PNM/Avangrid Merger Hearings Commence as Lawyer Is Disqualified

"The Attorney General's initial position in this case recommended denial of the merger and acquisition transactions proposed by the Joint Applicants for the Commission's approval," Schannauer wrote in the order [20-00222-UT]. "The Attorney General's position changed during the course of the proceedings when it signed on to the Stipulation in this case," he added.

PNM and Avangrid's response to a discovery request in the proceeding shows that Rael met with Balderas' office 18 times between late February and early April. During that time, Balderas was preparing testimony opposing the original proposal, according to the order. The discovery also shows evidence of meetings with the attorney for Bernalillo County, the state's most populous, where PNM is headquartered.

Schannauer in the order says PNM and Avangrid cited attorney-client privilege in protecting their communications with Rael. The attorney's communications with other parties were related to settlement discussions and are also protected, the joint applicants said.

"Either way, if Mr. Rael was advocating for Iberdrola's position or the Attorney General's position in those meetings, his representation at the time was adverse to at least one of the clients," Schannauer wrote.

New Energy Economy, a Santa Fe-based renewable-energy and ratepayer advocacy organization that opposes the merger, on July 23 applied for a subpoena to depose Rael. Schannauer, recognizing that the timeline for a subpoena process would have overlapped with the Aug. 11 start date for the NMPRC evidentiary hearings regarding the merger, ordered the parties involved in the alleged conflicts—PNM, Avangrid, the attorney general and Bernalillo County—to file positions on whether the conflicts existed or had been resolved and explain their involvement in them. The parties' responses prompted NEE on July 30 to seek disqualification of both Rael and Balderas from the proceeding.

"It is crucial that the proceeding and the Commission's final decision are viewed by the public as credible and without any taint of improper influence," Schannauer wrote in disqualifying Rael from the proceeding. He said state law provided no clear authority for the commission "to adjudicate the Attorney General's conduct," however.

"The Hearing Examiner and the Commission can and will consider Iberdrola's and the Attorney General's actions as they weigh the reasonableness of the Stipulation and the parties' supporting testimony," he wrote in the order. "Otherwise, NEE's remedy may lie with the New Mexico courts."

NEE and four other New Mexico organizations on July 15 filed ethics complaints against Balderas to the state ethics commission, the state auditor and the New Mexico Supreme Court (see CEM No. 1651).

"The Hearing Examiner quite properly held that Rael can't serve as the lawyer for the State and its people in some matters and just switch sides just to help Iberdrola make a deal with the AG. I have little doubt that Iberdrola hired Rael to get our Attorney General to change his position on the merger because Iberdrola knew Rael was an insider in the AG's office and a pal of the AG," NEE Executive Director Mariel Nanasi said in a news release.

Balderas, who took office in 2015 and is serving his second term, attended law school with Rael and previously hired his firm, Robles, Rael & Anaya, to represent the state in other matters.

Schannauer in an Aug. 10 order denied the joint applicants' claim of confidentiality surrounding internal audit reports the applicants had characterized as pertaining to ongoing criminal investigations in Spain involving Iberdrola and its executives. He ruled that the audit reports were material and relevant to the proceeding, and cited an additional order he filed July 19 determining that the Spanish criminal investigation and underlying facts are also relevant to the case.

The commission heard public comment in the proceeding Aug. 9 and 10.

Labor, professional and business-friendly groups, including multiple chambers of commerce, voiced support for the proposed merger, along with environmental and ratepayer organizations. The groups argued that the merger would create jobs, expand the economy, advance development of renewable energy in New Mexico and the region, and extend service to remote and low-income areas.

Opponents of the merger cited Avangrid's track record in Maine, where they say utility rates increased along with extensive power outages and poor service. Others addressed the allegations of Iberdrola's corruption and extortion, and said the company has a bad reputation internationally. Paulo Silva, a security contractor formerly employed by Iberdrola, told the commission he had been approached on multiple occasions to participate in improper bid-rigging schemes to benefit companies associated with Iberdrola, and said that the company's conduct could pose national security risks.

Formal hearings are scheduled to conclude Aug. 20. Schannauer said he expects the commission's final decision on the merger by late summer or early fall.