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SEC comment letter

[PNM Resources logo)

April 27, 2005

Mr. Jim Allegretto

Senior Assistant Chief Accountant

United States Securities and

Exchange Commission

450 Fifth Street, N.W.

Washington, D.C.  20549

RE:      PNM Resources, Inc.

            File No.  333-32170

            Form 10-K for the year ended December 31, 2004

Dear Mr. Allegretto:

This letter is in response to your correspondence dated
April 13, 2005, regarding our response dated April 4, 2005 to comment 3 of your
correspondence dated March 23, 2005.  Our response to your additional comments
is as follows.

1.  We note your response to
comment 3.  We are aware of our letter dated November 1, 2002.  Please note the
difference between the timing of discontinuance of SFAS No. 71 requested in our
November 1, 2002 comment No. 25 and comment No. 3 in our preceding letter
relating to income statement classification of adoption of Statement No. 143.
We do not believe such comments requested similar information.  We also realize
that the inclusion of a cost of removal component in rates, in and of itself, does
not constitute a legal asset retirement obligation ("ARO").  However, the EEI
October 2002 ARO whitepaper indicates that promises made by utilities in rate
case proceedings or specific orders issued by regulatory bodies in rate cases
should be evaluated as a potential legal obligation.  Please describe in detail
how you arrived at the conclusion that you did not have a legal obligation
associated with decommissioning your fossil fuel generating plants.  In this
regard, help us understand how you reached the conclusion to record a
cumulative  income  effect for amounts that were previously approved and
collected in rates for decommissioning.  Furthermore, please explain if you
have any legal commitment to return such amounts to ratepayers.  Lastly, please
tell us whether these fossil generating assets are still included in rate
base.  The EEI ARO whitepaper indicates that a regulated company may reverse
previous cost of removal accruals to a regulatory liability.  We may have
further comment.

SFAS No. 143, "Accounting for Asset Retirement
Obligations", sets forth how companies must account for the costs of removal of
long-lived assets when those assets are no longer used in a company's business,
but only if a company is legally required to remove such assets.  SFAS 143
requires that companies record the fair value of the costs of removal in the
period in which such obligations are incurred and capitalize that amount as
part of the book value of the long-lived asset.  The EEI October 2002 ARO white
paper addresses issues specific to the electric utility industry for
application of SFAS No.143.

In order to determine if PNM Resources, Inc. (the
"Company") had a legal obligation to remove its long-lived assets, the Company
reviewed the significant cases that deal with the retirement or decommissioning
costs of generating plants before the New Mexico Public Regulation Commission
and its predecessors ("NMPRC").  The major case was Case No. 2567 (which
implemented a companion case, No. 2530).  Case No. 2567 was resolved by
stipulation.  In testimony filed in support of the stipulation, the Company's
wholly owned subsidiary, Public Service Company of New Mexico ("PNM"),
explained that the depreciation rates embedded in the cost of service
supporting the stipulated rates included decommissioning cost estimates.  The
stipulation provided that PNM would be allowed to recover all fair, just and
reasonable costs arising from the decommissioning of its fossil-fuel generating
plants, including demolition, waste disposal, environmental and site
restoration.  Although PNM is allowed to recover any reasonable costs it incurs
for these purposes, PNM did not commit that it would undertake these efforts.
In approving the stipulation, the NMPRC expressly found that its approval to include
decommissioning costs in PNM's depreciation rates did not preclude the NMPRC
from later determining that such costs or rates should be revised, as
contemplated by NMPRC Rule 17.3.340 ("Depreciation Rule").  The NMPRC noted
that the Depreciation Rule embodies a process of continuing review and revision
of a utility's depreciation rates.  Thus, the assumption built into rates has
been that the plants will be decommissioned.  However, as has been recognized,
rates are developed based on numerous assumptions, some of which may never come
to fruition.  Under applicable case law, in order for promissory estoppel to
arise, there must be a promise which the promissor would reasonably expect to
induce action or forbearance on the part of the promissee or third party and
which in fact does so induce.  In such cases the promise is binding if it is
necessary to enforce it to avoid injustice.

In this situation, PNM's
testimony did not rise to a level of a promise or commitment to decommission
the generating plant.  The decommissioning was an assumption used to develop a
cost of service to support the reasonableness of stipulated rates.  The NMPRC,
in its order supported by the Depreciation Rule, accepted the cost level
assumption but specifically retained the authority to revise costs estimates
and assumptions in the future.  Pursuant to the Depreciation Rule, PNM must
make annual filings regarding its depreciation rates for the NMPRC to review.
Thus, there was no detrimental reliance on the part of the NMPRC.  Finally, the
third necessary element of promissory estoppel, avoiding injustice, is also
missing, since the NMPRC may make necessary adjustments in future ratemaking
proceedings or depreciation review proceedings.

Thus, there is nothing more in
PNM's situation than the inclusion of decommissioning costs in rates, which by
itself is insufficient to conclude that such costs qualify as an ARO.

There is no legal commitment
embodied in the rates or NMPRC orders or rules that would require refunds
associated with decommissioning costs if decommissioning doesn't actually
occur. The final order in Case No. 2567 requires PNM to conduct an annual
review of depreciation rates, including a separate statement of proposed
decommissioning costs to be included in the depreciation rates.  In addition,
PNM is required to do a detailed depreciation study at least every five years,
which includes revised estimates for decommissioning expenses and salvage
values.  If the NMPRC does not rule otherwise, within sixty days of the filing,
PNM is authorized to use the depreciation rates for the ensuing year.

As a result of these conclusions,
PNM recorded the difference between amounts previously recorded for fossil fuel
decommissioning and its legal obligation as part of the cumulative effect of
accounting change recorded on its consolidated statement of earnings in the
first quarter of 2003 associated with the adoption of SFAS No. 143.

PNM filed its five-year
depreciation study with the NMPRC on June 30, 2003 (after the adoption of SFAS
No. 143) requesting new depreciation rates for all of its electric plant,
property and equipment.  In submitting the new study, PNM advised the NMPRC of
its adoption of SFAS No. 143.  PNM told the NMPRC that, as a result, it would
no longer be basing its depreciation rates on the decommissioning assumptions
that had been used in prior studies.  Instead PNM developed depreciation rates
based on its ARO calculation. In addition, the depreciation reserve for amounts
previously recorded associated with fossil fuel decommissioning was reduced by
the cumulative effect amount.   The new rates, which included the adjustment to
the depreciation reserve, were approved by the NMPRC and went into effect
January 1, 2004.  As a result, consistent with the purposes of the Depreciation
Rule, there should not be a significant over-accrual in the depreciation
reserve due to the adoption of SFAS No. 143.  Thus, there should be no refund
liability.

These fossil-fuel generating assets are still in rate
base.

We hope this response provides
you all the information you need.  If you have further accounting questions,
you may contact Tom Sategna, Corporate Controller, at (505) 241-4615, or for
legal questions Pat Ortiz, General Counsel, at (505) 241-2896.

Sincerely,

/s/ John R.
Loyack

John R. Loyack

Senior Vice President & Chief
Financial Officer

cc:  Robert Babula, SEC Division
of Corporate Finance

       Mike Rico, PNM Resources,
Inc.