Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2023

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,
	2023		2022		2023		2022
Assets:	(In thousands)
Current:
FPPAC	$	65,251	$	8,904	$	—	$	—
NMPRC hedging plan	—		9,429		—		—

Energy efficiency costs	—		—		50		1,932
Renewable energy rider	5,021		—		—		—
SJGS Energy Transition Property	2,724		—		—		—
	72,996		18,333		50		1,932






Non-Current:
SJGS Energy Transition Property	$	340,629	$	343,238	$	—	$	—
SJGS - non-ETA	122,246		129,285		—		—

PVNGS leased interest	80,777		—		—		—

EIM	18,731		13,102		—		—
TEP	2,644		—		—		—
Loss on reacquired debt	13,806		15,323		25,019		26,317
Pension and OPEB	172,508		187,182		21,854		21,558
Deferred income taxes	71,359		67,621		8,882		9,193
AMS surcharge	—		—		—		6,254
AMS retirement and other costs	—		—		12,343		12,591
Deferred COVID-19 costs	5,664		5,664		—		1,053
Other	10,363		2,526		7,556		5,779
	838,727		763,941		75,654		82,745
Total regulatory assets	$	911,723	$	782,274	$	75,704	$	84,677





Liabilities:
Current:

SJGS rate refunds	$	(113,372)	$	—	$	—	$	—
PVNGS rate refunds	(19,194)		—		—		—
Renewable energy rider, including excess return	—		(5,076)		—		—
Energy efficiency costs	(1,454)		(2,837)		—		—
Transmission cost recovery factor	—		—		(5,159)		(9,089)
NMPRC hedging plan	(826)		—		—		—
	(134,846)		(7,913)		(5,159)		(9,089)
Non-Current:
Cost of removal	(247,627)		(238,903)		(117,759)		(97,030)
Deferred income taxes	(281,588)		(301,493)		(83,459)		(94,994)

Renewable energy tax benefits	(14,463)		(15,610)		—		—



PVNGS rate refunds	(19,194)		—		—		—
Pension and OPEB	—		—		(3,644)		(4,518)
COVID-19 cost savings	(900)		(900)		—		—
Other	(1,249)		(83)		(1,434)		(1,671)
	(565,021)		(556,989)		(206,296)		(198,213)
Total regulatory liabilities	$	(699,867)	$	(564,902)	$	(211,455)	$	(207,302)

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): SJGS Energy Transition Property (over the life of the securitized bonds); portions of PVNGS Leased Interest (through 2044); SJGS rate refunds (through 2024); PVNGS rate refunds (through 2025); deferred income taxes (over the remaining life of the taxable item, up to the remaining life of utility plant); pension and OPEB costs (through 2039).

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. 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.