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				TNMP
	December 31,				December 31,
	2016		2015		2016		2015
Assets:	(In thousands)
Current:
FPPAC	$	1,451	$	—	$	—	$	—
Energy efficiency costs	1,991		—		413		629
Other	—		—		—		441
	3,442		—		413		1,070
Non-Current:
CTC, including carrying charges	—		—		36,328		46,147
Coal mine reclamation costs	22,383		28,303		—		—
Deferred income taxes	62,918		66,990		9,932		10,244
Loss on reacquired debt	24,404		23,627		34,107		35,405
Pension and OPEB	249,286		218,743		27,661		23,356
AMS surcharge	—		—		14,669		1,673
AMS retirement costs	—		—		11,086		8,549
Other	6,422		5,247		2,027		2,380
	365,413		342,910		135,810		127,754
Total regulatory assets	$	368,855	$	342,910	$	136,223	$	128,824



	PNM						TNMP
	December 31,						December 31,
	2016			2015			2016			2015
Liabilities:	(In thousands)
Current:
FPPAC	$	—		$	(11,410	)	$	—		$	—
Renewable energy rider	(3,411		)	(2,584		)	—			—
Other	(106		)	(1,597		)	(92		)	—
	(3,517		)	(15,591		)	(92		)	—
Non-Current:
Cost of removal	(297,087		)	(284,015		)	(26,900		)	(26,859		)
Deferred income taxes	(62,920		)	(77,502		)	(2,644		)	(3,283		)
PVNGS ARO	(30,621		)	(33,747		)	—			—
Renewable energy tax benefits	(22,540		)	(23,697		)	—			—
Nuclear spent fuel reimbursements	(8,875		)	(9,214		)	—			—
Pension and OPEB	—			—			(1,955		)	(1,913		)
Other	(1,658		)	(6,688		)	(449		)	(495		)
	(423,701		)	(434,863		)	(31,948		)	(32,550		)
Total regulatory liabilities	$	(427,218	)	$	(450,454	)	$	(32,040	)	$	(32,550	)

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 PVNGS ARO (to be determined in a future regulatory proceeding). In addition, TNMP does not currently 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.