Santa Fe, NM - On November 1st, 2021 Hearing Examiner Ashley Schannauer issued an order recommending the PRC deny the $8Billion merger between Joint Applicants (Iberdrola, Avangrid and PNM). The stipulation (settlement) between the Joint Applicants and the signatories, including the Attorney General’s office, was found to be contrary to the public interest. Hearing Examiner Schannauer writes conclusively “The potential harms of the proposed transaction outweigh the promised benefits.The benefits are not meaningful if PNM’s customers do not have reliable service.”(pg 53)
The public interest has prevailed. As New Energy Economy argued, the potential risks of unreliability, corruption, diminished service quality, and local control significantly outweigh any benefits claimed by PNM and Avangrid.
The Stipulation does not fairly balance the interests of ratepayers and shareholders. PNM was granted a monopoly and is now attempting to sell their captive ratebase to a multinational corporation under criminal investigation with terms that maximize their private profit while leaving New Mexicans high and dry and exposed to enormous risk.
Chief Hearing Examiner Schannauer listed the harms and potential risks of the merger, including:
Commission jurisdiction over Iberdrola, Avangrid’s parent company is insufficient, especially given that Iberdrola is currently under investigation for fraud, bribery and corruption.
Diminishment of service quality, with over 63 million worth of penalties and violations since 2016.
The real purpose for Avangrid’s interest in PNM is to subsidize Iberdrola and Avangrid’s profit rather than focus on the needs of PNM ratepayers.
Avangrid’s aggressive expansion into non-utility projects has raised concerns among credit rating agencies and Avangrid has been downgraded by Moody’s.
Parent company Iberdrola is under criminal investigation in Spain.
The stipulated agreement does not contain adequate protections against these harms.
Our legal protections exist for a reason. We applaud the Hearing Examiner for his rigorous review of the facts of the case and his sound application of New Mexico’s regulatory protections and legal standards. Chief Hearing Examiner Schannauer has issued an impartial judgement that prioritizes the protection of ratepayers and the environment and upholds the public interest.
The recommended decision will now go to the full Public Regulation Commission for review and could either be accepted, modified or denied.
Quotes from the Recommended Decision:
Avangrid, Inc. has not been forthcoming regarding the penalties and disallowances that have been assessed against its Northeast public utilities, and it has violated and skirted Commission rules and orders in this proceeding. The Hearing Examiner is recommending sanctions against Avangrid, Inc. for its discovery violations in this case. Avangrid Renewables, LLC has also skirted and failed to Recommended Decision comply with Commission rules and orders in regard to its current renewable energy projects in New Mexico. p. 51-52.
Avangrid, Inc.’s interest in accelerating the renewable energy business of Avangrid Renewables, LLC in the Southwest may not be consistent with the provision of reliable utility service by PNM. Avangrid, Inc. states that it wants to use its acquisition of PNM as a “beachhead” for Avangrid Renewables, LLC’s projects in New Mexico and the Southwest. The resource needs of Avangrid Renewables, LLC may take priority over PNM’s need for resources to provide reliable utility service to its customers. Avangrid Renewables, LLC’s renewable energy development business is also riskier than the normal business of providing utility service and has recently contributed to a downgrade of Avangrid, Inc.’s credit ratings. p.52.
Avangrid, Inc.’s interest in growing its renewable energy business in the Southwest also presents the risk that the Proposed Transaction might result in an overall slowing of the development of New Mexico’s renewable energy resources. Avangrid Renewables, LLC is already developing and operating projects in New Mexico without its ownership of a New Mexico utility. p. 52.
“The issue of governance is particularly problematic, and it is not capable of cure with the modifications proposed by the parties…. There is a clear contradiction between Avangrid,
Inc. and Iberdrola, S.A.’s professed goals of local control and their refusal to allow that control. The limitations on local control that the Joint Applicants will allow indicate that Avangrid, Inc. and Iberdrola, S.A.’s insistence on their right of control will prevail and that PNM’s customers will be subject to the risks that the customers of Avangrid, Inc.’s other utilities have experienced.” P. 213
“The Avangrid, Inc./Iberdrola, S.A. group of companies have experienced compliance issues in this proceeding that may foretell future compliance issues if the Proposed Transaction is approved.” P. 166. “The Joint Applicants’ violations negatively impacted the proceedings. …The information may have also prompted some of the parties.” P. 178 “The Hearing Examiner, accordingly, finds that the violations at issue were willful and that sanctions are appropriate.” P.
181. The Hearing Examiner finds that the breadth of Avangrid, Inc.’s violations and their impact on the development of evidence in this case justifies the imposition of sanctions. The Hearing Examiner therefore recommends that New Energy Economy should be awarded its attorney fees for the time expended on NEE’s efforts to resolve the discovery dispute regarding NEE 4-55, including the bringing of the NEE Motion, paid for by shareholder funds (not to be reimbursed by ratepayers). P. 181.