December 3, 2021

PRC commissioners have concerns over Avangrid/PNM merger, as companies defend

Officials from Public Service Company of New Mexico and Avangrid say a pending merger would help the state’s largest electric utility reach renewable energy targets at a faster pace.

The two companies hosted a press conference on Thursday following the New Mexico Public Regulation Commission’s discussion the previous day regarding a hearing examiner’s recommendation that the commission deny the merger. 

Three of the five commissioners stated during the Wednesday meeting that they oppose the merger and believe that the potential harms to the customers outweigh the benefits.

Commission Chairman Stephen Fischmann, who was the first commissioner to express opposition to the merger, said that the main reason to reject it is that Avangrid has an “absolutely horrible record of running U.S. utilities.”

Commissioners Cynthia Hall and Theresa Becenti-Aguilar joined Fischmann in voicing opposition, which is an unusual move for the PRC, as the merger was not scheduled for a vote and the commission must still hear the exceptions in the case presented. 

Related: Hearing examiner says potential harms outweigh benefits in PNM/Avangrid merger

During the Thursday press conference, Attorney General Hector Balderas criticized the commissioners for voicing their opposition prior to the official vote and prior to hearing all the evidence.

“Based on the commissioners’ statements yesterday, I am a little concerned that they seem to have implied as jurors that they’re leaning one way or another in terms of making their decision,” he said.

During Thursday’s press conference, Balderas also spoke about the importance of transitioning away from fossil fuels and said that the merger could help New Mexico achieve the goals set out in the 2019 Energy Transition Act.

Even if the merger is rejected, Vincent-Collawn said PNM remains committed to transitioning away from fossil fuels, as required by the Energy Transition Act, though it will take a bit longer. 

This comes as Avangrid has faced opposition in Maine where customers and state officials say reliability has decreased and rates have increased following Avangrid’s acquisition of Central Maine Power. It also comes amid an investigation in Spain involving Avangrid’s parent company, Iberdrola, and corporate espionage. Avangrid has also faced more than $60 million in fines from New England regulators in multiple states for service issues.

Related: Iberdrola executives named in criminal espionage investigation

PNM and Avangrid officials used the press conference to address some of these concerns–saying that Avangrid’s utilities in the northeast have performed better than average  and that New Mexico does not have the same weather conditions or dense vegetation that has led to problems in places like Maine. Pedro Azagra Blázquez, Iberdrola’s corporate development director, also said that the investigation in Spain is ongoing and that it has not yet yielded any indictments or charges or determinations of wrongdoing. The officials also said that, if the merger is approved, the company would be required to pay fines if it did not meet reliability requirements and that any rate increase would require PRC approval.

While the hearing examiner has recommended the commission vote to reject the merger, he provided a list of recommended conditions for the commission to include should it choose to approve the merger. 

“It’s important that we listen closely to the hearing examiner because he also gave the commission a path forward to bring accountability to this field and also secure public interest in this clean energy economy race that we’re in,” Balderas said.

PNM Resources Chairwoman, President and CEO Pat Vincent-Collawn said the companies agree to those conditions.

She said the merger of the two companies provides a better credit rating for PNM as it looks to develop electric vehicle charging networks and to transition away from fossil fuels. 

PNM could also benefit from Avangrid’s large size, which will make it easier to acquire equipment at lower costs. Later she compared it to shopping at Costco and said if you buy in bulk you are able to save money.

Azagra Blázquez said the merger also moves $1 billion of PNM’s debt out of New Mexico and will provide opportunities for economic development in the state. Should the merger be rejected, he said Avangrid and Iberdrola would not consider New Mexico as a place to locate certain resources and activities. For example, he highlighted a command center for off-shore wind. If the merger is approved, on the other hand, he said Avangrid would base operations out of New Mexico on a national scale. 

He also said that Avangrid would help New Mexico develop a hydrogen industry. Iberdrola announced this week a partnership with a startup steel company in Sweden to build a renewable hydrogen plant in either Spain or Portugal that would power the iron production that is needed to make steel. This project’s budget is about $2.6 billion.

Projects that aren’t specifically tied to utilities are among the concerns that the hearing examiner highlighted in his recommended decision. He said Moody’s, a credit rating agency, downgraded Avangrid’s score due to Avangrid Renewables’ investments in non-utility projects. 

Ashley Schannauer, the hearing examiner, said Avangrid has an interest in expanding its renewables business in the southwest and this may not be consistent with providing reliable utility services to PNM customers.

“Avangrid states that it wants to use its acquisition of PNM as a beachhead for Avangrid Renewables’ projects in New Mexico and the Southwest. The resource needs of Avangrid Renewables may take priority over PNM needs for resources to provide reliable utility service to its customers,” he said.

Schannauer also said the merger could result in rigged bidding processes and that PNM would favor using Avangrid-owned renewable resources over those developed by other companies, thus increasing the electricity costs that customers would pay.

The vast majority of public input has urged the PRC to reject the merger. Commissioner Cynthia Hall said she has received hundreds of communications with members of the public opposing the merger.

At the start of the PRC meeting, many of the public commenters, including people from Maine who are current Avangrid customers, asked the commissioners to reject the merger. 

Daniel Pritchard, a Taos resident who is on the board of directors for Renewable Taos, said the merger is a takeover by a foreign company “that continues the treatment of New Mexico as a sacrifice zone where our energy resources get mined and sold and the profits leave the state.”

He said if the merger takes place profits will go to a Spanish corporation.

“This is absolutely the wrong way to support economic development for New Mexico. It would be best if these profits stayed within New Mexico,” he said.

Jim DesJardins, the executive director of Renewable Energy Industries Association of New Mexico, said there have been complaints that Central Maine Power under Avangrid improperly increased the costs that renewable energy developers had to pay to connect to the grid. He also expressed concerns about Central Maine Power’s net metering policies. Net metering allows customers who have solar panels at their house or business to sell excess power produced back to the company. Central Maine Power and Avangrid pushed for phasing out net metering requirements.

“Our organization has not taken a position either way on the merger,” DesJardins said. “We do urge that if the New Mexico Public Regulation Commission approves the merger, that there’ll be a commitment from the merged companies that net metering is preserved in a fair treatment for small generators in New Mexico. And we believe that this will help to provide the optimal grid for safety, reliability and clean energy.”

The merger has support from various union groups that would benefit from the proposed conditions, including increased jobs for New Mexicans in the utility sphere. It also has support from economic development groups like the Albuquerque Chamber of Commerce. 

Despite the fact that three commissioners have voiced opposition to the merger, Vincent-Collawn said PNM trusts the regulatory process.

Schannauer acknowledged that the benefits proposed in the merger stipulation–including investments in economic development, job creation and assistance for low-income customers–are greater than those seen in other merger cases that the PRC has granted. However, he said those previous cases did not have the potential harms to customers that the Avangrid and PNM merger case has.

“The benefits are not meaningful if PNM customers do not have reliable service,” he said.