Copyright © 2021 Albuquerque Journal
PNM Resources and Connecticut-based energy giant Avangrid want to provide direct oral testimony to the state Public Regulation Commission this Wednesday when the commission meets to review the companies’ proposed merger.
The companies filed a motion on Friday asking that the five elected PRC commissioners allow them to address issues raised during the PRC’s open public meeting last week. PRC Chair Stephen Fischmann and two other commissioners – Cynthia Hall and Theresa Becenti-Aguilar – openly stated their opposition to the deal during that meeting after Hearing Examiner Ashley Schannauer recommended that they reject the merger.
Schannauer – who presided over eight months of evidence-gathering and two weeks of public hearings in August – told commissioners that, in his opinion, the potential harm of allowing Avangrid and its parent firm, Spanish company Iberdrola, S.A., to acquire PNM Resources outweighs the public benefits.
But the companies, along with organizations supporting the merger, say they want an opportunity to directly respond to the issues and concerns raised at last week’s meeting before commissioners take a final vote on the deal. That’s critical, because the commission is ruling on something that will impact the entire state for decades to come, said PNM Resources Chairman, President and CEO Pat Vincent-Collawn.
“This decision is an important one for New Mexico, and the parties in the case have worked diligently over the last year to ensure it is in the best interests of customers and communities across the state,” Vincent-Collawn told the Journal in an email. “As commissioners prepare to make this historic decision, we believe that parties should have the opportunity to describe how the full case record and the extensive commitments in our agreements were developed to address the concerns raised in last week’s meeting.”
What’s at stake
Nearly all of the 24 parties involved in the case either outright support the merger or remain neutral. Only one group, New Energy Economy, directly opposes it.
If the PRC approves the deal, it 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.
Parties in the case negotiated a settlement agreement with the merger partners that commits Avangrid to invest more than $300 million in rate relief, local economic development programs, and job creation. It also includes numerous clauses to ensure customer quality of service, grid reliability, and local, independent control over PNM to guard against undue influence or anti-competitive practices by Avangrid or Iberdrola.
But Schannauer said those things are overshadowed by an apparent corporate culture at Avangrid and Iberdrola, which, he says, have shown a tendency to prioritize profit over public interest. That includes “poor performance” by Avangrid utilities in the U.S. Northeast, plus a criminal investigation of some Iberdrola executives in Spain.
The companies also resisted compliance with PRC rules and regulations during hearings, such as withholding information, according to Schannauer.
Schannauer’s findings deeply impacted commissioners, who voiced significant concerns last week about whether the PRC could effectively regulate PNM’s new owners, who they fear might use their corporate and financial muscle to stymie competition in the local energy market, monopolizing control of things like renewable development.
“The real issue for me is the behavior of these companies demonstrated here at the commission and elsewhere,” Commissioner Hall told the Journal. “I question whether the way they do business would be good for New Mexico and for consumers.”
Even if all benefits from the settlement, or stipulation, negotiated by parties in the case are factored in, the hearing examiner still recommends that the PRC reject the deal because of the alleged risks.
But the companies and merger supporters say the settlement itself contains extensive safeguards against those risks, which commissioners must consider before just accepting the hearing examiner’s recommendations.
The PRC must now decide if it will permit oral testimony at Wednesday’s meeting.
Parties in the case already filed “exceptions,” or responses, to Schannauer’s findings that are in the record for commissioners to review, Hall said.
“They pretty much already made their legal arguments, so I don’t expect we would hear anything new,” she said.
The parties, however, say their exceptions were limited to only 20 pages each, forcing them to focus only on certain issues. And at last week’s meeting, commissioners discussed many additional concerns that they want to address.
PRC impartiality questioned
Attorney General Hector Balderas said commissioners have an obligation to hear all sides before making a decision.
“I’m concerned that certain commissioners are pre-determining this case and unfairly communicating their positions in ways that may be denying due process rights for other parties,” Balderas told the Journal.
Balderas is a party in the case. He said his office helped negotiate the settlement, or stipulation, agreement with PNM and Avangrid as the state’s elected representative for consumers and small businesses.
But Balderas said the hearing examiner’s findings, plus commissioner willingness to simply accept Schannauer’s recommendations before even voting on the merger, raises concern about PRC impartiality. In fact, some commissioner comments at last week’s meeting – where Fischmann called the negotiated agreement “fool’s gold” that ignores the risks of the merger – significantly undermine confidence in the process.
“The comments made were very reckless for a judicial process,” Balderas said. “… I don’t think they’re giving proper consideration to the stipulation negotiated and supported by nearly all parties in this case.”
Doug Howe – a utility economist and 35-year veteran of the utility industry who served as a PRC commissioner from 2010-2011 – agreed.
“It’s unwise to blatantly, overtly come out and basically announce how they will vote as some commissioners did last week,” Howe told the Journal. “Commissioners have a great deal of power, and with that comes great responsibility to not pre-judge, to be neutral and to treat all equally. I think they crossed a line, that they may be jumping to judgment without thoroughly hearing all of the issues, and that’s unfair.”
In fact, the hearing examiner’s recommended decision itself seems biased, Howe said. That’s because he didn’t find fault with any of the benefits included in the settlement agreement, and he even suggested that if commissioners approve the merger, those benefits should all be included, plus some additional conditions that Schannauer recommended to strengthen consumer protections.
And the merger partners have since said they would accept all of Schannauer’s additional conditions.
“The majority of the recommended decision was about judging the character of the acquiring companies,” Howe said. “That’s the core it, and the hearing examiner makes very clear he doesn’t have a good opinion of them. I think that issue is subjective, and in my opinion, that appears to be bias.”
Hall said she’ll carefully consider all arguments if commissioners do allow oral testimony on Wednesday. Things can still change, she said.
“People do change their minds,” Hall told the Journal. “I don’t know what other commissioners think, but I’ve changed my mind in past PRC cases. That can happen.”
Fischmann said commissioners may not actually vote on Wednesday.
“I don’t know how it will go,” Fischmann told the Journal. “We could just decide we’re ready to vote on the docket, or even decide to put it off until January to sit on it awhile, think about the exceptions filed, and spend a little more time combing through them before making a final decision.”