Merger brightest option

PRC should approve the PNM/Avangrid deal but continue to protect NM’s ratepayers

If New Mexico had been content to plug along with a generally reliable, home-based electric utility that depended on a combination of natural gas, coal and nuclear energy, with some wind and solar mixed in, there wouldn’t be a particularly strong argument for the proposed merger/acquisition of PNM Resources by energy giant Avangrid.

But we weren’t content to just plug along. The Legislature, in 2019, at the urging of Gov. Michelle Lujan Grisham, passed the New Mexico Energy Transition Act requiring that 50% of investor-owned utility-generated electric power in the state be from renewable energy by 2030, 80% by 2040 and 100% carbon-free by 2045.

So, as someone once said, “we are where we are.” And given where we are, the benefits of the proposal in which Avangrid would acquire PNMR subsidiaries Public Service Company of New Mexico and Texas New Mexico Power in an all-cash transaction valued at $4.3 billion outweigh the concerns raised by a Public Regulation Commission hearing officer, who recommends the five PRC commissioners vote against approval.

That said, hearing examiner Ashley Schannauer raises some legitimate concerns in his recommended decision. They should be considered and addressed by commissioners after the parties file their exceptions to Schannauer’s recommendation. But, in fact, many of the issues already have been addressed in negotiations between PNM/Avangrid and the two dozen parties that formally intervened in the case.

Granted, the negotiations have been piecemeal, with some occurring after the formal hearing. Much to the hearing officer’s chagrin, they aren’t tied up nicely with a ribbon on top. But they are real. The merger partners are now offering $67 million in customer bill credits over three years, $10 million to assist low-income customers, $2 million to hook up new customers in underserved areas and $15 million for energy efficiency program assistance for low-income households.

And there are significant economic development benefits estimated at more than $200 million, including at least 150 good-paying new jobs. Business groups have testified in support, while unions, environmental groups and others have come on board in the regulatory process. Supporters in the case range from the state Attorney General’s Office to the electrical workers union to the Coalition for Clean Affordable Energy to Western Resource Advocates to Diné Citizens Against Ruining our Environment.

Avangrid and PNM have reached agreement with 2/3 of the 24 intervenors in the regulatory review process, with 23 of the groups and organizations now having either agreed to support the proposal or not to oppose it. In reaching its decision, the commission should focus on the full list of commitments — about 40 of those being reached over the summer.

Of particular note is the recent decision by the PRC staff and Bernalillo County to drop formal opposition to the proposal after getting additional concessions. In the case of PRC staff, it was in the form of tougher penalties for potential reliability problems down the road — a hearing officer concern. The city of Albuquerque and the Albuquerque Bernalillo County Water Utility Authority are among those that no longer oppose the deal.

Steve Michel, an attorney with Western Resource Advocates, says the most important benefit for New Mexicans is that Connecticut-based Avangrid — 81% owned by Spanish renewable energy giant Iberdrola — brings financial strength and industry expertise in renewable development to PNM that can help advance the state goal of transforming the local grid to 100% non-carbon generation. PNM’s mix of renewables now is about 30% — 21% wind and 9%solar.

PRC rejection of the merger deal, Michel says, means PNM “would struggle to meet New Mexico’s renewable energy goals and the economic benefits negotiated in the deal will disappear.”

Some concessions are non-monetary. For example, PNM and Avangrid have agreed to a seven-member board for the New Mexico utility that would include three independent directors from New Mexico. And those three would have to agree on all dividends, which protects against Avangrid draining cash out of PNM.

Further, the parties have said Don Tarry, a New Mexico native with a long history at PNM, would be in charge of operations in the state. He has made clear the company’s commitment to community involvement, charitable giving, economic development and education. To making this a better place — not a cash cow for a Spanish company.

When Lujan Grisham signed the ETA, she described it as “landmark energy legislation establishing New Mexico as a national leader in renewable transition efforts.”

If the merger is nixed, could PNM move ahead and meet the timelines set out in statute and the aspirations laid out by the governor? Perhaps. Is it less likely? Yes, especially given delays we already see with solar projects locally and supply chain problems nationally.

Along with eliminating the significant economic incentives, would killing the merger mean a greater likelihood of dirtier air, higher rates and power outages? Quite possibly.

So, yes, commissioners should consider the hearing officer’s objections, including a criminal investigation in Spain into alleged practices by Iberdrola. Should they also take note of the fact that all but one intervenor either supports the deal or is neutral? Absolutely.

At the end of the day, it’s their job to balance the concerns raised against both the short- and long-term benefits of the proposed merger — all while knowing it will be their job as regulators to protect the interests of ratepayers moving forward.

And when they do that, it seems the proposed merger offers a brighter path to a clean energy future and more prosperous New Mexico.