----

----

| **UNITED                STATES**                                                    |
|-------------------------------------------------------------------------------------|
| **SECURITIES                AND EXCHANGE COMMISSION**                               |
| Washington,                D.C.  20549                                    |
|                                                                                |
| **FORM                10-Q**                                                        |
| (Mark                One)                                                           |
|  [X]                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    |
| SECURITIES                EXCHANGE ACT OF 1934                                      |
|                                                                                |
| **For                the quarterly period ended September 30,                2007** |
|                                                                                |
|                                                                                |
|                                                                                |   |   |   |   |
| **Commission**                                                                      |   | **Name                of Registrants, State of Incorporation,** |   | **I.R.S.                Employer** |
| **File                Number**                                                      |   | **Address                and Telephone Number** |   | **Identification                No.** |
| 001-32462                                                                           |   | PNM                Resources, Inc. |   | 85-0468296 |
|                                                                                |   | (A                New Mexico Corporation) |   |   |
|                                                                                |   | Alvarado                Square |   |   |
|                                                                                |   | Albuquerque,                New Mexico  87158 |   |   |
|                                                                                |   | (505)                241-2700 |   |   |
|                                                                                |   |   |   |   |
| 001-06986                                                                           |   | Public                Service Company of New Mexico |   | 85-0019030 |
|                                                                                |   | (A                New Mexico Corporation) |   |   |
|                                                                                |   | Alvarado                Square |   |   |
|                                                                                |   | Albuquerque,                New Mexico  87158 |   |   |
|                                                                                |   | (505)                241-2700 |   |   |
|                                                                                |   |   |   |   |
| 002-97230                                                                           |   | Texas-New                Mexico Power Company |   | 75-0204070 |
|                                                                                |   | (A                Texas Corporation) |   |   |
|                                                                                |   | 4100                International Plaza, |   |   |
|                                                                                |   | P.O.                Box 2943 |   |   |
|                                                                                |   | Fort                Worth, Texas  76113 |   |   |
|                                                                                |   | (817)                731-0099 |   |   |

----

| Large                accelerated filer  ü | Accelerated                filer       | Non-accelerated                filer     |
|----------------------------------------------------------|-----------------------------------------------------------------|--------------------------------------------------------------|

| Large                accelerated filer      | Accelerated                filer      | Non-accelerated                filer  ü |
|-----------------------------------------------------------------|----------------------------------------------------------------|--------------------------------------------------------|

**PNM      AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a)      AND      (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE      FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).**

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**INDEX**

|                                                                                                                                             |  **Page                  No.** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|  **GLOSSARY**                                                                                                                          |  1                             |
|  **PART                I.  FINANCIAL INFORMATION**                                                                                |                                |
|  ITEM                  1.  FINANCIAL STATEMENTS (Unaudited)                                                                       |                                |
|  PNM                  RESOURCES, INC. AND SUBSIDIARIES                                                                                      |                                |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF EARNINGS                                                                        |  4                             |
|  CONDENSED                  CONSOLIDATED BALANCE SHEETS                                                                                |  5                             |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                           |   7                       |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                                                                 |   9                       |
|  PUBLIC                  SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY                                                                       |                                |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF EARNINGS                                                                        |  10                            |
|  CONDENSED                  CONSOLIDATED BALANCE SHEETS                                                                                |  11                            |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                           |   13                      |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE                  INCOME                                           |  15                            |
|  TEXAS-NEW                  MEXICO POWER COMPANY AND SUBSIDIARIES                                                                           |                                |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF EARNINGS                                                                        |  16                            |
|  CONDENSED                  CONSOLIDATED BALANCE SHEETS                                                                                |  17                            |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                      |  19                            |
|  CONDENSED                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE                  INCOME                                           |  21                            |
|  NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                      |  22                            |
| ITEM                  2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                  AND RESULTS OF OPERATIONS |  65                            |
| ITEM                  3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET                  RISK                                   |   96                      |
| ITEM                  4.  CONTROLS AND PROCEDURES                                                                                 |  105                           |
|  **PART                II.  OTHER INFORMATION**                                                                                   |                                |
| ITEM                  1.  LEGAL PROCEEDINGS                                                                                            |   107                     |
| ITEM                  1A.  RISK FACTORS                                                                                           |  107                           |
| ITEM                  6.  EXHIBITS                                                                                                |  108                           |
|  **SIGNATURE**                                                                                                                         |  109                           |

----

**GLOSSARY**

| **Definitions:**            |                                                                                                                                                                                                                                |
|-----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Afton                       | Afton                Generating Station                                                                                                                                                                                             |
| AG                          | New                Mexico Attorney General                                                                                                                                                                                          |
| ALJ                         | Administrative                Law Judge                                                                                                                                                                                             |
| Altura                      | Altura                Power L.P.                                                                                                                                                                                                    |
| APS                         | Arizona                Public Service Company                                                                                                                                                                                       |
| Avistar                     | Avistar,                Inc.                                                                                                                                                                                                        |
| BART                        | Best                Available Retrofit Technology                                                                                                                                                                                   |
| Board                       | Board                of Directors of PNMR                                                                                                                                                                                           |
| BTU                         | British                Thermal Unit                                                                                                                                                                                                 |
| Cal                PX       | California                Power Exchange                                                                                                                                                                                            |
| Cal                ISO      | California                Independent System Operator                                                                                                                                                                               |
| Cascade                     | Cascade                Investment, L.L.C.                                                                                                                                                                                           |
| Constellation               | Constellation                Energy Commodities Group, Inc.                                                                                                                                                                         |
| CTC                         | Competition                Transition Charge                                                                                                                                                                                        |
| Decatherm                   | Million                BTUs                                                                                                                                                                                                         |
| EaR                         | Earnings                at Risk                                                                                                                                                                                                     |
| ECJV                        | ECJV                Holdings, LLC                                                                                                                                                                                                   |
| EEI                         | Edison                Electric Institute                                                                                                                                                                                            |
| EIP                         | Eastern                Interconnection Project                                                                                                                                                                                      |
| EITF                        | Emerging                Issues Task Force                                                                                                                                                                                           |
| EnergyCo                    | EnergyCo,                LLC, a joint venture between PNMR and ECJV                                                                                                                                                                 |
| EPA                         | United                States Environmental Protection Agency                                                                                                                                                                        |
| ERCOT                       | Electric                Reliability Council of Texas                                                                                                                                                                                |
| ESPP                        | Employee                Stock Purchase Plan                                                                                                                                                                                         |
| FASB                        | Financial                Accounting Standards Board                                                                                                                                                                                 |
| FCPSP                       | First                Choice Power Special Purpose, L.P.                                                                                                                                                                             |
| FERC                        | Federal                Energy Regulatory Commission                                                                                                                                                                                 |
| FIN                         | FASB                Interpretation Number                                                                                                                                                                                           |
| FIP                         | Federal                Implementation Plan                                                                                                                                                                                          |
| First                Choice | First                Choice Power, L. P. and Subsidiaries                                                                                                                                                                           |
| Four                Corners | Four                Corners Power Plant                                                                                                                                                                                             |
| GAAP                        | Generally                Accepted Accounting Principles in the United States                of America                                                                                                                              |
| GWh                         | Gigawatt                hours                                                                                                                                                                                                       |
| ISO                         | Independent                System Operator                                                                                                                                                                                          |
| MD&A                    | Management’s                Discussion and Analysis of Financial Condition and Results                of Operations                                                                                                           |
| Moody’s               | Moody’s                Investor Services, Inc.                                                                                                                                                                                |
| MW                          | Megawatt                                                                                                                                                                                                                            |
| 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          |
| NMED                         | New                Mexico Environment Department                             |
| NMPRC                        | New                Mexico Public Regulation Commission                       |
| NOPR                         | Notice                of Proposed Rulemaking                                 |
| NRC                          | United                States Nuclear Regulatory Commission                   |
| NSPS                         | New                Source Performance Standards                              |
| NSR                          | New                Source Review                                             |
| OASIS                        | Open                Access Same Time Information System                      |
| OATT                         | Open                Access Transmission Tariff                               |
| O&M                      | Operations                and Maintenance                                    |
| PCRBs                        | Pollution                Control Revenue Bonds                               |
| PGAC                         | Purchased                Gas Adjustment Clause                               |
| PG&E                     | Pacific                Gas and Electric Co.                                  |
| PNM                          | Public                Service Company of New Mexico and Subsidiary           |
| 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                                      |
| PSA                          | Power                Supply Agreement                                        |
| PSD                          | Prevention                of Significant Deterioration                       |
| PUCT                         | Public                Utility Commission of Texas                            |
| PVNGS                        | Palo                Verde Nuclear Generating Station                         |
| REC                          | Renewable                Energy Certificates                                 |
| REP                          | Retail                Electricity Provider                                   |
| RMC                          | Risk                Management Committee                                     |
| RTO                          | Regional                Transmission Organization                            |
| 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                       |
| S&P                      | Standard                and Poors Ratings Services                           |
| TECA                         | Texas                Electric Choice Act                                     |
| TNMP                         | Texas-New                Mexico Power Company and Subsidiaries               |
| TNP                          | TNP                Enterprises, Inc. and Subsidiaries                        |
| Throughput                   | Volumes                of gas delivered, whether or not owned                |
| Twin                Oaks     | Assets                of Twin Oaks Power, L.P. and Twin Oaks Power III, L.P. |
| VaR                          | Value                at Risk                                                 |

----

| **Accounting                Pronouncements (as amended):** |
|------------------------------------------------------------|
| 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                48                                      | FIN                No. 48 “*Accounting for Uncertainty in Income                Taxes*” |
| SFAS                5                                      | SFAS                No. 5 “*Accounting for Contingencies*” |
| SFAS                57                                     | SFAS                No. 57 “*Related Party Disclosures*” |
| SFAS                71                                     | SFAS                No. 71 “*Accounting for Effects of Certain Types of                Regulation*” |
| SFAS                112                                    | SFAS                No. 112 “*Employers’ Accounting for Postemployment Benefits – an**amendment                of FASB Statements No. 5 and 43*” |
| SFAS                128                                    | SFAS                No. 128 “*Earnings per Share*” |
| SFAS                133                                    | SFAS                No. 133 “*Accounting for Derivative Instruments and Hedging                Activities*” |
| SFAS                141                                    | SFAS                No. 141 “*Business Combinations*” |
| SFAS                144                                    | SFAS                No. 144 “*Accounting for the Impairment or Disposal of Long-Lived                Assets”* |
| SFAS                149                                    | SFAS                No. 149 “*Amendment of Statement 133 on Derivative Instruments and**Hedging                Activities*” |
| SFAS                154                                    | SFAS                No. 154 “*Accounting Changes and Error                Corrections*” |

----

**PART      I. FINANCIAL INFORMATION**

**ITEM      1. FINANCIAL STATEMENTS**

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF      EARNINGS**

|                                                                   |   | **Three                Months Ended**                   |    |   | **Nine                Months Ended** |   |
|------------------------------------------------------------------------|--------|---------------------------------------------------------|---------|--------|--------------------------------------|--------|
|                                                                   |   | **September                30,**                        |    |   | **September                30,**     |   |
|                                                                   |   | **2007**                                                |    |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                   |   |                                                    |    |   | **(As                Restated,**     |   |   |   |   |   | **(As                Restated,** |   |
|                                                                   |   |                                                    |    |   | **See                Note 16)**      |   |   |   |   |   | **See                Note 16)** |   |
|                                                                   |   | (In                thousands, except per share amounts) |    |
| **Operating                Revenues:**                                 |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |
| Electric                                                               |   | $                                                       | 569,566 |   |                                 | $      | 580,967 |   |   | $ | 1,511,749 |   |   | $ | 1,506,786 |   |
| Gas                                                                    |   |                                                    | 59,537  |   |                                 |   | 69,001 |   |   |   | 351,162 |   |   |   | 345,346 |   |
| Other                                                                  |   |                                                    | 334     |   |                                 |   | 197 |   |   |   | 708 |   |   |   | 503 |   |
| Total                operating revenues                                |   |                                                    | 629,437 |   |                                 |   | 650,165 |   |   |   | 1,863,619 |   |   |   | 1,852,635 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                Expenses:**                                 |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of energy sold                                     |   |                                                    | 408,981 |   |                                 |   | 366,688 |   |   |   | 1,144,034 |   |   |   | 1,099,160 |   |
| Administrative                and general                              |   |                                                    | 69,256  |   |                                 |   | 69,599 |   |   |   | 204,803 |   |   |   | 201,215 |   |
| Energy                production costs                                 |   |                                                    | 57,669  |   |                                 |   | 38,813 |   |   |   | 157,749 |   |   |   | 120,762 |   |
| Depreciation                and amortization                           |   |                                                    | 36,714  |   |                                 |   | 39,899 |   |   |   | 116,851 |   |   |   | 112,182 |   |
| Transmission                and distribution costs                     |   |                                                    | 20,858  |   |                                 |   | 19,723 |   |   |   | 65,619 |   |   |   | 60,087 |   |
| Taxes                other than income taxes                           |   |                                                    | 14,263  |   |                                 |   | 18,382 |   |   |   | 51,886 |   |   |   | 53,607 |   |
| Total                operating expenses                                |   |                                                    | 607,741 |   |                                 |   | 553,104 |   |   |   | 1,740,942 |   |   |   | 1,647,013 |   |
| Operating                income                                        |   |                                                    | 21,696  |   |                                 |   | 97,061 |   |   |   | 122,677 |   |   |   | 205,622 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Income and Deductions:**                        |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                         |   |                                                    | 10,053  |   |                                 |   | 9,902 |   |   |   | 27,882 |   |   |   | 28,969 |   |
| Gains                (losses) on investments held by NDT               |   |                                                    | 3,897   |   |                                 |   | (166 | ) |   |   | 6,898 |   |   |   | 1,888 |   |
| Other                income                                            |   |                                                    | 1,686   |   |                                 |   | 1,333 |   |   |   | 5,613 |   |   |   | 4,368 |   |
| Equity                in net earnings of EnergyCo                      |   |                                                    | 10,556  |   |                                 |   | - |   |   |   | 12,166 |   |   |   | - |   |
| Carrying                charges on regulatory assets                   |   |                                                    | -       |   |                                 |   | 2,038 |   |   |   | - |   |   |   | 6,015 |   |
| Other                deductions                                        |   |                                                    | (2,056  | )      |                                 |   | (1,519 | ) |   |   | (8,572 | ) |   |   | (5,532 | ) |
| Net                other income and deductions                         |   |                                                    | 24,136  |   |                                 |   | 11,588 |   |   |   | 43,987 |   |   |   | 35,708 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                Charges:**                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on long-term debt                              |   |                                                    | 25,167  |   |                                 |   | 24,108 |   |   |   | 67,910 |   |   |   | 70,906 |   |
| Other                interest charges                                  |   |                                                    | 10,088  |   |                                 |   | 16,063 |   |   |   | 35,084 |   |   |   | 34,326 |   |
| Total                interest charges                                  |   |                                                    | 35,255  |   |                                 |   | 40,171 |   |   |   | 102,994 |   |   |   | 105,232 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                before Income Taxes**                        |   |                                                    | 10,577  |   |                                 |   | 68,478 |   |   |   | 63,670 |   |   |   | 136,098 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Income                Taxes (see Note 15)**                          |   |                                                    | 2,073   |   |                                 |   | 24,826 |   |   |   | 4,997 |   |   |   | 50,198 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Preferred                Stock Dividend Requirements of Subsidiary** |   |                                                    | 132     |   |                                 |   | 132 |   |   |   | 396 |   |   |   | 396 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings**                                        |   | $                                                       | 8,372   |   |                                 | $      | 43,520 |   |   | $ | 58,277 |   |   | $ | 85,504 |   |
|                                                                   |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings per Common Share (see Note 5):**         |   |                                                    |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   | $                                                       | 0.11    |   |                                 | $      | 0.62 |   |   | $ | 0.76 |   |   | $ | 1.24 |   |
| Diluted                                                                |   | $                                                       | 0.11    |   |                                 | $      | 0.62 |   |   | $ | 0.75 |   |   | $ | 1.23 |   |
| **Dividends                Declared per Common Share**                 |   | $                                                       | 0.23    |   |                                 | $      | 0.22 |   |   | $ | 0.69 |   |   | $ | 0.66 |   |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                                               |   | **September                30,** |      |   | **December                31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                                               |   | **2007**                         |      |   | **2006**                        |   |
|                                                                                                                               |   | (In                thousands)    |      |
| **ASSETS**                                                                                                                         |   |                             |      |   |                            |   |
| **Current                Assets:**                                                                                                 |   |                             |      |   |                            |   |
| Cash                and cash equivalents                                                                                           |   | $                                | 16,739    |   |                            | $      | 123,419 |   |
| Special                deposits                                                                                                    |   |                             | 1,295     |   |                            |   | 5,146 |   |
| Accounts                receivable, net of allowance for uncollectible accounts of $7,542                and                $6,899 |   |                             | 180,954   |   |                            |   | 168,126 |   |
| Unbilled                revenues                                                                                                   |   |                             | 94,920    |   |                            |   | 116,878 |   |
| Other                receivables                                                                                                   |   |                             | 96,174    |   |                            |   | 73,744 |   |
| Inventories                                                                                                                        |   |                             | 57,597    |   |                            |   | 63,329 |   |
| Regulatory                assets                                                                                                   |   |                             | 20,576    |   |                            |   | 17,507 |   |
| Derivative                instruments                                                                                              |   |                             | 54,521    |   |                            |   | 59,312 |   |
| Income                taxes receivable                                                                                             |   |                             | 42,965    |   |                            |   | 65,210 |   |
| Other                current assets                                                                                                |   |                             | 51,483    |   |                            |   | 63,414 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                current assets                                                                                                |   |                             | 617,224   |   |                            |   | 756,085 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Other                Property and Investments:**                                                                                 |   |                             |      |   |                            |   |   |   |
| Investment                in PVNGS lessor notes                                                                                    |   |                             | 192,568   |   |                            |   | 257,659 |   |
| Equity                investment in EnergyCo                                                                                       |   |                             | 261,657   |   |                            |   | - |   |
| Investments                held by NDT                                                                                             |   |                             | 138,999   |   |                            |   | 123,143 |   |
| Other                investments                                                                                                   |   |                             | 52,038    |   |                            |   | 46,577 |   |
| Non-utility                assets, net of accumulated depreciation of $1,433 and                $1,365                             |   |                             | 7,056     |   |                            |   | 7,565 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                other property and investments                                                                                |   |                             | 652,318   |   |                            |   | 434,944 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Utility                Plant:**                                                                                                  |   |                             |      |   |                            |   |   |   |
| Electric                plant in service                                                                                           |   |                             | 3,758,831 |   |                            |   | 4,263,068 |   |
| Gas                plant in service                                                                                                |   |                             | 756,352   |   |                            |   | 721,168 |   |
| Common                plant in service and plant held for future use                                                               |   |                             | 126,718   |   |                            |   | 157,064 |   |
|                                                                                                                               |   |                             | 4,641,901 |   |                            |   | 5,141,300 |   |
| Less                accumulated depreciation and amortization                                                                      |   |                             | 1,689,373 |   |                            |   | 1,639,156 |   |
|                                                                                                                               |   |                             | 2,952,528 |   |                            |   | 3,502,144 |   |
| Construction                work in progress                                                                                       |   |                             | 367,710   |   |                            |   | 230,871 |   |
| Nuclear                fuel, net of accumulated amortization of $18,806 and                $14,008                                 |   |                             | 53,659    |   |                            |   | 28,844 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Net                utility plant                                                                                                   |   |                             | 3,373,897 |   |                            |   | 3,761,859 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Deferred                Charges and Other Assets:**                                                                              |   |                             |      |   |                            |   |   |   |
| Regulatory                assets                                                                                                   |   |                             | 542,295   |   |                            |   | 553,564 |   |
| Pension                asset                                                                                                       |   |                             | 10,817    |   |                            |   | 8,853 |   |
| Goodwill                                                                                                                           |   |                             | 495,664   |   |                            |   | 495,738 |   |
| Other                intangible assets, net of accumulated amortization of $3,035 and                $2,052                        |   |                             | 76,219    |   |                            |   | 102,202 |   |
| Derivative                instruments                                                                                              |   |                             | 27,990    |   |                            |   | 39,886 |   |
| Other                deferred charges                                                                                              |   |                             | 52,045    |   |                            |   | 77,703 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                 deferred charges and other assets                                                                            |   |                             | 1,205,030 |   |                            |   | 1,277,946 |   |
|                                                                                                                               |   | $                                | 5,848,469 |   |                            | $      | 6,230,834 |   |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                                                     |   | **September                30,**                        |      |   | **December                31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                                                     |   | **2007**                                                |      |   | **2006**                        |   |
|                                                                                                                                     |   | (In                thousands, except share information) |      |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                            |   |                                                    |      |   |                            |   |
| **Current                Liabilities:**                                                                                                  |   |                                                    |      |   |                            |   |
| Short-term                debt                                                                                                           |   | $                                                       | 648,684   |   |                            | $      | 764,345 |   |
| Current                installments of long-term debt                                                                                    |   |                                                    | 448,935   |   |                            |   | 3,298 |   |
| Accounts                payable                                                                                                          |   |                                                    | 169,790   |   |                            |   | 214,229 |   |
| Accrued                interest and taxes                                                                                                |   |                                                    | 62,026    |   |                            |   | 98,789 |   |
| Regulatory                liabilities                                                                                                    |   |                                                    | 15,709    |   |                            |   | 1,172 |   |
| Derivative                instruments                                                                                                    |   |                                                    | 69,112    |   |                            |   | 68,575 |   |
| Other                current liabilities                                                                                                 |   |                                                    | 131,188   |   |                            |   | 225,653 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| Total                current liabilities                                                                                                 |   |                                                    | 1,545,444 |   |                            |   | 1,376,061 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| **Long-term                Debt**                                                                                                        |   |                                                    | 1,233,563 |   |                            |   | 1,765,907 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| **Deferred                Credits and Other Liabilities:**                                                                               |   |                                                    |      |   |                            |   |   |   |
| Accumulated                deferred income taxes                                                                                         |   |                                                    | 574,314   |   |                            |   | 586,283 |   |
| Accumulated                deferred investment tax credits                                                                               |   |                                                    | 27,678    |   |                            |   | 30,236 |   |
| Regulatory                liabilities                                                                                                    |   |                                                    | 396,216   |   |                            |   | 389,330 |   |
| Asset                retirement obligations                                                                                              |   |                                                    | 65,100    |   |                            |   | 61,338 |   |
| Accrued                pension liability and postretirement benefit cost                                                                 |   |                                                    | 129,577   |   |                            |   | 134,799 |   |
| Derivative                instruments                                                                                                    |   |                                                    | 30,912    |   |                            |   | 14,581 |   |
| Other                deferred credits                                                                                                    |   |                                                    | 127,428   |   |                            |   | 155,860 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| Total                deferred credits and other liabilities                                                                              |   |                                                    | 1,351,225 |   |                            |   | 1,372,427 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| Total                liabilities                                                                                                         |   |                                                    | 4,130,232 |   |                            |   | 4,514,395 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| **Commitments                and Contingencies (See Note 9)**                                                                            |   |                                                    |      |   |                            |   |   |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| **Cumulative                Preferred Stock of Subsidiary**                                                                              |   |                                                    |      |   |                            |   |   |   |
| without                mandatory redemption requirements ($100 stated value, 10,000,000                shares                authorized: |   |                                                    |      |   |                            |   |   |   |
| issued                and outstanding 115,293 shares)                                                                                    |   |                                                    | 11,529    |   |                            |   | 11,529 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| **Common                Stockholders’ Equity:**                                                                                    |   |                                                    |      |   |                            |   |   |   |
| Common                stock outstanding (no par value, 120,000,000 shares authorized:                issued                              |   |                                                    |      |   |                            |   |   |   |
| and                outstanding 76,770,266 and 76,648,472 shares)                                                                         |   |                                                    | 1,041,111 |   |                            |   | 1,040,451 |   |
| Accumulated                other comprehensive income, net of income tax                                                                 |   |                                                    | 23,075    |   |                            |   | 28,909 |   |
| Retained                earnings                                                                                                         |   |                                                    | 642,522   |   |                            |   | 635,550 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
| Total                common stockholders’ equity                                                                                   |   |                                                    | 1,706,708 |   |                            |   | 1,704,910 |   |
|                                                                                                                                     |   |                                                    |      |   |                            |   |   |   |
|                                                                                                                                     |   | $                                                       | 5,848,469 |   |                            | $      | 6,230,834 |   |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH      FLOWS**

|                                                                                                             |   | **Nine                Months Ended** |     |
|------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                             |   | **September                30,**     |     |
|                                                                                                             |   | **2007**                             |     |   | **2006** |   |
|                                                                                                             |   |                                 |     |   | **(As                Restated,** |   |
|                                                                                                             |   |                                 |     |   | **See                Note 16)** |   |
|                                                                                                             |   | (In                thousands)        |     |
| **Cash                Flows From Operating Activities:**                                                         |   |                                 |     |   |   |   |
| Net                earnings                                                                                      |   | $                                    | 58,277   |   |   | $ | 85,504 |   |
| Adjustments                to reconcile net earnings to net cash flows from operating                activities: |   |                                 |     |   |   |   |   |   |
| Depreciation                and amortization                                                                     |   |                                 | 141,220  |   |   |   | 131,543 |   |
| Allowance                for equity funds used during construction                                               |   |                                 | (1,201   | ) |   |   | (499 | ) |
| Deferred                income tax expense (benefit)                                                             |   |                                 | 4,769    |   |   |   | (624 | ) |
| Equity                in net earnings of EnergyCo                                                                |   |                                 | (12,166  | ) |   |   | - |   |
| Net                unrealized losses on derivatives                                                              |   |                                 | 15,618   |   |   |   | 4,485 |   |
| Realized                gains on investments held by NDT                                                         |   |                                 | (6,898   | ) |   |   | (1,888 | ) |
| Realized                loss on Altura contribution                                                              |   |                                 | 3,637    |   |   |   | - |   |
| Impairment                loss on intangible assets                                                              |   |                                 | 3,380    |   |   |   | - |   |
| Impairment                loss on utility plant                                                                  |   |                                 | 19,500   |   |   |   | - |   |
| Carrying                charges on regulatory assets and liabilities                                             |   |                                 | (692     | ) |   |   | (7,267 | ) |
| Amortization                of fair value of acquired Twin Oaks sales contract                                   |   |                                 | (35,073  | ) |   |   | (48,720 | ) |
| Stock                based compensation expense                                                                  |   |                                 | 6,115    |   |   |   | 6,648 |   |
| Excess                tax benefit from stock-based payment arrangements                                          |   |                                 | (9       | ) |   |   | (2,050 | ) |
| Other,                net                                                                                        |   |                                 | (3,089   | ) |   |   | (2,856 | ) |
| Changes                in certain assets and liabilities:                                                        |   |                                 |     |   |   |   |   |   |
| Accounts                receivable                                                                               |   |                                 | (20,430  | ) |   |   | 47,169 |   |
| Unbilled                revenues                                                                                 |   |                                 | 21,958   |   |   |   | 23,790 |   |
| Regulatory                assets                                                                                 |   |                                 | (6,037   | ) |   |   | 25,920 |   |
| Other                assets                                                                                      |   |                                 | 20,373   |   |   |   | (320 | ) |
| Accrued                pension liability and postretirement benefit costs                                        |   |                                 | (2,753   | ) |   |   | (4,381 | ) |
| Accounts                payable                                                                                  |   |                                 | (40,340  | ) |   |   | (102,956 | ) |
| Accrued                interest and taxes                                                                        |   |                                 | (8,520   | ) |   |   | 55,006 |   |
| Deferred                credits                                                                                  |   |                                 | (22,332  | ) |   |   | (10,524 | ) |
| Other                liabilities                                                                                 |   |                                 | (8,331   | ) |   |   | (11,798 | ) |
| Net                cash flows from operating activities                                                          |   |                                 | 126,976  |   |   |   | 186,182 |   |
|                                                                                                             |   |                                 |     |   |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                         |   |                                 |     |   |   |   |   |   |
| Utility                plant additions                                                                           |   |                                 | (336,597 | ) |   |   | (195,493 | ) |
| Proceeds                from sales of investments held by NDT                                                    |   |                                 | 99,525   |   |   |   | 65,759 |   |
| Purchases                of investments held by NDT                                                              |   |                                 | (104,455 | ) |   |   | (66,578 | ) |
| Proceeds                from sales of utility plant                                                              |   |                                 | 25,041   |   |   |   | - |   |
| Return                of principal on PVNGS lessor notes                                                         |   |                                 | 24,296   |   |   |   | 22,937 |   |
| Investments                in EnergyCo                                                                           |   |                                 | (45,040  | ) |   |   | - |   |
| Distributions                from EnergyCo                                                                       |   |                                 | 362,275  |   |   |   | - |   |
| Net                additions to restricted special deposits                                                      |   |                                 | (10,203  | ) |   |   | - |   |
| Twin                Oaks acquisition                                                                             |   |                                 | -        |   |   |   | (481,058 | ) |
| Other,                net                                                                                        |   |                                 | 4,443    |   |   |   | 2,922 |   |
| Net                cash flows used from investing activities                                                     |   |                                 | 19,285   |   |   |   | (651,511 | ) |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                                                                                                                                                                                                                                                                                                                                |   | **Nine                Months Ended** |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                |   | **September                30,**     |     |
|                                                                                                                                                                                                                                                                                                                                                                                                |   | **2007**                             |     |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   | **(As                Restated,** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   | **See                Note 16)** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   | (In                thousands)        |     |
| **Cash                Flows From Financing Activities:**                                                                                                                                                                                                                                                                                                                                            |   |                                 |     |   |   |   |
| Short-term                borrowings (repayments), net                                                                                                                                                                                                                                                                                                                                              |   |                                 | (115,661 | ) |   |   | 506,900 |   |
| Long-term                borrowings                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 20,000   |   |   |   | - |   |
| Redemption                of long-term debt                                                                                                                                                                                                                                                                                                                                                         |   |                                 | (100,500 | ) |   |   | - |   |
| Issuance                of common stock                                                                                                                                                                                                                                                                                                                                                             |   |                                 | 3,309    |   |   |   | 40,847 |   |
| Proceeds                from stock option exercise                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 10,935   |   |   |   | 9,921 |   |
| Purchase                of common stock to satisfy stock awards                                                                                                                                                                                                                                                                                                                                     |   |                                 | (18,078  | ) |   |   | (14,273 | ) |
| Excess                tax benefits from stock-based payment arrangements                                                                                                                                                                                                                                                                                                                            |   |                                 | 9        |   |   |   | 2,050 |   |
| Dividends                paid                                                                                                                                                                                                                                                                                                                                                                       |   |                                 | (52,545  | ) |   |   | (44,472 | ) |
| Other,                net                                                                                                                                                                                                                                                                                                                                                                           |   |                                 | (410     | ) |   |   | (2,977 | ) |
| Net                cash flows from financing activities                                                                                                                                                                                                                                                                                                                                             |   |                                 | (252,941 | ) |   |   | 497,996 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| **Change                in Cash and Cash Equivalents**                                                                                                                                                                                                                                                                                                                                              |   |                                 | (106,680 | ) |   |   | 32,667 |   |
| **Cash                and Cash Equivalents at Beginning of Period**                                                                                                                                                                                                                                                                                                                                 |   |                                 | 123,419  |   |   |   | 68,199 |   |
| **Cash                and Cash Equivalents at End of Period**                                                                                                                                                                                                                                                                                                                                       |   | $                                    | 16,739   |   |   | $ | 100,866 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| **Supplemental                Cash Flow Disclosures:**                                                                                                                                                                                                                                                                                                                                              |   |                                 |     |   |   |   |   |   |
| Interest                paid, net of capitalized interest                                                                                                                                                                                                                                                                                                                                           |   | $                                    | 90,799   |   |   | $ | 103,642 |   |
| Income                taxes paid (refunded), net                                                                                                                                                                                                                                                                                                                                                    |   | $                                    | 2,904    |   |   | $ | (620 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| **Supplemental                schedule of noncash investing and financing                activities:**                                                                                                                                                                                                                                                                                              |   |                                 |     |   |   |   |   |   |
| As                of June 1, 2007, PNMR contributed its ownership of Altura to EnergyCo                at a                fair value of $549.6 million after an adjustment for working capital                changes. See Note 11. In conjunction with the contribution, PNMR                removed Altura’s assets and liabilities from its balance sheet as                follows: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| Current                assets                                                                                                                                                                                                                                                                                                                                                                       |   | $                                    | 22,529   |   |   |   |   |   |
| Utility                plant, net                                                                                                                                                                                                                                                                                                                                                                   |   |                                 | 575,906  |   |   |   |   |   |
| Deferred                charges                                                                                                                                                                                                                                                                                                                                                                     |   |                                 | 46,018   |   |   |   |   |   |
| Total                assets contributed                                                                                                                                                                                                                                                                                                                                                             |   |                                 | 644,453  |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| Current                liabilities                                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 63,268   |   |   |   |   |   |
| Deferred                credits and other liabilities                                                                                                                                                                                                                                                                                                                                               |   |                                 | 37,005   |   |   |   |   |   |
| Total                liabilities contributed                                                                                                                                                                                                                                                                                                                                                        |   |                                 | 100,273  |   |   |   |   |   |
| Other                comprehensive income                                                                                                                                                                                                                                                                                                                                                           |   |                                 | (12,651  | ) |   |   |   |   |
| Total                liabilities and OCI contributed                                                                                                                                                                                                                                                                                                                                                |   |                                 | 87,622   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| Net                contribution to EnergyCo                                                                                                                                                                                                                                                                                                                                                         |   | $                                    | 556,831  |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 |     |   |   |   |   |   |
| Utility                plant purchased through assumption of long-term debt that offsets                a                portion of investment in PVNGS lessor notes and is eliminated in                consolidation. See Note 2.                                                                                                                                                            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                |   | $                                    | 41,152   |   |   |   |   |   |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE      INCOME**

|                                                                      |   | **Three                Months Ended** |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                      |   | **September                30,**      |   |   | **September                30,**     |   |
|                                                                      |   | **2007**                              |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                      |   |                                  |   |   | **(As                Restated,**     |   |   |   |   |   | **(As                Restated,** |   |
|                                                                      |   |                                  |   |   | **See                Note 16)**      |   |   |   |   |   | **See                Note 16)** |   |
|                                                                      |   |                                  |   |   | (In                thousands)        |   |   |   |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |
| **Net                Earnings**                                           |   | $                                     | 8,372  |   |                                 | $      | 43,520 |   |   | $ | 58,277 |   |   | $ | 85,504 |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Income:**                            |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Unrealized                Gain (Loss) on Investment Securities**:       |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                holding gains arising during                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| the                period, net of income tax (expense)                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $(1,549) $(586), $(4,070) and $(7,567)                  |   |                                  | 2,364  |   |                                 |   | 894 |   |   |   | 6,210 |   |   |   | 11,546 |   |
| Reclassification                adjustment for (gains) included in        |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| net                earnings, net of income tax expense                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $2,401, $48, $2,493 and $503                            |   |                                  | (3,664 | )      |                                 |   | (73 | ) |   |   | (3,804 | ) |   |   | (767 | ) |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Fair                Value Adjustment for Designated Cash Flow Hedges:** |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Change                in fair market value, net of income tax expense     |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| (benefit)                of $(4,887), $(8,425), $6,079 and $(4,874)       |   |                                  | 7,414  |   |                                 |   | 12,589 |   |   |   | (9,333 | ) |   |   | 7,076 |   |
| Reclassification                adjustment for (gains) losses included in |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| net                earnings, net of income tax expense (benefit)          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $482, $(3,822), $(653) and $3,442                       |   |                                  | (638   | )      |                                 |   | 7,003 |   |   |   | 1,093 |   |   |   | (5,021 | ) |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Other Comprehensive Income (Loss)**                |   |                                  | 5,476  |   |                                 |   | 20,413 |   |   |   | (5,834 | ) |   |   | 12,834 |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Comprehensive Income**                             |   | $                                     | 13,848 |   |                                 | $      | 63,933 |   |   | $ | 52,443 |   |   | $ | 98,338 |   |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF      EARNINGS**

|                                                              |   | **Three                Months Ended** |    |   | **Nine                Months Ended** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------------|--------|
|                                                              |   | **September                30,**      |    |   | **September                30,**     |   |
|                                                              |   | **2007**                              |    |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                              |   |                                  |    |   | **(As                Restated,**     |   |   |   |   |   | **(As                Restated,** |   |
|                                                              |   |                                  |    |   | **See                Note 16)**      |   |   |   |   |   | **See                Note 16)** |   |
|                                                              |   | (In                thousands)         |    |
| **Operating                Revenues:**                            |   |                                  |    |   |                                 |   |   |   |   |   |   |   |
| Electric                                                          |   | $                                     | 360,446 |   |                                 | $      | 302,900 |   |   | $ | 901,072 |   |   | $ | 873,665 |   |
| Gas                                                               |   |                                  | 59,537  |   |                                 |   | 69,001 |   |   |   | 351,162 |   |   |   | 345,346 |   |
| Total                operating revenues                           |   |                                  | 419,983 |   |                                 |   | 371,901 |   |   |   | 1,252,234 |   |   |   | 1,219,011 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                Expenses:**                            |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of energy sold                                |   |                                  | 263,223 |   |                                 |   | 208,968 |   |   |   | 758,518 |   |   |   | 733,640 |   |
| Administrative                and general                         |   |                                  | 46,887  |   |                                 |   | 43,750 |   |   |   | 134,136 |   |   |   | 125,397 |   |
| Energy                production costs                            |   |                                  | 60,004  |   |                                 |   | 36,314 |   |   |   | 144,163 |   |   |   | 116,629 |   |
| Depreciation                and amortization                      |   |                                  | 26,004  |   |                                 |   | 25,373 |   |   |   | 78,562 |   |   |   | 74,517 |   |
| Transmission                and distribution costs                |   |                                  | 16,388  |   |                                 |   | 14,858 |   |   |   | 51,273 |   |   |   | 45,081 |   |
| Taxes                other than income taxes                      |   |                                  | 8,712   |   |                                 |   | 7,763 |   |   |   | 27,418 |   |   |   | 25,490 |   |
| Total                operating expenses                           |   |                                  | 421,218 |   |                                 |   | 337,026 |   |   |   | 1,194,070 |   |   |   | 1,120,754 |   |
| Operating                income (loss)                            |   |                                  | (1,235  | )      |                                 |   | 34,875 |   |   |   | 58,164 |   |   |   | 98,257 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Income and Deductions:**                   |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                    |   |                                  | 10,386  |   |                                 |   | 8,562 |   |   |   | 25,738 |   |   |   | 26,585 |   |
| Gains                (losses) on investments held by NDT          |   |                                  | 3,897   |   |                                 |   | (166 | ) |   |   | 6,898 |   |   |   | 1,888 |   |
| Other                income                                       |   |                                  | 1,193   |   |                                 |   | 1,030 |   |   |   | 3,420 |   |   |   | 2,508 |   |
| Other                deductions                                   |   |                                  | (871    | )      |                                 |   | (667 | ) |   |   | (3,386 | ) |   |   | (3,023 | ) |
| Net                other income and deductions                    |   |                                  | 14,605  |   |                                 |   | 8,759 |   |   |   | 32,670 |   |   |   | 27,958 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                Charges:**                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on long-term debt                         |   |                                  | 13,405  |   |                                 |   | 13,080 |   |   |   | 37,797 |   |   |   | 38,106 |   |
| Other                interest charges                             |   |                                  | 3,485   |   |                                 |   | 1,945 |   |   |   | 10,824 |   |   |   | 5,237 |   |
| Total                interest charges                             |   |                                  | 16,890  |   |                                 |   | 15,025 |   |   |   | 48,621 |   |   |   | 43,343 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                (Loss) before Income Taxes**            |   |                                  | (3,520  | )      |                                 |   | 28,609 |   |   |   | 42,213 |   |   |   | 82,872 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Income                Taxes (Benefit)**                         |   |                                  | (1,762  | )      |                                 |   | 10,961 |   |   |   | 15,902 |   |   |   | 32,124 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings (Loss)**                            |   | $                                     | (1,758  | )      |                                 | $      | 17,648 |   |   | $ | 26,311 |   |   | $ | 50,748 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Preferred                Stock Dividend Requirements**          |   |                                  | 132     |   |                                 |   | 132 |   |   |   | 396 |   |   |   | 396 |   |
|                                                              |   |                                  |    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings (Loss) Available for Common Stock** |   | $                                     | (1,890  | )      |                                 | $      | 17,516 |   |   | $ | 25,915 |   |   | $ | 50,352 |   |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                                               |   | **September                30,** |      |   | **December                31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                                               |   | **2007**                         |      |   | **2006**                        |   |
|                                                                                                                               |   | (In                thousands)    |      |
| **ASSETS**                                                                                                                         |   |                             |      |   |                            |   |
| **Current                Assets:**                                                                                                 |   |                             |      |   |                            |   |
| Cash                and cash equivalents                                                                                           |   | $                                | 2,715     |   |                            | $      | 11,886 |   |
| Special                deposits                                                                                                    |   |                             | 975       |   |                            |   | 376 |   |
| Accounts                receivable, net of allowance for uncollectible accounts of $1,685                and                $1,788 |   |                             | 115,516   |   |                            |   | 122,648 |   |
| Unbilled                revenues                                                                                                   |   |                             | 42,766    |   |                            |   | 81,166 |   |
| Other                receivables                                                                                                   |   |                             | 81,966    |   |                            |   | 62,040 |   |
| Affiliate                accounts receivable                                                                                       |   |                             | 44        |   |                            |   | 8,905 |   |
| Inventories                                                                                                                        |   |                             | 55,691    |   |                            |   | 51,801 |   |
| Regulatory                assets                                                                                                   |   |                             | 20,576    |   |                            |   | 17,507 |   |
| Derivative                instruments                                                                                              |   |                             | 30,243    |   |                            |   | 27,750 |   |
| Income                taxes receivable                                                                                             |   |                             | -         |   |                            |   | 13,222 |   |
| Other                current assets                                                                                                |   |                             | 34,758    |   |                            |   | 51,231 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                current assets                                                                                                |   |                             | 385,250   |   |                            |   | 448,532 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Other                Property and Investments:**                                                                                 |   |                             |      |   |                            |   |   |   |
| Investment                in PVNGS lessor notes                                                                                    |   |                             | 231,924   |   |                            |   | 257,659 |   |
| Investments                held by NDT                                                                                             |   |                             | 138,999   |   |                            |   | 123,143 |   |
| Other                investments                                                                                                   |   |                             | 24,102    |   |                            |   | 15,634 |   |
| Non-utility                property                                                                                                |   |                             | 976       |   |                            |   | 966 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                other property and investments                                                                                |   |                             | 396,001   |   |                            |   | 397,402 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Utility                Plant:**                                                                                                  |   |                             |      |   |                            |   |   |   |
| Electric                plant in service                                                                                           |   |                             | 2,900,446 |   |                            |   | 2,742,795 |   |
| Gas                plant in service                                                                                                |   |                             | 756,352   |   |                            |   | 721,168 |   |
| Common                plant in service and plant held for future use                                                               |   |                             | 18,237    |   |                            |   | 72,806 |   |
|                                                                                                                               |   |                             | 3,675,035 |   |                            |   | 3,536,769 |   |
| Less                accumulated depreciation and amortization                                                                      |   |                             | 1,391,895 |   |                            |   | 1,279,349 |   |
|                                                                                                                               |   |                             | 2,283,140 |   |                            |   | 2,257,420 |   |
| Construction                work in progress                                                                                       |   |                             | 346,682   |   |                            |   | 191,403 |   |
| Nuclear                fuel, net of accumulated amortization of $18,806 and                $14,008                                 |   |                             | 53,659    |   |                            |   | 28,844 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Net                utility plant                                                                                                   |   |                             | 2,683,481 |   |                            |   | 2,477,667 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| **Deferred                Charges and Other Assets:**                                                                              |   |                             |      |   |                            |   |   |   |
| Regulatory                assets                                                                                                   |   |                             | 404,896   |   |                            |   | 410,979 |   |
| Derivative                instruments                                                                                              |   |                             | 21,683    |   |                            |   | 12,504 |   |
| Goodwill                                                                                                                           |   |                             | 102,775   |   |                            |   | - |   |
| Other                deferred charges                                                                                              |   |                             | 64,237    |   |                            |   | 66,465 |   |
|                                                                                                                               |   |                             |      |   |                            |   |   |   |
| Total                deferred charges and other assets                                                                             |   |                             | 593,591   |   |                            |   | 489,948 |   |
|                                                                                                                               |   | $                                | 4,058,323 |   |                            | $      | 3,813,549 |   |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                               |   | **September                30,**                        |      |   | **December                31,** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                               |   | **2007**                                                |      |   | **2006**                        |   |
|                                                                                                               |   | (In                thousands, except share information) |      |
| **LIABILITIES                AND STOCKHOLDER’S EQUITY**                                                      |   |                                                    |      |   |                            |   |
| **Current                Liabilities:**                                                                            |   |                                                    |      |   |                            |   |
| Short-term                debt                                                                                     |   | $                                                       | 285,584   |   |                            | $      | 251,300 |   |
| Current                installments of long-term debt                                                              |   |                                                    | 300,000   |   |                            |   | 710 |   |
| Accounts                payable                                                                                    |   |                                                    | 96,734    |   |                            |   | 138,577 |   |
| Affiliate                accounts payable                                                                          |   |                                                    | 8,338     |   |                            |   | 16,898 |   |
| Accrued                interest and taxes                                                                          |   |                                                    | 60,251    |   |                            |   | 41,340 |   |
| Regulatory                liabilities                                                                              |   |                                                    | 15,709    |   |                            |   | 1,172 |   |
| Derivative                instruments                                                                              |   |                                                    | 44,159    |   |                            |   | 43,096 |   |
| Other                current liabilities                                                                           |   |                                                    | 62,665    |   |                            |   | 81,552 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| Total                current liabilities                                                                           |   |                                                    | 873,440   |   |                            |   | 574,645 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| **Long-term                Debt**                                                                                  |   |                                                    | 705,654   |   |                            |   | 987,205 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| **Deferred                Credits and Other Liabilities:**                                                         |   |                                                    |      |   |                            |   |   |   |
| Accumulated                deferred income taxes                                                                   |   |                                                    | 380,257   |   |                            |   | 368,256 |   |
| Accumulated                deferred investment tax credits                                                         |   |                                                    | 27,497    |   |                            |   | 29,404 |   |
| Regulatory                liabilities                                                                              |   |                                                    | 355,621   |   |                            |   | 335,196 |   |
| Asset                retirement obligations                                                                        |   |                                                    | 64,372    |   |                            |   | 60,493 |   |
| Accrued                pension liability and postretirement benefit cost                                           |   |                                                    | 124,532   |   |                            |   | 129,595 |   |
| Derivative                instruments                                                                              |   |                                                    | 24,868    |   |                            |   | 14,100 |   |
| Other                deferred credits                                                                              |   |                                                    | 101,099   |   |                            |   | 112,990 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| Total                deferred credits and liabilities                                                              |   |                                                    | 1,078,246 |   |                            |   | 1,050,034 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| Total                liabilities                                                                                   |   |                                                    | 2,657,340 |   |                            |   | 2,611,884 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| **Commitments                and Contingencies (See Note 9)**                                                      |   |                                                    |      |   |                            |   |   |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| **Cumulative                Preferred Stock**                                                                      |   |                                                    |      |   |                            |   |   |   |
| without                mandatory redemption requirements ($100 stated value, 10,000,000                authorized: |   |                                                    |      |   |                            |   |   |   |
| issued                and outstanding 115,293 shares)                                                              |   |                                                    | 11,529    |   |                            |   | 11,529 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| **Common                Stockholder’s Equity:**                                                              |   |                                                    |      |   |                            |   |   |   |
| Common                stock outstanding (no par value, 40,000,000 shares authorized:                issued         |   |                                                    |      |   |                            |   |   |   |
| and                outstanding 39,117,799 shares)                                                                  |   |                                                    | 932,522   |   |                            |   | 765,500 |   |
| Accumulated                other comprehensive income, net of income tax                                           |   |                                                    | 14,502    |   |                            |   | 8,761 |   |
| Retained                earnings                                                                                   |   |                                                    | 442,430   |   |                            |   | 415,875 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
| Total                common stockholder’s equity                                                             |   |                                                    | 1,389,454 |   |                            |   | 1,190,136 |   |
|                                                                                                               |   |                                                    |      |   |                            |   |   |   |
|                                                                                                               |   | $                                                       | 4,058,323 |   |                            | $      | 3,813,549 |   |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH      FLOWS**

|                                                                                                             |   | **Nine                Months Ended** |     |
|------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                             |   | **September                30,**     |     |
|                                                                                                             |   | **2007**                             |     |   | **2006** |   |
|                                                                                                             |   |                                 |     |   | **(As                Restated,** |   |
|                                                                                                             |   |                                 |     |   | **See                Note 16)** |   |
|                                                                                                             |   | (In                thousands)        |     |
| **Cash                Flows From Operating Activities:**                                                         |   |                                 |     |   |   |   |
| Net                earnings                                                                                      |   | $                                    | 26,311   |   |   | $ | 50,748 |   |
| Adjustments                to reconcile net earnings to net cash flows from operating                activities: |   |                                 |     |   |   |   |   |   |
| Depreciation                and amortization                                                                     |   |                                 | 100,224  |   |   |   | 88,659 |   |
| Allowance                for equity funds used during construction                                               |   |                                 | (1,077   | ) |   |   | (348 | ) |
| Deferred                income tax (benefit)                                                                     |   |                                 | (14,695  | ) |   |   | (15,760 | ) |
| Net                unrealized losses on derivatives                                                              |   |                                 | 14,943   |   |   |   | 1,305 |   |
| Realized                gains on investments held by NDT                                                         |   |                                 | (6,898   | ) |   |   | (1,888 | ) |
| Carrying                charges on regulatory assets and liabilities                                             |   |                                 | (692     | ) |   |   | (2,597 | ) |
| Impairment                loss on utility plant                                                                  |   |                                 | 19,500   |   |   |   | - |   |
| Other,                net                                                                                        |   |                                 | (1,746   | ) |   |   | (3,677 | ) |
| Changes                in certain assets and liabilities, net of amounts                acquired:                |   |                                 |     |   |   |   |   |   |
| Accounts                receivable                                                                               |   |                                 | 16,962   |   |   |   | 74,126 |   |
| Unbilled                revenues                                                                                 |   |                                 | 41,931   |   |   |   | 35,591 |   |
| Regulatory                assets                                                                                 |   |                                 | (6,037   | ) |   |   | 25,944 |   |
| Other                assets                                                                                      |   |                                 | 27,254   |   |   |   | (9,226 | ) |
| Accrued                pension liability and postretirement benefit costs                                        |   |                                 | (2,538   | ) |   |   | (4,456 | ) |
| Accounts                payable                                                                                  |   |                                 | (44,666  | ) |   |   | (102,307 | ) |
| Accrued                interest and taxes                                                                        |   |                                 | 29,575   |   |   |   | 44,147 |   |
| Deferred                credits                                                                                  |   |                                 | (19,774  | ) |   |   | (6,456 | ) |
| Other                liabilities                                                                                 |   |                                 | (18,228  | ) |   |   | (29,645 | ) |
| Net                cash flows from operating activities                                                          |   |                                 | 160,349  |   |   |   | 144,160 |   |
|                                                                                                             |   |                                 |     |   |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                         |   |                                 |     |   |   |   |   |   |
| Utility                plant additions                                                                           |   |                                 | (260,250 | ) |   |   | (150,896 | ) |
| Proceeds                from sales of investments held by NDT                                                    |   |                                 | 99,525   |   |   |   | 65,759 |   |
| Purchases                of investments held by NDT                                                              |   |                                 | (104,455 | ) |   |   | (66,578 | ) |
| Proceeds                from sales of utility plant                                                              |   |                                 | 25,041   |   |   |   | - |   |
| Return                of principal on PVNGS lessor notes                                                         |   |                                 | 24,296   |   |   |   | 22,937 |   |
| Net                additions to restricted special deposits                                                      |   |                                 | (10,203  | ) |   |   | - |   |
| Other,                net                                                                                        |   |                                 | 1,653    |   |   |   | 6,815 |   |
| Net                cash flows from investing activities                                                          |   |                                 | (224,393 | ) |   |   | (121,963 | ) |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                                                                                                                                                                                                                                                                                                      |   | **Nine                Months Ended** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                      |   | **September                30,**     |    |
|                                                                                                                                                                                                                                                                                                                                                                      |   | **2007**                             |    |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   | **(As                Restated,** |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   | **See                Note 16)** |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   | (In                thousands)        |    |
| **Cash                Flows From Financing Activities:**                                                                                                                                                                                                                                                                                                                  |   |                                 |    |   |   |   |
| Short-term                borrowings (repayments), net                                                                                                                                                                                                                                                                                                                    |   |                                 | 35,310  |   |   |   | (31,926 | ) |
| Long-term                borrowings                                                                                                                                                                                                                                                                                                                                       |   |                                 | 20,000  |   |   |   | - |   |
| Dividends                paid                                                                                                                                                                                                                                                                                                                                             |   |                                 | (396    | ) |   |   | (396 | ) |
| Other,                net                                                                                                                                                                                                                                                                                                                                                 |   |                                 | (41     | ) |   |   | 87 |   |
| Net                cash flows from financing activities                                                                                                                                                                                                                                                                                                                   |   |                                 | 54,873  |   |   |   | (32,235 | ) |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| **Change                in Cash and Cash Equivalents**                                                                                                                                                                                                                                                                                                                    |   |                                 | (9,171  | ) |   |   | (10,038 | ) |
| **Cash                and Cash Equivalents at Beginning of Period**                                                                                                                                                                                                                                                                                                       |   |                                 | 11,886  |   |   |   | 12,690 |   |
| **Cash                and Cash Equivalents at End of Period**                                                                                                                                                                                                                                                                                                             |   | $                                    | 2,715   |   |   | $ | 2,652 |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| **Supplemental                Cash Flow Disclosures:**                                                                                                                                                                                                                                                                                                                    |   |                                 |    |   |   |   |   |   |
| Interest                paid, net of capitalized interest                                                                                                                                                                                                                                                                                                                 |   | $                                    | 49,839  |   |   | $ | 47,307 |   |
| Income                taxes paid, net                                                                                                                                                                                                                                                                                                                                     |   | $                                    | -       |   |   | $ | 455 |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| **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 14). |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| Current                assets                                                                                                                                                                                                                                                                                                                                             |   | $                                    | 15,444  |   |   |   |   |   |
| Other                property and investments                                                                                                                                                                                                                                                                                                                             |   |                                 | 10      |   |   |   |   |   |
| Utility                plant, net                                                                                                                                                                                                                                                                                                                                         |   |                                 | 96,468  |   |   |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 102,775 |   |   |   |   |   |
| Deferred                charges                                                                                                                                                                                                                                                                                                                                           |   |                                 | 1,377   |   |   |   |   |   |
| Total                assets transferred from TNMP                                                                                                                                                                                                                                                                                                                         |   |                                 | 216,074 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| Current                liabilities                                                                                                                                                                                                                                                                                                                                        |   |                                 | 17,313  |   |   |   |   |   |
| Long-term                debt                                                                                                                                                                                                                                                                                                                                             |   |                                 | 1,065   |   |   |   |   |   |
| Deferred                credits and other liabilities                                                                                                                                                                                                                                                                                                                     |   |                                 | 30,673  |   |   |   |   |   |
| Total                liabilities transferred from TNMP                                                                                                                                                                                                                                                                                                                    |   |                                 | 49,051  |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |    |   |   |   |   |   |
| Net                assets transferred – increase in common stockholder’s                equity                                                                                                                                                                                                                                                                |   | $                                    | 167,023 |   |   |   |   |   |

----

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE      INCOME**

|                                                                      |   | **Three                Months Ended** |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                      |   | **September                30,**      |   |   | **September                30,**     |   |
|                                                                      |   | **2007**                              |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                      |   |                                  |   |   | **(As                Restated,**     |   |   |   |   |   | **(As                Restated,** |   |
|                                                                      |   |                                  |   |   | **See                Note 16)**      |   |   |   |   |   | **See                Note 16)** |   |
|                                                                      |   |                                  |   |   | (In                thousands)        |   |   |   |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |
| **Net                Earnings (Loss) Available for Common Stock**         |   | $                                     | (1,890 | )      |                                 | $      | 17,516 |   |   | $ | 25,915 |   |   | $ | 50,352 |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Income (Loss):**                     |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Unrealized                Gain (Loss) on Investment Securities**:       |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                holding gains arising during                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| the                period, net of income tax (expense)                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $(1,549), $(586), $(4,070) and $(7,567)                 |   |                                  | 2,364  |   |                                 |   | 894 |   |   |   | 6,210 |   |   |   | 11,546 |   |
| Reclassification                adjustment for (gains) included in        |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| net                earnings, net of income tax expense                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $2,401, $48, $2,493 and $503                            |   |                                  | (3,664 | )      |                                 |   | (73 | ) |   |   | (3,804 | ) |   |   | (767 | ) |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Fair                Value Adjustment for Designated Cash Flow Hedges:** |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Change                in fair market value, net of income tax expense     |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| (benefit)                of $(903), $566, $(1,886) and $6,195             |   |                                  | 1,378  |   |                                 |   | (864 | ) |   |   | 2,877 |   |   |   | (9,453 | ) |
| Reclassification                adjustment for (gains) losses included in |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| net                earnings, net of income tax expense (benefit)          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| of                $826, $334, $(300) and $4,138                           |   |                                  | (1,261 | )      |                                 |   | (510 | ) |   |   | 458 |   |   |   | (6,314 | ) |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Other Comprehensive Income (Loss)**                |   |                                  | (1,183 | )      |                                 |   | (553 | ) |   |   | 5,741 |   |   |   | (4,988 | ) |
|                                                                      |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Total                Comprehensive Income (Loss)**                      |   | $                                     | (3,073 | )      |                                 | $      | 16,963 |   |   | $ | 31,656 |   |   | $ | 45,364 |   |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF      EARNINGS**

|                                                          |   | **Three                Months Ended** |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                                          |   | **September                30,**      |   |   | **September                30,**     |   |
|                                                          |   | **2007**                              |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                          |   | (In                thousands)         |   |
| **Electric                Operating Revenues:**               |   | $                                     | 52,680 |   |                                 | $      | 43,728 |   |   | $ | 137,144 |   |   | $ | 118,972 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                Expenses:**                        |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of energy sold                            |   |                                  | 7,544  |   |                                 |   | 7,050 |   |   |   | 21,936 |   |   |   | 20,644 |   |
| Administrative                and general                     |   |                                  | 6,024  |   |                                 |   | 7,451 |   |   |   | 22,288 |   |   |   | 24,512 |   |
| Depreciation                and amortization                  |   |                                  | 7,082  |   |                                 |   | 6,422 |   |   |   | 21,123 |   |   |   | 18,934 |   |
| Transmission                and distribution costs            |   |                                  | 4,465  |   |                                 |   | 3,547 |   |   |   | 14,332 |   |   |   | 11,755 |   |
| Taxes                other than income taxes                  |   |                                  | 6,503  |   |                                 |   | 6,455 |   |   |   | 16,741 |   |   |   | 17,127 |   |
| Total                operating expenses                       |   |                                  | 31,618 |   |                                 |   | 30,925 |   |   |   | 96,420 |   |   |   | 92,972 |   |
| Operating                income                               |   |                                  | 21,062 |   |                                 |   | 12,803 |   |   |   | 40,724 |   |   |   | 26,000 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Income and Deductions:**               |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                |   |                                  | 25     |   |                                 |   | 296 |   |   |   | 888 |   |   |   | 632 |   |
| Other                income                                   |   |                                  | 397    |   |                                 |   | 281 |   |   |   | 1,444 |   |   |   | 534 |   |
| Carrying                charges on regulatory assets          |   |                                  | -      |   |                                 |   | 2,038 |   |   |   | - |   |   |   | 6,015 |   |
| Other                deductions                               |   |                                  | (25    | )      |                                 |   | (17 | ) |   |   | (99 | ) |   |   | (60 | ) |
| Net                other income and deductions                |   |                                  | 397    |   |                                 |   | 2,598 |   |   |   | 2,233 |   |   |   | 7,121 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                Charges:**                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on long-term debt                     |   |                                  | 4,890  |   |                                 |   | 6,433 |   |   |   | 17,475 |   |   |   | 19,297 |   |
| Other                interest charges                         |   |                                  | 878    |   |                                 |   | 852 |   |   |   | 2,242 |   |   |   | 2,484 |   |
| Total                interest charges                         |   |                                  | 5,768  |   |                                 |   | 7,285 |   |   |   | 19,717 |   |   |   | 21,781 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                before Income Taxes**               |   |                                  | 15,691 |   |                                 |   | 8,116 |   |   |   | 23,240 |   |   |   | 11,340 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Income                Taxes**                               |   |                                  | 5,463  |   |                                 |   | 2,645 |   |   |   | 7,840 |   |   |   | 3,975 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings from Continuing Operations**    |   |                                  | 10,228 |   |                                 |   | 5,471 |   |   |   | 15,400 |   |   |   | 7,365 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Discontinued                Operations, net of income tax** |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **expense                of $0, $250, $0 and $1,237**         |   |                                  | -      |   |                                 |   | 519 |   |   |   | - |   |   |   | 2,617 |   |
|                                                          |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings**                               |   | $                                     | 10,228 |   |                                 | $      | 5,990 |   |   | $ | 15,400 |   |   | $ | 9,982 |   |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                         |   | **September                30,** |      |   | **December                31,** |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                         |   | **2007**                         |      |   | **2006**                        |   |
|                                                                                                         |   | (In                thousands)    |      |
| **ASSETS**                                                                                                   |   |                             |      |   |                            |   |
| **Current                Assets:**                                                                           |   |                             |      |   |                            |   |
| Cash                and cash equivalents                                                                     |   | $                                | 54        |   |                            | $      | 2,542 |   |
| Special                deposits                                                                              |   |                             | 50        |   |                            |   | - |   |
| Accounts                receivable, net of allowance for uncollectible accounts of $0 and                $31 |   |                             | 10,653    |   |                            |   | 10,317 |   |
| Unbilled                revenues                                                                             |   |                             | 4,368     |   |                            |   | 6,000 |   |
| Other                receivables                                                                             |   |                             | 5,023     |   |                            |   | 1,515 |   |
| Affiliate                accounts receivable                                                                 |   |                             | 10,833    |   |                            |   | - |   |
| Inventories                                                                                                  |   |                             | 1,662     |   |                            |   | 1,509 |   |
| Federal                income tax receivable                                                                 |   |                             | 32,053    |   |                            |   | 40,473 |   |
| Other                current assets                                                                          |   |                             | 581       |   |                            |   | 944 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| Total                current assets                                                                          |   |                             | 65,277    |   |                            |   | 63,300 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| **Other                Property and Investments:**                                                           |   |                             |      |   |                            |   |   |   |
| Other                investments                                                                             |   |                             | 555       |   |                            |   | 511 |   |
| Non-utility                property, net of accumulated depreciation of $0 and $3                            |   |                             | 2,111     |   |                            |   | 2,120 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| Total                other property and investments                                                          |   |                             | 2,666     |   |                            |   | 2,631 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| **Utility                Plant:**                                                                            |   |                             |      |   |                            |   |   |   |
| Electric                plant in service                                                                     |   |                             | 775,622   |   |                            |   | 925,538 |   |
| Common                plant in service and plant held for future use                                         |   |                             | 488       |   |                            |   | 589 |   |
|                                                                                                         |   |                             | 776,110   |   |                            |   | 926,127 |   |
| Less                accumulated depreciation and amortization                                                |   |                             | 269,183   |   |                            |   | 326,404 |   |
|                                                                                                         |   |                             | 506,927   |   |                            |   | 599,723 |   |
| Construction                work in progress                                                                 |   |                             | 13,953    |   |                            |   | 13,799 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| Net                utility plant                                                                             |   |                             | 520,880   |   |                            |   | 613,522 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| **Deferred                Charges and Other Assets:**                                                        |   |                             |      |   |                            |   |   |   |
| Regulatory                assets                                                                             |   |                             | 137,399   |   |                            |   | 142,585 |   |
| Goodwill                                                                                                     |   |                             | 261,121   |   |                            |   | 363,764 |   |
| Pension                asset                                                                                 |   |                             | 10,817    |   |                            |   | 8,853 |   |
| Other                deferred charges                                                                        |   |                             | 6,349     |   |                            |   | 9,205 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
| Total                deferred charges and other assets                                                       |   |                             | 415,686   |   |                            |   | 524,407 |   |
|                                                                                                         |   |                             |      |   |                            |   |   |   |
|                                                                                                         |   | $                                | 1,004,509 |   |                            | $      | 1,203,860 |   |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                 |   | **September                30,**                        |      |   | **December                31,** |   |
|------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                 |   | **2007**                                                |      |   | **2006**                        |   |
|                                                                                                 |   | (In                thousands, except share information) |      |
| **LIABILITIES                AND STOCKHOLDER’S EQUITY**                                        |   |                                                    |      |   |                            |   |
| **Current                Liabilities:**                                                              |   |                                                    |      |   |                            |   |
| Short-term                debt – affiliate                                                     |   | $                                                       | 18,500    |   |                            | $      | - |   |
| Current                installments of long-term debt                                                |   |                                                    | 148,935   |   |                            |   | 2,523 |   |
| Accounts                payable                                                                      |   |                                                    | 2,831     |   |                            |   | 11,332 |   |
| Affiliate                accounts payable                                                            |   |                                                    | 1,552     |   |                            |   | 15,673 |   |
| Accrued                interest and taxes                                                            |   |                                                    | 21,006    |   |                            |   | 23,110 |   |
| Other                current liabilities                                                             |   |                                                    | 3,933     |   |                            |   | 7,579 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| Total                current liabilities                                                             |   |                                                    | 196,757   |   |                            |   | 60,217 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| **Long-term                Debt**                                                                    |   |                                                    | 167,503   |   |                            |   | 420,546 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| **Deferred                Credits and Other Liabilities:**                                           |   |                                                    |      |   |                            |   |   |   |
| Accumulated                deferred income taxes                                                     |   |                                                    | 125,258   |   |                            |   | 145,641 |   |
| Accumulated                deferred investment tax credits                                           |   |                                                    | 181       |   |                            |   | 832 |   |
| Regulatory                liabilities                                                                |   |                                                    | 40,595    |   |                            |   | 54,134 |   |
| Asset                retirement obligations                                                          |   |                                                    | 651       |   |                            |   | 686 |   |
| Accrued                pension liability and postretirement benefit cost                             |   |                                                    | 5,044     |   |                            |   | 5,203 |   |
| Other                deferred credits                                                                |   |                                                    | 2,062     |   |                            |   | 1,982 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| Total                deferred credits and other liabilities                                          |   |                                                    | 173,791   |   |                            |   | 208,478 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| Total                liabilities                                                                     |   |                                                    | 538,051   |   |                            |   | 689,241 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| **Commitments                and Contingencies (See Note 9)**                                        |   |                                                    |      |   |                            |   |   |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| **Common                Stockholder’s Equity:**                                                |   |                                                    |      |   |                            |   |   |   |
| Common                stock outstanding ($10 par value, 12,000,000 shares                authorized: |   |                                                    |      |   |                            |   |   |   |
| issued                and outstanding 6,358 and 9,615 shares)                                        |   |                                                    | 64        |   |                            |   | 96 |   |
| Paid-in-capital                                                                                      |   |                                                    | 427,320   |   |                            |   | 492,812 |   |
| Accumulated                other comprehensive income, net of income tax                             |   |                                                    | 562       |   |                            |   | 562 |   |
| Retained                earnings                                                                     |   |                                                    | 38,512    |   |                            |   | 21,149 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
| Total                common stockholder’s equity                                               |   |                                                    | 466,458   |   |                            |   | 514,619 |   |
|                                                                                                 |   |                                                    |      |   |                            |   |   |   |
|                                                                                                 |   | $                                                       | 1,004,509 |   |                            | $      | 1,203,860 |   |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH      FLOWS**

|                                                                                                             |   | **Nine                Months Ended** |    |
|------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                                                             |   | **September                30,**     |    |
|                                                                                                             |   | **2007**                             |    |   | **2006** |   |
|                                                                                                             |   | (In                thousands)        |    |
| **Cash                Flows From Operating Activities:**                                                         |   |                                 |    |   |   |   |
| Net                earnings                                                                                      |   | $                                    | 15,400  |   |   | $ | 9,982 |   |
| Adjustments                to reconcile net earnings to net cash flows from operating                activities: |   |                                 |    |   |   |   |   |   |
| Depreciation                and amortization                                                                     |   |                                 | 20,991  |   |   |   | 24,733 |   |
| Rate                case amortization                                                                            |   |                                 | 2,777   |   |   |   | - |   |
| Allowance                for equity funds used during construction                                               |   |                                 | (124    | ) |   |   | (151 | ) |
| Deferred                income tax expense (benefit)                                                             |   |                                 | (3,253  | ) |   |   | (536 | ) |
| Carrying                charges on deferred stranded costs                                                       |   |                                 | -       |   |   |   | (6,015 | ) |
| Interest                on retail competition transition obligation                                              |   |                                 | -       |   |   |   | 1,345 |   |
| Other,                net                                                                                        |   |                                 | (1,108  | ) |   |   | (1,445 | ) |
| Changes                in certain assets and liabilities:                                                        |   |                                 |    |   |   |   |   |   |
| Accounts                receivable                                                                               |   |                                 | (10,033 | ) |   |   | 1,619 |   |
| Unbilled                revenues                                                                                 |   |                                 | (1,899  | ) |   |   | (1,100 | ) |
| Other                assets                                                                                      |   |                                 | (892    | ) |   |   | 1,665 |   |
| Accrued                pension liability and postretirement benefit costs                                        |   |                                 | (216    | ) |   |   | (498 | ) |
| Accounts                payable                                                                                  |   |                                 | (5,679  | ) |   |   | (1,765 | ) |
| Accrued                interest and taxes                                                                        |   |                                 | 7,554   |   |   |   | 6,259 |   |
| Change                in affiliate accounts                                                                      |   |                                 | (17,338 | ) |   |   | 14,513 |   |
| Other                liabilities                                                                                 |   |                                 | (1,081  | ) |   |   | (1,591 | ) |
| Net                cash flows from operating activities                                                          |   |                                 | 5,099   |   |   |   | 47,015 |   |
|                                                                                                             |   |                                 |    |   |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                         |   |                                 |    |   |   |   |   |   |
| Utility                plant additions                                                                           |   |                                 | (26,837 | ) |   |   | (29,301 | ) |
| Other,                net                                                                                        |   |                                 | -       |   |   |   | 66 |   |
| Net                cash flows from investing activities                                                          |   |                                 | (26,837 | ) |   |   | (29,235 | ) |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                                                                                                                                                                                                                                                                                                      |   | **Nine                Months Ended** |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                      |   | **September                30,**     |     |
|                                                                                                                                                                                                                                                                                                                                                                      |   | **2007**                             |     |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   | (In                thousands)        |     |
| **Cash                Flows From Financing Activities:**                                                                                                                                                                                                                                                                                                                  |   |                                 |     |   |   |   |
| Short-term                debt - affiliate                                                                                                                                                                                                                                                                                                                                |   |                                 | 18,500   |   |   |   | - |   |
| Redemption                of long-term debt                                                                                                                                                                                                                                                                                                                               |   |                                 | (100,500 | ) |   |   | - |   |
| Equity                contribution by parent                                                                                                                                                                                                                                                                                                                              |   |                                 | 101,249  |   |   |   | - |   |
| Other,                net                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 1        |   |   |   | 115 |   |
| Net                cash flows from financing activities                                                                                                                                                                                                                                                                                                                   |   |                                 | 19,250   |   |   |   | 115 |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |     |   |   |   |   |   |
| **Change                in Cash and Cash Equivalents**                                                                                                                                                                                                                                                                                                                    |   |                                 | (2,488   | ) |   |   | 17,895 |   |
| **Cash                and Cash Equivalents at Beginning of Period**                                                                                                                                                                                                                                                                                                       |   |                                 | 2,542    |   |   |   | 16,228 |   |
| **Cash                and Cash Equivalents at End of Period**                                                                                                                                                                                                                                                                                                             |   | $                                    | 54       |   |   | $ | 34,123 |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |     |   |   |   |   |   |
| **Supplemental                Cash Flow Disclosures:**                                                                                                                                                                                                                                                                                                                    |   |                                 |     |   |   |   |   |   |
| Interest                paid, net of capitalized interest                                                                                                                                                                                                                                                                                                                 |   | $                                    | 19,693   |   |   | $ | 17,962 |   |
| Income                taxes paid, net                                                                                                                                                                                                                                                                                                                                     |   | $                                    | -        |   |   | $ | - |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |     |   |   |   |   |   |
| **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 14). |   |
|                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |     |   |   |   |   |   |
| 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  |   |   |   |   |   |

----

**TEXAS-NEW      MEXICO POWER COMPANY AND SUBSIDIARIES**

**A      WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE      INCOME**

|                                                             | **Three                  Months Ended**                                                                                                                                                     |   | **Nine                  Months Ended**                                                                                                                       |
|------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                             | **September                  30,**                                                                                                                                                          |   | **September                  30,**                                                                                                                           |
|                                                             | **2007**                                                                                                                                                                                    |   | **2006**                                                                                                                                                     |   | **2007** |   | **2006** |
|                                                             |                                                                                                                                                                                        |   | (In                  thousands)                                                                                                                              |   |   |
|                                                             |                                                                                                                                                                                        |   |                                                                                                                                                         |   |   |   |   |
| **Net                  Earnings and Total Comprehensive Income** | $                                             10,228 |   | $                                        5,990 |   | $                                     15,400 |   | $                      9,982 |

----

**PNM      RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC      SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW      MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS**

**(1)       Significant      Accounting Policies and Responsibility for Financial      Statements**

**Financial      Statement Preparation**

**Principles      of Consolidation**

**Presentation**

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

   

| **(2)** | **Acquisitions,                Impairments, and                Disposition** |
|---------|------------------------------------------------------------------------------|

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

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

**REGULATED      OPERATIONS**

**PNM      Electric**

**TNMP      Electric**

**PNM      Gas**

----

**PNM              RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC              SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW              MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES              TO CONDENSED CONSOLIDATED FINANCIAL              STATEMENTS**

    

**UNREGULATED      OPERATIONS**

**Wholesale**

**First      Choice**

**EnergyCo**

----

**PNM              RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC              SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW              MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES              TO CONDENSED CONSOLIDATED FINANCIAL              STATEMENTS**

**CORPORATE      AND OTHER**

----

**PNM              RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC              SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW              MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES              TO CONDENSED CONSOLIDATED FINANCIAL              STATEMENTS**

    

**PNMR      SEGMENT INFORMATION**

|                                                          |   | **Regulated**       |      |   | **Unregulated**                   |   |    |                            |   |   |          |   |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|-----------------------------------|--------|---------|---------------------------------|--------|--------|---------------|--------|--------|
|                                                          |   | **PNM**                                           |      |   | **TNMP**                          |   |    |                            |   |   |          |   |   | **First** |   |   | **Corporate** |   |   |   |   |
| **2007**                                                      |   | **Electric                  (d)**                 |      |   | **Electric                  (d)** |   |    | **PNM                  Gas**    |   |   | **Wholesale** |   |   | **Choice** |   |   | **and                  Other** |   |   | **Consolidated** |   |
|                                                          |   |                                              |      |   |                              |   |    | (In                  thousands) |   |   |          |   |   |   |   |   |   |   |   |
| ***Three                  Months Ended September 30, 2007:*** |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |
| Operating                  revenues                           |   | $                                                 | 203,083   |   |                              | $      | 31,405  |                            |   | $      | 59,537        |   |   | $ | 204,125 |   |   | $ | 177,694 |   |   | $ | (46,407 | ) | (a) |   | $ | 629,437 |   |
| Intersegment                  revenues                        |   |                                              | 2,931     |   |                              |   | 21,275  |                            |   |   | -             |   |   |   | - |   |   |   | - |   |   |   | (24,206 | ) |   |   |   | - |   |
| **Total                  revenues**                           |   |                                              | 206,014   |   |                              |   | 52,680  |                            |   |   | 59,537        |   |   |   | 204,125 |   |   |   | 177,694 |   |   |   | (70,613 | ) |   |   |   | 629,437 |   |
| Cost                  of energy                               |   |                                              | 67,771    |   |                              |   | 7,544   |                            |   |   | 33,958        |   |   |   | 211,162 |   |   |   | 159,179 |   |   |   | (70,633 | ) | (a) |   |   | 408,981 |   |
| Intersegment                  energy transfer                 |   |                                              | 21,928    |   |                              |   | -       |                            |   |   | -             |   |   |   | (21,928 | ) |   |   | - |   |   |   | - |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                                              | 116,315   |   |                              |   | 45,136  |                            |   |   | 25,579        |   |   |   | 14,891 |   |   |   | 18,515 |   |   |   | 20 |   |   |   |   | 220,456 |   |
| Operating                  expenses                           |   |                                              | 70,816    |   |                              |   | 16,695  |                            |   |   | 23,775        |   |   |   | 13,764 |   |   |   | 13,583 |   |   |   | 23,413 |   | (f) |   |   | 162,046 |   |
| Depreciation                  and amortization                |   |                                              | 16,448    |   |                              |   | 7,081   |                            |   |   | 5,869         |   |   |   | 3,054 |   |   |   | 470 |   |   |   | 3,792 |   |   |   |   | 36,714 |   |
| **Operating                  income (loss)**                  |   |                                              | 29,051    |   |                              |   | 21,360  |                            |   |   | (4,065        | )      |   |   | (1,927 | ) |   |   | 4,462 |   |   |   | (27,185 | ) |   |   |   | 21,696 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                              |   |                                              | 8,330     |   |                              |   | 24      |                            |   |   | (91           | )      |   |   | 1,750 |   |   |   | 489 |   |   |   | (449 | ) |   |   |   | 10,053 |   |
| Equity                  in net earnings of EnergyCo           |   |                                              | -         |   |                              |   | -       |                            |   |   | -             |   |   |   | - |   |   |   | - |   |   |   | 10,556 |   |   |   |   | 10,556 |   |
| Other                  income (deductions)                    |   |                                              | 2,308     |   |                              |   | 372     |                            |   |   | 92            |   |   |   | 1,682 |   |   |   | 99 |   |   |   | (1,158 | ) |   |   |   | 3,395 |   |
| Net                  interest charges                         |   |                                              | (9,001    | )      |                              |   | (5,768  | )                               |   |   | (3,729        | )      |   |   | (3,544 | ) |   |   | (638 | ) |   |   | (12,575 | ) |   |   |   | (35,255 | ) |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                                              | 30,688    |   |                              |   | 15,988  |                            |   |   | (7,793        | )      |   |   | (2,039 | ) |   |   | 4,412 |   |   |   | (30,811 | ) |   |   |   | 10,445 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                                              | 12,149    |   |                              |   | 5,576   |                            |   |   | (3,085        | )      |   |   | (807 | ) |   |   | 1,667 |   |   |   | (13,427 | ) | (f) |   |   | 2,073 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                                 | 18,539    |   |                              | $      | 10,412  |                            |   | $      | (4,708        | )      |   | $ | (1,232 | ) |   | $ | 2,745 |   |   | $ | (17,384 | ) |   |   | $ | 8,372 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Nine                  Months Ended September 30, 2007:***  |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  revenues                           |   | $                                                 | 540,702   |   |                              | $      | 82,046  |                            |   | $      | 351,162       |   |   | $ | 515,689 |   |   | $ | 463,214 |   |   | $ | (89,194 | ) | (a) |   | $ | 1,863,619 |   |
| Intersegment                  revenues                        |   |                                              | 6,565     |   |                              |   | 55,098  |                            |   |   | 92            |   |   |   | 17,048 |   |   |   | 78 |   |   |   | (78,881 | ) |   |   |   | - |   |
| **Total                  revenues**                           |   |                                              | 547,267   |   |                              |   | 137,144 |                            |   |   | 351,254       |   |   |   | 532,737 |   |   |   | 463,292 |   |   |   | (168,075 | ) |   |   |   | 1,863,619 |   |
| Cost                  of energy                               |   |                                              | 200,154   |   |                              |   | 21,936  |                            |   |   | 240,766       |   |   |   | 453,148 |   |   |   | 395,858 |   |   |   | (167,828 | ) | (a) |   |   | 1,144,034 |   |
| Intersegment                  energy transfer                 |   |                                              | 19,898    |   |                              |   | -       |                            |   |   | -             |   |   |   | (19,898 | ) |   |   | - |   |   |   | - |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                                              | 327,215   |   |                              |   | 115,208 |                            |   |   | 110,488       |   |   |   | 99,487 |   |   |   | 67,434 |   |   |   | (247 | ) |   |   |   | 719,585 |   |
| Operating                  expenses                           |   |                                              | 217,029   |   |                              |   | 53,064  |                            |   |   | 75,308        |   |   |   | 58,690 |   |   |   | 41,701 |   |   |   | 34,265 |   | (b,f)  |   |   | 480,057 |   |
| Depreciation                  and amortization                |   |                                              | 49,220    |   |                              |   | 21,122  |                            |   |   | 18,114        |   |   |   | 17,000 |   |   |   | 1,411 |   |   |   | 9,984 |   |   |   |   | 116,851 |   |
| **Operating                  income (loss)**                  |   |                                              | 60,966    |   |                              |   | 41,022  |                            |   |   | 17,066        |   |   |   | 23,797 |   |   |   | 24,322 |   |   |   | (44,496 | ) |   |   |   | 122,677 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                              |   |                                              | 20,101    |   |                              |   | 888     |                            |   |   | 362           |   |   |   | 4,486 |   |   |   | 1,506 |   |   |   | 539 |   |   |   |   | 27,882 |   |
| Equity                  in net earnings of EnergyCo           |   |                                              | -         |   |                              |   | -       |                            |   |   | -             |   |   |   | - |   |   |   | - |   |   |   | 12,166 |   |   |   |   | 12,166 |   |
| Other                  income (deductions)                    |   |                                              | 3,490     |   |                              |   | 1,345   |                            |   |   | 265           |   |   |   | 2,977 |   |   |   | 66 |   |   |   | (4,600 | ) |   |   |   | 3,543 |   |
| Net                  interest charges                         |   |                                              | (28,187   | )      |                              |   | (19,717 | )                               |   |   | (9,683        | )      |   |   | (19,261 | ) |   |   | (1,814 | ) |   |   | (24,332 | ) |   |   |   | (102,994 | ) |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                                              | 56,370    |   |                              |   | 23,538  |                            |   |   | 8,010         |   |   |   | 11,999 |   |   |   | 24,080 |   |   |   | (60,723 | ) |   |   |   | 63,274 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                                              | 22,317    |   |                              |   | 7,954   |                            |   |   | 3,171         |   |   |   | 4,750 |   |   |   | 9,086 |   |   |   | (42,281 | ) | (b,c,f)  |   |   | 4,997 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                                 | 34,053    |   |                              | $      | 15,584  |                            |   | $      | 4,839         |   |   | $ | 7,249 |   |   | $ | 14,994 |   |   | $ | (18,442 | ) |   |   | $ | 58,277 |   |
|                                                          |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***At                  September 30, 2007:***                 |   |                                              |      |   |                              |   |    |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  assets**                             |   | $                                                 | 2,488,262 |   |                              | $      | 988,470 |                            |   | $      | 657,067       |   |   | $ | 369,085 |   |   | $ | 369,817 |   |   | $ | 975,768 |   |   |   | $ | 5,848,469 |   |
| **Goodwill**                                                  |   | $                                                 | 102,775   |   |                              | $      | 261,121 |                            |   | $      | -             |   |   | $ | - |   |   | $ | 131,768 |   |   | $ | - |   |   |   | $ | 495,664 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

**PNMR      SEGMENT INFORMATION**

|                                                          |   | **Regulated**       |      |   | **Unregulated**    |   |      |                            |   |   |          |   |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|-----------------------------------|--------|-----------|---------------------------------|--------|--------|---------------|--------|--------|
|                                                          |   | **PNM**                                           |      |   | **TNMP**                          |   |      |                            |   |   |          |   |   | **First** |   |   | **Corporate** |   |   |   |   |   |
|  **2006**                                                |   | **Electric                  (d)**                 |      |   | **Electric                  (d)** |   |      | **PNM                  Gas**    |   |   | **Wholesale** |   |   | **Choice** |   |   | **and                  Other** |   |   |   | **Consolidated** |   |
|                                                          |   |                                              |      |   |                              |   |      | (In                  thousands) |   |   |          |   |   |   |   |   |   |   |   |
| ***Three                  Months Ended September 30, 2006:*** |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |
| Operating                  revenues                           |   | $                                                 | 159,301   |   |                              | $      | 50,961    |                            |   | $      | 69,001        |   |   | $ | 193,150 |   |   | $ | 186,972 |   |   | $ | (9,220 | ) | (a)  |   | $ | 650,165 |   |
| Intersegment                  revenues                        |   |                                              | 2,414     |   |                              |   | 19,280    |                            |   |   | 245           |   |   |   | 11,551 |   |   |   | - |   |   |   | (33,490 | ) |   |   |   | - |   |
| **Total                  revenues**                           |   |                                              | 161,715   |   |                              |   | 70,241    |                            |   |   | 69,246        |   |   |   | 204,701 |   |   |   | 186,972 |   |   |   | (42,710 | ) |   |   |   | 650,165 |   |
| Cost                  of energy                               |   |                                              | 55,271    |   |                              |   | 27,987    |                            |   |   | 43,889        |   |   |   | 135,986 |   |   |   | 146,337 |   |   |   | (42,782 | ) | (a)  |   |   | 366,688 |   |
| Intersegment                  energy transfer                 |   |                                              | (5,861    | )      |                              |   | -         |                            |   |   | -             |   |   |   | 5,861 |   |   |   | - |   |   |   | - |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                                              | 112,305   |   |                              |   | 42,254    |                            |   |   | 25,357        |   |   |   | 62,854 |   |   |   | 40,635 |   |   |   | 72 |   |   |   |   | 283,477 |   |
| Operating                  expenses                           |   |                                              | 66,808    |   |                              |   | 20,877    |                            |   |   | 25,546        |   |   |   | 15,150 |   |   |   | 17,307 |   |   |   | 829 |   | (e) |   |   | 146,517 |   |
| Depreciation                  and amortization                |   |                                              | 15,241    |   |                              |   | 7,899     |                            |   |   | 6,007         |   |   |   | 7,894 |   |   |   | 510 |   |   |   | 2,348 |   |   |   |   | 39,899 |   |
| **Operating                  income (loss)**                  |   |                                              | 30,256    |   |                              |   | 13,478    |                            |   |   | (6,196        | )      |   |   | 39,810 |   |   |   | 22,818 |   |   |   | (3,105 | ) |   |   |   | 97,061 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                              |   |                                              | 6,380     |   |                              |   | 296       |                            |   |   | 668           |   |   |   | 1,346 |   |   |   | 877 |   |   |   | 335 |   |   |   |   | 9,902 |   |
| Other                  income (deductions)                    |   |                                              | 224       |   |                              |   | 2,406     |                            |   |   | 79            |   |   |   | (45 | ) |   |   | (57 | ) |   |   | (1,053 | ) |   |   |   | 1,554 |   |
| Net                  interest charges                         |   |                                              | (9,037    | )      |                              |   | (7,294    | )                               |   |   | (3,115        | )      |   |   | (12,226 | ) |   |   | (166 | ) |   |   | (8,333 | ) |   |   |   | (40,171 | ) |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                                              | 27,823    |   |                              |   | 8,886     |                            |   |   | (8,564        | )      |   |   | 28,885 |   |   |   | 23,472 |   |   |   | (12,156 | ) |   |   |   | 68,346 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                                              | 11,015    |   |                              |   | 2,896     |                            |   |   | (3,391        | )      |   |   | 11,436 |   |   |   | 8,358 |   |   |   | (5,488 | ) | (e)  |   |   | 24,826 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                                 | 16,808    |   |                              | $      | 5,990     |                            |   | $      | (5,173        | )      |   | $ | 17,449 |   |   | $ | 15,114 |   |   | $ | (6,668 | ) |   |   | $ | 43,520 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Nine                  Months Ended September 30, 2006:***  |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  revenues                           |   | $                                                 | 439,977   |   |                              | $      | 141,367   |                            |   | $      | 345,346       |   |   | $ | 499,281 |   |   | $ | 446,962 |   |   | $ | (20,298 | ) | (a) |   | $ | 1,852,635 |   |
| Intersegment                  revenues                        |   |                                              | 6,852     |   |                              |   | 53,015    |                            |   |   | 386           |   |   |   | 39,402 |   |   |   | - |   |   |   | (99,655 | ) |   |   |   | - |   |
| **Total                  revenues**                           |   |                                              | 446,829   |   |                              |   | 194,382   |                            |   |   | 345,732       |   |   |   | 538,683 |   |   |   | 446,962 |   |   |   | (119,953 | ) |   |   |   | 1,852,635 |   |
| Cost                  of energy                               |   |                                              | 144,053   |   |                              |   | 77,810    |                            |   |   | 243,748       |   |   |   | 398,732 |   |   |   | 354,745 |   |   |   | (119,928 | ) | (a) |   |   | 1,099,160 |   |
| Intersegment                  energy transfer                 |   |                                              | (2,515    | )      |                              |   | -         |                            |   |   | -             |   |   |   | 2,515 |   |   |   | - |   |   |   | - |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                                              | 305,291   |   |                              |   | 116,572   |                            |   |   | 101,984       |   |   |   | 137,436 |   |   |   | 92,217 |   |   |   | (25 | ) |   |   |   | 753,475 |   |
| Operating                  expenses                           |   |                                              | 201,174   |   |                              |   | 63,366    |                            |   |   | 76,516        |   |   |   | 45,315 |   |   |   | 45,852 |   |   |   | 3,448 |   | (e)  |   |   | 435,671 |   |
| Depreciation                  and amortization                |   |                                              | 44,529    |   |                              |   | 23,462    |                            |   |   | 17,921        |   |   |   | 18,210 |   |   |   | 1,518 |   |   |   | 6,542 |   |   |   |   | 112,182 |   |
| **Operating                  income (loss)**                  |   |                                              | 59,588    |   |                              |   | 29,744    |                            |   |   | 7,547         |   |   |   | 73,911 |   |   |   | 44,847 |   |   |   | (10,015 | ) |   |   |   | 205,622 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                              |   |                                              | 19,517    |   |                              |   | 632       |                            |   |   | 2,401         |   |   |   | 3,948 |   |   |   | 1,385 |   |   |   | 1,086 |   |   |   |   | 28,969 |   |
| Other                  income (deductions)                    |   |                                              | 638       |   |                              |   | 6,632     |                            |   |   | 169           |   |   |   | 991 |   |   |   | (292 | ) |   |   | (1,795 | ) |   |   |   | 6,343 |   |
| Net                  interest charges                         |   |                                              | (26,580   | )      |                              |   | (21,792   | )                               |   |   | (9,203        | )      |   |   | (25,559 | ) |   |   | (638 | ) |   |   | (21,460 | ) |   |   |   | (105,232 | ) |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                                              | 53,163    |   |                              |   | 15,216    |                            |   |   | 914           |   |   |   | 53,291 |   |   |   | 45,302 |   |   |   | (32,184 | ) |   |   |   | 135,702 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                                              | 21,047    |   |                              |   | 5,221     |                            |   |   | 362           |   |   |   | 21,109 |   |   |   | 16,118 |   |   |   | (13,659 | ) | (e)  |   |   | 50,198 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                                 | 32,116    |   |                              | $      | 9,995     |                            |   | $      | 552           |   |   | $ | 32,182 |   |   | $ | 29,184 |   |   | $ | (18,525 | ) |   |   | $ | 85,504 |   |
|                                                          |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***At                  September 30, 2006:***                 |   |                                              |      |   |                              |   |      |                            |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  assets**                             |   | $                                                 | 1,992,550 |   |                              | $      | 1,151,141 |                            |   | $      | 631,729       |   |   | $ | 1,086,354 |   |   | $ | 405,997 |   |   | $ | 575,615 |   |   |   | $ | 5,843,386 |   |
| **Goodwill**                                                  |   | $                                                 | -         |   |                              | $      | 363,763   |                            |   | $      | -             |   |   | $ | - |   |   | $ | 131,678 |   |   | $ | - |   |   |   | $ | 495,441 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

   

**PNM      SEGMENT INFORMATION**

|                                                          |   | **PNM**                           |      |   | **PNM** |   |    | **PNM**                         |   |   |      |   |   |   |             |   |
|---------------------------------------------------------------|--------|-----------------------------------|-----------|--------|---------|--------|---------|---------------------------------|--------|--------|-----------|--------|--------|--------|------------------|--------|
| **2007**                                                      |   | **Electric                  (d)** |      |   | **Gas** |   |    | **Wholesale**                   |   |   | **Other** |   |   |   | **Consolidated** |   |
|                                                          |   |                              |      |   |    |   |    | (In                  thousands) |   |   |      |   |   |   |             |   |
| ***Three                  Months Ended September 30, 2007:*** |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |
| Operating                  revenues                           |   | $                                 | 203,083   |   |    | $      | 59,537  |                            |   | $      | 204,125   |   |   | $      | (46,762          | )      |  (a) |   | $ | 419,983 |   |
| Intersegment                  revenues                        |   |                              | 2,931     |   |    | $      | -       |                            |   |   | -         |   |   |   | (2,931           | )      |   |   |   | - |   |
| **Total                  revenues**                           |   |                              | 206,014   |   |    |   | 59,537  |                            |   |   | 204,125   |   |   |   | (49,693          | )      |   |   |   | 419,983 |   |
| Cost                  of energy                               |   |                              | 67,771    |   |    |   | 33,958  |                            |   |   | 211,162   |   |   |   | (49,668          | )      |  (a) |   |   | 263,223 |   |
| Intersegment                  energy transfer                 |   |                              | 21,928    |   |    |   | -       |                            |   |   | (21,928   | )      |   |   | -                |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                              | 116,315   |   |    |   | 25,579  |                            |   |   | 14,891    |   |   |   | (25              | )      |   |   |   | 156,760 |   |
| Operating                  expenses                           |   |                              | 70,816    |   |    |   | 23,775  |                            |   |   | 13,764    |   |   |   | 23,636           |   |  (g) |   |   | 131,991 |   |
| Depreciation                  and amortization                |   |                              | 16,448    |   |    |   | 5,869   |                            |   |   | 3,054     |   |   |   | 633              |   |   |   |   | 26,004 |   |
| **Operating                  income (loss)**                  |   |                              | 29,051    |   |    |   | (4,065  | )                               |   |   | (1,927    | )      |   |   | (24,294          | )      |   |   |   | (1,235 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Interest                  income                              |   |                              | 8,330     |   |    |   | (91     | )                               |   |   | 1,750     |   |   |   | 397              |   |   |   |   | 10,386 |   |
| Other                  income (deductions)                    |   |                              | 2,308     |   |    |   | 92      |                            |   |   | 1,682     |   |   |   | 5                |   |   |   |   | 4,087 |   |
| Net                  interest charges                         |   |                              | (9,001    | )      |    |   | (3,729  | )                               |   |   | (3,544    | )      |   |   | (616             | )      |   |   |   | (16,890 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                              | 30,688    |   |    |   | (7,793  | )                               |   |   | (2,039    | )      |   |   | (24,508          | )      |   |   |   | (3,652 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                              | 12,149    |   |    |   | (3,085  | )                               |   |   | (807      | )      |   |   | (10,019          | )      |  (g) |   |   | (1,762 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                 | 18,539    |   |    | $      | (4,708  | )                               |   | $      | (1,232    | )      |   | $      | (14,489          | )      |   |   | $ | (1,890 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| ***Nine                  Months Ended September 30, 2007:***  |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |
| Operating                  revenues                           |   | $                                 | 540,702   |   |    | $      | 351,162 |                            |   | $      | 450,294   |   |   | $      | (89,924          | )      |  (a) |   | $ | 1,252,234 |   |
| Intersegment                  revenues                        |   |                              | 6,565     |   |    |   | 92      |                            |   |   | 17,048    |   |   |   | (23,705          | )      |   |   |   | - |   |
| **Total                  revenues**                           |   |                              | 547,267   |   |    |   | 351,254 |                            |   |   | 467,342   |   |   |   | (113,629         | )      |   |   |   | 1,252,234 |   |
| Cost                  of energy                               |   |                              | 200,154   |   |    |   | 240,766 |                            |   |   | 431,084   |   |   |   | (113,486         | )      |  (a) |   |   | 758,518 |   |
| Intersegment                  energy transfer                 |   |                              | 19,898    |   |    |   | -       |                            |   |   | (19,898   | )      |   |   | -                |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                              | 327,215   |   |    |   | 110,488 |                            |   |   | 56,156    |   |   |   | (143             | )      |   |   |   | 493,716 |   |
| Operating                  expenses                           |   |                              | 217,029   |   |    |   | 75,308  |                            |   |   | 41,365    |   |   |   | 23,288           |   |  (g) |   |   | 356,990 |   |
| Depreciation                  and amortization                |   |                              | 49,220    |   |    |   | 18,114  |                            |   |   | 9,316     |   |   |   | 1,912            |   |   |   |   | 78,562 |   |
| **Operating                  income (loss)**                  |   |                              | 60,966    |   |    |   | 17,066  |                            |   |   | 5,475     |   |   |   | (25,343          | )      |   |   |   | 58,164 |   |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Interest                  income                              |   |                              | 20,101    |   |    |   | 362     |                            |   |   | 4,339     |   |   |   | 936              |   |   |   |   | 25,738 |   |
| Other                  income (deductions)                    |   |                              | 3,490     |   |    |   | 265     |                            |   |   | 2,978     |   |   |   | (197             | )      |   |   |   | 6,536 |   |
| Net                  interest charges                         |   |                              | (28,187   | )      |    |   | (9,683  | )                               |   |   | (10,738   | )      |   |   | (13              | )      |   |   |   | (48,621 | ) |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                              | 56,370    |   |    |   | 8,010   |                            |   |   | 2,054     |   |   |   | (24,617          | )      |   |   |   | 41,817 |   |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                              | 22,317    |   |    |   | 3,171   |                            |   |   | 813       |   |   |   | (10,399          | )      |  (g) |   |   | 15,902 |   |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                 | 34,053    |   |    | $      | 4,839   |                            |   | $      | 1,241     |   |   | $      | (14,218          | )      |   |   | $ | 25,915 |   |
|                                                          |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| ***At                  September 30, 2007:***                 |   |                              |      |   |    |   |    |                            |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Total                  assets**                             |   | $                                 | 2,506,777 |   |    | $      | 663,831 |                            |   | $      | 369,085   |   |   | $      | 518,630          |   |   |   | $ | 4,058,323 |   |
| **Goodwill**                                                  |   | $                                 | 102,775   |   |    | $      | -       |                            |   | $      | -         |   |   | $      | -                |   |   |   | $ | 102,775 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

**PNM      SEGMENT INFORMATION**

|                                                          |   | **PNM**                           |      |   | **PNM**                               |   |    | **PNM**       |   |   |      |   |   |   |             |   |
|---------------------------------------------------------------|--------|-----------------------------------|-----------|--------|---------------------------------------|--------|---------|---------------|--------|--------|-----------|--------|--------|--------|------------------|--------|
| **2006**                                                      |   | **Electric                  (d)** |      |   | **Gas**                               |   |    | **Wholesale** |   |   | **Other** |   |   |   | **Consolidated** |   |
|                                                          |   |                              |      |   |  (In                  thousands) |   |    |          |   |   |      |   |   |
| ***Three                  Months Ended September 30, 2006:*** |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |
| Operating                  revenues                           |   | $                                 | 159,301   |   |                                  | $      | 69,001  |          |   | $      | 141,340   |   |   | $      | (9,418           | )      |  (a) |   | $ | 360,224 |   |
| Intersegment                  revenues                        |   |                              | 2,414     |   |                                  |   | 245     |          |   |   | 11,551    |   |   |   | (2,533           | )      |   |   |   | 11,677 |   |
| **Total                  revenues**                           |   |                              | 161,715   |   |                                  |   | 69,246  |          |   |   | 152,891   |   |   |   | (11,951          | )      |   |   |   | 371,901 |   |
| Cost                  of energy                               |   |                              | 55,271    |   |                                  |   | 43,889  |          |   |   | 121,730   |   |   |   | (11,922          | )      |  (a) |   |   | 208,968 |   |
| Intersegment                  energy transfer                 |   |                              | (5,861    | )      |                                  |   | -       |          |   |   | 5,861     |   |   |   | -                |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                              | 112,305   |   |                                  |   | 25,357  |          |   |   | 25,300    |   |   |   | (29              | )      |   |   |   | 162,933 |   |
| Operating                  expenses                           |   |                              | 66,808    |   |                                  |   | 25,546  |          |   |   | 10,573    |   |   |   | (242             | )      |   |   |   | 102,685 |   |
| Depreciation                  and amortization                |   |                              | 15,241    |   |                                  |   | 6,007   |          |   |   | 3,408     |   |   |   | 717              |   |   |   |   | 25,373 |   |
| **Operating                  income (loss)**                  |   |                              | 30,256    |   |                                  |   | (6,196  | )             |   |   | 11,319    |   |   |   | (504             | )      |   |   |   | 34,875 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Interest                  income                              |   |                              | 6,380     |   |                                  |   | 668     |          |   |   | 1,268     |   |   |   | 246              |   |   |   |   | 8,562 |   |
| Other                  income (deductions)                    |   |                              | 224       |   |                                  |   | 79      |          |   |   | (44       | )      |   |   | (195             | )      |   |   |   | 64 |   |
| Net                  interest charges                         |   |                              | (9,037    | )      |                                  |   | (3,115  | )             |   |   | (4,020    | )      |   |   | 1,148            |   |   |   |   | (15,024 | ) |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                              | 27,823    |   |                                  |   | (8,564  | )             |   |   | 8,523     |   |   |   | 695              |   |   |   |   | 28,477 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Income                  taxes (benefit)                       |   |                              | 11,015    |   |                                  |   | (3,391  | )             |   |   | 3,374     |   |   |   | (37              | )      |   |   |   | 10,961 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  net earnings (loss)**              |   | $                                 | 16,808    |   |                                  | $      | (5,173  | )             |   | $      | 5,149     |   |   | $      | 732              |   |   |   | $ | 17,516 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| ***Nine                  Months Ended September 30, 2006:***  |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |
| Operating                  revenues                           |   | $                                 | 439,977   |   |                                  | $      | 345,346 |          |   | $      | 414,714   |   |   | $      | (20,801          | )      |  (a) |   | $ | 1,179,236 |   |
| Intersegment                  revenues                        |   |                              | 6,852     |   |                                  |   | 386     |          |   |   | 39,402    |   |   |   | (6,865           | )      |   |   | $ | 39,775 |   |
| **Total                  revenues**                           |   |                              | 446,829   |   |                                  |   | 345,732 |          |   |   | 454,116   |   |   |   | (27,666          | )      |   |   |   | 1,219,011 |   |
| Cost                  of energy                               |   |                              | 144,053   |   |                                  |   | 243,748 |          |   |   | 373,363   |   |   |   | (27,524          | )      |  (a) |   |   | 733,640 |   |
| Intersegment                  energy transfer                 |   |                              | (2,515    | )      |                                  |   | -       |          |   |   | 2,515     |   |   |   | -                |   |   |   |   | - |   |
| **Gross                  margin**                             |   |                              | 305,291   |   |                                  |   | 101,984 |          |   |   | 78,238    |   |   |   | (142             | )      |   |   |   | 485,371 |   |
| Operating                  expenses                           |   |                              | 201,174   |   |                                  |   | 76,516  |          |   |   | 37,285    |   |   |   | (2,378           | )      |   |   |   | 312,597 |   |
| Depreciation                  and amortization                |   |                              | 44,529    |   |                                  |   | 17,921  |          |   |   | 9,760     |   |   |   | 2,307            |   |   |   |   | 74,517 |   |
| **Operating                  income (loss)**                  |   |                              | 59,588    |   |                                  |   | 7,547   |          |   |   | 31,193    |   |   |   | (71              | )      |   |   |   | 98,257 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Interest                  income                              |   |                              | 19,517    |   |                                  |   | 2,401   |          |   |   | 3,823     |   |   |   | 844              |   |   |   |   | 26,585 |   |
| Other                  income (deductions)                    |   |                              | 638       |   |                                  |   | 169     |          |   |   | 977       |   |   |   | (807             | )      |   |   |   | 977 |   |
| Net                  interest charges                         |   |                              | (26,580   | )      |                                  |   | (9,203  | )             |   |   | (11,683   | )      |   |   | 4,123            |   |   |   |   | (43,343 | ) |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  earnings before income taxes**     |   |                              | 53,163    |   |                                  |   | 914     |          |   |   | 24,310    |   |   |   | 4,089            |   |   |   |   | 82,476 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| Income                  taxes                                 |   |                              | 21,047    |   |                                  |   | 362     |          |   |   | 9,624     |   |   |   | 1,091            |   |   |   |   | 32,124 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Segment                  net earnings**                     |   | $                                 | 32,116    |   |                                  | $      | 552     |          |   | $      | 14,686    |   |   | $      | 2,998            |   |   |   | $ | 50,352 |   |
|                                                          |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| ***At                  September 30, 2006:***                 |   |                              |      |   |                                  |   |    |          |   |   |      |   |   |   |             |   |   |   |   |   |   |
| **Total                  assets**                             |   | $                                 | 2,008,424 |   |                                  | $      | 631,729 |          |   | $      | 392,788   |   |   | $      | 461,802          |   |   |   | $ | 3,494,743 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

   

**TNMP      SEGMENT INFORMATION**

*Footnote      explanations for the above tables are as follows:*

| (a)   | Reflects                EITF 03-11 impact of $46.8 million and $9.4 million for the three                months                ended September 30, 2007 and 2006 and $89.9 million and $20.8 million                for                the nine months ended September 30, 2007 and                2006. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | For                the nine months ended September 30, 2007, includes EnergyCo formation                costs of $4.2 million, impairment loss on Twin Oaks intangible assets                of                $3.4 million, and a loss related to the contribution of Altura to                EnergyCo                of $3.6 million (all included in operating expenses) and an income                tax                benefit of $4.4 million (included in income                taxes). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | Includes                an income tax benefit of $16.0 million for the settlement with the                IRS on                previously unrecognized income tax benefits.  See Note                15. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | Operations                and assets, including goodwill, transferred from TNMP Electric to                PNM                Electric on January 1, 2007 are included in PNM Electric and excluded                from                TNMP Electric in 2007, and excluded from PNM Electric and included                in TNMP                Electric in 2006. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | For                the three months and nine months ended September 30, 2006, includes                TNP                and Twin Oaks acquisition integration costs of $0.9 million and $3.7                million and an income tax benefit of $0.3 million and $1.4 million                in                income taxes. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f)                   | For                the three months and nine months ended September 30, 2007, includes                costs                of the Afton impairment of $19.5 million (See Note 2) and the business                improvement plan of $12.6 million (See Note 17) (included in operating                expenses) and an income tax benefit of $12.7 million (included in                income                taxes). |
|---------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (g)   | For                the three months and nine months ended September 30, 2007, includes                costs                of the Afton impairment of $19.5 million (See Note 2) and the business                improvement plan of $6.9 million (See Note 17) (included in operating                expenses) and an income tax benefit of $10.5 million (included in                income                taxes). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(4)** | **Energy                Related Derivative                Contracts** |
|---------|-----------------------------------------------------------------------|

**OVERVIEW**

----

**PNM                    RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                    SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                    MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                    TO CONDENSED CONSOLIDATED FINANCIAL                    STATEMENTS**

   

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

    

**PNMR**

|                                                     |   | **September                30,**              |    |   | **December                31,**      |   |    | **September                30,** |   |   | **December                31,** |   |
|----------------------------------------------------------|--------|-----------------------------------------------|---------|--------|--------------------------------------|--------|---------|----------------------------------|--------|--------|---------------------------------|--------|
|                                                     |   | **2007**                                      |    |   | **2006**                             |   |    | **2007**                         |   |   | **2006**                        |   |
| **Type                of Derivative**                    |   | **Mark-to-Market                Instruments** |    |   | **Hedge                Instruments** |   |
|                                                     |   |                                          |    |   | (In                thousands)        |   |    |                             |   |
| **Current                Assets**                        |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |
| Energy                contracts                          |   | $                                             | 14,568  |   |                                 | $      | 17,773  |                             |   | $      | 2,075                           |   |   | $ | 7,208 |   |
| Gas                fixed-for-float swaps and futures     |   |                                          | 33,251  |   |                                 |   | 21,875  |                             |   |   | 1,483                           |   |   |   | 4,655 |   |
| Options                                                  |   |                                          | 2,973   |   |                                 |   | 4,032   |                             |   |   | 160                             |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges |   |                                          | -       |   |                                 |   | -       |                             |   |   | 10,449                          |   |   |   | 16,748 |   |
| Total                current assets                      |   |                                          | 50,792  |   |                                 |   | 43,680  |                             |   |   | 14,167                          |   |   |   | 28,611 |   |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Deferred                Charges**                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                          |   |                                          | 4,123   |   |                                 |   | 2,666   |                             |   |   | -                               |   |   |   | 26,991 |   |
| Gas                fixed-for-float swaps                 |   |                                          | 16,790  |   |                                 |   | 7,288   |                             |   |   | 2,026                           |   |   |   | 1,872 |   |
| Options                                                  |   |                                          | 5,051   |   |                                 |   | 1,028   |                             |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges |   |                                          | -       |   |                                 |   | -       |                             |   |   |                            |   |   |   | 3,337 |   |
| Total                deferred charges                    |   |                                          | 25,964  |   |                                 |   | 10,982  |                             |   |   | 2,026                           |   |   |   | 32,200 |   |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Total                Assets**                          |   |                                          | 76,756  |   |                                 |   | 54,662  |                             |   |   | 16,193                          |   |   |   | 60,811 |   |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Current                Liabilities**                   |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                          |   |                                          | (15,237 | )      |                                 |   | (16,499 | )                                |   |   | -                               |   |   |   | - |   |
| Gas                fixed-for-float swaps                 |   |                                          | (35,062 | )      |                                 |   | (21,518 | )                                |   |   | (777                            | )      |   |   | (6,845 | ) |
| Options                                                  |   |                                          | (7,124  | )      |                                 |   | (4,003  | )                                |   |   | (462                            | )      |   |   | (109 | ) |
| Regulatory                liabilities for gas off-system |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| sales,                fixed-for-float swaps and forward  |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| physical                trades                           |   |                                          | (615    | )      |                                 |   | -       |                             |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges |   |                                          | -       |   |                                 |   | -       |                             |   |   | (10,449                         | )      |   |   | (16,748 | ) |
| Total                current liabilities                 |   |                                          | (58,038 | )      |                                 |   | (42,020 | )                                |   |   | (11,688                         | )      |   |   | (23,702 | ) |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Long-term                Liabilities**                 |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                          |   |                                          | (7,944  | )      |                                 |   | (7,472  | )                                |   |   | -                               |   |   |   | (154 | ) |
| Gas                fixed-for-float swaps                 |   |                                          | (3,253  | )      |                                 |   | (862    | )                                |   |   | (41                             | )      |   |   | (1,915 | ) |
| Options                                                  |   |                                          | (19,673 | )      |                                 |   | (842    | )                                |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges |   |                                          | -       |   |                                 |   | -       |                             |   |   | -                               |   |   |   | (3,337 | ) |
| Total                long-term liabilities               |   |                                          | (30,870 | )      |                                 |   | (9,176  | )                                |   |   | (41                             | )      |   |   | (5,406 | ) |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Total                Liabilities**                     |   |                                          | (88,908 | )      |                                 |   | (51,196 | )                                |   |   | (11,729                         | )      |   |   | (29,108 | ) |
|                                                     |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Net                Total Assets and Liabilities**      |   | $                                             | (12,152 | )      |                                 | $      | 3,466   |                             |   | $      | 4,464                           |   |   | $ | 31,703 |   |

----

**PNM              RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

    

**PNM**

|                                                      |   | **September                30,**              |    |   | **December                31,**      |   |    | **September                30,** |   |   | **December                31,** |   |
|-----------------------------------------------------------|--------|-----------------------------------------------|---------|--------|--------------------------------------|--------|---------|----------------------------------|--------|--------|---------------------------------|--------|
|                                                      |   | **2007**                                      |    |   | **2006**                             |   |    | **2007**                         |   |   | **2006**                        |   |
| **Type                of Derivative**                     |   | **Mark-to-Market                Instruments** |    |   | **Hedge                Instruments** |   |
|                                                      |   |                                          |    |   | (In                thousands)        |   |    |                             |   |
| **Current                Assets**                         |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |
| Energy                contracts                           |   | $                                             | 12,388  |   |                                 | $      | 16,374  |                             |   | $      | 2,075                           |   |   | $ | 1,057 |   |
| Gas                fixed-for-float swaps                  |   |                                          | 12,173  |   |                                 |   | 1,950   |                             |   |   | 1,418                           |   |   |   | 1,615 |   |
| Options                                                   |   |                                          | 2,178   |   |                                 |   | 2,986   |                             |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges  |   |                                          | -       |   |                                 |   | -       |                             |   |   | 10,449                          |   |   |   | 16,748 |   |
| Total                current assets                       |   |                                          | 26,739  |   |                                 |   | 21,310  |                             |   |   | 13,942                          |   |   |   | 19,420 |   |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Deferred                Charges**                       |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                           |   |                                          | 552     |   |                                 |   | 2,666   |                             |   |   | -                               |   |   |   | - |   |
| Gas                fixed-for-float swaps                  |   |                                          | 14,271  |   |                                 |   | 7,101   |                             |   |   | 2,026                           |   |   |   | 1,872 |   |
| Options                                                   |   |                                          | 4,835   |   |                                 |   | 825     |                             |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges  |   |                                          | -       |   |                                 |   | -       |                             |   |   | -                               |   |   |   | 3,337 |   |
| Total                deferred charges                     |   |                                          | 19,658  |   |                                 |   | 10,592  |                             |   |   | 2,026                           |   |   |   | 5,209 |   |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Total                Assets**                           |   |                                          | 46,397  |   |                                 |   | 31,902  |                             |   |   | 15,968                          |   |   |   | 24,629 |   |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Current                Liabilities**                    |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                           |   |                                          | (10,030 | )      |                                 |   | (10,928 | )                                |   |   | -                               |   |   |   | - |   |
| Gas                fixed-for-float swaps                  |   |                                          | (17,998 | )      |                                 |   | (6,440  | )                                |   |   | (397                            | )      |   |   | (2,872 | ) |
| Options                                                   |   |                                          | (5,285  | )      |                                 |   | (3,255  | )                                |   |   | -                               |   |   |   | - |   |
| Regulatory                liabilities for gas off-system  |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| sales,                fixed-for-float swaps and forward   |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| physical                trades                            |   |                                          | (615    | )      |                                 |   | -       |                             |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges  |   |                                          | -       |   |                                 |   | -       |                             |   |   | (10,449                         | )      |   |   | (16,748 | ) |
| Total                current liabilities                  |   |                                          | (33,928 | )      |                                 |   | (20,623 | )                                |   |   | (10,846                         | )      |   |   | (19,620 | ) |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Long-term                Liabilities**                  |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| Energy                contracts                           |   |                                          | (4,272  | )      |                                 |   | (7,472  | )                                |   |   | -                               |   |   |   | (154 | ) |
| Gas                fixed-for-float swaps                  |   |                                          | (960    | )      |                                 |   | (421    | )                                |   |   | (41                             | )      |   |   | (1,915 | ) |
| Options                                                   |   |                                          | (19,595 | )      |                                 |   | (801    | )                                |   |   | -                               |   |   |   | - |   |
| PGAC                portion of options, swaps and hedges  |   |                                          |    |   |                                 |   | -       |                             |   |   | -                               |   |   |   | (3,337 | ) |
| Total                long-term liabilities                |   |                                          | (24,827 | )      |                                 |   | (8,694  | )                                |   |   | (41                             | )      |   |   | (5,406 | ) |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Total                Liabilities**                      |   |                                          | (58,755 | )      |                                 |   | (29,317 | )                                |   |   | (10,887                         | )      |   |   | (25,026 | ) |
|                                                      |   |                                          |    |   |                                 |   |    |                             |   |   |                            |   |   |   |   |   |
| **Net                Total Assets and Total Liabilities** |   | $                                             | (12,358 | )      |                                 | $      | 2,585   |                             |   | $      | 5,081                           |   |   | $ | (397 | ) |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

| **(5)** | **Earnings                Per Share** |
|---------|---------------------------------------|

|                                                                |   | **Three                Months Ended**                   |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                |   | **September                30,**                        |   |   | **September                30,**     |   |
|                                                                |   | **2007**                                                |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                |   | (In                thousands, except per share amounts) |   |
|                                                                |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |
| **Net                Earnings**                                     |   | $                                                       | 8,372  |   |                                 | $      | 43,520 |   |   | $ | 58,277 |   |   | $ | 85,504 |   |
|                                                                |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Average                Number of Common Shares Outstanding**      |   |                                                    | 76,736 |   |                                 |   | 69,726 |   |   |   | 76,697 |   |   |   | 69,125 |   |
| **Dilutive                effect of common stock equivalents (a):** |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Stock                options and restricted stock                   |   |                                                    | 422    |   |                                 |   | 691 |   |   |   | 594 |   |   |   | 565 |   |
| Equity-linked                units                                  |   |                                                    | 403    |   |                                 |   | 344 |   |   |   | 860 |   |   |   | 94 |   |
| **Average                Common and Common Equivalent**             |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Shares**                                                          |   |                                                    | 77,561 |   |                                 |   | 70,761 |   |   |   | 78,151 |   |   |   | 69,784 |   |
|                                                                |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| **Net                Earnings per Share of Common Stock:**          |   |                                                    |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                               |   | $                                                       | 0.11   |   |                                 | $      | 0.62 |   |   | $ | 0.76 |   |   | $ | 1.24 |   |
| Diluted                                                             |   | $                                                       | 0.11   |   |                                 | $      | 0.62 |   |   | $ | 0.75 |   |   | $ | 1.23 |   |

| (a) | Excludes                the effect of average anti-dilutive common stock equivalents related                to                out-of-the-money stock options of 1,318,628 and 652,133 for the three                months and 760,400 and 1,469,333 for the nine months ended September                30,                2007 and 2006, respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PNM                  RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                  SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                  MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS**

    

| **(6)** | **Stock-Based                Compensation** |
|---------|---------------------------------------------|

**Stock      Options**

|                                                |   |       |      |   |          |   |   |                          |   |   | **Weighted-**                    |   |
|-----------------------------------------------------|--------|------------|-----------|--------|---------------|--------|--------|-------------------------------|--------|--------|----------------------------------|--------|
|                                                |   |       |      |   | **Weighted-** |   |   | **Aggregate**                 |   |   | **Average**                      |   |
|                                                |   |       |      |   | **Average**   |   |   | **Intrinsic**                 |   |   | **Remaining**                    |   |
|                                                |   |       |      |   | **Exercise**  |   |   | **Value**                     |   |   | **Contract                Life** |   |
| **Options                for PNMR Common Stock**    |   | **Shares** |      |   | **Price**     |   |   | (In                thousands) |   |   | (Years)                          |   |
|                                                |   |       |      |   |          |   |   |                          |   |   |                             |   |
| Outstanding                at beginning of period   |   |       | 2,999,606 |   |          | $      | 21.02  |                          |   |   |                             |   |   |   |
| Granted                                             |   |       | 766,400   |   |          |   | 30.47  |                          |   |   |                             |   |   |   |
| Exercised                                           |   |       | (431,965  | )      |          |   | 20.44  |                          |   |   |                             |   |   |   |
| Forfeited                                           |   |       | (28,707   | )      |          |   | 27.34  |                          |   |   |                             |   |   |   |
|                                                |   |       |      |   |          |   |   |                          |   |   |                             |   |   |   |
| Outstanding                at end of period         |   |       | 3,305,334 |   |          | $      | 23.25  |                          |   | $      | 99                               |   |   |   | 7.36 |   |
|                                                |   |       |      |   |          |   |   |                          |   |   |                             |   |   |   |   |   |
| Options                exercisable at end of period |   |       | 1,936,269 |   |          | $      | 19.97  |                          |   | $      | 6,409                            |   |   |   | 6.16 |   |
|                                                |   |       |      |   |          |   |   |                          |   |   |                             |   |   |   |   |   |
| Options                available for future grant   |   |       | 2,478,829 |   |          |   |   |                          |   |   |                             |   |   |   |   |   |

| **Options                for PNMR Common Stock**                                   |   | **2007**                                                              |   |   | **2006** |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|--------|----------|--------|
|                                                                               |   | (In                thousands,except                per share amounts) |   |
|                                                                               |   |                                                                  |   |   |     |   |
| Weighted-average                grant date fair value per share of options granted |   | $                                                                     | 4.70   |   |     | $      | 3.87 |   |
| Total                intrinsic value of options exercised during the period        |   | $                                                                     | 4,854  |   |     | $      | 5,691 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

    

**Restricted      Stock**

|                                            |   |       |    |   | **Weighted-**                 |   |
|-------------------------------------------------|--------|------------|---------|--------|-------------------------------|--------|
|                                            |   |       |    |   | **Average**                   |   |
| **Nonvested                Restricted**         |   |       |    |   | **Grant-Date**                |   |
| **PNMR                Common Stock**            |   | **Shares** |    |   | **Fair                Value** |   |
|                                            |   |       |    |   |                          |   |
| Nonvested                at beginning of period |   |       | 161,769 |   |                          | $      | 24.55 |   |
| Granted                                         |   |       | 106,400 |   |                          | $      | 28.79 |   |
| Vested                                          |   |       | (93,554 | )      |                          | $      | 24.20 |   |
| Forfeited                                       |   |       | (765    | )      |                          | $      | 26.34 |   |
| Nonvested              at end of period         |   |       | 173,850 |   |                          | $      | 26.13 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

| **(7)** | **Capitalization** |
|---------|--------------------|

**Short-term      Debt**

|                                     |   | **September                30,** |    |   | **December                31,** |   |
|------------------------------------------|--------|----------------------------------|---------|--------|---------------------------------|--------|
| **Short-term                Debt**       |   | **2007**                         |    |   | **2006**                        |   |
|                                     |   | (In                thousands)    |    |
|                                     |   |                             |    |   |                            |   |
| PNM                                      |   |                             |    |   |                            |   |
| Commercial                paper          |   | $                                | 70,584  |   |                            | $      | 251,300 |   |
| Revolving                credit facility |   |                             | 215,000 |   |                            |   | - |   |
|                                     |   |                             | 285,584 |   |                            |   | 251,300 |   |
| PNMR                                     |   |                             |    |   |                            |   |   |   |
| Commercial                paper          |   |                             | 65,000  |   |                            |   | 263,550 |   |
| Revolving                credit facility |   |                             | 298,000 |   |                            |   | - |   |
| Local                lines of credit     |   |                             | 100     |   |                            |   | - |   |
| Bridge                loan               |   |                             | -       |   |                            |   | 249,495 |   |
|                                     |   |                             |    |   |                            |   |   |   |
|                                     |   | $                                | 648,684 |   |                            | $      | 764,345 |   |

**Long-term      Debt**

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

**Stockholders’      Equity**

| **(8)** | **Pension                and Other Postretirement Benefit                Plans** |
|---------|----------------------------------------------------------------------------------|

* *

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

         

**PNM      Plans**

|                                                  |   | **Three                Months Ended September 30,** |    |
|-------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                  |   | **Pension                Plan**                     |    |   | **Other                Postretirement Benefits** |   |   | **Executive                Retirement Program** |   |
|                                                  |   | **2007**                                            |    |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                  |   |                                                |    |   |   |   |   | (In                thousands) |   |   |   |   |   |   |   |
|                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Components                of Net Periodic**         |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Benefit                Cost (Income)**              |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                cost                           |   | $                                                   | 36      |   |   | $ | 126 |   |   | $ | 632 |   |   | $ | 678 |   |   | $ | 14 |   |   | $ | 14 |   |
| Interest                cost                          |   |                                                | 7,953   |   |   |   | 7,710 |   |   |   | 1,928 |   |   |   | 1,842 |   |   |   | 272 |   |   |   | 264 |   |
| Expected                long-term return on assets    |   |                                                | (10,195 | ) |   |   | (10,139 | ) |   |   | (1,464 | ) |   |   | (1,355 | ) |   |   | - |   |   |   | - |   |
| Amortization                of net loss               |   |                                                | 972     |   |   |   | 1,210 |   |   |   | 1,461 |   |   |   | 1,670 |   |   |   | 24 |   |   |   | 25 |   |
| Amortization                of prior service cost     |   |                                                | 79      |   |   |   | 79 |   |   |   | (1,422 | ) |   |   | (1,422 | ) |   |   | 3 |   |   |   | 3 |   |
| **Net                periodic benefit cost (income)** |   | $                                                   | (1,155  | ) |   | $ | (1,014 | ) |   | $ | 1,135 |   |   | $ | 1,413 |   |   | $ | 313 |   |   | $ | 306 |   |

|                                                  |   | **Nine                Months Ended September 30,** |    |
|-------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                  |   | **Pension                Plan**                    |    |   | **Other                Postretirement Benefits** |   |   | **Executive                Retirement Program** |   |
|                                                  |   | **2007**                                           |    |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                  |   |                                               |    |   |   |   |   | (In                thousands) |   |   |   |   |   |   |   |
|                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Components                of Net Periodic**         |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Benefit                Cost (Income)**              |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                cost                           |   | $                                                  | 108     |   |   | $ | 378 |   |   | $ | 1,897 |   |   | $ | 2,035 |   |   | $ | 42 |   |   | $ | 42 |   |
| Interest                cost                          |   |                                               | 23,858  |   |   |   | 23,131 |   |   |   | 5,784 |   |   |   | 5,525 |   |   |   | 816 |   |   |   | 791 |   |
| Expected                long-term return on assets    |   |                                               | (30,585 | ) |   |   | (30,417 | ) |   |   | (4,393 | ) |   |   | (4,064 | ) |   |   | - |   |   |   | - |   |
| Amortization                of net loss               |   |                                               | 2,917   |   |   |   | 3,630 |   |   |   | 4,382 |   |   |   | 5,010 |   |   |   | 70 |   |   |   | 74 |   |
| Amortization                of prior service cost     |   |                                               | 238     |   |   |   | 238 |   |   |   | (4,265 | ) |   |   | (4,265 | ) |   |   | 10 |   |   |   | 10 |   |
| **Net                periodic benefit cost (income)** |   | $                                                  | (3,464  | ) |   | $ | (3,040 | ) |   | $ | 3,405 |   |   | $ | 4,241 |   |   | $ | 938 |   |   | $ | 917 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

    

**TNMP      Plans**

|                                                  |   | **Three                Months Ended September 30,** |   |
|-------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                  |   | **Pension                Plan**                     |   |   | **Other                Postretirement Benefits** |   |   | **Executive                Retirement Program** |   |
|                                                  |   | **2007**                                            |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                  |   |                                                |   |   |   |   |   | (In                thousands) |   |   |   |   |   |   |   |
| **Components                of Net Periodic**         |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Benefit                Cost (Income)**              |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                cost                           |   | $                                                   | -      |   |   | $ | - |   |   | $ | 98 |   |   | $ | 106 |   |   | $ | - |   |   | $ | - |   |
| Interest                cost                          |   |                                                | 1,057  |   |   |   | 1,085 |   |   |   | 165 |   |   |   | 178 |   |   |   | 19 |   |   |   | 19 |   |
| Expected                long-term return on assets    |   |                                                | (1,710 | ) |   |   | (1,754 | ) |   |   | (114 | ) |   |   | (114 | ) |   |   | - |   |   |   | - |   |
| Amortization                of net gain               |   |                                                | -      |   |   |   | - |   |   |   | (39 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization                of prior service cost     |   |                                                | (2     | ) |   |   | - |   |   |   | 15 |   |   |   | 15 |   |   |   | - |   |   |   | - |   |
| **Net                Periodic Benefit Cost (Income)** |   | $                                                   | (655   | ) |   | $ | (669 | ) |   | $ | 125 |   |   | $ | 185 |   |   | $ | 19 |   |   | $ | 19 |   |

|                                                  |   | **Nine                Months Ended September 30,** |   |
|-------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                  |   | **Pension                Plan**                    |   |   | **Other                Postretirement Benefits** |   |   | **Executive                Retirement Program** |   |
|                                                  |   | **2007**                                           |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                  |   |                                               |   |   |   |   |   | (In                thousands) |   |   |   |   |   |   |   |
| **Components                of Net Periodic**         |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Benefit                Cost (Income)**              |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                cost                           |   | $                                                  | -      |   |   | $ | - |   |   | $ | 295 |   |   | $ | 318 |   |   | $ | - |   |   | $ | - |   |
| Interest                cost                          |   |                                               | 3,171  |   |   |   | 3,254 |   |   |   | 496 |   |   |   | 533 |   |   |   | 57 |   |   |   | 57 |   |
| Expected                long-term return on assets    |   |                                               | (5,130 | ) |   |   | (5,263 | ) |   |   | (342 | ) |   |   | (342 | ) |   |   | - |   |   |   | - |   |
| Amortization                of net gain               |   |                                               | (5     | ) |   |   | - |   |   |   | (117 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization                of prior service cost     |   |                                               | -      |   |   |   | - |   |   |   | 45 |   |   |   | 45 |   |   |   | - |   |   |   | - |   |
| **Net                Periodic Benefit Cost (Income)** |   | $                                                  | (1,964 | ) |   | $ | (2,009 | ) |   | $ | 377 |   |   | $ | 554 |   |   | $ | 57 |   |   | $ | 57 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

    

| (**9)** | **Commitments                and Contingencies** |
|---------|--------------------------------------------------|

**OVERVIEW**

**COMMITMENTS      AND CONTINGENCIES RELATED TO THE ENVIRONMENT**

**PNM**

***Renewable      Portfolio Standard***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

***The      Clean Air Act***

*Regional      Haze*

*New      Source Review Rules*

*Citizen      Suit Under the Clean Air Act*

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

*Navajo      Nation Environmental Issues*

----

**PNM                  RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                  SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                  MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS**

    

*Four      Corners Federal Implementation Plan Litigation*

***Santa      Fe Generating Station***

----

**PNM                  RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                  SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                  MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS**

    

***Coal      Combustion Waste Disposal***

***NRC      Matters***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

**OTHER      COMMITMENTS AND CONTINGENCIES**

**PNM**

***PVNGS      Liability and Insurance Matters***

***San      Juan River Adjudication***

***Conflicts      at San Juan Mine Involving Oil and Gas Leaseholders***

***Western      United States Wholesale Power Market***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

*California      Refund Proceeding*

*Pacific      Northwest Refund Proceeding*

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

*FERC      Gaming Partnerships Order*

*California      Power Exchange and Pacific Gas and Electric Bankruptcies*

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

*California      Attorney General Complaint*

*California      Antitrust Litigation*

***Regional      Transmission Issues***

*Transmission      Services*

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

***FERC      Office of Market Oversight and Investigations***

***Natural      Gas Royalties Qui Tam Litigation***

----

**PNM                  RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                  SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                  MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL                  STATEMENTS**

         

***Biomass      Project***

***Valencia      Energy Facility***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

| **(10)** | **Regulatory                and Rate Matters** |
|----------|------------------------------------------------|

**PNMR**

***Price-to-Beat      Base Rate Reset***

***Energy      Agreement***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

**PNM**

***Gas      Rate Case***

**Electric      Rate Case**

**NMPRC      Inquiry on Fuel and Purchased Power Adjustment Clauses**

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

**Complaint      Against Southwestern Public Service Company**

**TNMP**

***TNMP      Competitive Transition Charge True-Up Proceeding***

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

***Interest      Rate for Calculating Carrying Charges on TNMP’s Stranded      Cost***

***60-Day      Rate Review***

| **(11)** | **EnergyCo                Joint Venture** |
|----------|-------------------------------------------|

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

|                                                             |   | **Three                Months**       |    |   | **Nine                Months** |   |
|------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------|--------|
|                                                             |   | **Ended**                             |    |   | **Ended**                      |   |
|                                                             |   | **September                30, 2007** |    |
|                                                             |   | (In                thousands)         |    |
|                                                             |   |                                  |    |   |                           |   |
| Revenues                                                         |   | $                                     | 100,463 |   |                           | $      | 114,828 |   |
| Expenses                and other income                         |   |                                  | 81,249  |   |                           |   | 93,563 |   |
| Earnings                before income taxes                      |   |                                  | 19,214  |   |                           |   | 21,265 |   |
| Income                taxes(1)                                   |   |                                  | 399     |   |                           |   | 399 |   |
| Net                earnings                                      |   | $                                     | 18,815  |   |                           | $      | 20,866 |   |
|                                                             |   |                                  |    |   |                           |   |   |   |
| 50                percent of net earnings                        |   | $                                     | 9,408   |   |                           | $      | 10,433 |   |
| Plus                amortization of basis difference in EnergyCo |   |                                  | 1,148   |   |                           |   | 1,733 |   |
| PNMR                equity in net earnings of EnergyCo           |   | $                                     | 10,556  |   |                           | $      | 12,166 |   |

|                                                         |   | **As                of September 30, 2007** |      |
|--------------------------------------------------------------|--------|---------------------------------------------|-----------|
|                                                         |   | (In                thousands)               |      |
|                                                         |   |                                        |      |
| Current                assets                                |   | $                                           | 92,417    |   |
| Net                utility plant                             |   |                                        | 833,607   |   |
| Deferred                assets                               |   |                                        | 331,129   |   |
| Total                assets                                  |   |                                        | 1,257,153 |   |
|                                                         |   |                                        |      |   |
| Current                liabilities                           |   |                                        | 85,329    |   |
| Long-term                debt                                |   |                                        | 622,778   |   |
| Other                long-term liabilities                   |   |                                        | 26,506    |   |
| Total                liabilities                             |   |                                        | 734,613   |   |
|                                                         |   |                                        |      |   |
| Owners’                equity                          |   | $                                           | 522,540   |   |
|                                                         |   |                                        |      |   |
| 50                percent of owners’ equity            |   | $                                           | 261,270   |   |
| Unamortized                PNMR basis difference in EnergyCo |   |                                        | 387       |   |
| PNMR                equity investment in EnergyCo            |   | $                                           | 261,657   |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

| **(12)** | **Related                  Party Transactions** |
|----------|-------------------------------------------------|

|                                                                    |   | **Three                Months Ended** |   |   | **Nine                Months Ended** |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                    |   | **September                30,**      |   |   | **September                30,**     |   |
|                                                                    |   | **2007**                              |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|                                                                    |   |                                  |   |   | (In                thousands)        |   |   |   |   |
| Electricity,                transmission and related services billings: |   |                                  |   |   |                                 |   |   |   |   |   |   |   |
| PNM                to TNMP                                              |   | $                                     | -      |   |                                 | $      | 11,208 |   |   | $ | 126 |   |   | $ | 39,117 |   |
| TNMP                to PNMR                                             |   |                                  | 21,057 |   |                                 |   | 19,378 |   |   |   | 55,444 |   |   |   | 52,545 |   |
|                                                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Shared                services billings from PNMR to:                   |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| PNM                                                                     |   |                                  | 21,350 |   |                                 |   | 31,366 |   |   |   | 70,945 |   |   |   | 93,742 |   |
| TNMP                                                                    |   |                                  | 3,888  |   |                                 |   | 6,809 |   |   |   | 14,006 |   |   |   | 25,097 |   |
|                                                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Services                billings from PNMR to EnergyCo                  |   |                                  | 4,580  |   |                                 |   | - |   |   |   | 7,994 |   |   |   | - |   |
|                                                                    |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Income                tax sharing payments from:                        |   |                                  |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| PNM                to PNMR                                              |   | $                                     | -      |   |                                 | $      | - |   |   | $ | - |   |   | $ | - |   |
| TNMP                to PNMR                                             |   |                                  | -      |   |                                 |   | - |   |   |   | - |   |   |   | - |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

| **(13)** | **New                Accounting Pronouncements** |
|----------|--------------------------------------------------|

| **(14)** | **Discontinued                Operations** |
|----------|--------------------------------------------|

|                                                                   |   | **Three                Months**       |   |   | **Nine                Months** |   |
|------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------|--------|
|                                                                   |   | **Ended**                             |   |   | **Ended**                      |   |
|                                                                   |   | **September                30, 2006** |   |
|                                                                   |   | (In                thousands)         |   |
|                                                                   |   |                                  |   |   |                           |   |
| Operating                revenues                                      |   | $                                     | 26,513 |   |                           | $      | 75,411 |   |
| Operating                expenses and other income                     |   |                                  | 25,744 |   |                           |   | 71,557 |   |
| Earnings                from discontinued operations before income tax |   |                                  | 769    |   |                           |   | 3,854 |   |
| Income                tax expense                                      |   |                                  | 250    |   |                           |   | 1,237 |   |
| Earnings                from discontinued operations                   |   | $                                     | 519    |   |                           | $      | 2,617 |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

|                                                   |   | **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 |   |

**(15)           Income      Taxes**

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

**(16)     Restatement**

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

**PNMR**

|                                                                                                                                                                             |   | Three                Months Ended September 30, 2006    |   |   | Nine                Months Ended September 30, 2006     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|
|                                                                                                                                                                             |   | As                Previously Reported                   |   |   | As                Restated                              |   |   | As                Previously Reported |   |   | As                Restated |   |
|                                                                                                                                                                             |   | (In                thousands, except per share amounts) |   |   | (In                thousands, except per share amounts) |   |
| **Consolidated                Statements of Earnings**                                                                                                                           |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |
| Energy                production costs                                                                                                                                           |   | $                                                       | 38,489 |   |                                                    | $      | 38,813 |   |   | $ | 119,790 |   |   | $ | 120,762 |   |
| Net                earnings*                                                                                                                                                     |   |                                                    | 43,844 |   |                                                    |   | 43,520 |   |   |   | 86,476 |   |   |   | 85,504 |   |
| Net                earnings per share                                                                                                                                            |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                            |   |                                                    | 0.63   |   |                                                    |   | 0.62 |   |   |   | 1.25 |   |   |   | 1.24 |   |
| Diluted                                                                                                                                                                          |   |                                                    | 0.62   |   |                                                    |   | 0.62 |   |   |   | 1.24 |   |   |   | 1.23 |   |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Consolidated                Statements of Cash Flows**                                                                                                                         |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                credits                                                                                                                                                  |   |                                                    |   |   |                                                    |   |   |   |   |   | (11,496 | ) |   |   | (10,524 | ) |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Consolidated                Statements of Comprehensive Income (Loss)**                                                                                                        |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |
| Total                comprehensive income                                                                                                                                        |   |                                                    | 64,257 |   |                                                    |   | 63,933 |   |   |   | 99,310 |   |   |   | 98,338 |   |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| *                Net earnings also appears in the Consolidated Statements of Cash                Flows and                Consolidated Statements of Comprehensive Income (Loss) |   |

**PNM**

|                                                                                                                                                                             |   | Three                Months Ended September 30, 2006    |   |   | Nine                Months Ended September 30, 2006     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|
|                                                                                                                                                                             |   | As                Previously Reported                   |   |   | As                Restated                              |   |   | As                Previously Reported |   |   | As                Restated |   |
|                                                                                                                                                                             |   | (In                thousands, except per share amounts) |   |   | (In                thousands, except per share amounts) |   |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |
| **Consolidated                Statements of Earnings**                                                                                                                           |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |
| Energy                production costs                                                                                                                                           |   | $                                                       | 35,990 |   |                                                    | $      | 36,314 |   |   | $ | 115,657 |   |   | $ | 116,629 |   |
| Net                earnings*                                                                                                                                                     |   |                                                    | 17,972 |   |                                                    |   | 17,648 |   |   |   | 51,720 |   |   |   | 50,748 |   |
| Net                earnings available for common stock**                                                                                                                         |   |                                                    | 17,840 |   |                                                    |   | 17,516 |   |   |   | 51,324 |   |   |   | 50,352 |   |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Consolidated                Statements of Cash Flows**                                                                                                                         |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                credits                                                                                                                                                  |   |                                                    |   |   |                                                    |   |   |   |   |   | (7,428 | ) |   |   | (6,456 | ) |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| **Consolidated                Statements of Comprehensive Income (Loss)**                                                                                                        |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |
| Total                comprehensive income                                                                                                                                        |   |                                                    | 17,287 |   |                                                    |   | 16,963 |   |   |   | 46,336 |   |   |   | 45,364 |   |
|                                                                                                                                                                             |   |                                                    |   |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |
| *                Net earnings also appears in the Consolidated Statements of Cash                Flows and                Consolidated Statements of Comprehensive Income (Loss) |   |
| **Net                earnings available for common stock also appears in the Consolidated                Statements of Comprehensive Income (Loss)                               |   |

----

**PNM                RESOURCES, INC. AND SUBSIDIARIES**

**PUBLIC                SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY**

**TEXAS-NEW                MEXICO POWER COMPANY**
**AND SUBSIDIARIES**

**NOTES                TO CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS**

      

| **(17)** | **Business                Improvement Plan** |
|----------|----------------------------------------------|

----

**ITEM        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF        OPERATIONS**

***MD&A      FOR PNMR***

**BUSINESS      AND STRATEGY**

*Overview*

*EnergyCo      Joint Venture*

| ·   | Competitive                retail energy sales; |
|--------------------|-------------------------------------------------|

| ·   | Development,                operation and ownership of diverse generation assets;                and |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | Wholesale                marketing and trading to optimize its                assets. |
|--------------------|---------------------------------------------------------------------------------------|

----

*TNMP      Asset Transfer to PNM*

*Business      Improvement Plan*

----

**RESULTS      OF OPERATIONS**

**Executive      Summary**

|                                          |   | **Three                Months Ended****September                30,** |   |   | **Nine                Months Ended****September                30,** |   |
|-----------------------------------------------|--------|-----------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|--------|
|                                          |   | **2007**                                                              |   |   | **2006**                                                             |   |   | **2007** |   |   | **2006** |   |
|                                          |   | (In                thousands, except per share amounts)               |   |
|                                          |   |                                                                  |   |   |                                                                 |   |   |   |   |   |   |   |
| Net                earnings                   |   | $                                                                     | 8,372  |   |                                                                 | $      | 43,520 |   |   | $ | 58,277 |   |   | $ | 85,504 |   |
| Average                common and common      |   |                                                                  |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| equivalent                shares              |   |                                                                  | 77,561 |   |                                                                 |   | 70,761 |   |   |   | 78,151 |   |   |   | 69,784 |   |
| Net                earnings per diluted share |   | $                                                                     | 0.11   |   |                                                                 | $      | 0.62 |   |   | $ | 0.75 |   |   | $ | 1.23 |   |

|                                                                                                    |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|---------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                                                                                    |   | (In                millions)                                               |   |
| **                           After-tax impacts** |   |                                                                       |   |   |                                                                      |   |
| IRS                settlement                                                                           |   | $                                                                          | -      |   |                                                                      | $      | 16.0 |   |
| Afton                impairment                                                                         |   |                                                                       | (11.8  | )      |                                                                      |   | (11.8 | ) |
| Business                improvement plan                                                                |   |                                                                       | (7.6   | )      |                                                                      |   | (7.6 | ) |
| Gain                on sale of turbine                                                                  |   |                                                                       | 1.7    |   |                                                                      |   | 1.7 |   |
| Plant                performance                                                                        |   |                                                                       | (6.6   | )      |                                                                      |   | 5.2 |   |
| PNM                Gas growth and weather                                                               |   |                                                                       | (0.5   | )      |                                                                      |   | 4.2 |   |
| TNMP                growth and weather                                                                  |   |                                                                       | 1.7    |   |                                                                      |   | 2.5 |   |
| PNM                Electric/Wholesale growth and weather                                                |   |                                                                       | 0.8    |   |                                                                      |   | (3.3 | ) |
| First                Choice (excluding net unrealized mark-to-market)                                   |   |                                                                       | (12.4  | )      |                                                                      |   | (12.5 | ) |
| Net                unrealized mark-to-market                                                            |   |                                                                       | (2.8   | )      |                                                                      |   | (9.9 | ) |
| Coal                costs                                                                               |   |                                                                       | (1.4   | )      |                                                                      |   | (6.2 | ) |
| Twin                Oaks and EnergyCo                                                                   |   |                                                                       | (4.6   | )      |                                                                      |   | (9.6 | ) |
| Financing                                                                                               |   |                                                                       | (0.7   | )      |                                                                      |   | (3.7 | ) |
| PUCT                order / carrying charges                                                            |   |                                                                       | 1.7    |   |                                                                      |   | 3.9 |   |
| Realized                gains on NDT                                                                    |   |                                                                       | 2.5    |   |                                                                      |   | 3.0 |   |
| Gas                rate increase                                                                        |   |                                                                       | 0.9    |   |                                                                      |   | 0.9 |   |
| Other                                                                                                   |   |                                                                       | 4.0    |   |                                                                      |   | - |   |
| Change                in net earnings                                                                   |   | $                                                                          | (35.1  | )      |                                                                      | $      | (27.2 | ) |

----

*Segment      Information*

----

**Regulated      Operations**

***PNM      Electric***

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions)                        |   |   |                                               |   |   | (In                millions) |   |   |   |   |
| Total                operating revenues      |   | $                                                   | 206.0  |   |                                               | $      | 161.7 |   |   | $ | 44.3 |   |   |   | 27.4 |   |   | $ | 547.3 |   |   | $ | 446.8 |   |   | $ | 100.5 |   |   |   | 22.5 |   |
| Cost                of energy                |   |                                                | 89.7   |   |                                               |   | 49.4 |   |   |   | 40.3 |   |   |   | 81.6 |   |   |   | 220.1 |   |   |   | 141.5 |   |   |   | 78.6 |   |   |   | 55.5 |   |
| Gross                margin                  |   |                                                | 116.3  |   |                                               |   | 112.3 |   |   |   | 4.0 |   |   |   | 3.6 |   |   |   | 327.2 |   |   |   | 305.3 |   |   |   | 21.9 |   |   |   | 7.2 |   |
| Operating                expenses            |   |                                                | 70.8   |   |                                               |   | 66.8 |   |   |   | 4.0 |   |   |   | 6.0 |   |   |   | 217.0 |   |   |   | 201.2 |   |   |   | 15.8 |   |   |   | 7.9 |   |
| Depreciation                and amortization |   |                                                | 16.4   |   |                                               |   | 15.2 |   |   |   | 1.2 |   |   |   | 7.9 |   |   |   | 49.2 |   |   |   | 44.5 |   |   |   | 4.7 |   |   |   | 10.6 |   |
| Operating                income              |   | $                                                   | 29.1   |   |                                               | $      | 30.3 |   |   | $ | (1.2 | ) |   |   | (4.0 | ) |   | $ | 61.0 |   |   | $ | 59.6 |   |   | $ | 1.4 |   |   |   | 2.3 |   |

|                                         |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|----------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                         |   | **Total**                                                                  |   |   | **Gross**                                                                 |   |   | **Operating** |   |   | **Total** |   |   | **Gross** |   |   | **Operating** |   |
|                                         |   | **Revenues**                                                               |   |   | **Margin**                                                                |   |   | **Income** |   |   | **Revenues** |   |   | **Margin** |   |   | **Income** |   |
|                                         |   | (In                millions)                                               |   |   | (In                millions)                                              |   |
| Transfer                of assets from TNMP  |   | $                                                                          | 26.5   |   |                                                                      | $      | 5.6 |   |   | $ | 0.7 |   |   | $ | 75.4 |   |   | $ | 18.2 |   |   | $ | 3.7 |   |
| Weather                                      |   |                                                                       | 6.4    |   |                                                                      |   | 2.7 |   |   |   | 2.7 |   |   |   | 6.2 |   |   |   | 2.6 |   |   |   | 2.6 |   |
| Customer/load                growth          |   |                                                                       | 11.5   |   |                                                                      |   | 2.6 |   |   |   | 2.6 |   |   |   | 18.4 |   |   |   | 6.2 |   |   |   | 6.2 |   |
| Plant                performance             |   |                                                                       | -      |   |                                                                      |   | (4.6 | ) |   |   | (6.5 | ) |   |   | - |   |   |   | 3.5 |   |   |   | 0.9 |   |
| Coal                costs                    |   |                                                                       | -      |   |                                                                      |   | (2.0 | ) |   |   | (2.0 | ) |   |   | - |   |   |   | (8.8 | ) |   |   | (8.8 | ) |
| General                operational increases |   |                                                                       | -      |   |                                                                      |   | - |   |   |   | 1.2 |   |   |   | - |   |   |   | - |   |   |   | (2.7 | ) |
| Other                                        |   |                                                                       | (0.1   | )      |                                                                      |   | (0.3 | ) |   |   | 0.1 |   |   |   | 0.5 |   |   |   | 0.2 |   |   |   | (0.5 | ) |
| Total                increase (decrease)     |   | $                                                                          | 44.3   |   |                                                                      | $      | 4.0 |   |   | $ | (1.2 | ) |   | $ | 100.5 |   |   | $ | 21.9 |   |   | $ | 1.4 |   |

----

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions, except customers)      |   |   |                                               |   |   | (In                millions, except customers) |   |   |   |   |
| Residential                                  |   | $                                                   | 78.0   |   |                                               | $      | 60.8 |   |   | $ | 17.2 |   |   |   | 28.3 |   |   | $ | 204.2 |   |   | $ | 168.1 |   |   | $ | 36.1 |   |   |   | 21.5 |   |
| Commercial                                   |   |                                                | 85.7   |   |                                               |   | 70.9 |   |   |   | 14.8 |   |   |   | 20.9 |   |   |   | 223.6 |   |   |   | 193.6 |   |   |   | 30.0 |   |   |   | 15.5 |   |
| Industrial                                   |   |                                                | 25.7   |   |                                               |   | 16.7 |   |   |   | 9.0 |   |   |   | 53.9 |   |   |   | 74.9 |   |   |   | 47.1 |   |   |   | 27.8 |   |   |   | 59.0 |   |
| Transmission                                 |   |                                                | 10.1   |   |                                               |   | 7.7 |   |   |   | 2.4 |   |   |   | 31.2 |   |   |   | 27.0 |   |   |   | 21.9 |   |   |   | 5.1 |   |   |   | 23.3 |   |
| Other                                        |   |                                                | 6.5    |   |                                               |   | 5.6 |   |   |   | 0.9 |   |   |   | 16.1 |   |   |   | 17.6 |   |   |   | 16.1 |   |   |   | 1.5 |   |   |   | 9.3 |   |
|                                         |   | $                                                   | 206.0  |   |                                               | $      | 161.7 |   |   | $ | 44.3 |   |   |   | 27.4 |   |   | $ | 547.3 |   |   | $ | 446.8 |   |   | $ | 100.5 |   |   |   | 22.5 |   |
| Average                customers (thousands) |   |                                                | 490.0  |   |                                               |   | 431.5 |   |   |   | 58.5 |   |   |   | 13.6 |   |   |   | 488.3 |   |   |   | 428.6 |   |   |   | 59.7 |   |   |   | 13.9 |   |

|        |   | **Three                Months Ended September 30,** |    |   | **Nine                Months Ended September 30,** |   |
|-------------|--------|-----------------------------------------------------|---------|--------|----------------------------------------------------|--------|
|        |   | **2007**                                            |    |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|        |   | (Gigawatt                hours)                     |    |   |                                               |   |   | (Gigawatt                hours) |   |   |   |   |
| Residential |   |                                                | 945.9   |   |                                               |   | 756.4 |   |   |   | 189.5 |   |   |   | 25.1 |   |   |   | 2,471.5 |   |   |   | 2,092.3 |   |   |   | 379.2 |   |   |   | 18.1 |   |
| Commercial  |   |                                                | 1,181.3 |   |                                               |   | 1,008.9 |   |   |   | 172.4 |   |   |   | 17.1 |   |   |   | 3,050.9 |   |   |   | 2,741.8 |   |   |   | 309.1 |   |   |   | 11.3 |   |
| Industrial  |   |                                                | 488.6   |   |                                               |   | 353.4 |   |   |   | 135.2 |   |   |   | 38.3 |   |   |   | 1,453.1 |   |   |   | 1,000.0 |   |   |   | 453.1 |   |   |   | 45.3 |   |
| Other       |   |                                                | 79.9    |   |                                               |   | 71.8 |   |   |   | 8.1 |   |   |   | 11.3 |   |   |   | 199.7 |   |   |   | 198.2 |   |   |   | 1.5 |   |   |   | 0.8 |   |
|        |   |                                                | 2,695.7 |   |                                               |   | 2,190.5 |   |   |   | 505.2 |   |   |   | 23.1 |   |   |   | 7,175.2 |   |   |   | 6,032.3 |   |   |   | 1,142.9 |   |   |   | 18.9 |   |

|                                         |   | **Three                Months Ended****September                30, 2006** |   |   | **Nine                Months Ended****September                30, 2006** |   |
|----------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                         |   | (Dollars                in millions)                                       |   |
| Total                revenues                |   | $                                                                          | 26.5   |   |                                                                      | $      | 75.4 |   |
| Cost                of energy                |   |                                                                       | 20.9   |   |                                                                      |   | 57.2 |   |
| Gross                margin                  |   |                                                                       | 5.6    |   |                                                                      |   | 18.2 |   |
| Operating                expenses            |   |                                                                       | 3.4    |   |                                                                      |   | 10.0 |   |
| Depreciation                and amortization |   |                                                                       | 1.5    |   |                                                                      |   | 4.5 |   |
| Operating                income              |   | $                                                                          | 0.7    |   |                                                                      | $      | 3.7 |   |
|                                         |   |                                                                       |   |   |                                                                      |   |   |   |
| Sales                volumes (GWhs)          |   |                                                                       | 293.4  |   |                                                                      |   | 848.1 |   |
| Average                customers (thousands) |   |                                                                       | 49.6   |   |                                                                      |   | 49.6 |   |

----

----

***TNMP      Electric***

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   |                                                |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                operating revenues      |   | $                                                   | 52.7   |   |                                               | $      | 70.2 |   |   | $ | (17.5 | ) |   |   | (24.9 | ) |   | $ | 137.1 |   |   | $ | 194.4 |   |   | $ | (57.3 | ) |   |   | (29.5 | ) |
| Cost                of energy                |   |                                                | 7.6    |   |                                               |   | 27.9 |   |   |   | (20.3 | ) |   |   | (72.8 | ) |   |   | 21.9 |   |   |   | 77.8 |   |   |   | (55.9 | ) |   |   | (71.9 | ) |
| Gross                margin                  |   |                                                | 45.1   |   |                                               |   | 42.3 |   |   |   | 2.8 |   |   |   | 6.6 |   |   |   | 115.2 |   |   |   | 116.6 |   |   |   | (1.4 | ) |   |   | (1.2 | ) |
| Operating                expenses            |   |                                                | 16.6   |   |                                               |   | 20.9 |   |   |   | (4.3 | ) |   |   | (20.6 | ) |   |   | 53.1 |   |   |   | 63.4 |   |   |   | (10.3 | ) |   |   | (16.2 | ) |
| Depreciation                and amortization |   |                                                | 7.1    |   |                                               |   | 7.9 |   |   |   | (0.8 | ) |   |   | (10.1 | ) |   |   | 21.1 |   |   |   | 23.5 |   |   |   | (2.4 | ) |   |   | (10.2 | ) |
| Operating                income              |   | $                                                   | 21.4   |   |                                               | $      | 13.5 |   |   | $ | 7.9 |   |   |   | 58.5 |   |   | $ | 41.0 |   |   | $ | 29.7 |   |   | $ | 11.3 |   |   |   | 38.0 |   |

|                                       |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|--------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                       |   | **Total**                                                                  |   |   | **Gross**                                                                 |   |   | **Operating** |   |   | **Total** |   |   | **Gross** |   |   | **Operating** |   |
|                                       |   | **Revenues**                                                               |   |   | **Margin**                                                                |   |   | **Income** |   |   | **Revenues** |   |   | **Margin** |   |   | **Income** |   |
|                                       |   | (In                millions)                                               |   |   | (In                millions)                                              |   |
| Transfer                of assets from PNM |   | $                                                                          | (26.5  | )      |                                                                      | $      | (5.6 | ) |   | $ | (0.7 | ) |   | $ | (75.4 | ) |   | $ | (18.2 | ) |   | $ | (3.7 | ) |
| Customer/load                growth        |   |                                                                       | 2.7    |   |                                                                      |   | 2.7 |   |   |   | 2.7 |   |   |   | 3.8 |   |   |   | 3.8 |   |   |   | 3.8 |   |
| PUCT                order                  |   |                                                                       | 5.6    |   |                                                                      |   | 5.6 |   |   |   | 4.6 |   |   |   | 13.5 |   |   |   | 13.5 |   |   |   | 10.7 |   |
| Transmission                prices         |   |                                                                       | 0.6    |   |                                                                      |   | 0.1 |   |   |   | 0.1 |   |   |   | 1.2 |   |   |   | (0.1 | ) |   |   | (0.1 | ) |
| Other                                      |   |                                                                       | 0.1    |   |                                                                      |   | - |   |   |   | 1.2 |   |   |   | (0.4 | ) |   |   | (0.4 | ) |   |   | 0.6 |   |
| Total                increase (decrease)   |   | $                                                                          | (17.5  | )      |                                                                      | $      | 2.8 |   |   | $ | 7.9 |   |   | $ | (57.3 | ) |   | $ | (1.4 | ) |   | $ | 11.3 |   |

----

|                                             |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|--------------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                             |   | **2007**                                            |   |   | **2006(1)**                                        |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006(1)** |   |   | **Change** |   |   | **%** |   |
|                                             |   | (In                millions, except customers)      |   |   |                                               |   |   | (In                millions, except customers) |   |   |   |   |
| Residential                                      |   | $                                                   | 23.4   |   |                                               | $      | 28.8 |   |   | $ | (5.4 | ) |   |   | (18.8 | ) |   | $ | 53.8 |   |   | $ | 68.8 |   |   | $ | (15.0 | ) |   |   | (21.8 | ) |
| Commercial                                       |   |                                                | 19.2   |   |                                               |   | 24.2 |   |   |   | (5.0 | ) |   |   | (20.7 | ) |   |   | 52.9 |   |   |   | 66.7 |   |   |   | (13.8 | ) |   |   | (20.7 | ) |
| Industrial                                       |   |                                                | 2.1    |   |                                               |   | 7.5 |   |   |   | (5.4 | ) |   |   | (72.0 | ) |   |   | 5.6 |   |   |   | 30.1 |   |   |   | (24.5 | ) |   |   | (81.4 | ) |
| Other                                            |   |                                                | 8.0    |   |                                               |   | 9.7 |   |   |   | (1.7 | ) |   |   | (17.5 | ) |   |   | 24.8 |   |   |   | 28.8 |   |   |   | (4.0 | ) |   |   | (13.9 | ) |
|                                             |   | $                                                   | 52.7   |   |                                               | $      | 70.2 |   |   | $ | (17.5 | ) |   |   | (24.9 | ) |   | $ | 137.1 |   |   | $ | 194.4 |   |   | $ | (57.3 | ) |   |   | (29.5 | ) |
| Average                customers (thousands) (2) |   |                                                | 226.8  |   |                                               |   | 273.5 |   |   |   | (46.7 | ) |   |   | (17.1 | ) |   |   | 225.8 |   |   |   | 272.3 |   |   |   | (46.5 | ) |   |   | (17.1 | ) |

| (1)   | The                customer class revenues and the average customer count have been                reclassified. |
|-----------------|------------------------------------------------------------------------------------------------------------------|

| (2)   | Under                TECA, customers of TNMP Electric in Texas have the ability to choose                First                Choice or any other REP to provide energy.  The average                customers reported above include 135,325 and 152,327 customers of                TNMP                Electric for the three months ended September 30, 2007 and 2006 and                139,388 and 155,374 customers for the nine months ended September                30, 2007                and 2006 who have chosen First Choice as their REP.  These                customers are also included in the First Choice                segment. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|        |   | **Three                Months Ended September 30,** |    |   | **Nine                Months Ended September 30,** |   |
|-------------|--------|-----------------------------------------------------|---------|--------|----------------------------------------------------|--------|
|        |   | **2007**                                            |    |   | **2006(2)**                                        |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006(2)** |   |   | **Change** |   |   | **%** |   |
|        |   | (Gigawatt                hours(1))                  |    |   |                                               |   |   | (Gigawatt                hours(1)) |   |   |   |   |
| Residential |   |                                                | 860.4   |   |                                               |   | 919.7 |   |   |   | (59.3 | ) |   |   | (6.4 | ) |   |   | 1,978.7 |   |   |   | 2,158.0 |   |   |   | (179.3 | ) |   |   | (8.3 | ) |
| Commercial  |   |                                                | 664.8   |   |                                               |   | 757.2 |   |   |   | (92.4 | ) |   |   | (12.2 | ) |   |   | 1,687.6 |   |   |   | 2,012.1 |   |   |   | (324.5 | ) |   |   | (16.1 | ) |
| Industrial  |   |                                                | 543.7   |   |                                               |   | 528.5 |   |   |   | 15.2 |   |   |   | 2.9 |   |   |   | 1,424.9 |   |   |   | 1,546.6 |   |   |   | (121.7 | ) |   |   | (7.9 | ) |
| Other       |   |                                                | 26.4    |   |                                               |   | 32.6 |   |   |   | (6.2 | ) |   |   | (19.0 | ) |   |   | 74.5 |   |   |   | 93.3 |   |   |   | (18.8 | ) |   |   | (20.2 | ) |
|        |   |                                                | 2,095.3 |   |                                               |   | 2,238.0 |   |   |   | (142.7 | ) |   |   | (6.4 | ) |   |   | 5,165.7 |   |   |   | 5,810.0 |   |   |   | (644.3 | ) |   |   | (11.1 | ) |

| (1)   | The                GWh sales reported above include 651.4 and 726.0 GWhs for the three                months                ended September 30, 2007 and 2006 and 1,611.7 and 1,836.0 GWhs for                the                nine months ended September 30, 2007 and 2006 used by customers of                TNMP                Electric respectively, who have chosen First Choice as their                REP.  These GWhs are also included below in the First Choice                segment. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                customer class sales have been                reclassified. |
|-----------------|--------------------------------------------------------------------------------|

----

***PNM      Gas***

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions)                        |   |   |                                               |   |   | (In                millions) |   |   |   |   |
| Total                operating revenues      |   | $                                                   | 59.5   |   |                                               | $      | 69.2 |   |   | $ | (9.7 | ) |   |   | (14.0 | ) |   | $ | 351.3 |   |   | $ | 345.7 |   |   | $ | 5.6 |   |   |   | 1.6 |   |
| Cost                of energy                |   |                                                | 33.9   |   |                                               |   | 43.8 |   |   |   | (9.9 | ) |   |   | (22.6 | ) |   |   | 240.8 |   |   |   | 243.7 |   |   |   | (2.9 | ) |   |   | (1.2 | ) |
| Gross                margin                  |   |                                                | 25.6   |   |                                               |   | 25.4 |   |   |   | 0.2 |   |   |   | 0.8 |   |   |   | 110.5 |   |   |   | 102.0 |   |   |   | 8.5 |   |   |   | 8.3 |   |
| Operating                expenses            |   |                                                | 23.8   |   |                                               |   | 25.6 |   |   |   | (1.8 | ) |   |   | (7.0 | ) |   |   | 75.3 |   |   |   | 76.6 |   |   |   | (1.3 | ) |   |   | (1.7 | ) |
| Depreciation                and amortization |   |                                                | 5.9    |   |                                               |   | 6.0 |   |   |   | (0.1 | ) |   |   | (1.7 | ) |   |   | 18.1 |   |   |   | 17.9 |   |   |   | 0.2 |   |   |   | 1.1 |   |
| Operating                income              |   | $                                                   | (4.1   | )      |                                               | $      | (6.2 | ) |   | $ | 2.1 |   |   |   | 33.9 |   |   | $ | 17.1 |   |   | $ | 7.5 |   |   | $ | 9.6 |   |   |   | 128.0 |   |

|                                                          |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|---------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                                          |   | **Total**                                                                  |   |   | **Gross**                                                                 |   |   | **Operating** |   |   | **Total** |   |   | **Gross** |   |   | **Operating** |   |
|                                                          |   | **Revenues**                                                               |   |   | **Margin**                                                                |   |   | **Income** |   |   | **Revenues** |   |   | **Margin** |   |   | **Income** |   |
|                                                          |   | (In                millions)                                               |   |   | (In                millions)                                              |   |
| Gas                prices                                     |   | $                                                                          | (3.7   | )      |                                                                      | $      | - |   |   | $ | - |   |   | $ | (20.5 | ) |   | $ | - |   |   | $ | - |   |
| Weather                                                       |   |                                                                       | (1.6   | )      |                                                                      |   | (1.1 | ) |   |   | (1.1 | ) |   |   | 32.0 |   |   |   | 5.1 |   |   |   | 5.1 |   |
| Customer                growth/usage                          |   |                                                                       | (1.7   | )      |                                                                      |   | 0.3 |   |   |   | 0.3 |   |   |   | 3.7 |   |   |   | 1.8 |   |   |   | 1.8 |   |
| Net                unrealized mark-to-market gains and losses |   |                                                                       | (0.3   | )      |                                                                      |   | (0.3 | ) |   |   | (0.3 | ) |   |   | 0.3 |   |   |   | 0.3 |   |   |   | 0.3 |   |
| Rate                increase                                  |   |                                                                       | 1.4    |   |                                                                      |   | 1.4 |   |   |   | 1.4 |   |   |   | 1.4 |   |   |   | 1.4 |   |   |   | 1.4 |   |
| Off-system                activities                          |   |                                                                       | (3.7   | )      |                                                                      |   | 0.1 |   |   |   | 0.1 |   |   |   | (10.7 | ) |   |   | 0.5 |   |   |   | 0.5 |   |
| Other                                                         |   |                                                                       | (0.1   | )      |                                                                      |   | (0.2 | ) |   |   | 1.7 |   |   |   | (0.6 | ) |   |   | (0.6 | ) |   |   | 0.5 |   |
| Total                increase (decrease)                      |   | $                                                                          | (9.7   | )      |                                                                      | $      | 0.2 |   |   | $ | 2.1 |   |   | $ | 5.6 |   |   | $ | 8.5 |   |   | $ | 9.6 |   |

----

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions, except customers)      |   |   |                                               |   |   | (In                millions, except customers) |   |   |   |   |
| Residential                                  |   | $                                                   | 31.4   |   |                                               | $      | 34.6 |   |   | $ | (3.2 | ) |   |   | (9.2 | ) |   | $ | 232.1 |   |   | $ | 214.7 |   |   | $ | 17.4 |   |   |   | 8.1 |   |
| Commercial                                   |   |                                                | 10.4   |   |                                               |   | 12.3 |   |   |   | (1.9 | ) |   |   | (15.4 | ) |   |   | 71.1 |   |   |   | 69.7 |   |   |   | 1.4 |   |   |   | 2.0 |   |
| Industrial                                   |   |                                                | 0.5    |   |                                               |   | 1.0 |   |   |   | (0.5 | ) |   |   | (50.0 | ) |   |   | 1.5 |   |   |   | 3.2 |   |   |   | (1.7 | ) |   |   | (53.1 | ) |
| Transportation(1)                            |   |                                                | 2.5    |   |                                               |   | 2.7 |   |   |   | (0.2 | ) |   |   | (7.4 | ) |   |   | 10.9 |   |   |   | 10.1 |   |   |   | 0.8 |   |   |   | 7.9 |   |
| Other                                        |   |                                                | 14.7   |   |                                               |   | 18.6 |   |   |   | (3.9 | ) |   |   | (21.0 | ) |   |   | 35.7 |   |   |   | 48.0 |   |   |   | (12.3 | ) |   |   | (25.6 | ) |
|                                         |   | $                                                   | 59.5   |   |                                               | $      | 69.2 |   |   | $ | (9.7 | ) |   |   | (14.0 | ) |   | $ | 351.3 |   |   | $ | 345.7 |   |   |   | 5.6 |   |   |   | 1.6 |   |
| Average                customers (thousands) |   |                                                | 490.0  |   |                                               |   | 481.1 |   |   |   | 8.9 |   |   |   | 1.8 |   |   |   | 490.8 |   |   |   | 481.0 |   |   |   | 9.8 |   |   |   | 2.0 |   |

| (1)   | Customer-owned                gas. |
|-----------------|------------------------------------|

|              |   | **Three                  Months Ended September 30,** |   |   | **Nine                  Months Ended September 30,** |   |
|-------------------|--------|-------------------------------------------------------|--------|--------|------------------------------------------------------|--------|
|              |   | **2007**                                              |   |   | **2006**                                             |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|              |   | (Thousands                  of Decatherms)            |   |   |                                                 |   |   | (Thousands                  of Decatherms) |   |   |   |   |
| Residential       |   |                                                  | 2,244  |   |                                                 |   | 2,450 |   |   |   | (206 | ) |   |   | (8.4 | ) |   |   | 20,015 |   |   |   | 17,471 |   |   |   | 2,544 |   |   |   | 14.6 |   |
| Commercial        |   |                                                  | 1,138  |   |                                                 |   | 1,320 |   |   |   | (182 | ) |   |   | (13.8 | ) |   |   | 7,288 |   |   |   | 6,877 |   |   |   | 411 |   |   |   | 6.0 |   |
| Industrial        |   |                                                  | 65     |   |                                                 |   | 129 |   |   |   | (64 | ) |   |   | (49.6 | ) |   |   | 178 |   |   |   | 395 |   |   |   | (217 | ) |   |   | (54.9 | ) |
| Transportation(1) |   |                                                  | 9,784  |   |                                                 |   | 8,769 |   |   |   | 1,015 |   |   |   | 11.6 |   |   |   | 30,733 |   |   |   | 29,171 |   |   |   | 1,562 |   |   |   | 5.4 |   |
| Other             |   |                                                  | 1,774  |   |                                                 |   | 2,327 |   |   |   | (553 | ) |   |   | (23.8 | ) |   |   | 3,599 |   |   |   | 5,394 |   |   |   | (1,795 | ) |   |   | (33.3 | ) |
|              |   |                                                  | 15,005 |   |                                                 |   | 14,995 |   |   |   | 10 |   |   |   | 0.1 |   |   |   | 61,813 |   |   |   | 59,308 |   |   |   | 2,505 |   |   |   | 4.2 |   |

| (1)   | Customer-owned                gas. |
|-----------------|------------------------------------|

----

----

**Unregulated      Operations**

***Wholesale***

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions)                        |   |   |                                               |   |   | (In                millions) |   |   |   |   |
| Total                operating revenues      |   | $                                                   | 204.1  |   |                                               | $      | 204.7 |   |   | $ | (0.6 | ) |   |   | (0.3 | ) |   | $ | 532.7 |   |   | $ | 538.7 |   |   | $ | (6.0 | ) |   |   | (1.1 | ) |
| Cost                of energy                |   |                                                | 189.2  |   |                                               |   | 141.8 |   |   |   | 47.4 |   |   |   | 33.4 |   |   |   | 433.2 |   |   |   | 401.3 |   |   |   | 31.9 |   |   |   | 7.9 |   |
| Gross                margin                  |   |                                                | 14.9   |   |                                               |   | 62.9 |   |   |   | (48.0 | ) |   |   | (76.3 | ) |   |   | 99.5 |   |   |   | 137.4 |   |   |   | (37.9 | ) |   |   | (27.6 | ) |
| Operating                expenses            |   |                                                | 13.7   |   |                                               |   | 15.2 |   |   |   | (1.5 | ) |   |   | (9.9 | ) |   |   | 58.7 |   |   |   | 45.3 |   |   |   | 13.4 |   |   |   | 29.6 |   |
| Depreciation                and amortization |   |                                                | 3.1    |   |                                               |   | 7.9 |   |   |   | (4.8 | ) |   |   | (60.8 | ) |   |   | 17.0 |   |   |   | 18.2 |   |   |   | (1.2 | ) |   |   | (6.6 | ) |
| Operating                income              |   | $                                                   | (1.9   | )      |                                               | $      | 39.8 |   |   | $ | (41.7 | ) |   |   | (104.8 | ) |   | $ | 23.8 |   |   | $ | 73.9 |   |   | $ | (50.1 | ) |   |   | (67.8 | ) |

|                                                          |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|---------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                                          |   | **Total**                                                                  |   |   | **Gross**                                                                 |   |   | **Operating** |   |   | **Total** |   |   | **Gross** |   |   | **Operating** |   |
|                                                          |   | **Revenues**                                                               |   |   | **Margin**                                                                |   |   | **Income** |   |   | **Revenues** |   |   | **Margin** |   |   | **Income** |   |
|                                                          |   | (In                millions)                                               |   |   | (In                millions)                                              |   |
| Twin                Oaks                                      |   | $                                                                          | (51.8  | )      |                                                                      | $      | (37.6 | ) |   | $ | (28.5 | ) |   | $ | (19.2 | ) |   | $ | (15.9 | ) |   | $ | (24.4 | ) |
| Net                unrealized mark-to-market gains and losses |   |                                                                       | (7.5   | )      |                                                                      |   | (4.4 | ) |   |   | (4.4 | ) |   |   | (24.7 | ) |   |   | (13.9 | ) |   |   | (13.9 | ) |
| Marketing                activity                             |   |                                                                       | 61.3   |   |                                                                      |   | (3.8 | ) |   |   | (3.8 | ) |   |   | 35.7 |   |   |   | (13.2 | ) |   |   | (14.1 | ) |
| Plant                performance                              |   |                                                                       | (2.3   | )      |                                                                      |   | (2.6 | ) |   |   | (4.5 | ) |   |   | 2.8 |   |   |   | 6.7 |   |   |   | 7.7 |   |
| Coal                costs                                     |   |                                                                       | -      |   |                                                                      |   | (0.4 | ) |   |   | (0.4 | ) |   |   | - |   |   |   | (1.5 | ) |   |   | (1.5 | ) |
| General                operational increases                  |   |                                                                       | -      |   |                                                                      |   | - |   |   |   | (0.1 | ) |   |   | - |   |   |   | - |   |   |   | (2.1 | ) |
| Other                                                         |   |                                                                       | (0.3   | )      |                                                                      |   | 0.8 |   |   |   | - |   |   |   | (0.6 | ) |   |   | (0.1 | ) |   |   | (1.8 | ) |
| Total                increase (decrease)                      |   | $                                                                          | (0.6   | )      |                                                                      | $      | (48.0 | ) |   | $ | (41.7 | ) |   | $ | (6.0 | ) |   | $ | (37.9 | ) |   | $ | (50.1 | ) |

|                                         |   | **For                the Period**                                |   |   | **For                the Period**            |   |   |                                                               |   |
|----------------------------------------------|--------|------------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------------------------------------------------------------------|--------|
|                                         |   | **July                1 –****September                30** |   |   | **January                1 – May 31,** |   |   | **April                18 –****September                30** |   |   |   |   |
|                                         |   | **2006**                                                         |   |   | **2007**                                     |   |   | **2006**                                                           |   |   | **Change** |   |
|                                         |   | (Dollarsin                millions)                              |   |   | (Dollars                in millions)         |   |
| Total                operating revenues      |   | $                                                                | 51.8   |   |                                         | $      | 65.4   |                                                               |   | $ | 84.6 |   |   | $ | (19.2 | ) |
| Cost                of energy                |   |                                                             | 14.2   |   |                                         |   | 22.1   |                                                               |   |   | 25.4 |   |   |   | (3.3 | ) |
| Gross                margin                  |   |                                                             | 37.6   |   |                                         |   | 43.3   |                                                               |   |   | 59.2 |   |   |   | (15.9 | ) |
| Operating                expenses            |   |                                                             | 4.6    |   |                                         |   | 17.3   |                                                               |   |   | 8.0 |   |   |   | 9.3 |   |
| Depreciation                and amortization |   |                                                             | 4.5    |   |                                         |   | 7.7    |                                                               |   |   | 8.5 |   |   |   | (0.8 | ) |
| Operating                income              |   | $                                                                | 28.5   |   |                                         | $      | 18.3   |                                                               |   | $ | 42.7 |   |   | $ | (24.4 | ) |
| Sales                Volumes (GWhs)          |   |                                                             | 618.6  |   |                                         |   | 915.9  |                                                               |   |   | 1,111.0 |   |   |   | (195.1 | ) |

----

|                            |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|---------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                            |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                            |   | (In                millions)                        |   |   |                                               |   |   | (In                millions) |   |   |   |   |
| Long-term                sales  |   | $                                                   | 48.1   |   |                                               | $      | 91.4 |   |   | $ | (43.3 | ) |   |   | (47.4 | ) |   | $ | 201.1 |   |   | $ | 196.6 |   |   | $ | 4.5 |   |   |   | 2.3 |   |
| Short-term                sales |   |                                                | 156.0  |   |                                               |   | 113.3 |   |   |   | 42.7 |   |   |   | 37.7 |   |   |   | 331.6 |   |   |   | 342.1 |   |   |   | (10.5 | ) |   |   | (3.1 | ) |
|                            |   | $                                                   | 204.1  |   |                                               | $      | 204.7 |   |   | $ | (0.6 | ) |   |   | (0.3 | ) |   | $ | 532.7 |   |   | $ | 538.7 |   |   | $ | (6.0 | ) |   |   | (1.1 | ) |

|                            |   | **Three                Months Ended September 30,** |    |   | **Nine                Months Ended September 30,** |   |
|---------------------------------|--------|-----------------------------------------------------|---------|--------|----------------------------------------------------|--------|
|                            |   | **2007**                                            |    |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                            |   | (Gigawatt                hours)                     |    |   |                                               |   |   | (Gigawatt                hours) |   |   |   |   |
| Long-term                sales  |   |                                                | 867.8   |   |                                               |   | 1,319.0 |   |   |   | (451.2 | ) |   |   | (34.2 | ) |   |   | 3,214.4 |   |   |   | 2,999.9 |   |   |   | 214.5 |   |   |   | 7.2 |   |
| Short-term                sales |   |                                                | 2,270.5 |   |                                               |   | 1,719.1 |   |   |   | 551.4 |   |   |   | 32.1 |   |   |   | 5,411.3 |   |   |   | 5,509.0 |   |   |   | (97.7 | ) |   |   | (1.8 | ) |
|                            |   |                                                | 3,138.3 |   |                                               |   | 3,038.1 |   |   |   | 100.2 |   |   |   | 3.3 |   |   |   | 8,625.7 |   |   |   | 8,508.9 |   |   |   | 116.8 |   |   |   | 1.4 |   |

----

----

***First      Choice***

|                                         |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|----------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                         |   | **2007**                                            |   |   | **2006**                                           |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006** |   |   | **Change** |   |   | **%** |   |
|                                         |   | (In                millions)                        |   |   |                                               |   |   | (In                millions) |   |   |   |   |
| Total                operating revenues      |   | $                                                   | 177.7  |   |                                               | $      | 187.0 |   |   | $ | (9.3 | ) |   |   | (5.0 | ) |   | $ | 463.3 |   |   | $ | 447.0 |   |   | $ | 16.3 |   |   |   | 3.6 |   |
| Cost                of energy                |   |                                                | 159.2  |   |                                               |   | 146.4 |   |   |   | 12.8 |   |   |   | 8.7 |   |   |   | 395.9 |   |   |   | 354.8 |   |   |   | 41.1 |   |   |   | 11.6 |   |
| Gross                margin                  |   |                                                | 18.5   |   |                                               |   | 40.6 |   |   |   | (22.1 | ) |   |   | (54.4 | ) |   |   | 67.4 |   |   |   | 92.2 |   |   |   | (24.8 | ) |   |   | (26.9 | ) |
| Operating                expenses            |   |                                                | 13.5   |   |                                               |   | 17.3 |   |   |   | (3.8 | ) |   |   | (22.0 | ) |   |   | 41.7 |   |   |   | 45.9 |   |   |   | (4.2 | ) |   |   | (9.2 | ) |
| Depreciation                and amortization |   |                                                | 0.5    |   |                                               |   | 0.5 |   |   |   | - |   |   |   | - |   |   |   | 1.4 |   |   |   | 1.5 |   |   |   | (0.1 | ) |   |   | (6.7 | ) |
| Operating                income              |   | $                                                   | 4.5    |   |                                               | $      | 22.8 |   |   | $ | (18.3 | ) |   |   | (80.3 | ) |   | $ | 24.3 |   |   | $ | 44.8 |   |   | $ | (20.5 | ) |   |   | (45.8 | ) |

|                                        |   | **Three                Months Ended****September                30, 2007** |   |   | **Nine                Months Ended****September                30, 2007** |   |
|---------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                        |   | **Total**                                                                  |   |   | **Gross**                                                                 |   |   | **Operating** |   |   | **Total** |   |   | **Gross** |   |   | **Operating** |   |
|                                        |   | **Revenues**                                                               |   |   | **Margin**                                                                |   |   | **Income** |   |   | **Revenues** |   |   | **Margin** |   |   | **Income** |   |
|                                        |   | (In                millions)                                               |   |   | (In                millions)                                              |   |
| Weather                                     |   | $                                                                          | (7.0   | )      |                                                                      | $      | (1.8 | ) |   | $ | (1.8 | ) |   | $ | (9.9 | ) |   | $ | (2.4 | ) |   | $ | (2.4 | ) |
| Customer                growth/usage        |   |                                                                       | 3.3    |   |                                                                      |   | (1.1 | ) |   |   | (1.1 | ) |   |   | 27.8 |   |   |   | (1.2 | ) |   |   | (1.2 | ) |
| Retail                per-MWh margins       |   |                                                                       | 2.1    |   |                                                                      |   | (11.5 | ) |   |   | (10.2 | ) |   |   | 12.0 |   |   |   | (7.6 | ) |   |   | (4.4 | ) |
| Trading                margin               |   |                                                                       | (7.1   | )      |                                                                      |   | (7.1 | ) |   |   | (7.1 | ) |   |   | (14.3 | ) |   |   | (14.3 | ) |   |   | (14.3 | ) |
| Bad                debt expense             |   |                                                                       | -      |   |                                                                      |   | - |   |   |   | (0.1 | ) |   |   | - |   |   |   | - |   |   |   | (2.1 | ) |
| Incentive-based                compensation |   |                                                                       | -      |   |                                                                      |   | - |   |   |   | 2.1 |   |   |   | - |   |   |   | - |   |   |   | 2.8 |   |
| Other                                       |   |                                                                       | (0.6   | )      |                                                                      |   | (0.6 | ) |   |   | (0.1 | ) |   |   | 0.7 |   |   |   | 0.7 |   |   |   | 1.1 |   |
| Total                increase (decrease)    |   | $                                                                          | (9.3   | )      |                                                                      | $      | (22.1 | ) |   | $ | (18.3 | ) |   | $ | 16.3 |   |   | $ | (24.8 | ) |   | $ | (20.5 | ) |

----

|                                              |   | **Three                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|---------------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                              |   | **2007**                                            |   |   | **2006(1)**                                        |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006(1)** |   |   | **Change** |   |   | **%** |   |
|                                              |   | (In                millions, except customers)      |   |   |                                               |   |   | (In                millions, except customers) |   |   |   |   |
| Residential                                       |   | $                                                   | 124.1  |   |                                               | $      | 119.1 |   |   | $ | 5.0 |   |   |   | 4.2 |   |   | $ | 298.1 |   |   | $ | 267.9 |   |   | $ | 30.2 |   |   |   | 11.3 |   |
| Mass-market                                       |   |                                                | 16.2   |   |                                               |   | 23.2 |   |   |   | (7.0 | ) |   |   | (30.2 | ) |   |   | 50.5 |   |   |   | 65.9 |   |   |   | (15.4 | ) |   |   | (23.4 | ) |
| Mid-market                                        |   |                                                | 40.5   |   |                                               |   | 37.7 |   |   |   | 2.8 |   |   |   | 7.4 |   |   |   | 109.5 |   |   |   | 93.3 |   |   |   | 16.2 |   |   |   | 17.4 |   |
| Trading                gains (losses)             |   |                                                | (5.7   | )      |                                               |   | 1.4 |   |   |   | (7.1 | ) |   |   | (507.1 | ) |   |   | (7.3 | ) |   |   | 7.1 |   |   |   | (14.4 | ) |   |   | (202.8 | ) |
| Other                                             |   |                                                | 2.6    |   |                                               |   | 5.6 |   |   |   | (3.0 | ) |   |   | (53.6 | ) |   |   | 12.5 |   |   |   | 12.8 |   |   |   | (0.3 | ) |   |   | (2.3 | ) |
|                                              |   | $                                                   | 177.7  |   |                                               | $      | 187.0 |   |   | $ | (9.3 | ) |   |   | (5.0 | ) |   | $ | 463.3 |   |   | $ | 447.0 |   |   | $ | 16.3 |   |   |   | 3.6 |   |
| Actual                customers (thousands) (2,3) |   |                                                | 258.6  |   |                                               |   | 243.4 |   |   |   | 15.2 |   |   |   | 6.2 |   |   |   | 258.6 |   |   |   | 243.4 |   |   |   | 15.2 |   |   |   | 6.2 |   |

| (1)   | The                customer class revenues and the customer counts have been reclassified                to                be consistent with the current year                presentation. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | See                note above in the TNMP Electric segment discussion about the impact                of                TECA. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Due                to the competitive nature of First Choice’s business, actual customer                count at September 30 is presented in the table above as a more                representative business indicator than the average customers that                are                shown in the table for TNMP                customers. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|        |   | **Three                Months Ended September 30,** |    |   | **Nine                Months Ended September 30,** |   |
|-------------|--------|-----------------------------------------------------|---------|--------|----------------------------------------------------|--------|
|        |   | **2007**                                            |    |   | **2006(2)**                                        |   |   | **Change** |   |   | **%** |   |   | **2007** |   |   | **2006(2)** |   |   | **Change** |   |   | **%** |   |
|        |   | (Gigawatt                hours (1))                 |    |   |                                               |   |   | (Gigawatt                hours (1)) |   |   |   |   |
| Residential |   |                                                | 886.5   |   |                                               |   | 847.3 |   |   |   | 39.2 |   |   |   | 4.6 |   |   |   | 2,139.5 |   |   |   | 1,911.5 |   |   |   | 228.0 |   |   |   | 11.9 |   |
| Mass-market |   |                                                | 101.3   |   |                                               |   | 157.6 |   |   |   | (56.3 | ) |   |   | (35.7 | ) |   |   | 312.7 |   |   |   | 440.4 |   |   |   | (127.7 | ) |   |   | (29.0 | ) |
| Mid-market  |   |                                                | 348.9   |   |                                               |   | 345.3 |   |   |   | 3.6 |   |   |   | 1.0 |   |   |   | 944.5 |   |   |   | 846.5 |   |   |   | 98.0 |   |   |   | 11.6 |   |
| Other       |   |                                                | 11.3    |   |                                               |   | 5.2 |   |   |   | 6.1 |   |   |   | 117.3 |   |   |   | 21.6 |   |   |   | 15.5 |   |   |   | 6.1 |   |   |   | 39.4 |   |
|        |   |                                                | 1,348.0 |   |                                               |   | 1,355.4 |   |   |   | (7.4 | ) |   |   | (0.5 | ) |   |   | 3,418.3 |   |   |   | 3,213.9 |   |   |   | 204.4 |   |   |   | 6.4 |   |

| (1)   | See                note above in the TNMP Electric segment discussion about the impact                of                TECA. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                customer class sales have been reclassified to be consistent with                current                year presentation. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

***EnergyCo***

|                                                        |   | **For                the Period**              |    |
|-------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                        |   | **July                1 - September 30, 2007** |    |   | **June                1 - September 30, 2007** |   |
|                                                        |   | (In                thousands)                  |    |
|                                                        |   |                                           |    |   |   |   |
| Operating                revenue                            |   | $                                              | 100,463 |   |   | $ | 114,828 |   |
| Cost                of energy                               |   |                                           | 56,419  |   |   |   | 60,979 |   |
| Gross                margin                                 |   |                                           | 44,044  |   |   |   | 53,849 |   |
| Operating                expenses                           |   |                                           | 12,279  |   |   |   | 15,046 |   |
| Depreciation                and amortization                |   |                                           | 5,790   |   |   |   | 7,318 |   |
| Operating income                                       |   |                                           | 25,975  |   |   |   | 31,485 |   |
| Other                income and (deductions)                |   |                                           | 217     |   |   |   | 241 |   |
| Net                interest expense                         |   |                                           | (6,978  | ) |   |   | (7,796 | ) |
| Earnings                before income taxes                 |   |                                           | 19,214  |   |   |   | 23,930 |   |
| Income                taxes (1)                             |   |                                           | 399     |   |   |   | 399 |   |
| Net                earnings                                 |   | $                                              | 18,815  |   |   | $ | 23,531 |   |
|                                                        |   |                                           |    |   |   |   |   |   |
| 50                percent of net earnings                   |   | $                                              | 9,408   |   |   | $ | 11,765 |   |
| Amortization                of basis difference in EnergyCo |   |                                           | 1,148   |   |   |   | 1,733 |   |
| PNMR                equity in net earnings of EnergyCo      |   | $                                              | 10,556  |   |   | $ | 13,498 |   |

| (1)   | Represents                the Texas Margin Tax, which is considered an income                tax. |
|-----------------|---------------------------------------------------------------------------------------------------|

**Corporate      and Other**

----

**PNMR      Consolidated**

----

**LIQUIDITY      AND CAPITAL RESOURCES**

**Statements      of Cash Flows**

|                                                    |   | **Nine                Months Ended September 30,** |   |
|---------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                    |   | **2007**                                           |   |   | **2006** |   |   | **Change** |   |
|                                                    |   |                                               |   |   | (In                millions) |   |   |   |   |
|                                                    |   |                                               |   |   |   |   |   |   |   |
| Net                cash flows from operating activities |   | $                                                  | 127.0  |   |   | $ | 186.2 |   |   | $ | (59.2 | ) |
| Net                cash flows from investing activities |   |                                               | 19.2   |   |   |   | (651.5 | ) |   |   | 670.7 |   |
| Net                cash flows from financing activities |   |                                               | (252.9 | ) |   |   | 498.0 |   |   |   | (750.9 | ) |
| Net                change in cash and cash equivalents  |   | $                                                  | (106.7 | ) |   | $ | 32.7 |   |   | $ | (139.4 | ) |

**Capital      Requirements**

----

----

**Liquidity**

|                                                         |   | **PNM**      |   |   | **PNMR**                     |   |   | **PNMR**         |   |
|--------------------------------------------------------------|--------|--------------|--------|--------|------------------------------|--------|--------|------------------|--------|
|                                                         |   | **Separate** |   |   | **Separate**                 |   |   | **Consolidated** |   |
|                                                         |   |         |   |   | (In                millions) |   |   |             |   |
|                                                         |   |         |   |   |                         |   |   |             |   |
| Financing                Capacity:                           |   |         |   |   |                         |   |   |             |   |
| Revolving                credit facility                     |   | $            | 400.0  |   |                         | $      | 600.0  |             |   | $ | 1,000.0 |   |
| Local                lines of credit                         |   |         | 13.5   |   |                         |   | 15.0   |             |   |   | 28.5 |   |
| Total                financing capacity                      |   | $            | 413.5  |   |                         | $      | 615.0  |             |   | $ | 1,028.5 |   |
|                                                         |   |         |   |   |                         |   |   |             |   |   |   |   |
| Commercial                paper program maximum              |   | $            | 300.0  |   |                         | $      | 400.0  |             |   | $ | 700.0 |   |
|                                                         |   |         |   |   |                         |   |   |             |   |   |   |   |
| Amounts                outstanding as of November 1, 2007:   |   |         |   |   |                         |   |   |             |   |   |   |   |
| Commercial                paper program                      |   | $            | -      |   |                         | $      | 60.2   |             |   | $ | 60.2 |   |
| Revolving                credit facility                     |   |         | 275.0  |   |                         |   | 330.0  |             |   |   | 605.0 |   |
| Local                lines of credit                         |   |         | 5.7    |   |                         |   | -      |             |   |   | 5.7 |   |
| Total                short-term debt outstanding             |   |         | 280.7  |   |                         |   | 390.2  |             |   |   | 670.9 |   |
|                                                         |   |         |   |   |                         |   |   |             |   |   |   |   |
| Letters                of credit                             |   |         | 3.1    |   |                         |   | 36.6   |             |   |   | 39.7 |   |
|                                                         |   |         |   |   |                         |   |   |             |   |   |   |   |
| Total                short term-debt and letters of credit   |   | $            | 283.8  |   |                         | $      | 426.8  |             |   | $ | 710.6 |   |
|                                                         |   |         |   |   |                         |   |   |             |   |   |   |   |
| Remaining                availability as of November 1, 2007 |   | $            | 129.7  |   |                         | $      | 188.2  |             |   | $ | 317.9 |   |

----

|                                  | PNMR   |   | PNM    |   | TNMP   |
|---------------------------------------|--------|--------|--------|--------|--------|
|                                  |   |   |   |   |   |
| S&P                               |   |   |   |   |   |
| Senior                unsecured notes | BBB-   |   | BBB    |   | BBB    |
| Commercial                paper       | A3     |   | A3     |   | *      |
| Moody’s                         |   |   |   |   |   |
| Senior                unsecured notes | Baa3   |   | Baa2   |   | Baa3   |
| Commercial                paper       | P3     |   | P2     |   | *      |
| Preferred                stock        | *      |   | Ba1    |   | *      |

**Off-Balance      Sheet Arrangements**

**Commitments      and Contractual Obligations**

**Contingent      Provisions of Certain Obligations**

----

**Capital      Structure**

|                                         |   | **September                30,** |   |   | **December                31,** |   |
|----------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
| **PNMR**                                     |   | **2007**                         |   |   | **2006**                        |   |
|                                         |   |                             |   |   |                            |   |
| Common                equity                 |   |                             | 50.2   | %      |                            |   | 48.9 | % |
| Preferred                stock of subsidiary |   |                             | 0.3    | %      |                            |   | 0.3 | % |
| Long-term                debt                |   |                             | 49.5   | %      |                            |   | 50.8 | % |
| Total                capitalization          |   |                             | 100.0  | %      |                            |   | 100.0 | % |

| **PNM**                             |   |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|
|                                |   |   |   |   |   |   |
| Common                equity        |   |   | 57.7   | %      |   |   | 54.4 | % |
| Preferred                stock      |   |   | 0.5    | %      |   |   | 0.5 | % |
| Long-term                debt       |   |   | 41.8   | %      |   |   | 45.1 | % |
| Total                capitalization |   |   | 100.0  | %      |   |   | 100.0 | % |

| **TNMP**                            |   |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|
|                                |   |   |   |   |   |   |
| Common                equity        |   |   | 59.6   | %      |   |   | 54.9 | % |
| Long-term                debt       |   |   | 40.4   | %      |   |   | 45.1 | % |
| Total                capitalization |   |   | 100.0  | %      |   |   | 100.0 | % |

----

***MD&A      FOR PNM***

**RESULTS      OF OPERATIONS**

**NINE      MONTHS ENDED SEPTEMBER 30, 2007**

**COMPARED      TO NINE MONTHS ENDED SEPTEMBER 30, 2006**

|                                                                                                                                                                            |   | **Nine                Months Ended**  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                            |   | **September                30, 2007** |   |
|                                                                                                                                                                            |   | (In                millions)          |   |
| **                                       After-tax Impacts** |   |                                  |   |
| TNMP                asset transfer                                                                                                                                              |   | $                                     | 2.6    |   |
| Plant                performance                                                                                                                                                |   |                                  | 5.2    |   |
| Net                unrealized mark-to-market                                                                                                                                    |   |                                  | (8.4   | ) |
| Coal                costs                                                                                                                                                       |   |                                  | (6.2   | ) |
| PNM                Electric/Wholesale growth and weather                                                                                                                        |   |                                  | (3.3   | ) |
| PNM                Gas growth and weather                                                                                                                                       |   |                                  | 4.2    |   |
| Afton                impairment                                                                                                                                                 |   |                                  | (11.8  | ) |
| Business                improvement plan                                                                                                                                        |   |                                  | (4.2   | ) |
| Financing                                                                                                                                                                       |   |                                  | (3.5   | ) |
| Other                                                                                                                                                                           |   |                                  | 0.9    |   |
| Net                change                                                                                                                                                       |   | $                                     | (24.5  | ) |

----

***MD&A      FOR TNMP***

**RESULTS      OF OPERATIONS**

**NINE      MONTHS ENDED SEPTEMBER 30, 2007**

**COMPARED      TO NINE MONTHS ENDED SEPTEMBER 30, 2006**

|                                                                                                                                                          |   | **Nine                Months Ended**  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                          |   | **September                30, 2007** |   |
| **                                    After-tax Impacts** |   | (In                millions)          |   |
| Discontinued                operations                                                                                                                        |   | $                                     | (2.6   | ) |
| Carrying                Charges                                                                                                                               |   |                                  | (3.9   | ) |
| PUCT                order                                                                                                                                     |   |                                  | 7.8    |   |
| Growth                and weather                                                                                                                             |   |                                  | 2.5    |   |
| Long-term                debt reduction                                                                                                                       |   |                                  | 1.8    |   |
| Other                                                                                                                                                         |   |                                  | (0.2   | ) |
| Net                change                                                                                                                                     |   | $                                     | 5.4    |   |

----

**OTHER      ISSUES FACING THE COMPANY**

**Global      Warming Issues**

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

----

**NEW      ACCOUNTING STANDARDS**

**DISCLOSURE      REGARDING FORWARD LOOKING STATEMENTS**

| ·   | The                risk that EnergyCo is unable to identify and implement profitable                acquisitions**,**including development of the Cedar Bayou Generating                Station and implementation of the acquisition of the Lyondell                facility,                or that                PNMR and ECJV will not agree to make additional capital contributions                to                EnergyCo, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                potential unavailability of cash from PNMR’s subsidiaries or EnergyCo due                to regulatory, statutory or contractual                restrictions, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                outcome of any appeals of the PUCT order in the stranded cost true-up                proceeding, |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | The                ability of First Choice to attract and retain                customers, |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Changes                in ERCOT protocols, |
|--------------------|--------------------------------------------|

| ·   | Changes                in the cost of power acquired by First                Choice, |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | Collections                experience, |
|--------------------|----------------------------------------|

| ·   | Insurance                coverage available for claims made in                litigation, |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Fluctuations                in interest rates, |
|--------------------|------------------------------------------------|

| ·   | Conditions                affecting the Company’s ability to access the financial markets, or                EnergyCo’s access to additional debt financing following the utilization                of its existing credit facility, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Weather, |
|--------------------|----------|

| ·   | Water                supply, |
|--------------------|------------------------------|

| ·   | Changes                in fuel costs, |
|--------------------|---------------------------------------|

| ·   | Availability                of fuel supplies, |
|--------------------|-----------------------------------------------|

| ·   | The                effectiveness of risk management and commodity risk                transactions, |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | Seasonality                and other changes in supply and demand in the market for electric                power, |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | Variability                of wholesale power prices and natural gas                prices, |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | Volatility                and liquidity in the wholesale power markets and the natural gas                markets, |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | Changes                in the competitive environment in the electric and natural gas                industries, |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | The                performance of generating units, including PVNGS, SJGS, Four Corners,                and                EnergyCo generating units, and transmission                systems, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                ability to secure long-term power                sales, |
|--------------------|----------------------------------------------------------------------------|

----

| ·   | The                risk that the Company and its subsidiaries and EnergyCo may have                to commit                to substantial capital investments and additional operating costs                to                comply with new environmental control requirements including possible                future requirements to address concerns about global climate                change, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                risks associated with completion of generation, including pollution                control equipment at SJGS, the expansion of the Afton Generating                Station,                and the EnergyCo Cedar Bayou Generating Station, transmission,                distribution, and other projects, including construction delays and                unanticipated cost overruns, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | State                and federal regulatory and legislative decisions and                actions, |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | The                outcome of legal proceedings, |
|--------------------|--------------------------------------------------|

| ·   | Changes                in applicable accounting principles,                and |
|--------------------|--------------------------------------------------------------------------------|

| ·   | The                performance of state, regional, and national                economies. |
|--------------------|-------------------------------------------------------------------------------------------|

**SECURITIES      ACT DISCLAIMER**

----

**ITEM      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**Accounting      for Derivatives**

**Commodity      Risk**

----

----

|                                                             |   | **September                30, 2007** |    |
|------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                             |   | (In                thousands)         |    |
|                                                             |   | Trading                               |    |   | EconomicHedges |   |   | Total |   |
| Mark-to-market                energy contracts:                  |   |                                  |    |   |   |   |   |   |   |
| Current                asset                                     |   | $                                     | 25,856  |   |   | $ | 24,936 |   |   | $ | 50,792 |   |
| Long-term                asset                                   |   |                                  | 6,278   |   |   |   | 19,686 |   |   |   | 25,964 |   |
| Total                mark-to-market assets                       |   |                                  | 32,134  |   |   |   | 44,622 |   |   |   | 76,756 |   |
| Current                liability                                 |   |                                  | (26,431 | ) |   |   | (31,607 | ) |   |   | (58,038 | ) |
| Long-term                liability                               |   |                                  | (5,999  | ) |   |   | (24,871 | ) |   |   | (30,870 | ) |
| Total                mark-to-market liabilities                  |   |                                  | (32,430 | ) |   |   | (56,478 | ) |   |   | (88,908 | ) |
|                                                             |   |                                  |    |   |   |   |   |   |   |   |   |   |
| Net                fair value of mark-to-market energy contracts |   | $                                     | (296    | ) |   | $ | (11,856 | ) |   | $ | (12,152 | ) |

|                                                             |   | **December                31, 2006** |    |
|------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                             |   | (In                thousands)        |    |
|                                                             |   | Trading                              |    |   | EconomicHedges |   |   | Total |   |
| Mark-to-market                energy contracts:                  |   |                                 |    |   |   |   |   |   |   |
| Current                asset                                     |   | $                                    | 22,442  |   |   | $ | 21,238 |   |   | $ | 43,680 |   |
| Long-term                asset                                   |   |                                 | 391     |   |   |   | 10,591 |   |   |   | 10,982 |   |
| Total                mark-to-market assets                       |   |                                 | 22,833  |   |   |   | 31,829 |   |   |   | 54,662 |   |
| Current                liability                                 |   |                                 | (21,425 | ) |   |   | (20,595 | ) |   |   | (42,020 | ) |
| Long-term                liability                               |   |                                 | (482    | ) |   |   | (8,694 | ) |   |   | (9,176 | ) |
| Total                mark-to-market liabilities                  |   |                                 | (21,907 | ) |   |   | (29,289 | ) |   |   | (51,196 | ) |
|                                                             |   |                                 |    |   |   |   |   |   |   |   |   |   |
| Net                fair value of mark-to-market energy contracts |   | $                                    | 926     |   |   | $ | 2,540 |   |   | $ | 3,466 |   |

----

|                                                                |   | **September                30, 2007** |   |
|---------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                |   | Trading                               |   |   | EconomicHedges |   |   | Total |   |
|                                                                |   | (In                thousands)         |   |
| Sources                of fair value gain (loss):                   |   |                                  |   |   |   |   |   |   |   |
| Fair                value at beginning of year                      |   | $                                     | 926    |   |   | $ | 2,540 |   |   | $ | 3,466 |   |
| Amount                realized on contracts delivered during period |   |                                  | 6,683  |   |   |   | 6,270 |   |   |   | 12,953 |   |
| Changes                in valuation techniques                      |   |                                  | 301    |   |   |   | (4,410 | ) |   |   | (4,109 | ) |
| Changes                in fair value                                |   |                                  | (8,206 | ) |   |   | (16,256 | ) |   |   | (24,462 | ) |
|                                                                |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Net                fair value at end of period                      |   | $                                     | (296   | ) |   | $ | (11,856 | ) |   | $ | (12,152 | ) |
|                                                                |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Net                unrealized loss for the period                   |   | $                                     | (1,222 | ) |   | $ | (14,396 | ) |   | $ | (15,618 | ) |

|                                                                |   | **September                30, 2006** |   |
|---------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                |   | Trading                               |   |   | EconomicHedges |   |   | Total |   |
|                                                                |   | (In                thousands)         |   |
| Sources                of fair value gain (loss):                   |   |                                  |   |   |   |   |   |   |   |
| Fair                value at beginning of year                      |   | $                                     | 2,270  |   |   | $ | 2,258 |   |   | $ | 4,528 |   |
| Amount                realized on contracts delivered during period |   |                                  | (7,390 | ) |   |   | 120 |   |   |   | (7,270 | ) |
| Changes                in fair value                                |   |                                  | 4,420  |   |   |   | (1,635 | ) |   |   | 2,785 |   |
|                                                                |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Net                fair value at end of period                      |   | $                                     | (700   | ) |   | $ | 743 |   |   | $ | 43 |   |
|                                                                |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Net                unrealized loss for the period                   |   | $                                     | (2,970 | ) |   | $ | (1,515 | ) |   | $ | (4,485 | ) |

**Fair      Value at September 30, 2007**

|                           |   | **Less                than** |   |   |                          |   |   |                        |   |   |      |   |
|--------------------------------|--------|------------------------------|--------|--------|-------------------------------|--------|--------|-----------------------------|--------|--------|-----------|--------|
|                           |   | **1                year**    |   |   | **1-3                Years**  |   |   | **4+                Years** |   |   | **Total** |   |
|                           |   |                         |   |   | (In                thousands) |   |   |                        |   |
| Trading                        |   | $                            | (575   | )      |                          | $      | 30     |                        |   | $      | 249       |   |   | $ | (296 | ) |
| Economic                hedges |   |                         | (6,671 | )      |                          |   | 2,195  |                        |   |   | (7,380    | )      |   |   | (11,856 | ) |
| Total                          |   | $                            | (7,246 | )      |                          | $      | 2,225  |                        |   | $      | (7,131    | )      |   | $ | (12,152 | ) |

----

|                                                                |   | **Nine                Months Ended** |    |
|---------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                |   | **September                30,**     |    |
|                                                                |   | **2007**                             |    |   | **2006** |   |
| **Type                of Derivative**                               |   | **Hedge                Instruments** |    |
|                                                                |   | (In                thousands)        |    |
| Change                in fair value of energy contracts             |   | $                                    | (31,970 | ) |   | $ | 27,354 |   |
| Change                in fair value of gas fixed for float swaps    |   |                                 | 4,924   |   |   |   | (24,649 | ) |
| Change                in the fair value of options                  |   |                                 | (193    | ) |   |   | 607 |   |
| Change                in regulatory assets for gas off-system sales |   |                                 | -       |   |   |   | 135 |   |
| Net                change in fair value                             |   | $                                    | (27,239 | ) |   | $ | 3,447 |   |

**Risk      Management Activities**

----

*.*

**Credit      Risk**

*PNM      Wholesale*

----

**PNM      Wholesale**

**Schedule      of Credit Risk Exposure**

**September      30, 2007**

|                                |   |                                  |    |   |         |   |   | **Net**      |   |
|-------------------------------------|--------|---------------------------------------|---------|--------|--------------|--------|--------|--------------|--------|
|                                |   | **(b)**                               |    |   | **Number**   |   |   | **Exposure** |   |
|                                |   | **Net**                               |    |   | **of**       |   |   | **of**       |   |
|                                |   | **Credit**                            |    |   | **Counter**  |   |   | **Counter-** |   |
|                                |   | **Risk**                              |    |   | **-parties** |   |   | **parties**  |   |
| **Rating                (a)**       |   | **Exposure**                          |    |   | **>10%**  |   |   | **>10%**  |   |
|                                |   | (Dollars                in thousands) |    |
|                                |   |                                  |    |   |         |   |   |         |   |
| External                ratings:    |   |                                  |    |   |         |   |   |         |   |
| Investment                grade     |   | $                                     | 151,891 |   |         |   | 2      |         |   | $ | 51,277 |   |
| Non-investment                grade |   |                                  | 17,044  |   |         |   | -      |         |   |   | - |   |
| Split                               |   |                                  | 849     |   |         |   | -      |         |   |   | - |   |
| Internal                ratings:    |   |                                  |    |   |         |   |   |         |   |   |   |   |
| Investment                grade     |   |                                  | 104     |   |         |   | -      |         |   |   | - |   |
| Non-investment                grade |   |                                  | 7,676   |   |         |   | -      |         |   |   | - |   |
| Total                               |   | $                                     | 177,564 |   |         |   |   |         |   | $ | 51,277 |   |

| (a)   | The***Rating***** **included in “Investment Grade”                is for counterparties with a minimum S&P rating of BBB- or Moody's                rating of Baa3.  If the counterparty has provided a guarantee by                a higher rated entity (e.g., its parent), determination is based                on the                rating of its guarantor.  The category “Internal Ratings -                Investment Grade” includes those counterparties that are internally rated                as investment grade in accordance with the guidelines established                in the                Company’s credit policy. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b)   | The                Net Credit Risk Exposure is the net credit exposure from PNM Wholesale                operations.  This includes long-term contracts, forward sales                and short-term sales. The exposure captures the net amounts due to                PNM                from receivables/payables for realized transactions, delivered and                unbilled revenues, and mark-to-market gains/losses (pursuant to contract                terms).  Exposures are offset according to legally enforceable                netting arrangements and reduced by credit collateral.  Credit                collateral includes cash deposits, letters of credit and performance                bonds                received from counterparties.  Amounts are presented before                those reserves that are determined on a portfolio                basis. |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PNM          Wholesale**

**Maturity        of Credit Risk Exposure**

**September      30, 2007**

|                                |   |                         |    |   |                          |   |   | **Greater**                |   |   | **Total**    |   |
|-------------------------------------|--------|------------------------------|---------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|--------------|--------|
|                                |   | **Less                than** |    |   |                          |   |   | **than**                   |   |   | **Net**      |   |
| **Rating**                          |   | **2                Years**   |    |   | **2-5                Years**  |   |   | **5                Years** |   |   | **Exposure** |   |
|                                |   |                         |    |   | (In                thousands) |   |   |                       |   |
|                                |   |                         |    |   |                          |   |   |                       |   |   |         |   |
| External                ratings:    |   |                         |    |   |                          |   |   |                       |   |   |         |   |
| Investment                grade     |   | $                            | 133,153 |   |                          | $      | 17,282 |                       |   | $      | 1,456        |   |   | $ | 151,891 |   |
| Non-investment                grade |   |                         | 17,044  |   |                          |   | -      |                       |   |   | -            |   |   |   | 17,044 |   |
| Split                               |   |                         | 849     |   |                          |   | -      |                       |   |   | -            |   |   |   | 849 |   |
| Internal                ratings:    |   |                         |    |   |                          |   |   |                       |   |   |         |   |   |   |   |   |
| Investment                grade     |   |                         | 104     |   |                          |   | -      |                       |   |   | -            |   |   |   | 104 |   |
| Non-investment                grade |   |                         | 7,676   |   |                          |   | -      |                       |   |   | -            |   |   |   | 7,676 |   |
| Total                               |   | $                            | 158,826 |   |                          | $      | 17,282 |                       |   | $      | 1,456        |   |   | $ | 177,564 |   |

*First      Choice*

**Interest      Rate Risk**

----

**Equity      Market Risk**

**Alternatives      Investment Risk**

----

**ITEM      4.  CONTROLS      AND PROCEDURES**

**PNMR**

**Disclosure      of controls and procedures**

**Changes      in internal controls**

| · ** ** | Implemented                a new system to assist with complex billing calculations for large                industrial customers at TNMP to record billing activities for Texas                market                ERCOT electronic data interchange transactions and modified the related                business process controls. |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Implemented                a new system that will support FCP’s trading activities by providing an                end-to-end flow of deal information from deal capture through scheduling                into settlements and posting in the general ledger and redesigned                the                related business process controls. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Outsourced                FCP’s retail electric provider function to assist with streamlining FCP’s                processes and improve upon recording and collecting revenue and                receivables for FCP’s mass market and commercial customers and redesigned                the related business process                controls. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Currently                designing and implementing monitoring controls for its equity investment                in EnergyCo to ensure that PNMR maintains its compliance with Section                404                of the Sarbanes-Oxley Act of 2002. It is expected that this effort                will                continue through the end of 2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**System      Upgrade**

| ·   | Upgraded                an integrated system for inventory management, purchasing, warehousing,                and work flow management, except for TNMP.  The upgrade will                also enhance internal monitoring and reporting for balance/reconciliation                of interface processing and clearly define allowable criteria for                when                disbursement authorization is                required. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**PNM**

**Disclosure      of controls and procedures**

----

**System      Upgrade**

| **·  ** | Upgraded                an integrated system for inventory management, purchasing, warehousing,                and work flow management.  The upgrade will also enhance                internal monitoring and reporting for balance/reconciliation of interface                processing and clearly define allowable criteria for when disbursement                authorization is required. |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**TNMP**

**Disclosure      of controls and procedures**

**Changes      in internal controls**

| ·    | Implemented                a new system to assist with complex billing calculations for large                industrial customers at TNMP to record billing activities for Texas                market                ERCOT electronic data interchange transactions and modified the related                business process controls. |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PART      II – OTHER INFORMATION**

**ITEM      1.  LEGAL PROCEEDINGS**

| ·   | Citizen                Suit Under the Clean Air Act |
|--------------------|-----------------------------------------------------|

| ·   | Navajo                Nation Environmental Issues |
|--------------------|---------------------------------------------------|

| ·   | Four                Corners Federal Implementation Plan                Litigation |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Legal                Proceedings discussed under the caption, “Western United States Wholesale                Power Market” |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Natural                Gas Royalties Qui Tam Litigation |
|--------------------|---------------------------------------------------------|

| ·   | TNMP                Competitive Transition Charge True-Up                Proceeding |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | San                Juan River Adjudication |
|--------------------|--------------------------------------------|

**ITEM      1A.  RISK FACTORS**

----

**ITEM      6.  EXHIBITS**

| 10.1** | PNMR   | Third                Amendment to the PNM Resources Executive Savings Plan II executed                June 4,                2007                                                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                         |
| 10.2** | PNMR   | Fifth                Amendment to the PNM Resources Non-Union Severance Pay Plan executed                on                March 12, 2007                                                    |
|   |   |                                                                                                                                                                                         |
| 10.3** | PNMR   | PNM                Resources, Inc. Non-Union Severance Pay Plan effective August                1, 2007                                                                                      |
|   |   |                                                                                                                                                                                         |
| 10.4** | PNMR   | Amended                and Restated Retention Bonus Agreement for Jeffry E. Sterba executed                September 7, 2007                                                                 |
|   |   |                                                                                                                                                                                         |
| 10.5** | PNMR   | Second                Amendment to the PNM Resources Officer Life Insurance Plan executed                April                15, 2007                                                       |
|   |   |                                                                                                                                                                                         |
| 10.6** | PNMR   | Agreement                dated August 16, 2007 between PNM Resources and Public Policy Strategy                Group LLC for consulting services performed by William J.                Real |
|   |   |                                                                                                                                                                                         |
| 12.1   | PNMR   | Ratio                of Earnings to Fixed Charges                                                                                                                                            |
|   |   |                                                                                                                                                                                         |
| 12.2   | PNM    | Ratio                of Earnings to Fixed Charges                                                                                                                                            |
|   |   |                                                                                                                                                                                         |
| 12.3   | PNM    | Ratio                of Earnings to Combined Fixed Charges and Preferred Stock                Dividends                                                                                      |
|   |   |                                                                                                                                                                                         |
| 31.1   | PNMR   | Chief                Executive Officer Certification Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 31.2   | PNMR   | Chief                Financial Officer Certification Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 31.3   | PNM    | Chief                Executive Officer Certification Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 31.4   | PNM    | Chief                Financial Officer Certification Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 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                                                                |
|   |   |                                                                                                                                                                                         |
| 32.1   | PNMR   | Chief                Executive Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 32.2   | PNMR   | Chief                Financial Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 32.3   | PNM    | Chief                Executive Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 32.4   | PNM    | Chief                Financial Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 32.5   | TNMP   | Chief                Executive Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |
|   |   |                                                                                                                                                                                         |
| 32.6   | TNMP   | Chief                Financial Officer Certification Pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002                                                                |

----

**SIGNATURE**

|                                                   | **PNM                RESOURCES, INC.****PUBLIC                SERVICE COMPANY OF NEW MEXICO****TEXAS-NEW                MEXICO POWER COMPANY** |
|--------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                   | (Registrants)                                                                                                                                  |
|                                                   |                                                                                                                                           |
|                                                   |                                                                                                                                           |
| Date:   November                8, 2007 | /s/                Thomas G. Sategna                                                                                                           |
|                                                   | Thomas                G. Sategna                                                                                                               |
|                                                   | Vice                President and Corporate Controller                                                                                         |
|                                                   | (Officer                duly authorized to sign this                report)                                                                    |

----