Copyright 2021 Albuquerque Journal
Consumer and environmental advocates want regulators to demand much more direct public benefits in the proposed merger between the New Mexico utility company and Connecticut-based energy giant Avangrid.
The state’s Public Regulatory Commission on Friday set a deadline for all parties to the case to file written testimony outlining their positions for public public hearings scheduled for early May. Many stakeholders were still making final changes to their documents on Friday before filing. But many told the Journal they plan to push for meaningful changes to the merger proposal that PNM and Avangrid jointly submitted to the PRC in November to ensure taxpayers and local communities receive net benefits. important.
The attorney general’s office, for example, can push for PNM’s parent company, PNM Resources, to share a substantial portion of what could represent more than $ 700 million in expected profits from the sale with its clients, rather than to simply distribute this product to shareholders. .
The Journal obtained a partial copy of the draft testimony prepared by an expert witness representing the VG in the case, who recommended that the PRC start with a basic 50/50 presumption as fair compensation for taxpayers. That would mean that PNM’s roughly 530,000 consumers would potentially share around $ 350 million in sales proceeds, perhaps in the form of credit on their monthly bills.
Share of taxpayers
Avangrid, which is majority owned by international energy company Iberdrola, SA, has offered to buy PNMR and its two utility subsidiaries PNM and Texas New Mexico Power at $ 50.30 per share, or about $ 4.3 billion on nearly 86 million shares outstanding.
The offered share price represents a premium of nearly 20% over the volume-weighted average PNMR share price calculated over six months before the merger announcement, according to the expert witness of the AG , attorney Scott Hempling, based in Maryland. These 20 p. Another 100 would total approximately $ 713 million.
But these additional profits, which Hempling calls a “control premium,” do not reflect the additional value created by shareholders. Rather, they reflect the value Avangrid places on purchasing a state-regulated monopoly that secures captive customers without competition from other utilities. As a result, the added value should be shared with taxpayers, Hempling said in his testimonial project.
“Iberdrola / Avangrid is paying this amount to gain control of the PNM franchise, the government-funded privilege of providing essential for-profit electrical service,” Hempling said. “The value that Iberdrola / Avangrid sees in this franchise was not created by the shareholders of PNM; it stems in large part from regulatory actions that require clients to financially support PNM by paying set commission rates. Since these rates have already provided PNMR shareholders with fair compensation, giving them the control premium is overcompensation. “
As of early Friday afternoon, the official attorney general’s file was still not available and it was not clear whether Attorney General Hector Balderas would support Hempling’s recommendation. The Auditor General’s office was still discussing its final position with different parties in the matter.
“I strongly support the transition from the state’s largest utility to Avangrid, a leader in clean energy,” Balderas told the Journal in an email. “But I remain concerned that the deal translates into an overwhelming profit by leaving the state and leaving no benefit to taxpayers for allowing PNM to monopolize the energy market.”
Other stakeholders are also pushing for the PNMR to share the proceeds with taxpayers, although the amounts recommended differ from party to party. This in part reflects different calculations on the total actual bonus that PNMR shareholders will receive as part of the sale.
Among others, for example, expert witness for the Albuquerque Bernalillo County Water Utility Authority, Mark E. Garrett of Garrett Group Consulting, recommends that up to $ 226 million be returned to PNM clients in the form of rate credit.
So far, Avangrid has only offered $ 25 million in total rate credits to PNM customers to pay over three years after the merger. If split between 530,000 PNM customers, that would add up to about $ 15.47 per year per customer, or about $ 1.29 in savings per month on invoices.
Avangrid also proposed to invest $ 2.5 million in shareholder money for local economic development over two years and to continue funding PNM’s low-income assistance programs for three years. In addition, it promises to create 100 new full-time jobs, without involuntary layoffs or cuts in wages or benefits for two years.
But some parties want a lot more help for low-income consumers and for communities affected by the transition from fossil fuels to clean energy. This includes significant investments in energy efficiency programs, such as grants to help withstand inclement weather in low-income homes, allowing families to lower their consumption and lower bills.
Avangrid is a leading renewable energy company, ranking third among wind developers in the country. The company operates in 24 states with total assets of $ 35 billion, as well as financial backing from Iberdrola, a global energy mammoth ranked as the world’s third largest electricity company.
Many environmental organizations support the merger with PNM in principle, as it could mean an acceleration of renewable energy development in New Mexico. But they want guarantees from Avangrid that he will make significant investments with substantial benefits for taxpayers and the state in general, said Stephanie Dzur, lawyer for the Clean and Affordable Energy Coalition.
“Avangrid says it can provide significant benefits, and it has an obligation to serve New Mexico with fair and reasonable rates,” Dzur said. “But we don’t want empty promises. We say “show me the money”, rather than taking things by faith. “
This means writing commitments directly into any PRC order approving the merger, said Noah Long, Western director of climate and energy for the Natural Resources Defense Council.
“We want clear commitments on energy efficiency, transportation electrification programs and investments in renewable energy production,” Long said. “We believe this is Avangrid’s intention, but we need to secure these commitments in writing.”
Environmental groups are also keen to include a discussion of PNM’s plans to exit the Four Corners coal-fired power plant in December 2024 more than six years ahead of schedule to participate in the merger hearings. PNM filed a plant abandonment request in January, which the PRC is currently considering as a separate case.
But Avangrid has conditioned his merger deal on PNM’s efforts to leave Four Corners because he doesn’t want smut on his books when he takes over public service. And many environmental groups oppose PNM’s current abandonment plan, which plans to sell its stake in Four Corners to the Navajo Nation, which could then continue to operate the plant with other co-owners until 2031.
Sierra Club Rio Grande section manager Camilla Feibelman said her group and others wanted to discuss these plans directly with Avangrid in the case of the merger to push for not only the exit of PNM from Four Corners, but also to close the plant before 2031.
“Four Corners is a different case, but we believe the PNM-Avangrid merger should be stipulated on a ban on allowing PNM to do anything that might extend the life of Four Corners after it leaves the company. factory, ”Feibelman said.
PNM said Avangrid will help New Mexico in its transition to renewables, and the PRC’s regulatory process will ensure the merger brings benefits to customers and the state.
“We believe that each of the parties involved in this regulatory process shares with us an interest in the future of our state,” PNM spokesperson Ray Sandoval told the Journal. “We look forward to reviewing their responses and working with them throughout the process.”
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