At least three of the five elected members of the state Public Regulation Commission said they oppose the proposed merger between PNM Resources and Connecticut-based energy giant Avangrid during an open public meeting Wednesday.
Commissioners didn’t vote on the deal, postponing a final decision until at least next week. But during the meeting, PRC Chairman Stephen Fischmann and two other commissioners — Cynthia Hall and Theresa Becenti Aguilar — said they agree with PRC Hearing Examiner Ashley Schannauer’s recommendation to reject the merger.
If the commission approves the deal, Avangrid would acquire PNM Resources 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.
But Schannauer — who oversaw eight months of evidence-gathering, plus two weeks of public hearings in August with parties in the case — released a “recommended decision” on Nov. 1 that said the potential harm outweighs the public benefits of the deal.
On Wednesday, he reiterated that position in a lengthy online presentation to the commission.
“I stand by that,” Schannauer told commissioners. “I recommend that the merger not be approved.”
Schannauer says Avangrid and its parent firm, Iberdrola, S.A., have demonstrated a clear tendency to put corporate profit over the interests of consumers through consistently “poor performance” in Avangrid’s management of eight electric and gas utilities it operates in northeastern states.
He cited questionable business behavior, including an ongoing criminal investigation of some Iberdrola executives in Spain, plus Iberdrola and Avangrid imposition of business decisions on their northeastern utilities that run counter to customer interests.
PNM ratepayers could face similar problems if the merger is approved, and the PRC could have difficulty effectively regulating PNM post-merger, Schannauer said.
Those concerns were reinforced in the PRC hearing process, he added, during which Avangrid and Iberdrola resisted compliance with commission rules and regulations.
The presentation provoked harsh reactions from Fishmann, who said corporate control by Avangrid and Iberdrola over PNM could lead to serious regulatory problems for the PRC. In particular, he questioned the companies’ “unethical” behavior, and the possibility that Avangrid and its subsidiaries could use control of PNM to monopolize energy development in New Mexico, squeezing out needed competition as the state works to develop renewable resources.
“There seems to be built into the merger huge opportunities for conflicts of interest through intra-company transactions with Avangrid affiliates that we’ll have a hard time regulating,” Fischmann said. “(Their) unethical behavior makes me concerned that the structure of Avangrid and Iberdrola is antithetical to promoting the public interest.”
He said the proposed benefits of the merger — which include more than $300 million in rate relief for PNM customers and economic development programs promised by Avangrid — do little to offset the potential harm if the deal is approved.
“All that is fool’s gold sitting in a pond of quicksand if we can’t address the baseline issues,” Fischmann said.
Avangrid negotiated those benefits with about two-thirds of the 24 parties involved in the case. But Fischmann said the negotiating parties “kind of ignored the fundamentals to get … their little piece of fool’s gold.”
The concessions reflect “special deals” that favor individual interests, he said.
“Add it all up and it doesn’t equal public interest,” Fischmann said.
Hall said there seems little possibility for correcting the structural problems of the merger.
“They will have a lot of opportunity for self-dealing,” Hall said. “… All these things add up to a big problem. I don’t see this merger as a good thing for our state.”
Becenti-Aguilar said she too is opposed, given all the concerns raised by the hearing examiner.
Still, the commission will consider more input from parties in the case at its next open public meeting Wednesday, Dec. 8, including filings by merger supporters in response to Schannauer’s recommended decision.
Of the 24 organizations involved, 23 now either directly support the merger or don’t oppose it.
PNM said it is disappointed in Schannauer’s “narrow view” presented to the commission.
“We hope the commission looks at all of the opinions of the parties, and not simply a single point of view,” PNM spokesman Ray Sandoval told the Journal in an email.
“We look forward to having both sides of the merger discussed as the commission continues its deliberations. We trust our regulatory system, and we are hopeful that when all the facts are considered, the merger benefits and opportunities will be realized for all New Mexicans.”