PNM and Avangrid are still negotiating with merger foes

Copyright © 2021 Albuquerque Journal

PNM Resources and Connecticut-based energy giant Avangrid are working to win more support for their proposed merger before regulatory hearings on the deal begin next month.

If approved by the Public Regulation Commission, Avangrid would acquire PNMR and its two utility subsidiaries – Public Service Company of New Mexico and Texas New Mexico Power – in an all-cash transaction valued at $4.3 billion. The deal would affect about 800,000 homes and businesses in New Mexico and Texas.

PRC hearing examiner Ashley Schannauer has scheduled two weeks of hearings with 24 organizations intervening in the case to run from Aug. 11-20, preceded by one day of open public comments set for Aug. 9. So far, 13 parties have signed onto a settlement agreement that outlines 56 specific commitments Avangrid has accepted in exchange for support of the merger.

Those commitments include an array of public benefits and promises by Avangrid that amount to about $270 million in total spending on rate relief for utility customers, economic development programs, and creation of at least 150 new local jobs. They also encompass agreements on the utility’s post-merger structure and administration to ensure electricity reliability, plus PNMR decision-making independence from Avangrid to protect New Mexico ratepayers from adverse intervention by the parent firm. And they include a variety of commitments sought by individual parties in the case, such as striving to achieve carbon-free generation by 2035 – 10 years ahead of the state’s legal requirements.

About half a dozen organizations have voiced staunch opposition to the deal, particularly Santa Fe-based New Energy Economy, which outright rejects any merger between PNM and Avangrid as irreconcilably detrimental to consumers.

But three key opponents are now proposing a series of amendments and additions to the settlement agreement that, if accepted by Avangrid, could potentially win their support for the merger. That includes Bernalillo County, the Albuquerque Bernalillo County Water Utility Authority and the New Mexico Affordable Reliable Energy Alliance, or NM AREA, which represents large industrial and institutional electric consumers. Those parties submitted written testimonies to the PRC on July 16.

Willing to deal?

Economist Maureen L. Reno, who is representing Bernalillo County in the case, said the recommendations address many of the county’s concerns and those of other settlement opponents.

“With these modifications, I believe that the (stipulation) would be in the public interest,” Reno said in her written testimony.

NM AREA representative Michael P. Gorman said NM AREA and other opposing parties in the case have held numerous discussions in recent weeks with both the merging companies and settlement supporters to hammer out “consensus language.”

“This settlement process has been difficult and has continued up to the drafting and filing of my testimony,” Gorman wrote.

Those filings generated upbeat responses from PNM and Avangrid executives.

“These constructive filings show that PNM, Avangrid and the parties share a common vision to move New Mexico forward,” said PNMR Chairman, President and CEO Pat Vincent-Collawn in a statement.

Avangrid President and Deputy CEO Robert Kump said the filings contain “constructive suggestions.”

Asking for more

In particular, all three of the parties propose significant hikes in the amount of rate relief and spending on economic development programs by Avangrid beyond the levels included in the current settlement, although the Water Utility Authority is proposing more than Bernalillo County and NM AREA.

The latter two recommend $65 million in rate relief for PNM customers, up from $50 million in the current agreement, to be credited on consumers’ monthly bills over three years. They also want economic development funding to increase from $7.5 million now in the settlement to $15 million.

In contrast, the water utility wants rate relief and economic development benefits to increase by a total of at least $53 million, compared to the $22.5 million hike the county and NM AREA propose.

Other spending now contained in the settlement would remain unchanged. That includes:

• $6 million to forgive past-due residential consumer debt accumulated during the pandemic.

• $15 million for energy efficiency to help low-income customers reduce consumption and electric costs.

• $2 million to extend electric service to more people in remote areas.

• $12.5 million to specifically benefit Indigenous community groups in the Four Corners area affected by coal plant closures.

All three parties also recommend independent monitoring of the 150 post-merger jobs that Avangrid has promised to create, with penalties for each job that doesn’t materialize.

Structure

Most of the remaining recommendations regard PNM’s post-merger structure and regulatory safeguards to protect against unfair business practices that favor Avangrid and its affiliates over New Mexico consumers, while also ensuring grid reliability and quality standards in consumer service. They would also enforce local regulatory authority over Avangrid and its majority owner, Spanish company Iberdrola, S.A.

Among other things, those recommendations include:

• A board of directors made up only of New Mexico residents, with 40% of seats reserved for “independent” members.

• An “independent evaluator” appointed by the PRC to ensure future PNM contracts don’t favor Avangrid or its affiliates over competing companies.

• New grid reliability and consumer-service standards with annual reporting on compliance.

• Legal authority for the PRC to order management audits of PNM.

Support needed

Additional merger support is critical for Avangrid, which has faced intense controversy since May over poor performance by other utilities it controls in the Northeast, a lack of information from Avangrid about those issues during the discovery process that parties rely on to prepare for hearings and concerns about Iberdrola’s business practices and the control it has over Avangrid.

Those concerns led to a series of rulings by the PRC hearing examiner, who ordered Iberdrola to become a direct party in the case for the merger process to move forward. He also ordered both Avangrid and Iberdrola to provide a lot more information about the issues regarding their business practices, both in the U.S. and in Spain. And he ordered Avangrid to explain why it has apparently withheld information, which could lead to regulatory fines against the company.

New Energy Economy says Avangrid’s utility performance in the Northeast – which has led to about $60 million in fines and penalties by regulators in three states – plus Iberdrola’s controlling role in the company foreshadow similar problems in New Mexico. Iberdrola itself is facing a criminal investigation for some of its business practices in Spain, and neither Avangrid nor Iberdrola has been forthcoming about those issues at the PRC, requiring direct orders by the hearing examiner to compel compliance with PRC rules, said NEE Executive Director Mariel Nanasi.

“They have failed to follow commission orders and rules, and that’s a problem,” Nanasi said.

Still, merger supporters say Avangrid’s commitments in the settlement provide significant public benefits and regulatory safeguards to ensure adequate post-merger performance and compliance with New Mexico laws. Nearly 20 environmental organizations support the merger because of Avangrid’s reputation as one of the nation’s largest renewable energy developers, plus the resources it can bring to advance the conversion of New Mexico’s grid to non-carbon generation.

The company is committing to significantly assist the Four Corners community in the transition to a clean energy economy while at the same time accelerating that process, said Kyle Tisdale, attorney with the Western Environmental Law Center.

“Avangrid has shown a commitment to putting New Mexico on a path to decarbonization and economic diversification in the communities impacted by the transition,” Tisdale said.

Editor’s Note: An earlier version of this story gave an incorrect figure for the dollar amount of rate relief and spending on economic development programs that Bernalillo County and the New Mexico Affordable Reliable Energy Alliance want to see from tech giant Avangrid if it is allowed to acquire PNM Resources. The story should have said the two entities were seeking a $22.5 million increase, not a $30 million increase. The story has been updated.

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