00 application and testimony package - pnm resources/media/files/p/pnm... · 2020. 11. 23. ·...

DOCKET NO. 51547

JOINT REPORT AND APPLICATION OF TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC. AND AVANGRID, INC. FOR REGULATORY APPROVALS UNDER PURA §§ 14.101, 39.262, AND 39.915

§ § § § § §

PUBLIC UTILITY COMMISSION

OF TEXAS

JOINT REPORT AND APPLICATION OF

TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC. AND AVANGRID, INC. FOR REGULATORY APPROVALS

UNDER PURA §§ 14.101, 39.262, AND 39.915

TABLE OF CONTENTS

SECTION PAGE Application 2

Direct Testimony and Exhibits of James Neal Walker 50

Direct Testimony and Exhibits of Stacy R. Whitehurst 67

Direct Testimony and Exhibit of Henry E. Monroy 109

Direct Testimony and Exhibits of Ellen Lapson 124

Direct Testimony and Exhibits of Pedro Azagra Blazquez 180

Direct Testimony and Exhibit of Robert D. Kump 300

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DOCKET NO. 51547

JOINT REPORT AND APPLICATION OF TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC., AND AVANGRID, INC. FOR REGULATORY APPROVALS UNDER PURA §§ 14.101, 39.262, AND 39.915

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OF TEXAS

JOINT REPORT AND APPLICATION OF TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC.

AND AVANGRID, INC. FOR REGULATORY APPROVALSUNDER PURA §§ 14.101, 39.262, AND 39.915

Texas-New Mexico Power Company (TNMP or the Company), NM Green Holdings, Inc.

(Green Holdings), and Avangrid, Inc. (Avangrid) (collectively Joint Applicants) file this Joint

Report and Application for Regulatory Approvals (Application) with the Public Utility

Commission of Texas (Commission) under Sections 14.101, 39.262(l)-(m), and 39.915 of the

Public Utility Regulatory Act (PURA).1

I. Introduction and Summary

Effective October 20, 2020, TNMP’s indirect parent company, PNM Resources, Inc.

(PNMR), entered into an Agreement and Plan of Merger (Merger Agreement) with Avangrid and

its subsidiary, Green Holdings, under which, following receipt of regulatory approvals and

satisfaction of other closing conditions, Green Holdings will be merged with and into PNMR with

PNMR as the surviving corporation and a direct subsidiary of Avangrid. Avangrid will then

contribute 100% of its interest in PNMR to Avangrid Networks, Inc. (Avangrid Networks).

Avangrid also proposes to then have PNMR’s subsidiary, TNP Enterprises, Inc. (TNPE) transfer

the 100% ownership interest in TNMP to a newly created special purpose entity (SPE) that will be

owned by TNPE, so that there would be a SPE interposed between TNMP and TNPE. These

collective steps are the Proposed Transaction. After closing, TNMP and Public Service of New

Mexico (PNM) will continue to be subsidiaries of PNMR and will be indirect subsidiaries of

Avangrid Networks and Avangrid. TNMP, Green Holdings and Avangrid file this Application for

Commission approvals necessary to complete the Proposed Transaction.

1 Public Utility Regulatory Act, Tex. Util. Code §§ 11.001-66.016.

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The Proposed Transaction provides significant benefits to TNMP customers and to Texas.

Those benefits include:

A direct financial benefit to TNMP customers in the form of an $8.6 million rate credit to

electric delivery rates payable over three years following closing of the Proposed

Transaction;

o These credits can be passed through directly to end-use customers by retail electric

providers (REPs);

o TNMP commits to working in good faith with affected REPs to determine an

acceptable method for implementation of such electric delivery rate credits to

implement this commitment;

Indirect financial benefits to TNMP communities in form of:

o Charitable contributions in accordance with TNMP’s past level of contributions, to

continue for at least three years;

Anticipated indirect financial benefits to TNMP customers realized in future rate

proceedings—in the form of:

o More efficient and cost-effective access to capital;

o A positive impact on TNMP’s financial strength; and

o More efficient and cost-effective procurement of necessary materials, equipment,

and services;

Retention of local control and management, with the addition of extensive support:

o Maintain TNMP’s headquarters in TNMP’s service territory;

o Maintain existing Texas management of TNMP’s day-to-day operations;

o Maintain Texas-based relationships with TNMP’s local communities, this

Commission and the Texas Legislature;

o Continue ownership of TNMP for at least five years;

o Continuation of high quality, safe and reliable service supported by honoring

TNMP’s current five-year capital expense plan, subject to customary exceptions

applied by the Commission to such capex plan commitments;

Continued support for TNMP employees:

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o There will be no involuntary terminations of TNMP’s employees (except for cause

or performance) for a minimum of two years following the closing of the Proposed

Transaction;

o TNMP will continue to honor current collective bargaining agreements post-

closing of the Proposed Transaction;

Financial and governance protections for TNMP and its customers provided by new

commitments included in this application and accompanying testimony that will become

PUC-enforceable only because of this Proposed Transaction, including commitments to:

o Create TNMP Holdings, an indirect, wholly-owned special purpose entity, to hold

100% of the equity interests of TNMP;

TNMP Holdings will have five directors, one of whom will be disinterested

and qualify as independent in all material respects in accordance with the

rules and regulations of the New York Stock Exchange;

The disinterested director will be named within 90 days after

closing;

A unanimous vote of the other directors will be required to remove

the disinterested director;

The compensation for being a TNMP Holdings director will not be

tied to the performance of any entity other than TNMP;

The disinterested director will be a resident of Texas and a United

States citizen;

TNMP Holdings will own 100% of the equity interests of TNMP, will be a

direct wholly-owned subsidiary of TNPE, and an indirect, wholly-owned

subsidiary of PNMR;

o Ensure that the sole authorized purpose of TNMP will be to provide transmission

and distribution utility service;

o Ensure that the sole authorized purpose of TNMP Holdings will be to own TNMP;

o Ensure that the TNMP Holdings board is obligated to act in the interests of TNMP;

o Ensure TNMP will maintain a name and logo separate from Avangrid, Iberdrola,

and all of their affiliates; provided that the Avangrid name and logo can also be

added for branding purposes (e.g., “An Avangrid Company”);

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o Ensure no pledging of TNMP assets, revenue, or stock for the benefit of any

affiliates;

o Ensure that debt at PNMR will be eliminated and will not be replaced as part of the

Proposed Transaction;

o Ensure that aside from existing arrangements, TNMP will not lend money to or

borrow money from any of its affiliates, other than money pool arrangements in

which TNMP may borrow from any affiliate but only lend to investment grade

rated, regulated utilities within Avangrid Networks;

o Ensure TNMP will not share credit facilities with affiliates, other than joint credit

revolvers with affiliates where liability shall be several and not joint, and where

there would not be cross default provisions applicable to any utility borrower;

o Ensure TNMP will not include in any of its credit or debt agreements cross-default

provisions related to any of its affiliates;

o Ensure any transfer of TNMP assets to an affiliate will be at arm’s length and

consistent with the Commission’s affiliate standards;

o Ensure TNMP will maintain separate books and records;

o Ensure TNMP will seek Commission authority to update its code of conduct to

incorporate the regulatory commitments adopted in this proceeding;

o Maintain stand-alone credit and debt ratings for TNMP with major rating agencies;

o Preclude issuance of any dividend by TNMP if its debt rating falls below BBB-

unless approved by the TNMP Holdings disinterested director or the Commission;

o Preclude issuance of new debt by TNMP or TNMP Holdings in connection with

this Proposed Transaction, provided that any increased costs due to refinancing of

existing TNMP debt caused by the Proposed Transaction will not be borne by

customers;

o Ensure that TNMP does not seek recovery in rates of any transaction acquisition

premium;

o Ensure that pushdown accounting is not used by TNMP Holdings or its affiliates;

o Ensure that TNMP does not seek recovery of transaction costs in rates (Transaction

costs are those incremental costs paid to advance or consummate the Proposed

Transaction and do not include TNMP employee time);

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o Ensure that TNMP customers will not bear transition costs;

o Ensure TNMP’s and TNMP Holdings’ corporate bylaws or LLC agreements reflect

the commitments adopted in this proceeding (updated documents to be filed 30 days

after closing);

o Prevent TNMP from building transmission assets outside ERCOT without

Commission permission, and prevent TNMP from taking action that will impair the

PUC’s jurisdiction or argue for FERC preemption over PUC cost allocation

decisions;

o Ensure TNMP will file annual compliance reports regarding these commitments at

the PUC for five years;

o Ensure PUC access to books and records of TNMP Holdings and its affiliates as

necessary to facilitate any necessary affiliate transaction review; and

o Acknowledge that the PUC has authority to change these regulatory commitments

and that any change in the commitments requires PUC approval.

II. The Joint Applicants

A. TNMP

TNMP, a wholly owned subsidiary of PNMR, is a transmission and distribution utility

serving four areas of Texas, all located in the Electric Reliability Council of Texas (ERCOT).

TNMP serves more than 259,000 homes and businesses in a service territory totaling 13,613 square

miles. With headquarters in Lewisville, TNMP has approximately 400 employees in more than

70 municipalities throughout the state. TNMP historically and currently receives support services

from affiliate employees located in Texas and New Mexico.

B. Avangrid

Avangrid is a leading United States sustainable energy company with approximately

$36 billion in assets and operations in 24 states. Avangrid was named among the World’s Most

Ethical companies in 2019 by the Ethisphere Institute. Avangrid employs approximately 6,600

people.

Avangrid’s primary business is ownership of its operating businesses, which are held by

two subsidiaries in two primary lines of business: Avangrid Networks and Avangrid Renewables.

Avangrid Networks owns eight electric and natural gas utilities, serving approximately 3.3 million

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customers in New York, Maine, Connecticut and Massachusetts, delivering electricity to

approximately 2.3 million electric utility customers and delivering natural gas to approximately

1.0 million natural gas public utility customers as of September 30, 2020. Avangrid Renewables

owns and operates approximately 7.5 gigawatts of wind and solar electricity generating capacity,

with a presence in 22 states across the United States.

Iberdrola S.A., a corporation (sociedad anónima) organized under the laws of the Kingdom

of Spain, a worldwide leader in the energy industry, directly owns 81.5% of the outstanding shares

of Avangrid common stock.

C. Green Holdings

Green Holdings is a New Mexico corporation and a wholly-owned subsidiary of Avangrid

that was formed solely for the purpose of merging with and into PNMR in the Proposed

Transaction. Its function is to be Avangrid’s acquisition subsidiary and ultimately, as set forth in

the Merger Agreement, it will be merged with and into PNMR. At that time, the separate corporate

existence of Green Holdings will cease and PNMR will be the surviving corporation wholly-owned

by Avangrid. Avangrid will provide Green Holdings with the financial resources needed to carry

out the Proposed Transaction.

III. Supporting Information

Joint Applicants provide the following information in support of this Application:

the direct testimony of the following witnesses: James Neal Walker, Stacy R.

Whitehurst, Henry E. Monroy, and Ellen Lapson for TNMP; Robert D. Kump and

Pedro Azagra Blazquez for Avangrid;

Merger Agreement (attached to the Direct Testimony of Mr. Azagra);

Regulatory Commitments (attached to the Direct Testimony of Mr. Kump);

Completed Commission Application for Sale, Transfer or Merger Form, attached as

Exhibit A to this Application;

Proposed Protective Order, attached as Exhibit B to this Application; and

Proposed Form of Notice, attached as Exhibit C to this Application.

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IV. The Proposed Transaction

The Proposed Transaction will first occur in accordance with the Merger Agreement, with

two additional post-closing steps. Under the Merger Agreement, Green Holdings will be merged

with and into PNMR, with PNMR as the surviving corporation and a direct subsidiary of Avangrid.

TNMP and PNM will continue to be subsidiaries of PNMR. Promptly following the closing,

Avangrid intends to transfer 100% of the ownership interests in Green Holdings to Networks,

making PNMR a subsidiary of Networks. Joint Applicants also propose inserting TNMP Holdings

between TNMP and TNPE. At the conclusion of these steps, TNMP would become an indirect

subsidiary of Avangrid Networks, Avangrid, and Iberdrola. Joint Applicants seek approval of the

Proposed Transaction as soon as possible so that they can close the Proposed Transaction

expeditiously, following receipt of regulatory approvals and satisfaction of other closing

conditions. In addition to approval by this Commission, Joint Applicants will seek review by the

New Mexico Public Regulation Commission, Federal Energy Regulatory Commission,

Department of Justice (Hart-Scott-Rodino Clearance), Nuclear Regulatory Commission, Federal

Communications Commission, and Committee on Foreign Investment in the United States.

V. Standards for Commission Review of the Proposed Transaction

The standards for Commission review of the Proposed Transaction are set out in PURA

§§ 14.101, 39.262(l)-(m), and 39.915. Under PURA §§ 39.262(l)–(m) and 39.915, the Proposed

Transaction cannot close unless the Commission finds that it is in the public interest. If the

Commission finds that the Proposed Transaction is in the public interest, the Commission shall

approve the Proposed Transaction. Under these provisions, the Commission must consider

whether the Proposed Transaction will adversely affect the reliability, availability, or cost of

service of the electric utility.

Under PURA § 14.101, the Commission must consider whether a proposed acquisition is

consistent with the public interest. In making this determination, the Commission must consider:

whether the Proposed Transaction will result in the transfer of jobs to workers outside of Texas,

adversely affect the health or safety of the utility’s customers or employees, or result in a decline

in service; the reasonable value of the property, facilities, or securities to be acquired; and whether

the utility will receive consideration equal to the reasonable value of the assets when it sells, leases,

or transfers assets.

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VI. The Proposed Transaction is in the Public Interest Because it Delivers Net Benefitsto TNMP Customers

As demonstrated in this Application and the supporting testimony and exhibits, the

Proposed Transaction not only satisfies these standards, it provides significant net benefits to

TNMP customers and to Texas that are achievable only because of the Proposed Transaction

through the commitments Joint Applicants are making to this Commission, to TNMP customers,

and to TNMP employees and communities within the TNMP service territory. Therefore, the

Proposed Transaction should be approved.

Avangrid’s commitments fall into seven categories:

Financial protections and code of conduct;

Local control and management;

Accounting and ratemaking;

Regulatory jurisdiction;

LLC agreements and corporate bylaws;

Tangible and quantifiable benefits; and

Governance.

A. Financial Protections and Code of Conduct

The Joint Applicants are, in this proceeding, committing to several significant financial

protections that will—because of this Proposed Transaction—become enforceable by the

Commission’s order, if that order approves the Proposed Transaction. These valuable protections

include commitments to:

o Create TNMP Holdings, an indirect, wholly-owned special purpose entity, to hold

100% of the equity interests of TNMP;

TNMP Holdings will own 100% of the equity interests of TNMP and will

be an indirect, wholly-owned subsidiary of PNMR;

o Ensure that the sole authorized purpose of TNMP will be to provide transmission

and distribution utility service;

o Ensure that the sole authorized purpose of TNMP Holdings will be to own TNMP;

o Ensure that the TNMP Holdings board is obligated to act in the interests of TNMP;

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o Ensure TNMP will maintain a name and logo separate from Avangrid, Iberdrola,

and all of their affiliates; provided that the Avangrid name and logo can also be

added for branding purposes (e.g. “An Avangrid Company”);

o Ensure no pledging of TNMP assets, revenue, or stock for the benefit of any

affiliates;

o Ensure that debt at PNMR will be eliminated and will not be replaced as part of the


o Ensure that aside from existing arrangements, TNMP will not lend money to or

borrow money from any of its affiliates, other than money pool arrangements in

which TNMP may borrow from any affiliate but only lend to investment grade

rated, regulated utilities within Avangrid Networks;

o Ensure TNMP will not share credit facilities with affiliates, other than joint credit

revolvers with affiliates where liability shall be several and not joint, and where

there would not be cross default provisions applicable to any utility borrower;

o Ensure TNMP will not include in any of its credit or debt agreements cross-default

provisions related to any of its affiliates;

o Ensure any transfer of TNMP assets to an affiliate will be at arm’s length and

consistent with the Commission’s affiliate standards;

o Ensure TNMP will maintain separate books and records;

o Ensure TNMP will seek Commission authority to update its code of conduct to

incorporate the regulatory commitments adopted in this proceeding;

o Maintain stand-alone credit and debt ratings for TNMP with major rating agencies;

o Preclude issuance of any dividend by TNMP if its debt rating falls below BBB-

unless approved by the TNMP Holdings disinterested director or the Commission;

and

o Preclude issuance of new debt by TNMP or TNMP Holdings in connection with

this Proposed Transaction, provided that any increased costs due to refinancing of

existing TNMP debt caused by the Proposed Transaction will not be borne by

customers.

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B. Retention of Local Control and Management

The Proposed Transaction is in the public interest because it will maintain the current local

management control and location of TNMP headquarters in TNMP’s service territory. As with all

previous Avangrid acquisitions of utilities, TNMP’s operations will continue to be managed by

the same TNMP management team. The TNMP President and senior management will retain day-

to-day operational control. This will assure the continuity not only of TNMP’s current operational

control, but also of TNMP’s respected relationships with local and state leaders, including with

this Commission. Moreover, with this Proposed Transaction, TNMP management will be given

access to and support from the entire Avangrid and Iberdrola family of companies (one of the

world’s top three utility companies) in order to take advantage of their experiences and best

practices, subject to any applicable regulatory requirements (e.g., code of conduct). Therefore,

TNMP’s continuation of the same high quality, safe, and reliable service will be augmented by

improvements in service that TNMP determines are in its and its customers’ best interests by

obtaining access to a wide network of best practices among its affiliated operating companies.

Avangrid recognizes that a significant reason for TNMP’s high quality, safe and reliable

service is its workforce. This is not a Proposed Transaction where the parties are seeking to extract

synergistic benefits from staffing reductions. Accordingly, TNMP will not implement any

involuntary workforce reductions (except for cause or performance) for two years and will not

reduce wages or benefits for that period. TNMP will also honor existing collective bargaining

agreements.

Avangrid also commits to holding its indirect controlling interest in TNMP for at least five

years.

C. Accounting and Ratemaking

Avangrid recognizes that accounting and ratemaking commitments are necessary to ensure

that customers do not bear costs such as any Proposed Transaction acquisition premium, Proposed

Transaction costs, or transition costs. Thus, consistent with commitments and requirements

established by the Commission in other transactions, the Joint Applicants’ testimony includes

commitments to:

o Ensure that TNMP does not seek recovery in rates of any transaction acquisition

premium;

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o Ensure that pushdown accounting is not used by TNMP Holdings or its affiliates;

o Ensure that TNMP does not seek recovery of transaction costs in rates (Transaction

costs are those incremental costs paid to advance or consummate the Proposed

Transaction and do not include TNMP employee time); and

o Ensure that TNMP customers will not bear transition costs.

D. Regulatory Jurisdiction

Preservation of this Commission’s regulatory jurisdiction over TNMP, an important utility

in this state, is vital. Accordingly, the Joint Applicants demonstrate in the accompanying

testimony that they will:

o Prevent TNMP from building transmission assets outside ERCOT without

Commission permission, and prevent TNMP from taking action that will impair the

PUC’s jurisdiction or argue for FERC preemption over PUC cost allocation

decisions;

o Ensure TNMP will file annual compliance reports regarding these commitments at

the PUC for five years;

o Ensure PUC access to books and records of TNMP Holdings and its affiliates as

necessary to facilitate any necessary affiliate transaction review; and

o Acknowledge that the PUC has authority to change these regulatory commitments

and that any change in the commitments requires PUC approval.

E. LLC Agreements and Corporate Bylaws

The Joint Applicants recognize that amending the relevant entities’ LLC agreements or

corporate bylaws to incorporate the applicable regulatory commitments will provide additional

certainty regarding compliance. Hence, the Joint Applicants commit to ensuring that TNMP’s and

TNMP Holdings’ corporate bylaws or LLC agreements reflect the commitments adopted in this

proceeding (updated documents to be filed within 30 days after closing).

F. Tangible and Quantifiable Benefits

The Proposed Transaction is in the public interest, in part, because it will provide

significant direct financial benefits to TNMP customers through implementation of an $8.6 million

rate credit over three years.

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Avangrid is also committing that TNMP will continue to make charitable contributions in

accordance with TNMP’s past level of contributions, to continue for at least three years.

Further, Avangrid is committing to maintain at least the same level of capital investment

in improving service to TNMP customers as TNMP has currently budgeted in its five-year plan.

Furthermore, the Proposed Transaction is in the public interest because it is expected to provide

TNMP with greater financial strength, more efficient access to capital, and more efficient and cost-

effective procurement of necessary materials, equipment, and services, all of which will be

attainable because of the affiliation of TNMP with one of the top three utility holding companies

in the world. In addition, TNMP is expected to have greater access to credit, financial, and

technical support than at any time in TNMP’s history.

G. Governance

Avangrid is committing to implement the following measures regarding governance of

TNMP and the SPE that will have as its sole purpose ownership of TNMP:

The SPE will have five directors, one of whom will be disinterested and qualify as

independent in all material respects in accordance with the rules and regulations of

the New York Stock Exchange;

The disinterested director will be named within 90 days after closing of the


A unanimous vote of the other directors will be required to remove the disinterested

director;

The compensation for being a TNMP Holdings director will not be tied to the

performance of any entity other than TNMP; and

The disinterested director will be a resident of Texas and a U.S. citizen.

In the absence of this Proposed Transaction, TNMP’s customers and Texans would not

benefit from the Commission enforceability of those significant protections, to which the Joint

Applicants are voluntarily committing.

For all the foregoing reasons, and for the reasons more fully explained in the testimony

accompanying this Application, the Proposed Transaction provides significant benefits to

customers and Texans and therefore is in the public interest.

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H. Summary

As required by the relevant statutes, the Proposed Transaction will not adversely affect the

reliability, availability, or cost of TNMP’s service under PURA §§ 39.262(l)-(m) and 39.915.

Customers will see no changes in the day-to-day operations of the Company, workforce pay and

staffing levels will be maintained, and necessary and prudent capital expenditures will be

maintained consistent with the Company’s current five-year budget,2 so the reliability and

availability of the Company’s service will not be adversely affected.

Finally, the Proposed Transaction also satisfies the standards in PURA § 14.101. It is in

the public interest and will not result in the transfer of jobs to workers outside of Texas, adversely

affect the safety of TNMP’s customers or employees, or result in a decline of service. The

Proposed Transaction is reasonable in light of the value of the property, facilities or securities to

be acquired. TNMP is not selling, leasing or transferring assets as a result of the Proposed

Transaction.

Accordingly, because the Proposed Transaction satisfies the relevant statutory standards

and will provide significant benefits to customers, it is in the public interest and should be

approved.

VII. Jurisdiction

The Commission has jurisdiction over this proceeding under PURA §§ 14.101, 39.262(l)–

(m), and 39.915.

VIII. Notice and Potentially Affected Persons

Persons potentially affected by the Proposed Transaction include retail end-use customers

who are connected to TNMP’s electric system, retail electric providers that take electric delivery

service from TNMP, and other electric service providers and wholesale market participants in

ERCOT. In compliance with 16 TAC § 22.55, Joint Applicants propose to provide notice of this

filing by emailing3 or mailing a notice substantially in the form attached as Exhibit B to this

Application to: (1) all affected counties and municipalities in TNMP’s service area; (2) all entities

listed in the Commission’s transmission matrix in Docket No. 50333, Commission Staff’s

2 Subject to qualifications consistent with prior Commission orders.3 Pursuant to the PUC’s Second Order Suspending Rules in Docket 50664, service via electronic mail is

appropriate.

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Application to Set 2020 Wholesale Transmission Service Charges for the Electric Reliability

Council of Texas; (3) all neighboring utilities and electric cooperatives of TNMP; (4) all REPs

serving TNMP’s service territory; and (5) all authorized representatives for parties in Docket No.

48401, Application of Texas-New Mexico Power Company for Authority to Change Rates.

IX. Request for Protective Order

Joint Applicants request that the Commission issue the standard Protective Order attached

as Exhibit C, pursuant to 16 TAC § 22.142(c).

X. Request for Commission Hearing

Joint Applicants request that the Commissioners conduct the hearing in this case

themselves if a hearing is necessary.

XI. Designated Representatives

TNMP’s business address is:

577 N. Garden Ridge Blvd.Lewisville, TX 75067

TNMP’s authorized legal representatives are:

Scott SeamsterAssociate General CounselTexas-New Mexico Power Company577 N. Garden Ridge Blvd.Lewisville, TX 75067T: 214-222-4143F: [email protected]

Kerry McGrathPatrick PearsallDuggins Wren Mann & Romero, LLP600 Congress Ave, Suite 1900Austin, TX 78701T: 512-744-9300F: [email protected]@dwmrlaw.com

Avangrid’s business address is:

180 Marsh Hill RoadOrange, Connecticut 06477

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Avangrid’s authorized legal representatives are:

R. Scott MahoneySVP – General Counsel & Corporate SecretaryAvangrid, Inc.180 Marsh Hill RoadOrange, Connecticut 06477T: [email protected]

Andrew KeverWilliam MooreEnoch Kever PLLC7600 N. Capital of Texas HwyBuilding B, Suite 200Austin, Texas 78731T: [email protected]@enochkever.com

XII. Conclusion

Consistent with this Application and the supporting evidence, Joint Applicants respectfully

request that the Commission find the Proposed Transaction is in the public interest under PURA

§§ 14.101, 39.262(l)–(m), and 39.915, and grant Joint Applicants all other relief to which they are

entitled.

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ApplicationExhibit A

PUC Docket No. 51547Page 1 of 13

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PUBLIC UTILITY COMMISSION OF TEXAS1701 N. CONGRESS AVENUEAUSTIN, TEXAS 78701(512) 936-7000

APPLICATION FOR SALE, TRANSFER, OR MERGER

This form should be used by public utilities for:

1) seeking authority to sell assign, or lease a Certificate of Convenience and Necessity or any rights obtained under a certificate;

2) reporting the sale, acquisition, lease or rental by or to any public utility of any plant as an operating system or unit for a total consideration in excess of $10,000,000;

3) reporting the merger or consolidation of two or more public utilities; and

4) reporting the purchase by one public utility of voting stock in another public utility.

See Sections 59, 63, and 64 of the Public Utility Regulatory Act, Art. 1446c V.A.C.S.

1. Proposed action or subject of report:

Sale, transfer, or lease of an entire Certificate of Convenience and Necessity

Sale, transfer or lease of a portion of Applicant’s service area or facilities to which it is certificated (including certificate rights)

_ Sale, transfer or lease of a utility plant as an operating system or unit for morethan $10,000,000 (including certificate rights)

Merger or consolidation of public utilities

Purchase by a public utility of voting stock in another public utility

X Other

This is a change-in-control application under PURA §§ 14.101, 39.262, and 39.915. Effective October 20, 2020, Texas-New Mexico Power Company’s(TNMP) parent company, PNM Resources, Inc. (PNMR), entered into an Agreement and Plan of Merger (Merger Agreement) with Avangrid, Inc. (Avangrid) and its subsidiary, NM Green Holdings, Inc. (Merger Sub or Green Holdings), under which, following receipt of regulatory approvals and satisfaction of other closing conditions, Merger Sub will be merged with and

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into PNMR with PNMR as the surviving corporation and a direct subsidiary of Avangrid (Transaction). TNMP and Public Service Company of New Mexico (PNM) will continue to be subsidiaries of PNMR and will be indirect subsidiaries of Avangrid. Following the closing of the Transaction, Avangrid intends to transfer 100% of the ownership interests in Green Holdings to Avangrid Networks, making PNMR a subsidiary of Networks. Avangrid also proposes to then have PNMR’s subsidiary, TNP Enterprises, Inc. (TNPE) transfer the 100% ownership interest in TNMP to a newly created special purpose entity (“SPE”) that will be owned by PNMR, so that there would be a SPE interposed between TNMP and TNPE. These conveyances together are the Proposed Transaction.

For a more detailed description of the proposed transaction, please refer to the direct testimony of TNMP witness James Neal Walker and Avangrid witnessPedro Azagra Blazquez

List all counties in which the utility’s service area will be affected by this transaction:

The counties in Texas served by TNMP are: Archer, Bosque, Brazoria, Clay, Collin,Comanche, Cooke, Coryell, Dallas, Denton, Erath, Fannin, Franklin, Galveston, Grayson,Hamilton, Hill, Hood, Hunt, Jack, Johnson, Lamar, Matagorda, McLennan, Montague, Palo Pinto, Pecos, Raines, Red River, Reeves, Somervell, Stephens, Terrell, Titus, Van Zandt,Ward, Winkler, and Young

2. Applicants: TNMP, Avangrid, and Green Holdings

Mark one:

X TNMP holds Certificate of Convenience and Necessity No. 30038.

X Avangrid and Green Holdings do not hold a certificate from the Public Utility Commission.

The Applicants are the:

Seller (transferor or lessor)

Purchaser (transferee or lessor)

One of the merging or consolidating utilities

X Other (please explain)

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Please see description of the proposed transaction in the response to Question No. 1.

Business Address: Texas-New Mexico Power Company577 N. Garden Ridge Blvd.Lewisville, TX 75067214-222-4142 (phone)214-222-4136 (fax)

Avangrid, Inc. NM Green Holdings, Inc.180 Marsh Hill RoadOrange, CT 06477

3. Applicants are:

TNMP is a Texas corporation and a wholly owned subsidiary of PNMR. Avangrid is a New York corporation. NM Green Holdings is a New Mexico corporation wholly owned by Avangrid.

4. If applicable, list the names, addresses and office of all partners or all officers of Applicants:

Officers of TNMP:

Name Position AddressPatricia K. Collawn Chief Executive Officer 414 Silver Ave. SW, Albuquerque,

NM 87102 James N. Walker President 577 N. Garden Ridge Blvd

Lewisville, TX 75067Keith C. Nix Vice President,

Engineering and Technical Services

577 N. Garden Ridge Blvd Lewisville, TX 75067

Evans Spanos Vice President, Operations 577 N. Garden Ridge Blvd Lewisville, TX 75067

Stacy R. Whitehurst Vice President, Regulatory Affairs

577 N. Garden Ridge Blvd Lewisville, TX 75067

Elizabeth Eden Vice President, Chief Information Officer

414 Silver Ave. SW, Albuquerque, NM 87102

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4

Michael P. Mertz Vice President andTreasurer


Henry E. Monroy Vice President andCorporate Controller


Charles N. Eldred Executive Vice President,Corporate Development and Finance


Joseph D. Tarry Senior Vice President and Chief Financial Officer


Patrick V. Apodaca Senior Vice President, General Counsel and Secretary


Chris M. Olson Senior Vice President, Utility Operations

414 Silver Ave. SW, Albuquerque, NM 87102414 Silver Ave. SW, Albuquerque, NM 87102

Becky R. Teague Vice President, Human Relations


Officers of Avangrid:

Name Position AddressDennis Arriola Chief Executive Officer 180 Marsh Hill Road

Orange, CT 06477Robert D. Kump President, Deputy Chief

Executive Officer 180 Marsh Hill RoadOrange, CT 06477

Douglas K. Stuver Chief Financial Officer, Principal Financial Officer and Senior Vice President

180 Marsh Hill RoadOrange, CT 06477

Scott M. Tremble Senior Vice President –Controller, Principal Accounting Officer


R. Scott Mahoney Senior Vice President –General Counsel andCorporate Secretary


Peter T. Church Senior Vice President -Human Resources and Corporate Administration


Ignacio Estella Senior Vice President -Corporate Development


Manuel Gonzalez Senior Vice President –Chief of Staff


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Officers of NM Green Holdings

Name Position AddressDennis Arriola President and Treasurer 180 Marsh Hill Road

Orange, CT 06477R. Scott Mahoney Vice President and

Secretary180 Marsh Hill RoadOrange, CT 06477

5. If applicable, list names, addresses and positions of Applicant’s five largestshareholders.

TNMP is wholly owned by TNP Enterprises, Inc., a subsidiary of PNMR.

Avangrid: As of September 30, 2020, Avangrid’s five largest shareholders were:

Shareholder Shares Held Percentage1

Iberdrola S.A. 252,235,232 81.63

Wellington Management Company, LLP 7,959,156 2.58

The Vanguard Group, Inc. 5,700,030 1.84

City National Rochdale, LLC 3,883,309 1.26

BlackRock Fund Advisors 2,539,968 0.82

NM Green Holdings

Shareholder Shares Held Percentage2

Avangrid 1000 100%

6. Applicants designate the following persons to be contacted with respect to any questions regarding the filing:

1 These percentages that may differ due to stock transactions made subsequent to the date of filing.2 These percentages that may differ due to stock transactions made subsequent to the date of filing.

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6

TNMP Avangrid and NM Green Holdings

Stacy WhitehurstVice President of Regulatory AffairsTexas-New Mexico Power Company577 N. Garden Ridge Blvd.Lewisville, TX 75067(214) [email protected]

R. Scott MahoneySVP-General Counsel & Corporate SecretaryAvangrid, Inc.180 Marsh Hill RoadOrange, CT 06477(207) [email protected]

7. If Applicants are represented by an attorney:

TNMP Avangrid and NM Green Holdings

Scott SeamsterState Bar No. 00784939Associate General CounselTexas-New Mexico Power Company577 N. Garden Ridge Blvd.Lewisville, TX 75067(214) [email protected]

Kerry McGrathState Bar No. 13652200Patrick PearsallState Bar No. 24047492Duggins Wren Mann & Romero, LLPP.O. Box 1149Austin, Texas 78767(512) [email protected]@dwmrlaw.com

R. Scott MahoneySVP-General Counsel & Corporate SecretaryAvangrid, Inc.180 Marsh Hill RoadOrange, CT 06477(207) [email protected]

Andrew KeverState Bar No. 11367050William MooreState Bar No. 00794330Enoch Kever PLLC7600 N. Capital of Texas HwyBuilding B, Suite 200Austin, TX 78731(512) [email protected]@enochkever.com

8. Do Applicants presently have a tariff on file with the Commission?

X Yes. If yes, date of filing: TNMP’s current base rates were approved by the Commission in Docket No. 48401 and the compliance tariff for those approved base rates was filed in that docket on January 4, 2019. Wholesale Transmission rates approved in Docket No. 51107 on October 7, 2020. Energy Efficiency Cost Recovery Factor approved in Docket No. 50894 on September

23



7

10, 2020. Distribution Cost Recovery Factor approved in Docket No. 50731 on August 13, 2020. Transmission Cost Recovery Factor approved in Docket No. 50891 on July 21, 2020.

Avangrid and NM Green Holdings do not have tariffs on file with the Commission.

____ No. If no, attach a written schedule of present rates and services.

9. Please indicate the proposed effect of this transaction on rates to be charged affected customers:

X All customers will be charged the same rates as they were charged before the transaction.

____ (Some) (all) customers will be charged different rates than they were charged before the transaction. If so, please explain.

____ Applicant intends to file with the Commission an application to change rates of (some) (all) of its customers as a result of this transaction. If so, please explain.

X Other: Please explain. TNMP and Avangrid have committed to provide a credit on customer electric bills in the amount of $8.6 million on a total company basis over 36 months.

10. Other party to this transaction: Not Applicable. There are no parties to the Transaction other than Applicants.

____ The other party holds Certificate of Convenience and Necessity No.

____ The other party does not hold a Certificate of Convenience and Necessity.

The other party is the:

_ Seller (transferor or lessor)

____ Purchaser (transferee or lessee)

____ One of the merging or consolidating utilities

____ Other:

Business Address

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8

Telephone

If there are more than two parties to this transaction, please attach sheets providing the information required in Question No. 9 through 16 for each party.

11. Other parties are:

Not Applicable. Please see response to Question No. 10.

12. If applicable, list the names, addresses and office of all partners or all officers of the other parties.


13. If applicable, list the names and addresses of the other party’s five (5) largest shareholders.


14. The other party designates the following person to be contacted with respect to any question regarding the filing: Not Applicable. Please see response to Question No. 10.

15. If the other party has retained an engineer: Not Applicable. Please see response to Question No. 10.

The Public Utility Commission should be informed of any change of engineer prior to the completion of a project in process.

16. If the other party is represented by an attorney:

Not Applicable. Please see response to Question No.10.

17. List all neighboring utilities, cities, political subdivisions, or other parties directly affected by this application.

TNMP’s neighboring electric utilities within Texas are Oncor, CenterPoint, AEP Texas North Company, Lonestar Transmission, Tri-County Electric Cooperative,

25



9

Brazos Electric Cooperative, Bowie Cass Electric Cooperative, Comanche Electric Cooperative, Cooke County Electric Cooperative, CoServ Electric Cooperative, Erath County Electric Cooperative, Fannin County Electric Cooperative, FEC Electric Cooperative, Fort Belknap Electric Cooperative, Grayson Electric Cooperative, Hamilton County Electric Cooperative, Hill County Electric Cooperative, Jackson County Electric Cooperative, J-A-C Electric Cooperative,Johnson County Electric Cooperative, Lamar County Electric Cooperative,McLennan County Electric Cooperative, Rio Grande Electric Cooperative,Southwest Texas Electric Cooperative, Trinity Valley Electric Cooperative, and Wise County Electric Cooperative.

Cities in TNMP’s Texas service area include:

Alvin Fullbright PattonvilleAngleton Gatesville PearlandAubrey Glen Rose Pecos Bagwell Gordon PetroliaBailey Gustine Pilot PointBailey’s Prairie Hamilton PointBarstow Hico PrincetonBelcherville Hillcrest Village RandolphBells Holiday Lakes RinggoldBlossom Iredell Rio VistaBlue Ridge Jean Saint JoBluffdale Jermyn SandersonBlum Kermit SantoBogata Kopperl StrawnBrazoria Krugerville SweenyBryson La Marque SylvanByers Lamkin TalcoCarlton League City Texas CityCeleste Leonard ThurberClifton Lewisville TiogoCoppell Lone Oak TolarCovington Loving Tom BeanCrawford Lowry Crossing ToyahDean Megargel TrentonDeport Meridian Valley MillsDetroit Mingus Walnut SpringsDickinson Montague West ColumbiaEliasville Morgan WestministerEmory Newcastle Whitewright

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10

Farmersville Nocona WhitneyFort Stockton Old Ocean WickettFriendswood Olney Wink

Counties included in TNMP’s service area are identified in the response to Question 1 above.

Applicants represent to the Public Utility Commission that each of the above parties and all other parties to this transaction were notified of the nature of this application and its filing with the Commission, and each of the above parties by that notification has an opportunity to protest that the application (See page 9). Other parties to this transaction have been furnished copies of this application.

18. Please describe the nature of the transaction. Indicate if it involves the transfer of certificated facilities and/or service area.

For a description of the transaction, see the response to Question No. 1. The transaction does not involve the transfer of certificated facilities and/or service area.

19. If the transaction involves the transfer of certificated facilities and/or service area please describe the qualifications of the purchaser (or transferee) to provide adequate utility service. Not Applicable.

20. State the purchase price and/or the other consideration for the transaction:

Please see the direct testimony of Avangrid witness Pedro Azagra Blazquez.

21. If applicable, state the original cost of plant to be sold or merged, as recorded - on books of Seller (or merging companies): Not Applicable.

22. If applicable, state the amount of accumulated depreciation and the date of acquisition:$ _______________ as of ________________, 20___. Not Applicable.

23. If applicable, state the amount recorded as plant acquisition adjustment on books of selling company(ies): $__________. Not Applicable.

24. Complete the following proposed entries in books of purchasing (or surviving) company to record purchase (or merger): Not Applicable.

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11

Utility plant in servicePlant acquisition adjustmentExtraordinary loss on purchaseAccumulated depreciation plantCashNotes payableMortgage payableOther list

25. If utility plant in service is traded for utility plant in service, give details of original cost -accumulated depreciation, and reasons for or justification of the trade: Not Applicable.

26. Provide analysis of tax consequences in transaction and recognition given in books to parties concerned: Not Applicable.

27. Describe type of plant facilities, and number of connections affected by this application. Not Applicable.

28. Describe the location of plant facilities involved in this application with respect to streets, highways, cities, known landmarks, water courses, coordinates of transmitter sites, etc.: Not Applicable.

29. Regarding the utility being sold, provide details of the following: Not Applicable.

a. Planned or needed capital improvements;b. Estimated cost of such improvements;c. Whether required to make such improvements by a federal or state agency;d. Any time limits imposed for such improvements.

30. Please describe anticipated impact of this transaction on the quality of utility service. Please explain anticipated changes in quality of service.

Applicants do not anticipate any adverse impact on the quality of utility service due to the proposed transaction. Please see the direct testimony of TNMP witnesses James Neal Walker and Stacy R. Whitehurst and Avangrid witness Robert D. Kump.

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12

31. If a merger or combination is sought by this application, please provide the following: Not Applicable.

a. A balance sheet for each entity;b. An income statement for each entity;c. Articles of Incorporation of a newly created entity;d. A preliminary prospectus if stock of a newly created entity is to be publicly

held.

If the Affiant(s) to this form is any person other than the sole owner, partner, or officer of the applicant or its attorney, a properly verified Power of Attorney must be enclosed.

29

Application Exhibit A

PUC Docket No. 51547 Page 13 of 13

30

ApplicationExhibit B


NOTICE OF APPLICATION FILED WITH

THE PUBLIC UTILITY COMMISSION OF TEXAS

Texas-New Mexico Power Company (TNMP), a regulated electric transmission and distribution company and a wholly owned subsidiary of PNM Resources, Inc. (PNMR), wishes to inform you that on November 23, 2020, TNMP, NM Green Holdings, Inc., and Avangrid, Inc., filed an Application for Sale, Transfer or Merger with the Public Utility Commission of Texas (“PUC” or “Commission”), a copy of which is kept at TNMP’s office at 577 N. Garden Ridge Blvd, Lewisville, Texas 75067. The application seeks regulatory approval of a proposed change of control pursuant to the Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 14.101, 39.262(l)-(m) and 39.915. The application does not seek Commission approval of a modification to TNMP’s rates or services.

The purpose of the application is to seek approval of a proposed sales transaction that would result in the ownership and control of TNMP being transferred through various subsidiaries to Avangrid. Avangrid's primary business is ownership of its operating businesses, which are held by two subsidiaries in two primary lines of business: Avangrid Networks and Avangrid Renewables. Avangrid Networks owns eight electric and natural gas utilities, serving approximately 3.3 million customers in New York, Maine, Connecticut and Massachusetts, delivering electricity to approximately 2.3 million electric utility customers and delivering natural gas to approximately 1.0 million natural gas public utility customers as of June 30, 2020. Avangrid Renewables owns and operates approximately 7.6 gigawatts of wind and solar electricity generating capacity, and has over 500 MW under construction, with a presence in 22 states across the United States.

Any person wishing to intervene in this proceeding must file a written request with the Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, TX 78711-3326, as soon as possible. Further information may also be obtained by calling the Commission at (512) 936-7120 or (888) 782-8477. Hearing- and speech-impaired individuals with text telephones (TTY) may contact the Commission at (512) 936-7136. The deadline for intervention in the proceeding is _________. This case has been assigned PUCT Docket No. 51547.

31

ApplicationExhibit C

PUC Docket No. 51547

DOCKET NO. 51547

JOINT REPORT AND APPLICATION OF TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC. AND AVANGRID, INC. FOR REGULATORY APPROVALS UNDER PURA §§ 14.101, 39.262, AND 39.915

§§§§§§


OF TEXAS

PROTECTIVE ORDER

This Protective Order shall govern the use of all information deemed confidential

(Protected Materials) or highly confidential (Highly Sensitive Protected Materials), including

information whose confidentiality is currently under dispute, by a party providing information to

the Public Utility Commission of Texas (Commission) or to any other party to this proceeding.

It is ORDERED that:

1. Designation of Protected Materials. Upon producing or filing a document, including,

but not limited to, records on a computer disk or other similar electronic storage medium

in this proceeding, the producing party may designate that document, or any portion of it,

as confidential pursuant to this Protective Order by typing or stamping on its face

“PROTECTED PURSUANT TO PROTECTIVE ORDER ISSUED IN DOCKET

NO. 51547” (or words to this effect) and consecutively Bates Stamping each page.

Protected Materials and Highly Sensitive Protected Materials include the documents so

designated, as well as the substance of the information contained in the documents and any

description, report, summary, or statement about the substance of the information

contained in the documents.

2. Materials Excluded from Protected Materials Designation. Protected Materials shall

not include any information or document contained in the public files of the Commission

or any other federal or state agency, court, or local governmental authority subject to the

Public Information Act.1 Protected Materials also shall not include documents or

information which at the time of, or prior to disclosure in, a proceeding is or was public

1 Tex. Gov’t Code Ann. §§ 552.001-552.353.

32

Docket No. 51547 Protective Order Page 2 of 16

knowledge, or which becomes public knowledge other than through disclosure in violation

of this Protective Order.

3. Reviewing Party. For the purposes of this Protective Order, a “Reviewing Party” is any

party to this docket.

4. Procedures for Designation of Protected Materials. On or before the date the Protected

Materials or Highly Sensitive Protected Materials are provided to the Commission, the

producing party shall file with the Commission and deliver to each party to the proceeding

a written statement, which may be in the form of an objection, indicating: (a) any

exemptions to the Public Information Act claimed to apply to the alleged Protected

Materials; (b) the reasons supporting the producing party’s claim that the responsive

information is exempt from public disclosure under the Public Information Act and subject

to treatment as protected materials; and (c) that counsel for the producing party has

reviewed the information sufficiently to state in good faith that the information is exempt

from public disclosure under the Public Information Act and merits the Protected Materials

designation.

5. Persons Permitted Access to Protected Materials. Except as otherwise provided in this

Protective Order, a Reviewing Party may access Protected Materials only through its

“Reviewing Representatives” who have signed the Protective Order Certification Form

(see Attachment A). Reviewing Representatives of a Reviewing Party include its counsel

of record in this proceeding and associated attorneys, paralegals, economists, statisticians,

accountants, consultants, or other persons employed or retained by the Reviewing Party

and directly engaged in this proceeding. At the request of the PUC Commissioners, copies

of Protected Materials may be produced by Commission Staff. The Commissioners and

their staff shall be informed of the existence and coverage of this Protective Order and shall

observe the restrictions of the Protective Order.

6. Highly Sensitive Protected Material Described. The term “Highly Sensitive Protected

Materials” is a subset of Protected Materials and refers to documents or information that a

producing party claims is of such a highly sensitive nature that making copies of such

documents or information or providing access to such documents to employees of the

Reviewing Party (except as specified herein) would expose a producing party to

33


unreasonable risk of harm. Highly Sensitive Protected Materials include but are not limited

to: (a) customer-specific information protected by § 32.101(c) of the Public Utility

Regulatory Act;2 (b) contractual information pertaining to contracts that specify that their

terms are confidential or that are confidential pursuant to an order entered in litigation to

which the producing party is a party; (c) market-sensitive fuel price forecasts, wholesale

transactions information and/or market-sensitive marketing plans; and (d) business

operations or financial information that is commercially sensitive. Documents or

information so classified by a producing party shall bear the designation “HIGHLY

SENSITIVE PROTECTED MATERIALS PROVIDED PURSUANT TO PROTECTIVE

ORDER ISSUED IN DOCKET NO. 51547” (or words to this effect) and shall be

consecutively Bates Stamped. The provisions of this Protective Order pertaining to

Protected Materials also apply to Highly Sensitive Protected Materials, except where this

Protective Order provides for additional protections for Highly Sensitive Protected

Materials. In particular, the procedures herein for challenging the producing party’s

designation of information as Protected Materials also apply to information that a

producing party designates as Highly Sensitive Protected Materials.

7. Restrictions on Copying and Inspection of Highly Sensitive Protected Material.

Except as expressly provided herein, only one copy may be made of any Highly Sensitive

Protected Materials except that additional copies may be made to have sufficient copies for

introduction of the material into the evidentiary record if the material is to be offered for

admission into the record. The Reviewing Party shall maintain a record of all copies made

of Highly Sensitive Protected Material and shall send a duplicate of the record to the

producing party when the copy or copies are made. The record shall specify the location

and the person possessing the copy. Highly Sensitive Protected Material shall be made

available for inspection only at the location or locations provided by the producing party,

except as specified by Paragraph 9. Limited notes may be made of Highly Sensitive

Protected Materials, and such notes shall themselves be treated as Highly Sensitive

Protected Materials unless such notes are limited to a description of the document and a

2 Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 11.001-66.016 (PURA).

34


general characterization of its subject matter in a manner that does not state any substantive

information contained in the document.

8. Restricting Persons Who May Have Access to Highly Sensitive Protected Material.

With the exception of Commission Staff, the Office of the Attorney General (OAG), and

the Office of Public Utility Counsel (OPC), and except as provided herein, the Reviewing

Representatives for the purpose of access to Highly Sensitive Protected Materials may be

persons who are (a) outside counsel for the Reviewing Party, (b) outside consultants for

the Reviewing Party working under the direction of Reviewing Party’s counsel or, (c)

employees of the Reviewing Party working with and under the direction of Reviewing

Party’s counsel who have been authorized by the presiding officer to review Highly

Sensitive Protected Materials. The Reviewing Party shall limit the number of Reviewing

Representatives that review Highly Sensitive Protected Materials to the minimum number

of persons necessary. The Reviewing Party is under a good faith obligation to limit access

to each portion of any Highly Sensitive Protected Materials to two Reviewing

Representatives whenever possible. Reviewing Representatives for Commission Staff,

OAG, and OPC, for the purpose of access to Highly Sensitive Protected Materials, shall

consist of their respective counsel of record in this proceeding and associated attorneys,

paralegals, economists, statisticians, accountants, consultants, or other persons employed

or retained by them and directly engaged in these proceedings.

9. Copies Provided of Highly Sensitive Protected Material. A producing party shall

provide one copy of Highly Sensitive Protected Materials specifically requested by the

Reviewing Party to the person designated by the Reviewing Party who must be a person

authorized to review Highly Sensitive Protected Material under Paragraph 8.

Representatives of the Reviewing Party who are authorized to view Highly Sensitive

Protected Material may review the copy of Highly Sensitive Protected Materials at the

office of the Reviewing Party’s representative designated to receive the information. Any

Highly Sensitive Protected Materials provided to a Reviewing Party may not be copied

except as provided in Paragraph 7. The restrictions contained herein do not apply to

Commission Staff, OPC, and the OAG when the OAG is a representing a party to the

proceeding.

35


10. Procedures in Paragraphs 10-14 Apply to Commission Staff, OPC, and the OAG and

Control in the Event of Conflict. The procedures in Paragraphs 10 through 14 apply to

responses to requests for documents or information that the producing party designates as

Highly Sensitive Protected Materials and provides to Commission Staff, OPC, and the

OAG in recognition of their purely public functions. To the extent the requirements of

Paragraphs 10 through 14 conflict with any requirements contained in other paragraphs of

this Protective Order, the requirements of these Paragraphs shall control.

11. Copy of Highly Sensitive Protected Material to be Provided to Commission Staff,

OPC and the OAG. When, in response to a request for information by a Reviewing Party,

the producing party makes available for review documents or information claimed to be

Highly Sensitive Protected Materials, the producing party shall also deliver one copy of

the Highly Sensitive Protected Materials to the Commission Staff, OPC, and the OAG (if

the OAG is representing a party) in Austin, Texas. Provided however, that in the event

such Highly Sensitive Protected Materials are voluminous, the materials will be made

available for review by Commission Staff, OPC, and the OAG (if the OAG is representing

a party) at the designated office in Austin, Texas. The Commission Staff, OPC and the

OAG (if the OAG is representing a party) may request such copies as are necessary of such

voluminous material under the copying procedures specified herein.

12. Delivery of the Copy of Highly Sensitive Protected Material to Commission Staff and

Outside Consultants. The Commission Staff, OPC, and the OAG (if the OAG is

representing a party) may deliver the copy of Highly Sensitive Protected Materials received

by them to the appropriate members of their staff for review, provided such staff members

first sign the certification specified by Paragraph 15. After obtaining the agreement of the

producing party, Commission Staff, OPC, and the OAG (if the OAG is representing a

party) may deliver the copy of Highly Sensitive Protected Materials received by it to the

agreed, appropriate members of their outside consultants for review, provided such outside

consultants first sign the certification in Attachment A.

13. Restriction on Copying by Commission Staff, OPC and the OAG. Except as allowed

by Paragraph 7, Commission Staff, OPC and the OAG may not make additional copies of

the Highly Sensitive Protected Materials furnished to them unless the producing party

36


agrees in writing otherwise, or, upon a showing of good cause, the presiding officer directs

otherwise. Commission Staff, OPC, and the OAG may make limited notes of Highly

Sensitive Protected Materials furnished to them, and all such handwritten notes will be

treated as Highly Sensitive Protected Materials as are the materials from which the notes

are taken.

14. Public Information Requests. In the event of a request for any of the Highly Sensitive

Protected Materials under the Public Information Act, an authorized representative of the

Commission, OPC, or the OAG may furnish a copy of the requested Highly Sensitive

Protected Materials to the Open Records Division at the OAG together with a copy of this

Protective Order after notifying the producing party that such documents are being

furnished to the OAG. Such notification may be provided simultaneously with the delivery

of the Highly Sensitive Protected Materials to the OAG.

15. Required Certification. Each person who inspects the Protected Materials shall, before

such inspection, agree in writing to the following certification found in Attachment A to

this Protective Order:

I certify my understanding that the Protected Materials are provided to me pursuant to the terms and restrictions of the Protective Order in this docket, and that I have been given a copy of it and have read the Protective Order and agree to be bound by it. I understand that the contents of the Protected Materials, any notes, memoranda, or any other form of information regarding or derived from the Protected Materials shall not be disclosed to anyone other than in accordance with the Protective Order and unless I am an employee of the Commission or OPC shall be used only for the purpose of the proceeding in Docket No. 51547. I acknowledge that the obligations imposed by this certification are pursuant to such Protective Order. Provided, however, if the information contained in the Protected Materials is obtained from independent public sources, the understanding stated herein shall not apply.

In addition, Reviewing Representatives who are permitted access to Highly Sensitive

Protected Material under the terms of this Protective Order shall, before inspection of such

material, agree in writing to the following certification found in Attachment A to this

Protective Order:

I certify that I am eligible to have access to Highly Sensitive Protected Material under the terms of the Protective Order in this docket.

37


The Reviewing Party shall provide a copy of each signed certification to Counsel for the

producing party and serve a copy upon all parties of record.

16. Disclosures between Reviewing Representatives and Continuation of Disclosure

Restrictions after a Person is no Longer Engaged in the Proceeding. Any Reviewing

Representative may disclose Protected Materials, other than Highly Sensitive Protected

Materials, to any other person who is a Reviewing Representative provided that, if the

person to whom disclosure is to be made has not executed and provided for delivery of a

signed certification to the party asserting confidentiality, that certification shall be executed

prior to any disclosure. A Reviewing Representative may disclose Highly Sensitive

Protected Material to other Reviewing Representatives who are permitted access to such

material and have executed the additional certification required for persons who receive

access to Highly Sensitive Protected Material. In the event that any Reviewing

Representative to whom Protected Materials are disclosed ceases to be engaged in these

proceedings, access to Protected Materials by that person shall be terminated and all notes,

memoranda, or other information derived from the protected material shall either be

destroyed or given to another Reviewing Representative of that party who is authorized

pursuant to this Protective Order to receive the protected materials. Any person who has

agreed to the foregoing certification shall continue to be bound by the provisions of this

Protective Order so long as it is in effect, even if no longer engaged in these proceedings.

17. Producing Party to Provide One Copy of Certain Protected Material and Procedures

for Making Additional Copies of Such Materials. Except for Highly Sensitive Protected

Materials, which shall be provided to the Reviewing Parties pursuant to Paragraphs 9, and

voluminous Protected Materials, the producing party shall provide a Reviewing Party one

copy of the Protected Materials upon receipt of the signed certification described in

Paragraph 15. Except for Highly Sensitive Protected Materials, a Reviewing Party may

make further copies of Protected Materials for use in this proceeding pursuant to this

Protective Order, but a record shall be maintained as to the documents reproduced and the

number of copies made, and upon request the Reviewing Party shall provide the party

asserting confidentiality with a copy of that record.

38


18. Procedures Regarding Voluminous Protected Materials. 16 Tex. Admin. Code (TAC)

§ 22.144(h) will govern production of voluminous Protected Materials. Voluminous

Protected Materials will be made available in the producing party’s voluminous room, in

Austin, Texas, or at a mutually agreed upon location, Monday through Friday, 9:00 a.m. to

5:00 p.m. (except on state or Federal holidays), and at other mutually convenient times

upon reasonable request.

19. Reviewing Period Defined. The Protected Materials may be reviewed only during the

Reviewing Period, which shall commence upon entry of this Protective Order and continue

until the expiration of the Commission’s plenary jurisdiction. The Reviewing Period shall

reopen if the Commission regains jurisdiction due to a remand as provided by law.

Protected materials that are admitted into the evidentiary record or accompanying the

evidentiary record as offers of proof may be reviewed throughout the pendency of this

proceeding and any appeals.

20. Procedures for Making Copies of Voluminous Protected Materials. Other than Highly

Sensitive Protected Materials, Reviewing Parties may take notes regarding the information

contained in voluminous Protected Materials made available for inspection or they may

make photographic, mechanical or electronic copies of the Protected Materials, subject to

the conditions in this Protective Order; provided, however, that before photographic,

mechanical or electronic copies may be made, the Reviewing Party seeking photographic,

mechanical or electronic copies must provide written confirmation of the receipt of copies

listed on Attachment B of this Protective Order identifying each piece of Protected

Materials or portions thereof the Reviewing Party will need.

21. Protected Materials to be Used Solely for the Purposes of These Proceedings. All

Protected Materials shall be made available to the Reviewing Parties and their Reviewing

Representatives solely for the purposes of these proceedings. Access to the Protected

Materials may not be used in the furtherance of any other purpose, including, without

limitation: (a) any other pending or potential proceeding involving any claim, complaint,

or other grievance of whatever nature, except appellate review proceedings that may arise

from or be subject to these proceedings; or (b) any business or competitive endeavor of

39


whatever nature. Because of their statutory regulatory obligations, these restrictions do not

apply to Commission Staff or OPC.

22. Procedures for Confidential Treatment of Protected Materials and Information

Derived from Those Materials. Protected Materials, as well as a Reviewing Party’s

notes, memoranda, or other information regarding or derived from the Protected Materials

are to be treated confidentially by the Reviewing Party and shall not be disclosed or used

by the Reviewing Party except as permitted and provided in this Protective Order.

Information derived from or describing the Protected Materials shall be maintained in a

secure place and shall not be placed in the public or general files of the Reviewing Party

except in accordance with the provisions of this Protective Order. A Reviewing Party must

take all reasonable precautions to insure that the Protected Materials including notes and

analyses made from Protected Materials that disclose Protected Materials are not viewed

or taken by any person other than a Reviewing Representative of a Reviewing Party.

23. Procedures for Submission of Protected Materials. If a Reviewing Party tenders for

filing any Protected Materials, including Highly Sensitive Protected Materials, or any

written testimony, exhibit, brief, motion or other type of pleading or other submission at

the Commission or before any other judicial body that quotes from Protected Materials or

discloses the content of Protected Materials, the confidential portion of such submission

shall be filed and served in sealed envelopes or other appropriate containers endorsed to

the effect that they contain Protected Material or Highly Sensitive Protected Material and

are sealed pursuant to this Protective Order. If filed at the Commission, such documents

shall be marked “PROTECTED MATERIAL” and shall be filed under seal with the

presiding officer and served under seal to the counsel of record for the Reviewing Parties.

The presiding officer may subsequently, on his/her own motion or on motion of a party,

issue a ruling respecting whether or not the inclusion, incorporation or reference to

Protected Materials is such that such submission should remain under seal. If filing before

a judicial body, the filing party: (a) shall notify the party which provided the information

within sufficient time so that the producing party may seek a temporary sealing order; and

(b) shall otherwise follow the procedures in Rule 76a, Texas Rules of Civil Procedure.

40


24. Maintenance of Protected Status of Materials during Pendency of Appeal of Order

Holding Materials are not Protected Materials. In the event that the presiding officer

at any time in the course of this proceeding finds that all or part of the Protected Materials

are not confidential or proprietary, by finding, for example, that such materials have

entered the public domain or materials claimed to be Highly Sensitive Protected Materials

are only Protected Materials, those materials shall nevertheless be subject to the protection

afforded by this Protective Order for three (3) full working days, unless otherwise ordered,

from the date the party asserting confidentiality receives notice of the presiding officer’s

order. Such notification will be by written communication. This provision establishes a

deadline for appeal of a presiding officer’s order to the Commission. In the event an appeal

to the Commissioners is filed within those three (3) working days from notice, the Protected

Materials shall be afforded the confidential treatment and status provided in this Protective

Order during the pendency of such appeal. Neither the party asserting confidentiality nor

any Reviewing Party waives its right to seek additional administrative or judicial remedies

after the Commission’s denial of any appeal.

25. Notice of Intent to Use Protected Materials or Change Materials Designation. Parties

intending to use Protected Materials shall notify the other parties prior to offering them

into evidence or otherwise disclosing such information into the record of the proceeding.

During the pendency of Docket No. 51547 at the Commission, in the event that a

Reviewing Party wishes to disclose Protected Materials to any person to whom disclosure

is not authorized by this Protective Order, or wishes to have changed the designation of

certain information or material as Protected Materials by alleging, for example, that such

information or material has entered the public domain, such Reviewing Party shall first file

and serve on all parties written notice of such proposed disclosure or request for change in

designation, identifying with particularity each of such Protected Materials. A Reviewing

Party shall at any time be able to file a written motion to challenge the designation of

information as Protected Materials.

26. Procedures to Contest Disclosure or Change in Designation. In the event that the party

asserting confidentiality wishes to contest a proposed disclosure or request for change in

designation, the party asserting confidentiality shall file with the appropriate presiding

officer its objection to a proposal, with supporting affidavits, if any, within five (5) working

41


days after receiving such notice of proposed disclosure or change in designation. Failure

of the party asserting confidentiality to file such an objection within this period shall be

deemed a waiver of objection to the proposed disclosure or request for change in

designation. Within five (5) working days after the party asserting confidentiality files its

objection and supporting materials, the party challenging confidentiality may respond.

Any such response shall include a statement by counsel for the party challenging such

confidentiality that he or she has reviewed all portions of the materials in dispute and,

without disclosing the Protected Materials, a statement as to why the Protected Materials

should not be held to be confidential under current legal standards, or that the party

asserting confidentiality for some reason did not allow such counsel to review such

materials. If either party wishes to submit the material in question for in camera inspection,

it shall do so no later than five (5) working days after the party challenging confidentiality

has made its written filing.

27. Procedures for Presiding Officer Determination Regarding Proposed Disclosure or

Change in Designation. If the party asserting confidentiality files an objection, the

appropriate presiding officer will determine whether the proposed disclosure or change in

designation is appropriate. Upon the request of either the producing or Reviewing Party

or upon the presiding officer’s own initiative, the presiding officer may conduct a

prehearing conference. The burden is on the party asserting confidentiality to show that

such proposed disclosure or change in designation should not be made. If the presiding

officer determines that such proposed disclosure or change in designation should be made,

disclosure shall not take place earlier than three (3) full working days after such

determination unless otherwise ordered. No party waives any right to seek additional

administrative or judicial remedies concerning such presiding officer’s ruling.

28. Maintenance of Protected Status during Periods Specified for Challenging Various

Orders. Any party electing to challenge, in the courts of this state, a Commission or

presiding officer determination allowing disclosure or a change in designation shall have a

period of ten (10) days from: (a) the date of an unfavorable Commission order; or (b) if the

Commission does not rule on an appeal of an interim order, the date an appeal of an interim

order to the Commission is overruled by operation of law, to obtain a favorable ruling in

state district court. Any party challenging a state district court determination allowing

42


disclosure or a change in designation shall have an additional period of ten (10) days from

the date of the order to obtain a favorable ruling from a state appeals court. Finally, any

party challenging a determination of a state appeals court allowing disclosure or a change

in designation shall have an additional period of ten (10) days from the date of the order to

obtain a favorable ruling from the state supreme court, or other appellate court. All

Protected Materials shall be afforded the confidential treatment and status provided for in

this Protective Order during the periods for challenging the various orders referenced in

this paragraph. For purposes of this paragraph, a favorable ruling of a state district court,

state appeals court, Supreme Court or other appellate court includes any order extending

the deadlines in this paragraph.

29. Other Grounds for Objection to Use of Protected Materials Remain Applicable.

Nothing in this Protective Order shall be construed as precluding any party from objecting

to the use of Protected Materials on grounds other than confidentiality, including the lack

of required relevance. Nothing in this Protective Order constitutes a waiver of the right to

argue for more disclosure, provided, however, that unless the Commission or a court orders

such additional disclosure, all parties will abide by the restrictions imposed by the

Protective Order.

30. Protection of Materials from Unauthorized Disclosure. All notices, applications,

responses or other correspondence shall be made in a manner which protects Protected

Materials from unauthorized disclosure.

31. Return of Copies of Protected Materials and Destruction of Information Derived

from Protected Materials. Following the conclusion of these proceedings, each

Reviewing Party must, no later than thirty (30) days following receipt of the notice

described below, return to the party asserting confidentiality all copies of the Protected

Materials provided by that party pursuant to this Protective Order and all copies reproduced

by a Reviewing Party, and counsel for each Reviewing Party must provide to the party

asserting confidentiality a letter by counsel that, to the best of his or her knowledge,

information, and belief, all copies of notes, memoranda, and other documents regarding or

derived from the Protected Materials (including copies of Protected Materials) that have

not been so returned, if any, have been destroyed, other than notes, memoranda, or other

43


documents which contain information in a form which, if made public, would not cause

disclosure of the substance of Protected Materials. As used in this Protective Order,

“conclusion of these proceedings” refers to the exhaustion of available appeals, or the

running of the time for the making of such appeals, as provided by applicable law. If,

following any appeal, the Commission conducts a remand proceeding, then the “conclusion

of these proceedings” is extended by the remand to the exhaustion of available appeals of

the remand, or the running of the time for making such appeals of the remand, as provided

by applicable law. Promptly following the conclusion of these proceedings, counsel for

the party asserting confidentiality will send a written notice to all other parties, reminding

them of their obligations under this Paragraph. Nothing in this Paragraph shall prohibit

counsel for each Reviewing Party from retaining two (2) copies of any filed testimony,

brief, application for rehearing, hearing exhibit or other pleading which refers to Protected

Materials provided that any such Protected Materials retained by counsel shall remain

subject to the provisions of this Protective Order.

32. Applicability of Other Law. This Protective Order is subject to the requirements of the

Public Information Act, the Open Meetings Act,3 the Texas Securities Act4 and any other

applicable law, provided that parties subject to those acts will notify the party asserting

confidentiality, if possible under those acts, prior to disclosure pursuant to those acts. Such

notice shall not be required where the Protected Materials are sought by governmental

officials authorized to conduct a criminal or civil investigation that relates to or involves

the Protected Materials, and those governmental officials aver in writing that such notice

could compromise the investigation and that the governmental entity involved will

maintain the confidentiality of the Protected Materials.

33. Procedures for Release of Information under Order. If required by order of a

governmental or judicial body, the Reviewing Party may release to such body the

confidential information required by such order; provided, however, that: (a) the

Reviewing Party shall notify the producing party of the order requiring the release of such

information within five (5) calendar days of the date the Reviewing Party has notice of the

3 Tex. Gov’t Code Ann. § 551.001-551.146.4 Tex. Rev. Civ. Stat. Ann. arts. 581-1 to 581-43.

44


order; (b) the Reviewing Party shall notify the producing party at least five (5) calendar

days in advance of the release of the information to allow the producing party to contest

any release of the confidential information; and (c) the Reviewing Party shall use its best

efforts to prevent such materials from being disclosed to the public. The terms of this

Protective Order do not preclude the Reviewing Party from complying with any valid and

enforceable order of a state or federal court with competent jurisdiction specifically

requiring disclosure of Protected Materials earlier than contemplated herein. The notice

specified in this section shall not be required where the Protected Materials are sought by

governmental officials authorized to conduct a criminal or civil investigation that relates

to or involves the Protected Materials, and those governmental officials aver in writing that

such notice could compromise the investigation and that the governmental entity involved

will maintain the confidentiality of the Protected Materials.

34. Best Efforts Defined. The term “best efforts” as used in the preceding paragraph requires

that the Reviewing Party attempt to ensure that disclosure is not made unless such

disclosure is pursuant to a final order of a Texas governmental or Texas judicial body, the

written opinion of the Texas Attorney General sought in compliance with the Public

Information Act, or the request of governmental officials authorized to conduct a criminal

or civil investigation that relates to or involves the Protected Materials. The Reviewing

Party is not required to delay compliance with a lawful order to disclose such information

but is simply required to timely notify the party asserting confidentiality, or its counsel,

that it has received a challenge to the confidentiality of the information and that the

Reviewing Party will either proceed under the provisions of §552.301 of the Public

Information Act, or intends to comply with the final governmental or court order.

Provided, however, that no notice is required where the Protected Materials are sought by

governmental officials authorized to conduct a criminal or civil investigation that relates

to or involves the Protected Materials, and those governmental officials aver in writing that

such notice could compromise the investigation and that the governmental entity involved

will maintain the confidentiality of the Protected Materials.

35. Notify Defined. “Notify” for purposes of Paragraphs 32, 33 and 34 means written notice

to the party asserting confidentiality at least five (5) calendar days prior to release;

including when a Reviewing Party receives a request under the Public Information Act.

45


However, the Commission, OAG, or OPC may provide a copy of Protected Materials to

the Open Records Division of the OAG as provided herein.

36. Requests for Non-Disclosure. If the producing party asserts that the requested

information should not be disclosed at all, or should not be disclosed to certain parties

under the protection afforded by this Protective Order, the producing party shall tender the

information for in camera review to the presiding officer within ten (10) calendar days of

the request. At the same time, the producing party shall file and serve on all parties its

argument, including any supporting affidavits, in support of its position of non-disclosure.

The burden is on the producing party to establish that the material should not be disclosed.

The producing party shall serve a copy of the information under the classification of Highly

Sensitive Protected Material to all parties requesting the information that the producing

party has not alleged should be prohibited from reviewing the information.

Parties wishing to respond to the producing party’s argument for non-disclosure shall do

so within five working days. Responding parties should explain why the information

should be disclosed to them, including why disclosure is necessary for a fair adjudication

of the case if the material is determined to constitute a trade secret. If the presiding officer

finds that the information should be disclosed as Protected Material under the terms of this

Protective Order, the presiding officer shall stay the order of disclosure for such period of

time as the presiding officer deems necessary to allow the producing party to appeal the

ruling to the Commission.

37. Sanctions Available for Abuse of Designation. If the presiding officer finds that a

producing party unreasonably designated material as Protected Material or as Highly

Sensitive Protected Material, or unreasonably attempted to prevent disclosure pursuant to

Paragraph 36, the presiding officer may sanction the producing party pursuant to 16 TAC

§ 22.161.

38. Modification of Protective Order. Each party shall have the right to seek changes in this

Protective Order as appropriate from the presiding officer.

39. Breach of Protective Order. In the event of a breach of the provisions of this Protective

Order, the producing party, if it sustains its burden of proof required to establish the right

to injunctive relief, shall be entitled to an injunction against such breach without any

46


requirements to post bond as a condition of such relief. The producing party shall not be

relieved of proof of any element required to establish the right to injunctive relief. In

addition to injunctive relief, the producing party shall be entitled to pursue any other form

of relief to which it is entitled.

47

ATTACHMENT A

Protective Order Certification

I certify my understanding that the Protected Materials are provided to me pursuant to the

terms and restrictions of the Protective Order in this docket and that I have received a copy of it

and have read the Protective Order and agree to be bound by it. I understand that the contents of

the Protected Materials, any notes, memoranda, or any other form of information regarding or

derived from the Protected Materials shall not be disclosed to anyone other than in accordance

with the Protective Order and unless I am an employee of the Commission or OPC shall be used

only for the purpose of the proceeding in Docket No. 51547. I acknowledge that the obligations

imposed by this certification are pursuant to such Protective Order. Provided, however, if the

information contained in the Protected Materials is obtained from independent public sources, the

understanding stated here shall not apply.

Signature Party Represented

Printed Name Date

I certify that I am eligible to have access to Highly Sensitive Protected Material under the terms

of the Protective Order in this docket.


Printed Name Date

48

ATTACHMENT B

I request to view/copy the following documents:

Document Requested # of Copies Non-Confidential

Protected Materialsand/or Highly

Sensitive Protected Materials


Printed Name Date

49

PUC DOCKET NO. 51547

BEFORE THE PUBLIC UTILITY COMMISSION OF TEXAS

JOINT REPORT AND APPLICATION OF

TEXAS-NEW MEXICO POWER COMPANY,NM GREEN HOLDINGS, INC.,

AND AVANGRID, INC.FOR REGULATORY APPROVALS

UNDER PURA §§ 14.101, 39.262, AND 39.915

PREPARED DIRECT TESTIMONY AND EXHIBITSOF

JAMES NEAL WALKER

ON BEHALF OFTEXAS-NEW MEXICO POWER COMPANY

NOVEMBER 23, 2020

50

DIRECT TESTIMONY OF J. NEAL WALKER PUC DOCKET NO. 51547

i

TABLE OF CONTENTS

I. INTRODUCTION AND QUALIFICATIONS.......................................................... 1

II. PURPOSE AND OVERVIEW OF TESTIMONY ................................................... 1

III. OVERVIEW OF FILING ....................................................................................... 3

IV. OVERVIEW OF PROPOSED TRANSACTION.................................................... 4

V. OVERVIEW OF TNMP’S SYSTEM AND OPERATIONS..................................... 5

VI. PROPOSED TRANSACTION IMPACT ON OPERATIONS................................. 7

VII. EFFECT OF THE PROPOSED TRANSACTION ON RELIABILITY, AVAILABILITY, AND COST OF SERVICE........................................................ 10

VIII. CONCLUSION ................................................................................................... 11

EXHIBITSEXHIBIT JNW-1

EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE

EXHIBIT JNW-2

MAP OF TNMP SERVICE TERRITORY

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1

I. INTRODUCTION AND QUALIFICATIONS1

Q. PLEASE STATE YOUR NAME, BUSINESS ADDRESS, AND PLACE OF 2

EMPLOYMENT.3

My name is James Neal Walker. I am the President of Texas-New Mexico Power 4

Company. My business address is 577 N. Garden Ridge Blvd., Lewisville, Texas, 5

75067. 6

Q. ON WHOSE BEHALF ARE YOU TESTIFYING?7

I am testifying on behalf of Texas-New Mexico Power Company (“TNMP” or 8

“Company”).9

Q. PLEASE PROVIDE A SUMMARY OF YOUR EDUCATIONAL BACKGROUND AND 10

PROFESSIONAL EXPERIENCE.11

Exhibit JNW-1 describes my background and experience. 12

Q. PLEASE DESCRIBE YOUR DUTIES AS THE PRESIDENT OF TNMP.13

As the President, I oversee all activities related to the planning, design, 14

construction, operation and maintenance of the TNMP electric transmission and 15

distribution system, as well as TNMP’s regulatory and legislative activities, Retail 16

Electric Provider (“REP”) relations, community and media relations. 17

Q. HAVE YOU TESTIFIED BEFORE IN REGULATORY PROCEEDINGS?18

Yes. Since 2005, I have sponsored testimony before the Public Utility Commission 19

of Texas (“PUCT”) in Docket Nos. 35460,1 36025,2 384803 and 48401.420

II. PURPOSE AND OVERVIEW OF TESTIMONY21

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING?22

1 Petition of PNM Resources, Inc. and Cap Rock Energy Corporation Regarding Proposed Merger and Acquisition of Stock, Docket No. 35460, Jul. 23, 2008.

2 Application of Texas-New Mexico Power Company for Authority to Change Rates, Docket No. 35025, Aug. 21, 2009.

3 Application of Texas-New Mexico Power Company for Authority to Change Rates, Docket No. 38480, Jan. 27, 2012.

4 Application of Texas-New Mexico Power Company for Authority to Change Rates, Docket No. 48401, Dec. 20, 2018.

52


2

The purpose of my direct testimony is to support the Joint Report and Application 1

of Texas-New Mexico Power Company, NM Green Holdings, Inc., and Avangrid, 2

Inc. for Regulatory Approvals Under PURA §§ 14.101, 39.262, And 39.915 (the 3

“Application”) filed in this docket. As described in my testimony, following the 4

closing of the proposed transaction presented in the Application, TNMP will 5

continue to be an indirect subsidiary of PNM Resources (“PNMR”). Under the 6

governing merger agreement, NM Green Holdings, Inc., a subsidiary of Avangrid, 7

Inc. (“Avangrid”), will be merged with and into PNMR, with PNMR as the surviving8

corporation and a direct subsidiary of Avangrid. Avangrid will subsequently9

transfer 100% ownership in PNMR to Avangrid Networks, Inc. (“Avangrid 10

Networks”), which is the corporate entity Avangrid uses to hold all its public utility 11

operating companies. Avangrid also proposes to then have PNMR’s subsidiary, 12

TNP Enterprises, Inc. (“TNPE”) transfer the 100% ownership interest in TNMP to 13

a newly created special purpose entity (“SPE”) that will be owned by TNPE, so that 14

there would be a SPE interposed between TNMP and TNPE. These collective 15

steps are the “Proposed Transaction.”16

Q. WHAT SPECIFIC AREAS WILL YOUR DIRECT TESTIMONY COVER?17

A. My testimony addresses TNMP’s operations and reliability, as well as the anticipated 18

impact of the Proposed Transaction on those operations. That impact is expected to be 19

positive but limited due to Avangrid’s commitments to retain existing management, 20

employees, headquarters, and forecast capital expenditure levels. Specifically, I address 21

the following subjects:22

1. Overview of Filing Package23

2. An overview of TNMP’s operations;2425

3. Overview of the Proposed Transaction.26

4. The effect of the Proposed Transaction on TNMP’s availability, reliability, 27

and cost of service.28

Q. DO YOU SPONSOR ANY EXHIBITS INCLUDED WITH THIS FILING?29

Yes. I sponsor Exhibits JNW-1 and JNW-2, which are attached to this testimony. 30

Q. WERE THESE EXHIBITS AND TESTIMONY PREPARED BY YOU OR UNDER YOUR 31

SUPERVISION?32

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3

Yes, these exhibits were prepared by me or under my direction and control. The 1

information contained in these exhibits is true and correct to the best of my 2

knowledge and belief.3

III. OVERVIEW OF FILING 4

Q. PLEASE DESCRIBE THE APPLICATION FILING.5

The filing includes the Application, which requests Commission approval of the 6

Proposed Transaction under PURA5 §§ 14.101, 39.262, and 39.915. In support of 7

the Application, Applicants6 also provide:8

1. The direct testimony of the following witnesses: Myself, Henry Monroy,9

Stacy R. Whitehurst, and Ellen Lapson for TNMP; and Robert D. Kump 10

and Pedro Azagra Blazquez for Avangrid.11

2. Regulatory Commitments (attached to the Direct Testimony of Avangrid 12

witness Mr. Kump).13

3. Completed Commission Application for Sale, Transfer or Merger Form 14

(attached to the Application as Exhibit A).15

Q. PLEASE SUMMARIZE THE SUBJECTS APPLICANTS’ WITNESSES ADDRESS.16

The following table identifies each witness filing direct testimony in support of the 17

Application and the subject matter addressed by that witness.18

WITNESS PARTY SUBJECT MATTER

Neal Walker, TNMP, President TNMP

Overview of the filing package;Overview of the Proposed Transaction;Overview of TNMP’s system and operations;Reliability, availability, and cost of service; andHealth and safety of TNMP’s customers and employees.

Stacy R. WhitehurstTNMP, VP of Regulatory Affairs

TNMP

Summary of necessary regulatory approvals for the Proposed Transaction;Statutory criteria and other factors;Continued compliance with regulatory requirements; andEffect of the Proposed Transaction on Commission jurisdiction.

5 PURA is codified at Tex. Util. Code Ann. §§ 11.001–66.016.6 The “Applicants” include: TNMP, NM Green Holdings, Inc., and Avangrid, Inc.

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4

Henry MonroyTNMP, Controller

TNMPOverview of PNMR and TNMP; andProposed Transaction accounting and tax implications

Ellen LapsonTNMP, Consultant

TNMP Impact of the Proposed Transaction on TNMP’s financial health

Robert D. Kump Avangrid Avangrid Regulatory Commitments

Pedro Azagra BlazquezAvangrid

Avangrid Proposed Transaction, Overview of Avangrid and Merger Agreement

IV. OVERVIEW OF PROPOSED TRANSACTION1

Q. PLEASE DESCRIBE THE PROPOSED TRANSACTION.2

Effective October 20, 2020, TNMP’s parent company, PNMR, entered into an 3

Agreement and Plan of Merger (“Merger Agreement”) with Avangrid and its 4

subsidiary, NM Green Holdings, Inc. (“Merger Sub”), under which, following receipt 5

of regulatory approvals and satisfaction of other closing conditions, Merger Sub 6

will be merged with and into PNMR with PNMR as the surviving corporation and a 7

direct subsidiary of Avangrid. Avangrid will subsequently transfer 100% ownership 8

in PNMR to Avangrid Networks, which is the corporate entity Avangrid uses to hold 9

all its public utility operating companies. Avangrid also proposes to then have 10

PNMR’s subsidiary, TNPE, transfer the 100% ownership interest in TNMP to a 11

newly created SPE that will be owned by TNPE, so that there would be a SPE 12

interposed between TNMP and TNPE.13

Q. WHAT IS THIS CASE ABOUT? 14

This case is about a proposed merger transaction whereby TNMP and PNMR’s 15

other subsidiaries will come under the indirect ownership of Avangrid. Avangrid 16

consists of Avangrid Networks, which owns eight electric and natural gas utilities17

in the northeast United States, and Avangrid Renewables, which operates 18

approximately 7.5 gigawatts of wind and solar electricity generating capacity, with 19

a presence in 22 states across the United States This case is also about the 20

benefits to TNMP’s customers, employees, and communities that will result from 21

TNMP having the added support of a well-qualified, financially strong parent 22

55


5

company with greater access to capital markets and a larger supply chain to 1

secure necessary equipment, materials, and services. 2

Q. WHAT APPROVALS ARE THE APPLICANTS SEEKING IN THIS CASE?3

Applicants request that the Commission approve the Proposed Transaction as in 4

the public interest. As will be described below and in the testimony of Applicants’ 5

other witnesses, the Proposed Transaction contains meaningful commitments that 6

serve the public interest.7

V. OVERVIEW OF TNMP’S SYSTEM AND OPERATIONS8

Q. PLEASE DESCRIBE TNMP.9

TNMP’s service territory consists of four non-contiguous areas within the State of 10

Texas that comprise a total of 13,163 square miles. One portion of this territory 11

extends from Lewisville, which is approximately 10 miles northeast of the Dallas-12

Fort Worth International Airport, eastward to municipalities located near the Red 13

River, and to communities north and west of Lewisville. The second portion is 14

south and west of the Dallas-Fort Worth Metroplex in the area surrounding Clifton. 15

The third portion of the service territory includes the area along the Texas Gulf 16

Coast between Houston and Galveston and extending west into Brazoria County, 17

and the fourth portion of the service territory includes areas of far west Texas 18

between Midland and El Paso. TNMP’s Texas operations lie entirely within the 19

Electric Reliability Council of Texas (“ERCOT”) region. Attached as Exhibit JNW-20

2 is a map of TNMP's service territory.21

Q. PLEASE DESCRIBE THE NATURE OF THE TNMP SERVICE TERRITORY.22

The TNMP service territory is very diverse, consisting of different types of 23

population centers, weather conditions, industrial facilities, and geographical 24

locations. Most of TNMP’s service territory consists of small communities and rural 25

areas. However, TNMP serves the largely metropolitan area of Lewisville, a 26

number of the suburban communities south of Houston, and the industrial load of 27

the Texas City Industrial Park, which includes large refineries and chemical plants, 28

as well as substantial customer-owned generation. TNMP’s west Texas service 29

area is sparsely populated and covers a large geographic area, with a large 30

56


6

number of oil and gas-related customers. TNMP has faced increasing demands 1

from the high level of activity and development among oil and gas exploration, 2

production, and associated processing businesses in this area.3

Q. WHAT IS THE PRIMARY NATURE OF THE SERVICES THAT TNMP PROVIDES?4

TNMP provides transmission and distribution delivery services at regulated rates 5

to various REPs that, in turn, provide retail electric service within TNMP’s service 6

territory. TNMP operates 929 miles of transmission lines and delivers power along7

13,235 miles of distribution. TNMP’s facilities include 129 load serving stations and 8

eighteen switching stations. Ultimately, as of September 30, 2020, TNMP serves9

259,651 end-use ESI IDs. A peak load of 1822 MW occurred in August 2020.10

Q. PLEASE DESCRIBE HOW TNMP IS OPERATED.11

The people responsible for day-to-day executive management and operation of 12

TNMP reside in Texas and report to the President of TNMP. TNMP’s Operations 13

employees report to the Vice President of Operations and are strategically placed 14

throughout TNMP’s service territory to ensure safe and reliable electric service to 15

end-use customers. TNMP’s engineering support functions are directed by 16

TNMP’s Vice President Technical Service & System Reliability. The people 17

responsible for providing these functions are located within TNMP’s service 18

territory as well. PNMR supports TNMP with general and administrative functions 19

and TNMP utilizes the call center and after hours call center and receives forestry 20

services from its sister company, Public Service Company of New Mexico. 21

Q. PLEASE DESCRIBE HOW TNMP MANAGES AND PROVIDES ITS OPERATIONS AND 22

RELIABILITY FUNCTIONS.23

Most of TNMP’s day-to-day operations and reliability functions are provided 24

directly by Texas-based, local personnel. TNMP Operations is organized along 25

geographic lines into three business units: Lewisville/North Texas, Central/West 26

Texas, and the Gulf Coast. TNMP Operations is responsible for transmission and 27

distribution line operation and maintenance; construction functions; service 28

installation and community liaison functions that are provided at the local level by 29

local personnel in each business unit. Line operation and maintenance includes 30

57


7

distribution construction activities, outage restoration, and service orders related 1

to meters, street lighting and line spotting. 2

Each Operations business unit is headed by an experienced Director that 3

reports to the Vice President of Operations. Directors are responsible for overall 4

management of operations in their areas. In addition to field and craft personnel 5

doing the construction and service work, each area has Project Managers and 6

Field Supervisors, as well as a Community Liaison to coordinate relations and 7

communications with local governmental entities.8

Technical Service & System Reliability is TNMP’s engineering organization, 9

providing activities related to the planning, design, construction, operation and 10

maintenance of the TNMP transmission and distribution system from an 11

engineering perspective. This includes transmission/distribution line engineering 12

and major construction, substation construction and maintenance, 13

transmission/distribution planning, protection and controls, and various support 14

personnel that provide services such as drafting, new customer service design, 15

Geographic Information Services (“GIS”) services, clerical and other various 16

engineering support-type services. This organization also includes TNMP’s 17

System Operation Control Center personnel that monitor and operate the system 18

on a 24-hour, seven day a week basis. These departments also have support 19

technicians that are responsible for the operations, maintenance and emergency 20

response for TNMP’s substation, protection, controls, real-time communications 21

monitoring equipment and substation/transmission customer metering functions.22

VI. PROPOSED TRANSACTION IMPACT ON OPERATIONS23

Q. WILL ANY TNMP PROPERTY OR FACILITIES BE TRANSFERRED AS A RESULT OF24

THE PROPOSED TRANSACTION? 25

No TNMP property or facilities will be sold, leased, or transferred as part of the 26

Proposed Transaction. The Proposed Transaction is simply a change in upstream 27

ownership of TNMP and does not involve transfer of TNMP assets.28

Q. DO YOU EXPECT TNMP’S OPERATIONS TO CHANGE AS A RESULT OF THE 29

PROPOSED TRANSACTION?30

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8

A. No. As discussed in the testimony of Avangrid witness Mr. Kump, TNMP’s management 1

team and employees will continue to be in charge of day-to-day operations after the 2

Proposed Transaction closes. Further, Applicants have committed: (1) that there will not 3

be involuntary reductions to TNMP’s workforce other than for cause or performance and 4

there will be no reductions to wages or benefits for at least 2 years as a result of the 5

Proposed Transaction; and (2) to maintain TNMP’s headquarters and senior management 6

in TNMP’s service territory. In addition, Avangrid has committed that TNMP will continue 7

to make capital expenditures consistent with its five-year plan, subject to adjustments 8

consistent with previous Commission orders, so there will not be a reduction in TNMP’s 9

infrastructure investment. In sum, the Proposed Transaction will not have an adverse 10

impact on service to customers or the health and safety of customers and employees. Nor 11

are any Texas jobs expected to be transferred to workers outside the state. As a result,12

the Proposed Transaction will not result in a decline in the reliability, availability, and 13

quality of TNMP’s service, although a sharing of information regarding best practices is 14

likely to have a beneficial effect on that service.15

Q. HOW WILL THIS OWNERSHIP STRUCTURE BENEFIT TNMP AND ITS 16

STAKEHOLDERS?17

The Proposed Transaction results in the addition of TNMP into the much larger 18

Avangrid Networks family of utilities. This will give TNMP access to the resources 19

of a much larger company, including improved access to capital to invest in needed 20

future infrastructure and facilities throughout TNMP’s service area and a larger 21

supply chain to secure necessary equipment, materials and services.22

Q. WHAT REGULATORY COMMITMENTS ACCOMPANY THE APPLICATION?23

Avangrid witness Mr. Kump sets out Applicants’ Regulatory Commitments. Those 24

Commitments fall broadly into a number of categories: financial protection and 25

code of conduct commitments; local control and management commitments;26

accounting and ratemaking commitments; regulatory jurisdiction commitments; 27

LLC and corporate bylaws commitments; tangible and quantifiable benefits28

commitments; and governance commitments. 29

Q. WHAT BENEFITS DOES THE PROPOSED TRANSACTION PROVIDE TO TNMP’S 30

STAKEHOLDERS?31

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9

For current customers, the Proposed Transaction provides $8.6 million of rate 1

credits over a three-year period. In addition, customers will benefit from 2

Applicants’ Regulatory Commitment to have TNMP maintain capital expenditure 3

levels, to maintain local management and headquarters, and to preserve and 4

enhance TNMP’s financial standing. No TNMP assets will transfer as a result of 5

the Proposed Transaction, nor will the Proposed Transaction result in any adverse 6

change in TNMP’s rates and services. TNMP’s customers will not experience any 7

change from the reliable service they currently receive, as Avangrid witness 8

Mr. Robert D. Kump describes, and TNMP will have increased access to capital to 9

further enhance its investment in safe, sustainable, reliable, and affordable service 10

to customers and a larger supply chain to secure necessary equipment, materials, 11

and services.12

Overall, the Proposed Transaction allows TNMP to enhance its long-13

standing commitment to the communities it serves via good corporate citizenship. 14

TNMP’s employees will benefit from the Regulatory Commitment not to implement, 15

as a result of the Proposed Transaction, any involuntary workforce reductions 16

(other than for cause or performance) or reductions to wages or benefits for at 17

least two years after the Transaction closes—commitments that would not exist 18

absent the Proposed Transaction. This continuity and certainty will help ensure 19

TNMP continues its history of providing safe and reliable service.20

Finally, TNMP’s state and municipal regulators will see no change, as the 21

local management presence and control will be maintained, and commitments 22

designed to protect TNMP’s financial strength and the Commissions regulatory 23

authority will be in place, and will become enforceable by the PUC solely because 24

of this Proposed Transaction (and the resulting approval order once issued).25

Q. HAVE APPLICANTS COMMITTED TO HAVE TNMP MAINTAIN ITS 5-YEAR CAPITAL 26

EXPENDITURE BUDGET AFTER THE PROPOSED TRANSACTION CLOSES?27

Yes. Avangrid is committing to maintain at least the same level of capital 28

investment in improving service to TNMP customers as TNMP has currently 29

budgeted in its five-year plan, subject to certain exceptions customarily included in 30

this commitment in acquisition cases. TNMP’s capital budget is set out below:31

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1

Q. WHAT IMPACT WILL THE PROPOSED TRANSACTION HAVE ON THE FINANCIAL 2

HEALTH OF TNMP?3

A. TNMP witness Ellen Lapson addresses the impact of the Proposed Transaction on 4

TNMP’s financial health.5

VII. EFFECT OF THE PROPOSED TRANSACTION ON RELIABILITY, AVAILABILITY,6AND COST OF SERVICE7

Q. DO YOU EXPECT COMPLETION OF THE PROPOSED TRANSACTION TO AFFECT 8

TNMP’S RELIABILITY, AVAILABILITY, AND COST OF SERVICE?9

TNMP’s electric system has provided a level of service quality that is comparable 10

or better than most of the other investor-owned utilities providing electric service 11

in the State of Texas. TNMP’s reliability and availability of service will be 12

maintained or enhanced as a result of the Proposed Transaction. Avangrid has 13

made commitments to ensure that TNMP’s management, workforce, and capital 14

expenditures are maintained, and so I don’t expect any change in those areas. As 15

part of a larger group of affiliated Avangrid utilities, TNMP will have access to 16

resources and best practices that may improve the quality of its service. TNMP 17

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witness Mr. Whitehurst addresses why the Proposed Transaction is not expected 1

to affect TNMP’s cost of service.2

Q. WHAT REGULATORY COMMITMENT IS INCLUDED WITH RESPECT TO TNMP’S3

CAPITAL EXPENDITURES?4

As described in Mr. Kump’s testimony, TNMP will continue to make utility capital 5

expenditures in an amount equal to the current budget for the five-year period 6

beginning January 1, 2021, through December 31, 2025, subject to certain 7

specified adjustments and limitations commonly included in such commitments by 8

the terms of Commission orders approving such commitments. Maintaining the 9

budgeted levels of utility capital expenditures will ensure that the Proposed 10

Transaction will not result in the reduction of any investments necessary to provide 11

safe and reliable service to TNMP’s customers. 12

VIII. CONCLUSION13

Q. PLEASE SUMMARIZE TNMP’S REQUEST IN THIS CASE.14

A. TNMP requests that the Commission approve the Proposed Transaction as in the public 15

interest. As described above and in other testimony, the Proposed Transaction contains 16

meaningful commitments that serve the public interest. Customers will benefit from17

$8.6 million in credits on electric bills over three years and a continued commitment to 18

safe, affordable, and reliable energy with strong service levels. 19

The Proposed Transaction does not adversely affect TNMP’s cost of service, nor 20

change any of TNMP’s obligations to comply with all applicable laws and regulations and 21

to provide safe and reliable service at fair, just, and reasonable rates to its customers. Nor 22

does it diminish or hinder the Commission or any other municipal or regulatory authority 23

in the exercise of its jurisdiction to assure that TNMP is complying with applicable laws 24

and regulations. 25

Q. IS THE PROPOSED TRANSACTION IN THE PUBLIC INTEREST?26

A. Yes. The Proposed Transaction will be marked by continuity in many respects while 27

providing significant benefits to stakeholders that would not occur otherwise. There are 28

also meaningful protections to avert financial and related risks. Collectively, these 29

attributes advance the public interest. I conclude that the Proposed Transaction is in the 30

public interest and should be approved.31

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Q. DOES THIS CONCLUDE YOUR TESTIMONY?1

A. Yes, it does.2

63

J. NEAL WALKER EDUCATION BACKGROUND AND BUSINESS EXPERIENCE

Neal Walker is currently the President of Texas-New Mexico Power Company (TNMP). Mr. Walker graduated from Texas Christian University in 1989 with a Bachelor’s Degree in Business Administration. He graduated from LeTourneau University in 1995 with a Master’s Degree in Business Administration. He has also completed executive education courses at Darden Graduate School, at University of Virginia, and Neeley School of Business at Texas Christian University. Mr. Walker has been employed by TNMP since 1990. He has worked at TNMP as a Contracts and Regulatory Projects Analyst, Pricing Analyst, Regulatory Affairs Specialist, Area Manager, Business Unit Manager, Director of Customer Operations, and Vice President of Operations. In 2011, Mr. Walker was promoted to President. In this capacity he directs all activities related to the planning, design, construction, operation and maintenance of the TNMP electric transmission and distribution system, as well as TNMP’s regulatory and legislative activities, Retail Electric Provider (“REP”) relations, community and media relations.

EXHIBIT JNW-1 PUC Docket No. 51547

Page 1 of 1

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EXHIBIT JNW-2 PUC Docket No. 51547

Page 1 of 1

66



JOINT REPORT AND APPLICATIONOF

TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC., AND AVANGRID, INC.

FORREGULATORY APPROVALS UNDERPURA §§ 14.101, 39.262, AND 39.915


STACY R. WHITEHURST


NOVEMBER 23, 2020

67

DIRECT TESTIMONY OF STACY R. WHITEHURST PUC DOCKET NO. 51547

i

TABLE OF CONTENTS

I. INTRODUCTION AND QUALIFICATIONS .....................................................................2

II. PURPOSE OF DIRECT TESTIMONY .............................................................................2

III. REGULATORY REQUIREMENTS..................................................................................3

IV. TARIFF CHANGES.......................................................................................................12

V. CODE OF CONDUCT ...................................................................................................13

VI. CONCLUSION ..............................................................................................................14

EXHIBITSEXHIBIT SRW-1

EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE

EXHIBIT SRW-2DISTRIBUTION COST RECOVERY FACTOR BASELINE

EXHIBIT SRW-3TEST YEAR ESI IDS BY MONTH

EXHIBIT SRW-4TEST YEAR METERED AND UNMETERED ESI IDS AND KWH

EXHIBIT SRW-5TEST YEAR METERED AND UNMETERED DISTRIBUTION CHARGES AND NUMBER OF UNITS

EXHIBIT SRW-6MERGER RATE CREDIT CALCULATION

EXHIBIT SRW-7RIDER MERGER RATE CREDIT

EXHIBIT SRW-8TNMP’S CURRENT TEXAS CODE OF CONDUCT

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I. INTRODUCTION AND QUALIFICATIONS1

Q. PLEASE STATE YOUR NAME, BUSINESS ADDRESS, AND PLACE OF 2

EMPLOYMENT.3

A. My name is Stacy R. Whitehurst. I serve as Vice President of Regulatory Affairs 4

at Texas-New Mexico Power Company (“TNMP”). My business address is 577 N. 5

Garden Ridge Blvd., Lewisville, Texas 75067.6


A. I am testifying on behalf of TNMP.8

Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND 9


A. Exhibit SRW-1 describes my background and experience, including proceedings 11

for which I have provided testimony.12

Q. PLEASE DESCRIBE YOUR DUTIES AS THE VICE PRESIDENT OF 13

REGULATORY AFFAIRS.14

A. As the Vice President of Regulatory Affairs, I report directly to the President of 15

TNMP. I oversee certain aspects of TNMP’s advanced metering system, billing, 16

Retail Electric Provider (“REP”) relations, energy efficiency, and all regulatory 17

activities for TNMP, which include certificate of convenience and necessity 18

applications, compliance filings, complaints, rulemakings, and contested cases.19

Q. HAVE YOU PREPARED ANY EXHIBITS?20

A. Yes. I am sponsoring Exhibits SRW-1 through SRW-8, which are attached to my 21

testimony. Each of these exhibits was prepared by me or under my direction and 22

control. The information contained in these exhibits is true and correct to the best 23

of my knowledge and belief. I also co-sponsor the Commission Sale, Transfer, 24

Merger form attached to the Application in this proceeding.25

II. PURPOSE OF DIRECT TESTIMONY26

Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY?27

A. The purpose of my direct testimony is to support the Joint Report and Application 28

of Texas-New Mexico Power Company, NM Green Holdings, Inc. And Avangrid, 29

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Inc. for Regulatory Approvals Under PURA §§ 14.101, 39.262, And 39.915 (the 1

“Application”) filed in this docket. If approved, TNMP will continue to be an indirect 2

subsidiary of PNM Resources (“PNMR”). At closing, PNMR will become a 3

subsidiary of Avangrid, Inc. (“Avangrid”), and then Avangrid will transfer 100% 4

ownership in PNMR to Avangrid Networks, Inc. (“Avangrid Networks”), which is the 5

corporate entity Avangrid uses to hold all its public utility operating companies. 6

Avangrid also proposes to then have PNMR’s subsidiary, TNP Enterprises, Inc. 7

(“TNPE”) transfer the 100% ownership interest in TNMP to a newly created special 8

purpose entity (“SPE”) that will be owned by TNPE, so that there would be a SPE 9

interposed between TNMP and TNPE. These collective steps are the “Proposed 10

Transaction.”11

Q. WHAT SPECIFIC AREAS WILL YOUR DIRECT TESTIMONY COVER?12

A. My direct testimony will address:13

1. The Texas regulatory requirements required for approval;14

2. How TNMP and Avangrid will meet the regulatory requirements; 15

3. Changes to TNMP’s tariff to implement the Regulatory Commitments 16

proposed by Avangrid; and 17

4. Changes to TNMP Code of Conduct to address new affiliates within ERCOT 18

and corporate owners resulting from the Transaction.19

III. REGULATORY REQUIREMENTS20

Q. ARE THERE ANY STATUTORY REQUIREMENTS THAT APPLY TO THIS 21

PROPOSED TRANSACTION?22

A. Yes. The Public Utility Regulatory Act1 (“PURA”) contains three separate 23

provisions that govern sale and merger transactions, PURA §§ 14.101, 39.262, 24

and 39.915.25

First PURA § 14.101 states:26

1 PURA is codified at Tex. Util. Code Ann. §§ 11.001–66.016.

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(a) Unless a public utility reports the transaction to the commission within a 1reasonable time, the public utility may not:2

(1) sell, acquire, or lease a plant as an operating unit or system in 3this state for a total consideration of more than $10 million; or4

(2) merge or consolidate with another public utility operating in this 5state.6

(b) A public utility shall report to the commission within a reasonable time 7each transaction that involves the sale of at least 50 percent of the stock of 8the utility. On the filing of a report with the commission, the commission shall 9investigate the transaction, with or without a public hearing, to determine 10whether the action is consistent with the public interest. In reaching its 11determination, the commission shall consider:12

(1) the reasonable value of the property, facilities, or securities to be 13acquired, disposed of, merged, transferred, or consolidated;14

(2) whether the transaction will:15

(A) adversely affect the health or safety of customers or 16employees;17

(B) result in the transfer of jobs of citizens of this state to 18workers domiciled outside this state; or19

(C) result in the decline of service;20

(3) whether the public utility will receive consideration equal to the 21reasonable value of the assets when it sells, leases, or transfers 22assets; and23

(4) whether the transaction is consistent with the public interest.24

(c) If the commission finds that a transaction is not in the public interest, the 25commission shall take the effect of the transaction into consideration in 26ratemaking proceedings and disallow the effect of the transaction if the 27transaction will unreasonably affect rates or service.28

(d) This section does not apply to:29

(1) the purchase of a unit of property for replacement;30

(2) an addition to the facilities of a public utility by construction; or31

(3) transactions that facilitate unbundling, asset valuation, 32minimization of ownership or control of generation assets, or other 33purposes consistent with Chapter 39.34

PURA § 39.262(l)-(m) states:35

(l) To protect retail customers in this state, and ensure the appropriateness 36of the nonbypassable rates of electric utilities and transmission and 37distribution utilities, notwithstanding any other provision of this title, an 38

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electric utility or transmission and distribution utility must report to and 1obtain approval of the commission before closing any transaction in which: 2

(1) the electric utility or transmission and distribution utility will be 3merged or consolidated with another electric utility or transmission 4and distribution utility; 5

(2) at least 50 percent of the stock of the electric utility or 6transmission and distribution utility will be transferred or sold; or 7

(3) a controlling interest or operational control of the electric utility or 8transmission and distribution utility will be transferred. 9

(m) The commission shall approve a transaction under Subsection (l) if the 10commission finds that the transaction is in the public interest. In making its 11determination, the commission shall consider whether the transaction will 12adversely affect the reliability of service, availability of service, or cost of 13service of the electric utility or transmission and distribution utility. The 14commission shall make the determination concerning a transaction under 15this subsection not later than the 180th day after the date the commission 16receives the relevant report. The commission may extend the deadline 17provided by this subsection for not more than 60 days if the commission 18determines the extension is needed to evaluate additional information, to 19consider actions taken by other jurisdictions concerning the transaction, to 20provide for administrative efficiency, or for other good cause. If the 21commission has not made a determination before the expiration of the 22deadline provided by or extended under this subsection, the transaction is 23considered approved.24

The third provision of PURA that governs this proceeding is PURA § 39.915, which25

states:26

(a) To protect retail customers in this state, and to ensure the continuation27of cost-effective energy efficiency measures and delivery systems, 28notwithstanding any other provision of this title, an electric utility or 29transmission and distribution utility must report to and obtain approval of the 30commission before closing any transaction in which:31

(1) the electric utility or transmission and distribution utility will be 32merged or consolidated with another electric utility or transmission 33and distribution utility;34

(2) at least 50 percent of the stock of the electric utility or 35transmission and distribution utility will be transferred or sold; or36

(3) a controlling interest or operational control of the electric utility or 37transmission and distribution utility will be transferred.38

(b) The commission shall approve a transaction under Subsection (a) if the 39commission finds that the transaction is in the public interest. In making its 40determination, the commission shall consider whether the transaction will 41

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adversely affect the reliability of service, availability of service, or cost of 1service of the electric utility or transmission and distribution utility. The 2commission shall make the determination concerning a transaction under 3this subsection not later than the 180th day after the date the commission 4receives the relevant report. The commission may extend the deadline 5provided by this subsection for not more than 60 days if the commission 6determines the extension is needed to evaluate additional information, to 7consider actions taken by other jurisdictions concerning the transaction, to 8provide for administrative efficiency, or for other good cause. If the 9commission has not made a determination before the expiration of the 10deadline provided by or extended under this subsection, the transaction is 11considered approved.12

Q. HAS THE COMMISSION ESTABLISHED ANY SUBSTANTIVE RULES THAT 13

AFFECT THIS PROPOSED TRANSACTION?14

A. Yes, this proceeding falls under 16 Tex. Admin. Code (“TAC”) § 25.74 which 15

states: 16

(a) Pursuant to Public Utility Regulatory Act (PURA) §39.262(l)-(m) and 17§ 39.915, an electric utility must report to and obtain approval of the 18commission before closing any transaction in which: 19

(1) the electric utility will be merged or consolidated with another 20electric utility; 21

(2) at least 50% of the stock of the electric utility will be transferred 22or sold; or 23

(3) a controlling interest or operational control of the electric utility will 24be transferred. 25

(b) Pursuant to PURA § 14.101(a)(1), an electric utility shall not sell, 26acquire, or lease a plant as an operating unit or system in the State of Texas 27for a total consideration of more than $10 million unless the electric utility 28reports such transaction to the commission at least one commission 29working day before the transaction closes. Pursuant to PURA § 37.154, if 30the transaction involves the sale, assignment, or lease of a certificate of 31convenience and necessity (“CCN”) or a right obtained under a CCN, the 32electric utility must obtain commission approval of such CCN transfer. 33

(c) An electric utility shall not purchase voting stock in another public utility 34doing business in the State of Texas unless the electric utility reports such 35purchase to the commission at least one commission working day before 36the transaction closes. 37

(d) An electric utility shall not loan money, stocks, bonds, notes, or other 38evidence of indebtedness to any person who directly or indirectly owns or 39holds 5% or more of the stock of the electric utility unless the electric utility 40reports such transaction to the commission at least one commission 41

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working day before the transaction closes. A properly filed tariff or energy 1efficiency plan with respect to energy conservation loans available to 2customers will be considered adequate reporting to the commission. 3

(e) This section does not apply to activities addressed by PURA §14.101(d) 4and §39.452(e). 5

(f) This section applies to any transaction addressed by this section that has 6not closed, except for a transaction addressed by PURA §39.262(n) or 7§ 39.915(c).8

Q. DOES TNMP HAVE COMMON STOCK OUTSTANDING THAT WOULD BE 9

SUBJECT TO PURA § 14.101?10

A. Yes. As shown in PNMR’s third quarter 10Q, the total number of shares of 11

common stock of TNMP, $10 par value per share, outstanding as of October 23, 12

2020, was 6,358, all held indirectly by PNMR (and none held by non-affiliates).13

Q. WILL THE OWNERSHIP OF THIS STOCK CHANGE?14

A. Ownership of the stock will indirectly change. The stock is owned by TNPE. TNPE15

is owned by PNMR, and PNMR is a publicly traded company on the New York 16

Stock Exchange (“NYSE”). After the close of the Transaction, PNMR will be 17

delisted from the NYSE; Avangrid (traded under the NYSE symbol “AGR”) will own 18

PNMR. TNMP Holdings will be a new special purpose entity that will be created 19

to hold the TNMP stock.20

Q. HOW WILL APPLICANTS DEMONSTRATE THAT THE PROPOSED21

TRANSACTION MEETS THE REQUIREMENTS OF PURA § 14.101, 39.262 (l) -22

(m), AND PURA § 39.915, AND 16 TAC § 25.72?23

A. In support of these requirements, Applicants will show the following:24

1. The Proposed Transaction is in the public interest because it will provide 25net tangible and quantifiable benefits to TNMP customers, establish 26Commission-enforceable financial and corporate governance protections 27for TNMP, and comply with PURA and the Commission’s rules;28

2. The Proposed Transaction will not adversely affect the health or safety of 29TNMP’s customers or employees; 30

3. The Proposed Transaction will not result in the transfer of TNMP jobs of 31citizens of Texas to workers domiciled outside Texas;32

4. The Proposed Transaction will not result in the decline of TNMP’s service; 33

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5. The Proposed Transaction will not adversely affect TNMP’s reliability of 1service;2

6. The Proposed Transaction will not adversely affect TNMP’s availability of 3service; and 4

7. The Proposed Transaction will not adversely affect TNMP’s cost of service.5

Q. DOES THE PROPOSED TRANSACTION MEET EACH OF THOSE 6

REQUIREMENTS?7

A. Yes. Through my testimony and the testimony of TNMP witnesses Neal Walker, 8

Henry E. Monroy, and Ellen Lapson, and Avangrid witnesses Robert D. Kump and 9

Pedro Azagra Blazquez, TNMP and Avangrid will show the Proposed Transaction 10

meets each of the requirements of PURA and the Commission’s Substantive 11

Rules. Mr. Walker’s testimony provides a summary table of the subject matter 12

addressed by each of these witnesses. 13

Q. ARE YOU AWARE OF THE REGULATORY COMMITMENTS BEING 14

PRESENTED BY AVANGRID WITNESS ROBERT D. KUMP?15

A. Yes. The Regulatory Commitments included as Exhibit RDK-1 to Mr. Kump’s 16

testimony can be classified as Financial Protections and Code of Conduct, Local 17

Control and Management, Accounting and Ratemaking, Regulatory Jurisdiction, 18

Agreements and Bylaws, Tangible and Quantifiable Benefits, and Governance.19

These Regulatory Commitments address certain considerations the Commission 20

will use to approve the Proposed Transaction. The Regulatory Commitments 21

demonstrate that the Proposed Transaction is in the public interest because it 22

provides net tangible and quantifiable benefits to TNMP customers and establishes23

Commission-enforceable financial and corporate governance protections for 24

TNMP.25

Q. WHO WILL ADDRESS EACH OF THE REGULATORY COMMITMENTS?26

A. Mr. Robert D. Kump will address each of the regulatory commitments, but some 27

are also discussed in the testimonies of other witnesses of the Applicants. 28

Q. WILL THE PROPOSED TRANSACTION ADVERSELY AFFECT THE HEALTH29

OR SAFETY OF CUSTOMERS OR EMPLOYEES?30

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A. No. As Mr. Kump and Mr. Walker discuss in further detail, the Proposed1

Transaction will not have an adverse impact on the daily operations of TNMP, and 2

TNMP will continue to invest in infrastructure and operate its system using the 3

same employees and processes. The Regulatory Commitments address the 4

minimum capital expenditure for the five-year period beginning January 1, 2021. 5

As a result, the health and safety of customers and employees will not be adversely 6

affected.7

Q. WILL THE PROPOSED TRANSACTION RESULT IN THE TRANSFER OF JOBS 8

OF CITIZENS OF TEXAS TO WORKERS DOMICILED IN OTHER STATES?9

A. No. As included in the Regulatory Commitments, there will not be any involuntary 10

reductions to TNMP’s workforce (other than for cause or performance) and there 11

will not be any reductions to wages or benefits for at least 2 years as a result of 12

the Proposed Transaction. TNMP’s employees do not currently enjoy such job 13

security; employees do not sign annual contracts. In addition, the Regulatory 14

Commitments require Applicants to maintain TNMP’s headquarters and 15

management in TNMP service territory in Texas. Consequently, no Texas jobs will 16

be transferred to workers outside the state. 17

Q. WHAT ARE THE REGULATORY COMMITMENTS WITH RESPECT TO UNION-18

REPRESENTED EMPLOYEES?19

A. In addition to the above commitments, all collective bargaining agreements will be 20

fully honored. 21

Q. WILL THE PROPOSED TRANSACTION ADVERSELY AFFECT TNMP’S 22

RELIABILITY OR AVAILABILITY OF SERVICE OR RESULT IN THE DECLINE 23

OF SERVICE?24

A. No. The Proposed Transaction will not have a negative effect on TNMP’s 25

operations, and thus, will not result in a decline of service. As noted in the 26

Regulatory Commitments, Applicants have committed to have TNMP maintain 27

minimum capital expenditures. Mr. Walker discusses TNMP operations and the 28

Proposed Transaction’s non-impacts further in his direct testimony.29

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TNMP witnesses Neal Walker and Henry Monroy discuss the current capital 1

budget and TNMP’s 5-year capital budget supported by PNMR in the long-range 2

plan. Their testimony demonstrates the ongoing support for the reliability of 3

service, availability of service, and the commitment to safe and reliable service.4

In addition, Avangrid commits that it will maintain its indirect controlling 5

ownership interest in TNMP for not less than five years following the closing of the 6

Proposed Transaction. 7

Q. WHO ADDRESSES WHETHER TNMP WILL HAVE SUFFICIENT ACCESS TO 8

FINANCIAL MEANS AND SUPPORT TO PROVIDE RELIABLE ELECTRIC 9

SERVICE AND ENSURE THE AVAILABILITY OF SERVICE AFTER CLOSING?10

A. Messrs. Pedro Azagra Blazquez and Robert D. Kump discuss this. Also, TNMP 11

witness Ms. Lapson addresses these requirements.12

Q. WILL THE PROPOSED TRANSACTION ADVERSELY AFFECT TNMP’S COST-13

OF-SERVICE?14

A. No. For the reasons I previously discussed, there will not be any adverse impacts 15

to TNMP’s cost-of-service. TNMP’s capital expenditure plan and operations 16

remain intact and unchanged as a result of the Proposed Transaction. In addition, 17

as part of the Regulatory Commitments, goodwill, transaction costs, and transition 18

costs will not be included in rate base or amortized as a component of cost of 19

service in any TNMP proceedings before the Commission.20

Q. IN ADDITION TO THE STATUTORY FACTORS DISCUSSED ABOVE, ARE YOU21

COVERING THE OTHER RATE-RELATED FACTORS THE COMMISSION HAS 22

CONSIDERED IN CHANGE-IN-CONTROL PROCEEDINGS?23

A. Yes. In conducting its public interest determination, the Commission has 24

historically considered whether the transaction provides net tangible and 25

quantifiable benefits to ratepayers. 26

Q. HOW HAS THE COMMISSION HISTORICALLY ADDRESSED THIS ISSUE? 27

A. The Commission has historically considered the impact of the transaction on the 28

rates charged to customers and the impact on local communities. This is to ensure 29

customers are adequately protected and that they will realize the benefits of any 30

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transaction. For transmission and distribution utilities, customer benefits may 1

consist of a range of factors including rate credits, savings from the transaction, 2

and/or commitments that the utility will not impose transaction-related costs on 3

customers.4

Q. DOES THE PROPOSED TRANSACTION PROVIDE TANGIBLE AND 5

QUANTIFIABLE BENEFITS TO TNMP’S CUSTOMERS ON A TIMELY BASIS?6

A. Yes. In support of the Proposed Transaction, TNMP will issue a rate credit to its 7

Texas customers of $8.6 million. This is a firm, quantifiable commitment, not a 8

promise of future savings. After the Proposed Transaction closes, TNMP will 9

distribute the rate credits to current customers over a three-year period. I will 10

discuss the implementation of this Regulatory Commitment later in my testimony.11

Q. WILL THIS PROPOSED TRANSACTION BE A “MEANS TO EVADE 12

REGULATION”?13

A. No. Once the Proposed Transaction closes, TNMP will continue to be regulated 14

by the PUCT. In fact, the Regulatory Commitments provide specific provisions to 15

protect the Commission’s jurisdiction. 16

1. The Regulatory Commitments forbid TNMP to build transmission assets 17

outside of ERCOT without prior Commission approval or otherwise take any 18

action that impairs the continuing jurisdiction of the Commission. 19

2. In addition, neither TNMP, the SPE, nor any of their affiliates will assert before 20

this Commission, the Federal Energy Regulatory Commission, or a federal or 21

Texas court of competent jurisdiction that the Commission is preempted 22

pursuant to the Federal Power Act (e.g., under a FERC tariff) from making a 23

determination regarding the cost recovery of affiliate costs sought to be 24

allocated to TNMP. Furthermore, Avangrid expressly acknowledges, in the 25

commitments, the Commission’s jurisdictional authority to alter the 26

commitments.27

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IV. TARIFF CHANGES1

Q. WILL TNMP BE MAKING ANY RATE CHANGES IN CONJUNCTION WITH THE2

PROPOSED TRANSATION?3

A. No rate changes are being proposed as part of the Proposed Transaction, but 4

Avangrid is proposing a rate credit back to customers in the amount of $8.6 million.5

This credit can be passed through directly to end-use customers by REPs, and 6

TNMP commits to working in good faith with affected REPs to determine an 7

acceptable method to implement this commitment.8

Q. HOW DO YOU PROPOSE TO PASS THIS RATE CREDIT ON TO THE 9

CUSTOMER CLASSES?10

A. TNMP has developed a plan that would reduce the customer charge for each end-11

use customer of each REP that TNMP serves. The plan provides a credit by 12

customer class to the customer charge for the next three years. TNMP commits 13

to working in good faith with affected REPs to ensure that this method, or another 14

method, is an acceptable method to implement this rate credit commitment.15

Q. HOW WERE THE CREDITS FOR EACH CUSTOMER CLASS DETERMINED?16

A. The first step was to identify the Distribution Cost Allocation Factor to be used to 17

allocate the rate credit to each customer class (Exhibit SRW-2). The number of 18

ESI IDs for each customer class was then annualized as of September 2020 19

(Exhibit SRW-3). For the lighting class, TNMP has calculated the number of ESI 20

IDs and kWh for metered accounts (Exhibit SRW-4), and the number of units for 21

unmetered accounts (Exhibit SRW-5). The rates per ESI ID or per kWh or per unit 22

for lighting is calculated in Exhibit SRW-6. The new tariff is reflected in Exhibit 23

SRW-7.24

Q. IN DOCKET NO. 30172, DID TNMP IMPLEMENT A RATE CREDIT?25

A. Yes.26

Q. CAN YOU EXPLAIN HOW TNMP IMPLEMENTED THE RATE CREDIT FROM 27

THAT PROCEEDING?28

A. TNMP included the credit in conjunction with the Texas SET 810_02 EDI 29

transaction.30

79


13

Q. WHAT SAC006 CODE CAN REPS EXPECT TO SEE ON THE 810_02 EDI 1

TRANSACTION IF THE SAME PROCESS IS FOLLOWED FOR THESE 2

CREDITS?3

A. TNMP proposes to use the SAC006 code of “RRR006”, but is willing to discuss 4

with PUCT Staff and other stakeholders other potential approaches that may 5

accomplish the goals discussed herein.6

Q. HOW WILL TNMP COMMIT TO WORKING IN GOOD FAITH WITH AFFECTED 7

REPS TO DETERMINE IF THE ABOVE EXAMPLE IS AN ACCEPTABLE8

METHOD FOR IMPLEMENTATION RATE CREDITS?9

A. If this methodology is acceptable and included in a Commission order, there will 10

be time between when a final order is issued in this case and when the Proposed 11

Transaction will close to work with REPs in good faith to implement this approach. 12

TNMP will work through the Texas Set Working Group at ERCOT to reach an 13

acceptable method for implementation.14

Q. WILL TNMP GIVE REPS AT LEAST 45 DAYS NOTICE BEFORE 15

IMPLEMENTATION?16

A. Yes. TNMP will send a market notice through the ERCOT Listserv at least 45 days 17

before implementation of any rate credit.18

V. CODE OF CONDUCT 19

Q. DOES TNMP CURRENTLY HAVE A CODE OF CONDUCT? 20

A. Yes. A copy of the Code of Conduct is attached to my testimony as SRW-8.21

Q. DOES THE CODE OF CONDUCT REQUIRE AMENDMENT AS A RESULT OF 22

THE PROPOSED TRANSACTION?23

A. Yes. If the Commission finds that the Proposed Transaction is consistent with the 24

public interest, TNMP will file a new Code of Conduct with the Commission that 25

incorporates the Commission-approved regulatory commitments.26

Q. HOW WILL TNMP ASSURE THE COMMISSION THAT THE AMENDED CODE 27

OF CONDUCT WILL BE FOLLOWED AFTER THE PROPOSED TRANSACTION28

IS CONSUMMATED? 29

80


14

A. TNMP will communicate the provisions of the amended Code of Conduct to those 1

employees of TNMP and any TNMP affiliate subject to its provisions. In addition, 2

Avangrid will communicate the substance of the amended Code of Conduct to 3

those employees of Avangrid and its affiliates who are impacted by its provisions.4

VI. CONCLUSION 5

Q. PLEASE SUMMARIZE YOUR TESTIMONY. 6

A. The Commission should find that Avangrid’s proposed acquisition of TNMP 7

through PNMR and TNPE is consistent with the public interest. The Proposed8

Transaction will have no negative impact on the Commission’s regulation or on 9

retail competition in Texas. 10

Q. DOES THIS CONCLUDE YOUR TESTIMONY?11

A. Yes, it does.12

81

STACY R. WHITEHURST Education Background and Business Experience

Stacy R. Whitehurst is the Vice President of Regulatory Affairs for TNMP. Mr.

Whitehurst has been employed in the electric utility industry since 2000, when he accepted a

position as a senior analyst with Texas-New Mexico Power Company. In this capacity, he was

responsible for creation of and modifications to TNPE's customer information and billing

systems to support the deregulation of electricity.

In August 2003, Mr. Whitehurst accepted the position of Senior Analyst in the Regulatory

Affairs department. Following the acquisition of TNP Enterprises by PNM Resources on June 6,

2005, Mr. Whitehurst was promoted to Supervisor of Texas Regulatory Policy. Mr. Whitehurst

was promoted to his current position in June 2011.

Mr. Whitehurst holds a Bachelor’s Degree from Texas A&M University.

EXHIBIT SRW-1 PUC Docket No. 51547

Page 1 of 4

83

PROCEEDINGS IN WHICH STACY R. WHITEHURST FILED TESTIMONY JURISDICTION DOCKET NO. DESCRIPTION

Texas 29206 Application of Texas-New Mexico Power Company, First Choice Power, Inc. and Texas Generating Company, L.P. to Finalize Stranded Costs under PURA §39.262

Texas 31825 Application of First Choice Power Special Purpose, LP to Increase Its Price To Beat Fuel Factors

Texas 31994 Application of Texas-New Mexico Power Company to Adjust the Competition of Transition Charge Pursuant to PURA § 39.262(g)

Texas 32109 Application of First Choice Power Special Purpose, L.P. to Adjust Its Price To Beat Base Rates Pursuant to PURA §39.202 and PUC Subst. R. §25.41(g)(3)

Texas 32795 Staff's Petition to Initiate a Generic Proceeding to Re-Allocate Stranded Costs pursuant to PURA §39.533(f)

Texas 35460 Petition of PNM Resources, Inc. and Cap Rock Energy Corporation Regarding Proposed Merger and Acquisition of Stock

Texas 36025 Application of Texas-New Mexico Power Company For Authority To Change Rates

Texas 37613 Application of Texas New Mexico Power Company For Approval of An Energy Efficiency Cost Recovery Factor


Texas 38306 Texas-New Mexico Power Company's Request For Approval of Advance Metering System (AMS) Deployment And AMS Surcharge


Texas 38880 Application of Texas-New Mexico Power Company For Rate Case Expense Severed From PUC Docket No. 38480; SOAH Docket No. 473-10-6053



Page 2 of 4

84



Texas 40516 Annual Compliance Of Texas-New Mexico Power Company To Reduce Certain Discretionary Charges


Texas 41629 Annual Compliance of Texas-New Mexico Power Company To Reduce Certain Discretionary Charges

Texas 41756 Application Of Texas-New Mexico Power Company To Amend Its Certificate of Convenience And Necessity For The Proposed Westminster 138-kV Transmission Line In Collin County

Texas 41901 Compliance Tariff of Texas New Mexico Power Company Related To Non-Standard Metering Service Pursuant PUC Subst. R. §25.133


Texas 42638 Annual Compliance of Texas-New Mexico Power Company To Reduce Certain Discretionary Charges

Texas 44340 Application Of Texas-New Mexico Power Company For Interim Update Of Wholesale Transmission Rates Pursuant To Subst. R. §25.192(h)


Texas 44900 Annual Compliance Filing of Texas-New Mexico Power Company to Reduce Certain Discretionary Charges

Texas 45216 Application Of Texas-New Mexico Power Company To Reconcile Advanced Metering System Costs


Texas 46119 Annual Compliance Filing of Texas-New Mexico Power Company to Reduce Certain Discretionary Charges

Texas 47217 Application of Texas New Mexico Power Company For


Page 3 of 4

85


Approval of An Energy Efficiency Cost Recovery Factor



Texas 48591 Review Of Rate Case Expenses Incurred By Texas New Mexico Power Company And Municipalities In Docket Nos. 48401,35038, And 41901


Texas 50731 Application of Texas-New Mexico Power Company For A Distribution Cost Recovery Factor


Texas 51387 Application of Texas-New Mexico Power Company For Change In Deployed Advanced Meter Technology


Page 4 of 4

86

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429


Page 1 of 3

91

TEXA

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Page 2 of 3

92

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Page 3 of 3

93

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Page 1 of 1

94

TEXAS-NEW MEXICO POWER COMPANY TARIFF FOR RETAIL DELIVERY SERVICE

6.1 Rate Schedules Applicable: Entire Certified Service Area Effective Date: TBD

Page No.: 137.5

Original 6.1.1.6.8 RIDER MRC –MERGER RATE CREDIT AVAILABILITY This rider is applicable to delivery service provided under Section 6.1.1.1.1 Residential Service, Section 6.1.1.1.2 Secondary Service (Less Than or Equal to 5 kW), Section 6.1.1.1.3 Secondary Service (Greater Than 5 kW), Section 6.1.1.1.4 Primary Service, Section 6.1.1.1.5 Transmission Service and Section 6.1.1.1.6 Lighting Service in the Company’s Tariff for Retail Delivery Service. The rider will expire the three years after the effective date of the rider or when the $8.6 million credit has been issued. MONTHLY CREDIT A Retail Customer's credit for the billing month shall be:

Residential Service $0.64 Per Customer Secondary Service (Less Than or Equal to 5KW) $0.20 Per Customer Secondary Service (Greater Than 5 KW) $2.93 Per Customer Primary Service $24.11 Per Customer Transmission Service $52.84 Per Customer Lighting Service Metered $0.002 Per kWh Non Metered

$0.161 Per Unit

NOTICE This rate schedule is subject to the Company's Tariff and Applicable Legal Authorities.


Page 1 of 1

95

of 13

TEXAS-NEW MEXICO POWER COMPANY PNM RESOURCES, INC.

TEXAS CODE OF CONDUCT

Introduction

Texas-New Mexico Power Company (TNMP) and PNM Resources, Inc. (PNM Resources) have adopted this Texas Code of Conduct as part of their program to comply with the affiliate transaction rules adopted by the Public Utilities Commission of Texas (the PUCT).

This Texas Code of Conduct applies to transactions involving TNMP and PNM Resources and their Competitive Affiliates beginning on June 6, 2005, the date on which PNM Resources acquired the outstanding common stock of TNP Enterprises, Inc.

It is important that all employees of TNMP, PNM Resources, and PNMR Services Company understand and comply with this Texas Code of Conduct in their interactions with PNM Resources’ Competitive Affiliates.

This Texas Code of Conduct is divided into the following general areas: Transactions between TNMP and its Competitive Affiliates;Safeguards relating to the provision of products and services;Information Safeguards;Separation of TNMP and its affiliates;Shared Officer and Director Compliance;Safeguards Relating to Joint Marketing and Advertising;Contracts between TNMP and its Competitive Affiliates;Implementation; andPUCT Filing Requirements.

Questions regarding the Texas Code of Conduct should be directed to Stacy Whitehurst at 214-222-4142.

Definitions. The following terms apply throughout this Texas Code of Conduct:

Arm’s Length Transactions: The standard of conduct under which unrelated parties, each acting in its own best interest, would carry out a particular transaction. Applied to related parties, a transaction is at arm’s length if the transaction could have been made on the same terms to a disinterested third party in a bargained transaction.


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of 13

Competitive Affiliates: TNMP or PNM Resources affiliates that provide a service or sell products in competitive, energy-related markets in Texas.

Confidential information: Any information not intended for public disclosure and

considered confidential or proprietary by persons privy to such information. Confidential information includes, but is not limited to, information relating to the interconnection of customers to TNMP’s Texas transmission or distribution systems, proprietary customer information, trade secrets, competitive information relating to internal manufacturing process, and information about TNMP’s Texas transmission or distribution system, operations, or plans for expansion.

Central Corporate Services: Services shared by TNMP and its affiliates and generally

provided by PNMR Services Co. These include: human resources, procurement, information technology, regulatory services, administrative services, real estate services, legal services, accounting, environmental services, internal audit, community relations, corporate communications, financial services, financial planning and management support, corporate services, corporate secretary, lobbying, risk management, and corporate planning.

Proprietary customer information: Any information compiled by TNMP on a customer

in the normal course of providing electric service that makes possible the identification of any individual customer by matching such information with the customer’s name, address, account number, type or classification of service, historical electricity usage, expected patterns of use, types of facilities used in providing service, individual contract terms and conditions, price, current charges, billing records, or any other information that the customer has expressly requested not be disclosed. Information that is redacted or organized in such a way as to make it impossible to identify the customer to whom the information relates does not constitute proprietary customer information.

PUCT: The Public Utility Commission of Texas REP: Retail Electric Provider. T&D Operations: Transmission and distribution operations conducted by TNMP in

Texas. Transaction: Transaction means the provision of any good, property, service, privilege,

or act between any two parties for which compensation normally would be provided if each party was independent of the other and acting in its best financial interest. In the application of the definition of transaction, TNMP, PNM Resources, and their affiliates will be inclusive rather than exclusive.

A. TRANSACTIONS BETWEEN TNMP AND ITS AFFILIATES

1. Separate Books and Records. TNMP, PNM Resources and each of their competitive affiliates will maintain separate accounts and records.


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of 13

2. Allocation of Costs. PNMR Services Co. will fully assign costs directly to the affiliate by whom or on whose behalf such costs are incurred, wherever possible. Costs shared among different affiliates will be fully allocated among such affiliates by using a methodology based on cost causation, wherever possible. Cost allocation will be consistent with the PNMR Services Co. Cost Allocation Manual in effect from time to time. To the extent that TNMP provides incidental services to its affiliates, TNMP will allocate costs in the same manner as PNMR Services Co.

3. Transactions among TNMP and its Competitive Affiliates. Transactions between TNMP and its Competitive Affiliates shall be at arm’s length, except that transactions governed by tariffs shall be in accordance with the applicable tariffs. TNMP will maintain for three years a contemporaneous record of all transactions with Competitive Affiliates other than transactions governed by tariffs. Central Corporate Services provided by PNMR Services Co. are not transactions with a Competitive Affiliate. TNMP personnel will submit reports of such transactions to the Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067 or by fax to #214-222-4156 within 24 hours after such transactions occur. The report will be in the form set out as Appendix A to this Texas Code of Conduct, or other form that may replace it.

4. Sale of Products or Services. All sales of products or services by TNMP to any affiliate will be governed by a tariff approved by the PUCT, unless the sales are otherwise approved by the PUCT. TNMP shall make available products and services to unaffiliated entities on the same terms and conditions as to its affiliates.

5. Purchase by TNMP of Products or Services from its Affiliates. a. Purchases from all affiliates. TNMP’s purchase of products, services, or

assets from an affiliate shall be at prices that are fair and reasonable to utility customers and that reflect the market value of the product, service, or asset.

b. Purchases from Competitive Affiliates. TNMP may not enter into a transaction with a competitive affiliate that has a per unit value of $75,000 or more, or a total value of $1 million or more, unless the transaction is the result of the bidding process described in Section G of this Texas Code of Conduct and the transaction is formalized in a written contract.

6. Transfers of Assets to Competitive Affiliates. TNMP may not transfer to a Competitive Affiliate assets having a per unit value of $75,000 or more, or a total value of $1 million or more, unless the transaction is the result of the bidding process described in Section G of this Texas Code of Conduct and the transaction is formalized in a written contract.

7. Anticompetitive Practices. TNMP may not engage in any anticompetitive practice that could harm competition in any market for competitive services. TNMP may not provide any Competitive Affiliate any preference over a non-affiliated company providing competitive services or its customers. All regulated


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services offered by TNMP must be available to all eligible customers and non-affiliated competitive suppliers in a nondiscriminatory manner.

8. Sharing of property, equipment, computer systems, information systems, and corporate support services. TNMP and PNM Resources, Inc. and their Competitive Affiliates may share common property, equipment, computer systems, information systems, and corporate support services, if TNMP implements safeguards included in this Texas Code of Conduct to preclude employees of a competitive affiliate from gaining access to information in a manner that would allow or provide a means to transfer confidential information from TNMP to an affiliate, create an opportunity for preferential treatment or unfair competitive advantage, lead to customer confusion, or create significant opportunities for cross-subsidization of affiliates.

B. SAFEGUARDS RELATING TO THE PROVISION OF PRODUCTS AND SERVICES. 1. Products and Services available on a Non-Discriminatory Basis. TNMP will

make products and services that it makes available to Competitive Affiliates available to all similarly situated entities, contemporaneously and in the same manner. TNMP will: apply its tariffs, prices, terms, conditions and discounts for its products and

services in the same manner to all similarly situated entities; process all requests for a product or service on a non-discriminatory basis;

and, apply tariff provisions that permit discretion in their application in the same

manner to all similarly situated competitors. TNMP will not use customer-specific contracts to circumvent these requirements or create a product or service arrangement with a Competitive Affiliate that is so unique that no competitor could be similarly situated to utilize the product or service.

2. Tying Arrangements Restricted. Unless otherwise allowed by the PUCT through a rule or tariff, TNMP will not condition the provision of any product, service, pricing benefit, or alternative terms or conditions upon the purchase of any other good or service from it or any of its Competitive Affiliates.

C. INFORMATION SAFEGUARDS 1. Nondiscriminatory availability of information.

a. TNMP will not permit Competitive Affiliates to have access to information in a manner that would result in preferential treatment of the Competitive Affiliates.

b. Anyone, including Competitive Affiliates, who possesses customer information that was obtained in a manner contrary to this Texas Code of Conduct shall not make any commercial use of such information and shall destroy the information or return it to TNMP.


Page 4 of 13

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c. TNMP will not allow preferential access by Competitive Affiliates to information about its transmission and distribution systems.

2. Proprietary customer information. a. TNMP will provide a customer with the customer’s proprietary customer

information, upon the customer’s request. b. Unless TNMP obtains from the customer prior affirmative written consent

or other verifiable authorization, it shall not release any proprietary customer information to any other entity, other than: the customer, an independent system operator, Central Corporate Services for the sole purpose of providing its

services, where authorized or requested to do so by the PUCT or where

required to do so by law, regulation or legal process, or to a provider of last resort.

c. TNMP will not disclose any aggregated customer information to a Competitive Affiliate, other than Central Corporate Services, unless it makes the same information available in a timely manner and on the same basis to any non-affiliates. Disclosure of information to Central Corporate Services is not disclosure to a Competitive Affiliate. If TNMP makes aggregate customer information available to a Competitive Affiliate, TNMP will report the transaction to the Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067, or by fax to #214-222-4156, on the form attached as Attachment A to this Texas Code of Conduct by no later than 8:00 am on the following calendar day. Within 24 hours of providing the information, and for at least 30 days, TNMP will post a conspicuous notice on its Internet web site providing the following information: The name of the Competitive Affiliate to which the information was

provided, The rate charged for the information, A meaningful description of the information provided, and Procedures by which non-affiliates may obtain records of such

information under the same terms and conditions. 3. Safeguards against disclosure by officers, directors, shared employees

and Central Corporate Services. To ensure that its officers, directors, shared employees, and Central Corporate Services do not use their access to TNMP operations information as a means to create opportunities for preferential treatment of TNMP’s Competitive Affiliates, each officer, director, and Central Corporate Services employee will be required to execute the Employee Acknowledgment Of Understanding form in which such person will agree that he


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or she will comply with all written policies regarding limitations on the use and distribution of Confidential Information. .

4. Restrictions on access to T&D information. Only TNMP employees and Central Corporate Services employees who require such information in connection with providing Central Corporate Services shall have access to transmission and distribution information. TNMP will restrict Competitive Affiliates’ access to information about T&D operations, through appropriate security devices, firewalls and procedures.

D. SEPARATION OF TNMP AND ITS AFFILIATES 1. Sharing of facilities, employees and other resources. TNMP and its

Competitive Affiliates may share employees, facilities, and resources as provided by the safeguards described in this Texas Code of Conduct if such sharing has been approved in advance by the PUCT. Any questions concerning such sharing or requests to share shall be submitted to Stacy Whitehurst, TNMP, Regulatory Policy.

2. Employee transfers. a. TNMP will not assign, for less than one year, utility employees engaged in

T&D operations to a Competitive Affiliate unless that employee has no knowledge of Confidential Information.

b. Employees engaged in T&D system operations who transfer to Competitive Affiliates will not remove or otherwise provide or use Confidential Information or property gained from the T&D operations in a discriminatory or exclusive fashion, to the benefit of the Competitive Affiliate or to the detriment of non-affiliated competitors.

c. Transferring employees will sign a statement indicating that they are aware of and understand the restrictions set forth in this Texas Code of Conduct.

d. TNMP will notify the Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067, or by fax to #214-222-4156, of any transfer of an employee to a Competitive Affiliate by the close of business on the business day prior to the effective date of the transfer. Such notice shall be in writing or via e-mail. TNMP will post on its internet site notice of any transfer within 24 hours of the transfer and will leave the notice posted for at least 30 days.

3. Physical separation. TNMP will not permit Competitive Affiliates’ personnel to have access to T&D facilities, except as permitted by law, rule, or PUCT order.

E. SHARED OFFICER AND DIRECTOR COMPLIANCE

1. Shared officers and directors are those individuals who are officers and directors of both the TNMP regulated utility company and PNM Resources, Inc. or any of its non-regulated affiliates.


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2. Shared officers and directors shall not include any officers of TNMP or PNM Resources, Inc. or its non-regulated affiliates assigned to supervision of day-to-day facility operations in any particular TNMP region. Any officers of TNMP responsible for daily supervision and operation of transmission and distribution systems in any particular region shall not be shared with non-regulated affiliates of PNM Resources, Inc.

3. Officers and directors will not be shared if doing so would result in the violation of any of the information sharing or other provisions of the Texas Code of Conduct.

4. Shared officers and directors will not, with the intent of giving a Competitive Affiliate an unfair competitive advantage, participate in decisions as a Competitive Affiliate officer or director, or attempt to influence decisions of other Competitive Affiliate officers and directors, while relying on confidential utility information pursuant to 16 Tex. Admin Code § 25.272(c)(3).

5. During any meetings of the Board of Directors or any committees, officers and directors shared between TNMP and PNM Resources or any of their Competitive Affiliates shall not disclose to Competitive Affiliate employees, or officers or directors who are not shared with TNMP any confidential utility information pursuant to 16 Tex. Admin Code § 25.272(c)(3). The PNM Resources Chief Compliance Officer, or designee, will review the agenda for any such meeting and will ensure that no inappropriate disclosure occurs. Officers and directors will recuse themselves from any such meetings during which prohibited topics are discussed.

F. SAFEGUARDS RELATING TO JOINT MARKETING AND ADVERTISING 1. Joint Marketing and Promotion.

a. TNMP will not conduct activities intended to promote the business of the Competitive Affiliates at the expense of non-affiliated competitors. TNMP will not: Provide or acquire leads on behalf of Competitive Affiliates; Solicit business or acquire information on behalf of Competitive

Affiliates; Share market analysis reports, market forecasts, planning or strategic

reports, or other types of proprietary or non-publicly available reports with its Competitive Affiliates;

Represent to customers or potential customers that it can offer competitive retail services bundled with its tariffed services;

Request authorization from its customers to pass on information exclusively to its Competitive Affiliates; or

Engage in the following activities: joint marketing, joint advertising or sales calls, joint proposals, joint promotional communications or correspondence (other than billing inserts pursuant to a PUCT-approved tariff that are also available to non-affiliated competitors on


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the same terms and conditions), joint presentations at trade shows, conferences or marketing events in Texas; or provide links from its Internet web site to the Competitive Affiliate’s Internet web site.

2. Provision of Technical Assistance. a. At a customer’s unsolicited request, TNMP may participate in meetings

with a Competitive Affiliate to discuss technical or operational subjects regarding TNMP’s provision of transmission or distribution services to the customer. TNMP may, however, participate in such meetings only in the same manner and to the same extent that it participates in such meetings with unaffiliated electric or energy services suppliers or their customers.

b. TNMP will not listen to, view, or otherwise participate in any way in a sales discussion between a customer and a Competitive Affiliate or an unaffiliated electric or energy services supplier.

3. Customer Requests a. Customer Requests for information.

(i) Requests for general information about products or services offered by Competitive Affiliates and their competitors. If a customer or potential customer requests general information about products or services to be provided by TNMP’s Competitive Affiliates or its affiliate’s competitors, TNMP personnel shall not: promote its Competitive Affiliate’s products or services, or offer any opinion regarding the service of the Competitive

Affiliate or any other service provider; or refer the customer or potential customer to the Competitive

Affiliate except as provided in subsection (ii), below.

(ii) Requests for specific Competitive Affiliate information. If a customer or potential customer makes an unsolicited request for information specifically about any of TNMP’s Competitive Affiliates, TNMP personnel may refer the customer or potential customer to the Competitive Affiliate for more information. The only information that TNMP may provide to the customer or potential customer is the address and telephone number of the Competitive Affiliate. TNMP will not transfer the customer directly to the Competitive Affiliate’s customer service office via telephone or provide any other electronic link whereby the customer could contact the Competitive Affiliate.

b. No Expression of Opinions by TNMP Personnel. TNMP personnel will not state or otherwise provide to any customer or potential customer any opinion regarding the reliability, experience, qualifications, financial capability, managerial capability, operations capability, customer service record, consumer practices or market share of its Competitive Affiliates or any competitor providing competitive services.


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G. CONTRACTS BETWEEN TNMP AND ITS COMPETITIVE AFFILIATES 1. Competitive Bidding Requirements. When:

procuring products and services, other than Central Corporate Services, that are offered by a Competitive Affiliate, or

selling to any Competitive Affiliate assets that have a per unit value of more than $75,000, or a total value of more than $1,000,000,

TNMP will follow the following procedures: a. Notice Requirements: TNMP will provide the following notice of any

request for proposals: Publication of notices in trade journals or newspapers, as appropriate,

that may be reasonably expected to provide notice to competitors of the Competitive Affiliate;

Mailing of notice to persons who previously requested to be notified of the requests for proposals; and

Conspicuous notice on TNMP’s Internet site or other public electronic bulletin board.

b. Independent Evaluator: If a Competitive Affiliate submits a bid to be evaluated, TNMP will use an independent evaluator. The independent evaluator will identify in writing the bids that are most advantageous and warrant negotiation and contract execution, in accordance with the criteria set forth in the request for proposals. TNMP retains responsibility for final selection of products or services. TNMP will maintain a record of all communications with the independent evaluator.

c. Competitive Bidding Procedures: TNMP will make a request for proposals available to interested persons by conspicuously posting the request on its Internet site or other electronic bulletin board. The request for proposals will clearly set forth the eligibility and

selection criteria and will specify the weight to be given to any non-cost selection criteria.

TNMP will strictly enforce the criteria specified in the request for proposals.

d. Evaluation of Bids. TNMP or the independent evaluator (if an independent evaluator is used) will evaluate each bid submitted in accordance with the criteria specified in the request for proposals. TNMP or the independent evaluator will not give preferential treatment or consideration to any bid.

e. Rejection of Bids. TNMP is not required to accept a bid and may reject any or all bids in accordance with the selection criteria specified in the request for proposals.

2. Contract Requirements. A contract will include, at a minimum, the following provisions: The effective date of the agreement;


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The parties to the agreement; The term of the agreement; A narrative describing the products or services provided to TNMP, including a

list by specific service of all the affiliated companies who provide or receive these services, or a narrative describing the assets being sold by TNMP to the Competitive Affiliate;

The obligations of the parties; The price for those products, services, or assets governed by the contract;

and Billing and payment procedures.

3. PUCT Filing Requirement. TNMP will file with the PUCT a signed copy of any contracts entered into with its Competitive Affiliates. These contracts shall be filed by June 1 of each year as attachments to the utility’s annual Report of Affiliate Activities filed with the PUCT.

H. IMPLEMENTATION 1. Code of Conduct Implementation Responsibilities. All officers, managers,

and supervisors employed by PNM Resources or any of its affiliates are responsible for monitoring and enforcing this Texas Code of Conduct to the extent it is applicable to their specific areas of supervisory responsibility. Every employee of PNM Resources or any of its affiliates is responsible for monitoring compliance with this Texas Code of Conduct. Any officer or employee of PNM Resources or any of its affiliates who discovers any event which may be in violation of this Texas Code of Conduct will report immediately to the Ethics and Compliance Hotline at 1-888- 840- 4158 and to the General Counsel of PNM Resources.

2. Informal Dispute Resolution. TNMP and PNM Resources will investigate complaints and disputes concerning violations of statutes, regulations and this Texas Code of Conduct governing TNMP affiliate transactions. Complaints concerning violations will be directed to the Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067 or by fax to # 214-222-4156. TNMP and PNM Resources will communicate the results of the investigation to the complainant in writing within 30 days after they have received the complaint, including a description of any action taken and the complainant’s right to file a complaint with the appropriate regulatory authority.

3. Corrective Action. Corrective action will be taken to ensure compliance with statutes, regulations and the Texas Code of Conduct. Any employee violating statutes, regulations, or this Texas Code of Conduct will face appropriate disciplinary action up to and including termination depending on the nature of the circumstances, seriousness, and/or frequency of the conduct or behavior. Management may choose to begin the steps of progressive discipline at any point, and may immediately terminate an employee who has violated statutes, regulations, or this Texas Code of Conduct.


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I. PUCT FILING REQUIREMENTS 1. Annual report of affiliate activities. TNMP will file with the PUCT a "Report of

Affiliate Activities" by June 1 of each year. This report shall be in a form approved by the PUCT and encompass the prior calendar year; report activities among TNMP and its affiliates; reflect any updates or changes to the code of conduct compliance plan

resulting from the formation of new affiliates; include copies of new or revised contracts or agreements between TNMP

and its affiliates, or (if there are not significant changes to the contract) an amendment sheet;

include information on the movement of TNMP employees among TNMP and its Competitive Affiliates; and

include a summary of information concerning deviations from the Texas Code of Conduct during the reporting period.

2. Copies of contracts or agreements. TNMP will file copies of the contracts and agreements with its Competitive Affiliates with the PUCT as attachments to the Annual Report of Affiliate Activities (a) in the first year it is in effect and (b) when significant changes have been made to it. In cases where there are no significant changes to a contract or agreement, TNMP will file an amendment sheet summarizing any changes in lieu of refiling the entire contract.

3. Tracking migration of employees. In addition to following the procedures described in the section entitled “Separation of the Utility and its Affiliates – Employee Transfers,” TNMP will include employee migration information in its annual Report of Affiliate Activities. The tracking information will include an identification code for the migrating employee, the respective titles held while employed at each entity, and the effective dates of the migration.

4. Annual reporting of informal complaint resolution. TNMP will report in its annual Report of Affiliate Activities: information regarding the nature and status of informal complaints handled in

accordance with its informal complaint procedures, and, information on all informal complaints that were initiated or remained

unresolved during the reporting period. The information reported will include the name of the complainant and a summary report of the complaint, including all relevant dates, companies involved, employees involved, the specific claim, and any actions taken to address the complaint.


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ATTACHMENT A AFFILIATE TRANSACTION* TIME AND ACTIVITY DAILY REPORT

(Transaction is defined on the Reverse Side, along with Instructions for completing the Report) Note: This form is for transactions between Texas-New Mexico Power Company and its affiliates, not

including transactions governed by tariffs or with Central Corporate Services. General Employee Information Employee Name Date E-Mail

Location Phone Number Business Unit

Specific Transaction Information

Time Involved_________ Hours

Individuals Involved Department Company1.

2.

3.

4.

5.

Describe Transaction or Information Exchanged (attach a separate sheet if more space is needed. Form of Communication for Transaction Nature of TransactionPhone Call

Meeting Tariffed

E-Mail Other Non-Tariffed Letter Discount

Other (specify) Hardcopy of Information to be Forwarded to __________________________.Please Attach.

Yes No

Employees must send the completed form to Stacy Whitehurst no later than noon of the day following any transaction with an affiliate. If the employee is uncertain as to whether or not an affiliate transaction has occurred they can call Stacy Whitehurst at 214-222-4142 and request assistance.


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AFFILIATE TRANSACTION TIME AND ACTIVITY DAILY REPORT

OBJECTIVE: To Provide Documentation of "Transactions" on a Daily Basis between TNMP and Affiliates.

TRANSACTION DEFINITION: Transaction means the provision of any good, property, service, privilege, or act between any two parties for which compensation normally would be provided if each party was independent of the other and acting in its best financial interest. In the application of the definition of transaction, employees should be inclusive rather than exclusive.

INSTRUCTIONS for Completing Form

1. This report will address all transactions between TNMP and Affiliates. Examples include:

Providing a competitive affiliate with TNMP customer billing information after receiving written authorization from the customer.

Signing a contract for purchase of goods or services if that contract includes both TNMP and an Affiliate.

Advising or providing a service to an Affiliate.

2. This report will be completed daily. Provide copy of hard copy or electronic information exchanged, if any, to the Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067.

3. File this report with Vice President of Regulatory Affairs, TNMP, 577 N. Garden Ridge Blvd, TX 75067 or fax # 214-222-4156 by noon the day following the transaction.

Hard copy to: Vice President of Regulatory Affairs, 577 N. Garden Ridge Blvd., Lewisville, Texas 75067.

Fax copy to: 214-222-4156

E-mail to: [email protected]

4. Please contact Stacy Whitehurst at [email protected] or 214-222-4142 with any questions.


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TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC., AND AVANGRID, INC.



HENRY E. MONROY


NOVEMBER 23, 2020

109

DIRECT TESTIMONY OF HENRY E. MONROY PUC DOCKET NO. 51547

i

TABLE OF CONTENTS

INTRODUCTION AND QUALIFICATIONS.......................................................... 1 PURPOSE OF TESTIMONY ................................................................................ 2 OVERVIEW OF CURRENT OWNERSHIP OF TNMP.......................................... 2 SUMMARY OF PROPOSED TRANSACTION..................................................... 2

NECESSARY REGULATORY APPROVALS...................................................... 6 CONCLUSION ..................................................................................................... 8

EXHIBIT

EXHIBIT HEM-1 EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE

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1

INTRODUCTION AND QUALIFICATIONS1

Q. PLEASE STATE YOUR NAME, BUSINESS ADDRESS, PLACE OF 2

EMPLOYMENT, AND POSITION.3

A. My name is Henry E. Monroy. I am employed by PNMR Services Company as 4

Vice-President, Corporate Controller for PNM Resources, Inc. (“PNMR”) and its 5

subsidiaries including Texas-New Mexico Power Company (“TNMP”). My address 6

is 414 Silver Avenue, SW, Albuquerque, New Mexico 87102.7

Q. PLEASE DESCRIBE YOUR RESPONSIBILITIES AS VICE PRESIDENT AND 8

CORPORATE CONTROLLER.9

A. As Vice President and Corporate Controller, I am responsible for all the 10

accounting, budgeting, cost of service, and tax functions for PNMR, TNMP and 11

Public Service of New Mexico (“PNM”).12


A. I am testifying on behalf of TNMP.14

Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND 15


A. My educational background and professional experience are summarized in 17

Exhibit HEM-1, which includes a list of cases in which I have testified before the 18

Public Utility Commission of Texas (“Commission”), New Mexico Public Regulation 19

Commission (“NMPRC”), and the Federal Energy Regulatory Commission 20

(“FERC”). Specifically, I have filed testimony before the Commission in Docket 21

Nos. 38306,1 47422,2 48001,3 and 484014.22

Q. HAVE YOU PREPARED ANY EXHIBITS?23

1 Texas-New Mexico Power Company’s Request for Approval of Advance Metering System (AMS) Deployment and AMS Surcharge, Docket No. 38306, Jul. 11, 2011.

2 Application of Texas-New Mexico Power Company for Interim Update of Wholesale Transmission Rates, Docket No. 47422, Sept. 13, 2017.

3 Application of Texas-New Mexico Power Company for Interim Update of Wholesale Transmission Rates, Docket No. 48001, Mar. 27, 2018.

4 Application of Texas-New Mexico Power Company to Change Rates Docket No. 48401, Dec. 20,2018.

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A. Yes. I am sponsoring Exhibit HEM-1, which is attached to my testimony. This 1

exhibit was prepared under my direction and control. The information contained 2

in this exhibit is true and correct to the best of my knowledge and belief.3

PURPOSE OF TESTIMONY4

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING?5

A. The purpose of my testimony will be to:6

provide an overview of current ownership of TNMP; 7

describe the regulatory approvals that are required before the Proposed 8

Transaction between TNMP’s parent company, PNMR, and Avangrid, Inc. 9

(“Avangrid”) can be completed; and10

address certain financial issues concerning the Proposed Transaction.11

OVERVIEW OF CURRENT OWNERSHIP OF TNMP12

WHO CURRENTLY OWNS TNMP?13

A. TNMP is indirectly owned by PNMR. PNMR is an energy holding company based 14

in Albuquerque, New Mexico, with 2019 consolidated operating revenues of $1.5 15

billion. PNMR is publicly traded on the New York Stock Exchange.16

CAN YOU PROVIDE SOME BACKGROUND OF THE OWNERSHIP OF TNMP 17

BY PNMR?18

A. Yes. TNMP is owned 100% by TNP Enterprises, Inc., a Texas corporation 19

(“TNPE”). PNMR owns 100% of the stock associated with TNPE. PNMR acquired 20

ownership of TNPE on April 22, 2005, as approved by the Commission in Docket 21

No. 30172.22

SUMMARY OF PROPOSED TRANSACTION23

PLEASE DESCRIBE THE PROPOSED TRANSACTION.24

A. Effective October 20, 2020, TNMP’s parent, PNMR, entered into an Agreement 25

and Plan of Merger (“Merger Agreement”) with Avangrid and its subsidiary, NM 26

Green Holdings, Inc. (“Merger Sub”), under which, following receipt of regulatory 27

approvals and satisfaction of other closing conditions, Merger Sub will be merged 28

with and into PNMR with PNMR as the surviving corporation and a direct 29

subsidiary of Avangrid, and then Avangrid will transfer 100% ownership in PNMR 30

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to Avangrid Networks, which is the corporate entity Avangrid uses to hold all its 1

public utility operating companies. Avangrid also proposes to then have TNPE 2

transfer the 100% ownership interest in TNMP to a newly created special purpose 3

entity (“SPE”) that will be owned by TNPE, so that there would be a SPE interposed 4

between TNMP and TNPE. These collective steps are the “Proposed 5

Transaction.”6

PLEASE SUMMARIZE THE PROPOSED OWNERSHIP STRUCTURE OF TNMP 7

FOLLOWING THE CLOSING OF THE PROPOSED TRANSACTION.8

A. After the Proposed Transaction closes, TNMP and its sister utility, PNM, will 9

continue to be subsidiaries of PNMR and will be indirect subsidiaries of Avangrid. 10

As such, TNMP’s business structure will continue to reflect a traditional utility 11

ownership model. Table 2 below shows the current organizational structure and 12

the new proposed organization structure after closing of the Proposed Transaction. 13

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4

Table 1 - Organizational Structure1

2WHAT REGULATORY COMMITMENTS ACCOMPANY THE PROPOSED 3

TRANSACTION?4

A. Mr. Kump addresses Applicants’ Regulatory Commitments in his testimony. I 5

specifically address capital expenditures, pledging of TNMP assets, and certain 6

accounting regulatory commitments below in my testimony.7

WILL ANY TNMP PROPERTY, FACILITIES, OR SECURITIES BE8

TRANSFERRED AS A RESULT OF THE PROPOSED TRANSACTION? 9

A. No assets of TNMP will be sold, leased, or transferred as part of the Proposed 10

Transaction. The Proposed Transaction is simply a change in upstream ownership 11

of TNMP and does not involve a transfer of TNMP assets. 12

WILL TNMP’S CURRENT CAPITAL EXPENDITURE PLAN BE CONTINUED?13

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5

A. Yes. Table 1 - PNMR 2021 - 2025 Capital Budget below provides the capital 1

budget for PNMR. As discussed by TNMP witness Walker, TNMP will continue to 2

make minimum capital expenditures in an amount equal to TNMP’s current five-3

year budget for the five year period beginning January 1 2021, subject to the 4

following qualifications: TNMP may reduce capital spending due to conditions not 5

under TNMP’s control, including, without limitation, siting delays, cancellations of 6

projects by third-parties, weaker than expected economic conditions, or if TNMP 7

determines that a particular expenditure would not be prudent. 8

Table 2 - PNMR 2021 - 2025 Capital Budget9

10HAS A COMMITMENT BEEN MADE REGARDING MAINTAINING TNMP’S 11

SEPARATE BOOKS AND RECORDS?12

A. Yes, Applicants have committed that TNMP will maintain accurate, appropriate, 13

and detailed books, financial records, and accounts, including checking and other 14

bank accounts, and custodial and other securities safekeeping accounts that are 15

separate and distinct from those of any other entity. This is consistent with TNMP’s 16

existing practice.17

PLEASE COMMENT ON ANY ACCOUNTING IMPACTS OF THE PROPOSED 18

TRANSACTION ON TNMP.19

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6

A. TNMP will remain subject to the United States Generally Accepted Accounting 1

Principles and Securities and Exchange Commission accounting and reporting 2

requirements. 3

ARE THERE ANY COMMITMENTS REGARDING THE MANAGEMENT OF THE 4

COMPANY’S BOOKS AND RECORDS AFTER CLOSING?5

A. TNMP’s operations, books, and records will continue to be kept and managed 6

separately from other affiliated companies. Additionally, TNMP’s affiliates will 7

provide the Commission access to books and records as necessary to facilitate 8

audit or review of TNMP transactions with affiliates. This is consistent with current 9

practice at TNMP and among its affiliates. 10

WHAT IS GOODWILL?11

A. Goodwill in accounting is an intangible asset that may arise when a buyer acquires 12

an existing business. Goodwill represents the excess of the consideration paid for 13

a business over the value of its separately identifiable assets.14

WHAT DO APPLICANTS PROPOSE REGARDING THE INCLUSION OF 15

GOODWILL IN RATES?16

A. Applicants commit that any goodwill or amortization of goodwill resulting from the 17

Proposed Transaction will not be included in rate base, cost of capital, or operating 18

expenses in future TNMP-related ratemaking proceedings. Additionally, 19

Applicants commit that no push-down accounting will be permitted by any affiliate 20

related to the Proposed Transaction.21

PLEASE DESCRIBE THE TAX CONSEQUENCES OF THE PROPOSED 22

TRANSACTION, IF ANY.23

A. There are no tax implications for TNMP for regulatory purposes. TNMP will 24

continue to calculate income taxes on a stand-alone basis for regulatory 25

ratemaking purposes. The Proposed Transaction will have no impact on the 26

Commission’s authority to determine TNMP’s income tax expense for setting rates.27

NECESSARY REGULATORY APPROVALS28

WHAT REGULATORY APPROVALS ARE NECESSARY FOR THE PROPOSED 29

TRANSACTION TO CLOSE?30

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A. In order for the Proposed Transaction to close, it must be approved by the 1

appropriate regulatory authorities, including this Commission, the New Mexico 2

Public Regulation Commission (“NMPRC”), and the Federal Energy Regulatory 3

Commission (“FERC”) under the Federal Power Act. The Proposed Transaction 4

also involves requisite clearance under the Hart-Scott-Rodino (“HSR”) Antitrust 5

Improvements Act, 15 U.S.C. § 18A; approval by the Federal Communications 6

Commission (“FCC”) to transfer or assign any applicable FCC licenses; filings with, 7

and consent of, the U.S. Nuclear Regulatory Commission (“NRC”) to transfer or 8

assign any applicable NRC license; and filings with, and consent of, the Committee 9

on Foreign Investment in the United States. 10

WHAT SPECIFIC REGULATORY APPROVALS ARE APPLICANTS SEEKING 11

FROM THE COMMISSION?12

A. Applicants request that the Commission, upon finding the Proposed Transaction 13

to be in the public interest, approve it under PURA §§ 14.101, 39.262(l)–(m), and 14

39.915. As discussed above, the Proposed Transaction will provide net tangible 15

and quantifiable benefits to all stakeholders. TNMP witnesses Walker and 16

Whitehurst support the Texas requirements.17

PLEASE DESCRIBE THE APPROVAL THAT PNM RESOURCES MUST 18

RECEIVE FROM THE NMPRC.19

A. Pursuant to the New Mexico Public Utility Act and NMPRC Rule 450, approval of 20

the merger by the NMPRC is required for the consummation of the merger. 21

IS TNMP REQUIRED TO OBTAIN FERC APPROVAL FOR THE PROPOSED 22

TRANSACTION?23

A. While FERC has no jurisdiction over merger transactions within ERCOT, FERC 24

approval is necessary as a result of the portion of this transaction that involves 25

FERC jurisdictional assets outside of ERCOT that are owned and operated by 26

PNM.27

PLEASE EXPLAIN THE REQUIREMENTS FOR TNMP UNDER HART-SCOTT-28

RODINO ANTITRUST ACT?29

A. The Proposed Transaction is subject to the requirements of the HSR Act, which 30

prevents Avangrid and PNMR from completing the Proposed Transaction until 31

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8

required information and materials are furnished to the Antitrust Division of the 1

Department of Justice, and the Federal Trade Commission, and the HSR Act’s 2

initial 30-day waiting period is terminated earlier or expires.3

PLEASE EXPLAIN IF NRC APPROVAL IS REQUIRED FOR TNMP?4

A. While TNMP owns no generation, an indirect acquisition of PNM requires NRC 5

approval based on PNM’s share of the joint ownership of the Palo Verde Nuclear 6

Generating Station. 7

CONCLUSION8

DOES THIS CONCLUDE YOUR TESTIMONY?9

A. Yes, it does.10

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EXHIBIT HEM-1PUC Docket No. 51547

Page 1 of 4

1

HENRY E. MONROYEDUCATIONAL AND PROFESSIONAL SUMMARY

Name: Henry E. Monroy

Address: PNM Resources Inc.MS 0915414 Silver SWAlbuquerque, NM 87102

Position: Vice-President, Corporate Controller

Education: Bachelor of Accountancy, New Mexico State University, 2001Certified Public Accountant in the State of New Mexico, December 2012

Employment: Employed by PNMR Services Company since 2003.Positions held within the Company include:

Controller, Utility OperationsDirector, Budget, Cost of Service and General AccountingDirector, Cost of Service and Audit Services Director, Cost of Service and Corporate BudgetDirector, Utility AccountingManager, Cost of ServiceSenior Manager, Derivative AccountingManager, Energy Analysis and AccountingProject ManagerSenior Accountant

Testimony Filed:In the Matter of the Application of Public Service Company of New Mexico for Revision of its Retail Electric Rates pursuant to Advice Notice No. 352, NMPRC Case No. 08-00273-UT, filed September 22, 2008.

In the Matter of Texas-New Mexico Power Company’s Request for Approval of an Advance Metering System (AMS) Deployment and AMS Surcharge, PUCT Docket No. 38036, filed May, 2010.

In the Matter of the Application of Public Service Company of New Mexico for the Abandonment and Decertification of the Generating Station in Las Vegas, New Mexico, NMPRC Case No. 10-00264-UT, filed August 30, 2010.

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Page 2 of 4

2

Initial Filing of PNM to Revise Sheets in its OATT, Coordination Tariff, and GFAs Reflecting Implementation of Transmission Formula Rate, FERC Docket Nos. ER13-685-000, ER13-687-000 and ER13-690-000, filed December 2012.

In the Matter of Public Service Company of New Mexico’s Renewable Energy Portfolio Procurement Plan for 2014 and Proposed 2014 Rider Rate Under Rate Rider No. 36, NMPRC Case No. 13-00183-UT, filed June 1, 2013.

In the Matter of the Application of Public Service Company of New Mexico for Continued Use of Fuel and Purchased Power Cost Adjustment Clause, NMPRC Case No. 13-00187-UT, filed May 28, 2013.

In the Matter of Application of PNM for Approval to Abandon San Juan Generating Station Units 2 and 3, Issuance of CCNs for Replacement Power Resources, Issuance of Accounting Order and Determination of Ratemaking Principles and Treatment,NMPRC Case No. 13-00390-UT, filed December 20, 2013.

In the Matter of the Application of PNM for Approval of Renewable Energy Rider No. 36 Pursuant to Advice Notice No. 439 and for Variances from Certain Filing Requirements, NMPRC Case No. 12-00007-UT, filed February 28, 2014.

In the Matter of Public Service Company of New Mexico’s Application for a Certificate of Public Convenience and Necessity and Related Approvals for the La Luz Energy Center, NMPRC Case No. 13-00175-UT, filed March 21, 2014.


In the Matter of the Application of Public Service Company of New Mexico for Revision of its Retail Electric Rates pursuant to Advice Notice No. 507, NMPRC Case No. 14-00332-UT, filed December 11, 2014.

In the Matter of the Application of PNM for Approval of Renewable Energy Rider No. 36 Pursuant to Advice Notice No. 439 and for Variances from Certain Filing Requirements, NMPRC Case No. 12-00007-UT, filed February 27, 2015.


In the Matter of Public Service Company of New Mexico’s Application for a Certificate of Public Convenience and Necessity and Related Approvals for the San Juan Gas Plant, NMPRC Case No. 15-00205-UT, filed June 30, 2015.

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3

In the Matter of the Application of Public Service Company of New Mexico for Revision of its Retail Electric Rates Pursuant to Advice Notice No. 513, NMPRC Case No. 15-00261-UT, filed August 27, 2015.

In the Matter of the Application of Public Service Company of New Mexico for Prior Approval of the Advanced Metering Infrastructure Project, Determination of Ratemaking Principles and Treatment, and Issuance of Related Accounting Orders, Case No. 15-00312-UT, filed February 26, 2016.

In the Matter of Public Service Company of New Mexico’s Application for a Certificate of Public Convenience and Necessity and Related Approvals for an 80MW Gas-Fired Generating Plant Located at the San Juan Generating Station, NMPRC Case No. 16-00105-UT, filed April 26, 2016.

In the Matter of the Application of Public Service Company of New Mexico for Revision of its Retail Electric Rates Pursuant to Advice Notice No. 533, NMPRC Case No. 16-00276-UT, filed December 7, 2016.

In the Matter of Public Service Company of New Mexico’s Application for Approval of its Renewable Energy Act Plan for 2018 and Proposed 2018 Rider Rate Under Rate Rider No. 36, NMPRC Case No. 17-00129-UT, filed June 1, 2017.

In the Matter of the Application of Texas-New Mexico Power Company for Interim Update of Wholesale Transmission Rates, PUCT Docket No. 47422, filed July 19, 2017.

In the Matter of Public Service Company of New Mexico's Application for ApprovalPursuant to 17 .9 .551 NMAC of Three Purchased Power Agreements in Accordancewith Special Service Contract with Facebook Inc., Case No. 18-00009-UT, filedJanuary 17, 2018.

In the Matter of Public Service Company of New Mexico’s Application for a Continued use of its Fuel and Purchased Power Cost Adjustment Clause, Case No.18-00096-UT, filed April 23, 2018.

In the Matter of Public Service Company of New Mexico’s Petition for Approval to Acquire the Western Spirit 345 kV Transmission Project, Case No. 19-00129-UT, filed May 10, 2019.

Affidavit in Support of Public Service Company of New Mexico’s Section 205 Filing for the Western Spirit Project. FERC Docket No. ER19-1824. Filed May 10, 2019.

In the Matter of PNM’s Abandonment of San Juan Generating Station Units 1 and 4, NMPRC Docket No. 19-00018-UT, filed January 10, 2019.

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4

In the Matter of Public Service Company of New Mexico Consolidated Application for Approvals for the Abandonment, Financing and Resource Replacement for San Juan Generating Station Pursuant to the Energy Transition Act, NMPRC Docket No. 19-00195-UT filed July 1, 2019.

123



TEXAS-NEW MEXICO POWER COMPANY, NM GREEN HOLDINGS, INC. AND AVANGRID, INC.



ELLEN LAPSON, CFA


NOVEMBER 23, 2020

124

DIRECT TESTIMONY OF ELLEN LAPSON, CFA PUC DOCKET NO. 51547

1

TABLE OF CONTENTS

I. INTRODUCTION AND PURPOSE....................................................................... 2II. EXECUTIVE SUMMARY...................................................................................... 5III. FINANCIAL STATUS OF PNMR AND TNMP BEFORE the TRANSACTION .... 6IV. FINANCIAL ASPECTS OF THE PROPOSED TRANSACTION.......................... 9V. BENEFICIAL FINANCIAL IMPACTS FOR TNMP AND CUSTOMERS ............ 10VI. CONCLUSIONS AND RECOMMENDATIONS.................................................. 12

EXHIBITS

TNMP EXHIBIT EL-1 Lapson Experience and Credentials

TNMP EXHIBIT EL-2 Correspondence of Rating Agency Symbols

TNMP EXHIBIT EL-3 S&P Global Ratings, “PNM Resources, Inc., Public Service Co. of New Mexico, Texas-New Mexico Power Co. Downgraded One Notch; Outlook Stable,” 6 April 2020.

TNMP EXHIBIT EL-4 Moody’s Investors Service, “Credit Opinion: Texas-New Mexico Power Company Update following negative outlook,” 4 September 2020.

TNMP EXHIBIT EL-5 S&P Global Ratings, “PNM Resources and Subsidiaries’ Outlook Revised to Positive on Announced Acquisition by Avangrid, Inc.; Ratings Affirmed,” 21 October 2020.

TNMP EXHIBIT EL-6 Moody’s Investors Service, “Issuer Comment: PNM Resources, Inc.: Acquisition by Avangrid, Inc. would be positive and bring long-term benefits to its utilities,” 21 October 2020.

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GLOSSARY OF DEFINED TERMS AND ACRONYMS1

Acronym / Defined Term Meaning

Avangrid Avangrid, Inc.Cash Flow Credit Metrics Key financial ratios used by credit

rating agencies to assess debt leverage by comparison of the level of debt and debt-like liabilities with a measure of operating cash flow. These ratios take the form of Debt-to-Operating Cash Flow, Debt-to-EBITDA, or Operating Cash Flow as a percentage of Debt.

Commission Public Utility Commission of TexasEBITDA Net Income Before Interest, Income

Taxes, Depreciation, and Amortization (a proxy for Operating Cash Flow

Iberdrola Iberdrola S.A.Moody’s Moody’s Investors ServicePNMR PNM Resources, indirect parent of

TNMPProposed Transaction or Transaction Proposed acquisition of PNMR by

Avangrid Inc. S&P Standard & Poor’s or S&P Global

RatingsSACP Stand-alone credit profile (a partial

component of S&P’s final credit rating of entities that are subsidiary companies and whose formal ratings are produced using S&P’s consolidated rating methodology)

Transaction or Proposed Transaction Proposed acquisition of PNMR by Avangrid Inc.

TNMP Texas-New Mexico Power Company

I. INTRODUCTION AND PURPOSE2

PLEASE STATE YOUR NAME, POSITION AND BUSINESS ADDRESS.3

A. My name is Ellen Lapson. My business address is 370 Riverside Drive, New York, 4

New York 10025.5

BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY?6

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A. I am the founder and principal of Lapson Advisory, a division of Trade Resources 1

Analytics, LLC. Through Lapson Advisory, I provide independent consulting 2

services relating to the financial strength of utilities and infrastructure companies. 3

I advise client companies on access to capital and debt markets. I frequently testify 4

as an expert witness relating to utility finance, financial strength, and utility capital 5

markets matters. Also, I develop and teach executive seminars about utility 6

investment analysis, credit evaluation, and corporate finance.7

WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY AND EXHIBITS?8

A. I am appearing as an expert financial witness on behalf of Texas New Mexico 9

Power Company (“TNMP”) and Avangrid, Inc. (“Avangrid”) in an application 10

regarding the proposed acquisition of TNMP’s parent, PNM Resources (“PNMR”), 11

by Avangrid; such acquisition and associated corporate organization steps as 12

described in the application filed in this proceeding being the “Proposed 13

Transaction” or the “Transaction”). My testimony assesses the impact of the 14

Proposed Transaction on the ongoing financial well-being of TNMP and its future 15

access to debt and equity capital. 16

PLEASE DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL 17

CREDENTIALS.18

A. I am a Chartered Financial Analyst (“CFA”) and earned a Master of Business 19

Administration from New York University Stern School of Business with a 20

specialization in Accounting. I have worked in the capital markets space with 21

particular focus on financing or analyzing the finances of regulated public utilities 22

for the past 50 years. I began my career as a securities analyst at Argus Research 23

Corporation analyzing utility company equity securities. For the next 20 years, I 24

held several posts at a predecessor of J.P. Morgan as a corporate banker and 25

investment banker, structuring and executing financing transactions for utility and 26

infrastructure companies. Thereafter, I worked for 17 years, first as a senior 27

director, and then as a managing director at Fitch Ratings, a major credit rating 28

agency, where I managed analysts who rated credits in the sectors of electricity, 29

natural gas and project finance, and chaired rating committees. After leaving Fitch 30

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Ratings nine years ago, I founded Lapson Advisory. The list of my professional 1

qualifications appears in TNMP Exhibit EL-1. 2

HAVE YOU PREVIOUSLY SUBMITTED ANY TESTIMONY IN PROCEEDINGS 3

BEFORE THIS COMMISSION OR OTHER JURISDICTIONS?4

A. My prior testimony before this Commission is listed below. 5

Docket No. 46416, Application of Entergy Texas, Inc. to Amend its 6Certificate of Convenience and Necessity to Construct Montgomery County 7Power Station in Montgomery County, on behalf of Entergy Texas, Inc.; 8

Docket No. 46957, Application of Oncor Electric Delivery LLC for Authority 9to Change Rates, on behalf of Oncor; 10

Docket No. 47527, Application of Southwestern Public Service for Authority 11to Change Rates, in Supplemental Direct Testimony on behalf of 12Southwestern Public Service Co.;13

Docket No. 48371, Application of Entergy Texas, Inc. to Change Retail 14Rates, on behalf of Entergy Texas, Inc.; 15

Docket No. 48401, Application of Texas-New Mexico Power to Change 16Retail Rates, on behalf of TNMP;17

Docket No. 48929, Joint Report and Application of Oncor Electric Delivery 18Company LLC, Sharyland Distribution & Transmission Services, L.L.C., 19Sharyland Utilities, L.P., and Sempra Energy for Regulatory Approvals 20Under PURA §§ 14.101, 37.154, 39.262 and 39.915, on behalf of Sharyland 21Utilities, L.P.; 22

Docket No. 49421, Application of Centerpoint Energy Houston Electric, LLC 23for Authority to Change Rates, on behalf of Centerpoint Energy Houston 24Electric, LLC.25

Docket No. 49849, Joint Application of El Paso Electric, Sun Jupiter 26Holdings and IIF US Holding 2 for Acquisition of El Paso Electric27

Exhibit TNMP EL-1 includes a list of all of my expert witness assignments in a 28

number of state and federal jurisdictions. 29

HAVE YOU PREVIOUSLY TESTIFIED AS AN EXPERT WITNESS IN UTILITY30

MERGER PROCEEDINGS?31

A. Yes, I have testified in proceedings involving El Paso Electric Company; 32

Washington Gas Light Inc.; Hawaiian Electric Inc.; and Pepco Holdings, as detailed 33

in Exhibit EL-1. 34

HOW IS THE BALANCE OF YOUR TESTIMONY ORGANIZED? 35

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The remainder of my testimony is comprised of the following sections: 1

II. Executive Summary 2

III. Financial Status of PNMR and TNMP before the Transaction3

IV. Financial Aspects of the Proposed Transaction4

V. Beneficial Financial Impacts for TNMP and Customers5

VI. Conclusions and Recommendations6

II. EXECUTIVE SUMMARY7

Q. PLEASE PROVIDE A SUMMARY OF YOUR TESTIMONY.8

A. I have reviewed the business combination agreed to by PNMR and Avangrid and 9

have assessed the impact of the combination of these entities upon the future 10

financial well-being of TNMP and its ability to serve its customers. I conclude that 11

as a result of the Proposed Transaction, TNMP will be financially stronger and 12

more resilient and will not suffer any financial harm. Avangrid enjoys higher credit 13

ratings than PNMR from well-regarded credit rating agencies. As Mr. Kump 14

explains in his testimony, Avangrid plans to entirely eliminate the debt of PNMR, 15

which will benefit TNMP. The expected credit upgrade of PNMR by S&P of at least 16

one notch, and the reduced financial leverage of PNMR, will improve PNMR’s 17

financial flexibility and resilience and will greatly reduce the potential for any 18

circumstances in which TNMP would be exposed to financial distress. 19

Going forward, TNMP will have improved access to equity capital via 20

Avangrid and Iberdrola as compared to the present basis with its current parent 21

PNMR. TNMP will be a financially stronger and more resilient utility with greater 22

access to capital funding, enabling TNMP to more readily fund external financial 23

needs and carry out its capital projects more efficiently. 24

In summary, I find that the Proposed Transaction will preserve and improve 25

the financial viability of TNMP and will enhance TNMP’s ability to serve its 26

customers by improving financial flexibility and providing consistent access to 27

capital. Finally, I recommend that the Commission approve the Proposed 28

Transaction as requested. 29

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III. FINANCIAL STATUS OF PNMR AND TNMP BEFORE the TRANSACTION1

WHAT ARE THE FINANCIAL CIRCUMSTANCES OF TNMP AND ITS PARENT 2

PNMR AT PRESENT, PRIOR TO THE PROPOSED TRANSACTION? 3

A. TNMP is a wholly-owned indirect subsidiary of PNMR. TNMP’s common equity is 4

sourced from PNMR, which in turn issues shares to public investors. PNMR’s 5

shares are listed on the New York Stock Exchange. TNMP issues its own 6

individual long-term debt to investors in the form of senior secured bonds. Its debt 7

carries credit ratings from two credit rating agencies, Moody’s and S&P. As of 8

September 30, 2020, TNMP has its own $75 million revolving credit facility to 9

provide liquidity for capital expenditure projects and seasonal needs, in addition to 10

an intercompany credit line of $150 million allowing TNMP to borrow from its 11

parent. 12

PRIOR TO THE ANNOUNCEMENT OF THE TRANSACTION, WHAT WERE THE 13

CREDIT RATINGS OF TNMP AND ITS PARENT PNMR?14

A. Moody’s and S&P ratings of PNMR are within the lower part of the investment 15

grade category, while TNMP is rated three notches higher than its parent PNMR. 16

The actions by S&P and Moody’s are discussed below and in Table 1.117

S&P: In April 2020, S&P lowered its issuer credit ratings of PNMR to BBB 18

from BBB+, citing weakening financial ratios and higher capital 19

expenditures with more investment in renewable energy resources. At the 20

same time, S&P lowered the issuer credit rating of TNMP by one notch to 21

BBB+ from A-. S&P maintained the rating for TNMP of BBB+ along with a 22

negative credit outlook after a routine credit review on September 3, 2020, 23

commenting that TNMP’s credit rating could be downgraded either due to 24

1 A table showing the correspondence of credit rating agencies’ rating symbols appears in TNMP Exhibit EL-2.

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its trend of weaker “Cash Flow Credit Metrics”2 or in the event of a 1

downgrade of PNMR.32

Moody’s: Moody’s rating for TNMP is A3, equivalent of S&P’s A- rating. 3

Moody’s rating methodology differs from S&P’s, in that Moody’s rating of 4

TNMP is based primarily upon the operating utility’s individual financial 5

condition and its Cash Flow Credit Metrics, rather than that of its parent or 6

consolidated group of companies. Moody’s rating for TNMP of A3 is not 7

currently constrained by the agency’s rating of PNMR; instead, the rating of 8

TNMP represents the agency’s view of TNMP’s financial condition on a 9

reasonably separate basis. Moody’s changed the rating outlook of TNMP to 10

negative from stable after a routine review on September 3, 2020, citing its 11

expectation that executing the TNMP capital expenditure program with 12

increased debt leverage (consistent with the Commission’s authorized 13

regulatory capital structure) will cause TNMP’s financial credit metrics to 14

weaken relative to the benchmarks for the current credit rating.415

It should be noted that because the two agencies use different credit 16

methodologies, the existence of debt leverage at PNMR has affected S&P’s rating 17

of TNMP but does not currently affect the rating by Moody’s.18

Table 1 below shows both agencies’ long-term credit ratings as of October 19

20, 2020, prior to the public announcement of the Proposed Transaction, and 20

reflecting the rating agencies’ response to the announcement of the Proposed 21

Transaction on October 21, 2020.22

2 Key financial ratios used by credit rating agencies to assess debt leverage by comparison of the level of debt and debt-like liabilities with a measure of operating cash flow. These ratios take the form of Debt-to-Operating Cash Flow, Debt-to-EBITDA, or Operating Cash Flow as a percentage of Debt.

3 S&P Global Ratings, “PNM Resources, Inc., Public Service Co. of New Mexico, Texas-New Mexico Power Co. Downgraded One Notch; Outlook Stable, April 6, 2020. (Exhibit TNMP EL-3)

4 Moody’s Investors Service, “Credit Opinion: Texas-New Mexico Power Company Update following negative outlook”, 4 September 2020. (Exhibit TNMP EL-4)

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Table 1: Credit Ratings and Outlooks of PNMR and TNMP

Before and After Transaction Announcement (a)PNMR TNMP

S&PIssuer Rating BBB BBB+Senior Secured Bonds none ASenior Unsecured Notes BBB-Short-term debt * *Outlook pre announcement Stable StableOutlook 10/21/20 (post announcement) Positive Positive

Moody's Issuer Rating Baa3 A3Senior Secured Bonds none A1Senior Unsecured Notes Baa3Short-term debt * *Outlook pre announcement Stable NegativeOutlook 10/21/20 (post announcement) Stable Negative

* Not rated(a) Ratings are shown as of Oct. 20 and Oct. 21, 2020.

1

DOES TNMP’S CAPITAL EXPENDITURE PROGRAM AFFECT TNMP’S 2

CREDIT RATINGS AND FINANCIAL STRENGTH? 3

A. Yes. TNMP’s capital expenditures are largely for transmission and distribution 4

projects. TNMP’s capital investment program is increasing, with budgeted 5

expenditures growing for the next several years. For example, Moody’s analyst 6

commented in a credit opinion on September 3, 2020, that the capital program is 7

driving a heightened need for external financing and a trend toward more debt 8

leverage within TNMP. The report states: 9

We expect TNMP's financial metrics will continue to gradually decline 10reflecting a capital structure that is becoming more leveraged. Capital11spending levels are expected to average $324 million over the next 12four years compared to an average of $186 million of capital spent 13over the past four years, and will lead to additional balance sheet 14

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leverage.51

To fund the external financing needed to carry out the capital budget, TNMP 2

will need consistent and steady access to sources of debt and equity in order to 3

remain in balance with its authorized regulatory capital structure and avoid ratings 4

downgrades. Thus, it is significant and beneficial to TNMP and its ability to provide 5

reliable service that the Proposed Transaction will maintain and enhance TNMP’s 6

access to external capital. 7

IV. FINANCIAL ASPECTS OF THE PROPOSED TRANSACTION 8

HOW IS AVANGRID VIEWED IN THE FINANCIAL MARKETS?9

A. Avangrid is viewed as a sound and low-risk participant within the U.S. utility sector, 10

compared to other utilities. Among its primary characteristics: 11

1. Low-risk electric and gas distribution and transmission subsidiaries, with a 12

diversity of regulatory jurisdictions, provide more than 60% of the consolidated 13

cash flow of the group; and this percentage will rise with the acquisition of 14

PNMR; 15

2. Its non-utility business involves renewables under long-term agreements, 16

generally with credit-worthy counterparties;17

3. Its 81.5% owner, Iberdrola, is a highly-regarded company in the E.U. and 18

globally; and 19

4. Iberdrola and Avangrid’s credit ratings are strong, and Avangrid has a 20

successful record of raising money in the debt capital market and short-term 21

funding market. 22

HOW DO AVANGRID AND IBERDROLA COMPARE WITH PNMR IN TERMS 23

OF CREDIT STRENGTH?24

5 Moody’s, Ibid, (Exhibit TNMP EL-4), page 6.

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A. Avangrid and Iberdrola have stronger financial characteristics than PNMR, as 1

reflected in S&P ratings that are one notch higher than PNMR’s, and Moody’s 2

ratings that are two notches higher than PNMR’s, as shown in Table 3. 3

Table 3: Comparative Ratings for Transaction EntitiesPNMR Avangrid Iberdrola

S&PIssuer Rating BBB BBB+ BBB+Senior Unsecured Notes BBB- BBB BBB*Short-term debt A-2 A-2

Moody's Issuer Rating Baa3 Baa1 Baa1Senior Unsecured Notes Baa3 Baa1 Baa1*Short-term debt P-2 P-2

* No rated issues are outstanding; this rating is indicative. 4

Q. HOW WILL THE OWNERSHIP OF PNMR AND TNMP CHANGE AS A RESULT 5

OF THE PROPOSED TRANSACTION?6

A. A specially-formed subsidiary of Avangrid will acquire all of PNMR’s shares for 7

cash of approximately $4.3 billion. In his prepared testimony, Mr. Robert Kump 8

explains that no incremental debt will be placed at PNMR or at PNMR’s operating 9

subsidiaries as a result of the Proposed Transaction. 10

V. BENEFICIAL FINANCIAL IMPACTS FOR TNMP AND CUSTOMERS11

WHAT BENEFICIAL CHANGES DO YOU ANTICIPATE WILL RESULT FROM 12

AVANGRID’S OWNERSHIP OF PNMR? 13

A. TNMP will become part of a significantly larger corporate entity with greater 14

economies of scale and the advantage of regulatory and jurisdictional diversity.15

When a utility parent holding company has a diverse set of subsidiaries, as is the 16

case with Avangrid, an adverse circumstance at a single subsidiary is unlikely to 17

impede the parent from obtaining funding in the equity market or fixed income 18

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market. If TNMP needs equity for any reason, Avangrid (and its 81.5% parent, 1

Iberdrola) will have broader sources and greater assurance of the ability to supply 2

capital to TNMP. 3

ARE YOU AWARE OF OTHER ASPECTS OF THE PROPOSED TRANSACTION 4

THAT WILL ENHANCE THE FINANCIAL STATUS OF PNMR’S OPERATING5

SUBSIDIARIES? 6

A. Yes. Mr. Kump’s testimony states that Avangrid plans to eliminate PNMR’s debt 7

at the consummation of the Transaction. Removing the parent company debt 8

would reduce the consolidated debt leverage of PNMR, a positive credit 9

development for TNMP as viewed by fixed-income investors and credit rating 10

agencies. 11

Parent-level debt is currently about 21% of total PNMR debt, and that share 12

would be eliminated. The financial community would consider that a meaningful 13

positive development.14

IS THE EXPECTED REDUCTION IN LEVERAGE MEANINGFUL FOR TNMP?15

A. Yes, it is quite favorable for TNMP to be relieved of the debt overhang at PNMR.16

In general, a minimally-levered or unlevered parent company is unlikely to 17

experience financial stress for itself or to trigger stress affecting its subsidiaries. 18

TNMP will be better off if PNMR improves its financial strength. 19

DO YOU FORESEE ANY CHANGES IN PNMR’S AND TNMP’S CREDIT 20

RATINGS BY S&P DUE TO THE TRANSACTION?21

A. Yes, we can expect S&P to upgrade both PNMR and TNMP. There is a very high 22

likelihood that the Transaction will be accompanied by S&P’s upgrade of PNMR’s 23

credit rating. The S&P issuer rating of Iberdrola and Avangrid are BBB+ (one notch 24

higher than the BBB issuer rating of PNMR). Upon the announcement of the 25

Proposed Transaction, S&P changed the rating outlook of PNMR and TNMP to 26

Positive from Stable and commented: 27

We expect the ratings on PNMR and PSNM will be aligned with the 28new owner's ICR [Issuer Credit Rating] as per S&P Global Ratings 29criteria for core subsidiaries…30

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The positive outlook on TNMP reflects the potential for a one-notch 1upgrade given our expectation that the company's stand-alone credit 2profile will remain 'a-' and the insulation will remain in place post-3acquisition. We also expect TNMP to be a core subsidiary of 4Avangrid. 6 [Emphasis added.]5

In the same October 21 release, S&P refers to its concurrent affirmation of its BBB+ 6

rating and Stable outlook of Iberdrola. 7

Q. CAN WE EXPECT HIGHER MOODY’S RATINGS FOR PNMR AND TNMP TO 8

RESULT FROM THE PROPOSED TRANSACTION?9

A. Like S&P, Moody’s published an October 21, 2020 credit commentary on the 10

Proposed Transaction, but made no changes in the ratings outlook of the entities.711

In its Issuer Comment Moody’s expresses a favorable view on the credit impacts 12

of the Proposed Transaction, but unlike S&P, Moody’s does not signal what ratings 13

action the agency will take. 14

My own estimation is that Moody’s is likely to raise PNMR’s rating when its 15

debt leverage is reduced or eliminated; the current Moody’s rating of Baa3 for 16

PNMR is quite low, and Moody’s could raise PNMR’s rating by two notches to Baa1 17

at the closing. 18

VI. CONCLUSIONS AND RECOMMENDATIONS 19

IN SUMMARY, DO YOU FORESEE ANY FINANCIAL INJURY TO TNMP AS A 20

RESULT OF THE PROPOSED TRANSACTION?21

A. No, none whatsoever. On the contrary, I see the Proposed Transaction providing 22

TNMP with greater financial strength and resilience. 23

DO YOU FORESEE ANY FINANCIAL BENEFITS TO TNMP AND ITS 24

CUSTOMERS AS A RESULT OF THE PROPOSED TRANSACTION? 25

A. Yes. TNMP will benefit in several ways from reduced financial risk by the reduction 26

or removal of debt at its parent, PNMR, and from the favorable credit profile and 27

6 S&P Global Ratings, “PNM Resources and Subsidiaries’ Outlook Revised to Positive on Announced Acquisition by Avangrid, inc.; Ratings Affirmed”, October 21, 2020. (Exhibit TNMP EL-5).

7 Moody’s Investors Service, “Issuer Comment: Acquisition by Avangrid, Inc. would be positive and bring long- term benefits to its utilities”, 21 October 2020. (Exhibit TNMP EL-6)

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good standing in financial markets of Avangrid and Iberdrola. This will add to the 1

financial market’s confidence in TNMP as a low-risk utility. We can expect with 2

some confidence that S&P will raise TNMP’s credit rating by one notch to A- from 3

BBB+ as an immediate consequence of closing the Proposed Transaction. 4

Due to their greater size and scale, Avangrid and Iberdrola also have a 5

broader investor base than PNMR, and they benefit from greater diversification of 6

risk. As a result, they will have a broader range of sources from which to raise 7

equity capital should TNMP require capital infusions. 8

WHAT IS YOUR RECOMMENDATION? 9

A. Based upon my financial analysis, I conclude that there are no downside financial 10

risks for TNMP as a result of the Proposed Transaction. There are a number of 11

benefits for TNMP and its customers that can result from joining TNMP with a 12

strong and robust parent company like Avangrid. Therefore, I recommend that 13

the Commission approve the Proposed Transaction. 14

DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?15

A. Yes. 16

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EXHIBIT EL-1PUC Docket No. 51547

Page 1 of 8

EXPERIENCE AND QUALIFICATIONSELLEN LAPSON, CFA

LAPSON ADVISORY 370 Riverside Dr., 9DFinancial Consulting New York, NY 10025Expert Testimony +1-212-866-1040Financial Training www.lapsonadvisory.com

SUMMARY OF QUALIFICATIONSExpert on financing utilities and infrastructure projects, with over 50 years of professional experience in commercial and investment banking, securities analysis, and credit ratings. Focus on utilities, power generation and alternative energy sources, natural gas and fuels, corporate and project finance. Services include expert financial witness testimony; credit rating advisory services; executive training in utility securities and credit analysis.

MBA Accounting and finance, NYU Stern School of Business; Chartered Financial Analyst (CFA).

EMPLOYMENT

Lapson AdvisoryPrincipal

Dec. 2011 to present

Financial consulting services to utilities and developers of infrastructure projects. Financial strategy and credit advisory for power, energy, infrastructure companies, and utilities. Expert witness testimony. Design and conduct financial and credit training.

Fitch RatingsUtilities, Power & GasManaging Director

1999-2011Senior Director

1994-1999

Chair of Fitch’s global Corporate Finance Criteria Committee overseeing criteria for rating corporations, financial institutions, insurers, REITs, and project finance transactions (2010-2011).Manager or primary analyst on credit ratings of over 200 utility, pipeline, power generationcompanies. Utility tariff monetization. Senior member of rating committees for utilities and energy and power-related projects.Liaison with utility sector fixed income investors, focusing on 50 largest institutional investors holding utility and power bonds, buy-side and sell-side analysts, and utility bankers.

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Page 2 of 8

JP Morgan Chase (formerly Chemical NY Corp.)Vice President 1975-94Asst. Vice President 1974-1975

Managed financial advisory transactions, structured debt private placements, syndicated credit facilities for utilities, mining and metals, project finance. Structured financing for utility regulatory assets (first of its kind “stranded cost” securitization transaction) for Puget Energy, 1992-94.Led financing for bankrupt utility as debtor-in-possession; prepared financing plans for distressedutilities; structured exit financing for reorganization of two utilities emerging from Chapter 11. Divisional Controller - 1981-1986

Argus Research Corp.Equity Security Analyst –Utilities1969-1974

Equity analysis of U.S. electric and gas utilities, natural gas pipelines, and telecommunications companies. Modeling and projecting corporate financial statements. Research coverage and reports.

EDUCATION & CHARTER

Stern School of Business, New York University, MBA, 1975Major concentration: AccountingMaster’s Thesis: Cash Flow vs. Accrual Accounting Data in Utility Equity Valuation

Chartered Financial Analyst (CFA) since 1978Barnard College, Columbia University, BA, 1969

PROFESSIONAL ASSOCIATIONS

Institute of Chartered Financial Analysts, 1978 - presentWall Street Utility Group, 1996 - present

ADVISORY COUNCILS AND BOARD SERVICERocky Mountain Institute Sustainable Finance Advisory Board member. 2016 to 2018.

Represented U.S. investment community in advisory panel on International Accounting Standard Board proposals for financial reporting for rate-regulated activities, sponsored by Edison Electric Institute and American Gas Association, Dec. 2014

National Academy of Sciences/ National Research Council, Resilient America Forum, July 2014.

MIT Energy Institute, External Advisory Council, The Future of Solar Energy, 2012-2014.

Electric Power Research Institute, Advisory Council, 2004-2011; Chair, 2009 and 2010.

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EXPERT WITNESS TESTIMONY

Jurisdiction Proceeding Topic

MassachusettsDepartment of Public Utilities

DPU 20-16, 20-17, and 20-18, Long-term purchase contract for offshore wind energy, Eversource, National Grid, Unitil (2020)

Remuneration toutilities for entering into long-term contracts

Public Utilities Commission Texas

Docket No. 49849, Joint Application of El Paso Electric, Sun Jupiter Holdings and IIF US Holding 2 for Acquisition of El Paso Electric… (2019-20)

Ring-fencing for utility merger and formation of holdco; financial strength

New Mexico Public Regulation Commission

Docket No. 19-00234 UT, Joint Application of El Paso Electric, Sun Jupiter Holdings, and IIF US Holding 2 (2019-20)

Ring-fencing for utility merger and formation of holdco; financial strength

Public Utilities Commission of Colorado

Proceeding No. 19AL-0268E, Filing to Revise Electric Tariff, on behalf of Xcel Public Service Co, of Colorado (2019)

Capital structure and cash flow measures


Docket No. 49421, Application of CenterPoint Energy Houston to change rates, on behalf of CEHE (2019)

Ring-fencing in context of a rate proceeding; financial strength


Docket No. 48929, Application of Oncor Electric Delivery Co. LLC, Sharyland Utilities LP, and SempraEnergy, on behalf of Sharyland Utilities (2019)

Ring-fencing for formation of an electric transmission utility

Public Utilities Commission of Colorado

Proceeding No. 17AL-0363G, Filing to Revise Gas Tariff, on behalf of Xcel Public Service Co, of Colorado (2018)

Cash flow and credit impacts of tax reform; capital structure

South Carolina Public Service Commission

Docket No. 2017-370-E; Joint Application for Merger and for Prudency Determi-nation, on behalf of South Carolina Electric & Gas Company (2018)

Benefits of merger and proposed rate plan; implications for cash flow and access to capital.

U.S. Federal District Court, District of SC

Civil Action No.: 3:18-cv-01795-JMC, Motion for Preliminary Injunction, on behalf of South Carolina Electric & Gas

Financial harm of rate cut compliant with Act


Docket No. 48401, Texas-New Mexico Power Co. Application to Change Retail Rates, on behalf of TNMP (2018)

Cash flow and credit impacts of tax reform


Docket No. 48371, Entergy Texas Inc., Application to Change Retail Rates, on behalf of ETI (2018)

Cash flow and credit impacts of tax reform

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Docket No. 47527, Southwestern Public Service Co. Application forRetail Rates, on behalf of SPS Co. (2018)

Adverse cash flow and credit impacts of tax reform; cap structure

New Mexico Public Regulation Commission

Case No. 17-00255-UT, Southwestern Public Service Co. Application for Retail Rates, on behalf of SPS Co. 2018)

Adverse cash flow and credit impacts of tax reform; cap structure

South Carolina Public Service Commission

Docket No. 2017-305-E, Response to ORS Request for Rate Relief, on behalf of S. Carolina Electric and Gas (2017)

Adverse financial implications of rate reduction sought by ORS

DC Public Service Commission

Formal Case No. 1142, Merger Application of AltaGas Ltd. and Washington Gas Light, Inc. (2017)

Ring-fencing for utility merger; financial strength

Public Service Commission of Maryland

Docket No. 9449, In the Matter of the Merger of AltaGas Ltd. and Washington Gas Light, Inc. (2017)

Ring-fencing for utility merger; financial strength


Docket No. 46957, Application of Oncor Electric Delivery LLC to ChangeRates, on behalf of Oncor. (2017)

Appropriate capital structure. Financial strength.


Docket No. 46416, Application of Entergy Texas, Inc. for a Certificate of Convenience & Necessity, Montgomery County, on behalf of Entergy Texas (2016-2017)

Debt equivalence and capital cost associated with capacity purchase obligations (PPA)

U.S. Federal Energy Regulatory Commission

Dockets No. EL16-29 and EL16-30, NCEMC, et al. vs Duke Energy Carolinas and Duke Energy Progress, on behalf of the Respondents (2016)

Capital market environment affecting the determination of the cost of equity capital

Hawaii Public Utilities Commission

Docket No. 2015-0022, Merger Application on behalf of NextEra Energy and Hawaiian Electric Inc. (2015)

Ring-fencing and financial strength


Dockets No. EL14-12 and EL15-45, ABATE, vs MISO, Inc. et al., on behalf of MISO Transmission Owners (2015)

Capital market environment; capital spending and risk


Dockets No. EL12-59 and 13-78, Golden Spread Electric Coop., on behalf of South-western Public Service Co. (2015)

Capital market environment; capital spending and risk

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Dockets No. EL13-33 and EL14-86, ENE et al. vs. Bangor Hydro-Electric Co. et al., on behalf of New England Transmission Owners. (2015)

Capital market environment affecting the measurement of the cost of equity capital


Dockets No. ER13-1508 et alia, Entergy Arkansas, Inc. and other Entergy utility subsidiaries, on behalf of Entergy Services Inc. (2014)

Capital market environment affecting the measurement of the cost of equity capital

Delaware Public Service Commission

DE Case 14-193, Merger of Exelon Corp. and Pepco Holdings, Inc. on behalf of the Joint Applicants (2015)

Ring-fencing for utility merger; avoidance of financial harm

Maryland Public Service Commission

Case No. 9361, Merger of Exelon Corp. and Pepco Holdings, Inc. on behalf of the Joint Applicants (2015)


New Jersey Board of Public Utilities

BPU Docket No. EM 14060581, Merger of Exelon Corp. and Pepco Holdings, Inc., on behalf of the Joint Applicants (2015)



Docket ER15-572 Application of New York Transco, LLC, on behalf of NY Transco, LLC. (2015)

Incentive compensation for electric transmission; capital market access


Docket EL 14-90-000 Seminole Electric Cooperative, Inc. and Florida Municipal Power Agency vs. Duke Energy FL on behalf of Duke Energy (2014)

Capital market environment affecting the determination of the cost of equity capital

DC Public Service Commission

Formal Case No. 1119 Merger of Exelon Corp. and Pepco Holdings Inc., on behalf of the Joint Applicants (2014-2015)



Docket EL14-86-000 Attorney General of Massachusetts et. al. vs. Bangor Hydro-Electric Company, et. al on behalf of New England Transmission Owners (2014)

Return on Equity; capital market environment

Arkansas PublicService Commission

Docket No. 13-028-U. Rehearing direct testimony on behalf of Entergy Arkansas. (2014)

Investor and rating agency reactions to ROE set by Order.

Illinois Commerce Commission

Docket No. 12-0560 Rock Island Clean Line LLC, on behalf of Commonwealth Edison Company, an intervenor (2013)

Access to capital for a merchant electric transmission line.

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Docket EL13-48-000 Delaware Division of the Public Advocate, et. al. vs. Baltimore Gas and Electric Company and PEPCO Holdings et al., on behalf of (i)Baltimore Gas and Electric and (ii) PEPCO and subsidiaries (2013)

Return on Equity; capital market view of transmission investment


Docket EL11-66-000 Martha Coakley et. al. vs. Bangor Hydro-Electric Company, et. al on behalf of a group of New England Transmission Owners (2012-13)

Return on Equity; capital market view of transmission investment

New York Public Service Commission

Cases 13-E-0030; 13-G-0031; and 13-S-0032 on behalf of Consolidated Edison Company of New York. (2013)

Cash flow and financial strength; regulatory mechanisms

Public Service Commission of Maryland

Case. 9214 re “New Generating Facilities To Meet Long-Term Demand For Standard Offer Service”, on behalf of Baltimore Gas and Electric Co., Potomac Electric Power Co., and Delmarva Power & Light (2012)

Effect of proposed power contracts on the credit and financial strength of MD utility counterparties

CONSULTING & ADVISORY ASSIGNMENTS

Public Service Co. of New Hampshire, 2020

Analyzed impacts of methods for recovering costs of energy efficiency program. Objective: Regulatory strategy

Washington Gas Light Co., 2019

Quantified the effect of merger upon the cost of long-term and short-term debt. Objective: Comply with regulatory order.

Cravath, Swaine & Moore LLP, 2019

Evaluated factors that influenced utility spending decisions on operations, maintenance, and capital projects. Objective: Support litigation strategy in contentious bankruptcy proceedings.

NJ American Water Co. 2018

Analyzed impacts of tax reform on water utility’s cash flow and ratings. Objective: Regulatory strategy

AltaGas Ltd.2017

Credit advisory on ratings under merger and no-merger cases.Objective: Compare strategic alternatives for M&A

Entergy Texas, Inc.2016

Research study on debt equivalence and capital cost associated with capacity purchase obligations. Impact of new GAAP lease accounting standard on PPAs.Objective: Economic comparison of resource options

Eversource Energy 2014

Evaluated debt equivalence of power purchase obligations.Objective: Clarify credit impact of various contract obligations.

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PROFESSIONAL AND EXECUTIVE TRAINING

In-house Training, Southern California Edison Co., Rosemead CA

Designed and delivered in-house training program on evaluating the credit of energy market counterparties, Nov. 2016

In-house Training, Undisclosed Financial Institution, NYC

Developed corporate credit case for internal credit training program and coordinated use in training exercise, 2016

CoBank, Denver CO Designed and delivered “Midstream Gas and MLPs: AdvancedCredit Training”, 2014

Empire District Electric Co., Joppa MO

Designed and delivered in-house executive training session Utility Sector Financial Evaluation, 2014

PPL Energy Corp, Allentown PA

Designed and delivered in-house Financial Training, 2014

SNL Knowledge Center Courses

“Credit Analysis for the Power & Gas Sector”, 2011-2014“Analyst Training in the Power & Gas Sectors: Financial StatementAnalysis”, 2013-2014

International Money Center Bank (Undisclosed)2014

Research study and recommendations on estimating Loss Given Default and historical experience of default and recovery in the regulated utility sector. Objective: Efficient capital allocation for loan portfolio

GenOn Energy Inc. 2012

White Paper on appropriate industry peers for a competitive power generation and energy company. Objective: Improve peer comparisons in shareholder communications and for compensation studies

TransmissionUtility(Undisclosed)2012

Recommended the appropriate capital structure and debt leverage during a period of high capital spending. Objective: Efficient equity level during multi-year capex project; preserve existing credit ratings

Toll Highway(Undisclosed)2012

Advised on adding debt while minimizing risk of downgrade. Recommended strategy for added leverage and rating agency communications. Free up equity for alternate growth investments via increased leverage while preserving credit ratings

District Thermal Cooling Company(Private)

Recommended a project loan structure to deal with seasonal cash flow. Optimized payment schedule, form and timing of financial covenants. Objectives: Reduce default risk; efficient borrowing structure

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EEI Transmission and Wholesale Markets School

“Financing and Access to Capital”, 2012

National Rural Utilities Coop Finance Corp.

“Credit Analysis for the Power Sector”, 2012

Judicial Institute of Maryland (Private seminar for MD judges)

“Utility Regulation and the Courts: Impact of Court Decisions on Financial Markets and Credit”, Annapolis MD, 2007

Edison Electric Institute “New Analyst Training Institute: Fixed Income Analysis and Credit Ratings”, 2008 and 2004

PUBLICATIONS/BOOK CHAPTERS

“Managing Credit Risk in the Electricity Market”, Ellen Lapson and Denise Furey, chapter 21 in Managing Energy Price Risk, 4th Edition, Vincent Kaminski ed., Risk Publications, London, 2016.

“Standard Market Design: Credit of Some Sectors Will Be Affected by SMD”, Ellen Lapson. Chapter in: Electric & Natural Gas Business: Understanding It, 2003 and Beyond, Robert E. Willett ed., Financial Communications Company, Houston, TX, 2003.

Energy Modeling and the Management of Uncertainty, Robert Jameson ed., Risk Publications, London, 1999. “Managing Risks Through Contract Technology: Know Your Counterparty”, Ellen Lapson, pp 154-155.

“Managing Credit Risk in the Electricity Market”, Ellen Lapson (pp 281-291). Chapter in: The US Power Market: Restructuring and Risk Management, Robert Jameson ed., RiskPublications, London, 1997.

Deregulation of the Electric Utility Industry – Proceedings of the AIMR Seminar; ed. AIMR (CFA Institute), Charlottesville, VA, 1997. Speaker 3: E. Lapson.

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Correspondence of Credit Rating Agency Rating Scales

Investment Grade Rating Categories

Moody's Standard & Poors Fitch

Aaa AAA AAA Aa1 AA+ AA+ Aa2 AA AA Aa3 AA- AA- A1 A+ A+ A2 A A A3 A- A- Baa1 BBB+ BBB+ Baa2 BBB BBB Baa3 BBB- BBB-

Speculative Grade Rating Categories Ba1 BB+ BB+ Ba2 BB BB Ba3 BB- BB- B1 B+ B+ B2 B B B3 B- B- Caa1 CCC+ CCC+ Caa2 CCC CCC Caa3 CCC- CCC- Ca CC cc' C C c D* D* d* SD* sd* *D= In default; SD and sd denote a selective default on specific debt instruments rather than a general default.

147

Research Update:

PNM Resources Inc., Public Service Co. Of NewMexico, Texas-New Mexico Power Co. DowngradedOne Notch; Outlook StableApril 6, 2020

Rating Action Overview

- S&P Global Ratings is lowering our ratings, including our issuer credit rating (ICR) on PNMResources Inc. (PNMR) and its subsidiary, Public Service Co. of New Mexico (PSNM) to 'BBB'from 'BBB+'. At the same time, we are lowering our ICR on subsidiary Texas-New Mexico PowerCo. (TNMP) to 'BBB+' from 'A-'. The downgrades reflects our expectations that the company'sweak historical financial measures will continue to remain below our downside threshold overthe next two years.

- We are also revising downward TNMP's financial risk profile to significant from intermediate,reflecting higher capital spending to support its expansion in transmission asset that we expectwill lead to modestly weaker financial measures. We are also revising TNMP's stand-alonecredit profile (SACP) to 'a-' from 'a'.

- At the same time, we are lowering PNMR's senior unsecured rating to 'BBB-' from 'BBB',PSNM's senior unsecured rating to 'BBB' from 'BBB+', PSNM's preferred stock rating to 'BB+'from 'BBB-'. TNMP's first-mortgage bond (FMB) rating is affirmed at 'A'.

- The stable rating outlook on PNMR reflects our view that the company will utilize thesecuritization measures to secure financing for the San Juan Generation Station unit'sretirement and replacement power projects and that the company's funds from operations(FFO) to debt will reflect about 15% over the next two years.

Rating Action Rationale

The ratings downgrade on PNMR and subsidiaries reflects PNMR's historical trend ofweakening financial metrics, which we expect will continue to remain below our downsidetrigger over the next two years. In early 2018 when we revised the rating outlook on PNMR andits subsidiaries to negative from stable, we indicated we could affirm the ratings and revise ouroutlook to stable if the company maintained FFO to debt at about 17%. Since then, the credit

Research Update:

PNM Resources Inc., Public Service Co. Of NewMexico, Texas-New Mexico Power Co. DowngradedOne Notch; Outlook StableApril 6, 2020

PRIMARY CREDIT ANALYST

Matthew L O'Neill

New York

(1) 212-438-4295

[email protected]

SECONDARY CONTACTS

Fei She, CFA

New York

+ 2124380405

[email protected]

Debadrita Mukherjee

GURGAON HARYANA

[email protected]

www.spglobal.com/ratingsdirect April 6, 2020 1

EXHIBIT EL-3 PUC Docket No. 51547

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measures have been consistently below the downgrade threshold. For 2018 and 2019, FFO to debtwas 15.8% and 15.5%, respectively. Furthermore, we expect that the credit measures willcontinue to remain below our downgrade threshold, reflecting regulatory lag from higher capitalspending and possibly weaker financial measures stemming from the coronavirus pandemic.Higher capital spending in New Mexico is necessary for the enhancement of the transmission gridto facilitate integration of renewable generation and battery storage, which is set to replaceexisting coal generation. In Texas, higher capital spending capital reflects investment in theupgrading and maintenance of the transmission infrastructure to enhance customer reliability.Furthermore, in the near term, the negative revenue impact from pandemic fallout may createadditional stress to the company's financial metrics.

Our ratings reflect our expectation that PNMR will be able to securitize the cost related to theclosing of the San Juan Generation Station. The Energy Transition Act (ETA) passed in 2019 inNew Mexico, increased the state's renewable portfolio target to 100% carbon free by 2045. Also,the New Mexico Supreme Court ruled that the ETA applies to PNMR's application for theabandonment, securitization, and repowering of the San Juan Generation Station facility and theNew Mexico Public Regulation Commission (NMPRC) recently issued a securitization financingorder. We view the securitization order as providing regulatory support to the company during thetransition and may eventually lead to improved financial measures because we generally treatsecuritization debt, under our criteria, as off balance sheet.

We continue to assess PNMR's business risk profile as strong. This reflects the lower-riskregulated utility operations in New Mexico (70%) and Texas (30%), which is offset by itshistorically challenging New Mexico regulatory environment that frequently demonstratesabove-average regulatory lag. This incorporates a history of regulatory decisions, includingdisallowances that has challenged the consistency of the regulatory construct in New Mexico, andresulted in more volatile profit measures for the company, compared to peers.

We assess PNMR's financial risk profile as significant using our medial volatility financial ratiobenchmarks. In our base case scenario, we forecast that adjusted FFO to total debt will bearound 15% over the next two years. This incorporates rate case increases, partially offset byrobust capital spending.

We expect TNMP's financial measures to weaken from previous projected levels, reflectingrobust capital spending on transmission assets. We are revising our assessment of TNMP'sstand-alone financial risk profile downward to significant from intermediate and lowering its SACPto 'a-' from 'a'. We previously expected FFO to debt to be about 23% and our revised expectation ofFFO to debt is about 18%-20%.

Under our group rating methodology, we assess the insulating measures in place as sufficientto rate TNMP one notch higher than parent PNMR. These measures include that:

- TNMP is a separate stand-alone legal entity, functioning independently--both financially andoperationally;

- TNMP files its own rate cases and is independently regulated by the Public Utility Commissionof Texas;

- TNMP has its own records and books, including stand-alone audited financial statements;

- TNMP has its own funding arrangements, issues its own long-term debt, and has a separatecommitted credit facility for its short-term funding needs;


Research Update: PNM Resources Inc., Public Service Co. Of New Mexico, Texas-New Mexico Power Co. Downgraded One Notch; Outlook Stable


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- TNMP does not commingle funds, assets, or cash flows with its parent or with its othersubsidiary;

- TNMP does not have any cross-default obligations and a default by its parent or its othersubsidiary would not directly lead to a default; and

- There is a clear economic incentive for PNMR to maintain TNMP's financial strength as TNMPcontributes a significant portion to the company's consolidated operations.

Outlook

The stable outlooks on PNMR and PSNM reflects our view that PNMR will consistently maintainFFO to debt ratio around 15% over the next two years. We also base the stable outlook on PNMR'sability to manage regulatory risk in New Mexico and Texas.

Downside scenario

We could lower the ratings on PNMR and PSNM if PNMR's consolidated financial measurescontinue to weaken, including FFO to debt that is consistently less than 14%, or if PNMR's abilityto manage regulatory risk weakens, resulting in higher business risk.

Upside scenario

We could raise our rating on PNMR and PSNM if PNMR's consolidated financial measuresimprove, including FFO to debt that is consistently higher than 17% absent any materialweakening in the business risk profile.

Texas-New Mexico Power Company (TNMP):

The stable outlook on TNMP is consistent with the stable outlook on parent PNMR. The stableoutlook on TNMP also reflects our expectations that its stand-alone financial measures willconsistently reflect FFO to debt of about 19% over the next two years and that TNMP will continueto manage regulatory risk in Texas.

Downside scenario

We could lower the rating on TNMP over the next two years if we lowered the rating on parentPNMR or if TNMP's stand-alone financial measures materially weakened, reflecting FFO to debtconsistently below 13%. We could also lower our rating on TNMP if we determined there was aweakening to TNMP's management of regulatory risk, thereby weakening the utility' business riskprofile.

Upside Scenario

We could raise the rating on TNMP over the next two years if we raised the rating on parent PNMRand, at the same time, TNMP's stand-alone credit profile does not materially weaken.




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Company Description

PNMR is a publicly traded utility holding company that wholly owns subsidiaries, PSNM andTNMP. On a consolidated basis it serves about 789,000 customers in New Mexico and Texas.PNMR owns, contracts and leases generation capacity of about 2,800 MW.

Liquidity

PNMR has adequate liquidity, in our view, and can more than cover its needs for the next 12months, even if EBITDA declines by 10%. We expect the company's liquidity sources over the next12 months will exceed its uses by more than 1.1x. Under our stress scenario, we do not expect thatPNMR would require access to capital markets during that period to meet liquidity needs. Inaddition, PNMR has sound relationships with its banks, a satisfactory standing in the creditmarkets, and could absorb a high-impact, low-probability event, with limited need for refinancing.

Principal liquidity sources include:

- Consolidated FFO of $530 million for the next 12 months;

- Consolidated credit facility availability of about $670 million;

- Minimal cash balances; and

- Equity forward settlements of about $290 million.

Principal liquidity uses include:

- Debt maturities of about $490 million including short-term borrowings;

- Maintenance capital spending of $550 million; and

- Consolidated dividend payments of about $100 million.

Environmental, Social, And Governance

Despite the company's significant reliance on fossil fuel and nuclear, we assess the company'senvironmental risks as in line with peers. With a total owned generation fleet capacity of about2,800 megawatts, close to 30% of generation capacity is from coal generation. The balance of thecompany's generation portfolio is from natural gas (36%), nuclear (15%), and renewables (19%).With the closure of the San Juan Generation Station in 2022, the company's coal portfolio will bereduced to 200mw. As part of the ETA, the company has a stated policu to be 100% carbon free by2040. Environmental risks include the potential for the ongoing cost of operating fossil units andthe potential for changing environmental regulations that may require significant capitalinvestments.

From a social perspective, PNMR's safety and health management processes, includinggroundwater recovery system and coal combustion residuals rules, enable it to effectively andsafely serve electricity and gas customers throughout the territory.

Governance factors are neutral to our ESG assessment. The company has an independent boardof directors that, in our view, is capably engaged in risk oversight on behalf of all stakeholders,including strategic planning, regulatory relationship management and compliance.




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Issue Ratings - Subordination Risk Analysis

We rate PNMR's unsecured debt 'BBB-', one notch below its ICR, as the priority debt at itssubsidiaries comprises more than 50% of the company's consolidated capital structure.

We rate PSNM's senior unsecured debt 'BBB', the same as the issuer credit rating on thecompany, because we view this instrument as unsecured debt of a qualifying investment-gradeutility.

We also rate PSNM's preferred stock 'BB+' or two notches below the issuer credit rating on PSNM,reflecting the deferability and subordination of the hybrid security.

Issue Ratings - Recovery Analysis

TNMP's first mortgage bonds benefit from a first-priority lien on substantially all of the utility'sreal property owned or subsequently acquired. Collateral coverage of greater than 1.5x supports arecovery rating of '1+' and an issue rating two notches above the issuer credit rating.

Ratings Score Snapshot

PNMR:

Issuer Credit Rating: BBB/Stable/--

Business risk: Strong

- Country risk: Very low

- Industry risk: Very low

- Competitive position: Satisfactory

Financial risk: Significant

- Cash flow/Leverage: Significant

Anchor: bbb

Modifiers:

- Diversification/Portfolio effect: Neutral (no impact)

- Capital structure: Neutral (no impact)

- Liquidity: Adequate (no impact)




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- Financial policy: Neutral (no impact)

- Management and governance: Satisfactory (no impact)

- Comparable rating analysis: Neutral (no impact)

Stand-alone credit profile: bbb

- Group credit profile: bbb

PSNM:

Issuer Credit Rating: BBB/Stable/--

Business risk: Strong



- Competitive position: Satisfactory



Anchor: bbb

Modifiers:







Stand-alone credit profile: bbb





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- Entity status within group: Core (No Impact)

TNMP:

Issuer Credit Rating: BBB+/Stable/--

Business risk: Excellent



- Competitive position: Strong



Anchor: a-

Modifiers:







Stand-alone credit profile: a-


- Entity status within group: Insulated (-1 notch from SACP)

Related Criteria

- General Criteria: Group Rating Methodology, July 1, 2019

- General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019

- Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019




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- Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March28, 2018

- Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For GlobalCorporate Issuers, Dec. 16, 2014

- General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

- Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

- Criteria | Corporates | Utilities: Key Credit Factors For The Regulated Utilities Industry, Nov. 19,2013

- General Criteria: Methodology: Industry Risk, Nov. 19, 2013

- Criteria | Corporates | Utilities: Collateral Coverage And Issue Notching Rules For '1+' And '1'Recovery Ratings On Senior Bonds Secured By Utility Real Property, Feb. 14, 2013

- General Criteria: Methodology: Management And Governance Credit Factors For CorporateEntities, Nov. 13, 2012

- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

Ratings List

Downgraded; Outlook Action

To From

Texas-New Mexico Power Co.

Issuer Credit Rating BBB+/Stable/-- A-/Negative/--

PNM Resources Inc.

Public Service Co. of New Mexico

Issuer Credit Rating BBB/Stable/NR BBB+/Negative/NR

Downgraded

To From

PNM Resources Inc.

Senior Unsecured BBB- BBB

Public Service Co. of New Mexico

Senior Unsecured BBB BBB+

Preferred Stock BB+ BBB-

Ratings Affirmed; Recovery Rating Unchanged

Texas-New Mexico Power Co.

Senior Secured

Local Currency A

Recovery Rating 1+

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors,have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with suchcriteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings




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information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this ratingaction can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings searchbox located in the left column.




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No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or anypart thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database orretrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). TheContent shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers,shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of theContent. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the resultsobtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is”basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OFMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THATTHE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARECONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive,special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits andopportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of suchdamages.

Copyright © 2020 by Standard & Poor’s Financial Services LLC. All rights reserved.


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INFRASTRUCTURE AND PROJECT FINANCE

CREDIT OPINION4 September 2020

Update

RATINGS

Texas-New Mexico Power CompanyDomicile Lewisville, Texas,

United States

Long Term Rating A3

Type LT Issuer Rating

Outlook Negative

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Robert Petrosino CFA +1.212.553.1946VP-Senior [email protected]

Jayce Kim +1.212.553.6836Associate [email protected]

Michael G. Haggarty +1.212.553.7172Associate Managing [email protected]

Jim Hempstead [email protected]

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Texas-New Mexico Power CompanyUpdate following negative outlook

SummaryTexas-New Mexico Power Company’s (TNMP, A3 negative) credit quality reflects its low-riskbusiness as a regulated transmission and distribution (T&D) utility in Texas where we viewthe regulatory environment as credit supportive under the Public Utility Commission of Texas(PUCT). However, since tax reform and its recent rate case, TNMP's credit measures havebeen declining. While TNMP's most recent general rate case outcome in December 2018was supportive, settling many issues and setting base-line values for future interim updatesto its T&D rates, the PUCT approved a 9.65% ROE and affirmed its 45% equity layer, lowerthan its last 10.13% allowed ROE and the 50% equity layer requested. Importantly, thePUCT approved, and TNMP has began utilizing Texas' distribution capital rider which reducesregulatory lag. Nevertheless, we expect TNMP will continue to move toward its authorizedcapital structure of 55% debt and 45% equity, which will pressure credit measures. As aresult, we expect TNMP's ratio of cash flow from operations pre-working capital (CFO pre-W/C) to debt to continue to decline and going forward will move to a range between 16%and 17%.

Coronavirus - The rapid spread of the coronavirus outbreak, severe global economic shock,low oil prices, and asset price volatility are creating a severe and extensive credit shock acrossmany sectors, regions and markets. The combined credit effects of these developmentsare unprecedented. We regard the coronavirus outbreak as a social risk under our ESGframework, given the substantial implications for public health and safety. However, weexpect TNMP to be relatively resilient to recessionary pressures because of its rate regulatedbusiness model and regulatory mechanisms.

This document has been prepared for the use of Elisabeth Eden and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's. 158


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MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 1

Historical CFO Pre-WC, Total Debt and CFO Pre-WC to Debt ($ MM)

$107 $110 $109 $139 $150

$447

$500

$616

$706

$817

24.0%22.0%

17.6%

19.7% 18.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

Dec-16 Dec-17 Dec-18 Dec-19 LTM Jun-20

CFO Pre-W/C Total Debt CFO Pre-W/C / Debt

Source: Moody's Financial Metrics

Credit strengths

» Low risk T&D utility in supportive regulatory jurisdiction under the PUCT

» Growing service territory with customer and load growth

» PUCT approved mechanisms allow timely recovery of capital

Credit challenges

» Net funding of external capital needs will gradually increase leverage

» Financial metrics have declined and we expect this to continue

» PUCT has lowered authorized ROEs and equity layers in some recent rate cases

» Exposure to oil-driven Texas economy

Rating outlookTNMP's negative outlook reflects our expectation that TNMP will move toward the 45% equity layer approved by its regulator throughdividend payouts and funding its external capital needs. Despite a credit supportive regulatory environment in Texas, including theability to use timely transmission and distribution cost recovery mechanisms, we expect the utility's CFO pre-W/C to debt ratio tofurther decline to the 16% to 17% range.

Factors that could lead to an upgradeWhile an upgrade is unlikely over the near term, TNMP's rating could be upgraded if the regulatory environment under the PUCTbecomes more credit supportive leading to higher returns and an improved financial profile, such that its ratio of CFO pre-W/C to debtwere to increase to above 22% on a sustainable basis.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 4 September 2020 Texas-New Mexico Power Company: Update following negative outlook



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Factors that could lead to a downgradeTNMP's rating could be downgraded if we believe the regulatory framework under the PUCT has become less credit supportive orpredictable resulting in lower returns or higher risks; or if financial metrics continue to deteriorate such that CFO pre-W/C to debt wereto fall below 18% on a sustained basis.

Key indicators

Exhibit 2Texas-New Mexico Power Company [1]

Dec-16 Dec-17 Dec-18 Dec-19 LTM Jun-20

CFO Pre-W/C + Interest / Interest 4.6x 4.6x 4.3x 5.7x 6.2x

CFO Pre-W/C / Debt 24.0% 22.0% 17.6% 19.7% 18.4%

CFO Pre-W/C – Dividends / Debt 16.9% 13.2% 10.8% 11.9% 11.2%

Debt / Capitalization 34.8% 39.6% 43.2% 44.1% 47.6%

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics

ProfileTNMP is an indirect wholly-owned subsidiary of PNM Resources, Inc. (PNMR: Baa3 stable), a utility holding company whose largestsubsidiary is the Public Service Company of New Mexico (PNM: Baa2 stable). TNMP is an electric transmission and distribution (T&D)utility with over 10,000 miles of transmission and distribution lines serving over 250,000 end-users in three non-contiguous areas inTexas. Since TNMP's transmission and distribution services are solely within the Electric Reliability Council of Texas (ERCOT) system,TNMP is not subject to rate regulation by the FERC. TNMP is regulated by the PUCT and operates solely within ERCOT in Texas.




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Exhibit 3

Service Territory

Source: Company Presentations

Detailed credit considerationsLOW RISK T&D UTILITY OPERATES IN A CREDIT SUPPORTIVE REGULATORY JURISDICTIONTNMP's low risk transmission and distribution operations are regulated by the PUCT, a credit positive given the transparent andsupportive regulatory framework that enables timely recovery of prudently incurred costs and investments. In addition, TNMP's T&Doperations in ERCOT have no provider of last resort obligations which is also a credit positive as TNMP is only obligated to deliverpower. We believe that ERCOT's regulatory framework for T&D's is generally more credit supportive than many state jurisdictions albeitwith ROEs and equity layers trending lower.

On May 30, 2018, TNMP filed its last general rate case (GRC) petition with the PUCT requesting a $31.3 million increase in rates, basedon an ROE of 10.5%, a cost of debt of 7.2% and a 50/50 debt/equity capital structure. TNMP settled this case where it received a rateincrease of $10.0 million, an authorized ROE of 9.65% and affirmed its equity ratio of 45.0%, return parameters commensurate withits Texas T&D peers. The PUCT approved the settlement in December 2018.

The approved settlement also allowed TNMP to use a portion of its post-tax reform overcollection to offset its Hurricane Harveyrelated regulatory asset and to collect a storm reserve. In addition, TNMP is refunding $37.8 million of the regulatory liability related to




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tax reform over a five year period and $108.7 million over the estimated useful life of utility plant in service. TNMP also included a finalreconciliation of its smart meter (AMS) costs which was approved and included in rate base.

Exhibit 4

TNMP's recent rate cases in Texas

Date

Rate Increase

($M)

Return on

Equity (%)

Common Equity to

Total Capital (%)

Rate Base

($M) Date

Decision

Type

Rate

Increase

($M)

Interim

Authorized?

Return on

Equity (%)

Common Equity to

Total Capital (%)

Rate Base

($M)

Rate Case

Duration

(months)

5/30/2018 31.3 10.50 50.00 522.41 12/20/2018 Settled 10.0 No 9.65 45.00 520.30 68/26/2010 20.1 11.50 50.00 332.19 1/20/2011 Settled 10.3 No 10.13 45.00 332.13 48/29/2008 24.1 11.25 40.00 430.10 8/21/2009 Settled 12.7 No NA NA NA 11

Increase Requested Increase Authorized

Source: SPGMI

TIMELY COST RECOVERY MECHANISMS ARE CREDIT POSITIVETNMP utilizes formula based rate making for transmission investments through a transmission cost (TCOS) recovery rider and recentlyimplemented formula based ratemaking for distribution investments through a distribution cost (DCOS) recovery rider. TNMP'sability to use both recovery mechanisms is credit positive. TNMP is allowed to update its transmission rates twice a year to recoverinvestments including the addition and retirement of transmission facilities, including depreciation and taxes as well as an approvedrate of return.

Exhibit 5

TNMP Regulatory Mechanisms

Adjustment clauses and riders TNMP

Conserv. Program expense Decoupling Renewables adjustment clause Environmental compliance adjustment clause Advanced metering rider Transmission cost of service mechanism (TCOS) Distribution cos of service mechanism (DCOS) [1] Transmission cost recovery factor (TCRF) Distribution cost recovery factor (DCRF) Municipal franchise fee adjustment clause

[1] Can only be used when earned ROE is below allowed ROESource: Company Filings

On 24 January 2020, TNMP filed a TCOS application to increase transmission revenues by $7.8 million annually based on an increasein rate base of $59.2 million and the increase was approved on 27 March 2020. TNMP filed its first DCOS application on 6 April 2020to increase distribution revenues by $14.7 million based on an increase in rate base of $149.2 million. A settlement in principle wasreached in May 2020 and approved by the PUCT on 13 August with new rates in place as of 1 September 2020.




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Exhibit 6

TNMP Capital Investments and Rate Base

254

337 290

342 348

$1.1 Billion

$1.3 Billion

$1.5 Billion

$1.6 Billion

$1.9 Billion

0%

5%

10%

15%

20%

25%

30%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2019A 2020E 2021E 2022E 2023E

($ B

illion

s)

TNMP Capital Invesments TNMP Rate Base Capital Investment / Rate Base (%)

Source: Company Presentations

DECLINING FINANCIAL METRICS ARE EXPECTED TO CONTINUE TO DETERIORATETNMP's financial metrics have declined over the last several years reflecting the impact of tax reform and loss of deferred taxes andmore recently incorporating regulatory return parameters. TNMP's most recent general rate case outcome in December 2018 wassupportive, settling many issues and setting base line values for future interim updates to its T&D rates. However, the PUCT alsoapproved a 9.65% ROE and a 45% equity layer, commensurate with its Texas peers, but lower than the last 10.13% allowed ROE. Weexpect TNMP will continue a balance funding of external capital needs, but that it will move toward a more levered regulatory capitalstructure of 55% debt.

TNMP is bolstering the reliability of its distribution network, adding new connections in its service territory and is experiencingrelatively good load and customer growth. The price of oil continues to be a driver of the Texas economy and population trends,contributing to much of TNMP's MWh sales growth. For the twelve months ended 30 June 2020, TNMP's CFO pre-W/C to debt was18.4% down from 24.0% and 22.0% in 2016 and 2017, respectively.

We expect TNMP's financial metrics will continue to gradually decline reflecting a capital structure that is becoming more leveraged.Capital spending levels are expected to average $324 million over the next four years compared to an average of $186 million ofcapital spent over the past four years, and will lead to additional balance sheet leverage. TNMP's credit profile is supported by its low-risk T&D operations and supportive regulatory construct, however going forward, its CFO pre-W/C to debt ratio is expected to moveinto the 16% to 17% range.

ESG considerationsEnvironmentalTNMP has a low carbon transition risk within the regulated utility sector as an electric transmission and distribution utility that ownsno generating assets. Moody’s framework for assessing carbon transition risk in this industry is set out in “Prudent regulation key tomitigating risk, capturing opportunities of decarbonization” (2 Nov 2017).

TNMP is exposed to environmental risk, most notably from water stress. According to Moody’s affiliate Four Twenty Seven, TNMP'sservice territory faces medium to high risk for water stress and a medium to high risk for heat stress based on the counties it serves.Please refer to Moody's report on “Intensifying climate hazards to heighten focus on infrastructure investments” (16 Jan 2020).

SocialSocial risks are primarily related to societal and demographic trends, health and safety as well as customer and regulatory relations.




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Social risks may also emanate from its environmental risk profile. Moody's see the potential for rising social risks associated with theCOVID-19 pandemic and the effect on TNMP's customers' ability to absorb rate hikes in the current weakened economic environment.

GovernanceFrom a governance perspective, financial and risk management policies are key to managing the company's environmental and socialrisks. The governance of TNMP is effected through its parent company PNMR, which scores highly under our corporate governanceassessment criteria. Moody's framework for assessing corporate governance is discussed in “Utilities and power companies – NorthAmerica Corporate governance assessments show generally credit-friendly characteristics” (September 19, 2019).

Nine of PNMR's board directors are considered independent by the company. Management has historically generally employeda balanced fiscal policy which is an important consideration along with maintaining strong financial measures and good liquidity,improving the company's ability to respond to environmental and socials risks.

Liquidity analysisTNMP's liquidity position is adequate considering its planned capital expenditures and dividends to PNMR, but it will continue to relyon external financings and parent company capital contributions to support higher spending. For the twelve months ended 30 June2020, TNMP's cash from operations was $147 million, dividends of $59 million and capital expenditures were $278 million, leading tonegative free cash flow of $190 million. Over the four year period from 2016 to 2019, cash flow from operations averaged $114 millionannually compared to annual average capital expenditures of about $186 million.

We anticipate capital spending will be substantially higher over the next few years at an average of about $324 million annually asTNMP continues to upgrade its system for reliability and safety measures as well as to meet customer and load growth. We expectTNMP’s internally generated cash flow from operations will continue to be less than its capital expenditures. Any shortfall in fundingthrough cash generation is expected to be met through short-term borrowings, long-term debt issuances and capital contributionsfrom the parent. We expect capital expenditures will be funded with a skew toward net debt compared to net equity in a manner toachieve the utility’s targeted capital structure including an equity ratio of 45%, compared to historical ratios above 50%. TNMP hada dividend payout ratio of 99% in 2019, which was more than the historical average of about 90% for the four years prior. PNMR hasalso made regular capital contribution to TNMP.

TNMP has a $75 million senior secured revolving credit facility that expires September 23, 2022. As of 24 July 2020, TNMP had noborrowings on its revolving credit facility along with $0.1 million of letters of credit and $63.5 million of cash on hand. The creditfacility does not contain a material adverse change clause for new borrowings and has only one financial covenant limiting debt to totalcapitalization to 65%. As of 24 July 2020, TNMP was in compliance with this covenant. TNMP also has a $50 million inter-companyborrowing arrangement with its parent PNMR and did not have anything outstanding as of 24 July 2020. TNMP has no significant debtmaturities until July 2024 when $80 million of First Mortgage Bonds are due. TNMP issued $185 million of First Mortgage Bonds inApril 2020.




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Rating methodology and scorecard factors

Exhibit 7

Rating FactorsTexas-New Mexico Power Company

Regulated Electric and Gas Utilities Industry [1][2]

Factor 1 : Regulatory Framework (25%) Measure Score Measure Score

a) Legislative and Judicial Underpinnings of the Regulatory Framework A A A Ab) Consistency and Predictability of Regulation A A A A

Factor 2 : Ability to Recover Costs and Earn Returns (25%)

a) Timeliness of Recovery of Operating and Capital Costs A A A Ab) Sufficiency of Rates and Returns A A Baa Baa

Factor 3 : Diversification (10%)

a) Market Position Ba Ba Ba Bab) Generation and Fuel Diversity N/A N/A N/A N/A

Factor 4 : Financial Strength (40%)

a) CFO pre-WC + Interest / Interest (3 Year Avg) 5.0x A 5x - 5.5x Ab) CFO pre-WC / Debt (3 Year Avg) 17.7% Baa 16% - 17% Baac) CFO pre-WC – Dividends / Debt (3 Year Avg) 10.9% Baa 9% - 12% Baad) Debt / Capitalization (3 Year Avg) 45.7% A 47% - 50% A

Rating:

Scorecard-Indicated Outcome Before Notching Adjustment A3 Baa1HoldCo Structural Subordination Notching 0 0 0 0a) Scorecard-Indicated Outcome A3 Baa1b) Actual Rating Assigned A3 A3

Current

LTM 6/30/2020

Moody's 12-18 Month Forward View

As of Date Published [3]

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 6/30/2020(L)[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody’s Financial Metrics




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Appendix

Exhibit 8

TNMP sources & uses and free cash flow analysis($ in millions as reported)

2016 2017 2018 2019 LTM

Sources:

CFO 112 86 122 138 147

Net Debt Issued (6) 55 113 95 111

Capital Contribution 50 50 30 80 80

Other Financing (1) (2) 1 (3) (2)

Total Sources: 154 190 265 309 337

Uses:

Capital Expenditures (123) (145) (223) (254) (278)

Dividends (32) (44) (42) (55) (59)

Total Uses: (154) (190) (265) (309) (337)

FCF 2016 2017 2018 2019 LTM

CFO 112 86 122 138 147

Capex (123) (145) (223) (254) (278)

Dividends (32) (44) (42) (55) (59)

Free Cash Flow (42) (103) (144) (172) (190)

Funded:

Capital Contributions 50 50 30 80 80

Net Debt issued (6) 55 113 95 111

Other Financing (1) (2) 1 (3) (2)

% Funded:

Equity Issued 118.0% 48.4% 20.9% 46.6% 42.1%

Debt issued -18.0% 51.6% 79.1% 53.4% 57.9%

100.0% 100.0% 100.0% 100.0% 100.0%

Other financing is predominantly short-term debt.Source: Moody's Investors Service




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Exhibit 9

Cash Flow and Credit Metrics [1]

CF Metrics Dec-16 Dec-17 Dec-18 Dec-19 LTM Jun-20

As Adjusted

FFO 120 130 122 132 142

+/- Other (12) (20) (14) 7 8

CFO Pre-WC 107 110 109 139 150

+/- ΔWC 8 (21) 17 (1) (3)

CFO 115 90 125 138 147

- Div 32 44 42 55 59

- Capex 126 149 227 254 278

FCF (42) (103) (144) (172) (190)

(CFO Pre-W/C) / Debt 24.0% 22.0% 17.6% 19.7% 18.4%

(CFO Pre-W/C - Dividends) / Debt 16.9% 13.2% 10.8% 11.9% 11.2%

FFO / Debt 26.8% 26.0% 19.9% 18.6% 17.3%

RCF / Debt 19.7% 17.1% 13.1% 10.8% 10.1%

Revenue 327 341 345 364 374

Cost of Good Sold 79 84 84 95 98

Interest Expense 30 31 33 30 29

Net Income 42 35 47 55 60

Total Assets 1,398 1,515 1,683 1,860 1,986

Total Liabilities 805 881 1,008 1,106 1,226

Total Equity 593 634 674 755 759

[1] All figures and ratios are calculated using Moody’s estimates and standard adjustments. Periods are Financial Year-End unless indicated. LTM = Last Twelve MonthsSource: Moody's Financial Metrics

Exhibit 10

Peer Comparison Table [1]DO NOT USE FOR MIDSTREAM

FYE FYE LTM FYE FYE LTM FYE FYE LTM FYE FYE LTM FYE FYE LTM

(in US millions) Dec-17 Dec-18 Jun-20 Dec-17 Dec-18 Jun-20 Dec-17 Dec-18 Jun-20 Dec-17 Dec-18 Jun-20 Dec-17 Dec-18 Jun-20

Revenue 341 345 374 3,958 4,101 4,452 2,998 3,234 2,893 1,538 1,595 1,706 917 904 874

CFO Pre-W/C 110 109 150 1,695 1,487 1,627 928 1,137 923 677 651 776 268 270 266

Total Debt 500 616 817 8,109 8,314 10,500 4,907 4,823 5,231 3,764 4,236 4,813 1,465 1,531 1,778

CFO Pre-W/C / Debt 22.0% 17.6% 18.4% 20.9% 17.9% 15.5% 18.9% 23.6% 17.6% 18.0% 15.4% 16.1% 18.3% 17.6% 15.0%

CFO Pre-W/C – Dividends / Debt 13.2% 10.8% 11.2% 18.0% 15.4% 12.1% 15.2% 19.2% 3.5% 18.0% 15.4% 16.1% 14.7% 13.9% 11.4%

Debt / Capitalization 39.6% 43.2% 47.6% 46.4% 45.3% 44.9% 60.0% 57.2% 57.2% 55.2% 55.1% 54.7% 50.4% 50.8% 53.4%

Texas-New Mexico Power Company Oncor Electric Delivery Company LLC CenterPoint Energy Houston Electric, LLC AEP Texas Inc. El Paso Electric Company

A3 Negative A2 Stable [2] Baa1 Stable Baa2 Stable Baa2 Stable

[1] All figures & ratios calculated using Moody’s estimates & standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. RUR* = Ratings under Review, where UPG = forupgrade and DNG = for downgrade[2] Senior secured ratingSource: Moody's Financial Metrics




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Ratings

Exhibit 11

Category Moody's RatingTEXAS-NEW MEXICO POWER COMPANY

Outlook NegativeIssuer Rating A3Sr Sec Bank Credit Facility A1First Mortgage Bonds A1

ULT PARENT: PNM RESOURCES, INC.

Outlook StableIssuer Rating Baa3Senior Unsecured Baa3

Source: Moody's Investors Service




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Page 12 of 13


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Page 13 of 13

PNM Resources And Subsidiaries Outlook Revised To Positive On Announced Acquisition By Avangrid Inc.; Ratings Affirmed

21-Oct-2020 10:30 EDT

View Analyst Contact Information

Table of Contents Rating Action Overview Related Criteria

Rating Action Overview

On Oct. 21, 2020, Connecticut-based utility operator Avangrid Inc. announced it will acquire PNM Resources Inc. (PNMR) and its subsidiaries, Public Service Co. of New Mexico (PSNM) and Texas-New Mexico Power Co. (TNMP), for about $8.3 billion, including the assumption of about $4 billion in debt at PNMR. S&P Global Ratings expects Avangrid to finance the acquisition in a balanced fashion to maintain credit metrics near current levels. We expect the transaction to close by the fourth quarter of 2021.

We are revising our outlook on PNMR and its subsidiaries, including PSNM and TNMP, to positive from stable.

We are affirming our ratings, including the 'BBB' issuer credit ratings (ICRs) on PNMR and PSNM and the 'BBB+' ICR on TNMP.

The positive outlooks reflect the probability that the companies will be acquired by a higher-rated entity, Avangrid (BBB+/Stable) and our expectation that the entities will be core to Avangrid following completion of the acquisition. We expect the ICRs on PNMR and PSNM will be aligned with Avangrid's ICR given the group credit profile rating of 'bbb+'.


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The positive outlook on TNMP reflects the potential for a one-notch upgrade given our expectation that the company's stand-alone credit profile will remain 'a-' and the insulation will remain in place post-acquisition. We also expect TNMP to be a core subsidiary of Avangrid.

NEW YORK (S&P Global Ratings) Oct. 21, 2020-- S&P Global Ratings today took the rating actions listed above. The outlook revision to positive from stable on PNMR, PSNM, and TNMP reflects the announcement of a pending acquisition by a higher-rated entity, Avangrid. The 'BBB+' ICR at Avangrid was affirmed following its announcement of the acquisition. We expect the ratings on PNMR and PSNM will be aligned with the new owner's ICR as per S&P Global Ratings criteria for core subsidiaries. The positive outlook on TNMP reflects our expectation that the company's stand-alone credit profile will remain 'a-' and that the insulation will remain in place following the acquisition, thereby supporting ratings one-notch higher than the parent.

Avangrid intends to purchase PNMR and its subsidiaries for about $8.3 billion, including the assumption of roughly $4 billion of debt. We expect Avangrid to fund the transaction in a well-balanced manner in order to support credit quality.

Our ratings affirmation on PNMR reflects our assessment of its Business Risk Profile (BRP) as strong and its Financial Risk Profile (FRP) as significant. We continue to assess PNMR's BRP as strong. This reflects the lower-risk regulated utility operations in New Mexico (70%) and Texas (30%), which is offset by its historically challenging New Mexico regulatory environment that frequently demonstrates above-average regulatory lag. It also incorporates a history of regulatory decisions, including disallowances that have challenged the consistency of the regulatory construct in New Mexico, and resulted in more volatile profit measures for the company, compared to that of peers.

Further, we continue to assess PNMR's FRP as significant using our medial volatility financial ratio benchmarks. In our base-case scenario, we forecast that adjusted funds from operations (FFO) to total debt will be about 15% over the next two years. This incorporates rate-case increases, partially offset by robust capital spending.

Our ratings affirmation on TNMP reflects our continued assessment of its BRP as excellent and its FRP as significant. The excellent BRP reflects the company's low-risk, regulated, electric transmission and distribution utility operations. In addition, we continue to expect robust capital spending on transmission assets and FFO to debt about 18%-20% over the forecast period.

Under our group rating methodology, we continue to assess the insulating measures in place as sufficient to rate TNMP one-notch higher than parent PNMR. These measures include that:

TNMP is a separate stand-alone legal entity, functioning independently--both financially and operationally;

TNMP files its own rate cases and is independently regulated by the Public Utility Commission of Texas;

TNMP has its own records and books, including stand-alone audited financial statements;


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TNMP has its own funding arrangements, issues its own long-term debt, and has a separate committed credit facility for its short-term funding needs;

TNMP does not commingle funds, assets, or cash flows with its parent or with its other subsidiary;

TNMP does not have any cross-default obligations and a default by its parent or its other subsidiary would not directly lead to a default; and

There is a clear economic incentive for PNMR to maintain TNMP's financial strength as TNMP contributes a significant portion to the company's consolidated operations.

PNMR and PSNM

The positive outlooks on PNMR and PSNM reflect the potential for higher ratings following the entities' acquisition by a higher-rated entity, Avangrid Inc. Following closing, we expect the issuer credit ratings to be aligned with the parent's group credit profile. In addition, we expect PNMR will consistently maintain FFO-to-debt ratio around 15% over the next two years and will continue to manage regulatory risk in New Mexico and Texas.

We could revise the outlook to stable from positive should the entities not be acquired. In addition, we could lower the ratings on PNMR and PSNM if PNMR's consolidated financial measures continue to weaken, including FFO to debt consistently less than 14%, or if PNMR's ability to manage regulatory risk weakens, resulting in higher business risk.

We could raise our rating on PNMR and PSNM if the entities are acquired by Avangrid Inc. We could also raise our rating on PNMR and PSNM if PNMR's consolidated financial measures improve, including FFO to debt consistently higher than 17% absent any material weakening in the business risk profile.

TNMP

The positive outlook on TNMP reflects the potential for higher ratings following the acquisition by Avangrid. It also reflects our expectation that the stand-alone credit profile will remain 'a-' following the transaction and that the insulation will remain in place, thereby supporting an ICR one notch above the 'bbb+' group credit profile of Avangrid. In addition, we expect TNMP's stand-alone financial measures will consistently reflect FFO to debt of about 19% over the next two years and that TNMP will continue to manage regulatory risk in Texas.

We could revise the outlook to stable from positive should the entity not be acquired. In addition, we could lower the rating on TNMP over the next two years if we lowered the rating on parent PNMR or if TNMP's stand-alone financial measures materially weakened, reflecting FFO to debt consistently below 13%. We could also lower our rating on TNMP if we determined there was a weakening to TNMP's management of regulatory risk, thereby weakening the utility' business risk profile.

We could raise our rating on TNMP by one notch if it is acquired by Avangrid, the insulation remains in place and, at the same time, TNMP's stand-alone credit profile does not materially weaken.


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Related Criteria

General Criteria: Group Rating Methodology, July 1, 2019 General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019 Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April

1, 2019 Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings,

March 28, 2018 Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors

For Global Corporate Issuers, Dec. 16, 2014 General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19,

2013 Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013 Criteria | Corporates | Utilities: Key Credit Factors For The Regulated Utilities Industry,

Nov. 19, 2013 General Criteria: Methodology: Industry Risk, Nov. 19, 2013 Criteria | Corporates | Utilities: Collateral Coverage And Issue Notching Rules For '1+'

And '1' Recovery Ratings On Senior Bonds Secured By Utility Real Property, Feb. 14, 2013

General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012

General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

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Primary Credit Analyst: Matthew L O'Neill, New York (1) 212-438-4295; [email protected]

Secondary Contact: Beverly R Gantt, New York + 1 (212) 438 1696; [email protected]

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Page 1 of 3

PNM Resources, Inc. Moody’s ISSUER COMMENT 21 October 2020 RATINGS

PNM Resources Rating Baa3 Outlook Stable

Public Service Company of New Mexico Rating Baa2 Outlook Stable

Texas-New Mexico Power Company Rating A3 Outlook Negative

Analyst Contacts Robert Petrosino CFA VP-Senior Analyst +1.212.553.1946 [email protected] Christopher Doyle +1.212.553.8843 Associate Analyst [email protected] Michael G. Haggarty +1.212.553.7172 Associate Managing Director [email protected] Jim Hempstead +1.212.553.4318 MD - Global Infrastructure & Cyber Risk [email protected]

Acquisition by Avangrid, Inc. would be positive and bring long- term benefits to its utilities On 21 October 2020, PNM Resources (PNMR, Baa3 stable) announced an agreement to be acquired by Avangrid, Inc. (Baa1 negative) for $7.8 billion including $4.3 billion in cash and the assumption of approximately $3.5 billion of consolidated debt. The transaction value is approximately 20x PNMR's 2022 projected earnings and 1.6x 2022 projected total rate base. The cash consideration is expected to be funded with a mix of debt and equity backed by funding support from Avangrid's 81.5% owner, Iberdrola SA (Baa3 stable).

The acquisition by Avangrid would be credit positive for PNMR given the high likelihood that PNMR would be collapsed into Avangrid. Moreover, PNMR's utilities, Public Service Company of New Mexico (PNM, Baa2 stable) and Texas-New Mexico Power (TNMP, A3 negative) would become part of a larger

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Page 2 of 3enterprise bringing medium and long-term benefits including economies of scale, expertise in developing renewable generation and modernizing grid networks to incorporate intermittent resources. Moreover, Iberdrola has access to global markets providing diversity in capital sourcing.

The transaction would require the approval of the New Mexico Public Regulation Commission (NMPRC) and the Public Utility Commission of Texas. New Mexico has been a relatively unpredictable regulatory environment compared to most U.S. jurisdictions due to investment disallowances and outstanding issues regarding the prudence of PNM's investments in the Four Corners' coal facility.

The acquisition is part of Iberdrola's long term strategy to grow its regulated and renewable generation businesses and marries well with PNM's goal to have zero emissions by 2040. Avangrid owns approximately 1,800 MWs of unregulated renewable generation in New Mexico and Texas. PNMR has a higher than industry average carbon transition risk largely driven by the fossil generation ownership at PNM, mitigated by the electric transmission and distribution operations at TNMP. However, under legislation passed in March 2019, New Mexico's Energy Transition Act provides a blueprint for PNM to transition its generation profile to emission free generation. Importantly, under this prescriptive legislation, the NMPRC unanimously approved the closure of PNM's San Juan coal facility in 2022 and recovery of the remaining related rate base through securitization, credit supportive outcomes.

PNMR scores highly under Moody's framework for assessing corporate governance where prudent financial and risk management policies have been employed. Iberdrola is showing its support of Avangrid through this acquisition, by providing a funding commitment up to the full amount transaction, by seeking to maintain its 81.5% ownership share and by making On 21 October 2020, PNM Resources (PNMR, Baa3 stable) announced an agreement to be acquired by Avangrid, Inc. (Baa1 negative) for $7.8 billion including $4.3 billion in cash and the assumption of approximately $3.5 billion of consolidated debt. The transaction value is approximately 20x PNMR's 2022 projected earnings and 1.6x 2022 projected total rate base. The cash consideration is expected to be funded with a mix of debt and equity backed by funding support from Avangrid's 81.5% owner, Iberdrola SA (Baa3 stable).

The acquisition by Avangrid would be credit positive for PNMR given the high likelihood that PNMR would be collapsed into Avangrid. Moreover, PNMR's utilities, Public Service Company of New Mexico (PNM, Baa2 stable) and Texas-

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Page 3 of 3New Mexico Power (TNMP, A3 negative) would become part of a larger enterprise bringing medium and long-term benefits including economies of scale, expertise in developing renewable generation and modernizing grid networks to incorporate intermittent resources. Moreover, Iberdrola has access to global markets providing diversity in capital sourcing.

The transaction would require the approval of the New Mexico Public Regulation Commission (NMPRC) and the Public Utility Commission of Texas. New Mexico has been a relatively unpredictable regulatory environment compared to most U.S. jurisdictions due to investment disallowances and outstanding issues regarding the prudence of PNM's investments in the Four Corners' coal facility.

The acquisition is part of Iberdrola's long term strategy to grow its regulated and renewable generation businesses and marries well with PNM's goal to have zero emissions by 2040. Avangrid owns approximately 1,800 MWs of unregulated renewable generation in New Mexico and Texas. PNMR has a higher than industry average carbon transition risk largely driven by the fossil generation ownership at PNM, mitigated by the electric transmission and distribution operations at TNMP. However, under legislation passed in March 2019, New Mexico's Energy Transition Act provides a blueprint for PNM to transition its generation profile to emission free generation. Importantly, under this prescriptive legislation, the NMPRC unanimously approved the closure of PNM's San Juan coal facility in 2022 and recovery of the remaining related rate base through securitization, credit supportive outcomes.

PNMR scores highly under Moody's framework for assessing corporate governance where prudent financial and risk management policies have been employed. Iberdrola is showing its support of Avangrid through this acquisition, by providing a funding commitment up to the full amount transaction, by seeking to maintain its 81.5% ownership share and by making

a material investment as part of its strategy to grow US operations. Upon completion of the transaction, governance practices are expected to be directed by Iberdrola. The financial policies to be employed by Iberdrola through Avangrid will have credit implications for PNM and TNMP.

We expect additional information around the transaction to be provided during Avangrid's 5 November Investor Day, including important new disclosure regarding Avangrid's financial outlook and overall strategy. We also view the transaction as having a degree of execution risk, since alternative bids could be made for PNMR and negotiations with state regulators and stakeholders could result in concessions such as customer credits, rate freezes or other economic compromises requisite to close the deal.

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Pedro Azagra Blazquez Direct Page 1 180

Pedro Azagra Blazquez Direct Page 3

Joint Report and Application of Texas-New Mexico Power Company, NM

Green Holdings, Inc., and Avangrid, Inc. for Regulatory Approvals under PURA

§§ 14.101, 39.262, and 39.915

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Pedro Azagra Blazquez Direct Page 7

Sociedad Anónima

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EXHIBIT PAB-1 PUC Docket No. 51547

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Robert D. Kump Direct Page 1

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on behalf of

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e.g.

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EXHIBIT RDK-1PUC Docket No. 51547

Page 1 of 7

Page 1

Proposed Regulatory Commitments of Avangrid and TNMP

The Applicants commit that unless explicitly stated otherwise, the following commitments will

apply as of closing of the transaction and continue to apply thereafter, unless and until altered by

the Commission.

Financial Protections and Code of Conduct

1. The Applicants commit to the following regulatory commitments addressing financial

protections and code of conduct:

a. Sole Authorized Purpose – The sole authorized purpose of TNMP will be the

provision of transmission and distribution utility service and the performance of

activities reasonably necessary and appropriate thereto. The sole authorized

purpose of the special purpose entity (“SPE”) that will be created and interposed

between TNMP and TNP Enterprises, Inc. (“TNPE”) (the SPE is to be named “TNMP

Holdings”) will be the direct ownership of TNMP.

b. Best Interest of Utility – The SPE board of directors must have the duty to act, subject

to applicable Texas law, in the best interests of TNMP.

c. Name and Logo – TNMP will maintain a separate name and logo from Avangrid,

Iberdrola, and all other Avangrid and Iberdrola subsidiaries and affiliates; provided

that the Avangrid name and logo can also be added for branding purposes (e.g., “An

Avangrid Company”).

d. Pledging of Assets/Stock – TNMP’s assets or revenues must not be pledged by the

SPE, TNPE, PNMR, Avangrid Networks, or any of its affiliates or subsidiaries for the

benefit of any entity other than TNMP.

e. Elimination of PNMR Debt – Debt at PNMR will be eliminated and will not be

replaced as part of the Proposed Transaction.

f. No Additional Inter-Company Debt or Lending – Aside from existing arrangements,

TNMP will not lend money to or borrow money from any of its affiliates, other than

money pool arrangements in which TNMP may borrow from any affiliate but only lend

to investment grade rated, regulated utilities within Avangrid Networks.

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g. Credit Facility – TNMP will not share credit facilities with affiliates, other than joint

credit revolvers with affiliates where liability shall be several and not joint, and where

there would not be cross default provisions applicable to any utility borrower.

h. Cross-Default Provisions – TNMP will not include in any of its debt or credit

agreements cross-default provisions relating to the SPE, TNPE, PNMR, Avangrid

Networks, Avangrid, Iberdrola, or any of their affiliates or subsidiaries. Under no

circumstances will any debt of TNMP become due and payable or otherwise be

rendered in default because of any cross-default or similar provisions of any debt or

other agreement of the SPE, TNPE, PNMR, Avangrid Networks, Avangrid, Iberdrola,

or any of their affiliates or subsidiaries.

i. Affiliate Asset Transfer – TNMP will not transfer material assets to affiliates other

than in a transfer that is at an arm’s length basis consistent with the Commission’s

affiliate standards applicable to TNMP.

j. Separate Books and Records – TNMP will maintain accurate, appropriate, and

detailed books, financial records and accounts, including checking and other bank

accounts, and custodial and other securities safekeeping accounts that are separate and

distinct from those of any other entity.

k. Code of Conduct – TNMP will file with the Commission for authority to amend and

update its code of conduct to incorporate all applicable conditions and limitations on

affiliate transactions required by these regulatory commitments.

l. Credit Ratings Agencies – TNMP, the SPE, TNPE, PNMR, and Avangrid Networks

must take the actions necessary to ensure the existence of TNMP’s standalone bond

credit and debt ratings. TNMP will, except as otherwise approved by the

Commission, be registered with a nationally recognized statistical ratings

organization that is registered with the United States Securities and Exchange

Commission. TNMP, the SPE, TNPE, PNMR, and Avangrid Networks must take the

actions necessary to ensure that TNMP maintains a standalone debt rating from at least

one of Moody’s, Fitch, or Standard & Poor’s.

m. Dividend Restriction – TNMP will not pay dividends, except for contractual tax

payments, at any time that TNMP’s debt rating is below (BBB-) or the equivalent

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with any one of the credit agencies rating TNMP unless approved by the

disinterested board member of the SPE or the Commission. Additionally, TNMP will

not issue stock or ownership interests that supersede the foregoing obligations

of TNMP nor will the SPE or any of its affiliates permit TNMP to act in a manner

that will supersede the foregoing obligations of TNMP.

n. No Transaction-Related Debt at TNMP or the SPE – TNMP and the SPE will not take

on any new debt in conjunction with the Transaction, provided that any increased costs

due to refinancing of existing TNMP debt caused by the Proposed Transaction will

not be borne by customers.

Local Control and Management

2. The Applicants commit to the following regulatory commitments addressing local control

and management:

a. Capital Expenditures – TNMP will continue to make minimum capital expenditures in

an amount equal to TNMP’s current five-year budget for the five year period

beginning January 1, 2021, subject to the following qualifications, which must be

reported to the Commission in TNMP’s earnings monitoring report: TNMP may

reduce capital spending due to conditions not under TNMP’s control, including,

without limitation, siting delays, cancellations of projects by third-parties, weaker

than expected economic conditions, or if TNMP determines that a particular

expenditure would not be prudent.

b. Headquarters – TNMP’s headquarters will remain in Texas in TNMP’s service

territory for so long as the SPE owns TNMP.

c. Management Day-to-Day Control – TNMP’s President and TNMP’s senior

management will continue to have day-to-day control over TNMP’s operations.

d. Continued Ownership – The SPE (directly) and Avangrid (indirectly) will maintain a

controlling ownership interest in TNMP for at least five years post-closing.

e. Workforce – For at least two years post-closing, as a result of the transaction,

TNMP will not implement any involuntary workforce reductions (other than for cause

or performance) or reductions in wages or benefits.

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Page 4

Accounting and Ratemaking

3. The Applicants commit to the following regulatory commitments addressing accounting and

ratemaking:

a. Goodwill – TNMP will not seek recovery in rates of any transaction acquisition

premium. Any goodwill associated with the transaction will not be included in rate

base, cost of capital, or operating expenses in future TNMP ratemaking

proceedings. Write-downs or write-offs of goodwill will not be included in the

calculation of net income for dividend or other distribution payment purposes.

b. No Pushdown Accounting – Neither the SPE nor TNPE nor PNMR nor any of its

affiliates will elect to apply pushdown accounting for the transaction (i.e., the

transaction will have no accounting impact on TNMP’s assets). Any incremental

goodwill will not be allocated to, nor recognized within, TNMP’s balance sheet.

c. Transaction Costs – Neither TNMP nor the SPE, nor any affiliate or subsidiary of

PNMR, will seek recovery of transaction costs in TNMP’s rates. None of the

transaction costs will be borne by TNMP’s customers, nor will TNMP seek to

include transaction costs in its rates. Transaction costs are those incremental costs paid

to advance or consummate the transaction. Transaction costs do not include TNMP

employee time but must include any form of incentive compensation associated

with the successful resolution of the application.

d. Transition Costs – No time and expenses, third party costs, fees, expenses, or costs

of the transition (transition costs) incurred by any party to the Transaction (including

Avangrid and its subsidiaries and PNMR and its subsidiaries) will be borne by

TNMP’s customers, nor will TNMP seek to include transition costs in rates. Transition

costs are those costs necessary to integrate TNMP into the holdings of the SPE

and Avangrid Networks, whether incurred before or after closing of the transaction,

including one-time transition costs being incurred whether directly or indirectly

through affiliate charges to transition TNMP to ownership by the SPE and to

integrate TNMP’s operations and systems with those of Avangrid Networks.

Provided, however, that transition costs do not include TNMP employee time, or costs

that reflect reasonable and necessary costs in providing service to the public.

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Regulatory Jurisdiction

4. The Applicants commit to the following regulatory commitments addressing regulatory

jurisdiction:

a. Commission Jurisdiction – TNMP will not build transmission assets outside of

ERCOT without prior Commission approval or otherwise take any action that

impairs the continuing jurisdiction of the Commission. Neither TNMP, the SPE, nor

any of their affiliates will assert before the Commission, FERC, or a federal or

Texas court of competent jurisdiction that the Commission is preempted pursuant to

the Federal Power Act (e.g., under a FERC tariff) from making a determination

regarding the cost recovery of affiliate costs sought to be allocated to TNMP.

b. Compliance Reports – For a period of five years after the closing of the transaction,

TNMP will make annual reports to the Commission regarding its compliance

with the terms stated in the order approving the transaction.

c. Access to Books and Records – The SPE will provide the Commission access to its

books and records, as well as those of its applicable affiliates, as necessary to

facilitate the Commission’s audit or review of affiliate transactions, if any, between

TNMP and the SPE or between TNMP and PNMR or any of its affiliates or

subsidiaries.

d. Amendments to Regulatory Commitments – Any amendments to these regulatory

commitments will require prior Commission approval.

e. Modification of Regulatory Commitments – TNMP, the SPE, TNPE, PNMR, and

Avangrid Networks acknowledge the Commission’s jurisdiction and authority to

initiate a future proceeding to modify any or all of the regulatory commitments

adopted as part of the final order in this proceeding (Docket No. 51547). Nothing

will preclude TNMP, the SPE, TNPE, PNMR, or Avangrid Networks from seeking

to modify these regulatory commitments in a future filing made with the

Commission.

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LLC Agreements or Corporate Bylaws

5. The Applicants commit to the following regulatory commitments addressing LLC

agreements or corporate bylaws:

a. Requirement to Abide by Commitments – TNMP’s and the SPE’s LLC agreements

or corporate bylaws will be modified to reflect that those entities must abide by the

commitments made to the Commission.

b. Amendments to LLC Agreements or Corporate Bylaws – No more than 30 days after

the closing of the transaction, the following entities must approve the necessary

amendments to their LLC agreements or corporate bylaws to give effect to the

provisions of this Order: TNMP and the SPE. The proposed amendments to the

LLC agreements or corporate bylaws will be filed with the Commission. To the

extent thereafter that any changes to the regulatory commitments approved in

this proceeding (Docket No. 51547) are sought, TNMP and the SPE must not

amend their LLC agreements or corporate bylaws until such changes are approved

by the Commission, and the amendments must be completed within the timeframe

ordered by the Commission.

Tangible and Quantifiable Benefits

6. The Applicants commit to the following regulatory commitments addressing tangible and

quantifiable benefits:

a. Rate Credit – TNMP will provide a direct financial benefit to TNMP customers in

the form of a $8.6 million rate credit to electric delivery rates payable over three

years following closing of the Transaction. This credit can be passed through directly

to end-use customers by retail electric providers (REPs), and TNMP commits to

working in good faith with affected REPs to determine an acceptable method for

implementation of such electric delivery rate credits to implement this commitment.

b. Charitable Giving – TNMP will make charitable contributions in accordance with its

past level of contributions over the first three years after closing of the Transaction.

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Governance

7. The Applicants commit to the following regulatory commitments addressing governance:

a. Governance – The SPE will have at least one disinterested director on its board in

addition to the other four directors. A disinterested director will qualify as independent

in all material respects in accordance with the rules and regulations of the New York

Stock Exchange (NYSE) (which are set forth in section 303A of the NYSE listed

company manual) from Avangrid, and its subsidiaries or affiliated entities and any

entity with a direct or indirect ownership interest in TNMP, and also will have no

material relationship with Avangrid or Iberdrola or their subsidiaries or affiliated

entities or any entity with a direct or indirect ownership interest in TNMP, currently

or within the previous five years.

i. Disinterested Director Appointment. The disinterested director will be

identified in a compliance filing made by TNMP within 90 days after

closing of the transaction.

ii. Terms of Disinterested Director. A person appointed to fill a disinterested

director position vacant due to death, resignation, removal, or other reason

other than expiration of the term of the position will serve the remainder of

that term.

iii. Disinterested Director Removal. A disinterested director may only be

removed by the unanimous vote of the remaining directors.

iv. Director Compensation/Financial Performance. The compensation for being

a TNMP Holdings director will in no manner be tied to, reflect, or be

related to the financial, operating, or other performance of any entity or

interest other than TNMP.

v. Disinterested Director Eligibility. To be eligible, a disinterested director must

be a United States citizen and a resident of the state of Texas.

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