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PNM Resources has agreed to sell its natural gas operations, a move that brings the company back to its roots as an electric utility and that officials say should be virtually invisible to consumers.

The state's largest utility, the parent company of Public Service Company of New Mexico, is selling the gas unit for $620 million to a subsidiary of Continental Energy Systems of Michigan.

The new company will operate as New Mexico Gas Co. and will be based in New Mexico, said Continental's CEO and president, former Albuquerque resident George Schreiber Jr.

The sale, which must be approved by state and federal regulators, isn't expected to be completed for about a year. In the meantime, PNM officials say consumers will see no changes in how their natural gas service is delivered or billed.

But once the transaction is completed, nearly 500,000 PNM customers who now receive their gas and electric charges on one monthly bill will receive a separate gas bill from New Mexico Gas Co.

PNM spokeswoman Susan Sponar said the two companies will work over the next year to make sure the sale - which includes the transfer of 800 PNM employees to the new company - is seamless for consumers.

"Because we have this time, both companies have enough time to think through the transition and make sure it's a smooth one and also to communicate with customers," Sponar said.

PNM provides electricity to more than 835,000 homes and businesses in New Mexico and Texas and natural gas to more than 492,000 customers in New Mexico.

PNM CEO Jeff Sterba, in a conference call with analysts this morning, said the gas side of the utility has historically been an underperformer. The motive behind the sale was to streamline PNM to focus on its strength as an electric utility, he said.

"We came to the conclusion we were best off serving our customers and shareholders if we narrowed that focus solely to our electric operations," Sterba said. "This will certainly strengthen our financial position," he added.

In a related purchase, PNM purchased Continental's only electric holding, a small electric utility in Texas called Cap Rock Energy Corp., for $202.5 million.

"What this does is it advances the vision and strategy of our company," Sterba said. "It expands our geographical footprint in Texas."

PNM previously announced plans to cut 15 percent of its work force of 3,300 over the next year as part of a companywide restructuring. It began looking at cost cutting after an unexpected drop in second-quarter earnings and rising costs.

Third-quarter rates were also down from the same quarter in 2006. Analysts had expected the utility to do better, but they pointed to weak results in PNM's retail supply business, plant outages and higher fuel costs.

In December, the national rating service Standard & Poor's also lowered PNM Resources' credit rating from BBB to BBB-, the lowest investment grade.

As the credit rating goes down, interest rates go up and financing costs are passed on to the customers.

Standard & Poor's said it reduced the credit rating because of continued weak cash flow and a "challenging regulatory environment, which has not permitted the company timely recovery of costs."

PNM recently wrapped up its case before the state Public Regulation Commission for a $77.3 million increase in electric rates.

Several groups intervened, including the commission staff, which said it would support a rate increase of just $18.3 million and oppose a fuel adjustment clause that would let the utility pass through fuel costs to customers.

The Associated Press contributed to this story.