Copyright © 2021 Albuquerque Journal
Connecticut-based energy giant Avangrid has taken a beating in state regulatory proceedings to approve its proposed merger with PNM Resources.
Ashley Schannauer, the Public Regulation Commission hearing examiner overseeing the case, said in May that the company has been “less than forthcoming” in providing needed information to fully evaluate Avangrid’s business practices in other states, raising “troubling” questions about its transparency and how it might conduct business in New Mexico if it takes over PNMR and its two utility subsidiaries, Public Service Company of New Mexico and Texas New Mexico Power.
Other parties in the case also question whether PNMR will be able to operate independently from Avangrid – and from Avangrid’s majority owner, Spanish company Iberdrola, S.A. – to make sure the interests of New Mexico ratepayers are always elevated above and beyond those of its future parent firms in business transactions. As a result, Schannauer ordered Iberdrola in June to become a direct party in PRC proceedings alongside Avangrid to address those concerns and other issues raised in the regulatory proceedings.
Until last week, only Avangrid executives had spoken directly with local media outlets about the proposed merger. But on Thursday, Iberdrola Chief Development Officer Pedro Azagra Blázquez offered an exclusive interview with the Journal, providing the first local media opportunity to directly discuss a myriad of issues under debate at the PRC.
Transparency about Iberdrola’s intentions and long-term goals here is critical. The company is a global energy powerhouse that operates in dozens of countries and is billed as the world’s third-largest utility and renewable energy developer.
It controls an 81.5% stake in Avangrid, giving it immense sway over how Avangrid manages its U.S.-based subsidiaries. That includes two company divisions – Avangrid Networks, which owns eight electric and gas utilities that serve 3.3 million customers in the Northeast, and Avangrid Renewables, which builds and operates renewable energy facilities across the country.
Azagra Blázquez sits on Avangrid’s board. He’s participated in many of its operations in the Northeast, including all merger negotiations to acquire utilities there.
He’s now Avangrid’s key witness in New Mexico, providing testimony to the PRC on its merger proposal with PNMR. And since mid-July, he’s been meeting directly with organizations here to negotiate more support for the merger.
Why acquire PNM?
New Mexico’s aggressive goals under the Energy Transition Act – which requires all public utilities here to convert to 80% renewables by 2040 and carbon-free generation by 2045 – is a central reason for Iberdrola’s interest in PNM, and in the state in general, Azagra Blázquez told the Journal.
New Mexico’s abundant wind and solar resources provide immense opportunities to not only accelerate that clean-energy transition, but to convert the state into a central hub to supply renewable electricity throughout the West, creating hundreds of jobs in the process with huge benefits for the local economy, he said.
“New Mexico is abundant with renewable resources and has a carbon commitment that requires substantial investment, and we can assist the state to achieve those goals,” Azagra Blázquez said. “New Mexico has substantial growth opportunity that will benefit its residents and PNM customers. … New Mexico has not yet hit its potential, but we believe it will.”
Renewable development is driving Iberdrola expansion into the U.S. Southwest, and into many other countries and regions as well. It’s been pursuing those goals since the late 1990s, before most other energy companies began expanding beyond fossil fuels, said Azagra Blázquez, who joined the firm in 1997.
The company still has a lot of natural gas and nuclear energy in its global portfolio. But it’s spearheading renewable development worldwide, managing some of the largest projects underway today in Europe, including on-shore and off-shore wind farms, solar generation and green hydrogen production.
In the U.S., Avangrid has major projects in the works. It will break ground this year on the nation’s first offshore wind farm – an 800-megawatt facility off New England to supply electricity to more than 400,000 homes and businesses. And it plans to construct green hydrogen facilities in four states.
That could soon include New Mexico under proposals Avangrid submitted to the U.S. Department of Energy, which is pushing green hydrogen technology around the country, Azagra Blázquez said.
Since the 1990s, Iberdrola has pursued a parallel, two-pronged strategy for global expansion that includes acquisition of local utilities on the one hand, and construction of new clean-energy generation on the other. Its utility subsidiaries, which now serve 13 million customers worldwide, are all run by local management.
“Our mission is based on a global company run locally,” Azagra Blázquez said.
That’s at the core of Avangrid’s strategy in New Mexico, where both Avangrid and Iberdrola expect PNMR to be run entirely by New Mexicans. Indeed, in new written testimony that Avangrid filed with the PRC on Thursday, the company committed to a seven-member PNMR board of directors made up only of New Mexico residents. “Independent” members will hold 40% of the seats, and they’ll have veto control over all dividend-related policies and executive compensation.
Iberdrola is now participating in negotiations and regulatory proceedings, but its direct involvement here will end once the merger is done. Azagra Blázquez personally manages Iberdrola’s mergers and acquisitions across the globe.
“I’m the one with the expertise needed for these deals,” he said. “We can’t have subsidiaries (like Avangrid) buying companies – that’s a higher level of strategic management. I’m here now meeting with people, but once we close, I’m out of here, and it will be local people running utility operations and projects.”
Apart from PNMR’s local control, both Iberdrola and Avangrid have fully committed to submit to PRC jurisdiction in all PNM-related regulatory matters, something they’ve promised from the start. But Azagra Blázquez didn’t formally join the PRC proceedings until the hearing examiner ordered it, because he’d never been asked by regulators to directly participate in previous merger cases, he said.
Azagra Blázquez says Avangrid has been forthcoming in providing all information requested by parties in the merger case, particularly in response to hearing examiner orders that the company provide documentation on poor performance of its Northeastern utilities, and about a criminal investigation in Spain that has involved some Iberdrola executives.
In May, Schannauer criticized Avangrid for not voluntarily offering documentation about fines imposed by northeastern regulators on some of its utilities there. After he ordered the company to submit all information on that into the PRC record, Avangrid produced about 2,500 pages of material.
But it wasn’t until PRC Commissioner Jefferson Byrd signed a separate “bench request” for additional information that Avangrid provided another 7,000 pages.
Azagra Blázquez blamed that on miscommunication. Regulators in previous merger cases never requested information about other Avangrid utilities, he said, so the company didn’t submit such documentation until directly requested. Then, Byrd’s directive provided more precise detail about issues of interest, expanding the range of documents requested.
“We weren’t trying to hide anything,” Azagra Blázquez said. “We give information when asked for it.”
Avangrid says its filings show the company has complied with all regulatory mandates to improve service at its northeastern subsidiaries, and its performance there is superior to other utilities in the region.
Some parties may dispute that during PRC open public hearings, scheduled for Aug. 11-20. But either way, Avangrid has agreed to establish new grid reliability and customer quality-of-service standards here, including annual reporting for the PRC to monitor PNM performance under Avangrid ownership, Azagra Blázquez said.
As for the criminal investigation in Spain, Iberdrola executives have only been asked to provide information about contracts the company had with a Spanish private investigator who did risk-assessment and market analysis on security issues. The courts are now investigating whether that private detective broke Spanish law by providing those services while also working for the government as a policeman. But Iberdrola is not being investigated, and hasn’t been accused of wrongdoing, Azagra Blázquez said.
Last week, Iberdrola filed testimony about the issue at the PRC, including confidential documents for review by parties in the case.
Azagra Blázquez and PNMR executives say that, if approved, the merger will provide major benefits for PNM ratepayers. That includes promises to invest $115.5 million after the merger, with $88 million in direct rate relief through credit on customers’ monthly bills and assistance for low-income consumers, plus $27.5 million for economic development programs.
Avangrid also promises to create 150 new high-paying jobs over three years, generating an estimated $200 million in local economic impact.
And it’s committed to strive for carbon-free generation by PNM by 2035, 10 years ahead of state mandates. That’s something PNM would be hard-pressed to achieve on its own, but the financial might of Avangrid and Iberdrola will make the transition much more attainable.
“We bring financial muscle to the table, with almost unlimited access to low-cost capital and equity held by Avangrid and Iberdrola,” Azagra Blázquez said.
Economies of scale also allow those companies to command lower prices when purchasing products and services, said PNMR Chairman, President and CEO Pat Vincent-Collawn.
“From the start, we’ve been impressed by the breath of global investment and strength of Iberdrola and Avangrid,” Vincent-Collawn told the Journal. “That’s a huge benefit for New Mexico … Avangrid is the nation’s third-largest developer for wind and solar generation, and it has the vision, the technology and the capital to help move us forward.”