NY experience backs PNM-Avangrid merger
Based on my experience as a New York state Public Service commissioner, I write to recommend the Public Regulation Commission approve the Avangrid/PNM merger.
While I was a member, the N.Y. commission unanimously approved the $4.5 billion takeover in 2008 by Iberdrola S.A., a Spanish company, of two New York utilities: New York State Electric & Gas (with) 1.7 million customers and Rochester Gas & Electric (with) 550,000 customers. This was a portion of Iberdrola’s first purchase of U.S. utilities. These companies are now part of Avangrid, Iberdrola’s U.S. subsidiary.
Our commission and staff had significant legacy issues with the previous owner well before the Iberdrola transaction. The CEO of the holding company before this transaction had attacked members of staff by name in advertisements in their local newspapers when he failed to receive a desired rate increase, causing understandable bad blood. But the senior executives of Iberdrola quickly addressed and resolved those legacy issues. They met with commissioners, staff and other interested parties prior to — as well as after — the commission’s unanimous approval to identify issues and solutions to problems. As an experienced transactional attorney, I was significantly involved in these discussions. Most wrinkles were ironed out successfully and promptly.
I was a member of the commission for six years starting in 2006 and for five years was on the Electricity Advisory Committee for the U.S. secretary of energy. Before joining the commission, I was a corporate lawyer and general counsel, founding more than 35 years ago a leading refuse-to-energy company, Covanta. For several years after the commission, I worked almost exclusively for a solar energy company on matters of electric policy. I have 35-plus years in electrical energy (experience), and have gained a balanced view of the renewable and the utility sectors.
Why do I recommend approval of the Avangrid-PNM merger?
In New Mexico, PNM, just like every other U.S. utility, will have to spend a lot of money to invest in its operations to achieve clean-energy goals. In my view, having the strong balance sheets of Avangrid and its parent company, Iberdrola, will make raising the needed capital less expensive and, therefore, customer bills smaller, than if PNM were a stand-alone company.
Prior to appearing before the N.Y. commission, Iberdrola succeeded in purchasing and operating one of the largest UK utilities, Scottish Power. The UK regulatory system was and is a set of rules completely different from Spain’s, yet the company was willing and able to work within it. As I had hoped, this approach carried over to its investments in (the New York utilities). And I would expect it would also carry over to its investment in New Mexico.
It is my experience in utility transactions that the basic operations of the utility company, in this case PNM, are unlikely to change. After Iberdrola’s purchases, while I was on the commission, we considered the sale of a New York utility to the largest UK utility and another to a Canadian company. Both were approved and, like our Iberdrola experience, there was no dramatic culture change. A different ownership of its stock doesn’t necessarily mean a difference in a utility’s service to customers. The change in ownership of New York State Electric & Gas and Rochester Gas & Electric in no way diminished the service to New York customers.