Decision looms as advocates, AG push regulators to reject sale of New Mexico Gas Co.

A significant number of intervenors in the proposed sale of New Mexico Gas Co. to a private equity firm have urged state regulators to reject the transaction, as the Public Regulation Commission nears a decision that could significantly reshape the utility.

The $1.25 billion sale, which could see Louisiana-based private equity firm Bernhard Capital Partners take control of NMGC, wrapped up evidentiary hearings in November. The public and case intervenors have reacted negatively to the deal, but it continues to see support from the utility and business stakeholders.

It is unclear when hearing examiners involved in the case will make their recommendations to state regulators, though they are expected soon. Commissioners, who have listened to public meetings and hearings over the utility sale, will follow with a final decision.

In post-hearing briefs filed in mid-December, advocacy groups such as the New Mexico Affordable Reliable Energy Alliance, New Energy Economy and Western Resource Advocates have asked commissioners to deny the sale.

Concerns raised by these groups rang similar, with many feeling that Bernhard’s current proposal is not in the public interest and customers would remain at risk of higher rates. 

But a division under the PRC has been the only group so far to urge approval of the sale if Bernhard makes recommended changes to its application, according to a Dec. 18 post-hearing brief. 

The Utility Division, which serves as staff to the PRC in regulating electric, natural gas, renewable energy resources, telecommunications and water and wastewater systems, represents the public interest in utility matters before commissioners.

Subject to sale approval, division staff are calling for the establishment of a severe weather fund, creation of a regulatory liability for ratepayer benefits and a $12 million annual cap for shared service costs.

Other groups, such as the Greater Albuquerque Chamber of Commerce and the Albuquerque Hispano Chamber of Commerce, have previously shown support for the sale.

The PRC did not respond to requests for comment on the Utility Division’s post-hearing brief or when commissioners would make a final decision.

The New Mexico Department of Justice, the Coalition for Clean Affordable Energy and federal agencies, including the U.S. Department of Energy, also called for rejection of the sale. These groups, however, recommended changes to the application if commissioners approve the sale.

In a post-hearing brief filed Dec. 10, New Mexico Attorney General Raúl Torrez said approval of the sale would not provide benefits to NMGC customers, claiming that the transaction carries “significant risks” and is “not in the public interest.”

Torrez said commissioners should be concerned about “three basic problems,” citing unease about Bernhard’s short-term investments, loading up NMGC with debt that could increase rates, and legal entities not holding the firm responsible for the actions of its portfolio companies.

Should commissioners approve the sale, Torrez provided a list of conditions that, only if implemented, would mitigate some of the office’s concerns with the transaction.

This included $22.4 million in rate credits per year over five years, surpassing Bernhard’s current offer of $22.4 million over 12 months, and barring NMGC from selling property worth more than $500,000 without PRC approval and notifying involved parties. 

“A rate credit of $22.4 million for five years would equal $112 million, or a little more than half of the acquisition expense, and would be a fair compromise,” Torrez wrote.

Additionally, Torrez said Bernhard should reallocate its current commitment of spending $10 million on economic development initiatives to a severe weather fund, ensuring the continued flow of gas during inclement weather.

The AG’s Office did not respond to requests for comment regarding Torrez’s recommendation. 

Hannah García covers tech and energy for the Journal. You can reach her at hgarcia@abqjournal.com.