A proposed merger between New Mexico's largest utility and the American utility arm of a Spanish multinational energy company cleared key hurdles this week, but regulatory approval at the state level could remain a challenge as a persistent opponent mounts objections to the foreign takeover of a homegrown utility.
The Federal Energy Regulatory Commission on April 21 approved the proposed merger between Avangrid, a subsidiary of Iberdrola, and Public Service Company of New Mexico following a settlement with a diverse group of intervenors that included state officials, labor, tribal and environmental groups. PNM and Avangrid on April 23 filed additional changes to a stipulation to the New Mexico Public Regulation Commission and added the Coalition for Clean Affordable Energy to the settlement agreement.
CCAE, a group of 12 organizations that includes the Southwest Energy Efficiency Project, 350.org, New Mexico Public Interest Research Group, the Sierra Club's Rio Grande Chapter and the Union of Concerned Scientists, signed on to the agreement after PNM and Avangrid agreed to an additional $10 million for low-income energy-efficiency benefits and other environmental enhancements, including a commitment from PNM to reach zero carbon emissions by 2035—five years ahead of the utility's previous goal—a tripling of funds supporting electric-vehicle adoption, and a new position within the company to seek out and manage federal grant opportunities.
CCAE joins New Mexico Attorney General Hector Balderas, Western Resource Advocates, International Brotherhood of Electrical Workers Local 611, Diné Citizens Against Ruining Our Environment, NAVA Education Project, San Juan Citizens Alliance, and Navajo environmental organization Tó Nizhóni Ání in signing the stipulation [20-00222-UT].
If approved by the NMPRC, the stipulation will bring nearly $300 million in additional benefits to the state compared with the original merger proposal. Other enhancements to the stipulation include economic development; the preservation of current jobs and low-income programs; and the continuance of PNM's charitable involvement in the community.
New environmental benefits in the stipulation include commitments to energy efficiency and solar programs; the creation of a carbon-reduction task force; and the hiring of a chief environmental officer responsible for ensuring the company meets or exceeds its carbon-reduction goal of zero percent by 2035. The stipulation also requires that PNM develop a long-term transmission plan to be included with future integrated resource plan filings at the commission.
The stipulation adds $6 million in COVID-19 arrearage relief for PNM customers, $15 million in low-income energy-efficiency assistance, and $2 million to improve electricity access for low-income residents in remote areas of PNM's territory.
The attorney general's office required a program to increase contracts for minority- and woman-owned businesses in the state as a condition for its support. The stipulation also requires that PNM continue to be managed locally and governed by a board of directors comprised of a majority of local New Mexico leaders.
But consumer watchdog and renewable-energy advocate New Energy Economy of Santa Fe in a recent Op-Ed called the settlement legally insufficient and said it is not in the public interest. "New Mexico's poverty means that we can be bought very, very cheaply," the article says.
The settlement more than doubles the merger applicants' original offer of $24.6 million in rate credits, to $50 million. This works out to just over a dollar per month for 36 months for the average PNM residential customer, or about $45 total, NEE says. The applicants have also refused to commit to a rate freeze as established by precedent in the NMPRC's 2020 approval of the sale of El Paso Electric to a JP Morgan investment fund, NEE witness Christopher Sandberg said in testimony filed to the NMPRC. NEE argues that the lack of a rate freeze renders the proposed rate benefits meaningless [19-00234-UT].
The group has also expressed concern that the purchase of PNM, a locally founded and operated company, by a foreign company would adversely affect the state. "Avangrid is a publicly traded worldwide energy conglomerate with approximately $36 billion in assets and operations in 24 U.S. states," the group said in a statement on its website. "Iberdrola . . . owns 81.5% of Avangrid's stock. This merger agreement would make PNM 2.8% of an international energy giant."
PNM maintains the stipulation has addressed those concerns, and in an April 21 news release said that its customers will continue to be served by local New Mexico employees and that its operations will still be regulated by the NMPRC.
PNM shareholders, who approved the initial merger, are expected to receive around $4 billion upon closure of the deal (see CEM No. 1613). PNM's senior management, including CEO Pat Vincent-Collawn and others who will leave the company if the merger is approved, will benefit from the stock purchase and receive a combined windfall of $38 million in executive compensation, Sandberg said in his testimony.
Also of concern to NEE is PNM's plan to abandon its 13-percent, 200-MW share in the coal-fired Four Corners Power Plant by transferring it to Navajo Transitional Energy Company. In addition to the transfer, PNM would pay NTEC $75 million to clear its coal lease obligations to the NTEC-owned Navajo Mine, which serves the plant. NTEC, a business wholly owned by the Navajo Nation, would continue participating in the plant as a wholesale power provider and as the owner and operator of the Navajo Mine, its dedicated fuel supplier, until Four Corners' scheduled closure date of 2031 (see CEM No. 1615). Both the mine and the power plant, which is operated by Arizona Public Service, are located in northwestern New Mexico on the Navajo Nation and are among the largest employers on the nation and in the region.
The merger proposal requests permission from the NMPRC to securitize PNM's stranded assets in Four Corners with ratepayer-backed bonds via provisions of the 2019 Energy Transition Act. PNM says the lower interest rates made possible through securitization would translate to savings for ratepayers over the life of the bonds.
NEE has filed multiple suits to the New Mexico Supreme Court challenging a similar plan to securitize PNM's stranded assets in the San Juan Generating Station, located just 15 miles from Four Corners and scheduled to close in June 2022. The group says shareholders, not ratepayers, should be on the hook for stranded fossil fuel assets, which it characterizes as imprudent investments by PNM. It also argues that PNM's transfer of Four Corners to NTEC does not reduce actual carbon emissions in the state.
Hearings regarding the merger are scheduled to begin May 3 at the NMPRC and are expected to last several weeks. The merger previously received approval from PNM shareholders and the Federal Communications Commission, as well as clearance from the Committee on Foreign Investment in the United States. The Public Utility Commission of Texas in March approved the merger relevant to PNM's ownership of Texas transmission and distribution utility TNMP.