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SEC Comment Letter

June 1, 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
May 10, 2005, regarding our response dated April 4, 2005 to comment 3 of your
correspondence dated March 23, 2005 and our response dated April 27, 2005 to
comment 1 of your correspondence dated April 13, 2005.  Our response to your
additional comments is as follows.

 We note your response to
     comment 1.  We understand you may not have a legal obligation to
     decommission your fossil generating units.  Absence of a legal obligation
     justifies not accruing a decommissioning liability in advance, as required
     under SFAS no. 143.  However, it is still unclear why you have recorded
     amounts previously collected in rates for decommissioning as part of the
     cumulative income effect, as opposed to a regulatory liability.  You
     indicated that "there is no legal commitment embodied in rates or NMPRC
     orders.that would require refund.".  You also indicate that depreciation
     rates were adjusted to reflect an ARO approach to determining closure
     expense subsequent to 6/30/03; which we assume means that depreciation
     rates excludes closure costs for fossil fuel plants.  If otherwise, please
     advise what you mean by this statement.  You finally indicate that the new
     "Depreciation Rule" will result in no significant over-accrual and hence
     no refund obligation.  We do not understand how the progression of these
     statements leads you to your conclusion.  Therefore, please explain in
     detail why you recorded a cumulative income effect, as opposed to a regulatory
     liability.  To the extent you have obtained an opinion of council or there
     is any relevant jurisdictional precedent or regulatory approval for
     collection of amounts that may never be expended and thus be retained by
     the company should be fully explained.  We may have further comment.

Legal Obligation to Remove Long-Lived Assets.
 In
order to determine if PNM Resources, Inc. (the "Company") had a legal
obligation to remove its long-lived assets, the Company reviewed a number of
different materials, including:  1) federal and state environmental laws,
regulations and permits related to generation assets; 2) construction,
operating and participation agreements for participant owned generation assets;
3) pollution control bond agreements related to pollution control facilities at
the generation facilities; 4) water contract agreements; 5) power purchase
agreements; 6) transmission participation agreements; 7) interconnection
agreements; 8) right-of-way agreements; 9) franchise agreements; 10) switchyard
agreements; 11) leases; and 12) the significant cases that deal with the
retirement or decommissioning costs of generating plants before the New Mexico
Public Regulation Commission ("NMPRC"), primarily Case No. 2567 (which
implemented a companion case, No. 2530).  These cases were discussed in our
letter dated April 27, 2005.  From these review activities, the Company
concluded there was a legal obligation to decommission only a small portion of
its fossil-fuel generating units.

No Refund Obligation.
 In
determining whether the Company's wholly-owned subsidiary, Public Service
Company of New Mexico ("PNM"), had an obligation to refund amounts previously
collected in rates for decommissioning expenses for PNM's fossil fuel units,
the Company reviewed the law applicable to utility refund obligations.  The
following is a summary of the Company's analysis.

New Mexico has for a long time
followed the generally-accepted ratemaking principle prohibiting retroactive
ratemaking.  In State Corporation Commission v. Mountain States Telephone
& Telegraph Co., 54 N.M. 315, 338, 224 P.2d 155, 170 (1950), the New
Mexico Supreme Court held that losses in a past period cannot be made up by
adjustments to future earnings.  In New Mexico Electric Service Co. v. New
Mexico Public Service Commission, 84 N.M. 683, 472 P.2d 648 (1970), the
utility had received a refund from its wholesale power supplier and had passed
on the refund only to customers who had contracts requiring that the refunds be
passed on.  The general body of ratepayers, however, did not receive a refund.
The Court held that the New Mexico Public Utility Act (the "Act") did not
provide authority to order refunds of rates already collected unconditionally.
The Act has not been amended in a way that would nullify that ruling.

The refund prong of the
retroactive ratemaking prohibition has been described as follows:   "Once rates
are set by a regulating agency in accordance with statutory guidelines, the
revenues realized belong to the company.  The amount, if any, remaining after
paying taxes, and operating expenses, including expenses of depreciation, is
the company's compensation for the use of its property."  Connecticut Light
& Power Co. v. Department of Public Utility Control, 40 Conn. Supp.
520, 536, 516 A.2d 888, 896 (1986).  Citing Board of Public Utility
Commissioners v. New York Telephone Co., 271 U.S. 23, 32 (1926), the
Connecticut court noted that where a utility has charged excessive depreciation
and so created a reserve account balance greater than required, the utility
cannot be compelled to apply that excessive balance to overcome deficits in
future earnings:  "[T]he law does not require the company to give up for the
benefit of future subscribers any part of its accumulations from past
operations."  516 A.2d at 896.

Attached as Exhibit 1 to this
response is the full cite regarding the Board of Public Utility Commissioners
vs. New York Telephone Co.

In order to avoid the application
of the retroactive ratemaking prohibition, the ratemaking agency must impose
conditions on the collection of rates making them subject to refund under
specified circumstances.  Thus, establishing interim rates that are subject to
refund or recoupment is permissible. U S West Communications, Inc. v. New
Mexico State Corporation Commission, 127 N.M. 254, 980 P.2d 37 (1999).
And, the NMPRC has long used automatic adjustment clauses with "balancing
accounts" to more precisely match volatile fuel and purchased power expenses
with associated revenue collections.  In this case, however, the NMPRC set
unconditional rates which were not subject to refund.  Rather, through its
Depreciation Rule (discussed in our previous correspondence), the NMPRC adjusts
the depreciation reserve periodically and prospectively so that at any particular
point in time there are not substantial over- or under-accruals in the
reserve.  These adjustments do not include a refund obligation.  The NMPRC's
acceptance of the latest depreciation study in 2003 which recalibrated the
depreciation reserve to recognize the elimination of full decommissioning of
fossil-fuel generating plants as an assumption in setting rates further
demonstrates the lack of future refund exposure in this regard. Thus, the
Company concluded PNM had no legal obligation to refund amounts previously
collected in rates for decommissioning expenses for PNM's fossil fuel units.

Other Relevant Information.  The Company's auditors
Deloitte & Touche LLP (lead partner on the engagement, the concur partner
and the national utilities director) have reviewed the responses that we have
supplied to the SEC regarding the conclusions reached for the adoption of
SFAS-143 and are in agreement with the Company's accounting treatment, i.e.,
the recording of the cumulative effect for amounts previously collected for
fossil fuel decommissioning costs.

The Company also did a review of
the 10K's of two other utilities that operate within the state of New Mexico
that are regulated by the NMPRC to determine how these utilities accounted for
the adoption of SFAS-143.  One of the utilities that has an ownership in a
coal-fired plant located in New Mexico recorded a cumulative effect for amounts
related to decommissioning of this facility, similar to how the Company
accounted for previously collected fossil-fuel decommissioning costs.  The
other utility did not have any specific disclosures related to its adoption of
SFAS-143.

Conclusions.
  The
Company completed its review of the agreements described above, regulatory
cases and law relevant to a determination of its legal obligation to
decommission, the law relevant to its refund obligations, and the relevant
authoritative accounting literature, and concluded that there was a legal
obligation to decommission only a small portion of its fossil fuel generating
units and no legal obligation to refund amounts previously collected in rates
for decommissioning expenses for PNM's fossil fuel units.  The Company
established the appropriate asset retirement obligation for the specific
fossil-fuel generation assets, as the Company had no legal obligation to refund
the amounts previously collected in rates for decommissioning expense, the
Company recognized the remaining difference as a cumulative effect to income in
accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations".

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

Sincerely,

/s/ Tom Sategna

Vice President and Corporate
Controller

cc:  Robert Babula, SEC Division
of Corporate Finance

       Mike Rico, PNM Resources,
Inc.

EXHIBIT
1

In Board of
Public Utility Commissioners v. New York Telephone Co., 271 U.S. 23 (1926),
the United States Supreme Court affirmed a lower court decision enjoining rates
established by the New Jersey Board of Public Utility Commissioners.  The Board
had refused to increase rates despite the utility's claim of a revenue
deficiency, essentially finding that the company had incurred excessive
depreciation charges in the past, creating a reserve depreciation account
greater than required to adequately maintain its property.  As a result, the
Board deducted from depreciation expense and added to net earnings an amount
sufficient to make up the revenue deficiency.  The resulting shortage in
depreciation expense was then to be made up out of the balance in the reserve
account built up in prior years.  In rejecting this ratemaking method, the
Court stated, at 31-32:

The customers are entitled to
demand service and the company must comply.  The company is entitled to just
compensation and, to have the service, the customers must pay for it.  The
relation between the company and its customers is not that of partners, agent
and principal, or trustee and beneficiary..The revenue paid by the customers
for service belongs to the company.  The amount, if any, remaining after paying
taxes and operating expenses including the expense of depreciation is the
company's compensation for the use of its property.  If there is no return, or
if the amount is less than a reasonable return, the company must bear the
loss.  Past losses cannot be used to enhance the value of the property or to
support a claim that rates for the future are confiscatory..And the law does
not require the company to give up for the benefit of future subscribers any
part of its accumulations from past operations.  Profits of the past cannot be
used to sustain confiscatory rates for the future.

Customers pay for service, not for the property used to
render it.  Their payments are not contributions to depreciation or other
operating expenses or to capital of the company.  By paying bills for service
they do not acquire any interest, legal or equitable, in the property used for
their convenience or in the funds of the company.  Property paid for out of
moneys received for service belongs to the company just as does that purchased
out of proceeds of its bonds and stock.  It is conceded that the

exchange rates
complained of are not sufficient to yield a just return after paying taxes and
operating expenses, including a proper allowance for current depreciation.  The
property or money of the company represented by the credit balance in the
reserve for depreciation cannot be used to make up the deficiency. (Citations
omitted.)

The New Mexico
Supreme Court has agreed with these principles.  In affirming a lower court
decision reversing a New Mexico Public Service Commission decision ordering
refunds to customers of wholesale power refunds the utility had received from
its supplier, the Court rejected an argument that the refunds constituted a
trust fund that belonged to ratepayers.  New Mexico Electric Service Co. v. New Mexico Public Service Commission, 84 N.M. 683, 685, 472 P.2d 648, 650 (1970).  And,
in another context, the New Mexico Supreme Court has cited favorably to the
passage from the New York Telephone opinion quoted above.  Gas
Company of New Mexico v. New Mexico Public Service Commission, 100 N.M.
740, 743, 676 P.2d 817 (1984).