Evidentiary hearings on the New Mexico Gas Co. sale have ended. Here are 3 key takeaways from the case.

Evidentiary hearings for the proposed acquisition of New Mexico Gas Co. came to a close Friday.

After nearly two weeks of testimony and cross-examination, hearing examiners hired by the New Mexico Public Regulation Commission are expected to recommend approval or refusal of the proposed $1.25 billion deal to commissioners.

The public was made aware of the sale last year when Emera, NMGC’s Canadian parent company, announced plans for Bernhard Capital Partners, a Louisiana-based private equity firm, to take control of the utility.

Intervenors in the case included energy advocacy groups, such as New Energy Economy and the Coalition for Clean Affordable Energy, as well as the New Mexico Department of Justice. Members from Bernhard, NMGC and Emera answered a variety of questions throughout the hearings.

Here are three takeaways.

Proposed commitments

In its original and revised applications, Bernhard offered various monetary and operational commitments should the deal close.

According to PRC documents filed on the second day of evidentiary hearings, joint applicants — in this case, Bernhard and NMGC — are proposing an additional $7.4 million in rate credits over one year, totaling around $22 million. In Bernhard’s original application, it offered $10 million in rate credits, before increasing to $15 million this summer in a revised application.

Bernhard claims there will be no “future rate impact of any kind” due to acquisition premiums, which are the increased costs of buying a company during these types of transactions. NMGC will not seek recovery from customers now or in the future for costs associated with the transaction. The private equity firm has also committed to no new customer rates until at least January 2028.

NMGC will maintain its current 740 employees, with an additional 20 new jobs for services provided outside of the state, for at least five years following the deal’s close. Additionally, the utility’s Albuquerque headquarters will remain unchanged for the duration of Bernhard’s ownership.

Bernhard’s revised application included $1.9 million for the HEATNM program, an assistance fund that helps income-qualifying New Mexicans pay their heating bills each winter, and added another $5 million in response to parties. The utility will invest another $5 million over a decade for entry-level training relevant to local labor workforces, as well as apprenticeship opportunities for high school and college students. All funds come at the shareholder’s expense rather than the customers’.

Joint applicants added other commitments during hearings, according to PRC documents. This included the requirement that at least six members on the NMGC board of directors be “independent” New Mexico residents who are business or community leaders.

Additionally, NMGC will need to provide notice to the PRC at least 15 days in advance of any disbursal of economic development funds, where commissioners can comment on or object to it.

Upgrades to NMGC’s IT systems

Should Bernhard own NMGC, the utility would transition to an Oracle Fusion Cloud Enterprise Resource Planning system, as well as an Oracle Work and Asset Cloud Service.

The service, cloned from a version specifically made for natural gas distribution company operations, was developed for Delta Utilities, a regulated natural gas utility included in Bernhard’s portfolio.

Mark Miko, chief information officer of Delta Utilities, addressed concerns posed by witnesses regarding the IT system transition in a revised application rebuttal testimony on Oct 10.

In it, Miko claimed that shared IT services with Delta Utilities and upgrades to NMGC’s current IT systems would provide “meaningful benefits” to both the gas utility and its customers.

According to PRC documents, the annual operating costs once transitioned are estimated to be $6.6 million — a reduction from the $7.8 million NMGC pays for its current IT systems.

NMGC’s current system was released in 2005, Miko said, and is approaching its “end-of-support” date in 2027. The proposed transition would improve services provided to the utility’s customers by enhancing processes and infrastructure, he said.

“By transitioning to a modern, integrated cloud-based system, NMGC will streamline these workflows, automate routine processes, and reduce the potential for error,” Miko said in the rebuttal. “This will result in faster processing times, improved data accuracy, and better coordination across departments.”

Regardless, Emera looks to sell

Jeff Baudier, senior managing director for Bernhard, issued a revised application rebuttal testimony on Oct. 10, in response to ownership concerns raised by intervenors.

In it, Baudier claimed that a primary customer advantage in the transaction was that Bernhard looks to own and invest in NMGC, whereas Emera wants to “divest from New Mexico.” This is a benefit intervenors “fail to acknowledge,” he said.

According to previous Journal reporting, Emera President and CEO Scott Balfour said the parent company wanted to sell NMGC for financial reasons and as a strategic decision.

“Emera has been a great steward of NMGC for the last ten years,” Baudier said in the rebuttal. “However, Emera now wishes to exit the gas utility business in New Mexico because, among other reasons, NMGC presents a limited potential to support a regional growth platform for Emera.”

Peter Gould, who was representing intervenor New Mexico Affordable Reliable Energy, questioned Baudier’s rebuttal comments on the first day of the evidentiary hearings, asking if he meant that Emera would no longer fulfill “basic utility obligations” in running NMGC should the transaction fail.

Baudier said this was not his intention, explaining that while he believes Emera would continue to run NMGC to the “best of its ability,” Bernhard approaches the sale “truly wanting” those obligations.

“What we’ve seen historically and we’re seeing today is that oftentimes, if a utility has rejected the ability to sell their asset but they want to exit, they will continue to try to,” Baudier said. “My expectation would be that, if this transaction is denied, Emera will try again sometime in the future to divest itself from this asset again.”