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The state Public Regulation Commission’s five elected members voted unanimously Wednesday afternoon to reject the proposed merger between PNM Resources and Connecticut energy giant Avangrid.
The commissioners accepted PRC hearing examiner Ashley Schannauer’s conclusions that the risks and potential harm from the deal outweigh the public benefits. Commissioners cited the poor performance record by Avangrid utilities in the Northeast, plus questionable corporate practices by Avangrid and its parent firm, Spanish company Iberdrola, S.A., as critical concerns that swayed them against the merger.
PRC ChairmanStephen Fischmann said the two companies have “a demonstrated record” of bad behavior, and the risk that New Mexico consumers will suffer similar problems overshadows any potential benefits offered in the deal.
Those benefits had included more than $300 million in rate relief, economic development investments and job creation promised by Avangrid.
“The whole deal for me boils down to promises versus actual performance,” Fischmann said. “… I don’t think we should hoist those risks on our ratepayers.”
Other commissioners agreed.
“There are a lot of risks that are hard to (fully) quantify, but there are strong red flags flying in our face,” said Commissioner Cynthia Hall.
PNM says it’s evaluating its next steps, but it’s unclear whether there are any further avenues to pursue.
Issues in Maine
In particular, commissioners cited reports of extensive customer dissatisfaction in Maine and other northeastern states where Avangrid utilities have collectively faced about $63 million in regulatory penalties for extensive electric outages and other adverse management issues.
In fact, one state legislator in Maine filed written testimony about the problems there with Avangrid, and also made public comments to the PRC urging the commission to reject the merger.
“It’s very telling for a representative from another state to call in to give his opinion about this company,” said Commissioner Jefferson Byrd. “… To me, that’s very concerning.”
The commission’s decision caps a yearlong regulatory process that began in November 2020, when the merger partners requested PRC approval for Avangrid to 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.
That kicked off an eight-month period of evidence-gathering and written and oral testimony on the potential pros and cons of the deal among 24 parties involved in the case, culminating in two weeks of public hearings in August.
Schannauer presided over the entire process, and then presented the commission with a “recommended decision” in early November that the PRC reject the merger. Schannauer cited a long litany of concerns in his decision that, taken together, led him to question the basic “corporate culture” of Avangrid and Iberdrola, which he said have shown a clear tendency to put corporate profit over customer interests.
Questions also arose about unethical behavior and adverse management practices that demonstrate disregard for government rules and regulations, according to Schannauer. That includes charges by the hearing examiner that both Avangrid and Iberdrola resisted compliance with PRC rules during the hearing process, such as allegedly withholding information requested by Schannauer and one party in the case.
In addition, an ongoing criminal investigation in Spain against some Iberdrola executives for potential bribery and other legal infractions apparently had a deep impact on commissioners, who received a confidential report on those issues that the PRC is legally prohibited from releasing to the public.
“The public is not privy to that confidential information, but it has only added to (our) concerns,” said Commissioner Joe Maestas.
Hall said the Spanish investigation is particularly problematic because it indicates an “aggressive modus operandi” by Iberdrola that allegedly includes “spying on competitor companies and members of the public.”
Still, the merger had broad backing from parties in the case, with nearly all of the 24 organizations involved either supporting the deal or not opposing it. Only one group, New Energy Economy, directly opposed the merger.
Supporting parties negotiated an extensive settlement agreement, or “stipulation,” that committed Avangrid to more than $300 million in economic benefits as part of the deal, plus safeguards to ensure that Avangrid complies with its commitments and that PNM service and grid reliability don’t deteriorate under the new ownership.
“We are disappointed by the commission’s decision to reject the agreement reached by the parties,” PNM Resources Chairman, President and CEO Pat Vincent-Collawn said in a statement. “We are examining all of our options and will wait to review the commission’s final order before taking any next steps.”
In November, Vincent-Collawn told the Journal that an appeal to the Supreme Court is one option open to the merger partners if the PRC rejected the deal.
Environmental groups that support the merger expressed frustration after the vote, citing the loss of economic benefits that would have come with the merger, plus financial resources and investments that Avangrid and Iberdrola could bring to developing renewable energy in the state.
“This unfortunate decision by the PRC means our state will lose $300 million in benefits for ratepayers, communities and workers, as well as important commitments and capabilities Avangrid would bring to address climate change,” said Steve Michel, an attorney with Western Resource Advocates.
The supporting parties had asked commissioners to allow them to provide oral testimony in response to Schannauer’s recommended decision before the vote, but the commission rejected that request early Wednesday afternoon. Commissioners said they had all the information they needed in the extensive evidentiary record compiled by the hearing examiner.
Some merger supporters said the commission was racing to judgment without respecting everyone’s full due process rights. But commissioners said all sides have had ample opportunity to make their arguments for and against during the yearlong hearing process.
“I want to make clear to the public that the evidentiary record has been complete for some time now, and no due rights were impinged on,” Hall said.