Regulatory Assets and Liabilities

The operations of PNM and TNMP are regulated by the NMPRC, PUCT, and FERC and the provisions of GAAP for rate-regulated enterprises are applied to its regulated operations. Regulatory assets represent probable future recovery of previously incurred costs that will be collected from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and liabilities reflected in the Consolidated Balance Sheets are presented below.



	PNM						TNMP
	December 31,						December 31,
	2015			2014			2015			2014
Assets:	(In thousands)
Current:
FPPAC	$	—		$	43,980		$	—		$	—
Transmission cost recovery factor	—			—			441			2,482
Energy efficiency costs	—			—			629			1,393
	—			43,980			1,070			3,875
Non-Current:
CTC, including carrying charges	—			—			46,147			55,292
Coal mine reclamation costs	28,303			34,224			—			—
Deferred income taxes	66,990			63,645			10,244			10,556
Loss on reacquired debt	23,627			25,439			35,405			36,703
Pension and OPEB	218,743			222,545			23,356			23,803
AMS surcharge	—			—			1,673			—
AMS retirement costs	—			—			8,549			6,453
Renewable energy costs	—			5,263			—			—
Other	5,247			5,929			2,380			1,155
	342,910			357,045			127,754			133,962
Total regulatory assets	$	342,910		$	401,025		$	128,824		$	137,837
Liabilities:
Current:
FPPAC	$	(11,410	)	$	—		$	—		$	—
Other	(4,181		)	(1,703		)	—			—
	(15,591		)	(1,703		)	—			—
Non-Current:
Cost of removal	(284,015		)	(277,148		)	(26,859		)	(29,391		)
Deferred income taxes	(77,502		)	(75,941		)	(3,283		)	(3,923		)
AROs	(33,747		)	(35,834		)	—			—
Renewable energy tax benefits	(23,697		)	(24,854		)	—			—
AMS surcharge	—			—			—			(5,227		)
Nuclear spent fuel reimbursements	(9,214		)	(3,625		)	—			—
Pension and OPEB	—			—			(1,913		)	(2,121		)
Other	(6,688		)	(8,079		)	(495		)	—
	(434,863		)	(425,481		)	(32,550		)	(40,662		)
Total regulatory liabilities	$	(450,454	)	$	(427,184	)	$	(32,550	)	$	(40,662	)

The Company’s regulatory assets and regulatory liabilities are reflected in rates charged to customers or have been addressed in a regulatory proceeding. The Company does not receive or pay a rate of return on the following regulatory assets and regulatory liabilities (and their remaining amortization periods): coal mine reclamation costs (through 2020); deferred income taxes (over the remaining life of the taxable item, up to the remaining life of utility plant); pension and OPEB costs (through 2033); and AROs (to be determined in a future regulatory proceeding). In addition, TNMP does not receive a return on substantially all of its loss on reacquired debt (through 2043).

The Company is permitted, under rate regulation, to accrue and record a regulatory liability for the estimated cost of removal and salvage associated with certain of its assets through depreciation expense. Under GAAP, actuarial losses and prior service costs for pension plans are required to be recorded in AOCI; however, to the extent authorized for recovery through the regulatory process these amounts are recorded as regulatory assets or liabilities. Based on prior regulatory approvals, the amortization of these amounts will be included in the Company’s rates.

Based on a current evaluation of the various factors and conditions that are expected to impact future cost recovery, the Company believes that future recovery of its regulatory assets are probable.