PNM and Avangrid, utility companies with powerful allies and billions of dollars between them, have encountered startling resistance to their merger proposal in New Mexico.
The companies, which would provide electricity to hundreds of thousands of New Mexico residents, took unanticipated criticism last week from New Mexico Public Regulation Commission hearing examiner Ashley Schannauer for not disclosing service problems and fines faced by Avangrid subsidiaries on the East Coast.
The verbal blitz prompted speculation about whether the five-member commission might deny the wishes of the two utility heavyweights. The merger still has the support of some of the state’s most powerful political figures. But last week’s hearing and other criticisms appear to have placed a hurdle in front of the proposal.
PNM and Avangrid express confidence they will address all concerns.
“I don’t think the merger is in jeopardy,” said Ron Darnell, PNM’s senior vice president for public policy.
Darnell said the majority of organizations that have weighed in on the proposal have supported it. The deal is in the public interest, he added, because Avangrid brings too much to the state to pass up.
Connecticut-based Avangrid echoed Darnell’s belief. “While some parties may have their own opinion of the case,” the company wrote in an email Friday, “we are actually quite optimistic after garnering at least 11 parties in support. ... As a new company coming in, we can always do things better but we believe we are learning what matters to stakeholders and now have better lines of communication.”
Nevertheless, a former member of the PRC said she isn’t sure where the discussion will lead.
“There just seem to be a lot of problems,” said Valerie Espinoza of Santa Fe, who left the regulation commission at the end of 2020 because of term limits.
The five commissioners “will do their due diligence and vote what would be in the best interests of the public. That’s my hope,” Espinoza said. “I can’t answer if they have the wherewithal” to turn it down.
In another worrisome signal for the merger proposal, Commissioner Jefferson Byrd of Tucumcari filed a formal request late last month for more information about Avangrid customer service issues and complaints.
Avangrid said it will provide complete answers to concerns by a Tuesday deadline. Critics and others then will have a week to respond, and Schannauer is expected to meet with all the players May 28 to schedule hearings.
The merger proposal has won the backing of Gov. Michelle Lujan Grisham and state Attorney General Hector Balderas.
Balderas’ expert witnesses, though, expressed reservations in their public testimony this spring.
One of them, Maryland attorney and utility analyst Scott Hempling, said PNM shareholders would benefit mightily from the merger and PNM customers minimally. He said the proposal is designed mainly “to maximize shareholder gain” and called it “a sale of public privilege for private gain.”
PNM and Avangrid sweetened the offer after that. The benefit for ratepayers increased from $24.6 million to $50 million — critics say it’s still a small benefit for individual customers — and state economic development contributions increased from $2.5 million to $7.5 million.
The merger applicants also said the development would create 150 jobs, up from the 100 originally mentioned.
Balderas cited benefits for neglected tribal communities, resources for union workers and for coal miners who have lost their jobs, and other advantages.
The proposal has received praise from numerous environmental, Native American and community groups. Steven Michel of Western Resource Advocates said the merger would address climate change through renewable energy, decarbonization, appointment of a company environmental officer and creation of a carbon-reduction task force.
But some attorneys see Avangrid as attempting to muscle its way to the finish line in the roughly $8.3 billion transaction. Its parent company, Iberdrola of Spain, hired as legal counsel a longtime New Mexico acquaintance of Balderas, attorney Marcus Rael Jr., in March. Commission records indicate Rael would be paid $400 an hour by Iberdrola.
Balderas later signed the tentative agreement with Avangrid. As attorney general, Balderas has used Rael as special counsel on several cases.
Mariel Nanasi, a critic of the proposal and a longtime opponent of PNM, challenges the appropriateness of Rael’s role because she contends he and Balderas are longtime friends. Nanasi is the head of Santa Fe-based advocacy group New Energy Economy.
In separate statements, Rael and Balderas didn’t address their friendship but said Rael has worked as special legal counsel for the Attorney General’s Office.
Hearing examiner Schannauer, an attorney whose job is to be a kind of recommending official for the commission, told the gathering by Zoom last week that Avangrid should have been more up front about its foibles elsewhere.
“I’m puzzled,” he said. “Have I missed something in the record?”
Others then stated their own objections. Attorney Peter Gould of Santa Fe said Avangrid tried to use an out-of-state attorney who had not gone through the formal approval process to work on a case when he doesn’t belong to the New Mexico Bar.
Gould also said Avangrid and PNM had gone around attorneys’ backs to lobby and pressure their clients directly to sign onto an agreement.
“They do not understand playing by the rules,” he said.
An attorney close to the issue who asked for anonymity said: “Can the deal get derailed? Yes. … Avangrid has put the deal in jeopardy.”
Avangrid pointed to its recognition in the Forbes-Just Capital “Just 100” this year. The company ranked No. 73 out of 928 publicly traded companies examined for treatment of workers, the environment, shareholders and other things.
PNM and Avangrid announced their proposal to merge late last year and have been working through the process required for approval. The Public Regulation Commission has the final word.
“We have to be completely neutral,” Commission Chairman Stephen Fischmann of Las Cruces said late last week. “We have to follow the facts and do what’s in the public interest.”
Nanasi said Avangrid initially “had the goodwill” of the state because of its reputation in renewable energy. “It’s all on Avangrid,” she said. “They have abused that goodwill.”
Nanasi said the merger is at risk. “And basically to say otherwise I think would be disregarding the very important issues that the hearing examiner raised.”
Schannauer’s written order cited customer service problems and fines involving Avangrid subsidiaries in Connecticut, Maine and New York.
He said Avangrid utilities have faced fines totaling $25 million over the past 16 months.
Some of those came up in federal Securities and Exchange Commission filings, Schannauer said. If they were serious enough to report to the SEC, he said, why weren’t they disclosed to the New Mexico commission?
The failure to be open with the state is important as a potential indicator of “the transparency by which Avangrid and PNM would conduct their business in New Mexico if the merger is approved,” he wrote.
In a JP Power customer service analysis last year, he wrote, Central Maine Power finished 128th of 128 electric utilities.
Rochester Gas and Electric finished No. 1 out of 12 midsize electric utilities in the East, United Illuminating finished 11th of 12, and New York State Electric 17th of 18 large electric utilities in the East, he said.
PNM said through a statement Friday: “This public hearing process is an opportunity for stakeholders to raise questions and concerns and allow Avangrid and PNM to address those concerns. We have confidence in this public process and do not believe it is constructive to guess outcomes when the hearing has not yet begun.”