Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

[]   Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c)

Item  8.01    Other Events.

PNM Resources, Inc. ("PNMR") and Public Service Company of New Mexico ("PNM") (collectively the "Company") conform their presentation of segment information contained in the 2004 Annual Report on Form 10-K to reflect the segment presentation previously disclosed in the Company's Form 10-Q for the quarterly period ended June 30, 2005.

In conjunction with the acquisition of TNP Enterprises, Inc. and Subsidiaries ("TNP") on June 6, 2005, Company management changed its business segment reporting.  TNP's primary subsidiaries are Texas-New Mexico Power Company ("TNMP") and First Choice Power, L.P. ("First Choice").  Upon review and in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), and as disclosed in the Company's Form 10-Q for the quarterly period ended June 30, 2005, the Company determined that two segments previously reported separately, Transmission and Electric, should be combined to form one reportable segment, PNM Electric, as this combined segment represents an integral part of serving utility customers. This also makes the PNM Electric segment comparable with the TNMP Electric segment post-acquisition.  All prior periods have been reclassified to conform to the current presentation and include certain estimates and allocations where necessary.

The Company's principal businesses include regulated operations and unregulated operations.  Regulated Operations, as presented in the 2004 Annual Report on Form 10-K, include the segments PNM Electric and PNM Gas and were previously referred to as Utility Operations.  Unregulated Operations include the segment PNM Wholesale and were previously referred to as Wholesale Operations.  Subsequent to the acquisition of TNP, Regulated Operations also include the TNMP Electric segment and Unregulated Operations include the First Choice segment.

This Current Report on Form 8-K conforms the information contained in the Company's 2004 Annual Report on Form 10-K to the presentation reported in its Form 10-Q for the quarterly period ending June 30, 2005.  Accordingly, this Form 8-K revises information previously reported in the Company's 2004 Annual Report on Form 10-K to reflect the effects of the change in segment reporting.  This report is limited to reclassifications to reflect the change in business segment reporting, including the change in principal business names, as discussed above.  

Sections of the 2004 Annual Report on Form 10-K that are included in their entirety in this Form 8-K are:

• Item 6. Selected Financial Data
• Item 8. Financial Statements and Supplementary Data

Sections of the 2004 Annual Report on Form 10-K that are not included in their entirety, but rather include only sections that require update due to the change in segment reporting, are:

• Item 1. Business
• Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Other sections of the 2004 Annual Report on Form 10-K are not included in whole or in part, as they are not impacted by the change in segment reporting.

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NO ATTEMPT HAS BEEN MADE IN THIS FORM 8-K TO MODIFY OR UPDATE OTHER DISCLOSURES AS PRESENTED IN THE ORIGINAL FORM 10-K.  THIS FORM 8-K DOES NOT INCLUDE DISCLOSURES FOR SEGMENTS, RESULTS OF OPERATIONS OR FINANCIAL POSITION OF TNP, SINCE THE ACQUISITON OF TNP OCCURRED AFTER THE PERIODS PRESENTED IN THE ORIGINAL FORM 10-K.  THIS FORM 8-K IS LIMITED TO THE RECLASSIFICATIONS NECESSARY TO REFLECT A CHANGE IN BUSINESS SEGMENT REPORTING AS REPORTED PRIOR TO PNMR'S ACQUISITION OF TNP.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements made in this report and other documents the Company files with the SEC that relate to future events or the Company's expectations, projections, estimates, intentions, goals, targets and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. You are cautioned that all forward-looking statements are based upon current expectations and estimates and the Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by the forward-looking statements, the Company cautions you not to place undue reliance on these statements. Many factors could cause actual results to differ, and will affect the Company's future financial condition, cash flow and operating results. These factors include the availability of cash from TNP Enterprises, Inc. and its subsidiaries, the risks that the businesses will not be integrated successfully, the risk that the benefits of the acquisition will not be fully realized or will take longer to realize than expected, disruption from the acquisition making it more difficult to maintain relationships with customers, employees, suppliers or other third parties, conditions in the financial markets relevant to the acquisition, the outcome of litigation with SW Acquisition, L.P. relating to the TNP Enterprises, Inc. acquisition and of any appeals of the Public Utility Commission of Texas order in the stranded cost true-up proceeding or the acquisition proceeding, the ability of First Choice Power to attract and retain customers, changes in Electric Reliability Council of Texas protocols, changes in the cost of power acquired by First Choice Power, collections experience, insurance coverage available for claims made in litigation, interest rates, weather (including impacts on the Company of the hurricanes in the Gulf Coast region), water supply, fuel costs, availability of fuel supplies, risk management and commodity risk transactions, seasonality and other changes in supply and demand in the market for electric power, wholesale power prices, market liquidity, the competitive environment in the electric and natural gas industries, the performance of generating units and transmission system, the ability of the Company to secure long-term power sales, the risks associated with completion of the construction of Luna Energy Facility, including construction delays and unanticipated cost overruns, state and federal regulatory and legislative decisions and actions, the outcome of legal proceedings, changes in applicable accounting principles and the performance of state, regional and national economies. For a detailed discussion of the important factors that affect the Company and that could cause actual results to differ from those expressed or implied by the Company's forward-looking statements, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's current and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and the Company's current and future Current Reports on Form 8-K, filed with the SEC.

                                                                                                           TABLE OF CONTENTS

GLOSSARY

THE COMPANY

PNM Resources, Inc., the Holding Company, was incorporated in the State of New Mexico on March 3, 2000.  The Holding Company's principal subsidiary, PNM, was incorporated in the State of New Mexico on May 9, 1917.  Upon the completion on December 31, 2001 of a one-for-one share exchange between PNM and the Holding Company, the Holding Company became the parent company of PNM.  Prior to the share exchange, the Holding Company had existed as a subsidiary of PNM.  The new parent company began trading on the New York Stock Exchange under the same PNM symbol beginning on December 31, 2001.

This filing for PNM Resources, Inc. and Subsidiaries and PNM is presented on a combined basis.  The Holding Company and PNM and Subsidiaries have their principal offices at Alvarado Square, Albuquerque , New Mexico 87158 (telephone number 505‑241‑2700).  The Holding Company is an investor-owned holding company of energy and energy-related companies.  PNM is a public utility primarily engaged in the generation, transmission, distribution, sale and marketing of electricity, and in the transmission, distribution and sale of natural gas within the State of New Mexico.  For the periods included in this report, the business of PNM constituted substantially all of the business of the Holding Company and its subsidiaries.  Therefore, the historical financial results and results of operations of PNM are virtually identical to the consolidated results of the Holding Company and all its subsidiaries for the periods presented.  For ease of discussion, this report may use the term "Company" when referring to PNM or when discussing matters of common applicability to the Holding Company and PNM. 

Effective December 30, 2004, the Holding Company became a registered holding company under PUHCA.  The Holding Company also created a subsidiary called PNMR Services Company, which began operating on January 1, 2005, subject to final approval by the SEC.  A registered holding company typically provides shared services to itself and its subsidiaries through a services company.  The Holding Company's status as a registered holding company will not change the utility operations of the Company.

The Company's principal businesses, whose operating results are regularly reviewed by the Company's management, are Regulated Operations and Unregulated Operations.  Regulated Operations include the PNM Electric and PNM Gas segments.  Unregulated Operations include the PNM Wholesale segment.  The Company allocates its business and results between the PNM Electric and PNM Wholesale segments for financial reporting purposes based on the asset allocations mandated in the Global Electric Agreement (see Note 14 - "Commitments and Contingencies - Global Electric Agreement" in the Notes to Consolidated Financial Statements).  PNM Electric consists of the generation, transmission and distribution of electricity for retail electric customers in New Mexico and the sale of transmission to third parties as well as to PNM Wholesale.  PNM Gas consists of the transportation and distribution of natural gas to end-users.  PNM Wholesale consists of the generation and sale of electricity into the wholesale market based on three product lines: long-term contracts, forward sales and short-term sales.  The Company has sources of power from property it owns or leases and power purchased by the Company through various long-term PPAs.  For the year ended December 31, 2004, the Company had a 2,529 MW generation capacity from these sources.  The plants owned by the Company are available through joint dispatch to support service to the retail customers of PNM. 

Financial information relating to amounts of sales, revenue, net income and total assets of the Company's reportable segments is contained in "Part II, Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2  - "Segment Information" in the Notes to Consolidated Financial Statements.

On July 25, 2004, the Company announced the proposed $1.024 billion acquisition of TNP, including its principal subsidiaries, TNMP and First Choice Power.  The Company expects the proposed TNP acquisition to be accretive to its earnings and free cash flow in the first full year after closing, which is expected in the second quarter of 2005.  (See "Acquisitions - Proposed TNP Acquisition" in "Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations" and Note 20 - "Proposed TNP Acquisition" in the Notes to Consolidated Financial Statements.)

REGULATED OPERATIONS

PNM Electric

The Company provides jurisdictional retail electric service to a large area of north central New Mexico, including the Cities of Albuquerque and Santa Fe, and certain other areas of New Mexico. The largest retail electric customer served by the Company accounted for approximately 8.6% of the Company's total retail electric revenues for the year ended December 31, 2004.  The Company also sells transmission to third parties as well as to PNM Wholesale. 

Weather-normalized retail electric load growth was 3.3% in 2004.  The Company's system peak demands for its retail customers and firm requirements customers in the summer and the winter for the last three years are shown in the following table:

SYSTEM PEAK DEMANDS

(Megawatts)

PNM Electric holds long-term, non-exclusive franchise agreements for its electric retail operations, with varying expiration dates.  These franchise agreements allow the Company to access public rights-of-way for placement of the Company's electric facilities.  Franchise agreements have expired in Albuquerque, Santa Fe, Bernalillo County, Sandoval County, San Miguel County, Village of Bosque Farms, Pueblo de Cochiti, Village of Tijeras, McKinley County and the City of Las Vegas.  The Company remains obligated under New Mexico state law to provide service to customers in these franchise areas despite the absence of an effective franchise agreement.  The Albuquerque metropolitan area accounted for approximately 53% of the Company's 2004 total electric utility operating revenues, and no other franchise area represents more than approximately 9%.  The Company continues to collect and pay franchise fees to Albuquerque and Santa Fe, Village of Bosque Farms, Village of Tijeras and the City of Las Vegas. The Company currently does not pay franchise fees to Bernalillo County, Luna County, Sandoval County, McKinley County, Pueblo de Cochiti or San Miguel County. 

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The Company owns or leases 2,856 circuit miles of electric transmission lines, interconnected with other utilities in New Mexico, east and south into Texas, west into Arizona, and north into Colorado and Utah.  Due to rapid load growth in the Company's service territory in recent years and the lack of transmission development, most of the capacity on this transmission system is fully committed and there is very little or no additional access available on a firm commitment basis.  These factors result in physical constraints on the system and limit the ability to wheel power into the Company's service area from outside of New Mexico.

 PNM Gas

PNM Gas distributes natural gas to most of the major communities in New Mexico, including Albuquerque and Santa Fe.  The Albuquerque metropolitan area accounted for approximately 50% of the total gas revenues in 2004.  No single sales-service customer accounted for more than 0.8% of the Company's therm sales in 2004.  PNM Gas holds long-term non-exclusive franchises with varying expiration dates in all incorporated communities requiring franchise agreements except for municipalities of Aztec, Bosque Farms, Clayton, Eunice, Gallup, Grants, Hurley, Milan, Santa Clara, Santa Fe County, and Tatum.  The Company remains obligated to serve these franchise areas pursuant to state law despite the absence of an effective franchise agreement.

The Company's customer base includes both sales-service customers and transportation-service customers.  Sales-service customers purchase natural gas and receive transportation and delivery services from the Company for which the Company receives both cost-of-gas and cost-of-service revenues.  Cost-of-gas revenues collected from sales-service customers are recovered in accordance with NMPRC regulations through the Company's PGAC and represent a pass-through of the Company's cost of natural gas to the customer.  Therefore, the Company's operating results are not affected by an increase or decrease in natural gas prices.  An order was issued by the NMPRC in 2001 that approved an agreement regarding PNM's hedging strategy and the implementation of a price management fund program which includes a continuous monthly balancing account with a carrying charge.  This carrying charge has the effect of keeping PNM whole on purchases of gas since it is compensated for the time value of money that exists due to any delay in collecting.  Additionally, the Company makes occasional gas sales to off-system sales customers.  Off-system sales deliveries generally occur at pipeline interconnects with the Company's system and profits are shared between the Company and its customers on a 30%/70% basis. 

The Company had 23 transportation-service customers in 2004, which procure gas for their end users independently of the Company's end users.  Transportation-service customers are gas marketers and producers contracting with the Company for transportation services to their end users and for other related services that provide the Company with cost-of-service revenues only.  Transportation services are provided to transportation-service customers at locations throughout the Company's distribution systems, as well as points on and off the Company's transmission pipelines.  The Company provided gas transportation deliveries to 1,474 transportation end users during 2004.

In 2004, 48% of the Company's total gas throughput was related to transportation gas deliveries.  The Company's transportation rates are unbundled, and transportation customers only pay for the service they receive.  In 2004, revenues from transportation customers accounted for 4% of the Company's total gas revenue.  Revenues from sales-service customers accounted for the remaining 96%.  Of this percentage, 67% was related to the cost of gas on

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which the Company makes no margin.  Because a major portion of the Company's load is related to heating, sales levels are affected by the weather.  In 2004, 63% of the Company's total gas sales occurred in the months of January, February, March and December.

The Company obtains its supply of natural gas primarily from sources within New Mexico by contracting with third party producers and marketers.  These contracts are generally sufficient to meet the Company's peak-day demand.  The Company serves certain cities, which depend on El Paso Natural Gas Company or Transwestern Pipeline Company, for transportation of gas supplies. Because these cities are not directly connected to the Company's transmission facilities, gas transported by these companies is the sole supply source for those cities.  Such transportation is regulated by the FERC.  As a result of FERC Order 636, the Company's options for transporting gas to these cities and other portions of its distribution system have increased.

UNREGULATED OPERATIONS

PNM Wholesale

PNM Wholesale consists of the generation and sale of electricity into the wholesale market based on three product lines, which are long-term contracts, forward sales and short-term sales.  Long-term contracts include sales to firm-requirements and other wholesale customers with multi-year arrangements.  At December 31, 2004, these contracts ranged from 1 to 16 year terms with an average term of 7.1 years.  Forward sales include sales in the forward market that range from 1 month to 3 years that are supplied by third-party purchases.  These transactions do not qualify as normal sales and purchases as defined in SFAS No. 133, as amended, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133") and, as a result, are marked to market.  Short-term sales generally include spot market, hour ahead, day ahead and week ahead contracts with terms of 30 days or less.  Also included are sales of any excess generation not required to fulfill PNM Electric's retail load and contractual commitments.  Short-term sales also cover the revenue credit to retail customers as specified in the Global Electric Agreement (see Note 14 - "Commitments and Contingencies - Global Electric Agreement" in the Notes to Consolidated Financial Statements).

The PNM Wholesale strategy calls for increased net asset-backed energy sales supported by long-term contracts in the wholesale market, where the Company's aggregate net open forward electric sales position, including short term sales and long-term contracts, is covered by its forecasted excess generation capacity.  Management actively monitors the net asset-backed sales by the use of stringent risk management policies.  The Company's future growth plans call for approximately 75% of its new generation portfolio to be committed through long-term contracts.  The 75% threshold is in compliance with the Global Electric Agreement.  Growth will be dependent on market development and on the Company's ability to generate funds for the Company's future expansion.  The Company continues to operate in the wholesale market and seek appropriately priced asset additions.  Expansion of the Company's generating portfolio will depend on the Company's ability to acquire favorably priced assets at strategic locations and to secure long-term commitments for the purchase of power from the acquired plants.

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EMPLOYEES

As of December 31, 2004, the Company had 2,623 full-time employees.  The following table sets forth the number of employees by business segment as of December 31, 2004:

(1)  These employees resided at the Holding Company at December 31, 2004 and effective January 1, 2005, reside at the Services Company.

The number of employees of the Company who are represented by unions or other collective bargaining groups include (i) PNM Electric, 241; (ii) PNM Gas, 57; and (iii) PNM Wholesale, 330.

SELECTED FINANCIAL DATA

The selected financial data and comparative operating statistics should be read in conjunction with the consolidated financial statements, the notes to consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.  All references to numbers of shares outstanding and per share amounts have been restated to reflect the 3-for-2 stock split that occurred on June 11, 2004.

PNM RESOURCES, INC. AND SUBSIDIARIES

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

(a)     Does not include Company use amounts of 25,623 for 2004, 26,117 for 2003, and 26,405 for 2002.

(b)     Includes EITF 03-11 adjustments of $33,609 for 2004 and $15,015 for 2003.

(c)     Includes EITF 02-3 adjustment of $73,987.

(a)     Includes EITF 03-11 adjustments of 632,460 MWh for 2004 and 359,800 MWh for 2003.

(b)     Includes EITF 03-11 adjustments of $33,609 for 2004 and $15,015 for 2003.

(c)     Includes EITF 02-3 adjustment of 1,336,745 MWh.

(d)    Includes EITF 02-3 of $73,987.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

OVERVIEW

The Management's Discussion and Analysis of Financial Condition and Results of Operations for the Holding Company and Subsidiaries and PNM and Subsidiaries is presented on a combined basis.  For the periods included in this report, the business of PNM constituted substantially all of the business of the Holding Company.  Therefore, the historical results of operations of PNM are virtually identical to the consolidated results of the Holding Company and all its subsidiaries for the periods presented.  For discussion purposes, this report will use the term "Company" when discussing matters of common applicability to the Holding Company and Subsidiaries and PNM.  Readers of Management's Discussion and Analysis of Financial Condition and Results of Operations should assume that the information presented applies to consolidated results of operations of both the Holding Company and its subsidiaries, including PNM, except where the context or references clearly indicate otherwise.  Discussions regarding specific contractual obligations generally reference the company that is legally obligated. In the case of contractual obligations of PNM, these obligations are consolidated with the Holding Company and its subsidiaries under GAAP.  Broader operational discussions refer to the Company.

The Holding Company was established as the holding company in 2001 and was exempt from regulation under PUHCA.  In April 2004, however, the SEC staff informed PNM Resources Inc. that, because of an SEC ruling in 2003, the level of interstate power sales by PNM did not allow the Holding Company to continue to claim exemption from registration.  On December 30, 2004, the Holding Company became a registered holding company under PUHCA.  The Holding Company also created a new subsidiary called PNMR Services Company, which began operating on January 1, 2005, subject to final approval by the SEC.

The Holding Company performed substantially all of the corporate activities of PNM from 2001 to 2004.  These activities were billed to PNM on a cost basis to the extent they were for the corporate management of PNM and are allocated to the operating segments.  The services functions previously performed by the Holding Company have been assumed by PNMR Services Company effective January 1, 2005.

The Holding Company is an investor-owned holding company of energy and energy related companies.  Its principal subsidiary, PNM, is an integrated public utility primarily engaged, within the State of New Mexico, in the generation, transmission and distribution of electricity; transmission, distribution and sale of natural gas; and the sale and marketing of electricity in the Western United States.  The Company's vision is to "Build America's Best Merchant Utility."  The Company views a merchant utility as the balanced combination of a strong regulated utility with growth-oriented electric sales in competitive markets. 

The Company is positioned as a Merchant Utility, primarily operating as a regulated energy service provider.  The Company is also engaged in the sale and marketing of electricity in the competitive wholesale energy marketplace.  As a utility, PNM has an obligation to serve its customers under the jurisdiction of the NMPRC.  As a wholesale electricity provider, PNM markets excess production from the utility, as well as unregulated generation, into a

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competitive marketplace.  As part of its electric wholesale power operation, it purchases wholesale electricity in the open market for future resale or to provide energy to retail customers in New Mexico when the Company's generation assets cannot satisfy demand.  The wholesale operations utilize a net asset-backed strategy, whereby the Company's aggregate net open position for the sale of electricity is covered by the Company's forecasted excess generation capabilities.

The Company's principal businesses, whose operating results are regularly reviewed by the Company's management, are Regulated Operations and Unregulated Operations.  Regulated Operations include PNM Electric and PNM Gas.  These segments model the resource allocations as mandated in the Global Electric Agreement (see Note 14 - "Commitments and Contingencies - Global Electric Agreement" in the Notes to Consolidated Financial Statements).  PNM Electric consists of the distribution, transmission and generation of electricity for retail electric customers in New Mexico and the sale of transmission to third parties as well as to PNM Wholesale.  PNM Gas includes the transportation and distribution of natural gas to end-users.  Unregulated Operations includes the PNM Wholesale segment.  PNM Wholesale consists of the generation and sale of electricity into the wholesale market based on three product lines that include long-term contracts, forward sales and short-term sales.

The Regulated Operations strategy is directed at supplying reasonably priced and reliable energy to retail customers through customer-driven operational excellence, high quality customer service, cost efficient processes, and improved overall organizational performance.

The Unregulated Operations strategy calls for increased net asset-backed energy sales supported by long-term contracts into the wholesale market, whereby the Company's aggregate net open forward electric sales position, including short term sales, forward sales and long-term contracts, is covered by its forecasted excess generation capacity.  Management actively monitors the net asset-backed sales by the use of stringent risk management policies.  The Company's future growth plans call for approximately 75% of its new generation portfolio to be committed through long-term contracts as required by the Global Electric Agreement.  Growth will be dependent on market development and on the Company's ability to generate funds for the Company's future expansion.  The Company will continue to operate in the wholesale market and seek reasonably priced asset additions.  Expansion of the Company's generating portfolio will depend on the Company's ability to acquire favorably priced assets at strategic locations and to secure long-term commitments for the purchase of power from the acquired plants.

The following is management's assessment of the Company's financial condition and the significant factors affecting the results of operations. This discussion should be read in conjunction with the Company's consolidated financial statements and related notes.  Trends and contingencies of a material nature are discussed to the extent known.  Refer to "Disclosure Regarding Forward Looking Statements" and "Risk Factors."

OVERALL OUTLOOK

Earnings growth in 2004 was primarily due to strong growth in the Company's electric and gas utility, coupled with reduced interest costs from debt refinancing and the positive effect of the gas rate increase, which went into full effect in April 2004.  Other factors that

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contributed to the increase in earnings during 2004 included lower coal costs, improved coal quality, strong fourth-quarter gas revenues, improved availability of SJGS and continued cost-control measures throughout the Company.  These positive factors more than offset the impact of the retail electric rate reduction that went into effect in September 2003.

PNM Wholesale operating revenues increased $35.1 million, or 6.3%, in 2004 over the prior year period primarily due to additional long-term contract sales and wholesale electric price improvements.  These new contracts support the Company's long-term growth plans and net asset-backed strategy.  In addition, the Company's 2004 short-term sales increased over the prior year period, partially due to an increase in average short-term prices.  Additionally, short-term sales volume increased as more favorable day-ahead market spreads shifted volume from forward sales due to less favorable market spreads between PVNGS and the Mead market hub. However, PNM Wholesale gross margin, or operating revenues minus cost of energy sold and intersegment energy transfer, decreased $8.7 million, or 8.3%.  The decrease reflected higher purchase power prices, the effect of less available excess energy resulting from increased electric retail load growth and unplanned outages on certain of the Company's generation facilities.

Operating revenues for PNM Electric decreased $2.1 million, or 0.4%, in 2004 from the prior year.  The decrease in revenues was due to an electric rate reduction, which decreased 2004 revenues by $16.7 million.  The Company reduced its retail rates based on an electric rate agreement that took effect in September 2003; under the agreement, rates will decrease again by 2.5% in September 2005 and remain at that level through 2007.  PNM Electric sales grew 2.4%, to 7.5 million MWh in 2004 compared to 7.3 million MWh in 2003.  Weather-normalized retail electric load growth was 3.3% in 2004.  This volume increase was due to customer growth, which increased revenues by $21.2 million.

Operating revenues for PNM Gas increased $132.7 million, or 37.0%, over the prior year primarily because of higher natural gas prices in 2004 as compared to 2003.  The Company purchases natural gas in the open market and resells it at the same price to its sales-service customers.  As a result, increases or decreases in gas revenues driven by gas costs do not impact the Company's consolidated gross margin or earnings.  In 2004, the Company began using gas swaps to lock in prices for off-system sales.  The gross margin, or operating revenues minus cost of energy sold, increased $17.8 million, or 13.7%, over the prior year.  This increase was due mainly to customer growth, a normal winter heating season during 2004 compared to the first quarter of 2003, and the NMPRC-approved rate increase, partially offset by the decrease in off-system transportation sales described above. 

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RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

Consolidated

The Company's net earnings for the year ended December 31, 2004 were $87.8 million, or $1.43 per diluted share of common stock, a 7.8% decrease in net earnings compared to $95.2 million, or $1.58 per diluted share of common stock, in 2003.  This decrease primarily resulted from items that occurred in 2003 that did not recur in 2004.  In 2003, the Company recognized $36.6 million, net of income taxes, as an addition to net income for the cumulative effect of changes in accounting principles for the adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") and the change in the pension actuarial valuation measurement date ($0.61 per diluted share of common stock).  This increase to 2003 income was partially offset by the write-off of transition costs of $9.5 million, net of income taxes, or $0.16 per diluted share of common stock, that resulted from the repeal of electric deregulation in New Mexico in 2003, and a charge of $10.0 million, net of income taxes, or $0.17 per diluted share of common stock, for costs related to long-term debt refinancing.

The following discussion is based on the methodology that the Company's management uses for making operating decisions and assessing performance of its various business activities.   As such, these statements report operating results without regard to the effect of accounting or regulatory changes, and similar one-time items not related to normal operations.  See Note 2 - "Segment Information", in the Notes to Consolidated Financial Statements for additional information regarding these results and the consolidated financial statements. 

In addition, adjustments related to EITF Issue 02-03 "Issues Related to Accounting for Contracts Involved in Energy Trading and Risk Management Activities" and 03-11 "Reporting Realized Gains and Losses on Derivative Instruments that are subject to FASB statement No. 133 and Not Held for Trading Purposes" are included in Corporate and Other.  These accounting pronouncements require a net presentation of trading gains and losses and realized gains and loss for certain non-trading derivatives.  Management evaluates wholesale operations on a gross presentation basis due to its net-asset-backed marketing strategy.

Corporate costs, income taxes and non-operating items are discussed only on a consolidated basis and are in conformity with the presentation in the consolidated financial statements.

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Regulated Operations

PNM Electric

The table below sets forth the operating results for PNM Electric.

The following table shows electric revenues by customer class and average customers:

PNM Electric Revenues

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The following table shows electric sales by customer class:

PNM Electric Sales

Operating revenues decreased $2.1 million, or 0.4%, from the prior year.  The decrease in revenues was primarily due to an electric rate reduction under the Global Electric Agreement.  The rate reduction decreased 2004 revenues by $16.7 million.  Under the agreement, rates will decrease again by 2.5% in September 2005 and remain at that level through 2007.  PNM Electric sales grew 2.4%, to 7.5 million MWh in 2004 compared to 7.3 million MWh in 2003.  Weather-normalized retail electric load growth was 3.3% in 2004.  This volume increase was due to customer growth, which increased revenues by $21.2 million.  This volume increase was offset slightly by warmer summer weather in 2003 compared to 2004.  Cooling Degree Days for Albuquerque declined 22% to 1,304 during the year ended December 31, 2004 compared to 1,671 during the year ended December 31, 2003.

The gross margin, or operating revenues minus cost of energy sold and intersegment energy transfer, decreased $2.8 million, or 0.7%, from the prior year.  Generation costs decreased by $3.5 million driven by lower fuel costs at SJGS, while purchased power costs increased $5.4 million due to higher prices.  In addition, costs of $5.9 million related to the amortization of certain coal mine reclamation costs as agreed to in the current electric rate agreement were incurred during 2004, an increase of $4.0 million compared to 2003.  These costs are amortized over 17 years.

Total non-fuel O&M expenses increased $5.2 million, or 3.2%, over the prior year.  Energy production costs increased $5.1 million, or 4.7%, primarily due to increased plant maintenance costs of $4.3 million for planned and unplanned outages in 2004.  Transmission and distribution O&M expense decreased $0.2 million, or 0.8%, primarily due to a decrease in operating lease costs of $1.1 million for a transmission line, a portion of which was purchased in April 2003 and decreased maintenance costs of $0.3 million in 2004, which were mostly offset by increased labor and outside services costs.  Customer-related expense increased $2.6 million, or 17.0%, as a result of favorable collection outcomes in 2003.  Administrative and general expense decreased $2.3 million, or 33.5%, due to lower expenses for paid-time-off and insurance, regulatory commission expense and outside service costs.

Depreciation and amortization decreased $10.5 million, or 14.3%.  This reduction was primarily attributable to a decrease in depreciation rates to align depreciation expenses with NMPRC approved rates based on a new five-year depreciation study, which decreased

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depreciation expense by $8.2 million year over year.  Additionally, depreciation decreased $3.0 million due to the Company's billing system being fully depreciated at the end of 2003.  The Company expects to see depreciation rise going forward as a result of increased investment in new information technology platforms.

 PNM Gas

The table below sets forth the operating results for PNM Gas.

The following table shows gas revenues by customer and average customers:

PNM Gas Revenues

*Customer-owned gas.

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The following table shows gas throughput by customer class:

PNM Gas Throughput

*Customer-owned gas.

Operating revenues increased $132.7 million, or 37.0%, over the prior year primarily because of higher natural gas prices in 2004 as compared to 2003 and the rate increase discussed below.  The Company purchases natural gas in the open market and resells it at the same price to its sales-service customers.  As a result, increases or decreases in gas revenues driven by gas costs do not impact the Company's consolidated gross margin or earnings.  In 2004, off-system sales revenues increased $47.7 million due to the revision of an interstate transportation contract and improved conditions in the gas market.  Total gas sales volumes increased 5.0%, resulting from off-system sales and customer growth of 2.0%; customer growth increased revenues $2.7 million over the prior year.  A normal early winter season compared to a warmer 2003 increased revenues $3.0 million.  In addition, revenues grew $11.4 million due to a cost of service rate increase granted by the NMPRC in January 2004.  The rate increase is expected to increase gas revenues by approximately $22.0 million annually; however, implementation of the residential increase was delayed until April 2004.  The increase in operating revenues was partially offset by a decrease in off-system transportation of $5.4 million due to lower price differences between the San Juan and Permian basins. 

The gross margin, or operating revenues minus cost of energy sold, increased $17.8 million, or 13.7%, over the prior year.  This increase was due mainly to customer growth, a normal winter heating season during the first quarter 2004 compared to the first quarter of 2003, and the NMPRC-approved rate increase, partially offset by the decrease in off-system transportation sales described above. 

Total non-fuel O&M expenses increased $1.0 million, or 1.9%, over the prior year.  Customer-related expense increased $2.5 million, or 14.6%, primarily due to an improvement in collection rates in 2003 that was maintained in 2004. Transmission and distribution O&M expense decreased $1.5 million primarily due to a reduction in payroll costs from a Company reorganization.  Administrative and general expense decreased $0.4 million due primarily to a $1.3 million decrease in paid-time-off expense, offset in part by increased insurance expense of $0.5 million and increased capital activity in 2004.

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Depreciation and amortization decreased $3.3 million, or 14.8%, primarily due to the Company's customer billing system being fully depreciated at the end of 2003.  The Company expects to see depreciation rise going forward as a result of increased investment in new information technology platforms and other capital spending.

Unregulated Operations

 PNM Wholesale

The table below sets forth the operating results for PNM Wholesale.

The following table shows revenues by customer class:

PNM Wholesale Revenues

*Includes mark-to-market gains/(losses).

The following table shows sales by customer class:

PNM Wholesale Sales

Operating revenues increased $35.1 million or 6.3% over the prior year.  This increase in wholesale electric sales primarily reflects additional long-term contract sales and wholesale electric price improvements in forward and short-term prices.  New long-term contracts added 437,446 MWhs, or $21.0 million in revenues, slightly offset by a decrease in certain existing contract sales prices of $3.3 million due largely to a price reduction for sales to Kirtland Air Force Base.  These contracts support the Company's long-term growth plans and net asset-backed strategy.  In addition, the Company's short-term sales increased $21.7 million, or 8.7%, compared to the prior year period, partially due to an increase in average short-term prices of 4.4%.  Additionally, short-term sales volume increased 3.8% as more favorable day-ahead market spreads shifted volume from forward sales, which decreased 16.6%.  Forward sales decreased $7.5 million or 4.5% due to less favorable energy purchase-to-sale market spreads between PVNGS and the Mead market hub.

The gross margin, or operating revenues minus cost of energy sold and intersegment energy transfer, decreased $8.9 million, or 8.4%, from the prior year.  Forward sales margin decreased $1.9 million reflecting higher purchase prices, partially offset by higher sale prices.  Short-term sales margin decreased $13.7 million primarily due to the effect of higher purchase costs and less available excess energy resulting from increased electric retail load growth and unplanned outages on certain of the Company's generation facilities, partially offset by higher

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sales volumes and higher market prices.  Average forward and short-term market purchase prices increased 10.7% over the prior year while average forward and short-term market sale prices increased 4.4% over the prior year.  The Company had an unfavorable change in the unrealized mark-to-market position of $1.7 million from the prior year ($1.8 million gain in 2004 versus $3.5 million gain in 2003), reflecting depressed pricing caused by cooler weather.  Long-term contracts margin increased $6.8 million due to additional long-term sales under new and existing contracts.  In addition, the long-term margin increase included $6.1 million from sales of pollution credits.

Total non-fuel O&M decreased $0.7 million, or 1.8%, from the prior year.  Administrative and general decreased $1.1 million, or 13.4%, due to transportation costs of $1.0 million recognized in 2003 for turbines that were placed in storage, which did not recur in 2004.

Corporate and Other

Corporate administrative and general expenses, which represent costs that are driven primarily by corporate-level activities, is allocated to the business segments and is presented in the corporate allocation line item in the segment statements.  These costs decreased $1.8 million, or 1.6%, from the prior year to $113.7 million.  The decrease in these costs was due to a net decrease in pension and benefit costs of $1.6 million due to decreased pension and benefit expenses of $11.5 million, resulting from higher returns on pension plan assets and lower retiree medical cost projections.  The decrease was partially offset by increased 401(k) and benefit costs of $9.9 million.

Taxes other than income increased $2.7 million due to the 2003 favorable resolution of tax issues of $2.4 million and increased social security taxes due to overall higher payroll costs.

Consolidated

Other Income and Deductions

Other income decreased $4.6 million, or 8.8%, from the prior year due to decreased tax credits of $2.4 million, and a decrease in the equity component of AFUDC of $1.3 million.  Additionally, other income decreased due to favorable 2003 customer settlements of $0.8 million, which did not recur in 2004.

Other deductions decreased $38.0 million from the prior year primarily due to a charge of $16.7 million in 2003 for the write-off of transition costs due to the repeal of deregulation in New Mexico and a charge of $16.6 million in 2003 for costs related to long-term debt refinancing. 

Interest Expense

Interest expense decreased $14.8 million, or 22.4%, over the prior year due to debt refinancing, including SUNs and PCBs, and lower short-term debt balances, which decreased interest costs $10.1 million.  Additionally, the Company had lower borrowing levels in 2004, which reduced interest expense by $2.6 million, and a favorable interest rate swap which further reduced interest expense by $2.1 million.

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Income Taxes

The Company's consolidated income tax expense was $49.2 million for the year ended December 31, 2004, compared to $27.9 million for the prior year before the cumulative effect of a change in accounting principles.  The increase was due to the impact of higher pre-tax earnings.  The Company's effective income tax rates for the years ended December 31, 2004 and 2003 were 35.81% and 32.05%, respectively.  The increase in the effective tax rate, year-over-year, was due to a decrease in permanent tax differences, resulting from AFUDC and certain tax credits in 2003.

Cumulative Effect of a Change in Accounting Principle

Effective January 1, 2003, the Company adopted SFAS 143.  The effect of the initial application of the new standard is reported as a cumulative effect of a change in accounting principle.  As a result, the Company recorded income, net of income taxes, of approximately $37.4 million, or $0.62 per diluted common share, representing amounts expensed in prior years for its asset retirement obligations in excess of the actual legal obligations as established under the new accounting standard.

In 2003, the Company changed its valuation date for its pension and post retirement benefits plans from September 30 to December 31 to better reflect the actual plan balances as of the Company's year end balance sheet date.  The effect of the change in the pension plans' valuation date is reported as a cumulative effect of a change in accounting principle.  The Company recorded additional expense, net of income taxes, of approximately $0.8 million, or $0.01 per diluted common share reflecting the effect of changing the valuation date.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

Consolidated

The Company's net earnings for the year ended December 31, 2003 were $95.2 million or $1.58 per diluted share of common stock, a 49.5% increase in net earnings compared to $63.7 million or $1.07 per diluted share of common stock in 2002.  This increase primarily reflects the cumulative effect of a change in accounting principle for the adoption of SFAS 143 of $37.4 million, net of income taxes, and improved operating performance.  This increase was partially offset by the write-off of transition costs of $9.5 million, net of income taxes, that resulted from the repeal of electric deregulation in New Mexico in the first quarter of 2003 and a charge of $10.0 million, net of income taxes, for costs related to long-term debt refinancing.

The following discussion is based on the methodology that the Company's management uses for making operating decisions and assessing performance of its various business activities.  As such, these statements report operating results without regard to the effect of accounting or regulatory changes, and similar one-time items not related to normal operations.  See Note 2 - "Segment Information", in the Notes to Consolidated Financial Statements for additional information regarding these results and the consolidated financial statements. 

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In addition, adjustments related to EITF Issue 02-03 "Issues Related to Accounting for Contracts Involved in Energy Trading and Risk Management Activities" and 03-11 "Reporting Realized Gains and Losses on Derivative Instruments that are subject to FASB statement No. 133 and Not Held for Trading Purposes" are included in Corporate and Other.  These accounting pronouncements require a net presentation of trading gains and losses and realized gains and loss for certain non-trading derivatives.  Management evaluates wholesale operations on a gross presentation basis due to its net-asset-backed marketing strategy.

Corporate costs, income taxes and non-operating items are discussed only on a consolidated basis and are in conformity with the presentation in the consolidated financial statements.

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PNM Electric

The table below sets forth the operating results for PNM Electric.

The following table shows electric revenues by customer class and average customers:

PNM Electric Revenues

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The following table shows electric sales by customer class:

PNM Electric Sales

Operating revenues decreased $10.3 million, or 1.8%, over the prior year primarily due to the transfer of a significant customer from retail to wholesale electric rates in the first quarter of 2003 and a 4% retail electric rate reduction, which became effective in September 2003.  Rates will decrease again by 2.5% in September 2005 and remain at that level through 2007.  The customer transfer reduced PNM Electric revenues $17.1 million.  The rate reduction resulted in a decrease in revenues of approximately $6.9 million. In addition, revenues decreased due to lower demand for wheeling of $7.4 million to California from Arizona as a result of lower demand in the California Market.  These decreases were partially offset by average customer growth of approximately 3.1% and increased demand for wheeling in New Mexico of $1.7 million and $2.3 million in new contract revenue.  The contract with such customer was not renewed for 2004.  After adjusting 2002 MWh sales for the transfer of the significant customer from retail to wholesale for comparative purposes, retail electric MWh sales increased due to customer growth. 

The gross margin, or operating revenues minus cost of energy sold and intersegment energy transfer, decreased $15.7 million, or 3.6%, over the prior year.  This decrease was due primarily to the rate decrease, an increase in cost of energy due to outages at PVNGS Unit 2 during the fourth quarter of 2003 for a steam-generator replacement project, and the customer transfer described above.  These decreases were partially offset by customer growth and lower cost of generation.

Total non-fuel O&M expenses decreased $10.6 million, or 6.1%, over the prior year.  Energy production costs decreased $5.2 million, or 4.6%, primarily due to 2002 outages at Four Corners and Reeves Station, which did not recur in 2003, for $1.3 million and $1.0 million, respectively and reduced PVNGS plant maintenance costs of $0.5 million due to increased capitalized expenditures related to the steam-generator replacement project.  Transmission and distribution O&M decreased $2.9 million, or 8.5%, due to a decrease in lease costs of $3.3 million for the EIP transmission line, a portion of which was purchased in April 2003, offset by increased maintenance costs incurred for reliability purposes.  Customer-related expense decreased $1.8 million, or 10.6%, due to decreased bad debt expense as a result of continued collection efforts and the favorable outcome of a customer bankruptcy proceeding.  Depreciation and amortization increased $5.1 million, or 7.5%, due to a higher depreciable plant base for new service delivery.  In addition, lower energy production costs related to decreased

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decommissioning expenses of $2.7 million were mostly offset by an increase in depreciation expense of $2.2 million for the change in accounting for costs related to asset retirement obligations as required by SFAS 143 and the purchase of additional transmission lines.

PNM Gas

The table below sets forth the operating results for PNM Gas.

The following table shows gas revenues by customer and average customers:

PNM Gas Revenues

*Customer-owned gas.

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The following table shows gas throughput by customer class:

PNM Gas Throughput

*Customer-owned gas.

Operating revenues increased $80.9 million, or 29.2%, over the prior year to $358.3 million, primarily because of higher natural gas prices in 2003 as compared to 2002.  The gross margin, or operating revenues minus cost of energy sold, decreased $3.2 million, or 2.4%, over the prior year.  This decrease is due mainly to the expiration in January 2003 of a rate rider for the recovery of certain costs of $4.1 million.  The rate rider decrease was offset by an increase in volume.  Transportation throughput increased by 5.9 million decatherms, or 13.1% driven by gas pipe line extensions, increasing off-system sales.  Despite customer growth of 2.0%, volume from other customers decreased 3.0 million decatherms, or 6.3%, caused by warmer weather in 2003.

Total non-fuel O&M expenses decreased $0.5 million, or 0.9%, over the prior year.  Administrative and general costs decreased $0.9 million, or 30.7%, primarily due to lower consulting costs of $1.0 million.  Depreciation and amortization increased $1.5 million or 7.3% due to a higher depreciable plant base for new service delivery and transportation gas line extensions.  Taxes other than income taxes decreased $0.8 million or 10.8% due to a decrease in property tax of $0.2 million as a result of a change in assessed values and a decrease in NMPRC supervision and lower inspection fees of $0.6 million.

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 PNM Wholesale

The table below sets forth the operating results for PNM Wholesale.