In conjunction with these goals,objectives, PNM and TNMP are dedicated to:

PNMR’s success in accomplishing these strategic goalsits financial objectives is highly dependent on two key factors: fair and timely regulatory treatment for its regulated utilities. utilities and the utilities’ strong operating performance. The Company has multiple strategies in place to achieve favorable regulatory treatment, all of which have as their foundation a focus on the basics: safety, operational excellence, and customer satisfaction, while engaging stakeholders to build productive relationships. The Company believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience.

Both PNM and TNMP seek cost recovery for their investments through general rate cases, periodic cost of service filings, and various rate riders. PNM filed a general rate casescase with the NMPRC in August 2015December 2016 and December 2016. Thethe NMPRC issued a rate ordersorder in those casesthat case in September 2016 and January 2018. TNMP filed a general rate case in May 2018 and the PUCT issued an order in that case in December 2018. Additional information about rate filings is provided in Operations and Regulation below and in Note 17.

PNMR’s common stock trades on the New York Stock Exchange under the symbol PNM. PNMR was incorporated in the State of New Mexico in 2000.

These filings for PNMR, PNM, and TNMP include disclosures for each entity. For discussion purposes, this report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. A reference to “MD&A” in this report refers to Part II, Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations. A reference to a “Note” refers to the accompanying Notes to Consolidated Financial Statements.

Financial information relating to amounts of revenue, net income,earnings, and total assets of reportable segments is contained in MD&A and Note 2.

The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) on its website.

PNM is an electric utility that provides electric generation, transmission, and distribution service to its rate-regulated customers. PNM was incorporated in the State of New Mexico in 1917. PNM’s retail electric service territory covers a large area of north-central New Mexico, including the cities of Albuquerque, Rio Rancho, and Santa Fe, and certain areas of southern New Mexico. Service to retail electric customers is subject to the jurisdiction of the NMPRC. The largest retail electric customer served by PNM accounted for 2.3%3.1% of its revenues for the year ended December 31, 2018.2021. Other services provided by PNM include wholesale transmission services to third parties as well as the generation and sale of electricity into the wholesale market, which services are regulated by FERC. PNM owns transmission lines that are interconnected with other utilities in New Mexico, Texas, Arizona, Colorado, and Utah.parties. Regulation encompasses the utility’s electric rates, service, accounting, issuances of securities, construction of major new generation, abandonment of existing generation, types of generation resources, transmission and distribution facilities, and other matters. See NoteNotes 16 and 17 for additional information on rate cases and other regulatory matters.

PNM holds long-term, non-exclusive franchise agreements for its electric retail operations, with varying expiration dates. These franchise agreements allow the utility to access public rights-of-way for placement of its electric facilities. Franchise agreements have expired in some areas PNM serves, including Albuquerque, Rio Rancho, and Santa Fe.serves. Because PNM remains obligated under New Mexico state law to provide service to customers in these areas, the expirations should not have a material adverse impact. The Albuquerque, Rio Rancho, and Santa Fe metropolitan areas accounted for 41.9%41.2%, 7.5%7.2%, and 6.7%5.7% of PNM’s 20182021 revenues and no other franchise area represents more than 5%. PNM also earns revenues from its electric retail operations in its service areas that do not require franchise agreements.

PNM owns 3,2063,426 miles of electric transmission lines that interconnect with other utilities in New Mexico, Arizona, Colorado, Texas, and Utah. New Mexico ranks third in the Nation for energy potential from solar power according to the Nebraska Department of Energy & Energy Sun Index and ranks third in the Nation for land-based wind capacity according to the U.S. Office of Energy Efficiency and Renewable Energy. PNM owns transmission capacity in an area of eastern New Mexico with large wind generation potential and in recent years there has been substantial interest by developers of wind generation to interconnect to PNM’s transmission system in this area. PNM plans to constructinvested approximately $130$285 million for the expansion of newPNM’s transmission facilities by 2020system reflecting the purchase of the Western Spirit Line to provide additional transmission service to delivertransmit power from these generation resources to customers in New Mexico and California.

PNM also generates and sells electricity into the wholesale market. Through December 31, 2017, PNM’s 134 MW share of Unit 3 at PVNGS was excluded from retail rates and was being soldbegan participating in the wholesale market. Effective JanuaryEIM on April 1, 2018,2021 which generated $12.5 million of cost savings to customers for the year. The NMPRC authorizedgranted PNM authority to include PVNGS Unitseek recovery of costs associated with joining the EIM in a future general rate

The use of a FTY should helprates PNM mitigate the adverse effects of regulatory lag, which is inherent when using a historical test year. Accordingly, the utility’s earnings should more closely reflect thecharges retail customers are subject to traditional rate of return allowedregulation by the NMPRC. PNMR believesIn December 2016, PNM filed the NM 2016 Rate Case with the NMPRC. After extensive settlement negotiations and public proceedings, the NMPRC issued a Revised Order Partially Adopting Certification of Stipulation dated January 17, 2018. The key terms of that achieving earningsorder include an increase in base non-fuel revenues of $10.3 million, which includes a reduction to reflect the impact of the decrease in the federal corporate income tax rate and updates to PNM’s cost of debt (aggregating an estimated $47.6 million annually), a ROE of 9.575%, a requirement to return to customers over a three-year period the benefit of the reduction in the New Mexico corporate income tax rate, a disallowance of PNM’s ability to collect an equity return on certain investments aggregating $148.1 million at Four Corners, and a requirement to consider the prudency of PNM’s decision to continue its participation in Four Corners in PNM’s next general rate case filing. In accordance with the NMPRC’s final order, PNM implemented 50% of the approved rate increase for service rendered beginning February 1, 2018 and the rest of the increase for service rendered on January 1, 2019.

PNM has a NMPRC-approved rate rider to collect costs for renewable energy procurements that approximate its allowedare not otherwise being collected in rates. If PNM’s earned return on jurisdictional equity in a calendar year, adjusted for weather and other items not representative of normal operation, exceeds the NMPRC-approved rate by 0.5%, the rider provides that PNM would refund the excess to customers during the following year. PNM did not exceed the limitation in 2020 and does not expect to exceed the limitation in 2021. The NMPRC has also approved riders designed to allow PNM to bill and collect substantially all of return isfuel and purchased power costs and costs of approved energy efficiency initiatives.

Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line described below, are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an important factorapproved formula. The formula includes updating cost of service components, including investment in attracting equity investors,plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as being considered favorably by credit rating agencies and financial analysts.

The ETA became effective on June 14, 2019. As discussed below, the ETA amends the REA and requires utilities operating in New Mexico to provide 100% zero-carbon energy by regulators2045. The ETA also provides for a transition from fossil-fueled generating resources to renewable and intervenors who may assert different interpretationsother carbon-free resources by allowing utilities to issue to qualified investors securitized bonds, or assumptions.“energy transition bonds,” related to the retirement of certain coal-fired generating facilities. Proceeds from the energy transition bonds must be used to provide utility service to customers and for other costs as defined by the ETA. On January 29, 2020, the NM Supreme Court issued a ruling requiring the NMPRC apply the ETA to all aspects of PNM’s SJGS Abandonment Application. On April 1, 2020, the NMPRC unanimously approved the hearing examiners’ recommended decisions regarding the abandonment of SJGS and the related securitized financing under the ETA. On May 8, 2020, CFRE and NEE filed a joint statement of issues with the NM Supreme Court which asserts that the NMPRC improperly applied the ETA and that the ETA violates the New Mexico Constitution. On January 10, 2021, the NM Supreme Court issued its decision rejecting CFRE’s and NEE’s constitutional challenges to the ETA and affirmed the NMPRC final order.

Renewable Energy

The REA was enacted to encourage the development of renewable energy in New Mexico. The act establishes a mandatory RPS requiring a utilityETA amended the REA and requires utilities operating in New Mexico to acquire ahave renewable energy portfolioportfolios equal to 15% of retail electric sales by 2015 and 20% by 2020.2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The actREA provides for streamlined proceedings for approval of utilities’ renewable energy procurement plans, assuresprovides utilities recovery of costs incurred consistent with approved procurement plans, and requires the NMPRC to establishsets a RCT for the procurement of renewable resources to prevent excessive costs being added to rates. PNM files required renewable energy plans with the NMPRC annually and makes procurements consistent with the plans approved by the NMPRC. See Note 17.

TNMP is a regulated utility operating and incorporated in the State of Texas. TNMP’s predecessor was organized in 1925. TNMP provides transmission and distribution services in Texas under the provisions of TECA and the Texas Public Utility Regulatory Act. TNMP is subject to traditional cost-of-service regulation with respect to rates and service under the jurisdiction of the PUCT and certain municipalities. TNMP’s transmission and distribution activities are solely within ERCOT, which is the independent system operator responsible for maintaining reliable operations for the bulk electric power supply system in most of Texas. Therefore, TNMP is not subject to traditional rate regulation by FERC. TNMP serves a market of small to medium sized communities, most of which have populations of less than 50,000. TNMP is the exclusive provider of transmission and distribution services in most areas it serves.

TNMP’s service territory consists of three non-contiguous areas. One portion of this territory extends from Lewisville, which is approximately 10 miles north of the Dallas-Fort Worth International Airport, eastward to municipalities near the Red

TNMP provides transmission and distribution services at regulated rates to various REPs that, in turn, provide retail electric service to consumers within TNMP’s service area. See Notes 16 and 17 for additional information on rate cases and other regulatory matters.

For its volumetric load customersconsumers billed on KWh usage, TNMP experienced increasesa decrease in weather-normalizedweather normalized retail KWh sales of 3.2%0.8% in 20182021 and 1.2%an increase of 2.9% in 2017.2020. For its weather normalized demand-based load, excluding retail transmission consumers, TNMP experienced an increase of 1.8% in 2021 and a decrease of 1.3% in 2020. As of December 31, 2018, 992021, 110 active REPs receive transmission and distribution services from TNMP. In 2018,2021, the three largest REP customers of TNMPREPs accounted for 21%23%, 16%19%, and 12%10% of TNMP’s operating revenues. No other customerconsumer accounted for more than 10% of revenues.

TNMP holds long-term, non-exclusive franchise agreements for its electric transmission and distribution services. These agreements have varying expiration dates and some have expired. TNMP intends to negotiate and execute new or amended franchise agreements with municipalities where the agreements have expired or will be expiring. Since TNMP is the exclusive provider of transmission and distribution services in most areas that it serves, the need to renew or renegotiate franchise agreements should not have a material adverse impact. TNMP also earns revenues from service provided to facilities in its service area that lie outside the territorial jurisdiction of the municipalities with which TNMP has franchise agreements.

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and the activities of PNMR Services Company. PNMR Services Company provides corporate services through shared services agreements to PNMR and all of PNMR’s business units, including PNM and TNMP. These services are charged and billed at cost on a monthly basis to the business units. The activities of PNMR Development, NM Capital, and NMRD are also included in Corporate and Other.

As of December 31, 2018,2021, the total net generation capacity of facilities owned or leased by PNM was 2,1022,168 MW. PNM also obtains power under long-term PPAs for the power produced by Valencia, New Mexico Wind, Red Mesa Wind, Casa Mesa Wind, La Joya Wind I and II, the Lightning Dock Geothermal facility, and the NMRD-owned solar facilities.

PNM’s capacity in electric generating facilities, which are owned, leased, or under PPAs, in commercial operation as of December 31, 20182021 is:

SJGS is operated by PNM and, until December 2017, consisted of four units. As discussed in Note 16, SJGS Units 2 and 3 were retired in December 2017 and the ownership interests in SJGS Unit 4 were restructured as of December 31, 2017. restructured. PNM has received NMPRC approval to retire its remaining ownership in SJGS in 2022. See Note 17.

Four Corners Units 4 and 5 are 13% owned by PNM. These units are jointly owned with APS, SRP, Tucson, and NTEC, and are operated by APS. Prior to July 22, 2018, NTEC’s 7% share of Four Corners was owned by an affiliate of APS, which had acquired the interest from EPE on July 7, 2016. PNM had no ownership interest in Four Corners Units 1, 2, or 3, which were shut down by APS on December 30, 2013. The Four Corners plant site is located on land within the Navajo Nation and is subject to an easement from the federal government. APS, on behalf of the Four Corners participants, negotiated amendments to extend the owners’ right to operate the plant on the site to July 2041. In June 2021, APS and the owners of Four Corners entered into agreements to operate Four Corners seasonally beginning in Fall 2023, subject to the necessary approvals. Under seasonal operations, a single unit will remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages. In addition, the other unit will be operational throughout the summer season when customer demand is the highest. PNM filed the Four Corners Abandonment Application, which seeks NMPRC approval to exit PNM’s 13% share of Four Corners as of December 31, 2024. See Note 16 for additional information about Four Corners.17.

PNM owns 100% of Reeves, Afton, Rio Bravo, Lordsburg, and La Luz and one-third of Luna. The remaining interests in Luna are owned equally by Tucson and Samchully Power & Utilities 1, LLC. PNM is also entitled to the entire output of Valencia under a PPA. Reeves, Lordsburg, Rio Bravo, La Luz, and Valencia are used primarily for peaking power and transmission support. As discussed in Note 10, Valencia is a variable interest entity and is consolidated by PNM as required by GAAP.PNM.

PNM is participating in the three units of PVNGS with APS (the operating agent), SRP, EPE, SCE, SCPPA, and the Department of Water and Power of the City of Los Angeles. PNM is entitled to 10.2%, including portions that are leased to PNM, of the power and energy generated by PVNGS. See Note 8 for additional information concerning the PVNGS leases. Currently, PNM has ownership interests of 2.3% in Unit 1, 9.4% in Unit 2, and 10.2% in Unit 3 and has leasehold interests of 7.9% in Unit 1 and 0.8% in Unit 2. The lease payments for the leased portions of PVNGS are recovered through retail rates approved by the NMPRC.

On April 5, 2021, PNM and SRP entered into an Asset Purchase and Sale Agreement, pursuant to which PNM agreed to sell to SRP certain PNM-owned assets and nuclear fuel necessary to the ongoing operation and maintenance of leased capacity in PVNGS Unit 1 and Unit 2, which SRP has agreed to acquire from the lessors upon termination of the existing leases. The proposed transaction between PNM and SRP received all necessary approvals, including NRC approval for the transfer of the associated possessory licenses to SRP at the end of the term of each of the respective leases. See NoteNotes 16 and 17 for information on other PVNGS matters including the NMPRC’s approval for PNM to include PVNGS Unit 3 as a jurisdictional resource to serve New Mexico retail customers beginning in 2018Leased Interest Abandonment Application and Note 178 for additional information concerning the NMPRC’s treatment of the purchased assets and extended leases in PNM’s NM 2015 Rate Case. See Note 8 for information concerning PNM’s option to purchase or return the assets underlying four leases in PVNGS Unit 1 and one lease in PVNGS Unit 2 that expire January 2023 and January 2024.leases.

At December 31, 2018,2021, PNM owns a total of 107158 MW of solar facilities in commercial operation. In addition, PNM is also entitledpurchases renewable power under long-term PPAs to the entire output from 30 MW of NMRD-owned solar facilities. As discussedserve New Mexico retail customers, including a data center located in Note 1, NMRD is a 50% equity method investee of PNMR Development. As discussed in Note 17, PNM’s 2018service territory. At December 31, 2021, renewable energy procurement plan includes the additionprocured under these agreements from wind, solar-PV, and

Equivalent availability of PNM’s major base-load generating stations was:

SJGS, PVNGS, Four Corners, and Luna are joint projects each owned or leased by several different entities. Some participants in the joint projects are investor-owned entities, while others are privately, municipally, or co-operatively owned. Furthermore, participants in SJGS have varying percentage interests in different generating units within the project. The primary operating or participation agreements for the joint projects expire in July 2022 for SJGS, July 2041 for Four Corners, December 2046 for Luna, and November 2047 for PVNGS. SJGS and Four Corners are coal-fired generating plants that obtain their coal requirements from mines near the plants. An agreement for coal supply for SJGS, which expires on June 30, 2022, became effective onOn January 31, 2016. At that same time,2016 an agreement to restructure the ownership in SJGS became effective. The restructuring agreement provided for certain participants in SJGS to exit ownership at December 31, 2017, by which time SJGS Units 2 and 3 were required to be permanently shut down. On April 1, 2020, the NMPRC approved the abandonment of PNM’s remaining interest in SJGS on June 30, 2022. On February 17 2022, PNM filed a request with the NMPRC to extend operation of SJGS Unit 4 until September 30, 2022. The filing provided that PNM had obtained agreement from the SJGS owners to extend operation of Unit 4, but was unable to secure the extended operation of Unit 1. See Note 1617 for a discussion ofadditional information about PNM’s SJGS Abandonment Application.

The primary operating or participation agreements for the restructuring of SJGS ownership. In December 2013, a coal supply arrangementother joint projects expire July 2041 for Four Corners, that runs through July 6, 2031 was executed.December 2046 for Luna, and November 2047 for PVNGS. As described above, Four Corners is located on land within the Navajo Nation and is subject to an easement from the federal government. On January 8, 2021, PNM filed the Four Corners Abandonment Application, which seeks NMPRC approval to exit PNM’s 13% share of Four Corners as of December 31, 2024. See Note 17 for additional information about PNM’s Four Corners Abandonment Application. Portions of PNM’s interests in PVNGS Units 1 and 2 are held under leases. See Nuclear Plant above and Note 8 regarding PNM’s actions related to these leases.

In 2018, 2017,both 2021 and 2016, 2.7%, 2.4%, and 2.5%2020, 4.1% of PNM’s generation was from utility-owned solar, which has no fuel cost. In December 2017, SJGS Units 2 and 3 were retired and PNM assumed a greater interest in SJGS Unit 4, which results in a lower percentage of PNM’s electric generation capacity being fueled by coal. The generation mix for 20192022, including power procured under long-term PPAs, is expected to be 41.7%25.7% coal, 30.3%33.2% nuclear, 24.8%18.3% gas and oil, and 3.2% utility-owned solar.22.8% from renewable resources, including solar, wind, and geothermal. Due to locally available natural gas and oil supplies, the utilization of locally available coal deposits, and the generally adequate supply of nuclear fuel, PNM believes that adequate sources of fuel are available for its generating stations into the foreseeable future. See Sources of Power – PNM – PPAs for information concerning the cost of purchased power. PNM recovers substantially all of its fuel and purchased power costs through the FPPAC.

Coal

ASJGS and Four Corners are coal-fired generating plants that obtain their coal requirements from mines near the plants. The coal supply contract for SJGS, which expireswas set to expire on June 30, 2022, became effectivebut was extended, subject to FERC acceptance of the SJGS participation agreement, through September 30, 2022 with an amendment to the coal supply agreement executed on January 31, 2016.February 17, 2022. Coal supply has not been arranged for periods after the existing contract expires. Substantially all of the benefits of lowerPNM’s coal pricing under the new contractcosts are being passed throughon to PNM’s customers under the FPPAC. PNM believes there is adequate availability of coal resources to continue to operate SJGS through mid-2022.September 30, 2022.

In late December 2013, a fifteen-year coal supply contractarrangement for Four Corners which beganthat runs through July 6, 2031 was executed. Since that time, certain amendments have been made to the contract including amendments to reduce annual take-or-pay minimums and to change the annual contract period to end in May rather than in July 2016, was executed. The average coal price per ton under the new contract was approximately 51% higher in the twelve months ended June 30, 2017 than in the twelve months ended June 30, 2016 and approximately 6.9% higher in the twelve months ended June 30, 2018 than in the twelve months ended June 30, 2017.of each year. The contract provides for pricing adjustments over its term based on economic indices.

See Note 16 for additional information about PNM’s December 2018 Compliance Filing and PNM’s coal supply. As discussed insupply arrangements. See Note 17 for additional information about PNM’s 2017 IRP also indicates that PNM exiting ownership inSJGS Abandonment Application, PNM’s Four Corners afterAbandonment Application, and the 2020 IRP, which all focus on a carbon-free electricity portfolio by 2040 that would eliminate coal at the end of its current coal supply agreement in 2031 would provide long-term cost savings to PNM’s customers.2024.

All spent nuclear fuel from PVNGS is being stored on site.on-site. PVNGS has sufficient capacity at its on-site ISFSI to store all of the nuclear fuel that will be irradiated during the initial operating license periods, which end in December 2027. Additionally, PVNGS has sufficient capacity at its on-site ISFSI to store a portion of the fuel that will be irradiated during the extended license periods, which end in November 2047. If uncertainties regarding the United States government’s obligation to accept and store spent fuel are not favorably resolved, the PVNGS participants will evaluate alternative storage solutions. These may obviate the need to expand the ISFSI to accommodate all of the fuel that will be irradiated during the extended license periods.

Electric utilities are subject to stringent laws and regulations for protection of the environment by local, state, federal, and tribal authorities. In addition, PVNGS is subject to the jurisdiction of the NRC, which has the authority to issue permits and licenses and to regulate nuclear facilities in order to protect the health and safety of the public from radioactive hazards and to conduct environmental reviews. The liabilities under these laws and regulations can be material. In some instances, liabilities may be imposed without regard to fault, or may be imposed for past acts, whether or not such acts were lawful at the time they occurred. See MD&A – Other Issues Facing the Company – Climate Change Issues for information on GHG. In addition, Note 16 contains information related to the following matters, incorporated in this item by reference:

Regulated utilities are generally not subject to competition from other utilities in areas that are under the jurisdiction of state regulatory commissions. In New Mexico, PNM does not have direct competition for services provided to its retail electric customers. In Texas, TNMP is not currently in any direct retail competition with any other regulated electric utility. However, PNM and TNMP are subject to customer conservation and energy efficiency activities, as well as initiatives to utilize alternative energy sources, including self-generation, or otherwise bypass the PNM and TNMP systems.

PNM is subject to varying degrees of competition in certain territories adjacent to or within the areas it serves. This competition comes from other utilities in its region as well as rural electric cooperatives and municipal utilities.  PNM is involved in the generation and sale of electricity into the wholesale market although PNM has decided to stop pursuing wholesale generation contracts.serve its New Mexico retail customers.  PNM is subject to competition from regional utilities and merchant power suppliers with similar opportunities to generate and sell energy at market-based prices and larger trading entities that do not own or operate generating assets.

Statements made in this filing that relate to future events or PNMR’s, PNM’s, or TNMP’s expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates.estimates and apply only as of the date of this report. PNMR, PNM, and TNMP assume no obligation to update this information.

Because actual results may differ materially from those expressed or implied by these forward-looking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR’s, PNM’s, and TNMP’s business, financial condition, cash flows, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors, which are neither presented in order of importance nor weighted, include:

For information about the risks associated with the use of derivative financial instruments see Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”

The business and financial results of PNMR, PNM, and TNMP are subject to a number of risks and uncertainties, many of which are beyond their control, including those set forth below and in MD&A, Note 16, and Note 17. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see Disclosure Regarding Forward Looking Statements in Item 1. Business. TNMP provides transmission and distribution services to REPs that provide electric service to consumers in TNMP’s service territories. References to customers in the risk factors discussed below also encompass the customers of these REPs who are the ultimate consumers of electricity transmitted and distributed through TNMP’s facilities.

The rates PNM charges its customers are regulated by the NMPRC and FERC. TNMP is regulated by the PUCT. The Company is in a period requiring significant capital investment and is projecting total construction expenditures for the years 2019-20232022-2026 to be $2,708.7 million.$4.2 billion. See Note 14. PNM and TNMP anticipate a trend toward increasing costs, for which itthey will have to seek regulatory recovery. These costs include or are related to:

At the same time costs are increasing, there are factors placing downward pressurespressure on the demand for power, thereby reducing customer usage. These factors include:

The combination of costs increasing relatively rapidly and the technologies and behaviors that are reducing energy consumption places upward pressure on the per unit prices that must be charged to recover costs. This upward pressure on unit prices could result in additional efforts by customers to reduce consumption through energy efficiency or to pursue self-generation or other alternative sources of power.measures. Without timely cost recovery and the authorization to earn a reasonable return on invested capital, the Company’s liquidity and results of operations could be negatively impacted.

On January 29, 2021 PNM filed its 2020 IRP addressing the forecasting process. Forecasts of both operating and capital expenditures necessitate reliance on many assumptions concerning future conditions and operating results. Accordingly, if rate requests based20-year planning period, from 2020 through 2040. The plan focuses on a FTY cannot be successfully supported, cash flowscarbon-free electricity portfolio by 2040 that would eliminate coal at the end of 2024. This includes replacing the power from San Juan with a mix of approved carbon-free resources and resultsthe plan to exit Four Corners at the end of operations may be negatively impacted. This could result from not being able2024. The plan highlights the need for additional investments in a diverse set of resources, including renewables to withstand challenges from regulatorssupply carbon-free power, energy storage to balance supply and intervenorsdemand, and efficiency and other demand-side resources to mitigate load growth. See additional discussion regarding the utility’s capability to make reasonable forecasts.