PUBLIC SERVICE COMPANY OF NEW MEXICO
                           2001 OFFICER INCENTIVE PLAN


INTRODUCTION
------------

This plan serves as comprehensive  single source of information about the Public
Service  Company of New Mexico  ("PNM")  annual  incentive  program  for company
officers. It describes the objectives of the plan, its various elements, and how
they  function.  If you have  questions that are not addressed by this document,
please direct them to your manager.

Note:  Upon final approval and formation of the new Holding  Company,  this plan
will become the Manzano Corporation Officer Incentive Plan.

PLAN OBJECTIVES
---------------

The plan is designed to:

o Attract,  motivate  and retain key officer  talent in a  competitive  business
  environment.

o Link  the  interests  of  officers  with  those  of our  shareholders  through
  short-term incentives.

o Align  total  short-term  cash  compensation  opportunities  with  competitive
  practices.

o Reinforce a total compensation mix for officers that is risk/reward oriented.

o Customize  the plan to meet the needs of  specific  business  segments  within
  Manzano Corporation.

EFFECTIVE DATES
---------------

The plan is effective from January 1, 2001 through  December 31, 2001 (the "Plan
Year"). The Compensation and Human Resources  Committee (the "Committee") of the
Board of Directors (the "Board") reserves the right,  however, to adjust,  amend
or suspend the plan at its discretion during the Plan Year.

ADMINISTRATION
--------------

o   Plan Year Goals

    At the beginning of the Plan Year, after considering the  recommendations of
    management,  the Committee  will approve the  corporate  goals against which
    performance will be measured for the Plan Year. The corporate and individual
    / unit performance  goals will be communicated to all eligible  participants
    as soon thereafter as feasible.

o    Incentive Award Approvals and Payout Timing

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


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ELIGIBILITY
-----------

All officers of the company are eligible to participate in the plan.

o    Pro Rata Awards for Partial Service Periods

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


     - Participants who are newly hired during the Plan Year.

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

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

     - Participants  who are  impacted or leave the  company  due to  retirement
       during the Plan Year.

     - The spouse or legal representative of a deceased participant.


o    Forfeiture of Awards

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


o    Provisions for a Change in Control

     The following provisions will apply should a Change in Control (CIC) of the
     company occur:

     - If  neither  the plan nor the  participant  are  terminated  due to a CIC
       during the Plan Year, a full year award equal to the higher of 50% of the
       maximum  award  opportunity  or the award that  results  from  projecting
       performance results through year-end based on year-to-date performance as
       of the CIC,  if  feasible,  will be paid to all  employees  who are still
       active as of December 31 of the Plan Year.

     - If either the plan or a  participant  is  terminated as a result of a CIC
       during the Protection  Period (as defined in the Retention  Plans), a pro
       rata award equal to the higher of 50% of the maximum award opportunity or
       the award  that  results  from  projecting  performance  results  through
       year-end  based on  year-to-date  performance as of the CIC, if feasible,
       will be paid for the  number of full  months  worked up until the date of
       termination.


o    Eligible "Base" for Incentive Purposes

     For the  purpose  of  incentive  calculations,  the salary  range  midpoint
     effective  December  31 of the Plan Year is  defined  as the  participant's
     eligible base unless the participant has been demoted during the Plan Year.
     In this event,  the officer's  award may be prorated based on the period of
     time worked at each level.


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AWARD DETERMINATION
-------------------

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

o    Minimum Performance Threshold

     The EPS "Threshold"  indicated on the EPS performance scale in Attachment A
     must be achieved before any payout will be made for the 2001 Plan Year.

o    Maximum Award Opportunity

     For the 2001 Plan Year, the maximum award opportunities are as follows:

            Eligibility Level                      Maximum Award Opportunity
            -----------------                      -------------------------

            Vice President                             50% of Midpoint
            Senior Vice President                      60% of Midpoint
            Executive Vice President                   70% of Midpoint
            Chairman, President and CEO               100% of Midpoint


PERFORMANCE CRITERIA
--------------------

The  following  stand-alone  performance  criteria are used to determine  awards
under the plan:

o     Corporate  Total  Shareholder  Return  (TSR):  TSR is defined as PNM stock
      price  appreciation  and dividends  compared to the  Philadelphia  Utility
      Index.  The percentage  points by which the company's TSR  outperforms the
      index by comparing  TSR for the last 15 days of the current plan year with
      the last 15 days of the prior plan year will  determine the award for this
      criterion.  In order  for a payout to be made for TSR  performance,  there
      must be an  increase  in the PNM  stock  price.  The  scale  provides  for
      interpolation of awards between performance targets.

o     Corporate  Earnings Per Share (EPS):  EPS is defined as  company-wide  net
      income related to running the business  (excluding  certain  extraordinary
      items or events that result in  windfalls  or  penalties  which are not in
      keeping  with the  spirit of the plan)  divided by the number of shares of
      PNM common stock  outstanding.  The scale  provides for  interpolation  of
      awards between performance targets.

o     Individual / Unit Performance:  These goals,  which are agreed upon at the
      beginning of the Plan Year, are customized by officer.






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