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,
	2018		2017		2018		2017
Assets:	(In thousands)
Current:
FPPAC	$	4,104	$	363	$	—	$	—
Energy efficiency costs	430		1,776		—		794
	4,534		2,139		—		794
Non-Current:
CTC, including carrying charges	—		—		17,744		26,998
Coal mine reclamation costs	19,915		16,462		—		—
Deferred income taxes	63,369		59,220		9,309		9,621
Loss on reacquired debt	21,085		22,744		31,510		32,808
Pension and OPEB⁽¹⁾	227,400		222,774		26,972		26,153
Shutdown of SJGS Units 2 and 3	119,785		125,539		—		—
Hurricane recovery costs⁽²⁾	—		—		1,551		6,640
AMS surcharge	—		—		31,435		27,903
AMS retirement and other costs	—		—		16,489		8,948
Other	9,349		12,500		3,017		2,362
	460,903		459,239		138,027		141,433
Total regulatory assets	$	465,437	$	461,378	$	138,027	$	142,227



	PNM						TNMP
	December 31,						December 31,
	2018			2017			2018			2017
Liabilities:	(In thousands)
Current:
Renewable energy rider	$	(4,475	)	$	(779	)	$	—		$	—
Other	(1,500		)	(5		)	(3,471		)	(1,525		)
	(5,975		)	(784		)	(3,471		)	(1,525		)
Non-Current:
Cost of removal	(263,597		)	(256,493		)	(29,637		)	(26,541		)
Deferred income taxes	(407,978		)	(445,390		)	(143,745		)	(148,455		)
PVNGS ARO	(18,397		)	(24,889		)	—			—
Renewable energy tax benefits	(20,226		)	(21,383		)	—			—
Nuclear spent fuel reimbursements	—			(5,518		)	—			—
Accelerated depreciation SNCRs	(3,690		)	—			—			—
Pension and OPEB⁽³⁾	—			—			(3,940		)	(3,442		)
Other	(83		)	(768		)	(136		)	(699		)
	(713,971		)	(754,441		)	(177,458		)	(179,137		)
Total regulatory liabilities	$	(719,946	)	$	(755,225	)	$	(180,929	)	$	(180,662	)

⁽¹⁾Includes $0.4 million for certain pension costs as described in Note 11

⁽²⁾Amount shown is net of amounts owed under the PUCT’s January 25, 2018 order as described in Note 17

⁽³⁾Includes less than $0.1 million of amounts owed to customers for certain pension costs as described in Note 11

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).

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 is probable.