Proposed New Mexico utility merger spurs numerous concerns
ALBUQUERQUE, N.M. (AP) — Consumer advocacy groups, environmentalists and the New Mexico attorney general’s office are concerned about a proposed multibillion-dollar merger of the state’s largest electric utility with a U.S. subsidiary of global renewable energy giant Iberdrola.
The groups have filed testimony with state regulators ahead of hearings that will begin next month. It will be up to the state Public Regulation Commission to determine if the merger provides meaningful benefits to Public Service Co. of New Mexico customers and if it would be in the public interest.
Groups intervening in the case contend that PNM executives and shareholders will reap the benefits of the proposed transaction with Connecticut-based Avangrid, as the company is offering only $2.5 million in economic development funds and 100 new jobs.
A similar acquisition last year of El Paso Electric Co. by an investment firm resulted in $100 million to promote economic development in the utility’s service area. That included $20 million over 20 years in New Mexico — eight times more than what Avangrid is proposing for a deal that involves a utility with a larger customer base and infrastructure that includes transmission and access to eastern New Mexico’s lucrative wind resources.
Negotiations are ongoing among the groups involved in the case. Rebuttal testimony is due Wednesday.
PNM will be on the hook for making significant capital investments as it aims for carbon-free electricity generation over the next two decades. Experts have said the utility could benefit from a merger due to Avangrid’s credit standing and access to capital markets. Meanwhile, Avangrid wants to build its assets within the U.S. utility sector.
Andrea Crane, a financial consultant who is testifying on behalf of the attorney general’s office, suggested that the proposal falls short of meeting the general goals for New Mexico’s energy future: electrification for all, cost-effective greening, economic development and respect for the customer.
The benefits are “woefully inadequate to demonstrate that the merger, as currently proposed, is in the public interest,” she wrote.
She recommended that rate credits for customers be boosted fourfold and that economic development funds should be around $80 million.
The proposed merger agreement also includes a provision that requires PNM to seek regulatory approval to abandon its ownership in the coal-fired Four Corners Power Plant, which serves customers throughout the Southwest U.S. The utility filed the paperwork to do so earlier this year.
PNM wants to recoup from customers $300 million in abandonment costs and has proposed transferring its share to a Navajo energy company. Consumer groups say that wouldn’t be fair to ratepayers, and environmentalists and Native American activists say the proposal would violate provisions of New Mexico’s Energy Transition Act by allowing the plant to continue operating.
The recommendations by the attorney general’s expert call for PNM to absorb the costs related to the Four Corners plant, that Iberdrola be a party to the merger and that the Public Regulation Commission’s regulatory jurisdiction be protected.
“It’s a complicated issue that’s going to take a lot of review by all parties involved,” Commission Chairman Stephen Fischmann told the Santa Fe New Mexican. “There’s all kinds of potential outcomes, and as commissioners, we have to keep an open mind. … And our charter is the public interest.”
Attorney General Hector Balderas said Monday he supports the idea of the merger given Avangrid’s focus on renewable energy, but he’s concerned the deal would result in overwhelming profit for PNM that would leave the state. He said he wants to ensure benefits to consumers and that underserved New Mexicans have access to clean energy.
Other critics have concerns about high payouts for officers and departing executives, noting that at minimum they would be valued at more than three times the rate credits that PNM’s 538,000 customers would see.
Scott Hempling, a public utilities analyst who also is testifying for the attorney general, stated that the goal was value for shareholders and that customers were relevant only as sources for that value. He said Avangrid will pay $4.3 billion to shareholders as part of the agreement.
In radio advertisements, PNM is touting the merger as a way to move the state closer to its renewable energy goals and create more jobs. Under the state’s energy law, investor owned utilities must be 100% carbon free by 2045.
As for critics’ concerns about shareholder benefits outweighing those of customers, the utility said customers are paying for a service while shareholders carry the risk that comes along with making investments needed to produce and deliver electricity.
PNM spokesman Ray Sandoval said in a statement that Avangrid is committed to continuing PNM’s operations and contributions to the community. He called the $24.6 million in rate credits for customers “a gesture of goodwill and demonstration of its good intentions.”
Critics say just over one-third of the rate credits would end up trickling down to residential customers because they would be allocated based on how much electricity is used. It would amount to about 55 cents per customer.
Public Regulation Commission staff members also have reservations about the proposal as currently structured, saying it would likely “chill a competitive climate” for renewable energy development in the state.