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Table of Contents

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, 2016

Commission File
 
Name of Registrants, State of Incorporation,
 
I.R.S. Employer
 Number
 
 Address and Telephone Number
 
 Identification No.
001-32462
 
PNM Resources, Inc.
 
85-0468296
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
001-06986
 
Public Service Company of New Mexico
 
85-0019030
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
002-97230
 
Texas-New Mexico Power Company
 
75-0204070
 
 
(A Texas Corporation)
 
 
 
 
577 N. Garden Ridge Blvd.
 
 
 
 
Lewisville, Texas 75067
 
 
 
 
(972) 420-4189
 
 

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
PNM Resources, Inc. (“PNMR”)
YES
ü
NO
 
 
Public Service Company of New Mexico (“PNM”)
YES
ü
NO
 
 
Texas-New Mexico Power Company (“TNMP”)
YES
 
NO
ü

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
PNMR
YES
ü
NO
 
 
PNM
YES
ü
NO
 
 
TNMP
YES
ü
NO
 




Table of Contents

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 
 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer
 
Smaller Reporting Company
 
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 


Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES     NO ü

As of October 21, 2016, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM outstanding as of October 21, 2016 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP outstanding as of October 21, 2016 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

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).

This combined Form 10-Q is separately filed by PNMR, PNM, and TNMP.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  When this Form 10-Q is incorporated by reference into any filing with the SEC made by PNMR, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.



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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX

 
Page No.
 
 
 
 
 
 


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GLOSSARY

Definitions:
  
 
ABCWUA
 
Albuquerque Bernalillo County Water Utility Authority
Afton
  
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
ALJ
  
Administrative Law Judge
AMI
 
Advanced Metering Infrastructure
AMS
 
Advanced Meter System
AOCI
  
Accumulated Other Comprehensive Income
APS
  
Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners
ASU
 
Accounting Standards Update
BACT
  
Best Available Control Technology
BART
  
Best Available Retrofit Technology
BDT
 
Balanced Draft Technology
BHP
  
BHP Billiton, Ltd
Board
  
Board of Directors of PNMR
BTMU
 
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
BTMU Term Loan Agreement
 
NM Capital’s $125.0 Million Unsecured Term Loan
BTU
  
British Thermal Unit
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CCN
 
Certificate of Convenience and Necessity
CO2
  
Carbon Dioxide
CSA
 
Coal Supply Agreement
CTC
  
Competition Transition Charge
DC Circuit
 
United States Court of Appeals for the District of Columbia Circuit
Delta
  
Delta-Person Generating Station, now known as Rio Bravo
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EGU
 
Electric Generating Unit
EIP
  
Eastern Interconnection Project
EIS
 
Environmental Impact Study
EPA
  
United States Environmental Protection Agency
ESA
 
Endangered Species Act
Exchange Act
 
Securities Exchange Act of 1934
Farmington
 
The City of Farmington, New Mexico
FASB
  
Financial Accounting Standards Board
FERC
  
Federal Energy Regulatory Commission
FIP
  
Federal Implementation Plan
Four Corners
  
Four Corners Power Plant
FPPAC
  
Fuel and Purchased Power Adjustment Clause
FTY
 
Future Test Year
GAAP
  
Generally Accepted Accounting Principles in the United States of America
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours

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IRP
 
Integrated Resource Plan
IRS
  
Internal Revenue Service
ISFSI
 
Independent Spent Fuel Storage Installation
KW
  
Kilowatt
KWh
  
Kilowatt Hour
La Luz
  
La Luz Generating Station
LIBOR
  
London Interbank Offered Rate
Lightning Dock Geothermal
 
Lightning Dock geothermal power facility, also known as the Dale Burgett Geothermal Plant
Lordsburg
  
Lordsburg Generating Station
Luna
  
Luna Energy Facility
MD&A
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU
  
Million BTUs
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour
NAAQS
 
National Ambient Air Quality Standards
Navajo Acts
  
Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT
  
Nuclear Decommissioning Trusts for PVNGS
NEC
 
Navopache Electric Cooperative, Inc.
NEE
 
New Energy Economy
NEPA
 
National Environmental Policy Act
NERC
  
North American Electric Reliability Corporation
New Mexico Wind
 
New Mexico Wind Energy Center
NM 2015 Rate Case
 
Request for a General Increase in Electric Rates Filed by PNM on August 27, 2015
NM Capital
 
NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR
NM Supreme Court
 
New Mexico Supreme Court
NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.
NMMMD
 
The Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRC
  
New Mexico Public Regulation Commission
NOx
  
Nitrogen Oxides
NOPR
 
Notice of Proposed Rulemaking
NPDES
 
National Pollutant Discharge Elimination System
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PCRBs
  
Pollution Control Revenue Bonds
PNM
  
Public Service Company of New Mexico and Subsidiaries, a wholly-owned subsidiary of PNMR
PNM 2014 Term Loan Agreement
 
PNM’s $175.0 Million Unsecured Term Loan
PNM 2016 Term Loan Agreement
 
PNM’s $175.0 Million Unsecured Term Loan

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PNM Multi-draw Term Loan
 
PNM’s $125.0 Million Unsecured Multi-draw Term Loan Facility
PNM New Mexico Credit Facility
 
PNM’s $50.0 Million Unsecured Revolving Credit Facility
PNM Revolving Credit Facility
 
PNM’s $400.0 Million Unsecured Revolving Credit Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR 2015 Term
   Loan Agreement
 
PNMR’s $150.0 Million Three-Year Unsecured Term Loan
PNMR Development
 
PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR
PNMR Revolving Credit Facility
 
PNMR’s $300.0 Million Unsecured Revolving Credit Facility
PNMR Term Loan Agreement
  
PNMR’s $150.0 Million One-Year Unsecured Term Loan
PPA
  
Power Purchase Agreement
PSA
 
Power Sales Agreement
PSD
  
Prevention of Significant Deterioration
PUCT
  
Public Utility Commission of Texas
PV
  
Photovoltaic
PVNGS
  
Palo Verde Nuclear Generating Station
RA
 
San Juan Project Restructuring Agreement
RCRA
  
Resource Conservation and Recovery Act
RCT
  
Reasonable Cost Threshold
REA
 
New Mexico’s Renewable Energy Act of 2004
REC
  
Renewable Energy Certificates
Red Mesa Wind
 
Red Mesa Wind Energy Center
REP
  
Retail Electricity Provider
Rio Bravo
 
Rio Bravo Generating Station, formerly known as Delta
RMC
  
Risk Management Committee
ROE
 
Return on Equity
RPS
  
Renewable Energy Portfolio Standard
S&P
  
Standard and Poor’s Ratings Services
SCR
 
Selective Catalytic Reduction
SEC
  
United States Securities and Exchange Commission
SIP
  
State Implementation Plan
SJCC
  
San Juan Coal Company
SJGS
  
San Juan Generating Station
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
TECA
  
Texas Electric Choice Act
Tenth Circuit
 
United States Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries, a wholly-owned subsidiary of TNP
TNMP 2015 Bond Purchase Agreement
 
TNMP’s $60.0 Million First Mortgage Bonds
TNMP Revolving Credit Facility
  
TNMP’s $75.0 Million Secured Revolving Credit Facility
TNP
  
TNP Enterprises, Inc. and Subsidiaries, a wholly-owned subsidiary of PNMR
Tucson
  
Tucson Electric Power Company

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Table of Contents

UG-CSA
 
Underground Coal Sales Agreement
US Supreme Court
 
Supreme Court of the United States
Valencia
 
Valencia Energy Facility
VaR
 
Value at Risk
VIE
 
Variable Interest Entity
WACC
 
Weighted Average Cost of Capital
WEG
 
WildEarth Guardians
Westmoreland
 
Westmoreland Coal Company
Westmoreland Loan
 
$125.0 Million of funding provided by NM Capital to WSJ
WSJ
 
Westmoreland San Juan, LLC, an indirect wholly-owned subsidiary of Westmoreland

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
400,374

 
$
417,433

 
$
1,026,726

 
$
1,103,187

Operating Expenses:

 
 
 

 

Cost of energy
108,766

 
124,255

 
282,498

 
353,939

Administrative and general
46,942

 
46,375

 
139,214

 
130,161

Energy production costs
31,460

 
42,168

 
112,026

 
129,627

Regulatory disallowances and restructuring costs
16,451

 

 
17,225

 
1,744

Depreciation and amortization
53,017

 
47,503

 
153,801

 
139,013

Transmission and distribution costs
16,056

 
16,768

 
49,965

 
50,123

Taxes other than income taxes
19,611

 
18,859

 
57,598

 
55,093

Total operating expenses
292,303

 
295,928

 
812,327

 
859,700

Operating income
108,071

 
121,505

 
214,399

 
243,487

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
4,604

 
1,151

 
18,420

 
4,842

Gains on available-for-sale securities
4,531

 
2,536

 
15,380

 
12,116

Other income
4,884

 
6,165

 
13,413

 
16,844

Other (deductions)
(3,764
)
 
(3,222
)
 
(10,866
)
 
(10,591
)
Net other income and deductions
10,255

 
6,630

 
36,347

 
23,211

Interest Charges
32,467

 
27,528

 
97,179

 
86,714

Earnings before Income Taxes
85,859

 
100,607

 
153,567

 
179,984

Income Taxes
27,303

 
35,752

 
50,094

 
61,621

Net Earnings
58,556

 
64,855

 
103,473

 
118,363

(Earnings) Attributable to Valencia Non-controlling Interest
(4,006
)
 
(3,678
)
 
(11,037
)
 
(10,909
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Attributable to PNMR
$
54,418

 
$
61,045

 
$
92,040

 
$
107,058

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.68

 
$
0.77

 
$
1.15

 
$
1.34

Diluted
$
0.68

 
$
0.76

 
$
1.15

 
$
1.34

Dividends Declared per Common Share
$
0.22

 
$
0.20

 
$
0.66

 
$
0.60


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



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Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Net Earnings
$
58,556

 
$
64,855

 
$
103,473

 
$
118,363

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period, net of income tax (expense) benefit of $(1,877), $1,200, $(1,216) and $(1,213)
2,933

 
(1,862
)
 
1,899

 
1,882

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $1,985, $3,925, $3,955 and $8,838
(3,101
)
 
(6,090
)
 
(6,180
)
 
(13,714
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(537), $(583), $(1,611) and $(1,749)
839

 
905

 
2,517

 
2,715

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $(172), $276, $509 and $276
269

 
(428
)
 
(796
)
 
(428
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(79), $0, $(224) and $0
123

 

 
349

 

Total Other Comprehensive Income (Loss)
1,063

 
(7,475
)
 
(2,211
)
 
(9,545
)
Comprehensive Income
59,619

 
57,380

 
101,262

 
108,818

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,006
)
 
(3,678
)
 
(11,037
)
 
(10,909
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Comprehensive Income Attributable to PNMR
$
55,481

 
$
53,570

 
$
89,829

 
$
97,513


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


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Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
103,473

 
$
118,363

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
178,137

 
165,563

Deferred income tax expense
50,302

 
62,511

Net unrealized (gains) losses on commodity derivatives
2,179

 
1,251

Realized (gains) on available-for-sale securities
(15,380
)
 
(12,116
)
Stock based compensation expense
4,401

 
3,748

Regulatory disallowances and restructuring costs
17,225

 
1,744

Other, net
(954
)
 
(4,301
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(1,145
)
 
(23,783
)
Materials, supplies, and fuel stock
(4,629
)
 
(3,629
)
Other current assets
(11,819
)
 
37,756

Other assets
1,916

 
12,350

Accounts payable
6,192

 
1,275

Accrued interest and taxes
20,816

 
28,233

Other current liabilities
(19,431
)
 
(12,731
)
Other liabilities
(10,297
)
 
(40,662
)
Net cash flows from operating activities
320,986

 
335,572

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(502,530
)
 
(411,606
)
Proceeds from sales of available-for-sale securities
280,989

 
166,097

Purchases of available-for-sale securities
(284,706
)
 
(166,268
)
Return of principal on PVNGS lessor notes
8,547

 
21,694

Investment in Westmoreland Loan
(122,250
)
 

Principal repayments on Westmoreland Loan
15,000

 

Other, net
179

 
2,891

Net cash flows from investing activities
(604,771
)
 
(387,192
)

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.

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Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings, net
105,300

 
(3,000
)
Long-term borrowings
503,500

 
463,605

Repayment of long-term debt
(288,157
)
 
(333,066
)
Proceeds from stock option exercise
6,668

 
7,394

Awards of common stock
(14,920
)
 
(18,955
)
Dividends paid
(52,967
)
 
(48,188
)
Valencia’s transactions with its owner
(12,327
)
 
(12,107
)
Other, net
(1,682
)
 
(5,402
)
Net cash flows from financing activities
245,415

 
50,281

 
 
 
 
Change in Cash and Cash Equivalents
(38,370
)
 
(1,339
)
Cash and Cash Equivalents at Beginning of Period
46,051

 
28,274

Cash and Cash Equivalents at End of Period
$
7,681

 
$
26,935

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
75,537

 
$
63,046

Income taxes paid (refunded), net
$
850

 
$
(1,636
)
 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
30,208

 
$
(8,748
)

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


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Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
7,681

 
$
46,051

Accounts receivable, net of allowance for uncollectible accounts of $1,264 and $1,397
92,060

 
98,699

Unbilled revenues
57,705

 
52,012

Other receivables
17,715

 
28,590

Current portion of Westmoreland Loan
43,553

 

Materials, supplies, and fuel stock
72,015

 
67,386

Regulatory assets
7,558

 
1,070

Commodity derivative instruments
3,949

 
3,813

Income taxes receivable
6,904

 
5,845

Other current assets
89,746

 
82,104

Total current assets
398,886

 
385,570

Other Property and Investments:
 
 
 
Long-term portion of Westmoreland Loan
66,230

 

Available-for-sale securities
271,035

 
259,042

Other investments
428

 
604

Non-utility property
3,404

 
3,404

Total other property and investments
341,097

 
263,050

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
6,842,017

 
6,307,261

Less accumulated depreciation and amortization
2,312,560

 
2,058,772

 
4,529,457

 
4,248,489

Construction work in progress
227,355

 
204,766

Nuclear fuel, net of accumulated amortization of $50,623 and $44,455
87,083

 
82,117

Net utility plant
4,843,895

 
4,535,372

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
463,016

 
470,664

Goodwill
278,297

 
278,297

Commodity derivative instruments
747

 
2,622

Other deferred charges
77,732

 
73,753

Total deferred charges and other assets
819,792

 
825,336

 
$
6,403,670

 
$
6,009,328


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


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PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
355,900

 
$
250,600

Current installments of long-term debt
101,335

 
124,979

Accounts payable
76,403

 
100,419

Customer deposits
11,693

 
12,216

Accrued interest and taxes
80,180

 
58,306

Regulatory liabilities
6,403

 
15,591

Commodity derivative instruments
2,423

 
1,859

Dividends declared
17,656

 
17,656

Other current liabilities
49,833

 
59,494

Total current liabilities
701,826

 
641,120

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
2,207,005

 
1,966,969

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
935,796

 
877,393

Regulatory liabilities
468,979

 
467,413

Asset retirement obligations
119,032

 
111,895

Accrued pension liability and postretirement benefit cost
63,437

 
73,097

Commodity derivative instruments
58

 

Other deferred credits
137,686

 
133,692

Total deferred credits and other liabilities
1,724,988

 
1,663,490

Total liabilities
4,633,819

 
4,271,579

Commitments and Contingencies (See Note 11)


 


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

Equity:
 
 
 
PNMR common stockholders’ equity:
 
 
 
Common stock (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,162,599

 
1,166,465

Accumulated other comprehensive income (loss), net of income taxes
(73,643
)
 
(71,432
)
Retained earnings
599,249

 
559,780

Total PNMR common stockholders’ equity
1,688,205

 
1,654,813

Non-controlling interest in Valencia
70,117

 
71,407

Total equity
1,758,322

 
1,726,220

 
$
6,403,670

 
$
6,009,328

 
 
 
 

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


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Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

 
Attributable to PNMR
 
Non-
controlling
Interest
in Valencia
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
Total PNMR Common Stockholders’ Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2015
$
1,166,465

 
$
(71,432
)
 
$
559,780

 
$
1,654,813

 
$
71,407

 
$
1,726,220

Net earnings before subsidiary preferred stock dividends

 

 
92,436

 
92,436

 
11,037

 
103,473

Total other comprehensive income (loss)

 
(2,211
)
 

 
(2,211
)
 

 
(2,211
)
Subsidiary preferred stock dividends

 

 
(396
)
 
(396
)
 

 
(396
)
Dividends declared on common stock

 

 
(52,571
)
 
(52,571
)
 

 
(52,571
)
Proceeds from stock option exercise
6,668

 

 

 
6,668

 

 
6,668

Awards of common stock
(14,920
)
 

 

 
(14,920
)
 

 
(14,920
)
Excess tax (shortfall) from stock-based payment arrangements
(15
)
 

 

 
(15
)
 

 
(15
)
Stock based compensation expense
4,401

 

 

 
4,401

 

 
4,401

Valencia’s transactions with its owner

 

 

 

 
(12,327
)
 
(12,327
)
Balance at September 30, 2016
$
1,162,599

 
$
(73,643
)
 
$
599,249

 
$
1,688,205

 
$
70,117

 
$
1,758,322



The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



14

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Electric Operating Revenues
$
311,276

 
$
333,437

 
$
780,228

 
$
870,826

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
88,565

 
105,708

 
222,376

 
299,302

Administrative and general
41,370

 
41,927

 
122,553

 
118,450

Energy production costs
31,460

 
42,168

 
112,026

 
129,627

Regulatory disallowances and restructuring costs
16,451

 

 
17,225

 
1,744

Depreciation and amortization
33,312

 
29,042

 
97,778

 
86,446

Transmission and distribution costs
9,311

 
10,478

 
29,868

 
31,519

Taxes other than income taxes
10,750

 
10,404

 
33,289

 
31,194

Total operating expenses
231,219

 
239,727

 
635,115

 
698,282

Operating income
80,057

 
93,710

 
145,113

 
172,544

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
1,509

 
1,152

 
8,549

 
4,869

Gains on available-for-sale securities
4,531

 
2,536

 
15,380

 
12,116

Other income
3,239

 
5,369

 
9,578

 
13,661

Other (deductions)
(2,790
)
 
(2,616
)
 
(7,653
)
 
(7,230
)
Net other income and deductions
6,489

 
6,441

 
25,854

 
23,416

Interest Charges
22,213

 
19,837

 
66,494

 
59,477

Earnings before Income Taxes
64,333

 
80,314

 
104,473

 
136,483

Income Taxes
19,343

 
27,258

 
32,131

 
44,560

Net Earnings
44,990

 
53,056

 
72,342

 
91,923

(Earnings) Attributable to Valencia Non-controlling Interest
(4,006
)
 
(3,678
)
 
(11,037
)
 
(10,909
)
Net Earnings Attributable to PNM
40,984

 
49,378

 
61,305

 
81,014

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Available for PNM Common Stock
$
40,852

 
$
49,246

 
$
60,909

 
$
80,618


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


15

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Net Earnings
$
44,990

 
$
53,056

 
$
72,342

 
$
91,923

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period, net of income tax (expense) benefit of $(1,877), $1,200, $(1,216) and $(1,213)
2,933

 
(1,862
)
 
1,899

 
1,882

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $1,985, $3,925, $3,955 and $8,838
(3,101
)
 
(6,090
)
 
(6,180
)
 
(13,714
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(537), $(583), $(1,611) and $(1,749)
839

 
905

 
2,517

 
2,715

Total Other Comprehensive Income (Loss)
671

 
(7,047
)
 
(1,764
)
 
(9,117
)
Comprehensive Income
45,661

 
46,009

 
70,578

 
82,806

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,006
)
 
(3,678
)
 
(11,037
)
 
(10,909
)
Comprehensive Income Attributable to PNM
$
41,655

 
$
42,331

 
$
59,541

 
$
71,897


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


16

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
72,342

 
$
91,923

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
122,344

 
111,371

Deferred income tax expense
33,175

 
46,268

Net unrealized (gains) losses on commodity derivatives
2,179

 
1,251

Realized (gains) on available-for-sale securities
(15,380
)
 
(12,116
)
Regulatory disallowances and restructuring costs
17,225

 
1,744

Other, net
(563
)
 
(5,288
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
8,283

 
(16,220
)
Materials, supplies, and fuel stock
(7,731
)
 
(3,328
)
Other current assets
(4,005
)
 
36,707

Other assets
10,117

 
12,126

Accounts payable
6,819

 
(794
)
Accrued interest and taxes
16,146

 
22,856

Other current liabilities
(18,908
)
 
(12,099
)
Other liabilities
(13,401
)
 
(34,224
)
Net cash flows from operating activities
228,642

 
240,177

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(377,637
)
 
(301,410
)
Proceeds from sales of available-for-sale securities
280,989

 
166,097

Purchases of available-for-sale securities
(284,706
)
 
(166,268
)
Return of principal on PVNGS lessor notes
8,547

 
21,694

Other, net
171

 
3,051

Net cash flows from investing activities
(372,636
)
 
(276,836
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


17

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings, net
42,400

 

Long-term borrowings
321,000

 
313,605

Repayment of long-term debt
(271,000
)
 
(214,300
)
Equity contribution from parent
28,142

 

Dividends paid
(4,538
)
 
(46,548
)
Valencia’s transactions with its owner
(12,327
)
 
(12,107
)
Other, net
(928
)
 
(4,934
)
Net cash flows from financing activities
102,749

 
35,716

 
 
 
 
Change in Cash and Cash Equivalents
(41,245
)
 
(943
)
Cash and Cash Equivalents at Beginning of Period
43,138

 
25,480

Cash and Cash Equivalents at End of Period
$
1,893

 
$
24,537

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
53,791

 
$
42,680

Income taxes paid (refunded), net
$

 
$
(1,450
)
 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
20,200

 
$
(9,933
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


18

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1,893

 
$
43,138

Accounts receivable, net of allowance for uncollectible accounts of $1,264 and $1,397
63,109

 
78,291

Unbilled revenues
47,450

 
42,641

Other receivables
15,676

 
24,725

Affiliate receivables
8,956

 
15,105

Materials, supplies, and fuel stock
68,208

 
60,477

Regulatory assets
4,364

 

Commodity derivative instruments
3,949

 
3,813

Income taxes receivable
15,621

 
14,577

Other current assets
81,419

 
74,990

Total current assets
310,645

 
357,757

Other Property and Investments:
 
 
 
Available-for-sale securities
271,035

 
259,042

Other investments
197

 
366

Non-utility property
96

 
96

Total other property and investments
271,328

 
259,504

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
5,303,910

 
4,833,303

Less accumulated depreciation and amortization
1,785,507

 
1,569,549

 
3,518,403

 
3,263,754

Construction work in progress
152,940

 
172,238

Nuclear fuel, net of accumulated amortization of $50,623 and $44,455
87,083

 
82,117

Net utility plant
3,758,426

 
3,518,109

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
335,025

 
342,910

Goodwill
51,632

 
51,632

Commodity derivative instruments
747

 
2,622

Other deferred charges
71,209

 
66,810

Total deferred charges and other assets
458,613

 
463,974

 
$
4,799,012

 
$
4,599,344

 
 
 
 

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


19

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
42,400

 
$

Current installments of long-term debt
56,862

 
124,979

Accounts payable
59,003

 
72,386

Affiliate payables
15,082

 
14,318

Customer deposits
11,693

 
12,216

Accrued interest and taxes
50,379

 
33,189

Regulatory liabilities
6,403

 
15,591

Commodity derivative instruments
2,423

 
1,859

Dividends declared
132

 
132

Other current liabilities
31,606

 
42,251

Total current liabilities
275,983

 
316,921

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
1,574,725

 
1,455,698

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
737,780

 
696,384

Regulatory liabilities
434,755

 
434,863

Asset retirement obligations
118,133

 
111,049

Accrued pension liability and postretirement benefit cost
57,057

 
66,285

Commodity derivative instruments
58

 

Other deferred credits
117,797

 
117,275

Total deferred credits and liabilities
1,465,580

 
1,425,856

Total liabilities
3,316,288

 
3,198,475

Commitments and Contingencies (See Note 11)


 


Cumulative Preferred Stock
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,264,918

 
1,236,776

Accumulated other comprehensive income (loss), net of income taxes
(73,240
)
 
(71,476
)
Retained earnings
209,400

 
152,633

Total PNM common stockholder’s equity
1,401,078

 
1,317,933

Non-controlling interest in Valencia
70,117

 
71,407

Total equity
1,471,195

 
1,389,340

 
$
4,799,012

 
$
4,599,344


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.

20

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
 
Attributable to PNM
 
 
 
 
 
 
 
 
 
Total PNM
Common
Stockholder’s
Equity
 
Non-
controlling
 Interest in Valencia
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
 
 
Total
Equity
 
 
 
 
 
 
 
(In thousands)
Balance at December 31, 2015
$
1,236,776

 
$
(71,476
)
 
$
152,633

 
$
1,317,933

 
$
71,407

 
$
1,389,340

Net earnings

 

 
61,305

 
61,305

 
11,037

 
72,342

Total other comprehensive income (loss)

 
(1,764
)
 

 
(1,764
)
 

 
(1,764
)
Dividends declared on preferred stock

 

 
(396
)
 
(396
)
 

 
(396
)
Equity contribution from parent
28,142

 

 

 
28,142

 

 
28,142

Dividends declared on common stock

 

 
(4,142
)
 
(4,142
)
 

 
(4,142
)
Valencia’s transactions with its owner

 

 

 

 
(12,327
)
 
(12,327
)
Balance at September 30, 2016
$
1,264,918

 
$
(73,240
)
 
$
209,400

 
$
1,401,078

 
$
70,117

 
$
1,471,195



The accompanying notes, as they relate to PNM, are an integral part of these financial statements.

21

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Electric Operating Revenues
$
89,098

 
$
83,996

 
$
246,498

 
$
232,361

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
20,201

 
18,547

 
60,122

 
54,637

Administrative and general
9,588

 
9,071

 
29,382

 
26,946

Depreciation and amortization
16,354

 
15,016

 
45,760

 
42,065

Transmission and distribution costs
6,745

 
6,290

 
20,097

 
18,604

Taxes other than income taxes
7,851

 
7,405

 
20,849

 
19,782

Total operating expenses
60,739

 
56,329

 
176,210

 
162,034

Operating income
28,359

 
27,667

 
70,288

 
70,327

Other Income and Deductions:
 
 
 
 
 
 
 
Other income
1,376

 
774

 
2,999

 
3,106

Other (deductions)
(521
)
 
(102
)
 
(860
)
 
(349
)
Net other income and deductions
855

 
672

 
2,139

 
2,757

Interest Charges
7,308

 
6,855

 
22,150

 
20,636

Earnings before Income Taxes
21,906

 
21,484

 
50,277

 
52,448

Income Taxes
8,053

 
7,795

 
18,460

 
19,200

Net Earnings
$
13,853

 
$
13,689

 
$
31,817

 
$
33,248


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.



22

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
31,817

 
$
33,248

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
47,055

 
43,272

Deferred income tax expense
(739
)
 
3,575

Other, net
(391
)
 
(125
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(9,428
)
 
(7,563
)
Materials and supplies
3,102

 
(301
)
Other current assets
(3,570
)
 
2,712

Other assets
(8,415
)
 
(272
)
Accounts payable
(6,758
)
 
(210
)
Accrued interest and taxes
22,896

 
19,757

Other current liabilities
(363
)
 
1,033

Other liabilities
399

 
(5,870
)
Net cash flows from operating activities
75,605

 
89,256

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(93,048
)
 
(90,497
)
Net cash flows from investing activities
(93,048
)
 
(90,497
)
Cash Flow From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
(59,000
)
 
(5,000
)
Short-term borrowings (repayments) – affiliate, net
(11,800
)
 
25,800

Long-term borrowings
60,000

 

Equity contribution from parent
50,000

 

Dividends paid
(17,965
)
 
(19,559
)
Other, net
(775
)
 

Net cash flows from financing activities
20,460

 
1,241

 
 
 
 
Change in Cash and Cash Equivalents
3,017

 

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
3,018

 
$
1

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
15,642

 
$
13,308

Income taxes paid (refunded), net
$
850

 
$
545

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
(10
)
 
$
(216
)

The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.



23

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
3,018

 
$
1

Accounts receivable
28,951

 
20,408

Unbilled revenues
10,255

 
9,371

Other receivables
1,129

 
811

Materials and supplies
3,807

 
6,909

Regulatory assets
3,194

 
1,070

Other current assets
2,167

 
1,053

Total current assets
52,521

 
39,623

Other Property and Investments:
 
 
 
Other investments
231

 
238

Non-utility property
2,240

 
2,240

Total other property and investments
2,471

 
2,478

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,342,081

 
1,285,727

Less accumulated depreciation and amortization
435,245

 
406,516

 
906,836

 
879,211

Construction work in progress
45,580

 
16,561

Net utility plant
952,416

 
895,772

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
127,991

 
127,754

Goodwill
226,665

 
226,665

Other deferred charges
4,776

 
4,847

Total deferred charges and other assets
359,432

 
359,266

 
$
1,366,840

 
$
1,297,139


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.

24

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$

 
$
59,000

Short-term debt – affiliate

 
11,800

Accounts payable
9,258

 
16,006

Affiliate payables
2,346

 
3,681

Accrued interest and taxes
55,788

 
32,891

Other current liabilities
3,012

 
2,044

Total current liabilities
70,404

 
125,422

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
420,802

 
361,411

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
232,218

 
232,791

Regulatory liabilities
34,224

 
32,550

Asset retirement obligations
739

 
695

Accrued pension liability and postretirement benefit cost
6,380

 
6,812

Other deferred credits
4,841

 
4,