10.	Rate Matters

Recently Concluded Regulatory Proceedings - NMPRC and PUCT

Base Rate

New Mexico Retail Rate Case - In February 2011, SPS filed a request with the NMPRC seeking to increase New Mexico electric rates approximately $19.9 million. The rate filing was based on a 2011 test year adjusted for known and measurable changes for 2012, a requested ROE of 11.25 percent, an electric rate base of $390.3 million and an equity ratio of 51.11 percent.

In December 2011, the NMPRC approved a black box settlement with new rates effective Jan. 1, 2012. The settlement increased base rates by $13.5 million. SPS agreed not to file another base rate case until Dec. 3, 2012 with new final rates from the result of such case not going into effect until Jan. 1, 2014 (Settlement Period). However, SPS can request to implement interim rates if the NMPRC standard for interim rates is met. During the Settlement Period, rates are to remain fixed aside from the continued operation of the fuel adjustment clause and certain exceptions for energy efficiency, a rider for an approved renewable portfolio standard regulatory asset, and actual costs incurred for environmental regulations with an effective date after Dec. 31, 2010.

Texas Retail Rate Case - In May 2010, SPS filed a request with the PUCT seeking to increase Texas electric rates by approximately $71.5 million inclusive of franchise fees. The rate filing was based on a 2009 test year adjusted for known and measurable changes, a requested ROE of 11.35 percent, an electric rate base of $1.031 billion and an equity ratio of 51.0 percent. In November 2010, SPS filed an update to the cost of service to reflect the sale of Lubbock facilities which reduced the total request to approximately $63.7 million.

Effective Feb. 16, 2011, the parties reached an unopposed settlement to resolve all issues in the case and increase base rates by $39.4 million, of which $16.9 million is associated with the transfer of two riders, the TCRF and the PCRF, into base rates. Effective Jan. 1, 2012, base rates increased by an additional $13.1 million.

SPS agreed not to file another rate case until Sept. 15, 2012. In addition, SPS cannot file a TCRF application until 2013, and if SPS files a TCRF application before the effective date of rates in its next rate case, it must reduce the calculated TCRF revenue requirement by $12.2 million.