                              |   | Vice President and             |
|                              |   | Controller                     |

----