Good day, ladies and gentlemen, and welcome to the PNM Resources First Quarter Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Jimmie Blotter, Investor Relations Director. You may begin.

Thank you, Destiny, and thank you, everyone, for joining us this morning for the PNM Resources First Quarter 2014 Earnings Conference Call. Please note that the presentation for this conference call and other supporting documents are available on our website at pnmresources.com. Joining me today are PNM Resources Chairman, President and CEO, Pat Vincent-Collawn; and Chuck Eldred, our CFO; as well as several other members of our executive management team. Before I turn the call over to Pat, I need to remind you that some of the information provided this morning should be considered forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates, and that PNM Resources assumes no obligation to update this information. For a detailed discussion of factors affecting PNM Resources' results, please refer to our current and future annual reports on Form 10-K, quarterly reports on Form 10-Q, as well as reports on Form 8-K filed with the SEC. And with that, I will turn the call over to Pat.

Thank you, Jimmie. Good morning, everyone, and thank you for joining us on this beautiful, sunny, spring New Mexico morning. We'll begin in Slide 4 with the headlines from the first quarter. GAAP earnings were up $0.03 per share compared to quarter 1 in 2013 while ongoing earnings were equal year-over-year. We are confident that the company continues to be on the right track and we are affirming our 2014 consolidated ongoing earnings guidance range of $1.42 to $1.52 per diluted share. On April 30, the EPA gave us some good news and issued its proposed draft approval for our BART filing regarding the San Juan Generation Station. Final EPA approval is expected about the end of September, and I'll have a more detailed BART update in a few minutes. I'm also pleased to note that this past Wednesday, Standard & Poor's recognized the continued improvements in our business by changing the outlook for PNM Resources, PNM and TNMP to positive. Both S&P and Moody's now have the outlook for all of our entities rated as positive. On Slide 5, I'll start with PNM. In the first quarter, we saw decline in load year-over-year. The industrial and commercial classes showed decreases. And in each case, it was due to a specific large customer looking to cut expenses. Residential load was also down this quarter. We look at what's driving the numbers. New Mexico still lags the nation in postrecession recovery. The local economy continues to show signs of a rebound, but it has not been able yet to build momentum. Employment growth for both the state and Albuquerque Metro was positive, although it is only 0.2%. New Mexico's unemployment rate had been declining in 2013, but increased in the first quarter and it's now above the national average, with New…

Thank you, Pat, and good morning. Let's begin with a financial review with the first quarter results beginning on Slide 9 of the presentation. First quarter ongoing EPS was flat at $0.18 compared to the first quarter 2013. TNMP was up $0.04. And Corporate and Other, benefiting from reduced interest expense, was up $0.02. These were offset by PNM, which was down $0.06. Now going to more detail on Slide 10. Starting with PNM's positive drivers, rate release added $0.01. This includes both the renewable rider and the temporary Gallup contract. Palo Verde 3 market prices contributed $0.01, as did gains from Palo Verde Nuclear Decommissioning Trust. Offsetting these were an increase in depreciation and property taxes of $0.01 and an increase in outage cost of $0.02. During the first quarter, the weather in New Mexico was very mild, compared to the severe weather or polar vortex, that some may refer to, that most of you have experienced. As a result, weather was down $0.02. Heating degree days were down 14% compared to the first quarter of 2013 and 7% compared to normal. The continued softness in PNM's load for the quarter represented a decrease of $0.03. Moving to TNMP drivers in total, we are up $0.04. Rate relief for TCOS filings added $0.01. Load and weather was a combined improvement of $0.02. The strong Texas economy result in higher residential usage and higher demand charges from large commercial customers, causing TNMP's load to be up $0.015. Weather accounted for $0.005. Heating degree days were up 30% compared to Q1 of 2013, and 27% compared to normal. Offsetting this was a 37% decline in cooling degree days compared to last year and 57% compared to normal. Now turning to Slide 11. Before reviewing the guidance details, I want to announce…

Thank you, Chuck. I'm pleased with the company's performance and how we continue to effectively manage operations, especially during continued economic challenges in New Mexico. Going forward, we have a lot to do this year and we're confident that with our rate base growth, fine-tuning our businesses and above-average dividend growth, we will deliver our 10% to 13% total return proposition. Operator, we'll now open it up for questions.

[Operator Instructions] Our first question comes from Paul Fremont of Jefferies.

I guess, going back to your 2014 earnings guidance presentation, the load that you were projecting for PNM was 0% to minus 1%. And I think you gave a sensitivity of $0.05 for each percent. Are you sort of changing the annual expectation in terms of load for 2014, given sort of a 2.9% reduction on the first quarter?

Hi, Paul, this is Chuck. The answer is no. We're going to keep with the guidance range of 0% to negative 1%. If you were to get into the details of our load, January and February were frankly right on target. It was March which is, we consider a shoulder month, as well as April. And so you'd see some softness in the load that we feel will be rebounded as we go throughout the second and third quarters. We did have mild weather, as we've mentioned, which kept a lot of customers from heating and cooling systems to be used such that, that resulted in the decrease of $0.02 for the quarter. So we're still confident that we will continue to see that range of 0% to 1%, but we stay very cautiously towards understanding the impacts of that. And as a result, we continue to manage and mitigate any kind of exposure to load. As I mentioned, keeping O&M flat. We've had a very strong load growth at TNMP. And as I said, could very well easily exceed the guidance of that and help offset. Another example is the fuel continuation filing at PNM, which allows us to get -- keep a 10% of our off-system sales, which was really outside of guidance for this year. That's at least another $0.01. So when we've had some improvement in our pension and met retired medical expenses. So the bottom line is we continue to manage the risk of the load degradation until we begin to see a stronger improvement. But we don't feel, given the shoulder months and where we are at first quarter, that we feel we need to change the guidance of 0% to minus 1%.

Okay. Because also in the assumptions for both -- for O&M, for both PNM and TNMP, you -- your expectation, your built-in expectation, I think, was for flat O&M. So is there some other potential offset if the load growth does come in weaker?

We do have contingency plans that we have built into our -- managing of the business at PNM. And as I mentioned, we expect to get the 10% of off-system sales, which is helping to offset some of that impact for this year, which was outside of guidance. And the pension and medical retiree expenses, we're picking up some additional returns based on the performance and assumptions built in the original guidance. That will continue to manage the risk of the load and keep a close eye on it, as we go through the year. But still comfortable we can offset any impacts on load.

Okay. And then the -- my other question, I think relates to your planned GRC filing. Is that likely to occur later this year?

Paul, we've talked about filing in December of this year for rates that would go into effect on January 1, 2016.

Your next question comes from Ali Agha of SunTrust.

Just one quick counting question on the quarter. I noticed that the effective tax rate looked a little low, if my math was right, coming in at around 28%. So your normal 35%, 36%. Was there something going on, on the tax front?

Not that I'm aware there would be anything unusual. You may want to just follow up with Jimmie on that to kind of see what your assumptions are. But nothing unusual that happened in the first quarter that would trigger any comment on that.

And then separately, Pat, you talked about, with regards to the BART filing at the Commission that settlements can happen, theoretically, at any time. Can you give us some insight, at least qualitatively, to the receptivity of settlement? And realistically, from a timing perspective, would you think that's closer to the time of the hearings? Or when would be sort of the obvious inflection point for a settlement to occur?

Yes, I think everyone is very receptive to a settlement, Ali, since it's a very complicated case. And I think that settling it would make everybody more comfortable. Because when you do settlements, there's a lot more ability to do give and take. Usually, there's 2 times that it's more likely to have a settlement. Sometimes you have them right before this afternoon or whenever your testimony is due, so the testimony that is filed is that of the settlement. The other logical time you tend to get one is right before the hearings start. That tends to focus the minds. So those are the 2 times historically we have had settlement. And I think either of those could be reasonable. And there really is -- there's very much an openness to settling. The staff has been pretty busy up until now, so...

Right. And in terms of -- even though there have been some more separate filings, the fact that you're going through this complicated process right now, and right after that, you're going to file your rate case. I mean, how concerned are you by just the way the chronology or the timing is playing out in terms of putting a lot of stuff in front of the staff and the Commission? You think that could have some negative implications for the rate case, just from a timing perspective?

If we look at what the staff and the Commission has on their plate, just holistically, there -- the case won't go until the end of the year. I'd say the BART stuff doesn't hit the Commission until the end of the year itself. The TECO [ph] hearings are done. SPS's rate cases, done. So they won't be back into the -- in front of the commission for a while. El Paso won't be there for a while. So it's just kind of us. And the way the Commission's schedule is set is that we will have a ruling on BART before the end of the year. And then the rate case doesn't -- gets filed until the end of the year. And usually, there's no action on that until the following year. So we've made sure that there's not pancaked things on them and they've got a little breathing room in between the filings -- or the work that needs to be done on the filings.

Okay, last question. It looks like, Chuck, from your comments, given some cost savings, et cetera, you would still expect PNM to come in at the retail level to own its authorized ROE. I'm assuming that's still the case and, a, given that assumption, is the focus on the next rate case primarily going to be the Palo Verde lease acquisition? Or are you going to frame this rate case coming up?

Well, the -- to a lot of what Pat just referred to is the fact that we will have potential settlement discussions that involve San Juan and Palo Verde 3, that's part of what, I think, is the motivation of trying to work through the expectation of the 2016 rate case of understanding what we settled with, regarding things that will take place in 2018 rate case. So we're making good progress. We've had some short filings with the La Luz heating station. That was settled, that was put out of the way. The continuation filing was settled, that's been put out of the way. So the Palo Verde leases would be probably the new piece of information that they'll deal with in 2016. But beyond that, it's just the normal ROE depreciation schedules, CapEx for infrastructure investment, just the core fundamental things that are necessary to get recovery in the business. So we don't see any controversy there. But it's just more of making sure there are a lot of transparency and understanding around the BART. In the 2018, the Palo Verde 3 and the San Juan unit being shut down. So that's why we're all motivated to begin to work through potential settlements to clear the expectations and understanding for future rate increases.

One of the key things in 2016, we'll also be resetting the volume. So any -- if rate of growth stays flat, it picks up slightly, we get a chance to reset that. And it's a future test year. So that also helps with the next rate case.

Your next question comes from Paul Ridzon of KeyBanc.

Can you give a little more clarity on the Gallup contract? Is that $0.03 impact to '14? Or is that an annual earnings number?

No, that's $0.03 impact for '14, the last half of the year. The contract falls off at the end of June.

So in the '15, there should be another $0.03 impact as that -- you get to full year?

Actually, for a full year, it's closer to $0.05 to $0.06.

Okay. And is the GRC the only way you can seek relief if you continue to have customer attrition?

Yes, the only -- GRC is the only thing we have. We have an energy efficiency rider and we have a renewable rider, but we don't have any other mechanisms here in New Mexico. The one thing to remember that in 2015, the half price lease payments at Palo Verde go in there. So that provides relief for next year, if there were to be continued volume erosion.

Okay. And then do you have any other large C&Is, who are on the bubble that there could be risk of losing?

No, we actually don't -- we're not a very large business-focused state here. Our industrial class is only about 15% of our sales, it's pretty small. And the businesses we tend to have here tend to be more small and midsized businesses. So it's more just they're fine-tuning their operations as opposed to anyone leaving.

Our next question comes from Brian Russo of Ladenburg Thalmann.

I'm just curious, we've heard from a number of other utilities that have expressed some skepticism on their weather-normalized load growth models, given kind of the volatility we saw in the first quarter weather. And I'm just curious how confident are you in that negative 2.9% at PNM? And whereas 8% weather-normalized load growth at TNMP seems to be somewhat of an outlier?

Well, Brian, forecasters don't like it when I say this, but it's just as much of an art as it is of a science. Especially on a quarterly basis, I think sometimes it's difficult to tell. We had very different weather. We don't -- didn't get the polar vortex down here. And personally, we're happy about that. Corporately, we would've liked it. So I don't get too upset about looking at the quarters like that, because there is a lot of art in that weather normalization.

You can also see, Brian, when you look at 5-year normalization versus 10-year normalization, we see some differences relative to increased load on a 5-year basis. So we look at all the sensitivities and we've done some updated analysis on our models, appliance survey work that's been done to get a better feel for customer usages. So we really have fine-tuned things. And it's just a lot of it's in the economy, and the economy being slow and sluggish in New Mexico and rebounding. And so we're just experiencing that, but we're confident, over time, that will work itself back into being positive.

Okay. And you mentioned 1 large industrial customer that the load declined due to managing expenses. Is that viewed as kind of temporary? Or is that kind of the new level that customer will operate at?

I suspect, Brian, it's the new level the customer's going to operate at.

Okay. And then lastly, I'm not sure if you mentioned this earlier, but what was the impact of weather versus normal?

It was minus $0.02.

[Operator Instructions] Our next question comes from Kit Konolige of BGC.

So just to explore the sales number a little bit more. I think, Pat, you mentioned in your comments at the beginning, that it appeared that there was an issue with usage decline per customer that you attributed to a weak economy. Is -- have your guys done any work in trying to dig into that issue? Which, obviously, if that's going to continue, could be a serious problem. Or on the other hand, how confident are you that unemployment starts improving and the economy overall starts growing better, that usage issues would decline or disappear and sales growth would resume?

Sure, I think there's 2 things. One is that just on terms of the whole load, customer growth picks up again. So even if your usage is flat, when your economy picks up and you get job growth, you get customer growth, so that offsets some decline in usage. I think that this year, when we forecasted the 0% to 1% down, we do see some of this decline being permanent. Lightings, new lighting standards are in place for residential customers who can't buy those incandescent bulbs anymore. And lighting is a big piece of our load here. But a lot of it, we just think, and from talking to people is that they're just kind of being conservative now because they're a bit nervous about the economy. The restaurants are down. People are just kind of watching their pocket books. And when you get weather that's different, people don't turn on their air conditioners as early. Once people turn on their air conditioners, for example, they leave them on. And we hit a new peak last summer. So we know people are using their air conditioners. It's a lot of this -- and I think it was Brian's question, a lot of it, the weather normalization and the usage are kind of hard to pick apart. But we -- I'd say, we do see some permanent changes due to energy efficiency. But we think it'll pick up again when the economy starts growing.

Great. And when it does, I mean, what's your view of a 5-year sales growth rate, let's say?

Well, really, I think, as Pat mentioned earlier, the 2016 rate case will adjust for the impacts on load. And whether we pursue decoupling or what methodology that ultimately is pursued in that '16 case and then we'll build off of a new base there. But we're still seeing just around -- roughly around a 1% type of sales growth. And then we begin to see that increase over a longer period of time. But it's -- as Pat said, it's more of an art and it's more of when the economy in New Mexico begins to recover. And with the governor pursuing some tax incentives and reductions, we are beginning to see interest and inquiries in New Mexico. And certainly, there are opportunities over the next few years to see some growth in New Mexico more than what we're able to recognize right now. That would be our more opportunistic view in the future.

And our commercial growth really follows very closely residential growth and good job growth because much of it is small- and medium-sized commercial. So when that picks up, commercial starts again.

We have a follow-up question from Paul Ridzon of KeyBanc.

Is there any sense of the appetite for decoupling in the state? Have you had any discussions?

We have, Paul. And actually, in the rate case a while back, we did put it in. We took it out as part of the stipulation because staff and the interveners who weren't ready for it yet. But that is one of the things we're looking very closely and will probably file in the rate case. The nice thing about decoupling is it really encourages everyone to do energy efficiency, which is very popular with customers. And so I think that there's becoming more and more of an appetite for it. And our neighboring state, Arizona, has gone there now and I think the time is right for it here.

Would you pursue weather decoupling or just more conservation decoupling?

We're still looking at that.

And I'm not showing any further questions at the time. I'd like to turn it back to Pat Collawn, for closing remarks.

Thank you, and thank you, everybody, for spending time with us on this spring morning. If you have any questions, please follow-up with us. And we look forward to seeing many of you in the months to come. Have a great weekend.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.