PNM, Avangrid sweeten merger deal

·5 min read

Aug. 25—PNM Resources and Connecticut-based energy giant Avangrid are offering another $10 million in economic development funding, plus strict regulatory controls to ensure grid reliability, to gain more support for their proposed merger.

The latest concessions, contained in a filing the companies made to the state Public Regulation Commission on Monday afternoon, resolved some outstanding disputes with the PRC's Utility Division staff. Until now, staff had opposed the merger. But the new filing reflects a negotiated settlement on issues that previously kept staff from supporting it.

PRC hearing examiner Ashley Schannauer must decide if he will permit the latest concessions to become part of the official record that will go before the full five-member commission for a final decision on the merger this fall. Schannauer presided over nearly two weeks of public hearings with 24 parties intervening in the case. The hearings ended Friday, and Schannauer told intervenors no new evidence would be accepted.

But the two companies and PRC staff are now requesting that Schannauer either waive that decision to allow the new agreements contained in Monday's filing to be incorporated, or briefly reopen the record to accept them as additional evidence.

If Schannauer concedes, it would leave only one party still opposing the merger deal — Santa Fe-based New Energy Economy. All others in the case now either directly support the merger or don't oppose it, said Steve Michel, an attorney with Western Resource Advocates, which joined the merger settlement agreement in April.

"At this point, the opposition is limited to just New Energy Economy, which wants the merger to just be rejected outright," Michel said. "... Everyone else is supporting or not opposing it. From the stakeholders' perspective, it seems we've coalesced around a series of agreements on conditions for the merger to proceed."

If approved by the PRC, Avangrid would acquire PNM Resources and its two utility subsidiaries — Public Service Company of New Mexico and Texas New Mexico Power — in an all-cash transaction valued at $4.3 billion.

With the oral public hearings now over, intervening parties will still file written briefs in the case, the last of which are due in late September. After that, Schannauer will release a "recommended decision" on the proposed merger, which the five commissioners will then review for a final decision.

Pushed to deal

Comments made during last week's hearings by Commissioner Joseph Maestas encouraged PNMR, Avangrid and PRC staff to press on in negotiating a final resolution to their pending differences, although that didn't occur until shortly after the hearings ended, according to the Monday filing.

Maestas had posed questions about the merger to Avangrid President and Deputy CEO Robert Kump on the last day of hearings. Maestas said economic development funding is a critical benefit for consumers in the merger process, and urged all parties to try one more time to reach a final, consensus agreement.

That led to new "compromise positions" that the negotiating parties say justify reopening the record. That includes $10 million in additional economic development funding for a total of $25 million that Avangrid now promises to invest over 10 years, up from $15 million over five years previously.

"In other words, should the commission determine the merger should be approved, the value of opening the record is at least a $10 million increase," read the Monday filing.

Shortly after hearings started on Aug. 11, Avangrid had also offered $8 million in new money to be added to its previous commitments, including another $6 million in rate benefits for consumers and $2 million more in economic development funding.

With the latest $10 million concession made with PRC staff, the company is now offering a total of $133.5 million in direct merger benefits. That includes:

—$67 million in rate relief for customers over three years

—$10 million to forgive past-due residential consumer debt accumulated during the pandemic

—$15 million for energy efficiency to help low-income customers reduce consumption and electric costs

—$2 million to extend electric service to more people in remote areas

—$25 million in economic development funding

—$12.5 million for Indigenous community groups in the Four Corners region

—$2 million for scholarships and apprenticeships in the greater metropolitan area

Avangrid has promised as well to create 150 new high-paying jobs over three years, generating an estimated $200 million in local economic impact.

The merger partners and PRC staff also announced new regulatory controls to ensure grid reliability under Avangrid going forward. Avangrid previously agreed to work with PRC staff and others to create new reliability standards with annual reporting to measure and monitor compliance.

The new controls now define initial standards that Avangrid must meet, plus automatic penalties ranging from $250,000 to $500,000 for each incident of noncompliance, depending on how long the problems last. That's a significant concession by Avangrid, because previous agreements only called for establishing new reliability standards after the merger, with stipulations to allow staff or other parties to seek penalties for noncompliance in the future, Michel said.

"The standards and penalties weren't spelled out before, and it would have been staff's responsibility to seek fines rather than the automatic obligations now included in this new agreement," Michel said. "I think there's a strong case now that the merger will benefit PNM customers and the state in general. ... But we'll have to see if the hearing examiner and commissioners feel that way."

New Energy Economy, however, remains firmly opposed to the merger.

NEE Executive Director Mariel Nanasi said PRC staff settled for substantially less economic development funding and much softer reliability standards than the utility division originally sought.

"Having automatic penalties for reliability underperformance is good," Nanasi told the Journal. "But staff settled for way less than what it said in the hearings is necessary to protect customers from unreliable service."

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