The Public Regulation Commission hearing examiner reviewing the potential merger between PNM Resources and Connecticut-based energy giant Avangrid recommended Monday afternoon that the five PRC commissioners reject the proposed deal.
“The potential harms of the proposed transaction outweigh the benefits,” hearing examiner Ashley Schannauer said in his “recommended decision” on the merger, which he sent late Monday to roughly two dozen parties intervening in the case.
The recommended decision is non-binding on PRC commissioners, who must now make their own decision about the merger.
If approved by the PRC, 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, including some 530,000 customers served by PNM around the state.
The two companies requested PRC approval for the merger in late 2020, ushering in more than 10 months of testimony and evidence-gathering by parties participating in the case. That included two weeks of public hearings from Aug. 10-20, where Schannauer and the intervening parties weighed the pros and cons of a “stipulated agreement” that PNMR and Avangrid had negotiated with nearly two-thirds of the case participants.
In exchange for support from intervening parties, Avangrid agreed to dozens of concessions in the stipulation, such as economic benefits for rate payers and local communities. That included $65 million in customer rate relief — to be credited on consumers’ monthly bills over three years — and $50 million more in other types of customer assistance and spending on economic development programs. It also included safeguards to protect the public against adverse management of PNM by Avangrid in the future.
Schannauer, however, said months of negotiations between the utilities and parties supporting the stipulation led to numerous changes in Avangrid’s commitments and promises, making it extremely difficult to point to a final, cohesive agreement that reflects the interests of all parties involved.
Indeed, an initial agreement was signed with some parties in early May, then modified through negotiations with more parties to reach a second, expanded agreement on June 4. But, in the following months leading up to and including the public hearings in August, Avangrid and PNMR continued negotiating with different parties. In the end, the merger partners agreed to more than 40 modifications to the June 4 stipulation, with no clear consensus among supporters about all the changes.
“The number of amendments the signatories have proposed after executing the June 4 stipulation and the conflicts among the proposed amendments indicate there is no longer an agreement that can be approved,” Schannauer wrote in his recommended decision.
Many changes were negotiated to satisfy the “narrow interests” of individual parties, Schannauer added, with no final agreement reached that’s clearly supported by everyone.
“As a result, the original signatories to the June 4 stipulation no longer support the terms of that stipulation and there is no widespread agreement on a modified set of conditions under which all or most of the parties propose approval of the proposed transaction,” Schannauer said.
The commissioners can accept or reject Scahnnauer’s recommendations. If they vote to approve the merger, they can also impose their own conditions on PNMR and Avangrid.
However, if the commission does approve the merger, Schannauer outlined a number of stipulation modifications the merger parties negotiated that he says commissioners should include in their final order.
“Any approval should include at least those changes,” Schannauer said.
See the full document published on the PRC’s public access portal here: Certificate of Stipulation