Annual Shareholder Luncheon October 17, 2013

Sheriff Dan Houston - Matt Rush Pledge and Invocation Sheriff Dan Houston - Matt Rush

Special Guests

Thanks to today’s sponsors:

Teen Vernacular

Swerve Example: "Would you cover my shift at work instead of going to the movies with your friend?" "Swerve! I'm going to the movies."   If someone is being really rude, you can say "swerve" and walk away.

Swerve To dismiss or to say no to a request; to imply dodging or avoiding a person or a person's request.

NMUSA Update Bill Hagler Past President

Ash Collins President

Board of Directors 2013 – 2014 Officers: Directors: Ash Collins, Jr., President Dr. Lenton Malry, Vice President Ed Borchardt, Secretary Dan Lyon, J. D., Treasurer Bill Hagler, Past President Directors: John Florez Bill Pope Bob Reed We have an incredibly diverse and talented Board of Directors. All members of the board are volunteers who own stock in at least one of the six companies doing business in New Mexico. We try to assure that we have a fair representation of all companies. Here to introduce the Board members to you, is the current president of NMUSA, Mr. Bill Pope. Bill has been is retired from Southwestern Public Service and was the first Chairman of the PRC 10

Working with: Public Regulation Commission New Mexico Legislature Governor and other elected officials

Lunch

Edison Electrical Institute Brad Viator Edison Electrical Institute

EEI Update NMUSA Annual Meeting Albuquerque, NM Brad Viator

2012 Threat Obama budget proposed taxing dividends as ordinary income Top rate 39.6% No parity with capital gains

Engaged Strategic Partners

The American Taxpayer Relief Act of 2012

Dividend Tax Cap a Win for Utilities January 2, 2013 US ‘Fiscal Cliff‘ Agreement Calms Utilities' Fears on Tax Rates January 2, 2013 Fiscal Cliff Dividend Tax Cap a Win for Utilities January 2, 2013 Energy Sector Counts Its Wins in Cliff Deal

Environmental Issue Update

NSPS Timeline June 1, 2015 Final State Emissions Guidelines September 20, 2013 New Source Proposal Compliance June 1, 2014 Proposed State Emissions Guidelines June 30, 2016 State Compliance plans due

GHG New Source Performance Standards (NSPS) New sources: Clean Air Act (CAA) section 111(b) Command-and-control regulations (no role for states) Key issues: Compliance with natural-gas standards during normal operations Lack of an achievable standards for new coal units Existing sources: CAA section 111(d) EPA provides guidelines for state regulation Level of required reductions Extent of state compliance flexibility

What is the Role of the States in the NSPS Process? EPA sets emissions guidelines for states States submit compliance plans to EPA States have a lot of flexibility in crafting these plans But, plans ultimately must be approved by EPA Options for states could include: Variances for individual units Averaging Renewable energy standards Energy efficiency improvements

Smart Grid and DER

Traditional Electric Grid Centralized Generation Coal Hydro Nuclear End Use (Load) Industrial Commercial Residential One-Way Power Flow Substation Transmission (high voltage) Distribution (medium voltage)

Smart Grid Ecosystem Utility Operations Customer Premise Adapted from EPRI source image Distributed Generation & Storage PHEV Distribution Operations Dynamic Systems Control Outage Management Remote Monitoring & Control of Distribution Assets Data Management Customer Portal or Meter Energy Storage Advanced Monitoring, Communications & Control Utility Operations Customer Premise Smart End-Use Devices In-home monitoring “Smart” Thermostats Pool Pumps HVAC Systems Advanced Monitoring, Communications & Control

DER Challenges Net Metering Policies In many states net metering policies have been established to encourage the deployment of distributed resources particularly rooftop PV solar panels These policies allow PV customers to sell excess electricity back to the utility at the retail rate (the same price at which customers purchase electricity from their utility; which does not consider overhead costs, including distribution, transmission and generation among others). This credit is netted out of the PV customers utility bill Net metering effectively leads to more customers using the distribution system, but fewer paying the costs, thus an awkward cross subsidization of customers willing AND able to purchase these expensive systems.

Thank You Brad Viator Director, External Affairs Edison Electric Institute 202-508-5203 bviator@eei.org

Wally Drangmeister Moderator

The rapidly evolving energy industry and the future for utilities Annette Gardiner President NM Gas Company Riley Hill President and CEO Xcel Energy Pat Vincent-Collawn Chair, President and CEO PNM Resources

Door Prizes 33

P.O. Box 95735 Albuquerque, NM 87199 (505) 836-4223 Email: carla@nmusa.org Website: www.nmusa.org New mail address at the end of the year. 34