El Paso Electric Company (EE) 2019年年度報告「NYSE」.pdf

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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_Form 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2019OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 19

2、34For the transition period from to Commission file number 001-14206El Paso Electric Company(Exact name of registrant as specified in its charter)Texas74-0607870(Stateorotherjurisdictionofincorporationororganization)(I.R.S.EmployerIdentificationNo.)Stanton Tower100 North Stanton StreetEl Paso,Texas7

3、9901(Addressofprincipalexecutiveoffices)(ZipCode)Registrantstelephonenumber,includingareacode:(915)543-5711Securities Registered Pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon Stock,No Par ValueEENew York Stock ExchangeSecuriti

4、es Registered Pursuant to Section 12(g)of the Act:NoneIndicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNoIndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YesNoIndicatebycheckmarkwhethertheregist

5、rant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesNoIndicatebycheckmarkwhethertheregistranthassubm

6、ittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).YesNoIndicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfile

7、r,anon-acceleratedfiler,asmallerreportingcompany,oranemerginggrowthcompany.Seethedefinitionsoflargeacceleratedfiler,acceleratedfiler,smallerreportingcompany,andemerginggrowthcompanyinRule12b-2oftheExchangeAct.LargeacceleratedfilerAcceleratedfiler Non-acceleratedfilerSmallerreportingcompany Emergingg

8、rowthcompany Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2o

9、ftheAct).YesNoAsofJune28,2019,theaggregatemarketvalueofthevotingstockheldbynon-affiliatesoftheregistrantwas$2,636,107,949(basedontheclosingpriceasquotedontheNewYorkStockExchangeonthatdate).AsofJanuary31,2020,therewere40,752,141sharesoftheCompanyscommonstockoutstanding.DOCUMENTS INCORPORATED BY REFER

10、ENCEPortionsoftheregistrantsdefinitiveProxyStatementforthe2020annualmeetingofitsshareholdersoranamendmenttothisForm10-KareincorporatedbyreferenceintoPartIIIofthisreport.TableofContentsDEFINITIONSThefollowingabbreviations,acronymsordefinedtermsusedinthisreportaredefinedbelow:Abbreviations,Acronyms or

11、 Defined TermsTermsA&G AdministrativeandgeneralABFUDC AllowanceforBorrowedFundsUsedDuringConstructionACE AffordableCleanEnergyAEFUDC AllowanceforEquityFundsUsedDuringConstructionAFUDC AllowanceforFundsUsedDuringConstructionALJ AdministrativeLawJudgeAmendedandRestated2007LTIP TheCompanysamendedandres

12、tatedstock-basedlong-termincentiveplanAmendedREA AmendmenttotheREAbytheNewMexicoEnergyTransitionAct,effectiveJune14,2019AMI AdvancedMeteringInfrastructureANPPParticipationAgreementArizonaNuclearPowerProjectParticipationAgreementdatedAugust23,1973,asamendedAOCI AccumulatedOtherComprehensiveIncomeAPSA

13、rizonaPublicServiceCompanyARO AssetRetirementObligationsASUAccountingStandardsUpdateBoardofDirectors TheBoardofDirectorsoftheCompanyCAA U.S.CleanAirActCAASettlementAgreementSettlementAgreementbetweentheU.S.DepartmentofJustice,onbehalfoftheEPA,andAPSresolvingpendingmattersundertheCAACCN Certificateof

14、ConvenienceandNecessityCEO ChiefExecutiveOfficerCommonFacilities ThethreenucleargeneratingunitsandcommonfacilitiesatPaloVerdeCompanyElPasoElectricCompanyComplianceAgreementTheCompanysAgreementwiththeTCEQundertheTexasEnvironmentalHealthandSafetyAuditPrivilegeActtoaddresscertainwaterandwastecompliance

15、issuesassociatedwiththeintegrityofthesyntheticlineroftheevaporationpondatNewmanConversionservices TheconversionofuraniumconcentratestouraniumhexafluorideCWIP ConstructionWorkInProgressCopper TheCompanysCopperPowerStationCPP CleanPowerPlanD.C.Circuit U.S.CourtofAppealsfortheDistrictofColumbiaCircuitD

16、CRF DistributionCostRecoveryFactorDOEU.S.DepartmentofEnergyDOL U.S.DepartmentofLaborEECRF EnergyEfficiencyCostRecoveryFactorEEI EdisonElectricInstituteElPasoCityofElPaso,TexasEnrichmentservices TheenrichmentofuraniumhexafluorideEPA U.S.EnvironmentalProtectionAgencyERISA EmployeeRetirementIncomeSecur

17、ityActof1974EUERF EfficientUseofEnergyRecoveryFactorExchangeAct TheSecuritiesExchangeActof1934,asamended(i)TableofContentsAbbreviations,Acronyms or Defined TermsTermsFabricationservices ThefabricationoffuelassembliesFASBFinancialAccountingStandardsBoardFCC FederalCommunicationsCommissionFERCFederalE

18、nergyRegulatoryCommissionFinalRule EPAfinalruletighteningtheprimaryandsecondaryNAAQSforground-levelozoneFortBlissFortBliss,theU.S.ArmypostnexttoElPaso,TexasFourCorners FourCornersGeneratingStationFPPCAC NewMexicoFuelandPurchasedPowerCostAdjustmentClauseFreeport Freeport-McMoRanCopperandGoldEnergySer

19、vicesLLCFTC FederalTradeCommissionGAAP U.S.GenerallyAcceptedAccountingPrinciplesGEIS GenericEnvironmentalImpactStatementGHG GreenhouseGasGorskiActionGorskiv.ElPasoElectricCompany.,etal.,CaseNo.1:19-cv-07211,intheU.S.DistrictCourtfortheSouthernDistrictofNewYorkHAFB HollomanAirForceBaseHSRAct Hart-Sco

20、tt-RodinoAntitrustImprovementsActof1976IIF InfrastructureInvestmentsFund,aninvestmentvehicleadvisedbyJ.P.MorganInvestmentManagementInc.IncentivePlan TheCompanysAnnualShort-TermIncentivePlanIRP IntegratedResourcePlanISFSI IndependentspentfuelstorageinstallationkV Kilovolt(s)kWKilowatt(s)kWhKilowatt-h

21、our(s)LasCrucesCityofLasCruces,NewMexicoLIBOR LondonInterbankOfferedRateLocal960 TheInternationalBrotherhoodofElectricalWorkersLocal960LTPPA Long-TermPurchasedPowerAgreementMaturityDate ThedateofmaturityoftheCompanysobligationsundertheRCF,currentlySeptember13,2023MergerMergerofMergerSubwithandintoth

22、eCompanywiththeCompanyasthesurvivingcorporationpursuanttotheMergerAgreementMergerAgreement AgreementandPlanofMerger,byandamongtheCompany,ParentandMergerSub,datedJune1,2019MergerConsiderationTherighttoreceive$68.25incashpershareofcommonstock,withoutinterest,pursuanttothetermsandconditionssetforthinth

23、eMergerAgreementMergerSub SunMergerSubInc.,aTexascorporationandwhollyownedsubsidiaryofParentMPS TheCompanysMontanaPowerStationMWMegawatt(s)MWhMegawatt-hour(s)NAAQS NationalAmbientAirQualityStandardsNAV NetAssetValueNDT TheCompanysPaloVerdenucleardecommissioningtrustfundsNERC NorthAmericanElectricRel

24、iabilityCorporation(ii)TableofContentsAbbreviations,Acronyms or Defined TermsTermsNetgeneratingcapabilityThemaximumloadnetofplantoperatingrequirementsthatageneratingplantcansupplyunderspecifiedconditionsforagiventimeinterval,withoutexceedingapprovedlimitsoftemperatureandstressNewman TheCompanysNewma

25、nPowerStationNMPRCNewMexicoPublicRegulationCommissionNMPRCFinalOrder NMPRCFinalOrderinCaseNo.15-00127-UTNMPUA NewMexicoPublicUtilityActNMSU NewMexicoStateUniversityNOL NetOperatingLossesNOLcarryforwards NetOperatingLosscarryforwardsNOPR NoticeofProposedRulemakingNRCU.S.NuclearRegulatoryCommissionNYS

26、E NewYorkStockExchangeOATT OpenAccessTransmissionTariffOPEBPlanTheCompanysotherpost-retirementbenefitsplan,includinghealthcarebenefitsforretiredemployeesandtheireligibledependentsandlifeinsurancebenefitsforretiredemployeesonlyO&M OperationsandmaintenancePaloVerdePaloVerdeGeneratingStationPaloVerdePa

27、rticipantsThoseutilitiesthatshareinpowerandenergyentitlements,andbearcertainallocatedcosts,withrespecttoPaloVerdepursuanttotheANPPParticipationAgreementParent SunJupiterHoldingsLLCPCBs PollutionControlBondsPNM PublicServiceCompanyofNewMexicoPowerPurchaseandSaleAgreementTheCompanysAgreementwithFreepo

28、rtpursuanttowhichFreeportdeliversenergytotheCompanyfromtheLunaEnergyFacilityandtheCompanydeliversalikeamountofenergyatGreenlee,ArizonaPPA PurchasedPowerAgreementppb PartsperbillionPUCTPublicUtilityCommissionofTexasPURA TexasPublicUtilityRegulatoryActRCF TheCompanysRevolvingCreditFacilityRCFAgreement

29、ThirdamendedandrestatedcreditagreementdatedSeptember13,2018,byandbetweentheCompanyandTheBankofNewYorkMellonTrustCompany,N.A.,astrusteeoftheRGRTREA NewMexicoRenewableEnergyActRetirementPlan TheCompanysRetirementIncomePlanRGECRioGrandeElectricCooperativeRGRTRioGrandeResourcesTrustIIRGRTNotes$110.0mill

30、ionaggregateprincipalamountofSeniorNotesissuedbyRGRTin2010RGRTSeniorNotes$65.0millionaggregateprincipalamountof4.07%SeniorGuaranteedNotesissuedbyRGRTin2018,dueAugust15,2025RioGrande TheCompanysRioGrandePowerStationRosenblattActionRosenblattv.ElPasoElectricCompany.,etal.,CaseNo.1:19-cv-01367-UNA,inth

31、eU.S.DistrictCourtfortheDistrictofDelawareROU Right-of-useRPS RenewablePortfolioStandard(iii)TableofContentsAbbreviations,Acronyms or Defined TermsTermsRule551 NMPRCRule17.9.551oftheNewMexicoAdministrativeCodeSEC U.S.SecuritiesandExchangeCommissionSecuritiesAct TheSecuritiesActof1933,asamendedShowCa

32、useProceedingFERCproceedinginwhichacompanymustreviseitstransmissionratesfortheTCJAeffectorshowcauseastowhyitshouldnotberequiredtodosoSPS SouthwesternPublicServiceCompanySPSAppealNo.1 SouthwesternPublicServiceCo.v.NMPRC,No.S-1-SC-37248,intheNewMexicoSupremeCourtSPSAppealNo.2 SouthwesternPublicService

33、Co.v.NMPRC,No.S-1-SC-37308,intheNewMexicoSupremeCourtSteinActionSteinv.ElPasoElectricCompany.,etal.,CaseNo.1:19-cv-06703,intheU.S.DistrictCourtfortheSouthernDistrictofNewYorkTCEQ TexasCommissiononEnvironmentalQualityTCJA ThefederallegislationcommonlyreferredtoastheTaxCutsandJobsActof2017TCRF Transmi

34、ssionCostRecoveryFactorTEP TucsonElectricPowerCompanyTexasFuelRule FuelcostrecoveryruleofthePUCTU.S.UnitedStatesWasteConfidenceDecision TheNRCsWasteConfidenceDecisionandtemporarystorageruleWhiteSands WhiteSandsMissileRange2013Study 2013PaloVerdeDecommissioningStudy2016Study 2016PaloVerdeDecommission

35、ingStudy2017AllSourceRFP 2017AllSourceRequestforProposalsforElectricPowerSupplyandLoadManagementResources2017PUCTFinalOrder PUCTFinalOrderinDocketNo.468312017TexasRetailRateCaseTheCompanysrequestforanincreaseinnon-fuelbaserevenues,filedwiththeCityofElPaso,othermunicipalitiesincorporatedintheCompanys

36、Texasserviceterritory,andthePUCTinDocketNo.468312018IRP IRPfortheperiod2018-2037filedinNMPRCCaseNo.18-00293-UT2019DCRFratefiling DCRFratefilinginPUCTDocketNo.493952019TCRFratefiling TCRFratefilinginPUCTDocketNo.491482019Study 2019PaloVerdeDecommissioningStudy2020ProxyStatement ProxystatementfortheCo

37、mpanys2020AnnualMeetingofShareholders(iv)TableofContentsTABLE OF CONTENTSItemDescriptionPagePART I1Business11ARiskFactors121BUnresolvedStaffComments212Properties213LegalProceedings214MineSafetyDisclosures21PART II5MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySe

38、curities226SelectedFinancialData247ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations257AQuantitativeandQualitativeDisclosuresAboutMarketRisk458FinancialStatementsandSupplementaryData479ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure1209AControlsand

39、Procedures1209BOtherInformation120PART III10Directors,ExecutiveOfficersandCorporateGovernance12111ExecutiveCompensation12212SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters12213CertainRelationshipsandRelatedTransactions,andDirectorIndependence12214PrincipalAccounti

40、ngFeesandServices122PART IV15ExhibitsandFinancialStatementSchedules12316Form10-KSummary130(v)TableofContentsFORWARD-LOOKING STATEMENTSCertainmattersdiscussedinthisAnnualReportonForm10-K,otherthanstatementsofhistoricalfact,areforward-lookingstatementswithinthemeaningofSection27AoftheSecuritiesActof19

41、33,asamended,andSection21EoftheSecuritiesExchangeActof1934,asamended(theExchangeAct).Forward-lookingstatementsoftenincludewordslikebelieve,anticipate,target,project,expect,predict,proforma,estimate,intend,will,isdesignedto,planandwordsofsimilarmeaning,orareindicatedbyElPasoElectricCompanys(theCompan

42、y)discussionofstrategiesortrends.Forward-lookingstatementsdescribetheCompanysfutureplans,objectives,expectationsorgoals.AlthoughtheCompanybelievesthattheexpectationsreflectedinsuchforward-lookingstatementsarereasonable,noassurancescanbegiventhattheseexpectationswillprovetobecorrect.Suchstatementsadd

43、ressfutureeventsandconditionsandinclude,butarenotlimitedto:capitalexpenditures,earnings,liquidityandcapitalresources,ratemaking/regulatorymatters/compliancematters,litigation,accountingmatters,includingaccountingfortaxesandleases,possiblecorporaterestructurings,acquisitionsanddispositions,includingt

44、hemergerofSunMergerSubInc.(MergerSub),aTexascorporationandwhollyownedsubsidiaryofSunJupiterHoldingsLLC,aDelawarelimitedliabilitycompany(Parent)withandintotheCompany(theMerger),compliancewithdebtandotherrestrictivecovenants,interestratesanddividends,environmentalmatters,nuclearoperations,operationoft

45、heCompanysgeneratingunitsanditstransmissionanddistributionsystems,theavailabilityandcostsofnewand/oremergingtechnologies,andtheoveralleconomyoftheCompanysservicearea.Theseforward-lookingstatementsarebasedonassumptionsandanalysesinlightoftheCompanysexperienceandperceptionofhistoricaltrends,currentcon

46、ditions,expectedfuturedevelopmentsandotherfactorstheCompanybelieveswereappropriateinthecircumstanceswhenthestatementsweremade.Forward-lookingstatementsbytheirnatureinvolvesubstantialrisksanduncertaintiesthatcouldsignificantlyimpactexpectedresults,andactualfutureresultscoulddiffermateriallyfromthosed

47、escribedinsuchstatements.Whileitisnotpossibletoidentifyallfactors,theCompanycontinuestofacemanyrisksanduncertainties.Factorsthatwouldcauseorcontributetosuchdifferencesinclude,butarenotlimitedto:decisions and actions of the Companys regulators and the resulting impact on the Companys operations,cost

48、of capital,sales,andprofitability,theCompanysabilitytofullyandtimelyrecoveritscostsandearnareasonablerateofreturnonitsinvestedcapitalthroughtheratesthatitispermittedtocharge,rates,costrecoverymechanismsandotherregulatorymattersincludingtheabilitytorecoverfuelcostsonatimelybasis,theabilityoftheCompan

49、ysoperatingpartnerstomaintainplantoperationsandmanageoperationsandmaintenance(O&M)costsatthePaloVerdeGeneratingStation(PaloVerde),anditsrelatedtransmissionfacilities,includingcoststocomplywithanyneworexpandedregulatoryorenvironmentalrequirements,reductionsinoutputatgenerationplantsoperatedbytheCompa

50、ny,thesizeoftheCompanysconstructionprogramanditsabilitytocompleteconstructiononbudgetandontime,thereceiptofrequiredapprovalsbytheCompanysregulatorsandotherpermitsrelatedtotheCompanysconstructionprograms,theCompanysrelianceonsignificantcustomers,(vi)TableofContentsthecreditworthinessoftheCompanyscust

51、omers,unscheduledoutagesofgeneratingunitsincludingoutagesatPaloVerde,changesincustomersdemandforelectricityasaresultofenergyefficiencyinitiativesandemergingcompetingservicesandtechnologies,includingdistributedgenerationandbatterystorage,individualcustomergroups,includingdistributedgenerationcustomer

52、s,maynotpaytheirfullcostofservice,andothercustomersmayormaynotberequiredtopaythedifference,changesin,andtheassumptionsusedfor,pensionandotherpost-retirementandpost-employmentbenefitliabilitycalculations,aswellasactualandassumedinvestmentreturnsonpensionplanandotherpost-retirementplanassets,theimpact

53、ofchangingcostescalationandotherassumptionsontheCompanysnucleardecommissioningliabilityforPaloVerde,aswellasactualandassumedinvestmentreturnsonassetsintheCompanysPaloVerdenucleardecommissioningtrustfunds(NDT),disruptionsintheCompanystransmissionanddistributionsystems,andinparticularthetransmissionli

54、nesthatdeliverpowerfromitsremotegeneratingfacilities,thesufficiencyoftheCompanysinsurancecoverage,includingavailability,cost,coverageandterms,electricutilityderegulationorre-regulation,regulatedandcompetitivemarkets,ongoingmunicipal,stateandfederalactivities,cutsinmilitaryspendingorprolongedshutdown

55、softhefederalgovernmentthatreducedemandfortheCompanysservicesfrommilitaryandgovernmentalcustomers,political,legislative,judicialandregulatorydevelopments,homelandsecurityconsiderations,includingthoseassociatedwiththeUnitedStates(U.S.)/Mexicoborderregionandtheenergyindustry,changes in environmental l

56、aws and regulations and the enforcement or interpretation thereof,including those related to air,water orgreenhousegas(GHG)emissionsorotherenvironmentalmatters,economic,commercialbank,financialandcapitalmarketconditions,increasesincostofcapital,theimpactofchangesininterestratesorratesofinflation,act

57、ionsbycreditratingagencies,changesinaccountingrequirementsandotheraccountingmatters,changingweathertrendsandtheimpactofsevereweatherconditions,possiblephysicalorcyberattacks,intrusionsorothercatastrophicevents,theimpactoflawsuitsfiledagainsttheCompany,Texas,NewMexicoandelectricindustryutilityservice

58、reliabilitystandardsandservicerequirements,uranium,naturalgas,oilandwholesaleelectricitypricesandavailability,possibleincometaxandinterestpaymentsasaresultofauditadjustmentsproposedbytheU.S.InternalRevenueServiceorstatetaxingauthorities,theimpactofchangestoU.S.taxlaws,theimpactofinternationaltradean

59、dtariffnegotiations,theimpactofU.S.healthcarereformlegislation,theeffectivenessoftheCompanysriskmanagementactivities,lossofkeypersonnel,theCompanysabilitytorecruitandretainqualifiedemployeesandtheCompanysabilitytosuccessfullyimplementsuccessionplanning,(vii)TableofContentsothercircumstancesaffecting

60、anticipatedoperations,salesandcosts,andcertainrisksanduncertaintiesassociatedwiththeMergerincluding,withoutlimitation:theriskthatParentortheCompanymaybeunabletoobtaingovernmentalandregulatoryapprovalsrequiredfortheMerger,orthatrequiredgovernmentalandregulatoryapprovalsoragreementswithotherpartiesint

61、erestedthereinmaydelaytheMerger,maysubjecttheMergertoorimposeadverseconditionsorcostsormaycausethepartiestoabandontheMerger,theoccurrenceofanyevent,changeorothercircumstancesthatcouldgiverisetotheterminationoftheMergerorcouldotherwisecausethefailureoftheMergertoclose,theriskthataconditiontotheclosin

62、goftheMergermaynotbesatisfiedorwaived,thefailureofParenttoobtainanyfinancingnecessarytocompletetheMerger,theoutcomeofanylegalproceedings,regulatoryproceedingsorenforcementmattersthathavebeenormaybeinstitutedrelatingtotheMerger,thereceiptofanunsolicitedofferfromanotherpartytoacquireassetsorcapitalsto

63、ckoftheCompanythatcouldinterferewiththeMerger,thetimingtoconsummatetheMerger,thecostsincurredtoconsummatetheMerger,theriskthatthependencyofthependingMergerdisruptscurrentplansandoperationsandthepotentialdifficultiesinmaintainingrelationshipswithcustomers,employees,regulatorsorsuppliers,andthediversi

64、onofmanagementtimeandattentionfromtheCompanysongoingbusinessoperationsduetotheMerger.Theselistsarenotall-inclusivebecauseitisnotpossibletopredictallfactors.AdiscussionofsomeofthesefactorsisincludedinthisAnnualReportonForm10-KundertheheadingsRiskFactorsandManagementsDiscussionandAnalysisofFinancialCo

65、nditionandResultsofOperationsSummaryofCriticalAccountingPoliciesandEstimatesandManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsLiquidityandCapitalResources.ThisAnnualReportonForm10-Kshouldbereadinitsentirety.Managementcautionsagainstputtingunduerelianceonforward-lookingstat

66、ementsorprojectinganyfutureresultsbasedonsuchstatementsorpresentorpriorearningslevels.Anyforward-lookingstatementspeaksonlyasofthedatesuchstatementwasmade,andtheCompanyisnotobligatedtoupdateanyforward-lookingstatementtoreflecteventsorcircumstancesafterthedateonwhichsuchstatementwasmade,exceptasrequi

67、redbyapplicablelawsorregulations.(viii)TableofContentsPART IItem 1.BusinessGeneralEl Paso Electric Company(the Company)is a public utility engaged in the generation,transmission and distribution of electricity in an area ofapproximately10,000squaremilesinwestTexasandsouthernNewMexico.TheCompanyalsos

68、ervesafullrequirementswholesalecustomerinTexas.TheCompanyownsorhassignificantownershipinterestsinseveralelectricalgeneratingfacilitiesprovidingitwithanetgeneratingcapacityofapproximately2,085megawatts(MW).FortheyearendedDecember31,2019,theCompanysenergysourcesconsistedofapproximately44%nuclearfuel,4

69、4%naturalgas,12%purchasedpowerandlessthan1%generatedbyCompany-ownedsolarphotovoltaicpanels.AsofDecember31,2019,theCompanyhadpowerpurchaseagreements for 107 MW from solar photovoltaic generation facilities and intends to expand its portfolio of renewable energy sources,particularly solarphotovoltaicg

70、eneration.SeeEnergySourcesPurchasedPower.The Company serves approximately 432,800residential,commercial,industrial,public authority and wholesale customers.The Company distributeselectricity to retail customers principally in El Paso,Texas and Las Cruces,New Mexico(representing approximately 64%and

71、11%,respectively,of theCompanysretailrevenuesfortheyearendedDecember31,2019).Inaddition,theCompanyswholesalesalesincludesalesforresaletootherelectricutilitiesandpowermarketers.Principalindustrial,publicauthorityandotherlargeretailcustomersoftheCompanyincludeU.S.militaryinstallations,suchasFortBlissU

72、.S.ArmyPost(FortBliss)inTexasandWhiteSandsMissileRange(WhiteSands)andHollomanAirForceBase(HAFB)inNewMexico,anoilrefinery,severalmedicalcenters,twolargeuniversitiesandasteelproductionfacility.The Companys principal offices are located at the Stanton Tower,100NorthStanton Street,ElPaso,Texas 79901(tel

73、ephone:915-543-5711).TheCompanywasincorporatedinTexasin1901.AsofJanuary31,2020,theCompanyemployedapproximately1,100individuals,37%ofwhomarecoveredbyacollectivebargainingagreement.OnJune1,2019,theCompanyenteredintoanAgreementandPlanofMerger(theMergerAgreement),byandamongtheCompany,ParentandMergerSub.

74、PursuanttotheMergerAgreement,onandsubjecttothetermsandconditionssetforththerein,MergerSubwillmergewithandintotheCompany,withtheCompanycontinuingasthesurvivingcorporationintheMergerandbecomingawhollyownedsubsidiaryofParent.ParentandMergerSubareaffiliatesoftheInfrastructureInvestmentsFund,aninvestment

75、vehicleadvisedbyJ.P.MorganInvestmentManagementInc.(IIF).SeePartII,Item8,FinancialStatementsandSupplementaryData,NoteTofNotestoFinancialStatementsforadiscussionoftheMerger.TheCompanymakesavailablefreeofchargethroughitswebsite,itsAnnualReportonForm10-K,quarterlyreportsonForm10-Q,currentreportsonForm8-

76、K,proxystatementandallamendmentstothosereportsassoonasreasonablypracticableaftersuchmaterialiselectronicallyfiledwithorfurnishedtotheU.S.SecuritiesandExchangeCommission(SEC).Inaddition,copiesofthisAnnualReportonForm10-Kwillbemadeavailablefreeofchargeuponwrittenrequest.TheSECalsomaintainsaninternetsi

77、tethatcontainsreports,proxyandinformationstatementsandotherinformationforissuersthatfileelectronicallywiththeSEC.Theaddressofthatsiteiswww.sec.gov.TheinformationontheCompanyswebsiteisnotincorporatedbyreferenceintothisAnnualReportonForm10-K.1TableofContentsFacilitiesAsofDecember31,2019,theCompanysnet

78、generatingcapabilityofapproximately2,085MWconsistsofthefollowing:StationPrimary FuelTypeCompanys Share ofNetGeneratingCapability(MW)CompanyOwnershipInterestLocationNewmanPowerStationNaturalGas752 100%ElPaso,TexasPaloVerdeNuclear633 15.8%Wintersburg,ArizonaRioGrandePowerStationNaturalGas276 100%Sunla

79、ndPark,NewMexicoMontanaPowerStationNaturalGas354 100%ElPasoCounty,TexasCopperPowerStationNaturalGas64 100%ElPaso,TexasRenewables*Solar6 100%CulbersonCountyandElPasoCounty,Texas;DoaAnaCountyandOteroCounty,NewMexicoTotal 2,085 _*Renewablenameplatesare8MWwith70%contributionattimeofpeak.Palo VerdeTheCom

80、panyownsaninterest,alongwithsixotherutilities,inthethreenucleargeneratingunitsandcommonfacilities(CommonFacilities)atPaloVerde.ArizonaPublicServiceCompany(APS)servesasoperatingagentforPaloVerde,andundertheArizonaNuclearPowerProjectParticipationAgreementdatedAugust23,1973,asamended(ANPPParticipationA

81、greement),theCompanyhaslimitedabilitytoinfluenceoperationsandcostsatPaloVerde.Palo Verde Operating Licenses.OperationofeachofthethreePaloVerdeUnitsrequiresanoperatinglicensefromtheU.S.NuclearRegulatoryCommission(NRC).TheNRCissuedfullpoweroperatinglicensesforUnit1inJune1985,Unit2inApril1986andUnit3in

82、November1987andissuedrenewedoperatinglicensesforeachofthethreeunitsinApril2011,whichextendedthelicensesforUnits1,2and3toJune2045,April2046andNovember2047,respectively.Decommissioning.PursuanttotheANPPParticipationAgreementandfederallaw,theCompanymustfunditsshareoftheestimatedcoststodecommissionPaloV

83、erdeUnits1,2and3,includingtheCommonFacilities,throughthetermoftheirrespectiveoperatinglicenses.In2017,theutilitiesthatshareinpowerandenergyentitlements,andbearcertainallocatedcosts,withrespecttoPaloVerde pursuant to the ANPP Participation Agreement(the Palo Verde Participants)approved the 2016 Palo

84、Verdedecommissioningstudy(2016Study),whichestimatedthattheCompanymustfundapproximately$432.8million(statedin2016dollars)tocoveritsshareofdecommissioningcosts.AtDecember31,2019,theCompanysdecommissioningtrustfundhadabalanceof$326.0million.Althoughthe2016Studywasbasedonthelatestavailableinformation,th

85、erecanbenoassurancethatdecommissioningcostestimateswillnotincreaseinthefutureorthatregulatoryrequirementswillnotchange.Spent Fuel and Waste Disposal.PursuanttotheNuclearWastePolicyActof1982,asamendedin1987,theU.S.DepartmentofEnergy(DOE)islegallyobligatedtoacceptanddisposeofallspentnuclearfuelandothe

86、rhigh-levelradioactivewastegeneratedbyalldomesticpowerreactorsby1998.TheDOEsobligationsarereflectedinacontractforDisposalofSpentNuclearFueland/orHigh-LevelRadioactiveWastewitheachnuclearpowerplant.TheDOEfailedtobeginacceptingspentnuclearfuelby1998.OnDecember19,2012,APS,actingonbehalfofitselfandthePa

87、loVerdeParticipants,filedasecondbreachofcontractlawsuitagainsttheDOE.ThislawsuitsoughttorecoverdamagesincurredduetotheDOEsfailuretoacceptPaloVerdesspentnuclearfuelfortheperiodbeginningJanuary1,2007throughJune30,2011.PursuanttothetermsoftheAugust18,2014settlementagreement,andasamendedwiththeDOE,APSfi

88、lesannualclaimsfortheperiodJuly1ofthethen-previousyeartoJune30ofthethen-currentyearonbehalfofitselfandthoseutilitiesthatshareinpowerandenergyentitlements,andbearcertainallocatedcosts,withrespecttoPaloVerdebasedupontheANPPParticipationAgreementdatedAugust23,1973.Thesettlementagreement,asamended,provi

89、desAPSwithamethodforsubmittingclaimsandreceivingrecoveryforcostsincurredthroughDecember31,2016,whichhas2TableofContentsbeenextendedtoDecember31,2019.TheCompanysshareofcostsrecoveredin2019,2018,and2017,respectivelyarepresentedbelow(inthousands):Costs Recovery PeriodAmount RefundedAmount Credited toCu

90、stomers through FuelAdjustment ClausesPeriod Credited toCustomersJuly2017-June2018$1,604$1,005 June2019July2016-June20171,413 1,121 March2018July2015-June20161,779 1,432 March2017OnOctober31,2019,APSfileda$16.0millionclaimfortheperiodJuly1,2018throughJune30,2019.TheCompanysshareofthisclaimisapproxim

91、ately$2.5million.ThisclaimispendingDOEreview.ThemajorityofthereimbursementreceivedbytheCompanyisexpectedtobecreditedtocustomersthroughtheapplicablefueladjustmentclauses.DOEs Construction Authorization Application for Yucca Mountain.TheDOEhadplannedtomeetitsdisposalobligationsbydesigning,licensing,co

92、nstructingandoperatingapermanentgeologicrepositoryinYuccaMountain,Nevada.InMarch2010,theDOEfiledamotiontodismisswithprejudiceitsYuccaMountainconstructionauthorizationapplicationthatwaspendingbeforetheNRC.SeveralinterestedpartieshaveintervenedintheNRCproceeding.Additionally,anumberofinterestedparties

93、havefiledavarietyoflawsuitsindifferentjurisdictionsaroundthecountrychallengingtheDOEsauthoritytowithdrawtheYuccaMountain construction authorization application and NRCscessation of its review of the Yucca Mountain constructionauthorizationapplication.ThecaseshavebeenconsolidatedintoonematterattheU.S

94、.CourtofAppealsfortheDistrictofColumbiaCircuit(D.C.Circuit).InAugust2013,theD.C.CircuitorderedtheNRCtoresumeitsreviewoftheapplicationwithavailableappropriatedfunds.FollowingtheD.CCircuitsAugust2013order,theNRCissuedtwovolumesofthesafetyevaluation report developed as part of the Yucca Mountain constr

95、uction authorization application.Publication of thesevolumesdoesnotsignalwhetherorwhentheNRCmightauthorizeconstructionoftherepository.TheCompanycannotpredictwhenspentfuelshipmentstotheDOEwillcommence.Waste Confidence and Continued Storage.On June 8,2012,the D.C.Circuit issued its decision on a chall

96、enge by several states andenvironmentalgroupsoftheNRCsrulemakingregardingtemporarystorageandpermanentdisposalofhighlevelnuclearwasteandspentnuclearfuel.ThepetitionerschallengedtheNRCs2010updatetotheagencysWasteConfidenceDecisionandtemporarystoragerule(WasteConfidenceDecision).TheD.C.Circuitfoundthat

97、theNRCsevaluationoftheenvironmentalrisksfromspentnuclearfuelwasdeficient,andthereforeremandedtheWasteConfidenceDecisionupdateforfurtheractionconsistentwiththeNationalEnvironmentalPolicyAct.InSeptember2013,theNRCissueditsdraftGenericEnvironmentalImpactStatement(GEIS)tosupportanupdatedWasteConfidenceD

98、ecision.OnAugust26,2014,theNRCapprovedafinalruleontheenvironmentaleffectsofcontinuedstorageofspentnuclearfuel.RenamedtheContinuedStorageRule,theNRCsdecisionadoptedthefindingsoftheGEISregardingtheenvironmentalimpactsofstoringspentfuelatanyreactorsiteafterthereactorslicensedperiodofoperations.Asaresul

99、t,thosegenericimpactsdonotneedtobere-analyzedintheenvironmentalreviewsforindividuallicenses.ThefinalContinuedStorageRulewassubjecttocontinuinglegalchallengesbeforetheNRCandtheD.C.Circuit.InJune2016,theD.C.Circuitissueditsfinaldecision,rejectingallremaininglegalchallengestotheContinueStorageRule.OnAu

100、gust8,2016,theD.C.Circuitdeniedapetitionforrehearing.PaloVerdehassufficientcapacityatitson-siteindependentspentfuelstorageinstallation(ISFSI)tostoreallofthenuclearfuelthatwillbeirradiatedduringtheinitialoperatinglicenseperiod,whichendsinDecember2027.Additionally,PaloVerdehassufficientcapacityatitson

101、-siteISFSItostoreaportionofthefuelthatwillbeirradiatedduringtheperiodofextendedoperation,whichendsinNovember2047.IfuncertaintiesregardingtheU.S.governmentsobligationtoacceptandstorespentfuelarenotfavorablyresolved,APSwillevaluatealternativestoragesolutionsthatmayobviatetheneedtoexpandtheISFSItoaccom

102、modateallofthefuelthatwillbeirradiatedduringtheperiodofextendedoperation.Liability and Insurance Matters.ThePaloVerdeParticipantshaveinsuranceforpublicliabilityresultingfromnuclearenergyhazards,coveredbyprimaryliabilityinsuranceprovidedbycommercialinsurancecarriersand3TableofContentsanindustry-wider

103、etrospectiveassessmentprogram.Ifalossatanuclearpowerplantcoveredbytheprogramsexceedstheaccumulatedfundsintheprimarylevelofprotection,theCompanycouldbeassessedretrospectivepremiumadjustmentsonaperincidentbasisupto$65.2million,withanannualpaymentlimitationofapproximately$9.7million.ThePaloVerdePartici

104、pantsalsomaintain$2.8billionofallrisknuclearpropertyinsurance.TheinsuranceprovidescoverageforpropertydamageanddecontaminationatPaloVerde.Forcoveredincidentsinvolvingpropertydamagenotaccompaniedbyareleaseofradioactivematerial,thepolicyscoveragelimitis$2.3billion.Inaddition,theCompanyhassecuredinsuran

105、ceagainstportionsofanyincreasedcostofgenerationorpurchasedpowerandbusinessinterruptionresultingfromasuddenandunforeseenoutageatPaloVerde.Fossil-Fueled PlantsTheCompanyownstheNewmanPowerStation(Newman),whichconsistsofthreeconventionalsteam-electricgeneratingunitsandtwocombinedcyclegeneratingunits.The

106、stationoperatesprimarilyonnaturalgasbuttheconventionalsteam-electricgeneratingunitscanalsooperateonfueloil.TheCompanyownstheRioGrandePowerStation(RioGrande),whichconsistsoftwoconventionalsteam-electricgeneratingunitsandoneaeroderivativeunitthatoperatesonnaturalgas.RioGrandeUnit6withnetgeneratingcapa

107、bilityof45MW,wasinitiallyplacedininactivereservestatusin2015,andhasbeenactivatedasneeded.TheCompanyownstheMontanaPowerStation(MPS),whichconsistsoffouraeroderivativegeneratingunitsthatoperateonnaturalgas.Theunitscanalsooperateonfueloil.TheCompanyownstheCopperPowerStation(Copper),whichconsistsofanatur

108、algascombustionturbineusedprimarilytomeetpeakdemand.Solar Photovoltaic FacilitiesTheCompanysTexasCommunitysolarfacility,a3MWutility-scalesolarplantlocatedatMPS,andtheElPasoElectricHollomanAtlasSolarArray,a5MWutility-scalesolarplantlocatedonHAFB,begancommercialoperationsonMay31,2017,andOctober18,2018

109、,respectively.TheCompanyalsoownssixothersolarphotovoltaicfacilitieswithatotalcapacityof0.2MW.Transmission and Distribution Lines and AgreementsTheCompanyowns,orhassignificantownershipinterestsin,four345kilovolt(kV)transmissionlinesinNewMexicoandArizonaandthree500kVlinesinArizona.TheselinesenabletheC

110、ompanytodeliveritsenergyentitlementsfromitsremotegenerationatPaloVerdetoitsservicearea(pursuanttovarioustransmissionandpowerexchangeagreementstowhichtheCompanyisaparty).TheCompanyalsoownsthetransmissionanddistributionnetworkwithinitsNewMexicoandTexasretailserviceareaandoperatesthesefacilitiesunderfr

111、anchiseagreementswithvariousmunicipalities.PursuanttostandardsestablishedbytheNorthAmericanElectricReliabilityCorporation(NERC)andtheWesternElectricityCoordinatingCouncil,theCompanyoperatesitstransmissionsysteminawaythatallowsittomaintainsystemintegrityintheeventthatanyoneofthesetransmissionlinesiso

112、utofservice.Inadditiontothetransmissionanddistributionlineswithinourserviceterritory,theCompanystransmissionnetworkandassociatedsubstationsincludethefollowing:LineLength(miles)Voltage(kV)Company OwnershipInterestSpringerville-MachoSprings-Luna-DiabloLine(1)310 345 100.0%WestMesa-ArroyoLine(2)202 345

113、 100.0%Greenlee-Hidalgo-Luna-NewmanLine(3)Greenlee-Hidalgo60 345 40.0%Hidalgo-Luna50 345 57.2%Luna-Newman87 345 100.0%EddyCounty-AMRADLine(4)125 345 66.7%PaloVerdeTransmissionPaloVerde-Westwing(5)45 500 18.7%PaloVerde-Jojoba-Kyrene(6)75 500 18.7%_4TableofContents(1)RunsfromTucsonElectricPowerCompany

114、s(TEP)SpringervilleGeneratingPlantnearSpringerville,Arizona,totheCompanysDiabloSubstationnearSunlandPark,NewMexico.(2)RunsfromPublicServiceCompanyofNewMexicos(PNM)WestMesaSubstationnearAlbuquerque,NewMexico,totheCompanysArroyoSubstationnearLasCruces,NewMexico.(3)RunsfromTEPsGreenleeSubstationnearDun

115、can,Arizona,toNewman.(4)RunsfromtheCompanysandPNMshighvoltagedirectcurrentterminalattheEddyCountySubstationnearArtesia,NewMexico,totheAMRADSubstationnearOroGrande,NewMexico.(5)Representstwo45-mile,500kVlinesrunningfromPaloVerdetotheWestwingSubstationlocatednorthwestofPhoenixnearPeoria,Arizona.(6)Run

116、sfromPaloVerdetotheJojobaSubstationnearGilaBend,Arizona,thentotheKyreneSubstationnearTempe,Arizona.Environmental MattersGeneral.TheCompanyissubjecttoextensivelaws,regulationsandpermitrequirementswithrespecttoairandGHGemissions,waterdischarges,soilandwaterquality,wastemanagementanddisposal,naturalres

117、ourcesandotherenvironmentalmattersbyfederal,state,regional,tribalandlocalauthorities.Failuretocomplywithsuchlaws,regulationsandrequirementscanresultinactionsbyauthoritiesorotherthirdpartiesthatmightseektoimposeontheCompanyadministrative,civiland/orcriminalpenaltiesorothersanctions.Inaddition,release

118、sofpollutantsorcontaminantsintotheenvironmentcanresultincostlycleanupliabilities.Theselaws,regulationsandrequirementsaresubjecttochangethroughmodificationorreinterpretation,ortheintroductionofnewlawsandregulations,and,asaresult,theCompanymayfaceadditionalcapitalandoperatingcoststocomply.Certainkeyen

119、vironmentalissues,lawsandregulationsfacingtheCompanyaredescribedfurtherbelow.InMarch2017,theCompanyenteredintoaComplianceAgreement(ComplianceAgreement)withtheTexasCommissiononEnvironmentalQualityundertheTexasEnvironmental,HealthandSafetyAuditPrivilegeActtoaddresscertainwaterandwastecomplianceissuesa

120、ssociatedwiththeintegrityofthesyntheticlineroftheevaporationpondatNewman.TheCompanyhascompletedacapitalprojecttoextendthelifeoftheevaporationpondthatsatisfiesitsobligationundertheComplianceAgreement.Therehasbeennofurtherregulatoryactionsincethecompletionofthecapitalproject.Air Emissions.TheU.S.Clean

121、AirAct(CAA),associatedregulationsandcomparablestateandlocallawsandregulationsrelatingtoairemissionsimpose,amongotherobligations,limitationsonpollutantsgeneratedduringtheoperationsoftheCompanysfacilitiesandassets,includingsulfurdioxide,particulatematterandnitrogenoxides.National Ambient Air Quality S

122、tandards(NAAQS).UndertheCAA,theU.SEnvironmentalProtectionAgency(EPA)setsNAAQSforsixcriteriapollutantsconsideredharmfultopublichealthandtheenvironment,includingparticulatematter,nitrogenoxide,carbonmonoxide,ozoneandsulfurdioxide.OnOctober1,2015,theEPAreleasedafinalrule(theFinalRule)tighteningtheprima

123、ryandsecondaryNAAQSforground-levelozonefromits2008standardlevels of 75 parts per billion(ppb)to 70 ppb.The EPA published the Final Rule on June 4,2018,designating El Paso County,Texas,asattainment/unclassifiableunderthe2015ozoneNAAQSanddesignatingasectionofsouthernDoaAnaCounty,NewMexico,asnonattainm

124、ent.InAugust2018,severalpetitionsforreviewoftheFinalRulewerefiledintheD.C.Circuit.Oneofthesepetitions,filedbytheCityofSunlandPark,NewMexico,specificallychallengestheattainment/unclassifiabledesignationofElPasoCounty,Texas.TheCompanyandotherintervenorsfiledandweregrantedmotionstointerveneinthechallen

125、gestoEPAs2015ozoneNAAQSdesignations.ThecasewasheardbytheD.C.CircuitinNovember2019andadecisionregardingtheElPasodesignationisexpectedin2020.States,includingNewMexico,thatcontainanyareasdesignatedasnonattainmentarerequiredtocompletedevelopmentofimplementationplansinthe2020-2021timeframe.Mostnonattainm

126、entareasareexpectedtohaveuntil2020or2023tomeettheprimary(health)standard,withtheexactattainmentdatevaryingbasedontheozonelevelinthearea.TheCompanycontinuestoevaluatewhatimpactthesefinalandproposedNAAQScouldhaveonitsoperations.IftheCompanyisrequiredtoinstalladditionalequipmenttocontrolemissionsatitsf

127、acilities,theNAAQS,individuallyorintheaggregate,couldhaveamaterialimpactonitsoperationsandfinancialresults.Other Laws and Regulations and Risks.TheCompanysolditsinterestinFourCornersGeneratingStation(FourCorners)toAPSsaffiliateonJuly6,2016attheexpirationofthe50-yearparticipationagreement.Asoftheclos

128、ingdateofthesale,theCompanysenvironmentalliabilitiesassociatedwithFourCornerswerelimitedtoconditionsthatexistedatthetimeofthesaleandfurtherlimitedtotheportionthereofforwhichtheCompanywouldhavebeenfinanciallyresponsibleifFourCornershadfullyceasedoperationonJuly6,2016.Pursuanttothetermsoftheassetpurch

129、aseagreement,neitherAPSsaffiliatenorAPSassumedtheCompanyspre-closingobligationsunderenvironmentallawswithrespecttoitsinterestinFourCorners.TheCompany5TableofContentsmaybesubjecttocertainfutureclaimsunderenvironmentallawsandregulationsasaformerownerofFourCorners.Theextentofsuchclaims,ifany,cannotbepr

130、edictedwithcertainty.Climate Change.Therehasbeenawide-rangingpolicydebate,atthelocal,state,nationalandinternationallevelsregardingtheimpactofGHGandpossiblemeansfortheirregulation.Effortscontinuetobemadeintheinternationalcommunitytowardtheadoptionofinternationaltreatiesorprotocolsthatwouldaddressglob

131、alclimatechangeissues.InApril2016,theU.S.signedtheParisAgreement,whichrequirescountriestoreviewandrepresentaprogressionintheirintendednationallydeterminedcontributions,whichsetGHGemissionreductiongoalseveryfiveyearsbeginningin2020.InAugust2017,theU.S.formallydocumentedtotheUnitedNationsitsintenttowi

132、thdrawfromtheParisAgreement.TheearliestpossibleeffectivewithdrawaldatefromtheParisAgreementisNovember2020.However,thereisnoguaranteethattheU.S.willnotreentertheParisAgreementorothersimilaragreementsinthefuture.Atthestatelevel,severalstateshavealreadyadoptedmeasuresrequiringGHGemissionstobereducedwit

133、hinstateboundaries.Forexample,thegovernorofNewMexicosignedanexecutiveorderinJanuary2019thatsupportstheParisAgreementandincludesagoalofreducingstatewideGHGemissionsbyatleast45%by2030.TheexecutiveorderalsocreatesaClimateChangeTaskForcetoevaluateanddevelopregulatorystrategiestoreachthe45%reductiongoal.

134、TheTaskForceissuedaninitialrecommendationandstatusupdatedetailingpolicyandregulatorystrategiesinNovember2019,andanticipatesissuingasecondreportinthefallof2020.AlthoughtheCompanycannotcurrentlydeterminetheeffectofpotentialregulatorystrategiesthatmaybesuggestedbytheNewMexicoClimateChangeTaskForce,ifim

135、plemented,theycouldbematerialtotheCompanysbusiness,reputation,financialconditionorresultsofoperations.Thefederalgovernmenthasconsidered,proposedand/orfinalizedlegislationorregulationslimitingGHGemissions,includingcarbondioxide.Inparticular,theU.S.CongresshasconsideredlegislationtorestrictorregulateG

136、HGemissions.InOctober2015,theEPApublishedaruleestablishingguidelinesforstatestoregulatecarbondioxideemissionsfromexistingpowerplants,knownastheCleanPowerPlan(CPP).OnAugust31,2018,theEPApublishedaproposaltoreplacetheCPPcalledtheAffordableCleanEnergy(ACE)rule.TheACErulewasfinalizedinJuly2019.Remaining

137、legalchallengestotheCPPweremootedinSeptember2019,butlegalchallengestotheACEruleareongoing.Asadopted,theACEruleisfocusedoncoal-firedgenerationandwouldnotimposerequirementsonouroperations.However,atthistimetheCompanycannotdeterminetheimpactthattheACEruleandrelatedproposalsandlegalchallengesmayhaveonth

138、eCompanysfinancialposition,resultsofoperationsorcashflows.InadditiontolegislationandregulationsregardingGHGs,therehavealsobeeneffortsinrecentyearsaimedattheinvestmentcommunity,includinginvestmentadvisors,sovereignwealthfunds,publicpensionfunds,universitiesandothergroups,promotingthedivestmentoffossi

139、lfuelequitiesaswellastopressurelendersandotherfinancialservicescompaniestolimitorcurtailactivitieswithcompaniesengagedintheextractionoffossilfuelreserves.Iftheseeffortsaresuccessful,ourabilitytoaccesscapitalmarketsmaybelimitedandourstockpricemaybenegativelyimpacted.Membersoftheinvestmentcommunityhav

140、erecentlyincreasedtheirfocusonsustainabilitypractices,includingpracticesrelatedtoGHGsandclimatechange,inthenaturalgasandotherindustries.Someofourcustomershavebeguntoscreentheirserviceprovidersforcompliancewithsustainabilitymetrics.Additionally,membersoftheinvestmentcommunityhavebeguntoscreencompanie

141、ssuchasoursforsustainabilityperformancebeforeinvesting.AlthoughasignificantportionoftheCompanysgenerationassetsarenuclearorgas-fired,andasaresult,theCompanybelievesthatitsGHGemissionsarelowrelativetoelectricpowercompanieswhorelymoreoncoal-firedgeneration,currentandfuturelegislationandregulationofGHG

142、s;anyfuturerelatedlitigation;orpressurefrom members of the investment community or customers to further improve our sustainability practices could impose significant costs and/or operatingrestrictionsontheCompany,reducedemandforthepowertheCompanygenerates,and/orrequiretheCompanytopurchaserightstoemi

143、tGHG,anyofwhichcouldbematerialtotheCompanysbusiness,reputation,financialconditionorresultsofoperations.ClimatechangealsohaspotentialphysicaleffectsthatcouldberelevanttotheCompanysbusiness.ClimatechangecouldaffecttheCompanysserviceareabycausinghighertemperatures,lesswinterprecipitationandlessspringru

144、noff,aswellasbycausingmoreextremeweatherevents.SuchdevelopmentscouldchangethedemandforpowerintheregionandcouldalsoimpactthepriceorreadyavailabilityofwatersuppliesoraffectmaintenanceneedsandthereliabilityofCompanyequipment.TheCompanybelievesthatmaterialeffectsontheCompanysbusinessorresultsofoperation

145、smayresultfromthephysicalconsequencesofclimatechange,theregulatoryapproachtoclimatechangeultimatelyselectedandimplementedbygovernmentalauthorities,orboth.Giventhesignificantuncertaintiesregardingwhetherandhowtheseissueswillberegulated,aswellasthetimingandseverityofanyphysicaleffectsofclimatechange,t

146、heCompanybelievesitisnotpossibletomeaningfullyquantifythecostsofthesepotentialimpactsatpresent.Environmental Litigation and Investigations.SinceJuly2011,theU.S.DepartmentofJustice,onbehalfoftheEPA,andAPShavebeenengagedinsubstantivesettlementnegotiationsinanefforttoresolvecertainpendingmatters.Theall

147、egationsbeing6TableofContentsaddressedthroughsettlementnegotiationsarethatAPSfailedtoobtainthenecessarypermitsandinstallthecontrolsnecessaryundertheCAAtoreducesulfurdioxide,nitrogenoxides,andparticulatematter,andthatAPSfailedtoobtainanoperatingpermitunderTitleVoftheCAAthatreflectsapplicablerequireme

148、ntsimposedbylaw.OnJune24,2015,thepartiesfiledwiththeU.S.DistrictCourtfortheDistrictofNewMexicoasettlementagreement(CAASettlementAgreement)resolvingthismatter.OnAugust17,2015,theU.S.DistrictCourtenteredtheCAASettlementAgreement.Theagreementimposesatotalcivilpenaltypayablebytheco-ownersofFourCornersco

149、llectivelyintheamountof$1.5million,anditrequirestheco-ownerstopay$6.7millionforenvironmentalmitigationprojects.AtDecember31,2019,theCompanyhasaccrueditsremainingunpaidshareofapproximately$0.2millionrelatedtothismatter.Construction ProgramUtility construction expenditures reflected in the following t

150、able consist primarily of local generation,expanding and updating the transmission anddistributionsystems,thecostofcapitalimprovementsandreplacementsatPaloVerdeandothergeneratingfacilities,andotherpropertyandequipment.StudiesindicatethattheCompanywillneedadditionalpowergenerationresourcestomeetincre

151、asingloadrequirementsonitssystemandtoreplaceretiringplants.Afterevaluationofthecompetitive2017AllSourceRequestforProposalsforElectricPowerSupplyandLoadManagementResources(2017AllSourceRFP),thewinningbidsincludetheconstructionofa228MWnaturalgascombustionturbinegeneratingunitatNewmaninElPasowithananti

152、cipatedoperationaldatein2023.Thecostsofthenewgeneratingunitareincludedinthetablebelow.Thewinningbidsalsoincludedpurchasedpoweragreements(PPAs)for200MWofutilityscalesolarresourcesand100MWofbatterystorage,whicharenotincludedintheconstructionprogram.ThecontractsforthePPAshavebeennegotiatedandexecuted.T

153、heselectedproposalsaresubjecttoobtainingtheapplicableenvironmentalandconstructionrelatedpermits,andobtainingnecessaryapprovalsbythePublicUtilityCommissionofTexas(PUCT)andtheNewMexicoPublicRegulationCommission(NMPRC).TheCompanysestimatedcashconstructioncostsfor2020through2024areapproximately$1.6billi

154、on.Actualcostsmayvaryfromtheconstructionprogram estimates shown.Such estimates are under continuous review and subject to ongoing adjustment and are updated periodically to reflect changedconditions.By Year(1)(2)(3)(4)(estimates in millions)By Function(estimates in millions)2020$266 Production(1)(2)

155、$5622021309 Transmission1702022327 Distribution(3)5692023332 General(4)2782024345 Total$1,579 Total$1,579_(1)Doesnotincludeacquisitioncostsfornuclearfuel.SeeEnergySourcesNuclearFuel.(2)Estimatedproductioncostsconsistof:a.$279millionfornewgeneratingcapacity,primarilyincluding:i.$136millionofconstruct

156、ioncostsfrom2020through2024fora228MWcombustionturbinegeneratingunitatNewmanwithananticipatedoperationaldatein2023asaresultofthe2017AllSourceRFP.ii.$134millionofinitialconstructioncostsfrom2020through2024fora320MWcombinedcyclegeneratingunittobecompletedin2027.Theplansforthe320MWunitaresubjecttochange

157、astheconstructionprogramisreviewedandupdatedinconjunctionwithrecentlegislativeandregulatoryactivitiespertainingtorenewablerequirements.b.$283millionofothergenerationcosts,including$183millionforPaloVerde.(3)Estimateddistributioncostsinclude:a.$111millionofinitialprojectcostsforAdvancedMeteringInfras

158、tructure(AMI),includingdeploymentoftheback-officesystemsandmeters.LegislativeproposalsregardingtheclarificationoftheregulatoryprocesstoimplementAMIorEnergyGridModernizationwerepassedduringtheTexasandNewMexicolegislativesessionsthatconvenedinJanuary2019,andJanuary2020,respectively.TheTexaslegislation

159、hasbeenenactedintolaw,andtheNewMexicolegislationisawaitingconsiderationbythestatesGovernor.Withthesestatutoryclarifications,theCompanynowhastheopportunitytorequestregulatoryapprovalforthedeploymentofAMI.(4)Estimated general plant costs include upgrades of$153 million for information technology proje

160、cts,including telecommunications networkenhancements,$94millionfortheCompanysfacilities,and$31millionfortheCompanysfleet.7TableofContentsEnergy SourcesGeneralThefollowingtablesummarizesthepercentagecontributionofnuclearfuel,naturalgasandpurchasedpowertothetotalkilowatt-hour(kWh)energymixoftheCompany

161、.EnergygeneratedbyCompany-ownedsolarphotovoltaicpanelsaccountedforlessthan1%ofthetotalkWhenergymixoftheCompany.Years Ended December 31,201920182017Power Source(percentage of total kWh energy mix)Nuclear44%44%49%Naturalgas44%44%36%Purchasedpower12%12%15%Total100%100%100%Allocatedfuelandpurchasedpower

162、costsaregenerallyrecoverablefromcustomersinTexasandNewMexicopursuanttoapplicableregulations.HistoricalfuelcostsandrevenuesarereconciledperiodicallyinproceedingsbeforethePUCTandtheNMPRC.SeePartII,Item8,FinancialStatementsandSupplementaryData,NoteDofNotestoFinancialStatementsforfurtherdiscussiononTexa

163、sandNewMexicoRegulatoryMatters.Nuclear FuelThenuclearfuelcycleforPaloVerdeconsistsofthefollowingstages:theminingandmillingofuraniumoretoproduceuraniumconcentrates,theconversionoftheuraniumconcentratestouraniumhexafluoride(conversionservices),theenrichmentofuraniumhexafluoride(enrichmentservices),the

164、fabricationoffuelassemblies(fabricationservices),theutilizationofthefuelassembliesinthereactors,andthestorageanddisposalofthespentfuel.PursuanttotheANPPParticipationAgreement,theCompanyownsanundividedinterestinnuclearfuelpurchasedinconnectionwithPaloVerde.ThePaloVerdeParticipantsarecontinuallyidenti

165、fyingtheirfuturenuclearfuelresourceneedsandnegotiatingarrangementstofillthoseneeds.ThePaloVerdeParticipantshavecontractedfor100%ofPaloVerdesrequirementsforuraniumconcentratesthrough2025and30%ofitsrequirementsthrough2028.Theparticipantshavecontractedfor100%ofPaloVerdesrequirementsforconversionservice

166、sthrough2025and40%ofitsrequirementsthrough2030.Theparticipantshavealsocontractedfor100%ofPaloVerdesrequirementsforenrichmentservicesthrough2021,90%ofitsrequirementsfor2022,and80%for2023through2026andallofPaloVerdesrequirementsforfuelassemblyfabricationservicesthrough2027.Nuclear Fuel Financing.TheCo

167、mpanysfinancingofnuclearfuelisaccomplishedthroughRioGrandeResourcesTrustII(RGRT),aTexasgrantortrust,whichisconsolidatedintheCompanysfinancialstatements.AsofDecember31,2019,RGRThas$110millionaggregateprincipalamountborrowedintheformofseniornotes,ofwhich$45millionwillmatureinAugust2020.TheCompanyantic

168、ipatesrepayingthe$45millionofseniornotesatmaturitywithborrowingsundertheCompanysRevolvingCreditFacility(RCF).TheCompanyguaranteesthepaymentofprincipalandinterestontheRGRTseniornotes.ThenuclearfuelfinancingrequirementsofRGRTaremetwithacombinationoftheseniornotesandshort-termborrowingsundertheRCF.Natu

169、ral GasTheCompanymanagesitsnaturalgasrequirementsthroughacombinationofalong-term(greaterthanayear)supplycontract,severalmedium-term(greaterthanamonthbutlessthanoneyear)supplycontractsandspotorshort-term(dailytoamonth)marketpurchases.Thelong-termsupplycontractprovidesforfirmdeliveriesofgasatmarket-ba

170、sedindexprices.Medium-termandspotagreementsareeitherfixedpricedand/orindexpriceddependingonthemarket.TheCompanysnaturalgasrequirementsatNewman,RioGrandeandMPSweremetwithshort-termandmedium-termnaturalgaspurchasesfromvarioussuppliersandthispracticeisexpectedtocontinuein2020.Interstategasisdeliveredun

171、derabasefirmtransportationcontract.TheCompanyanticipatesitwillcontinuetopurchasenaturalgasatspotmarketpricesonamonthlybasisforaportionofthefuelneedsforNewman,RioGrandeandMPS.TheCompanywillcontinuetoevaluatetheavailabilityofshort-termnaturalgassuppliesversusmediumandlong-termsuppliestomaintainareliab

172、leandeconomicalsupplyforitslocalgeneratingstations.NaturalgasforNewmanandCopperwasalsodeliveredpursuanttoalong-termintrastatenaturalgascontractforfirmtransportationtoincludenaturalgasreservationandstorageforNewmanandCopperprovidedbyONEOKWesTexTransmission,LLCandONEOKTexasGasStorage,LLC,respectively,

173、thatcontinuethroughMarch31,2028.Thedeliveriesofintrastatenatural8TableofContentsgastoMPSbeganinthesecondquarterof2019.Underthiscontract,intrastategassupplyissourcedinthesamemannerasinterstategasthroughavarietyofmediumandshort-termpurchasecontracts.Purchased PowerTosupplementitsowngenerationandoperat

174、ingreserverequirements,andtomeetitsRenewablePortfolioStandard(RPS)requirements,theCompanyengagesinpowerpurchasearrangementsthatmayvaryindurationandamountbasedonanevaluationoftheCompanysresourceneeds,theeconomicsofthetransactionsandspecificRPSrequirements.TheCompanyhasafirm100MWPowerPurchaseandSaleAg

175、reement(PowerPurchaseandSaleAgreement)withFreeport-McMoRanCopperandGoldEnergyServicesLLC(Freeport),pursuanttowhichFreeportdeliversenergytotheCompanyfromtheLunaEnergyFacility(anaturalgas-firedcombinedcyclegenerationfacilitylocatedinLunaCounty,NewMexico)andtheCompanydeliversalikeamountofenergyatGreenl

176、ee,Arizona.TheCompanymaypurchaseuptothecontractedMWamountataspecifiedpriceattimeswhenenergyisnotexchangedunderthePowerPurchaseandSaleAgreement.ThePowerPurchaseandSaleAgreementwasapprovedbytheFederalEnergyRegulatoryCommission(FERC)andwillcontinuethroughaninitialtermendingDecember31,2021,withsubsequen

177、trolloversuntilterminated.Uponmutualagreement,thePowerPurchaseandSaleAgreementallowsthepartiestoincreasetheamountofenergythatispurchasedandsoldthereunder.Thepartieshaveagreedtoincreasetheamountupto125MWthroughDecember2021.TheCompanyhasenteredintoseveralpowerpurchaseagreementstohelpmeetitsRPSrequirem

178、ents.Specifically,theCompanyhasa25-yearpowerpurchaseagreementwithHatchSolarEnergyCenterI,LLCfora5MWsolarphotovoltaicprojectlocatedinsouthernNewMexico,whichbegancommercialoperationinJuly2011.InJune2015,theCompanyenteredintoaconsentagreementwithHatchSolarEnergyCenterI,LLCtoprovideforadditionalorreplac

179、ementphotovoltaicmodules.TheCompanyalsoenteredintoa20-yearcontractwithSolarRoadrunner,LLC,asubsidiaryofGlobalInfrastructurePartners,(formerlyknownasNRGSolarRoadrunnerLLC)forthepurchaseofalloftheoutputofa20MWsolarphotovoltaicplantbuiltinsouthernNewMexico,whichbegancommercialoperationinAugust2011.Inad

180、dition,theCompanyhas25-yearpowerpurchaseagreementstopurchasealloftheoutputoftwoadditionalsolarphotovoltaicprojectslocatedinsouthernNewMexico,SunEEPE1,LLC(10MW)andSunEEPE2,LLC(12MW),whichbegancommercialoperationinJune2012andMay2012,respectively.InSeptember2017,LongroadSolarPortfolioHoldings,LLCpurcha

181、sedSunEEPE1,LLC,andinOctober2017,SiliconRanchCorporationpurchasedSunEEPE2,LLCwiththeCompanysconsentperthetermsofbothpowerpurchaseagreements.Furthermore,theCompanyhasa20-yearpowerpurchaseagreementwithMachoSpringsSolar,LLCtopurchasetheentiregenerationoutputdeliveredfromthe50MWMachoSpringssolarphotovol

182、taicprojectlocatedinLunaCounty,NewMexico,whichbegancommercialoperationin May2014.Finally,theCompany has a 30-year power purchase agreement with Newman Solar LLC to purchase the total output,which is approximately 10MW,from a solarphotovoltaicgenerationplantonlandsubleasedfromtheCompanyinproximitytoN

183、ewman.ThissolarprojectbegancommercialoperationinDecember2014.Otherpurchasesofshorterdurationweremadeduring2019tosupplementtheCompanysgenerationresourcesduringplannedandunplannedoutages,foreconomicreasonsandtosupplyoff-systemsales.TheCompanyconcludedandannounceditsselectionofresourcesfromits2017AllSo

184、urceRFPonDecember26,2018.Inadditiontoconventionalnaturalgasgeneration,theCompanyinitiatedcontractnegotiationsduring2019forpowerpurchaseagreementsfrombothsolarandbatterystorageresources.OnNovember18,2019,theCompanyfiledforregulatoryapprovalwiththeNMPRCforthreepowerpurchaseagreementsrelatingtobothsola

185、randbatterystorageresourcesasaresultoftheCompanys2017AllSourceRFP.9TableofContentsOperating StatisticsYears Ended December 31,201920182017Operatingrevenues(inthousands):Non-fuelbaserevenues:Retail:Residential$302,991$297,597$287,884Commercialandindustrial,small195,829 194,341 198,799Commercialandind

186、ustrial,large35,211 34,920 38,403Salestopublicauthorities97,840 95,460 97,890Totalretailnon-fuelbaserevenues631,871 622,318 622,976Wholesale:Salesforresale-fullrequirementcustomer2,842 2,780 2,730Totalnon-fuelbaserevenues634,713 625,098 625,706Fuelrevenues:Recoveredfromcustomersduringtheperiod121,46

187、1 156,493 218,380Overcollectionoffuel(27,170)(4,736)(17,133)Totalfuelrevenues94,291 151,757 201,247Off-systemsales88,343 86,418 58,986Wheelingrevenues22,621 19,026 18,114Energyefficiencycostrecovery9,458 8,888 Miscellaneous8,101 8,188 8,229Totalrevenuesfromcustomers857,527 899,375 912,282Other4,467

188、4,228 4,515Totaloperatingrevenues$861,994$903,603$916,797Numberofcustomers(endofyear)(1):Residential382,946 376,651 370,054Commercialandindustrial,small43,137 42,141 42,291Commercialandindustrial,large48 48 48Other6,623 6,170 5,500Total432,754 425,010 417,893AverageannualkWhuseperresidentialcustomer

189、7,888 7,988 7,671Energysupplied,net,kWh(inthousands):Generated10,245,719 9,943,721 8,950,875Purchasedandinterchanged1,333,749 1,355,309 1,540,841Total11,579,468 11,299,030 10,491,716Energysales,kWh(inthousands):Retail:Residential2,998,517 2,988,695 2,823,260Commercialandindustrial,small2,406,623 2,4

190、31,920 2,410,710Commercialandindustrial,large1,028,162 1,050,834 1,045,319Salestopublicauthorities1,568,358 1,563,227 1,564,670Totalretail8,001,660 8,034,676 7,843,959Wholesale:Salesforresale-fullrequirementcustomer61,815 58,991 62,887Off-systemsales2,987,821 2,687,961 2,042,884Totalwholesale3,049,6

191、36 2,746,952 2,105,771Totalenergysales11,051,296 10,781,628 9,949,730LossesandCompanyuse528,172 517,402 541,986Total11,579,468 11,299,030 10,491,716Nativesystem:Peakload,kW1,985,000 1,929,000 1,935,000Netgeneratingcapabilityforpeak,kW2,085,000 2,085,000 2,082,000Totalsystem:Peakload,kW(2)2,062,000 2

192、,006,000 1,982,000Netgeneratingcapabilityforpeak,kW2,085,000 2,085,000 2,082,000_(1)Thenumberofretailcustomerspresentedisbasedonthenumberofservicelocations.(2)Includesspotsalesandnetlossesof77,000kilowatts(kW),77,000kWand47,000kWfor2019,2018and2017,respectively.10TableofContentsRegulationGeneralTher

193、atesandservicesoftheCompanyareregulatedbyincorporatedmunicipalitiesinTexas,thePUCT,theNMPRCandtheFERC.Municipalorders,ordinancesandotheragreementsregardingratesandservicesadoptedbyTexasmunicipalitiesaresubjecttoreviewandapprovalbythePUCT.TheFERChasjurisdictionovertheCompanyswholesale(salesforresale-

194、fullrequirementcustomer)transactions,transmissionserviceandcompliancewithfederally-mandatedreliability standards.ThedecisionsofthePUCT,theNMPRCandtheFERCaresubjecttojudicialreview.SeePartII,Item8,FinancialStatementsandSupplementaryData,NoteDofNotestoFinancialStatementsforfurtherdiscussiononRegulator

195、yMatters.Power Sales ContractsTheCompanyhasenteredintoseveralshort-term(threemonthsorless)off-systemsalescontractsthroughout2019.Franchises and Significant CustomersFranchisesTheCompanyoperatesunderfranchiseagreementswithseveralcitiesinitsserviceterritory,includingonewithElPaso,Texas,thelargestcityi

196、tserves.ThefranchiseagreementallowstheCompanytoutilizepublicrights-of-waynecessarytoserveitscustomerswithinElPaso.PursuanttotheElPasofranchiseagreement,theCompanypaystotheCityofElPaso,onaquarterlybasis,afeeequalto5.00%ofgrossrevenuestheCompanyreceivesforthegeneration,transmissionanddistributionofele

197、ctricalenergyandotherserviceswithinthecity.The2005ElPasofranchiseagreementsetthefranchisefeeat3.25%ofgrossrevenues,butthatamounthassincebeenadjustedbytwoamendments.The2010amendmentaddedanincrementalfeeequalto0.75%ofgrossrevenuestobeplacedinarestrictedfundtobeusedbythecitysolelyforeconomicdevelopment

198、andrenewableenergypurposes.The2018amendment,approvedonMarch20,2018,andapplicabletobillsissuedonorafterOctober1,2018,increasedthededicatedincrementalfeeby1.00%ofgrossrevenuesandextendedthetermofthefranchiseagreementby30years.Anyassignmentofthefranchiseagreement,includingadeemedassignmentasaresultofac

199、hangeincontroloftheCompany,requirestheconsentoftheCityofElPaso.Accordingly,theCompanyonSeptember20,2019,soughtapprovalfromtheCityofElPasoforadeemedassignmentofthefranchiseagreementasaresultofthependingMerger,whichapprovalwasgrantedonFebruary4,2020.TheElPasofranchiseagreementissettoexpireonJuly31,206

200、0.TheCompanydoesnothaveawrittenfranchiseagreementwithLasCruces,NewMexico,thesecondlargestcityinitsserviceterritory.TheCompanyutilizespublicrights-of-waynecessarytoserviceitscustomerswithinLasCrucesunderanimpliedfranchisepursuanttostatelawbysatisfyingallobligationsunderthefranchiseagreementthatexpire

201、donApril30,2009.TheCompanypaystheCityofLasCrucesafranchisefeeof2.00%ofgrossrevenuestheCompanyreceivesfromserviceswithintheCityofLasCruces.TheCompanyalsomaintainsfranchiseagreementswithothermunicipalities,andapplicablecounties,withinitsserviceterritories.Military InstallationsTheCompanyservesHAFB,Whi

202、teSandsandFortBliss.Thesemilitaryinstallationsrepresentapproximately2.8%oftheCompanysannualretailrevenuesin2019.InJuly2014,theCompanysignedanagreementwithFortBlissunderwhichFortBlisstakesretailelectricservicefromtheCompanyundertheapplicableTexastariffs.TheCompanyservesWhiteSandsundertheapplicableNew

203、Mexicotariffs.InAugust2016,theCompanysignedacontractwithHAFBunderwhichtheCompanyprovidesretailelectricserviceandlimitedwheelingservicestoHAFBundertheapplicableNewMexicotariffs.Asstatedinthecontract,HAFBpurchasesthefulloutputofaCompany-owned5-MWsolarfacilityuponitscompletedconstruction,whichoccurredo

204、nOctober18,2018.HAFBsotherpowerrequirementsareprovidedundertheapplicableNewMexicotariffswithlimitedwheelingservicesunderthecontract.Other InformationInvestorsshouldnotethatweannouncematerialfinancialinformationinourfilingswiththeSEC,pressreleasesandpublicconferencecalls.BasedonguidancefromtheSEC,wem

205、ayalsousetheInvestorRelationssectionofourwebsite()tocommunicatewithinvestorsabouttheCompany.Itispossiblethatthefinancialinformationweposttherecouldbedeemedtobematerialinformation.TheinformationcontainedonoraccessiblefromourwebsiteisnotincorporatedbyreferenceintoanddoesnotconstituteapartofthisAnnualR

206、eportonForm10-K.11TableofContentsItem 1A.Risk FactorsLikeothercompaniesinourindustry,ourfinancialresultsareprimarilyimpactedbyweather,theeconomyofourserviceterritory,marketpricesforpower,fuelprices,andthedecisionsofregulatoryagencies.Ourcommonstockpriceandcreditworthinessmaybeaffectedbylocal,regiona

207、landnationalmacroeconomictrends,generalmarketconditionsandtheexpectationsoftheinvestmentcommunity,allofwhicharelargelybeyondourcontrol.Inaddition,thefollowingstatementshighlightriskfactorsthatmayaffectourfinancialconditionandresultsofoperations.Thesearenotintendedtobeanexhaustivediscussionofallsuchr

208、isks,andthestatementsbelowmustbereadtogetherwithfactorsdiscussedelsewhereinthisAnnualReportonForm10-KandinourotherfilingswiththeSEC.Risk Factors Relating to Our OperationsOur Revenues and Profitability Depend Upon Regulated RatesOurratesaregovernedbyTexas,NewMexicoandfederallawsandregulations,withou

209、rretailratessubjecttoregulationbyincorporatedmunicipalitiesinTexas,thePUCT,theNMPRCandourwholesaleratessubjecttoregulationbytheFERC.Therecanbenoassurancethatthelawsandregulationsortheapplicationthereofinourdifferentjurisdictionswillbesimilarorconsistent,whichcouldleadtodifferenttreatmentofcertainmat

210、tersbyourregulatorsindifferentjurisdictions.ThePUCTFinalOrderinDocketNo.46831(2017PUCTFinalOrder)establishedourcurrentretailbaseratesinTexas,effectiveJuly18,2017.Inaddition,theNMPRCFinalOrderinCaseNo.15-00127-UT(NMPRCFinalOrder)establishedratesinNewMexicothatbecameeffectiveinJuly2016.Ourprofitabilit

211、ydependsonourabilitytorecoverthecosts,includingareasonablereturnoninvestedcapital,ofprovidingelectricservicetoourcustomersthroughbaseratesapprovedbyourregulators.Theseratesaregenerallyestablishedbasedonananalysisoftheexpensesweincurinahistoricaltestyear,andasaresult,theratesultimatelyapprovedbyourre

212、gulatorsmayormaynotmatchourexpensesatanygiventimeandrecoveryofexpensesmaylagbehindtheoccurrenceofthoseexpenses.RatesinNewMexicomaybeestablishedusingprojectedcostsandinvestmentforafuturetestyearperiodincertaininstances.Whilerateregulationisbasedontheassumptionthatwewillhaveareasonableopportunitytorec

213、overourcostsandearnareasonablerateofreturnonourinvestedcapital,therecanbenoassurancethatourfutureTexasratecases,NewMexicoratecasesorFERCratecaseswillresultinratesthatwillallowustofullyrecoverourcostsincludingareasonablereturnoninvestedcapital,orthatourregulatorswillmakesimilarorconsistentdeterminati

214、onswithrespecttoourrates,operationsorothermattersbeforeourregulators.Therecanbenoassurancethatregulatorswilldeterminethatallofourcostsarereasonableandhavebeenprudentlyincurred,includingcostsassociatedwithfutureplantretirements.Itisalsolikelythatthirdpartieswillinterveneinanyratecasesandchallengewhet

215、herourcostsarereasonableandnecessary.Ifallofourcostsarenotrecovered,ortimelyrecovered,throughtheretailratesultimatelyapprovedbyourregulators,ourprofitabilityandcashflowcouldbeadverselyaffectedwhich,overtime,couldadverselyaffectourabilitytomeetourfinancialobligations.We May Not Be Able To Recover All

216、 Costs of New Generation and Transmission AssetsWereceivedapproval,bothfromthePUCTandtheNMPRC,toconstructUnits3and4,two89-MWsimple-cycleaeroderivativecombustionturbinesatMPS.In2016,wecompletedconstructionoftheseunits,whichbegancommercialoperationinMay2016andSeptember2016,respectively.ThePUCTapproved

217、theinclusionoftheTexasjurisdictionalportionofMPSUnits3and4inbaseratesinthe2017PUCTFinalOrder.However,theNewMexicojurisdictionportionofMPSUnits3and4havenotyetbeenapprovedbytheNMPRCforinclusionincustomerbaserates.Accordingly,weareexposedtotheriskoffailingtorecoverthesecostsaswellascostsassociatedwitht

218、heconstructionofothernewunitsandtransmissionanddistributionassets.Weannouncedtheresultsofthe2017AllSourceRFPonDecember26,2018,thatincludeadiversegenerationmix.Theselectedproposalsaresubjecttotheexecutionofcontractsfollowingnegotiationswiththewinningbidders,obtainingtheapplicableenvironmentalandconst

219、ructionrelatedpermitsandobtainingnecessaryapprovalsbythePUCTandtheNMPRC.Inrelationtothe2017AllSourceRFP,theCompanyfiledforregulatoryapprovalwiththeNMPRCforthreeLong-TermPurchasedPowerAgreementsrelatingto(i)a100-MWsolarplanttobeconstructedinSantaTeresa,NewMexico;(ii)a100-MWsolarplantcombinedwith50-MW

220、ofbatteryenergystoragetobeconstructedinOteroCounty,NewMexico;and(iii)a50-MWbatteryenergystoragefacilitytobeconstructedinCanutillo,Texas.Additionally,theCompanyhasfiledacertificateofconvenienceandnecessitywithboththePUCTandtheNMPRCtoownandoperateanewapproximately228-MWnaturalgas-firedunittobeconstruc

221、tedattheCompanysexistingNewmanPowerStation.TheCompanycannotpredicttheoutcomeofthesefilingsatthistime.Inaddition,forallresourceadditions,ifthecontracts,permits,approvalsortheconstructionofthenewunitisnotcompletedontime,wemayberequiredtopurchasepoweroroperatelessefficientgeneratingunitstomeetcustomerr

222、equirements.AnyreplacementpurchasedpowerorfuelcostswillbesubjecttoregulatoryreviewbythePUCTandtheNMPRC.Wefacefinancial12TableofContentsriskstotheextentthatrecoveryisnotallowedforanyreplacementfuelcostsresultingfromdelaysinthecompletionofthesenewunitsorothernewunits.Weakness in the Economy and Uncert

223、ainty in the Financial Markets Could Reduce Our Sales,Hinder Our Capital Programs and Increase Our FundingObligations for Pensions and DecommissioningTheglobalcreditandequitymarketsandtheoveralleconomycanbeextremelyvolatile,whichcouldhaveanumberofadverseeffectsonouroperations,fundingobligationsandca

224、pitalprograms.Forexample,tightcreditandcapitalmarketscouldmakeitdifficultandmoreexpensivetoraisecapitaltofundouroperationsandcapitalprograms.Ifweareunabletoaccessthecreditmarkets,wecouldberequiredtodeferoreliminateimportantcapitalprojectsinthefuture.Inaddition,declinesinstockmarketperformancemayredu

225、cethevalueofourfinancialassetsanddecommissioningtrustinvestmentsandnegativelyimpactourresultsofoperations.Similarly,inflationaryincreaseswillincreaseourfuturedecommissionobligations.Suchmarketresultsmayalsoincreaseourfundingobligationsforourpensionplans,otherpost-retirementbenefitplansandtheNDT.Chan

226、gesinthecorporateinterestratesthatweuseasthediscountratetodetermineourpensionandotherpost-retirementliabilitiesmayhaveanimpactonourfundingobligationsforsuchplansandtrusts.Further,aneconomicdownturnmayresultinreducedcustomerdemand,bothintheretailandwholesalemarkets,andincreasesincustomerdelinquencies

227、andwrite-offs.Uncertaintyinthecreditmarketsmaynegativelyimpacttheabilityofourcustomerstofinancepurchasesofourservicesandcouldadverselyaffectthecollectabilityofourreceivables.Thecreditmarketsandoveralleconomy(includinginflationaryincreases)mayalsoadverselyimpactourabilitytoarrangefuturefinancingsonac

228、ceptabletermsandthereforeourabilitytorefinanceourexistingindebtednesscouldbelimited.Furthermore,thecreditmarketsandoveralleconomymayalsoadverselyimpactthefinancialhealthofoursuppliers.Ifthatweretooccur,ouraccesstoandpricesforinventory,suppliesandcapitalequipmentcouldbeadverselyaffected.Ourpowertradi

229、ngcounterpartiescouldalsobeadverselyimpactedbythemarketandeconomicconditions,whichcouldresultinreducedwholesalepowersalesorincreasedcounterpartycreditrisk.Similarly,actionsorinactionofCongressandofgovernmentalagenciescanimpactouroperations.Partialgovernmentshutdowns,suchasoccurredin2013,theendof2018

230、andthebeginningof2019,canimpactbothsalesandtimelyreceivablesfrompublicauthorities,commercial,industrialandresidentialcustomers.Theoccurrenceofanyoftheseeventscouldhaveamaterialadverseeffectonourresultsofoperations,financialconditionandcashflows.There are Inherent Risks in the Ownership of Nuclear Fa

231、cilitiesOur15.8%ownershipinterestinPaloVerde,whichisthelargestnuclearelectricgeneratingfacilityintheU.S.,subjectsustoanumberofrisks.Asignificantpercentageofourgeneratingcapacity,off-systemsalesmargins,assetsandoperatingexpensesisattributabletoPaloVerde.OurinterestineachofthethreePaloVerdeunitstotals

232、approximately633MWofgeneratingcapacity.PaloVerderepresentsapproximately30%ofouravailablenetgeneratingcapacityandprovidedapproximately44%ofourenergyrequirementsforthetwelvemonthsendedDecember31,2019.PaloVerdecomprisesapproximately23%ofourtotalnetplant-in-serviceandPaloVerdeexpensescompriseasignifican

233、tportionofO&MexpensesforthetwelvemonthsendedDecember31,2019.APSistheoperatingagentforPaloVerde,andwehavelimitedabilityundertheANPPParticipationAgreementtoinfluenceoperationsandcostsatPaloVerde.PaloVerdeoperatedatacapacityfactorof92.5%and90.2%inthetwelvemonthsendedDecember31,2019and2018,respectively.

234、WeparticipateinPaloVerdewithoneormorepartieswhomaynothavethesamegoals,strategies,prioritiesorresourcesaswedoandmaycompetewithus.Furthermore,regulatory compliance issues and financial restraints could cause these parties to make decisions that could potentially be adverse to us.Additionally,ifoneormo

235、reoftheparticipantsdefaultsinperformanceofitsobligationsundertheANPPParticipationAgreement,thenon-defaultingparticipantsmustbearalloperating,maintenance,andothercostsotherwisepayablebythedefaultingparticipant(andwillreceivethegenerationshareofthedefaultingparticipant)intheratiooftheirrespectiveshare

236、tothetotalsharesofallnon-defaultingparticipants.AsPaloVerdeisanuclearelectricgeneratingfacility,itissubjecttoenvironmental,healthandfinancialrisks,suchastheabilitytoobtainadequatesuppliesofnuclearfuelandwater;theabilitytodisposeofspentnuclearfuel;increasesindecommissioningcostsduetoinflationandregul

237、atorychanges;theabilitytomaintainadequatetrustfundreservesfordecommissioning;potentialliabilitiesarisingoutoftheoperationofthesefacilities;thecostsofsecuringthefacilitiesagainstpossibleterroristattacks;cyber-attacks,orothercausesandunscheduledoutagesduetoequipmentandotherproblems.Ifanuclearincidentw

238、eretooccuratPaloVerde,itcouldmateriallyandadverselyaffectourresultsofoperationsandfinancialcondition.Amajorincidentatanuclearfacilityanywhereintheworldcouldcauseregulatorybodiestolimitorprohibittheoperationorlicensingofanydomesticnuclearunitandtopromulgatenewregulationsthatcouldrequiresignificantcap

239、italexpendituresand/orincreaseoperatingcosts.13TableofContentsTheNRChasbroadauthorityunderfederallawtoimposesafety-related,security-relatedandotherlicensingrequirementsfortheoperationofnucleargeneratingfacilities.EventsatnuclearfacilitiesofotheroperatorsorimpactingtheindustrygenerallymayleadtheNRCto

240、imposeadditionalrequirementsandregulationsonallnucleargeneratingfacilities,includingPaloVerde.Intheeventofnoncompliancewithitsrequirements,theNRChastheauthoritytoimposeaprogressivelyincreasedinspectionregimethatcouldultimatelyresultintheshut-downofaunitorcivilpenalties,orboth,dependingupontheNRCsass

241、essmentoftheseverityofthesituation,untilcomplianceisachieved.Theincreasedcostsresultingfrompenalties,aheightenedlevelofscrutinyandimplementationofplanstoachievecompliancewithNRCrequirementsmayadverselyaffectourfinancialcondition,resultsofoperationsandcashflows.We May Not Be Able to Recover All of Ou

242、r Fuel Expenses from Customers On a Timely Basis Or at AllIn general,by law,we are entitled to recover our reasonable and necessary fuel and purchased power expenses from our customers in Texas andNewMexico.NMPRCCaseNo.18-00006-UTprovidesforcapacityandenergydeliveredtoNewMexicocustomersfromthederegu

243、latedPaloVerdeUnit3toberecoveredbasedonanapprovedfuelandpurchasedpowercost.FuelandpurchasedpowerexpensesinTexasandNewMexicoaresubjecttoreconciliationbythePUCTandNMPRC.Priortothecompletionofareconciliation,werecordfuelandpurchasedpowercostssuchthatfuelrevenuesequalrecoverablefuelandpurchasedpowerexpe

244、nseincludingthere-pricedenergycostsforPaloVerdeUnit3inNewMexico.Intheeventthatrecoveryoffuelandpurchasedpowerexpensesisdeniedinanyreconciliationproceeding,theamountsrecordedforfuelandpurchasedpowerexpensescoulddifferfromtheamountsweareallowedtocollectfromourcustomers,andwewouldincuralosstotheextento

245、fthedisallowance.InNewMexico,theFuelandPurchasedPowerCostAdjustmentClause(FPPCAC)allowsustoreflectcurrentfuelandpurchasedpowerexpensesintheFPPCACandtoadjustforunder-recoveriesandover-recoverieswithatwo-monthlag.InTexas,fuelcostsarerecoveredthroughafixedfuelfactor.InTexas,wecanseektoreviseourfixedfue

246、lfactorbaseduponourapprovedformulaatleastfourmonthsafterourlastrevisionexceptinthemonthofDecember.Ifwemateriallyunder-recoverfuelcosts,wemayseekasurchargetorecoverthosecostsatanytimethebalanceexceedsathresholdmaterialamountandisexpectedtocontinuetobemateriallyunder-recovered.Duringperiodsofsignifica

247、ntincreasesinnaturalgasprices,werealizealagintheabilitytoreflectincreasesinfuelcostsinourfuelrecoverymechanismsinTexas.Asaresult,cashflowisimpactedduetothelaginpaymentoffuelcostsandcollectionoffuelcostsfromcustomers.TotheextentthefuelandpurchasedpowerrecoveryprocessesinTexasandNewMexicodonotprovidef

248、orthetimelyrecoveryofsuchcosts,wecouldexperienceamaterialnegativeimpactonourcashflow.Security Breaches,Criminal Activity,Terrorist Attacks and Other Disruptions to Our Infrastructure Could Interfere With Our Operations,CouldExpose Us or Our Customers or Employees to a Risk of Loss,and Could Expose U

249、s to Liability,Regulatory Penalties,Reputational Damage and OtherHarm to Our BusinessWerelyuponourinfrastructuretomanageorsupportavarietyofbusinessprocessesandactivities,includingthegeneration,transmissionanddistributionofelectricity,supplychainfunctions,andtheinvoicingandcollectionofpaymentsfromour

250、customers.Wealsouseinformationtechnologysystemsforinternalaccountingpurposesandtocomplywithfinancialreporting,legalandtaxrequirements.Ourinformationtechnologynetworksandinfrastructuremaybevulnerabletodamage,disruptionsorshutdownsduetoattacksbyhackers,breachesduetoemployeeerrorormalfeasance,systemfai

251、lures,computerviruses,naturaldisasters,aphysicalattackonourfacilities,orothercatastrophicevents.Theoccurrenceofanyoftheseeventstousorourkeysuppliersorserviceproviderscouldimpactthereliabilityofourgeneration,transmissionanddistributionsystemsandenergymarketingandtradingfunctions;couldexposeusorourcus

252、tomersoremployeestoariskoflossormisuseofconfidentialinformation;andcouldresultinlegalclaimsorproceedings,liabilityorregulatorypenaltiesagainstus,damageourreputationorotherwiseharmourbusiness.Inaddition,wemayberequiredtoincursignificantcoststopreventorrespondtodamagecausedbythesedisruptionsorsecurity

253、breachesinthefuture.Further,certainofthevariousinternalsystemsweusetoconductourbusinessesarehighlyintegrated.Consequently,acyber-attackorunauthorizedaccessinanyoneofthesesystemscouldpotentiallyimpacttheothersystems.Additionally,wecannotpredicttheimpactthatanyfutureinformationtechnologyorterroristatt

254、ackmayhaveontheenergyindustryingeneral.Theeffectsofsuchattacksagainstusorothersintheenergyindustrycouldincreasethecostofregulatorycompliance,increasethecostofinsurancecoverageorresultinadeclineintheU.S.economywhichcouldnegativelyaffectourresultsofoperationsandfinancialcondition.Ongoingandfuturegover

255、nmentaleffortstoregulatecybersecurityintheenergyindustrycouldleadtoincreasedregulatorycompliancecosts.Asdomesticandglobalcyberthreatsareon-goingandincreasinginsophistication,magnitudeandfrequency,ourcriticalenergyinfrastructuremaybetargetsofterroristactivitiesorotherwisecoulddisruptourbusinessoperat

256、ions.Anysuchdisruptionscouldresultinsignificantcoststorepairdamagedfacilitiesandimplementincreasedsecuritymeasures,whichcouldhaveamaterialadverseeffectonourresultsofoperations,financialconditionandcashflows.14TableofContentsWearesubjecttolawsandrulesissuedbymultiplegovernmentagenciesconcerningsafegu

257、ardingandmaintainingtheconfidentialityofoursecurity,customerandbusinessinformation.Oneoftheseagencies,theNERC,hasissuedcomprehensiveregulationsandstandardssurroundingthesecurityofbulkpowersystems,andiscontinuallyintheprocessofdevelopingupdatedandadditionalrequirementswithwhichtheutilityindustrymustc

258、omply.TheNRCalsohasissuedregulationsandstandardsrelatedtotheprotectionofcriticaldigitalassetsatcommercialnuclearpowerplants.TheincreasingpromulgationofNERCandNRCrulesandstandardswillincreaseourcompliancecostsandourexposuretothepotentialriskofviolationsofthestandards.Experiencingacybersecurityinciden

259、tcouldcauseustobenon-compliantwithapplicablelawsandregulations,suchasthosepromulgatedbyNERCandtheNRC,orcontractsthatrequireustosecurelymaintainconfidentialdata,causingustoincurcostsrelatedtolegalclaimsorproceedingsandregulatoryfinesorpenalties.We May Incur Additional Capital and Operating Costs in C

260、onnection with the Physical Security and Cyber Security of New TechnologiesWeoperateinahighlyregulatedindustrythatrequiresthecontinuedoperationanddevelopmentofsophisticatedinformationtechnologysystemsandnetworkinfrastructure.Theintroductionofnewtechnologyandtheemergenceofnewindustrystandardsandtechn

261、ologicalhurdlescancreateunanticipateddifficulties,includingfailuresorinadequacyofequipmentorsoftware,difficultiesinintegratingthevariouscomponentsoftheequipment,changesintechnology,cybersecurityissuesandfactorsoutsideourcontrol,whichcouldnegativelyaffectourresultsofoperationsandfinancialcondition.As

262、wecontinuetodevelopnewtechnologytokeepupwiththedemandsoftheindustryandtheneedsofourcustomers,wemayberequiredtoexpendsignificantcapitalandotherresourcestoprotectagainstsecuritybreachesortoalleviateproblemscausedbysecuritybreaches.Failure to Maintain the Security of Personally Identifiable Information

263、 Could Adversely Affect UsInconnectionwithourbusinessweandourvendors,suppliersandcontractorscollectandretainpersonallyidentifiableinformation(e.g.,informationofourcustomers,shareholders,suppliersandemployees),andthereisanexpectationthatweandsuchthirdpartieswilladequatelyprotectthatinformation.TheU.S

264、.regulatoryenvironmentsurroundinginformationsecurityandprivacyisincreasinglydemanding.Asignificanttheft,lossorfraudulentuseofthepersonallyidentifiableinformationwemaintainorfailurebyourvendors,suppliersandcontractorstouseormaintainsuchinformationinaccordancewithcontractualprovisionscouldadverselyimp

265、actourreputationandcouldresultinsignificantcosts,fines,litigationandlossofreputation.Weather Conditions Affect the Demand for Electricity or Could Result in Unplanned OutagesOurserviceterritoryisinwestTexasandsouthernNewMexicoandisparticularlysusceptibletodryandhottemperaturesinthesummermonths.These

266、seasonalweatherpatternsresultintemperaturesthatcanleadtodaytimehighsexceeding100degreesFahrenheitforextendedperiodsduringthesummerwhenwetypicallyexperiencepeakkWhsalesathighersummerrates.MildertemperaturesduringthisperiodwilloccuroccasionallyandresultinlesskWhsales,whichwilladverselyaffectourresults

267、ofoperations.Fromtimetotime,weexperienceextremeweatherconditions,includinghighwinds(usuallyinthespringmonthsbutcanoccurduringothermonths),thatmayresultinunplannedoutages.Undersuchconditions,wemayincuradditionalcoststorepairand,ifnecessary,toreplaceequipment.Dependinguponthelengthandextentofthedamage

268、,wemayalsoincuradditionalpurchasedpowercosts.Fallenpowerlinesandpolescancauseseveredamagetocustomerpropertyandsubjectustoclaims,allofwhichcouldhaveamaterialadverseeffectonourresultsofoperationsandcashflows.Equipment Failures and Other External Factors Can Adversely Affect Our ResultsThegenerationand

269、transmissionofelectricityrequiretheuseofexpensiveandcomplexequipment.Whilewehaveamaintenanceprograminplace,generatingplantsaresubjecttounplannedoutagesbecauseofequipmentfailureandsevereweatherconditions.Theadvancedageofseveralofourgas-firedgeneratingunitsinornearElPasoincreasesthevulnerabilityofthes

270、eunits.Intheeventofunplannedoutages,wemustacquirepowerfromothersourcesatunpredictablecostsinordertosupplyourcustomersandcomplywithourcontractualagreements.ThisadditionalpurchasedpowercostwouldbesubjecttoreviewandapprovalofthePUCTandtheNMPRCinreconciliationproceedings.Asnotedabove,intheeventthatrecov

271、eryforfuelandpurchasedpowerexpensescoulddifferfromtheamountsweareallowedtocollectfromourcustomers,wewouldincuralosstotheextentofthedisallowance.Unplannedoutagescouldalsopreventusfromsellingexcesspoweratwholesale.Inaddition,actionsofotherutilitiesmayadverselyaffectourabilitytousetransmissionlinestode

272、liverorimportpower,thussubjectingustounexpectedexpensesortothecostanduncertaintyofpublicpolicyinitiatives.Wemayalsoincuradditionalcapitalandoperatingcostsinconnectionwiththephysicalsecurityandcybersecurityoftransmissionlinesandgenerationfacilities.Damagetocertaintransmissionandgenerationfacilitiesdu

273、etovandalismorotherdeliberateacts,ordamageduetosevereweathercouldleadtooutagesorotheradverseeffects.Weareparticularlyvulnerabletothisbecauseasignificantportionofouravailableenergy(atPaloVerde)islocatedhundredsofmilesfromElPasoandLasCrucesandmustbedeliveredtoourcustomersoverlongdistancetransmissionli

274、nes.Inaddition,PaloVerdesavailabilityisanimportantfactorinrealizingoff-systemsalesmargins.Thesefactors,15TableofContentsaswellasinterestrates,economicconditions,fuelpricesandpricevolatility,couldhaveamaterialadverseeffectonourearnings,cashflowandfinancialposition.Whilewebelievethatwemaintainadequate

275、insurancecoverageforsuchincidents,thereisnoassurancethatallcostsinexcessofdeductibleamountswillbereimbursedorthatwecanmaintainsuchcoveragelimitsinthefutureatcompetitivemarketrates.Intheeventfutureinsurancecostsand/ordeductibleamountsincrease,ourfinancialcondition,operatingresultsandcashflowscouldbem

276、ateriallyadverselyaffected.Competition and Deregulation Could Result in a Loss of Customers and Increased CostsAsaresultofchangesinfederallaw,ourwholesaleandlargeretailcustomershaveaccessto,invaryingdegrees,alternativesourcesofpower,includingco-generationofelectricpower.Deregulationlegislationisinef

277、fectinTexasrequiringustoseparateourtransmissionanddistributionfunctions,whichwouldremainregulated,fromourpowergenerationandenergyservicesbusinesses,whichwouldoperateinacompetitivemarket,inthefuture.In2004,thePUCTapprovedaruledelayingretailcompetitioninourTexasserviceterritory.Thisrulewascodifiedinth

278、eTexasPublicUtilityRegulatoryAct(PURA)inJune2011.ThePURAidentifiesvariousmilestonesthatwemustreachbeforeretailcompetitioncanbegin.Thefirstmilestonecallsforthedevelopment,approvalbytheFERC,andcommencementofindependentoperationofaregionaltransmissionorganizationintheareathatincludesourserviceterritory

279、.Thisandothermilestonesarenotlikelytobeachievedforanumberofyears,ifatall.ThereissubstantialuncertaintyaboutboththeregulatoryframeworkandmarketconditionsthatwouldexistifandwhenretailcompetitionisimplementedinourTexasserviceterritory,andwemayincursubstantialpreparatory,restructuringandothercoststhatma

280、ynotultimatelyberecoverable.Therecanbenoassurancethatderegulationwouldnotadverselyaffectourfutureoperations,cashflowandfinancialcondition.Future Costs of Compliance with Environmental Laws and Regulations CouldAdversely Affect Our Operations and Financial ResultsWearesubjecttoextensivefederal,statea

281、ndlocalenvironmentallawsandregulationsrelatingtodischargesintotheair,airquality,dischargesofeffluentsintowater,waterquality,theuseofwater,thehandling,disposalandclean-upofhazardousandnon-hazardoussubstancesandwastes,naturalresourcesandhealthandsafety.Compliancewiththeselegalrequirements,whichchangef

282、requentlyandoftenbecomemorerestrictive,couldrequireustocommitsignificantcapitalandoperatingresourcestowardpermitting,emissionfees,environmentalmonitoring,installationandoperationofpollutioncontrolequipmentandpurchasesofairemissionallowancesandpossibleoffsets.Theselawsandregulationscouldalsoresultinl

283、imitationsinoperatinghoursandchangesinconstructionschedulesforfuturegeneratingunits.Costofcompliancewithenvironmentallawsandregulationsorfinesorpenaltiesresultingfromnon-compliance,ifnotrecoveredinourrates,couldadverselyaffectouroperationsandfinancialresults,especiallyifemissionordischargelimitsaret

284、ightened,moreextensivepermittingrequirementsareimposed,additionalsubstancesbecomeregulatedandthenumberandtypesofassetsweoperateincrease.Wecannotestimateourcompliancecostsoranypossiblefinesorpenaltieswithcertainty,orthedegreetowhichsuchcostsmightberecoveredinourrates,duetoourinabilitytopredicttherequ

285、irementsandtimingofimplementationofenvironmentallawsorregulations.Forexample,theEPAhasissuedintherecentpastvariousproposedregulationsregardingairemissions,suchastherevisionoftheprimaryandsecondaryground-levelozoneNAAQS.Iftheseregulationsbecomefinalizedandsurvivelegalchallenges,thecosttoustocomplycou

286、ldadverselyaffectouroperationsandourfinancialresults.Climate Change and Related Legislation and Regulatory Initiatives Could Affect Demand forElectricity or Availability of Resources,and Could Result in Increased Compliance CostsWeemitGHG(includingcarbondioxide)throughtheoperationofourpowerplants.Fe

287、derallegislationhasbeenintroducedinbothhousesofCongresstoregulateGHGemissionsandnumerousstateshaveadoptedprogramstostabilizeorreduceGHGemissions.Additionally,theEPAisproceedingwithregulationofGHGundertheCAA.InOctober2015,theEPApublishedaruleestablishingguidelinesforstatestoregulatecarbondioxideemiss

288、ionsfromexistingpowerplants,knownastheCPP.LegalchallengestotheCPPareongoing.OnAugust31,2018,theEPApublishedaproposaltoreplacetheCPPcalledtheACErule.TheACErulewasfinalizedinJuly2019.RemaininglegalchallengestotheCPPweremootedinSeptember2019.LegalchallengestotheACEruleareongoing.Asadopted,theACEruleisf

289、ocusedoncoal-firedgeneration,andwouldnotimposerequirementsonouroperations.However,atthistimetheCompanycannotdeterminetheimpactthattheACErule,andrelatedproposalsandlegalchallengesmayhaveonitsfinancialposition,resultsofoperationsorcashflows.Itisnotpossibletopredicthowanypending,proposedorfutureGHGlegi

290、slationbyCongress,thestatesormulti-stateregionsoranyGHGregulationsadoptedbytheEPAorstateenvironmentalagencieswillimpactourbusiness.Additionally,weareunabletopredicthowinitiativesbymembersoftheinvestmentcommunityorcustomerscouldaffectourbusiness.However,anylegislationorregulationofGHGemissions,anyfut

291、urerelatedlitigation,orinitiativestofurtherimprovesustainabilitypractices16TableofContentsbyinvestorsorcustomerscouldresultinincreasedcompliancecostsoradditionaloperatingrestrictionsorincreasedorreduceddemandforourservices,couldrequireustopurchaserightstoemitGHGandcouldhaveamaterialadverseeffectonou

292、rbusiness,financialcondition,reputationorresultsofoperations.Adverse Regulatory Decisions or Changes in Applicable Regulations or Laws Could Have a Material Adverse Effect on Our Business or Result inSignificant Additional CostsOurbusinessissubjecttoextensivefederal,stateandlocallawsandregulationsre

293、gardingsafetyandperformance,sitingandconstructionoffacilities,customerserviceandtherateswecanchargeourcustomers,amongotherthings.FERCregulatesourwholesaleoperations,provisionoftransmissionservicesandcompliancewithfederallymandatedreliabilitystandards.FERChasissuedanumberofrulespertainingtopreventing

294、unduediscriminationintransmissionservicesandelectricreliabilitystandards.UndertheEnergyPolicyActof2005,FERCcanimposepenalties(upto$1,291,894perviolation,perday)forfailuretocomply with statutes,rules and orders within FERCs jurisdiction,including mandatory electric reliability standards.Additional re

295、gulatory authorities havejurisdiction over some of our operations and construction projects,including the EPA,the DOE,the PUCT,the NMPRCand various local municipalities(includingthecitiesofElPasoandLasCruces).Wemustperiodicallyapplyforlicensesandpermitsfromthesevariousauthoritiesandabidebytheirrespe

296、ctiveorders.Shouldwebeunsuccessfulinobtaining necessary licenses or permits or should these regulatory authorities initiate any investigations or enforcement actions or impose penalties ordisallowancesonus,ourbusinesscouldbeadverselyaffected.Existingregulationsmayberevisedorreinterpreted,andnewlawsa

297、ndregulationsmaybeadoptedorbecomeapplicabletousorourfacilitiesinamannerthatmayhaveadetrimentaleffectonourbusinessorresultinsignificantadditionalcostsbecauseofourobligationtocomplywiththoserequirements.In addition,our service territory borders with Mexico and,as such,businesses in our service territo

298、ry rely heavily on commerce with businesses inMexico.Changesinregulationsorenforcementrestrictingsuchcommerceactivitiescouldreduceourcustomergrowthrateandmateriallyadverselyaffectourresultsofoperations,financialconditionandcashflows.TheNewMexicoRenewableEnergyAct(theREA)requireselectricutilitiestome

299、etanRPSoftwentypercentofitstotalretailsalestoNewMexicocustomersby2020.EffectiveJune14,2019,theNewMexicoEnergyTransitionActamendedtheREA(theAmendedREA)to,amongotheramendments:(i)increasetheRPStofortypercentby2025,fiftypercentby2030andeightypercentby2040;(ii)imposeazero-carbonstandardby2045;(iii)elimi

300、natethereductiontotheRPSrequirementforsalestoqualifyinglargenon-governmentalcustomerswhosecostsarecappedundertheREA;(iv)setastatutoryreasonablecostthresholdand(v)providecostrecoveryforcertainundepreciatedinvestmentsanddecommissioningcosts,suchascoal-firedgeneration,associatedwithgenerationrequiredby

301、theNMPRCtobediscontinuedandreplacedwithlowerorzero-carbongeneration.InadministeringtheeightypercentRPSandzero-carbonstandards,theAmendedREArequirestheNMPRCtoconsidercertainfactors,includingsafety,reliabilityandrateimpacttocustomers.OnOctober10,2019,theNMPRCinitiatedarulemakingproceedingtoimplementth

302、eAmendedREAinCaseNo.19-00296-UT.TheCompanyiscurrentlyevaluatingtheimpactthattheAmendedREAmayhaveonitsoperations.Further,theCompanyhasnotdeterminedthecostsassociatedwithcomplyingwiththeAmendedREAincludingpotentialfinesthatcouldbeassociatedwithnon-compliance.Failure to Successfully Operate Our Facilit

303、ies or Perform Certain Corporate Functions May Adversely Affect Our Operations and FinancialConditionOurperformancedependsonthesuccessfuloperationofourfacilities.Operatingthesefacilitiesinvolvesmanyrisks,including:operatorerrororfailureofequipmentorprocesses,includingfailuretofollowappropriatesafety

304、protocols;thehandlingofhazardousequipmentormaterialsthatcouldresultinseriouspersonalinjury,lossoflifeandenvironmentalandpropertydamage;operatinglimitationsthatmaybeimposedbyenvironmentalorotherregulatoryrequirements;labordisputes;informationtechnologyorfinancialsystemfailures,includingthoseduetothei

305、mplementationandintegrationofnewtechnology,thatimpairourinformationtechnologyinfrastructure,reportingsystemsordisruptnormalbusinessoperations;informationtechnologyfailurethataffectsourabilitytoaccesscustomerinformationorcausesustoloseconfidentialorproprietarydatathatmateriallyandadverselyaffectsourr

306、eputationorexposesustolegalclaims;and17TableofContentscatastrophiceventssuchasfires,earthquakes,explosions,leaks,floods,droughts,naturaldisasters,terrorism,pandemichealtheventsorothersimilaroccurrences,whichmayrequireparticipationinmutualassistanceeffortsbyusorotherutilitiestoassistinpowerrestoratio

307、nefforts.Sucheventsmayresultinadecreaseoreliminationofrevenuefromourfacilities,anincreaseinthecostofoperatingourfacilitiesordelaysincashcollections,anyofwhichcouldhaveamaterialadverseeffectonourresultsofoperations,financialconditionandcashflows.The Effects of Technological Advancement,Energy Conserv

308、ation Measures and Distributed Generation Could Adversely Affect Our Operations andFinancial ResultsNewtechnologiesmayemergethatcouldbesuperiorto,ormaynotbecompatiblewith,someofourexistingtechnologies,andmayrequireustomakesignificantexpenditurestoremaincompetitive.Ourfuturesuccesswilldepend,inpart,o

309、nourabilitytoanticipateandadapttotechnologicalchangesinacost-effectivemannerandtooffer,onatimelybasis,servicesthatmeetcustomerdemandsandevolvingindustrystandards.Additionally,theelectricutilityindustryisundergoingothertechnologicaladvancessuchastheexpandedcost-effectiveutilizationofenergyefficiencym

310、easures,energystorageanddistributedgeneration,includingsolarrooftopprojects.Customersincreaseduseofenergyefficiencymeasures,energystorageanddistributedgenerationcouldresultinlowerdemand.Reduceddemandduetoenergyefficiencymeasures,energystorageandtheuseofdistributedgeneration,totheextentnotsubstantial

311、lyoffsetthroughratemakingmechanisms,couldhaveamaterialadverseimpactonourfinancialcondition,resultsofoperationsandcashflows.Inflation Could Adversely Affect Our Financial ResultsForthepastseveralyears,inflationhasbeenrelativelylowand,thereforehashadlittleimpactonourresultsofoperationsandfinancialcond

312、ition.However,shouldweexperienceincreasesincostsduetoinflationaryimpacts,anydelaysinrequestingandreceivingcompensatoryincreasesinourbaseratescouldhaveamaterialadverseimpactonourfinancialcondition,resultsofoperationsandcashflows.Our Line of Business Is Concentrated Solely to the Electric Industry and

313、 to One RegionWeareafullyverticallyintegratedelectricutilitycompanywhoseonlybusinessisthegeneration,transmissionanddistributionofelectricitytocustomersinanareaofapproximately10,000squaremilesinwestTexasandsouthernNewMexico.Approximately86%ofrevenuesaredirectlyrelatedtotheretailsalesofelectricpowerto

314、approximately432,800residential,commercialandpublicauthoritycustomers.Assuch,risksuniquelyassociatedwiththeutilityindustrysuchaschangesinutilitylegislationandregulations,weatherpatternsintheregionandeconomicconditionswillhaveagreatereffectonouroveralloperatingresultsthanotherwiseifouroperationswerem

315、orediversifiedintootherlinesofbusinessandinabroadergeographicalarea.The Operation of Transmission Lines on Public and Private Properties,including Indian Lands,Could Result in Uncertainty Related to ContinuedEasements and Rights-of-Way and Significantly Impact Our BusinessPortionsofourtransmissionli

316、nesarelocatedonpublicandprivateproperties,includingIndianlands,pursuanttoeasementsorotherrights-of-waythatareeffectiveforspecifiedperiods.Weareunabletopredictthefinaloutcomeofpendingorfutureapprovalsbyapplicablepropertyownersandgoverningbodieswithrespecttorenewalsoftheseeasementsandrights-of-way.Our

317、 Success Depends on the Availability of the Services of a Qualified Workforce and Our Ability to Attract and Retain Qualified Personnel andSenior ManagementOurworkforceisagingandmanyemployeeshaveretiredinthelastfewyearsorareorwillbecomeeligibletoretirewithinthenextfewyears.Althoughwehaveundertakenef

318、fortstorecruitandtrainnewfieldservicepersonnel,wemaybefacedwithashortageofexperiencedandqualifiedpersonnel.Ourcosts,includingcoststoreplaceemployees,benefit(includinghealthcare)costs,retirementcosts,productivitycostsandsafetycosts,mayrise.Failuretohireandadequatelytrainreplacementemployees,including

319、thetransferofsignificantinternalhistoricalknowledgeandexpertisetothenewemployees,orthefutureavailabilityandcostofcontractlabormayadverselyaffecttheabilitytomanageandoperateourbusiness.Ifweareunabletosuccessfullyattractandretainanappropriatelyqualifiedworkforce,ourresultsofoperationscouldbenegatively

320、affected.AsubstantialnumberofouremployeesarecoveredbyacollectivebargainingagreementthatwasrenewedforfouryearsinOctober2019.Labordisruptions,strikesorsignificantnegotiatedwageandbenefitincreases,whetherduetounionactivities,employeeturnoverorotherwise,couldhaveamaterialadverseeffectonourbusiness,resul

321、tsofoperationsandcashflows.18TableofContentsWedependonourseniormanagementandotherkeypersonnel.Oursuccessdependsonourabilitytoattractandretainkeypersonnel.Theinabilitytorecruitandretainoreffectivelytransitionkeypersonnelortheunexpectedlossofkeypersonnelmayadverselyaffectouroperations.Inaddition,becau

322、seoftherelianceonourmanagementteam,ourfuturesuccessdependsinpartonourabilitytoidentifyanddeveloptalenttosucceedseniormanagement.Anysuchoccurrencescouldnegativelyimpactourfinancialconditionandresultsofoperations.Our Ability to Accurately Report Our Financial Results or Prevent Fraud May Be Adversely

323、Affected if We Fail to Maintain an Effective System ofInternal ControlsEffectiveinternalcontrolsarenecessaryforustoprovidereliablefinancialreports,effectivelypreventfraudandoperatesuccessfullyasapubliccompany.Ifoureffortstomaintainaneffectivesystemofinternalcontrolsarenotsuccessful,weareunabletomain

324、tainadequatecontrolsoverourfinancialreportingandprocessesinthefutureorweareunabletocomplywithourobligationsunderSection404oftheSarbanes-OxleyActof2002,ouroperatingresultscouldbeharmed,orwemayfailtomeetourreportingobligations.Ineffectiveinternalcontrolscouldalsocauseinvestorstoloseconfidenceinourrepo

325、rtedfinancialinformation,whichwouldlikelyhaveanegativeeffectonthetradingpriceofourcommonstockandothersecurities.Insufficient Insurance Coverage and Increased Insurance Costs Could Adversely Affect Our Operations and Financial ResultsWecurrentlyhavegeneralliabilityandpropertyinsuranceinplacetocoverce

326、rtainofourfacilitiesinamountsthatweconsiderappropriate.Suchpoliciesaresubjecttocertainlimitsanddeductiblesanddonotincludebusinessinterruptioncoverage.Insurancecoveragemaynotbeavailableinthefutureatcurrentcostsoroncommerciallyreasonableterms,andtheinsuranceproceedsreceivedforanylossof,oranydamageto,a

327、nyofourfacilitiesmaynotbesufficienttorestorethelossordamagewithoutnegativeimpactonourresultsofoperations,financialconditionandcashflows.We Are Subject to Costs and Other Effects of Legal and Regulatory Proceedings,Disputes and ClaimsFromtimetotimeinthenormalcourseofbusiness,wearesubjecttovariouslaws

328、uits,audits,regulatoryproceedings,disputesandclaimsthatcouldresultinadverse judgments or settlements,fines,penalties,injunctions or other adverse consequences.These matters are subject to a number of uncertainties,andmanagementisoftenunabletopredicttheoutcomeofsuchmatters;resultingliabilitiescouldex

329、ceedamountscurrentlyreservedorinsuredagainstwithrespecttosuchmatter.Thelegalcostsandfinalresolutionofmattersinwhichweareinvolvedcouldhaveareputationalimpactandashort-orlong-termnegativeeffectonourresultsofoperations,financialconditionandcashflows.Similarly,thetermsofresolutioncouldrequireustochangeo

330、uroperationalpracticesandprocedures,whichcouldalsohaveamaterialadverseeffectonourresultsofoperations,financialconditionandcashflows.Risk Factors Related to Our FinancingsAdverse Changes in Our Credit Ratings Could Negatively Affect Our Access to the Capital Markets and our Cost of Borrowed FundsAcce

331、sstothecapitalmarketsisimportanttoourabilitytooperateourbusinessandcompleteourcapitalprojects.Creditratingagenciesevaluateourcreditratingsonaperiodicbasisandwhencertaineventsoccur.Theseratingsarepremisedonfinancialratiosandperformance,ourregulatoryenvironmentandratemechanisms,resourcerisksandpowersu

332、pplycosts,andotherfactors.AratingsdowngradecouldincreasefeesontheRCFtherebyincreasingthecostoffundingday-to-dayworkingcapitalrequirements,andcouldalsoresultinhigherinterestratesonfuturelong-termdebt.Inaddition,anyratingsdowngradeorplacementofourcreditratingsonnegativewatchcouldhaveanadverseimpactont

333、hepriceofourcommonstock.Ifaccesstocapitalweretobecomesignificantlyconstrainedorcostsofcapitalincreasedsignificantlyduetoloweredcreditratings,prevailingindustryconditions,regulatoryconstraints,thevolatilityofthecapitalmarketsorotherfactors,ourfinancialconditionandresultsofoperationscouldbeadverselyaffected.Changes in the Method of Determining the London Interbank Offered Rate(LIBOR),or the Replace