Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2021

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,
	2021		2020		2021		2020
Assets:	(In thousands)
Current:
FPPAC	$	7,130	$	—	$	—	$	—
Transmission cost recovery factor	—		—		3,906		—
Energy efficiency costs	—		—		2,158		202
Other	1,591		—		—		—
	8,721		—		6,064		202


	PNM				TNMP
	December 31,				December 31,
	2021		2020		2021		2020
Assets (Continued):	(In thousands)
Non-Current:

Coal mine reclamation costs(1)	$	9,942	$	9,980	$	—	$	—
Deferred income taxes	68,687		65,564		9,505		9,817
Loss on reacquired debt	17,249		19,748		27,615		28,914
Pension and OPEB(2)	165,006		190,147		17,924		22,863

Shutdown of SJGS Units 2 and 3	100,954		107,231		—		—

AMS surcharge	—		—		12,507		18,761
AMS retirement and other costs	—		—		12,286		13,915

Deferred cost under the ETA	42,656		42,703		—		—
Deferred COVID-19 costs	6,896		8,761		—		676
SJGS replacement resources	8,269		8,282		—		—
EIM	7,028		2,209		—		—
Other	2,294		3,328		5,440		4,891
	428,981		457,953		85,277		99,837
Total regulatory assets	$	437,702	$	457,953	$	91,341	$	100,039





Liabilities:
Current:
FPPAC	$	—	$	(2,274)	$	—	$	—
Renewable energy rider	(5,989)		(2,044)		—		—
Energy efficiency costs	(2,327)		(1,101)		—		—
Transmission cost recovery factor	—		—		—		(2,052)

	(8,316)		(5,419)		—		(2,052)
Non-Current:
Cost of removal	(294,193)		(284,695)		(73,029)		(59,613)
Deferred income taxes	(321,976)		(343,844)		(107,250)		(119,695)
PVNGS ARO	(1,215)		(5,394)		—		—
Renewable energy tax benefits	(16,756)		(17,912)		—		—


Accelerated depreciation SNCRs(3)	(16,331)		(12,045)		—		—
Pension and OPEB	(2,376)		—		(6,099)		(5,535)
COVID-19 cost savings	(900)		(900)		—		—
Other	(83)		(83)		(1,185)		(512)
	(653,830)		(664,873)		(187,563)		(185,355)
Total regulatory liabilities	$	(662,146)	$	(670,292)	$	(187,563)	$	(187,407)

(1) Includes $9.3 million in coal mine reclamation costs related to PNM’s planned retirement of SJGS in 2022 and recoverable under the ETA as described in Note 16

(2) Includes $2.2 million for certain PNM pension costs as described in Note 11

(3) Amounts to be included under the ETA

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); PVNGS ARO (to be determined in a future regulatory proceeding); costs recoverable under the ETA (over the securitization period); deferred COVID-19 costs (to be determined in a future regulatory proceeding); and SJGS replacement resources (to be determined in a future regulatory proceeding).

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. 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 is probable.