8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

August 3, 2006

El Paso Electric Company

(Exact name of registrant as specified in its charter)

Texas	0-296	74-0607870
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Stanton Tower, 100 North Stanton, El Paso, Texas	79901
(Address of principal executive offices)	(Zip Code)

(915) 543-5711

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

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 communication 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 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 3, 2006, the Company announced its financial results for the quarter ended June 30, 2006. A copy of the press release containing the announcement is included as Exhibit 99.01 to this Current Report and is incorporated herein by reference. The Company does not intend for this exhibit to be incorporated by reference into future filings under the Securities Exchange Act of 1934.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

99.01 Earnings Press Release, dated August 3, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EL PASO ELECTRIC COMPANY
By:	/s/ SCOTT D. WILSON
	Scott D. Wilson
	Executive Vice President,
	Chief Financial Officer and
	Chief Administrative Officer
	(Duly Authorized Officer and
	Principal Financial Officer)

Dated: August 3, 2006

EX-99.01

EXHIBIT 99.01

El Paso Electric

NEWS RELEASE

For Immediate Release Date: August 3, 2006 Contact: Media Teresa Souza 915/543-5823 Investor Relations: Steve Busser 915/543-5983 Rachelle Williams 915/543-2257

El Paso Electric Announces Second Quarter Financial Results

Overview

• For the second quarter 2006, EE reported net income of $15.2 million, or $0.32 and $0.31 basic and diluted earnings per share, respectively. In the second quarter of 2005, EE had a net loss of $4.0 million or $0.08 loss per share.

• For the six months ended June 30, 2006, EE reported net income of $24.6 million, or $0.51 and $0.50 basic and diluted earnings per share, respectively. Net income for the six months ended June 30, 2005 was $0.8 million, or $0.02 basic and diluted earnings per share.

“Although we are obviously disappointed by increases in generation operation and maintenance expenses primarily driven by Palo Verde related repair efforts and unanticipated maintenance at gas-fired units, anticipated decreases in depreciation and interest expense more than offset these items during the quarter,” said Gary Hedrick, President and CEO. “Of particular note, Unit 1 at the Palo Verde nuclear plant is now at full capacity after an extended outage and our retail sales grew at a better than expected rate due to customer growth and hot spring and summer weather.”

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Page 1 of 13

Earnings Summary

The table and explanations below present the major factors affecting 2006 net income relative to 2005.

	Quarter Ended						Six Months Ended
	Net Income			Basic EPS			Net Income			Basic EPS
June 30, 2005	$	(3,962	)	$	(0.08	)	$	795		$	0.02
Changes in (net of tax):
Loss on extinguishment of debt		12,039			0.25			12,039			0.25
Income tax adjustment for change in tax law		6,174			0.13			6,174			0.13
Depreciation and amortization		4,337			0.09			8,276			0.17
Retail base revenue		3,409			0.07			5,312			0.11
Transmission wheeling revenue		1,813			0.04			2,617			0.05
Interest on long-term debt		1,586			0.03			3,635			0.08
Palo Verde operations and maintenance		(4,277	)		(0.09	)		(5,897	)		(0.12	)
Fossil fuel plant maintenance		(2,519	)		(0.05	)		(3,914	)		(0.08	)
Taxes other than income taxes		(1,442	)		(0.03	)		(2,771	)		(0.06	)
Off-system sales retained margin		(43	)		(0.00	)		(954	)		(0.02	)
Other		(1,866	)		(0.04	)		(759	)		(0.02	)
June 30, 2006	$	15,249		$	0.32		$	24,553		$	0.51

Second Quarter and Six Months Ended

Earnings for the quarter and six months ended June 30, 2006 when compared to the same periods last year were positively affected by:

• The loss on extinguishment of debt incurred in 2005 related to the refinancing of our first mortgage bonds in May 2005 with no comparable activity in 2006.

• A reduction in income tax expense in 2006 to recognize the change in tax rates resulting from changes in the Texas franchise (income) tax law in May 2006. This adjustment was a non-cash change in the second quarter of 2006, affecting deferred income tax liabilities.

• Decreased depreciation expense as a result of completing the recovery of certain fresh-start accounting related assets over the period of the Texas Rate Stipulation which ended in July 2005.

• Higher retail base revenues due to increased retail kilowatt-hour sales in 2006 resulting from growth in customers served and hot summer weather in 2006.

• Increased transmission wheeling revenues in 2006.

• Decreased interest on long-term debt in 2006 resulting from refinancing our first mortgage bonds in May 2005 and reissuing and remarketing pollution control bonds in August 2005.

Earnings for the quarter and six months ended June 30, 2006 when compared to the same periods last year were negatively affected by:

• Increased Palo Verde non-fuel operations and maintenance expenses in 2006 as discussed below.

• Higher maintenance costs at our gas-fired generating plants.

• Increased taxes other than income taxes primarily due to increased revenue-related taxes including an increase in the gross receipts tax rate in the City of El Paso and higher taxable revenues including the collection of fuel surcharges in Texas.

• Decreased retained margins from off-system sales as we experienced lower volumes of off-system sales in the first quarter of 2006 when we normally realize more off-system sales due to reduced Palo Verde

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Page 2 of 13

output. The lower margins were partially offset by the increase in the Company’s share of margins from 50% to 75% in Texas and higher revenues per MWh for such sales.

Key Earnings Drivers

Our earnings are largely influenced by base revenues from retail electric customers, operations at Palo Verde, and off-systems sales margins.

Retail Base Revenues

Retail base revenues increased by $5.5 million, pretax or 5% in the second quarter of 2006 compared to the same period in 2005 primarily due to increased revenues from residential, small commercial and industrial customers and public authority customers. Residential base revenues increased by $3.9 million, pretax or 9.5% in the second quarter of 2006 compared to the same period in 2005 primarily as a result of an increase in average usage per customer due to hotter than normal spring and summer weather conditions and a 2.6% increase in the average number of residential customers. During the second quarter of 2006, cooling degree days were 20% above both last year and the 10-year average.

Base revenues from small commercial and industrial customers increased $1.2 million, pretax or 2.9% in the second quarter of 2006 compared to the same period last year, primarily the result of a 3.0% increase in the average number of small commercial and industrial customers. Base revenues from sales to public authorities increased $0.6 million, pretax or 3.2% primarily due to customer growth of 5.6%.

Retail base revenues for the six-months ended June 30, 2006 increased $8.6 million, pretax or 4.2% largely due to a 2.8% increase in the number of customers served and the hotter than normal spring and summer weather. The hotter weather in the second quarter was partially offset by warmer than normal winter weather in the first quarter of 2006.

Palo Verde Operations

We own approximately 600 megawatts (undivided interest) of generating capacity in the three generating units at the Palo Verde nuclear power station. The operation of Palo Verde not only affects our ability to make off-system sales, but also impacts fuel costs to native load customers and represents a significant portion of our non-fuel operating expenses. Generation from Palo Verde declined 26.1% in the quarter ended June 30, 2006 compared to the same period in 2005 as Palo Verde Unit 1 did not operate during the second quarter and Palo Verde Unit 3 did not operate during a scheduled refueling and maintenance outage.

As previously disclosed, Palo Verde Unit 1 operated at significantly reduced power levels from December 25, 2005 until March 18, 2006 due to vibration in one of its shutdown cooling lines. An outage began March 18, 2006, during which inspections and tests were performed in preparation for an outage expected to begin in June 2006 during which necessary modifications would be made to remedy the situation. Arizona Public Service Company (“APS”) informed us that as a result of tests performed during the March outage, vibration limits could be exceeded under a limited number of scenarios if the unit returned to service at reduced power levels. Consequently, rather than pursue operating modifications to bring the unit back into service at a reduced level, APS informed us that the unit would remain shutdown until the necessary modifications could be completed. The modifications were performed in the second quarter and the unit was restarted in early July. Palo Verde Unit 1 reached full capacity on July 16, 2006. Palo Verde operations and maintenance costs increased $4.3 million, net of tax, or $0.09 per basic share for the quarter ended June 30, 2006 and $5.9 million, net of tax, or $0.12 per share for the six months ended June 30, 2006 compared to the same periods last year primarily due to the modifications at Unit 1 and the Unit 3 maintenance and refueling outage.

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Page 3 of 13

Off-system Sales

We continue to make off-system sales in the wholesale power markets when competitively priced excess power is available from our generating plants and purchased power contracts. The table below shows megawatt-hours of off-system sales and the pre-tax margins realized and retained by us from sales for the quarter and six month periods ended June 30, 2006 and 2005:

	Quarter Ended June 30				Six Months Ended June 30
	2006		2005		2006		2005
MWh sales		288,099		246,031		675,977		833,142
Total margins (in thousands)	$	775	$	1,130	$	8,502	$	13,660
Retained margins (in thousands)	$	627	$	696	$	6,877	$	8,415

For the quarter ended June 30, 2006, retained margins from off-system sales decreased approximately $69,000. Almost all of the off-system sales in the second quarter of 2006 were arbitrage sales which have very low margins. We make arbitrage sales when we can purchase power at one location and sell it at another location from our generation. Partially offsetting the lower margins was our retention of a higher percentage of margins in Texas which increased in July 2005 to 75% compared to the previous 50% as a result of the new rate agreement with the City of El Paso. The margin sharing provisions of the rate settlement are subject to approval by the Public Utility Commission of Texas (PUCT).

For the six months ended June 30, 2006, our retained margins decreased approximately $1.5 million reflecting a reduction in off-system kilowatt-hour sales of 34% in the first quarter of 2006, primarily due to reduced output from Palo Verde. Partially offsetting this was an increase in the percentage of off-system sales margins retained by us from 50% to 75% beginning in July 2005 per the City of El Paso rate agreement. The table below shows on a per MWh basis, revenues, costs and margins from off-system sales for the first two quarters of 2006 and 2005.

Quarter Ended	Average Revenue Per MWh		Average Cost of Energy Per MWh		Average Margin Per MWh
March 31, 2005	$	45.49	$	24.15	$	21.34
June 30, 2005	$	47.45	$	42.86	$	4.59
March 31, 2006	$	68.99	$	49.07	$	19.92
June 30, 2006	$	48.39	$	45.70	$	2.69

Capital and Liquidity

At June 30, 2006, common stock equity comprised 47.9% of our permanent capitalization (common stock, long-term debt and the current portion of long-term debt and financing obligations).

No common stock or long-term debt was repurchased during the second quarter of 2006.

Cash flows from operations improved significantly in 2006 relative to 2005 as we have collected fuel costs which were deferred in 2005. Cash flow from operating activities for the six month period ended June 30, 2006 was 141% of cash requirements for capital additions and other capital requirements compared to 66% in 2005.

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Page 4 of 13

Cash flow from operations was positively impacted by the collection of $25.7 million of Texas fuel surcharges in the first six months of 2006. In 2005, significant fuel costs were deferred for future recovery. In Texas, fuel costs are recovered through a fixed fuel factor which may be adjusted twice a year. We record deferred fuel revenues and a deferred asset for the under-recovery of fuel costs until they can be recovered from Texas customers. In October 2005, we began recovering through a fuel surcharge $53.6 million of fuel under-recoveries over a 24-month period. In February 2006, we increased our fuel factors on an interim basis and implemented an additional fuel surcharge to recover $34 million of fuel under-recoveries, including interest through the surcharge period, over a twelve-month period. The increase in cash flows from operations has allowed us to internally finance additional investments in electric utility plant and to increase our balance of cash and temporary investments by $24 million in 2006.

2006 Earnings Guidance

We are reiterating our earnings guidance for 2006 of $1.10 to $1.35 per basic share.

Conference Call

A conference call to discuss second quarter 2006 earnings is scheduled for 4 p.m. Eastern Time, Thursday, August 3, 2006. The dial-in number is 888-982-4489 with a passcode of 2006. The conference leader will be Scott Wilson, Executive Vice President and Chief Financial and Administrative Officer of EE. A replay will run through August 18, 2006. The dial-in number is 888-403-4664 and a passcode is not required for the replay. The conference call and presentation slides will be webcast live on EE’s website found at http://www.epelectric.com. A replay of the webcast will be available shortly after the call.

Safe Harbor

This news release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (i) increased prices for fuel and purchased power and the possibility that regulators may not permit EE to pass through all such increased costs to customers; (ii) determinations by regulators that may adversely affect EE’s ability to recover previously incurred fuel costs in rates; (iii) fluctuations in off-system sales margins due to uncertainty in the economy power market and the availability of generating units; (iv) disallowance of the retention of 75% of off-system sales margins by the PUCT; (v) unanticipated increased costs associated with scheduled and unscheduled outages; (vi) the cost of replacing steam generators for Palo Verde Unit 3 and other costs at Palo Verde; (vii) the costs of legal defense and possible judgments which may accrue as the result of ongoing litigation or any regulatory proceeding; (viii) deregulation of the electric utility industry; (ix) reduced wholesale margins; (x) possible increased costs of compliance with environmental or other laws, regulations and policies; (xi) possible income tax and interest payments as a result of audit adjustments proposed by the IRS; (xii) possible warranty obligations attributable to MiraSol Energy Services, a subsidiary of EE; (xiii) a possible reduction in the reliability of our service and possible added expense in the event of a strike by, or lock out of, our union employees; and (xiv) other factors detailed by EE in its public filings with the Securities and Exchange Commission. EE’s filings are available from the Securities and Exchange Commission or may be obtained through EE’s website, www.epelectric.com. Any such forward-looking statement is qualified by reference to these risks and factors. EE cautions that these risks and factors are not exclusive. EE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EE except as required by law.

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Page 5 of 13

El Paso Electric Company and Subsidiary

Consolidated Statements of Operations

Quarter Ended June 30, 2006 and 2005

(In thousands except for per share data)

(Unaudited)

	2006			2005			Variance
Operating revenues, net of energy expenses:
Base revenues	$	116,228		$	110,676		$	5,552	(a)
Off-system sales margins, net of sharing		627			696			(69	)(b)
Other		4,059			1,647			2,412
Operating Revenues Net of Energy Expenses		120,914			113,019			7,895
Other Operating Expenses:
Other operations and maintenance		45,948			40,140			5,808
Palo Verde operations and maintenance		23,556			16,658			6,898
Taxes other than income taxes		12,358			10,033			2,325
Loss on extinguishment of debt		—			19,418			(19,418	)
Other income		92			888			(796	)
Earnings Before Interest, Taxes, Depreciation and Amortization		39,144			27,658			11,486	(c)
Depreciation and amortization		16,860			23,855			(6,995	)
Interest charges		7,801			10,236			(2,435	)
Income Before Income Taxes		14,483			(6,433	)		20,916
Income tax benefit		(766	)		(2,471	)		1,705	(d)
Net Income	$	15,249		$	(3,962	)	$	19,211
Basic Earnings per Share	$	0.32		$	(0.08	)	$	0.40
Diluted Earnings per Share	$	0.31		$	(0.08	)	$	0.39
Weighted average number of shares outstanding		48,284			47,704			580
Weighted average number of shares and dilutive potential shares outstanding		48,796			47,704			1,092

(a) Base revenues exclude fuel recovered through New Mexico base rates of $7.6 million and $7.1 million, respectively.

(b) Texas customers received 25% of margins in the second quarter of 2006 and 50% in the second quarter of 2005.

(c) EBITDA is a non-GAAP financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP.

(d) The 2006 income tax benefit includes the recognition of a change in deferred income tax liability resulting from changes in the Texas franchise (income) tax law in May 2006 of $6.2 million.

Page 6 of 13

El Paso Electric Company and Subsidiary

Consolidated Statements of Operations

Six Months Ended June 30, 2006 and 2005

(In thousands except for per share data)

(Unaudited)

	2006		2005		Variance
Operating revenues, net of energy expenses:
Base revenues	$	212,709	$	204,065	$	8,644	(a)
Off-system sales margins, net of sharing		6,877		8,415		(1,538	)(b)
Other		10,645		4,009		6,636
Operating Revenues Net of Energy Expenses		230,231		216,489		13,742
Other Operating Expenses:
Other operations and maintenance		86,451		76,888		9,563
Palo Verde operations and maintenance		40,245		30,733		9,512
Taxes other than income taxes		24,918		20,449		4,469
Loss on extinguishments of debt		—		19,418		(19,418	)
Other income		223		979		(756	)
Earnings Before Interest, Taxes, Depreciation and Amortization		78,840		69,980		8,860	(c)
Depreciation and amortization		34,078		47,425		(13,347	)
Interest charges		15,447		21,255		(5,808	)
Income Before Income Taxes		29,315		1,300		28,015
Income tax expense		4,762		505		4,257	(d)
Net Income	$	24,553	$	795	$	23,758
Basic Earnings per Share	$	0.51	$	0.02	$	0.49
Diluted Earnings per Share	$	0.50	$	0.02	$	0.48
Weighted average number of shares outstanding		48,208		47,555		653
Weighted average number of shares and dilutive potential shares outstanding		48,753		47,978		775

(a) Base revenues exclude fuel recovered through New Mexico base rates of $14.3 million and $13.6 million, respectively.

(b) Texas customers received 50% of margins through June 30, 2005. Beginning in July 2005 customers’ share of margins decreased to 25%.

(c) EBITDA is a non-GAAP financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP.

(d) The 2006 income tax expense includes the recognition of a benefit due to a change in deferred income tax liability resulting from changes in the Texas franchise (income) tax law in May 2006 of $6.2 million.

Page 7 of 13

El Paso Electric Company and Subsidiary

Cash Flow Summary

Six Months Ended June 30, 2006 and 2005

(In thousands and Unaudited)

	2006			2005
Cash flows from operating activites:
Net income	$	24,553		$	795
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization of electric plant in service		34,078			47,425
Deferred income taxes, net		3,770			1,783
Loss on extinguishment of debt		—			19,418
Other		12,728			13,380
Change in working capital items:
Net recovery (deferral) of fuel revenues		17,324			(18,081	)
Other		(14,352	)		(34,074	)
Net cash provided by operating activites		78,101			30,646
Cash flows from investing activites:
Cash additions to utility property, plant and equipment		(42,792	)		(35,851	)
Cash additions to nuclear fuel		(8,124	)		(7,844	)
Decommissioning trust funds		(3,991	)		(3,949	)
Other		(427	)		1,244
Net cash used for investing activities		(55,334	)		(46,400	)
Cash flows from financing activities:
Reacquistion and remarketing of debt		—			(381,847	)
Issuance of new debt		—			397,688
Nuclear fuel financing obligation		1,218			4,772
Other (a)		185			(24,300	)
Net cash provided by (used for) financing activities		1,403			(3,687	)
Net increase (decrease) in cash and temporary investments		24,170			(19,441	)
Cash and temporary investments at beginning of period		7,956			29,401
Cash and temporary investments at end of period	$	32,126		$	9,960
Cash Interest Payments	$	16,464		$	29,004

(a) Includes $22.4 million in 2005 to settle cash flow hedge associated with the issuance of senior notes in June 2005

Page 8 of 13

El Paso Electric Company and Subsidiary

Quarter Ended June 30, 2006 and 2005

Sales and Revenues Statistics

	2006		2005		Increase (Decrease)
MWh sales:
Retail:
Residential		538,372		486,420	10.7	%
Commercial and industrial, small		581,136		553,977	4.9	%
Commercial and industrial, large		306,684		307,020	(0.1	%)
Sales to public authorities		362,809		335,442	8.2	%
Total retail sales		1,789,001		1,682,859	6.3	%
Wholesale:
Sales for resale		14,443		13,051	10.7	%
Off-system sales		288,099		246,031	17.1	%
Total wholesale sales		302,542		259,082	16.8	%
Total MWh sales		2,091,543		1,941,941	7.7	%
Operating revenues (in thousands):
Base revenues:
Retail:
Residential	$	45,021	$	41,110	9.5	%
Commercial and industrial, small		42,554		41,359	2.9	%
Commercial and industrial, large		10,159		10,321	(1.6	%)
Sales to public authorities		17,933		17,379	3.2	%
Total retail base revenues		115,667		110,169	5.0	%
Wholesale:
Sales for resale		561		507	10.7	%
Total base revenues		116,228		110,676	5.0	%
Fuel revenues:
Recovered from customers during the period		57,084		36,149	57.9	%
Under/(over) collection of fuel		10,543		20,594	(48.8	%)
New Mexico fuel in base revenues		7,639		7,098	7.6	%
Total fuel revenues		75,266		63,841	17.9	%
Off-system sales		13,942		11,674	19.4	%
Other		6,360		3,109	104.6	%
Total operating revenues	$	211,796	$	189,300	11.9	%
Off-system sales (in thousands):
Gross margins	$	775	$	1,130	(31.4	%)
Retained margins		627		696	(9.9	%)
Average number of retail customers:
Residential		307,657		299,759	2.6	%
Commercial and industrial, small		32,467		31,530	3.0	%
Commercial and industrial, large		58		58	0.0	%
Sales to public authorities		4,816		4,562	5.6	%
Total		344,998		335,909	2.7	%
Number of retail customers (end of period):
Residential		308,107		300,235	2.6	%
Commercial and industrial, small		32,565		31,637	2.9	%
Commercial and industrial, large		59		59	0.0	%
Sales to public authorities		4,819		4,572	5.4	%
Total		345,550		336,503	2.7	%
Weather statistics					10 Yr Average
Heating degree days		16		84	87
Cooling degree days		1,149		942	960

Page 9 of 13

El Paso Electric Company

Quarter Ended June 30, 2006 and 2005

Generation and Purchased Power Statistics

	2006		2005		Increase (Decrease)
Generation and purchased power (MWh):
Palo Verde	649,690		879,109		(26.1	)%
Four Corners	211,121		185,265		14.0	%
Gas plants	591,716		674,956		(12.3	)%
Total generation	1,452,527		1,739,330		(16.5	)%
Purchased power	818,164		372,001		119.9	%
Total available energy	2,270,691		2,111,231		7.5	%
Line losses and Company use	179,148		169,390		5.8	%
Total	2,091,543		1,941,941		7.7	%
Palo Verde capacity factor	48.1	%	65.9	%
Four Corners capacity factor	92.1	%	81.3	%

Page 10 of 13

El Paso Electric Company and Subsidiary

Six Months Ended June 30, 2006 and 2005

Sales and Revenues Statistics

	2006		2005		Increase (Decrease)
MWh sales:
Retail:
Residential		989,535		935,884	5.7	%
Commercial and industrial, small		1,030,743		989,467	4.2	%
Commercial and industrial, large		568,148		574,860	(1.2	%)
Sales to public authorities		645,035		603,488	6.9	%
Total retail sales		3,233,461		3,103,699	4.2	%
Wholesale:
Sales for resale		23,680		21,216	11.6	%
Off-system sales		675,977		833,142	(18.9	%)
Total wholesale sales		699,657		854,358	(18.1	%)
Total MWh sales		3,933,118		3,958,057	(0.6	%)
Operating revenues (in thousands):
Base revenues:
Retail:
Residential	$	82,186	$	77,832	5.6	%
Commercial and industrial, small		77,442		74,890	3.4	%
Commercial and industrial, large		19,204		19,097	0.6	%
Sales to public authorities		32,969		31,414	5.0	%
Total retail base revenues		211,801		203,233	4.2	%
Wholesale:
Sales for resale		908		832	9.1	%
Total base revenues		212,709		204,065	4.2	%
Fuel revenues:
Recovered from customers during the period		107,799		68,219	58.0	%
Under/(over) collection of fuel		7,955		18,052	(55.9	%)
New Mexico fuel in base revenues		14,256		13,644	4.5	%
Total fuel revenues		130,010		99,915	30.1	%
Off-system sales		40,701		38,384	6.0	%
Other		10,805		6,121	76.5	%
Total operating revenues	$	394,225	$	348,485	13.1	%
Off-system sales (in thousands):
Gross margins	$	8,502	$	13,660	(37.8	%)
Retained margins		6,877		8,415	(18.3	%)
Average number of retail customers:
Residential		306,680		298,672	2.7	%
Commercial and industrial, small		32,344		31,355	3.2	%
Commercial and industrial, large		59		58	2.0	%
Sales to public authorities		4,809		4,560	5.5	%
Total		343,892		334,645	2.8	%
Number of retail customers (end of period):
Residential		308,107		300,235	2.6	%
Commercial and industrial, small		32,565		31,637	2.9	%
Commercial and industrial, large		59		59	0.0	%
Sales to public authorities		4,819		4,572	5.4	%
Total		345,550		336,503	2.7	%
Weather statistics					10 Yr Average
Heating degree days		1,040		1,291	1308
Cooling degree days		1,162		944	981

Page 11 of 13

El Paso Electric Company

Six Months Ended June 30, 2006 and 2005

Generation and Purchased Power Statistics

	2006		2005		Increase (Decrease)
Generation and purchased power (MWh):
Palo Verde	1,583,858		2,100,088		(24.6	)%
Four Corners	418,632		378,075		10.7	%
Gas plants	1,038,076		1,179,232		(12.0	)%
Total generation	3,040,566		3,657,395		(16.9	)%
Purchased power	1,228,634		631,955		94.4	%
Total available energy	4,269,200		4,289,350		(0.5	)%
Line losses and Company use	336,082		331,293		1.4	%
Total	3,933,118		3,958,057		(0.6	)%
Palo Verde capacity factor	58.7	%	79.1	%
Four Corners capacity factor	91.6	%	83.0	%

Page 12 of 13

El Paso Electric Company and Subsidiary

Financial Statistics

At June 30, 2006 and 2005

(In thousands, except number of shares and book value per share)

	2006			2005
Balance Sheet
Cash and Temporary Investments	$	32,126		$	9,960
Common Stock Equity	$	583,914		$	522,145
Long-term Debt, Net of Current Portion		590,851			590,825
Financing Obligations, Net of Current Portion		21,474			20,120
Total Capitalization	$	1,196,239		$	1,133,090
Current Portion of Long-Term Debt and
Financing Obligations	$	21,649		$	25,850
Number of Shares		48,456,574			47,947,716
Book Value Per Common Share	$	12.05		$	10.89
Common Equity Ratio		47.9	%		45.1	%
Debt Ratio		52.1	%		54.9	%

Page 13 of 13