AG faces ethics complaint in utility merger

Editor’s note: This story was originally published by Searchlight New Mexico, a nonprofit investigative news organization. A longer, unedited version can be found at http://www.searchlightnm.org/

Attorney General Hector Balderas’ relationship with a local law firm is under scrutiny amid allegations that Albuquerque-based attorney Marcus Rael Jr. used his influence with the attorney general to persuade Balderas to sign off on a multibillion-dollar utility merger.

The merger between a global energy giant and New Mexico’s largest utility could drastically changes electricity distribution in the state, with hundreds of millions of dollars for New Mexico utility customers hanging in the balance.

For eight months, the state has been involved in negotiations over a proposed merger between Connecticut-based Avangrid and Public Service Company of New Mexico. Rael, who frequently represents

the state, was hired to represent Avangrid’s parent company, Iberdrola.

Five civic and environmental justice groups have filed a complaint with the State Ethics Commission, the state auditor and the disciplinary board of the New Mexico Supreme Court, alleging Rael used his influence to push the attorney general into signing on early to the merger deal.

Balderas, who has participated in negotiations on behalf of consumers, initially criticized the deal before supporting it.

“Balderas agrees that the (merger deal) is magically in the public interest, despite his own experts’ testimony detailing why the merger is bad for New Mexicans because it doesn’t adequately protect their rights,” said Mariel Nanasi, the executive director of New Energy Economy, one of the complainants calling for an investigation.

Balderas in a statement denied any claims of favoritism or conflict of interest. And Rael said his firm always adheres to the state’s Rules of Professional Conduct.

Both UNM law grads

Since taking office in 2015, Balderas has hired Marcus Rael Jr. or others at his firm, Robles, Rael & Anaya, to help represent the state in at least 19 cases, at least triple the number of cases farmed out to any other private law firm, a review by Searchlight New Mexico showed. Balderas and Rael both graduated from the University of New Mexico School of Law in 2001 and briefly worked together before Balderas ran for public office.

The story behind the complaint is a complicated one involving a sprawling merger and questions about whether it would serve New Mexicans or was instead commandeered to profit utility companies.

The five groups — New Energy Economy, Democracy Rising, Indivisible Nob Hill, Renewable Taos and Retake Our Democracy — argue that Balderas awarded Rael’s law firm lucrative contracts without considering the lawyers’ experience or expertise for the case — a violation of state ethics law. They say that Balderas’ relationship with Rael presented a conflict of interest in the merger case.

Balderas declined repeated requests for an interview with Searchlight regarding the merger. In a written statement to Searchlight, Matt Baca, a spokesman for the Attorney General’s Office, said the claims about favoritism or a conflict of interest are entirely false. “New Energy Economy has reached a new low in attacking another party in this case with such a baseless complaint,” the statement said.

“With respect to his relationship to Mr. Rael, the Attorney General has friendships with many of the attorneys in the case and at the PRC,” Baca said in a separate statement.

Rael said in an email that he had not seen the complaint, but that his firm specializes in representing local and state governments. “All the firm’s public contracts, including those with the Office of the Attorney General, were awarded in accordance with the stringent requirements of the State Procurement Code and the Governmental Conduct Act. It also goes without saying that the attorneys of my firm strictly adhere to the New Mexico Rules of Professional Conduct,” the statement said.

Close ties

Rael’s legal appointments have involved him in cases with broad implications for the state, including Texas vs. New Mexico, a Supreme Court case concerning groundwater rights. Lawyers at Rael’s firm are also involved in the Yazzie-Martinez case, which is focused on widespread inequities in education.

In 2018, then-state auditor Wayne Johnson opened an investigation into the relationship between Balderas and Rael and the bidding process for outside firms, following an anonymous tip about the amount of work that the Attorney General’s Office was sending to Robles, Rael & Anaya. Results were never made public.

Avangrid is the U.S. subsidiary of the Spanish energy giant Iberdrola, and if the merger goes forward — which could happen as early as this fall — the state’s electricity infrastructure will become a part of Iberdrola’s massive global energy portfolio.

For PNM and Avangrid, billions of dollars are at stake.

Agreement revised

Iberdrola hired Rael in February, before a hearing with the Public Regulation Commission. Over the past eight months, parties involved in the hearing have filed thousands of pages of documents for review and presented arguments before the hearing examiner. This administrative process is expected to end with public hearings in August, after which the five elected PRC board members will decide whether to allow the merger to go forward. The attorney general participates in this process by providing testimony to determine whether or not the merger is in the public interest.

Hearing documents show Rael held 18 meetings at the Attorney General’s Office from his hiring till April 5. For his services, Iberdrola paid him $400 an hour, almost double his regular rate with the Attorney General’s Office.

At the time Rael was hired, the Attorney General’s Office was pushing for changes to the merger deal that would better serve the public, such as money for infrastructure projects and credits on utility bills.

On April 2, Balderas told the Journal that he had concerns about the merger’s lack of benefits for utility customers and worried about utility profits leaving the state. Experts for the state recommended massive changes, including doubling customers’ credits, making a 30-fold increase to the economic development funds paid to New Mexican communities, and placing the cost for leaving the Four Corners Coal Plant on shareholders, rather than customers.

Days after those recommendations were filed with the PRC, Rael visited Balderas’ office. Hearing documents do not reveal what they discussed, but a few weeks later Balderas signed on to a tentative merger deal that fell dramatically short of what expert witnesses had suggested. The complaint alleges Rael pushed Balderas into the deal on behalf of Iberdrola.

“We were satisfied that the [new agreement] improved significantly from the opening application, including increased economic development, rate credits, a full commitment to transition to clean energy, and investing in tribal communities and frontline workers,” Balderas wrote in an emailed statement to Searchlight.

The revised agreement includes additional benefits for the state, customers, tribal communities and union workers — but it saves PNM and Avangrid-Iberdrola $395 million that would have gone to customers and communities if the experts’ suggestions had been adopted in full.

Political ties

Lawyers and other employees at Robles, Rael & Anaya have donated more than $36,000 to Balderas since his first run for public office in 2005 — more contributions than from almost any other entity.

Balderas has retained the law firm to represent the state in lucrative cases and paid out millions in fees and expenses to the firm. Invoices and contracts from the Attorney General’s Office obtained by New Energy Economy and shared with Searchlight show more than $3 million in direct payments of fees and expenses to Robles, Rael & Anaya.