**EXHIBIT
      10.31**





**PNM
      RESOURCES, INC.**


**2006
      OFFICER INCENTIVE PLAN**





**INTRODUCTION**





This
      document serves as a comprehensive single source of information about the PNM
      Resources, Inc. Officer Incentive Plan (the “Plan”). It describes the objectives
      of the Plan, its various elements, and how they function. If you have questions
      that are not addressed by this document, please direct them to the Compensation
      Department.





**PLAN
      OBJECTIVES**





The
      Plan
      is designed to motivate and reward participants for achieving and exceeding
      annual company, business unit and individual goals, and the company-wide
      earnings per share (“EPS”) goal.





**EFFECTIVE
      DATES**





The
      Plan
      is effective from January 1, 2006 through December 31, 2006 (the “Plan Year”).
      Management reserves the right, however, to adjust, amend or suspend the Plan
      at
      its discretion during the Plan Year, with the approval of the Human Resources
      and Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”).





**ADMINISTRATION**





·
            **Plan
                Year Goals**





Individual
      goal sets (e.g. combined company, business unit, and individual) will be
      established for each Officer. After considering the recommendations of
      management, the Committee will approve the company-wide EPS goals against which
      performance will be measured for the Plan Year.





·
            **Incentive
                Award Approvals and Payout
                Timing**





Shortly
      after the end of the Plan Year, the Committee or the Board will, in its sole
      discretion, determine the final performance results which will be used to
      calculate awards, if any. Awards will be distributed by check to eligible
      participants following such approval during the first quarter following the
      end
      of the Plan Year.





**ETHICS**





The
      purpose of the Plan is to fairly reward performance achievement. Any employee
      who manipulates or attempts to manipulate the Plan for personal gain at the
      expense of customers, other employees or company objectives will be subject
      to
      appropriate disciplinary action, up to and including termination of
      employment.





**ELIGIBILITY**





All
      officers are eligible to participate in the Plan with the exception of the
      Vice
      Presidents for First Choice Power, who will participate in the First Choice
      Power Incentive Plan. For purposes of this Plan, officer means any employee
      of
      the company with the title of Chief Executive Officer, President, Executive
      Vice
      President, Senior Vice President or Vice President.




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·
            **Pro
                Rata Awards for Partial Service
                Periods**





Pro
      rata
      awards for the number of months actively employed at each eligibility level
      during the Plan Year will be paid to the following participants at the time
      awards are paid to all participants: (Note: Any month in which a participant
      is
      actively on the payroll for at least one day will count as a full
      month.)





-
            Participants
                who are newly hired during the Plan
                Year.





-
            Participants
                who are promoted, transferred or demoted during the Plan
                Year.





-
            Participants
                who are on leave of absence for any full months during the Plan Year.





-
            Participants
                who are impacted or leave the company due to retirement or disability
                during the Plan Year.(Note:
                For purposes of the Plan, “retirement” means termination of employment
                with the company and all affiliates after the employee has attained:
                (1)
                age forty-five and twenty years of service; (2) age fifty-five and
                ten
                years of service; (3) the age at which the early distribution penalty
                of
                Section 72(t) of the Internal Revenue Code no longer applies and
                five
                years of service; or (4) any age and thirty years of
                service.)





-
            Participants
                who die during the Plan Year, in which case the award will be paid
                to the
                spouse of a married participant or the legal representative of an
                unmarried participant.





·
            **Forfeiture
                of Awards**





Any
      participant who terminates employment on or before awards are distributed for
      the Plan Year for any reason other than death, impaction or retirement (e.g.,
      voluntary separation, termination for performance or misconduct - even if the
      terminated participant elects to take retirement) will not be eligible for
      payment of an award.





·
            **Provisions
                for a Change in
                Control**





Please
      refer to the PNM Resources, Inc. Officer Retention Plan for additional
      information.





**·**
            **Eligible
                Base for Incentive
                Purposes**





For
      the
      purpose of incentive calculations, the applicable salary grade midpoint is
      the
      participant’s salary grade midpoint effective December 31 of the Plan Year
      unless the participant has been demoted during the Plan Year. In this event,
      the
      participant’s salary grade midpoint may be prorated based on the period of time
      worked at each level.





**AWARD
      DETERMINATION**





Awards
      may be earned for performance that provides additional value to our
      shareholders. The incremental performance needed to fund awards is taken into
      consideration in establishing performance thresholds and goals under the
      Plan.





·
            **Performance
                Thresholds**





I **n
      order to be eligible for incentive awards, the following performance threshold
      must be met for 2006 (Individual Award):**





-
            Overall
                combined company, business unit, and individual goal performance
                that at
                least achieves****the
                threshold performance level. If this performance threshold is not
                met, no
                award will be paid for the Plan
                Year.




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**In
      order to be eligible for the award enhancement, the following performance
      threshold must be met for 2006:**





**-**
            Company-wide
                EPS of $1.68 or more. If this performance threshold is not met, no
                award
                enhancement will be applied.





·
            **Combined
                Company, Business Unit, and Individual Performance Award
                Opportunity**





For
      the
      2006 Plan Year, the combined company, business unit, and individual performance
      (Individual Award) opportunities are as follows:




**Individual
                    Goal Set****Award
                    Eligibility Level**
                **Threshold***
                **Stretch***
                **Optimal***Vice-President
                4.0%
                7.0%
                10.0%Senior
                    Vice-President
                6.4%
                11.2%
                16.0%Executive
                    Vice-President
                8.0%
                14.0%
                20.0%Chairman,
                    President, and CEO
                11.2%
                19.6%
                28.0%


*
      Award
      calculated as a percentage of salary grade midpoint





·
            **Earnings
                Per Share (EPS) Award
                Enhancement**





For
      the
      2006 Plan Year, the EPS award enhancement opportunities are as
      follows:





**EPS
                Threshold Target = $1.65**
            **EPS
                = $1.65 to $1.90**
            **EPS
                Optimal Target = $1.90**Individual
                Award is equal to the workgroup result - the multiplier is
                1
            Workgroup
                Award is enhanced 1.16x to 5x using straight-line
                interpolation
            Individual
                Award is enhanced a maximum of 5x





For
      this
      Plan, EPS is defined as net income related to running the business (excluding
      certain extraordinary items or events that result in windfalls or penalties
      which are not in keeping with the spirit of the Plan) divided by the number
      of
      shares of PNM Resources, Inc. common stock outstanding.




·
            **Award
                Calculation**





Combined
      company, business unit, and individual goal performance that meets or exceeds
      the threshold target level will be eligible for an award. The amount of each
      participant’s award is determined by the participant’s eligibility level and the
      level of combined company, business unit, and individual goal performance in
      the
“Combined Company, Business Unit, and Individual Performance Award Opportunity”
table above.





Company
      EPS performance that meets or exceeds the threshold target will serve as an
      enhancement to the award paid for workgroup performance. As identified in the
      “EPS Award Enhancement” table above, the award enhancement will be a minimum of
      1x at the EPS threshold target, a maximum of 5x at the EPS optimal target,
      and
      interpolated between the EPS threshold and optimal targets.





The
      resulting percent is multiplied by the participant’s eligible salary grade
      midpoint to determine the amount of the participant’s award.





**For
      Example** **:** Assume
      that overall workgroup results are at the optimal performance level and
      company-wide EPS performance is $1.78. A participant who is eligible for an
      award at the Vice-President eligibility level would receive an award of 26%
      of
      salary grade midpoint for the Plan Year. That is, workgroup optimal performance
      resulting in an award of 10%, which is then enhanced 2.60x for EPS performance.
      Assuming the participant’s salary grade midpoint is $170,500 the award would be
      $44,330 ($170,500 x 26%).


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