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NMGCO #2476303

Natural Gas Integrated Resource Plan 2012 – 2022

April 02, 2012

Natural Gas Integrated Resource Plan | 2

NMGCO #2476303

Safe Harbor Statement This document contains forward-looking statements. Such statements are subject to a variety of risks, uncertainties and other factors, most of which are beyond the company’s control, and many of which could have a significant impact on the company’s operations, results of operations, and financial condition, and could cause actual results to differ materially from those anticipated.

The information in this document is based on the best available information at the time of preparation. The company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events, except to the extent the events or circumstances constitute material changes in the Integrated Resource Plan that are required to be reported to the New Mexico Public Regulation Commission pursuant to Rule 17.7.4 New Mexico Administrative Code.


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TABLE OF CONTENTS

Regulatory Requirements 5

Introduction 6

New Mexico Gas Company’s System Overview 6

Customer Demand and System Capacity 8

Demand 8

System Capacity 9

NMGC’s Portfolio of Demand-Side and Supply-Side Resources 11

Demand-Side Resources – NMGC Gas Energy Efficiency Program 11

Supply-Side Resources 15

Natural Gas Price Outlook 20

Conclusions Regarding the Current Gas Supply Portfolio 21

Foreseeable Resource Needs 23

Evaluation of Gas Supply Reliability 23

Public Advisory Process 25

Overview 25

Announcement of IRP Public Meetings 25

IRP Public Meetings and Topics 25

Coordination of IRP Process with Energy Efficiency Programs 26

Internet Posting of Information 26


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LIST OF FIGURES

Fig.1: NMGC Transmission Systems ......................................................................................................................... 7

Fig.2: Statewide Average Peak Day Growth (10-Years) ............................................................................................. 8

Fig.3: Forecasted Demands over Planning Horizon Compared to System Capacity ..................................................... 9

Fig. 4: Energy Efficiency Program Participation Summary ....................................................................................... 13

Fig.5: NMGC Natural Gas Perspective Map ............................................................................................................ 15

Fig.6: Combined Basin Production v. NMGC Demand ............................................................................................. 16

Fig.7: Long-term futures price projections ............................................................................................................... 20

Fig. 8: NMGC Supply Portfolio ............................................................................................................................... 21

Fig. 9: NMGC Long-term Contracts ........................................................................................................................ 22


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Regulatory Requirements In accordance with 17.7.4 New Mexico Administrative Code (“NMAC”), “Integrated Resource Plans for Gas Utilities”, New Mexico Gas Company, Inc. (“NMGC”) has established a process to analyze and determine the most cost-effective portfolio of resources to supply the energy needs of its customers for the planning period of 2012 – 2022. According to the requirements of the rule, this IRP contains the following specifics related to NMGC’s resource plan:

• Current load forecast; • Description of existing portfolio of resources; • Summary of foreseeable resource needs for the planning period; • Anticipated resources to be added during the planning period and the evaluation of

various options that could reasonably be added to the utility’s resource portfolio; • Description of the public advisory process; • Other information that may aid the Commission in reviewing the utility’s planning

processes.


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Introduction New Mexico Gas Company’s System Overview

NMGC’s service territory is throughout the State of New Mexico serving approximately 500,000 meters and an estimated 1.7 million people in 23 of New Mexico’s 33 counties. NMGC owns, operates, and maintains approximately 11,600 miles of transmission and distribution pipeline throughout the State. The NMGC transmission systems are defined as follows:

• Northwest Transmission System o Major Operating Areas: Albuquerque, Santa Fe, Farmington, Gallup, Grants,

Espanola, Taos, Red River, and surrounding communities and pueblos

• Southeast Transmission System o Major Operating Areas: Roswell, Artesia, Carlsbad, Loving, Lovington, and

surrounding communities and pueblos

• Alamogordo Area Transmission System o Major Operating Areas: Alamogordo, Chaparral, White Sands, Tularosa, and

surrounding communities

• Belen Area Transmission System o Major Operating Areas: Belen, Los Lunas, and surrounding communities

• Clovis Area Transmission System

o Major Operating Areas: Clovis, Portales, Tucumcari, and surrounding communities

• Truth or Consequences Area Transmission System o Major Operating Areas: Truth or Consequences, Akela, Arrey, and surrounding

communities

• Chamberino Area Transmission System o Major Operating Areas: Chamberino and surrounding communities

Downstream from NMGC’s transmission systems, distribution systems deliver gas to customers. There are several distribution systems that are not directly connected to NMGC’s transmission systems, but instead are connected to pipeline systems owned by others. These include the areas of Silver City, Anthony, Tyrone, Bayard, Hurley, Rodeo, Sunland Park, Clayton, Chama, Dulce, and surrounding communities.


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Fig.1: NMGC Transmission Systems


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Customer Demand and System Capacity Demand

The predominant use of natural gas by customers of NMGC is as a heating fuel, a demand which is weather driven. As temperatures decrease and wind speeds increase, customer heating requirements increase, and customer demand for natural gas goes up. Customer use of natural gas, or natural gas demand, is the primary criteria for evaluating system capacity. For planning purposes, NMGC has established the highest usage day experienced as its peak day demand criteria.

Peak day demand will change over time as the number of customers change or their usage patterns change. NMGC incorporates these changes into its peak day demand planning through growth forecasting.

Growth is monitored on a yearly basis and is dependent on economic conditions, population patterns, and past customer usage. Growth forecasts are applied to the highest ever peak day demand and forecasted out 10 years. For the planning horizon, the statewide natural gas peak day demand is forecasted to grow an average of 0.5% to 1.3% per year. Figure 2 shows the peak day demand growth rate for the major operational areas around the state.

Fig.2: Statewide Average Peak Day Growth (10-Years)


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System Capacity

System capacity is the total volume of natural gas that our transmission and distribution system can supply to our customers during any given day. This system capacity is contingent on the upstream capacity/deliverability and pressure provided by interstate pipeline operators and third party producers that provide natural gas to our transmission and distribution systems.

Through the use of hydraulic modeling, NMGC continually models and tests the capacity of its transmission and distribution systems in order to ensure adequate capacity to meet the peak day demand requirements of its customers. NMGC incorporates growth forecasts to compare with the Company’s existing system capacity to determine if there is a future resource need.

Fig.3: Forecasted Demands over Planning Horizon Compared to System Capacity


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Growth is not uniform and constant, and the need for natural gas system infrastructure improvements may be impacted over time by uneven growth or inconsistent growth. Additionally, any new large-scale projects (such as gas-fired electric generation) will require a case-by-case evaluation regarding their impact on system capacity and may require changes to Company infrastructure.

Currently, our conclusion is that our system capacity is adequate to meet current demand, including anticipated growth over the next 10 years, and absent unforeseen events, no major infrastructure additions are necessary over the planning horizon for NMGC’s transmission or distribution systems for system capacity purposes.


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NMGC’s Portfolio of Demand-Side and Supply-Side Resources Demand-Side Resources – NMGC Gas Energy Efficiency Program

INTRODUCTION Pursuant to the Efficient Use of Energy Act (“EUEA”) and consistent with the New Mexico Public Regulation Commission (“Commission” or “NMPRC”) Energy Efficiency Rule 17.7.2 NMAC (“EE Rule”), the NMGC Energy Efficiency Program is designed to help NMGC customers reduce their energy usage and save money on their utility bills by providing incentives for installing energy efficiency measures in their homes and businesses. The EUEA authorizes public utility investments in energy efficiency and load management and consequently, finds that investing in cost-effective energy efficiency and load management is an acceptable use of customer money. The EUEA requires the NMPRC to direct utilities to evaluate and implement cost-effective energy efficiency programs. In 2009, the Commission hired an independent evaluator and third party contractor, ADM and Associates (“ADM”) through a competitive bidding process to ensure compliance with the measurement and verification reporting requirements of the EE Rule for program years 2010 and 2011.

ENERGY EFFICIENCY PROGRAM DEVELOPMENT METHODOLOGY The EE Rule requires the use of a cost effectiveness threshold test for program consideration, as measured by the Total Resource Cost (“TRC”) Test. The TRC Test is the ratio of the net-present-value of the benefits of a program to the costs that includes both the participants' and the utility's costs and the savings are based on the avoided gas costs. A benefit-cost ratio greater than one indicates that the program is beneficial to the utility and its ratepayers on a total resource cost basis. All programs proposed by NMGC have a TRC of 1.0 or above.

ENERGY EFFICIENCY PUBLIC ADVISORY PROCESS NMGC conducted three Energy Efficiency Public Advisory Group1

1 The members of the Energy Efficiency Advisory Group included: NM Public Regulation Commission Staff; New Mexico Department of Energy Minerals and Natural Resources; New Mexico Mortgage Finance Authority (“MFA”); the Natural Resource Defense Council; the Southwest Energy Efficiency Project; United States Air Force; ICF International, CLEAResult; Public Service Company of New Mexico; the NM Shareholders Alliance; and several residential customers.

meetings in 2011. NMGC presented information detailing the energy savings achieved at the conclusion of Program Year 2010, provided details on the new programs for Program Year 2011, and explored potential new programs for 2012 through the solicitation of program ideas and presentation of programs and measures employed in other areas of the country. Group discussions also


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covered the findings of the 2010 Measurement and Verification (“M&V”) report and the annual energy efficiency program report and potential modifications of programs proposed for 2012.

The Energy Efficiency Advisory Group provided significant input into the current and proposed energy efficiency programs and measures, evaluation methodology and potential implementation methods for the 2011 and 2012 NMGC energy efficiency programs.

2011 PORTFOLIO OF ENERGY EFFICIENCY PROGRAMS NMGC’s 2011 Portfolio of energy efficiency programs were approved by the NMPRC on February 17, 2011 in NMPRC Case. No. 10-00295-UT. This portfolio includes program applications for sales and transportation customers in the residential and commercial customer classes. The 2011 energy efficiency program portfolio2

Residential

includes:

• The Low Flow Showerhead program

• The Residential Energy Efficient Water Heater program

• The High Efficiency Furnace program

• The Residential Insulation program

• The ENERGY STAR Homes program

• The Low-Income Weatherization program

Commercial

• The ENERGY STAR Commercial Food Services program

• The Commercial High Efficiency Water Heater program

• The Commercial Solutions program

• SCORE Pilot program

Participants in NMGC’s energy efficiency programs can see a significant reduction in annual gas consumption depending on the programs in which they participate. Estimated energy savings for residential programs range from 23 to 210 therms per year. Assuming an incremental cost per therm of $1.00, participants could save between $23 and $210 per year. The following table shows the participation and annual therm savings for each program for the program year of 2011. The therm savings have been adjusted to account for the number of free-riders as reported by the independent evaluator.

2 For additional information and program detail regarding NMGC’s 2011 energy efficiency programs please see NMPRC Case No. 10-00295-UT.


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Fig. 4: Energy Efficiency Program Participation Summary

For additional information and program detail regarding NMGC’s 2011 energy efficiency programs, see NMPRC Case No. 10-00295-UT. Energy efficiency program requests are made annually by NMGC and are expected to continue throughout the 10-year IRP planning horizon.

MEASUREMENT AND VERIFICATION OF ENERGY EFFICIENCY PROGRAMS NMGC worked closely with the independent evaluator ADM to provide them with the data necessary to complete the 2010 and 2011 M&V reports. This included rebate processing files, budget data by program, MFA program files and avoided cost information. The 2011 report, which will include actual gas savings realized through energy efficiency program implementation, will be submitted to the NMPRC by July 1, 2012.

NMGC is required by the EE Rule to file the independent evaluator’s M&V Report as well as its own Annual Program Report, which reports actual participation rates and budgets, with the

Program 2011 Participation2011 Annual Gas Savings

(Therms)Residential Low Flow

Showerheads3,000 27,000

Residential Water Heating 800 36,720

Residential High Efficiency Furnace

820 59,040

Residential Insulation 800 72,000

Energy Star Homes 325 41,600

Low Income Weatherization 600 126,000

Commercial Energy Star Food Service

260 54,054

Commercial High Efficiency Water Heater

50 30,280

Commercial Solutions 15 (projects) 97,050

SCORE Pilot 18 (projects) 45,594

TOTAL 589,338

Summary of Anticipated Program Participation


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NMPRC by July 1st of each calendar year. Program proposals and modifications are filed annually by October 1.

The most recent Annual Program Report and independent evaluator M&V Report are available through NMGC’s web site at http://www.nmgco.com/regulatory_filings.aspx.

ENERGY EFFICIENCY IMPACT ON INTEGRATED RESOURCE PLAN NMGC’s energy efficiency programs have continued to expand. NMGC’s 2012 proposed energy efficiency programs can be found in NMPRC Case No. 11-00369-UT. Public awareness and participation levels are increasing – and therm savings are the result. NMGC’s energy efficiency programs are available to both sales and transportation customers in a number of customer classes.

From an overall system planning standpoint, energy efficiency gains have yet to be a significant offset to peak customer demand. Improvements in technology and building standards combined with expanded participation in energy efficiency programs offer the promise of compounded gas savings over time.

http://www.nmgco.com/regulatory_filings.aspx�


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Supply-Side Resources

OVERVIEW NMGC purchases natural gas from the San Juan basin (blue area in Fig.5) and Permian basin (purple area in Fig.5) in order to supply gas to its customers. The majority of gas purchased by NMGC is produced in New Mexico. NMGC does not own or control natural gas production or processing, but rather contracts with producers and marketers for supplies to be received at market pooling points or processing plant tailgates. Natural gas supplies are transported via the interstate pipelines and delivered to NMGC through pipeline interconnects, or supplied into NMGC’s pipelines directly from processing plant tailgates. NMGC employs a portfolio of gas supply contracts, transportation contracts with interstate pipelines, and gas storage contracts to provide natural gas to its customers. Figure 5 illustrates the proximity of NMGC’s transmission systems as well as the two interstate pipelines that traverse the State between the San Juan and Permian basins.

Fig.5: NMGC Natural Gas Perspective Map

Map Legend

EPNG Pipeline

TW Pipeline

NMGC Transmission

NMGC Distribution

Permian Basin

San Juan Basin

Storage Facility


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REGIONAL NATURAL GAS PRODUCTION FORECASTS Production forecasts of the San Juan and Permian basins over the next ten years predict a moderate decline in overall production from the two basins combined. However, because the volume of gas produced in the two basins greatly exceeds the current and forecasted needs of NMGC, there is expected to be more than adequate supplies of gas available throughout the period covered in the report, and then well into the future. As reflected in Figure 6 below, based on current conservative projections, in 2021 the amount of gas produced from the San Juan and Permian basins combined will exceed NMGC’s demand by more than six billion cubic feet per day.

Fig.6: Combined Basin Production v. NMGC Demand

COMPANY SUPPLY SOURCES Firm Contract Supplies NMGC utilizes a diverse portfolio of short-term and long-term gas supply contracts to meet expected demand and unforeseen demand requirements. Each year, NMGC analyzes historic system demand and updates its forecasts. This forecasted load is separated into two classes: baseload demand and swing demand. Baseload demand is the minimum demand expected every day. Swing demand is any incremental demand above baseload. Swing demand is variable and largely dependent on changes in load


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due to weather. Each summer, NMGC uses a competitive procurement process which solicits bids from a number of suppliers in the San Juan and Permian basins for supplies for the upcoming winter heating season.

Purchases of baseload gas are comprised of a mix of monthly, daily and fixed price contracts. This approach is intended to provide reliability to the gas supply, and reduce price volatility.

Swing contracts include flex and peaking agreements. Swing contracts stipulate that the gas volumes will be available, but there is no obligation to take the supplies if they are not needed. These supplies can be utilized when the baseload supplies do not fill the entire demand on a daily basis.

Incremental Supply Sources The San Juan and Permian basins contain numerous market hubs where natural gas is traded. These hubs are interconnected to interstate pipelines.

• San Juan Basin Points o El Paso San Juan Bondad Station – EPNG’s furthest north trading point in

the San Juan Basin near the Colorado border. NMGC has transportation from this point to the NMGC Northwest transmission system.

o El Paso San Juan Non-Bondad Station – An EPNG trading point in the San Juan Basin located just outside of Farmington. NMGC has transportation from this point to its Northwest, Belen area, and Clovis area transmission systems.

o Transwestern Blanco – A TW trading point located in the San Juan Basin just outside of Farmington, NM. NMGC has transportation from this point to the Northwest, Southeast, Belen area, and Clovis area transmission systems.

o TW Blanco Hub – NMGC is part owner of the TW Blanco Hub in the San Juan Basin. This connection allows NMGC to receive tailgate gas from the TW Hub without the need of transportation. This would include the ability to receive from larger tailgates such as Milagro and Valverde.

• Permian Basin Points o El Paso Keystone – An EPNG point in the Permian Basin located in West

Texas. NMGC has transportation from this point to the Northwest, Southeast, Alamogordo area, Truth or Consequences area, and Chamberino area transmission systems.

o El Paso Waha – An EPNG point in the Permian Basin located in West Texas. NMGC has alternate transportation from this point to the Northwest,


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Southeast, Alamogordo area, Truth or Consequences area, and Chamberino area transmission systems. NMGC would source natural gas out of the El Paso Keystone prior to El Paso Waha given the option.

o Transwestern Central Pool – A TW trading point located in the Permian Basin in West Texas. NMGC has transportation from this point to the Northwest transmission system.

o Transwestern West Texas – A TW trading point located in the Permian Basin in West Texas. NMGC has transportation from this point to the Northwest transmission system.

• Gas Processing Plant Tailgates o Williams Kutz – Connected directly to the NMGC Northwest transmission

system in the San Juan Basin. NMGC can contract/buy supplies directly from this point.

o DCP Artesia and DCP Eunice – Connected directly to the NMGC Southeast transmission system in the Permian Basin. NMGC can contract/buy supplies directly from this point.

o Frontier Abo and Frontier Maljamar – Connected directly to the NMGC Southeast transmission system in the Permian Basin. NMGC can contract/buy supplies directly from this point.

Storage Resources Storage is an important component of the NMGC supply portfolio. NMGC currently has rights to 3.2 Bcf of storage capacity in a facility located in Winkler County, Texas. NMGC has rights to withdraw up to 216,500 MMBtu/day in the peak demand winter months of December through February.

On-System Transportation On-system transportation customers purchase gas from a third party (a “shipper”) and transport the gas on NMGC’s system. On-system transportation customers are primarily industrial and commercial customers. Shippers purchase gas supplies for their customers and nominate the gas to the NMGC systems. Shippers contract with NMGC for the transportation of gas to their end-users.

Third Party Transportation Contracts All of the natural gas consumed by NMGC customers must be transported from its source to its point of use. NMGC owns and operates approximately 1,600 miles of transmission pipeline which serve a significant portion of its transportation needs. For the remainder, NMGC relies on contractual relationships with third party pipelines.


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NMGC regularly analyzes its gas transportation portfolio to ensure the optimal combination of daily capacity entitlements and routing choices in a cost-effective manner.

As outlined in Figure 5 (on pg. 15), NMGC’s pipeline network has several interconnections with the El Paso Natural Gas (“EPNG”) and Transwestern (“TW”) interstate pipelines that traverse the State. NMGC holds multiple firm and interruptible transportation agreements with both pipelines. NMGC holds five firm agreements with EPNG that together provide firm capacity entitlements to all of its transmission and distribution system interconnections across New Mexico. NMGC holds four firm agreements with TW. Each of the TW interconnections supplies NMGC transmission pipelines in different geographical locations of the State.

NMGC also holds long-term firm transportation agreements, which include a Right-of-First-Refusal, with two other interstate pipelines. Those contracts are with OkTex Pipeline Company for service to the La Union, NM area and with West Texas Gas Company for service to Clayton, NM. NMGC also leases two small gathering pipelines from Benson-Montin-Greer. The COU pipeline is located in Sandoval County and delivers natural gas to remote customers. The Brazos pipeline is a distribution line that delivers gas to the communities of Chama, Lumberton, and Dulce, NM.


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Natural Gas Price Outlook

Gas prices have steadily declined year-to-year since 2008 due in large part to the national shale gas production boom. Production in excess of demand, high national storage levels, and low national demand has put continual downward pressure on prices. On March 30, 2012 the NYMEX Henry Hub front-month hit its 10-year low settling at $2.13/MMBtu. Based on the current market conditions the natural gas futures market is still in a contango state, meaning that the current months prices are lower than prices in future months. Figure 7 below is a snapshot of the Henry Hub futures market as of March 30, 2012.

Fig.7: Long-term futures price projections

As always, the daily market will be susceptible to short term price volatility caused by below normal weather and increased demand in supplies. However, volatility as a whole has been significantly less than in past years. This is due in large part to the supply-demand balance favoring supply.


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Conclusions Regarding the Current Gas Supply Portfolio

NMGC develops and utilizes a diverse natural gas supply portfolio. Supplies are contracted in both the San Juan and Permian basins. Contracts are put in place and diversified among many different suppliers to protect against supplier default and to alleviate credit risk. Supplies placed into storage can be scheduled to many of NMGC’s transmission and distribution systems throughout the State. NMGC uses storage supplies as a way to balance the systems and help with supply reliability in peak demand conditions.

Given the current San Juan and Permian basin supply forecasts, NMGC expects to be able to continue to acquire and diversify its baseload and swing supplies over the planning horizon. NMGC anticipates continuing to build the most cost-effective portfolio for its customers that will allow for adequate supplies over the planning horizon. Figure 8 below shows NMGC’s 2011/2012 winter supply portfolio. NMGC will continue to use a portfolio strategy consisting of firm supply contracts, storage, and incremental swing supplies to meet customer needs. Detailed gas contract information can be found in NMGC’s Annual Gas Supply Plan, last filed with the NMPRC on November 9, 2011 in both redacted and confidential (filed under a 2-year seal) versions.

Fig. 8: NMGC Supply Portfolio


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NMGC also contracts for longer-term supplies to help fulfill baseload requirements. These long-term supplies allow NMGC to have many supply contracts in place before the next winter’s heating season. Going forward, NMGC will continue to evaluate long-term supplies as part of its overall supply portfolio. Figure 9 below summarizes NMGC’s contracted long-term supplies through 2021-2022.

Fig. 9: NMGC Long-term Contracts

12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22October 32,000 32,000 22,000 22,000 15,000 15,000 15,000 15,000 15,000 15,000

November 84,600 84,600 48,000 48,000 35,000 25,000 25,000 25,000 25,000 25,000December 124,600 124,600 83,000 73,000 55,000 40,000 40,000 40,000 40,000 40,000

January 124,600 124,600 73,000 55,000 55,000 40,000 40,000 40,000 40,000 40,000February 109,600 109,600 63,000 50,000 50,000 40,000 40,000 40,000 40,000 40,000

March 64,600 64,600 38,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000April 28,000 27,000 27,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000May 27,000 17,000 17,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000June 27,000 17,000 17,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000July 27,000 17,000 17,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

August 27,000 17,000 17,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000September 27,000 17,000 17,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Existing Long-Term Volumes Under Contract (MMBtu/d)


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Foreseeable Resource Needs Evaluation of Gas Supply Reliability

Assuming that production and processing are reliable, as discussed above, NMGC has in place a system and supply resource plan adequate for the forecasting period.

Regional gas supply reliability was recently examined by the Federal Energy Regulatory Commission (“FERC”) in its Report on the Outages and Curtailments during the Southwest Cold Weather Event of February 1 thru 5, 2011, dated August 2011. Among other things, FERC found that freeze-offs within the Permian and San Juan basins, as well as the growing interdependency between natural gas and electricity, has led to increased supply reliability issues for Southwestern utilities. FERC found, among other things, that additional “local” gas storage in Arizona and New Mexico could have prevented many of the outages that occurred by making additional supply available during periods of peak demand, including severe cold weather events.3

In addition, following a utility workshop, the NMPRC Utility Staff in a report issued in December 2011, among other things recommended that New Mexico consider creating an inventory of gas storage locations in New Mexico, and the means to encourage development.

The NMPRC also had an independent investigator look into the events surrounding the February 2011 outage and released a report on his findings. Michael Johnson, retired Conoco Gas and Power chairman, published a recommendation that the development of additional storage resources would be advantageous during a severe cold weather event.

NMGC has studied a number of options to enhance supply reliability through the development of local storage options. Three of these options are described in more detail below.

OPTION 1: PIPELINE TO A NEW SUPPLY BASIN NMGC has studied the feasibility of laying approximately 141 miles of transmission pipeline from NMGC’s system just north of Santa Fe to the Raton Basin in southern Colorado. This would provide NMGC with access to supplies from the Raton Basin. In addition, this location is interconnected to a large interstate transmission pipeline network, and can access supplies from numerous gas fields in the Rocky Mountain area, as well as Mid-Continent gas supplies. 3 While FERC specifically recommended that lawmakers in New Mexico and Texas should determine whether production shortages during extreme cold weather events can be effectively and economically mitigated through the adoption of minimum, uniform standards for winterization of natural gas production and processing facilities, since NMGC is not involved in and does not control the production or processing of natural gas, implementation of this recommendation is essentially out of the Company’s control.


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These supplies would diversify the gas supply available to NMGC and potentially provide more supply reliability on peak demand days. Total project cost is estimated to be approximately $215 million. This project would add $5.00 to $6.00 per month to an average residential customer’s bill.

OPTION 2: UNDERGROUND STORAGE NMGC has identified a possible underground natural gas storage location near the Albuquerque / Santa Fe load centers. If the reservoir could be successfully developed for natural gas storage, it could be connected to NMGC’s northwest transmission system, providing firm availability of supplies for peak day needs. Due to the geology of the reservoir, the ultimate cost and performance of the project is unknown. Total project cost is estimated to be at least $150 million, which would add $3.00 to $4.00 per month to an average residential customer’s bill.

OPTION 3: LIQUEFIED NATURAL GAS STORAGE (“LNG”) NMGC has analyzed the feasibility of constructing an above ground liquefied natural gas storage facility near NMGC’s northwest transmission system. The storage tank would be sized to store 1 BCF of liquefied natural gas, which would provide NMGC with the ability to withdraw approximately 100,000 MMBtu per day when necessary. Total project cost is estimated to be $110 million, which would add approximately $3.00 per month to an average residential customer’s bill.

While all of the above projects could enhance supply reliability, the LNG project aligns with the stated suggestions of the FERC, NMPRC and the Johnson report regarding the need for more localized storage as well as having the lowest overall estimated project cost.


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Public Advisory Process Overview

Consistent with the requirements of Rule 17.7.4.10E NMAC, this IRP was developed with input from stakeholders who participated in the public advisory process. Participating stakeholders included representatives of NMPRC Staff, City of Roswell, University of New Mexico, Valverde Energy, National Nuclear Security Agency, Public Service Company of New Mexico, KRQE-TV, Regenesis Power, T&D Crisis Management, AARP, New Mexico Mortgage Finance Authority, and individual NMGC customers.

Announcement of IRP Public Meetings

NMGC invited the public to participate in the planning process as it progressed. On February 7, 2011, NMGC posted notice in the Albuquerque Journal of the initial IRP Public Advisory Group meeting to be held on March 8, 2011 in Albuquerque. As the Albuquerque Journal is a newspaper of general circulation available in every county where NMGC provides natural gas utility service, this notice was available to virtually every NMGC customer. Notice of the initial IRP meeting was also carried in NMGC’s bill stuffer provided in customer invoices throughout the February billing period. Pursuant to 17.7.4.12A NMAC, a copy of the notice was served on the NMPRC, interveners in the utility’s last general rate case and energy efficiency case, NMPRC Case Nos. 06-00210-UT (2006 PNM gas rate case) and 10-00295-UT (2011 NMGC Energy Efficiency Program Request), respectively, and to participants in the 2008 PNM Gas IRP proceedings by hard copy First Class Mail and email service on February 9, 2011. In an effort to promote attendance and provide customers with information regarding the IRP process, a copy of the meeting notice, was also posted to New Mexico Gas Company’s website, www.nmgco.com/regulatory_filings.aspx, on January 24, 2011.

Meetings subsequent to the initial IRP meeting were noticed via email to the IRP Public Advisory Group, NMGC website postings, and press releases to the Albuquerque Journal and to the local community newspapers where the meetings were to be held, and also by paid newspaper notice postings to generate greater public participation.

IRP Public Meetings and Topics

To facilitate the public input process, NMGC held six IRP Public Advisory meetings held around the State in an effort to include a wide geographic range of participants. Meetings were held in



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Albuquerque, Alamogordo, Roswell, Gallup, Taos and Santa Fe during the March 2011 through February 2012 timeframe.

Public participation in the IRP provided insight into NMGC’s planning efforts. Discussion topics included in the meetings were designed to educate the participants in the NMPRC’s requirements for the IRP process and reporting, NMGC’s current efforts in gas energy efficiency measures or demand-side management, current and projected load forecasts, characteristics of NMGC’s gas system and long range planning, natural gas supply outlook at a national and local level, use of natural gas storage, seasonal supply/demand modeling and risk mitigation leading to cost effective portfolio development, and an assessment of additional resource needs coupled with identification of resource options.

Coordination of IRP Process with Energy Efficiency Programs

The public advisory group meetings relating to NMGC’s 2011 and 2012 Energy Efficiency Program requests overlapped with the IRP public advisory meetings. Continuity and a general understanding and awareness of the two projects, IRP and energy efficiency, was evident as a number of the IRP Public Advisory Group participants also participated in the gas energy efficiency public advisory group. Information on the expected savings from the 2010 and 2011 energy efficiency programs was provided as demand side savings in the IRP meetings.

Internet Posting of Information

NMGC established an internet posting of IRP information including a general description of the IRP process, meeting invitations and presentation materials for the IRP Public Advisory meetings, as well as a link to Commission’s Rules, including the Gas IRP rule. Through the use of the internet, individuals unable to participate in the gas IRP meetings were able to track the progress of the project and review information related to the IRP development and NMGC’s gas utility business.

A copy of this NMPRC filed IRP report will also be posted on the NMGC website at http://www.nmgco.com/regulatory_filings.aspx .


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