Power deal

PRC must decide whether multibillion-dollar proposal to merge PNM, energy giant is good deal for ratepayers

Some key dollar figures have risen to the forefront as the regulatory examination of the proposed merger between PNM Resources and energy giant Avangrid is set to begin in earnest.

There will be broader policy issues, of course, but based on initial statements and written testimony, we can expect a good deal of focus on the following as the Public Regulation Commission begins open public hearings in May to determine whether the merger is in the public interest:

■ $4.3 billion. The amount Avangrid proposes to pay to PNM shareholders in an all-cash deal. Under terms of the merger, PNMR and its two utilities — Public Service Company of New Mexico and Texas New Mexico Power — would become Avangrid subsidiaries. Avangrid is 81% owned by Spanish energy giant Iberdrola S.A.

■ $735 million. The roughly 20% premium over market price Avangrid proposed paying to PNMR shareholders for their shares based on average stock prices before the deal was struck last year.

■ $12.5 million. The amount listed in the proxy statement as “golden parachute” compensation to three top executives who would leave the company, including CEO Pat Vincent-Collawn. The company says another $26 million is owed to six top PNMR executives regardless of the merger.

■ $36.5 million is the amount investment banking firm Evercore will earn for brokering a successful deal.

■ $25 million. The amount Avangrid has proposed to give PNM’s 530,000 ratepayers as a credit on their utility bills over a three-year period. It would amount to about $1.29 per month on an average residential bill.

■ $350 million. The amount the state Attorney

General’s expert witness, Scott Hempling, says is the appropriate starting point as credit to ratepayers. The Maryland-based lawyer says the real value being acquired by Avangrid is hundreds of thousands of “captive” ratepayers in a regulated monopoly. He says the deal is not in the public interest.

■ Up to $277 million. The amount Mark E. Garrett, the expert witness for the Albuquerque Bernalillo County Water Utility Authority, recommends be returned to ratepayers in rate credits. The water authority also says the merger is not in the public interest as structured.

■ 100. The number of new employees Avangrid has pledged to hire, along with a promise of no cuts in jobs and no wage and benefit reductions for two years.

■ $2.5 million. The amount Avangrid has pledged to pump into local economic development efforts.

■ $35 billion. Total assets of Avangrid, which operates in 24 states.

That and much more will be taken into consideration by the PRC as Avangrid, PNMR and intervenors argue their respective positions and offer testimony before a hearing officer, who will make a recommendation for the commission to consider. Options include approval, rejection or approval conditioned on changes.

N.M. Attorney General Hector Balderas, who by law is responsible for representing residential ratepayers, said he strongly supports “the transition of the state’s largest utility to Avangrid, a leader in clean energy.” But he adds, “I remain concerned that the deal results in overwhelming profit, leaving the state and leaving ratepayers no benefit for having allowed PNM to monopolize our energy market.”

Balderas touches on two basic points: Avangrid with its enormous resources could put the state on an accelerated path to renewable electricity, coupled with additional investment. But the rate credit proposed for PNM customers pales in comparison to benefits to shareholders, and Avangrid’s proposed economic development incentive amount is viewed by some as a pittance.

“Avangrid says it can bring significant benefits, and it has an obligation to serve New Mexico with just and reasonable rates,” said Stephanie Dzur, attorney for the Coalition for Clean Affordable Energy. “But we don’t want empty promises. We’re saying, ‘show me the money rather than just take things on faith.’ ”

And there are other questions. Avangrid has made short-term commitments, but over time will the new ownership step up the way PNM has in supporting the community? Will there truly be a high degree of local control? Or, will PNM become a relatively small balance sheet entry and remote outpost of an out-of-state corporate giant?

Another vexing issue: Some environmental groups are upset that Avangrid conditioned the merger on PNM getting rid of its interest in the Four Corners generating plant because it didn’t want any coal on its books. PNM essentially has brokered a proposed deal with the Navajo Nation, which could continue running the plant with other utilities until 2031. That’s a separate case also pending before the PRC. “We believe the PNM-Avangrid merger should be stipulated on not allowing PNM to do anything that could extend the life of Four Corners after it exits the plant,” said Sierra Club Rio Grande Chapter Director Camilla Feibelman.

Another question: would PNM be insulated from any events that negatively impact Avangrid’s international parent Iberdrola?

And, it will be interesting to see if commissioners probe the fact merger talks were essentially going on quietly behind the scenes as New Mexico lawmakers, Gov. Michelle Lujan Grisham and PNM all pushed for the landmark Energy Transition Act that would move the state to 100% non-carbon electric generation by 2040 with relatively high potential rate caps — no doubt an attractive prospect for a suitor like Avangrid.

The hearings should generate strong public interest. PNM has a big economic footprint, and almost everybody pays for electricity. PNMR and Avangrid have a duty to their shareholders — it’s not their job to look out for ratepayers. That’s the job of the attorney general when it comes to residential customers, and to intervenors in relation to other groups. Then it’s up to the PRC to balance those competing interests in deciding whether this merger is in the public interest. So it’s important that this process play out in the open — under the lights.