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Understanding the real beneficiaries of the proposed merger

On Friday we began digging into the financial beneficiaries of the proposed merger in cross-examination of PNM CFO Donald Tarry and PNM VP for Public Policy, Ron Darnell. Don Tarry testified that if the merger is approved, the top three executives of PNM will receive "change of control" and retirement payouts totaling $29.6M. In contrast, the 480,000 residential ratepayers in NM will receive a combined total of $26M in rate credits for the privilege of being captive customers to the new utility owners. As the SF New Mexican put it "It pays to lose your job through a merger when you’re a top executive at the Public Service Company of New Mexico."

PNM VP Ron Darnell also testified that 33,500 New Mexicans will begin receiving disconnect notices starting this week. When Mariel asked PNM to acknowledge that these are some of the poorest people in New Mexico, PNM's CEO to-be post-merger answered: "couldn't say for sure." When we asked if the Joint Applicants are willing to forgive all arrearages (unpaid accounts) as part of the merger agreement, he declined.

On Monday the NM Attorney General's witness, Ms. Andrea Crane, testified that rate credits being offered to New Mexicans are being allocated unfairly. As the merger proposal now stands, credits will be distributed according to usage rather than on a per customer basis. That means Walmart, Facebook and other significant energy users, who frankly don't need any financial help, will benefit disproportionately to residential customers. As the proposal stands now ($1.64 per month for residential users), Ms. Crane testified, "the numbers get too small to have any benefit."

The fiction that this merger will benefit the people of New Mexico is exposed. In fact this merger will benefit shareholders and executives while keeping New Mexican's captive to their monopoly energy control.

Even though the Attorney General signed on to the Iberdrola/Avangrid merger, the Attorney General's expert, Ms. Crane testified that her recommended conditions were either completely ignored or were insufficiently addressed in the stipulation:

1. Ms. Crane recommended a $85M rate credit - Joint Applicants currently propose $67M. Ms Crane also recommended that credits be allocated on a per customer basis, rather than based on usage. The stipulation is silent on this issue and Joint Applicants testify that they will allocate the rate credit on a usage (kWh) basis. This would harm ratepayers and benefit the largest users.

2. Ms. Crane recommended that the Four Corners Power Plant undepreciated investments should be borne by shareholders, not ratepayers, and that the proposed sale to NTEC be abandoned. She testified that Four Corners Power Plant divestiture was a cost of the merger and the stipulation did not resolve the Four Corners Power Plant issue.

3. Ms. Crane recommends that economic development funds should be at least $80M. Even with value of added jobs proposed by Joint Applicants, the stipulation includes only about half of that amount.

4. Ms. Crane recommends automatic penalties for failure to meet the promised 150 jobs in NM and for retention of those jobs for at least five years. The stipulation includes no automatic penalties or retention requirements.

5. Ms. Crane recommends quarterly reporting requirements for reliability and customer service metrics. The stipulation includes no accountability or penalties for non performance for unreliability or poor customer service metrics.

6. Ms. Crane recommends that PNM should seek PRC approval for allocable charges and allocation methodologies related to any merger integration projects or any service company functions transferred from PNM Services Company to affiliates or parent companies to ensure costs are appropriate and avoid wasteful expenditures that will be billed to ratepayers. The stipulation does not explicitly address this issue.

7. Ms. Crane recommends that any support services provided by Avangrid or Iberdrola to PNM should be supported with a cost benefit study and the company should be required to demonstrate that services are being obtained at lowest possible cost. The stipulation does not explicitly address this issue.

In fact, the value of the rate credits, economic development funds and jobs proposed by Joint Applicants are negated entirely by the $300M Four Corners Power Plant cost that Ms Crane testifies should be borne by shareholders themselves:

Hearings continue throughout this week as we continue our efforts to find answers to the questions at the heart of the merger - who will pay for the energy transition, and who will profit? We contend that the company that has profited for decades through their monopoly control over NM energy should not be bailed out for their imprudent decisions by New Mexico ratepayers. The wind and the sun belong to us all and should benefit the people rather than Wall Street shareholders and a few executives.


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