Much has been made about the benefits of the proposed Avangrid-Public Service Company of New Mexico merger. However, the costs to ratepayers are substantial.

If the merger (i.e. acquisition), is approved, PNM will be a subsidiary, not partner, to Avangrid. It would be difficult, if not impossible, to police the holding companies of Avangrid and its Spain parent company, Iberdrola; the Avangrid/Iberdrola affiliates, business spinoffs, would remain most significantly outside of the regulation of the Public Regulation Commission. As Avangrid develops solar generation in New Mexico, Avangrid, not PNM, would own the generation. PNM would buy Avangrid’s solar through purchase power contracts and recover the costs on a dollar-for-dollar basis in utility rates. Avangrid, not PNM, would reap all the profits on the solar generation. PNM, as a subsidiary to Avangrid, would be at the mercy of Avangrid’s potentially very pricey solar.

Similarly, during the PRC merger hearings, Avangrid testified that it intended to use New Mexico as its “beachhead” for solar generation for the out-of-state wholesale market. This means all the profits would flow to Avangrid and Iberdrola. Thus, the state of New Mexico would lose a key source of potential revenue for its much-needed economic diversification from oil and gas.

It’s important to know that Avangrid’s renewable energy portfolio is almost all wind generation, with less than 2 percent solar. Also during the PRC merger hearings, Avangrid stated it would be starting toward the bottom of a learning curve in developing New Mexico solar.

And understand that in its 2020 integrated resource plan (that did not include the merger), PNM touts it will be 100 percent emissions-free by 2040. Further, PNM is getting out of coal — Four Corners and San Juan — without the merger. With San Juan, PNM is replacing the coal electricity with solar. While Avangrid claims it will have PNM emissions-free by 2035, that date could certainly slip given Avangrid’s steep solar learning curve. (See pnmforwardtogether.com/assets/uploads/PNM-2020-IRP-EXECUTIVE-SUMMARY-NEW-COVER.pdf and newprojectmedia.com/news/pnm-submits-ppas-for-san-juan-replacement.)

The way forward to 100 percent clean energy and a new significant source of state revenues beyond oil and gas royalties is not through acquisition of PNM by private, for-profit holding companies, but through a public partnership with the state of New Mexico where all citizens — most certainly the Indigenous communities most impacted by coal generation and oil and gas fracking — are the “shareholders” benefiting from not only a cleaner environment and better health, but the profits from a sustainable economy.

Cynthia Mitchell is a 40-year veteran in energy policy and utility regulation. As an economist, she has worked for attorney general utility consumer advocate divisions around the country. She moved to Santa Fe in October 2020. Contact her at cynthiakmitchell@gmail.com.

(3) comments

Susan H Bell

Thank you Ms Mitchell. Thank you Mr Johnson. To have a Spanish, for-profit company with minimal knowledge of solar power generation learn & profit off the backs of NM ratepayers is unconscionable. The amount of dollars being spent on advertising in their campaign should be the largest red flag of all. The best interests of NM ratepayers aren't even close to the interests of this company or PNM.

Pamela Rogers

Yes, thank you Cynthia, I agree. We would be missing out on a great opportunity to partner with tribes and municipalities and to enrich New Mexicans directly if the merger goes through. Maybe we need a consultant on how to get this going instead of a giant corporation.

Mike Johnson

There was once a young grad student at MIT's Sloan School of Business (me), who wrote his thesis on how mergers effect the industry, and the benefits and costs. Short story, mergers happen for one primary reason, to reduce competition: There are few benefits and huge costs and problems. The swallowing up of a smaller business by a huge competitor is never a good path to prosperity and the greater good of the public involved. Why not have Exxon buy all the local NM petroleum companies, or Walmart buy all the local NM retailers? On the scholarly side there is this evidence as well:

"Disadvantages of a Merger

1. Raises prices of products or services

A merger results in reduced competition and a larger market share. Thus, the new company can gain a monopoly and increase the prices of its products or services.

2. Creates gaps in communication

The companies that have agreed to merge may have different cultures. It may result in a gap in communication and affect the performance of the employees.

3. Creates unemployment

In an aggressive merger, a company may opt to eliminate the underperforming assets of the other company. It may result in employees losing their jobs.

4. Prevents economies of scale

In cases where there is little in common between the companies, it may be difficult to gain synergies. Also, a bigger company may be unable to motivate employees and achieve the same degree of control. Thus, the new company may not be able to achieve economies of scale."

This is not a place NM ratepayers and citizens should be taking the risks associated with this ill-advised merger.

https://corporatefinanceinstitute.com/resources/knowledge/deals/merger/

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