G. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Texas, New Mexico and Arizona. The Company is no longer subject to tax examination by the taxing authorities in the federal jurisdiction for years prior to 2007 and in the state jurisdictions for years prior to 1998. The Company is currently under audit in the federal jurisdiction for 2009 and in Texas for 2007. A deficiency notice relating to the Company's 1998 through 2003 income tax returns in Arizona contests a pollution control credit, a research and development credit, and the sales and property apportionment factors. The Company is contesting these adjustments.

On March 23, 2010, the Patient Protection and Affordable Care Act ("PPACA") was signed into law. A major provision of the law is that, beginning in 2013, the income tax deductions for the cost of providing certain prescription drug coverage will be reduced by the amount of the Medicare Part D subsidies received. The Company was required to recognize the impacts of the tax law change at the time of enactment and recorded a non-cash charge to income tax expense of approximately $4.8 million in the first quarter of 2010.

The Company's consolidated effective tax rates are represented in the tables below.


	Effective Tax Rates
	Three Months Ended June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2011			2010			2011			2010			2011			2010
Federal statutory tax rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
Consolidated effective tax rate		33.7	%		35.2	%		32.0	%		41.8	%		32.6	%		36.4	%
Without PPACA		33.7	%		35.2	%		32.0	%		32.6	%		32.6	%		32.0	%

The Company's consolidated effective tax rate for the three, six and twelve months ended June 30, 2011 and the three months ended June 30, 2010, differs from the federal statutory tax rate primarily due to the allowance for equity funds used during construction and state income taxes. The Company's effective tax rates for the six and twelve months ended June 30, 2010, without the effect of the enactment of the PPACA differ from the federal statutory tax rate primarily due to state income taxes, the allowance for equity funds used during construction, the tax rate on earnings on qualified decommissioning trust investments, and various permanent tax differences.