Regulated Return

The Company uses a return on rate base ("regulated return") to evaluate the operations of each of its regulated business segments. While the Company believes this financial measure is appropriate and useful for investors, it is not a measure presented in accordance with generally accepted accounting principles in the U.S. (GAAP). The Company does not intend for this measure, or any piece of this measure, to represent any financial measure as defined by GAAP. Furthermore, the Company's calculation of this measure as presented may or may not be comparable to similarly titled measures used by other companies.

Regulated return measures the regulated earnings contribution of a business segment as a percentage of the portion of its rate base deemed financed by common equity. Regulated return is calculated by dividing ongoing earnings for the regulated portion of the business segment, as adjusted, by the common equity portion of its estimated rate base, based on a defined capital structure. TXNM Energy believes rate base to be a measure that is required by the New Mexico Public Regulation Commission (NMPRC) and the Public Utility Commission of Texas (PUCT), and does not believe rate base to be comparable to a GAAP measure.