Regulatory Assets and Liabilities

The operations of PNM and TNMP are regulated by the NMPRC, PUCT, and FERC and the provisions of GAAP for rate-regulated enterprises are applied to its regulated operations. Regulatory assets represent probable future recovery of previously incurred costs that will be collected from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and liabilities reflected in the Consolidated Balance Sheets are presented below.

PNM



	December 31,
	2014			2013
Assets:	(In thousands)
Current:
FPPAC	$	43,980		$	19,394
Non-Current:
Coal mine reclamation costs	34,224			40,144
Deferred income taxes	63,645			61,850
Loss on reacquired debt	25,439			27,490
Pension and OPEB	222,545			206,691
FPPAC	—			25,386
Renewable energy costs	5,263			13,311
Other	5,929			9,345
	357,045			384,217
Total regulatory assets	$	401,025		$	403,611
Liabilities:
Current:
Other	$	(1,703	)	$	(1,081	)
Non-Current:
Cost of removal	(277,148		)	(266,075		)
Deferred income taxes	(75,941		)	(80,495		)
AROs	(35,834		)	(37,567		)
Renewable energy tax benefits	(24,854		)	(26,011		)
Other	(11,704		)	(4,463		)
	(425,481		)	(414,611		)
Total regulatory liabilities	$	(427,184	)	$	(415,692	)

TNMP



	December 31,
	2014			2013
Assets:	(In thousands)
Current:
Transmission cost recovery factor	$	2,482		$	4,250
Other	1,393			772
	3,875			5,022
Non-Current:
CTC, including carrying charges	55,292			63,606
Deferred income taxes	10,556			10,868
Pension	23,803			19,938
Loss on reacquired debt	36,703			38,616
AMS retirement costs	6,453			5,083
Other	1,155			1,627
	133,962			139,738
Total regulatory assets	$	137,837		$	144,760
Liabilities:
Non-Current:
Cost of removal	$	(29,391	)	$	(30,863	)
Deferred income taxes	(3,923		)	(4,563		)
AMS surcharge	(5,227		)	(7,251		)
OPEB	(2,121		)	(3,361		)
Total regulatory liabilities	$	(40,662	)	$	(46,038	)

The Company’s regulatory assets and regulatory liabilities are reflected in rates charged to customers or have been addressed in a regulatory proceeding. The Company does not receive or pay a rate of return on the following regulatory assets and regulatory liabilities (and their remaining amortization periods): coal mine reclamation costs (through 2020); deferred income taxes (over the remaining life of the taxable item, up to the remaining life of utility plant); pension and OPEB costs (through 2033); and AROs (to be determined in a future regulatory proceeding). In addition, TNMP does not receive a return on substantially all of its loss on reacquired debt (through 2043).

The Company is permitted, under rate regulation, to accrue and record a regulatory liability for the estimated cost of removal and salvage associated with certain of its assets through depreciation expense. Under GAAP, actuarial losses and prior service costs for pension plans are required to be recorded in AOCI; however, to the extent authorized for recovery through the regulatory process these amounts are recorded as regulatory assets or liabilities. Based on prior regulatory approvals, the amortization of these amounts will be included in the Company’s rates.

Based on a current evaluation of the various factors and conditions that are expected to impact future cost recovery, the Company believes that future recovery of its regulatory assets are probable.