As we previously shared, New Energy Economy joined over a dozen intervenors in opposing the PNM Avangrid merger agreement because it was not in the public interest. We have been hard at work producing testimony, digging for more information in discovery and producing rebuttal testimony as new facts emerge. Yesterday we were disappointed that a small handful of the intervenors decided to sign onto an “initial settlement” with PNM/Avangrid. Among them, the NM Attorney General, Hector Balderas, who is once again failing in his duty to protect consumers' rights.
New Energy Economy, along with the vast majority of intervenors in the case, continues to oppose the terms of the merger. In considering settlement we believe that it is fundamental that the benefits are equitable and the legal standards meet the public interest. It is not a good sign that the foreign moneyed interests have been able to persuade handful out of two dozen regular intervenors to capitulate – despite their legally insufficient settlement proposal. Ratepayers, New Mexicans and impacted communities deserve so much more! This settlement disproportionately benefits Wall St. shareholders at the expense of New Mexicans. New Mexico’s poverty means that we can be bought very, very cheaply. This settlement is a miscarriage of justice and in the long run the health and welfare of New Mexicans will suffer.
New Energy Economy contends that the merger is still not in the public interest because:
As part of the Merger Agreement Avangrid has required that PNM file for “abandonment”[1] of its 13% share in the Four Corners Power Plant (FCPP) and securitize the remaining undepreciated investments, pursuant to the Energy Transition Act (ETA) for $300 million from ratepayers. The purpose of the ETA is to transition New Mexico’s dependence on climate-altering coal to renewables, but PNM’s proposed abandonment and “sale” of its ownership interest in the FCPP to Navajo Energy Transitional Company (NTEC)[2] will not result in shut-down or closure of the FCPP and will allow NTEC and the other remaining owners of that plant to continue operating until at least 2031, if not longer. The PNM “sale” to NTEC is contrary to both the letter and spirit of the ETA and cannot be in the public interest.[3]
PNM’s decisions related to investment in the Four Corners Power Plant were imprudent and full cost recovery of $300 million would negate any and all possible benefits of the proposed acquisition. The Avangrid/Iberdrola merger requires that ratepayers pay for the imprudence of PNM’s investment in FCPP. This despite the fact that our Supreme Court has held that failure to conduct an alternative energy procurement analysis is a “fundamental flaw” because “[t]he goal of the consideration of alternatives is, of course, to reasonably protect ratepayers from wasteful expenditure. Pub. Serv. Co. of New Mexico v. New Mexico Pub. Regulation Comm'n, 2019-NMSC-012, 444 P.3d 460, ¶32, 40, The Court concluded that ratepayers should be held harmless from the impacts of a utility’s imprudent decisions. A merger that requires securitization of $300M of undepreciated investments at FCPP infringes on consumers’ due process protections and unfairly saddles customers with costs of a utility’s imprudent actions.
No meaningful economic benefits for ratepayers. The Joint Applicants have revised their initial offer from $24.6 million of “rate credits” to $50 million, which sounds like a lot, but, PNM’s customers will receive a bit more than one dollar every month over 36 months, which equals about $45 total per average residential customer. Compare this to three very important metrics:
1) Avangrid/Iberdrola will pay PNM Resources stockholders in excess of $700 million just for holding PNMR stock certificates. Avangrid has agreed to pay PNM Resources stockholders $50.30 per share upon closing of the merger deal set for January 2022. PNM Resources is the parent company of PNM (and is the entity which is actually traded on the New York Stock Exchange). That windfall produces no customer benefit whatsoever, but merely enriches those shareholders.
2) PNM’s senior management will receive a combined $38 million in executive compensation if shareholders approve the company’s proposed merger with energy giant Avangrid. The “golden parachute” includes shares held by PNM Executives and directors that will total between $84.3 million and $94.3 million – a distribution that is hardly fair, just and reasonable, or in the public interest!
3) No agreement to a rate freeze. PRC (2020) law is that when there is a merger in the context of a regulated monopoly the applicants agree in advance to a rate freeze for a certain period of time. Joint Applicants have refused to agree to a rate freeze. The PNM/Avangrid “rate credit” is not significant enough, but without knowing what rate increases are planned for the near future this alleged “benefit” is entirely unquantifiable. If ratepayers are required to pay PNM/Avangrid $300 million for irresponsible investments in FCPP then after the $50 million “rate credit, ratepayers will still owe Avangrid $250 million for 25 years as a “non-bypassabale charge on their monthly bills.
Why is the chief law enforcement officer of the state of New Mexico signing on to a stipulation that doesn't conform with PRC legal standards?
El Paso Electric merged with JP Morgan after PRC approval in 2020. In that merger case the PRC set forth legal standards that a merger acquisition must meet. It is alarming that Avangrid/Iberdrola is coming to this state and won't comply with the regulatory laws - this doesn't bode well. At minimum they failed to:
1. Address the issue of the FCPP divestiture, a condition precedent for the merger equal to $300M. If ratepayers are saddled with $300M in costs it directly conflicts with PRC law regarding holding ratepayers harmless for merger costs and Joint Applicants' claim that the merger a) won't adversely impact ratepayers; b) that ratepayers will be held harmless from transaction costs; and c) no adverse impact on utility’s existing rates - of course there will be a significant impact on rates from a $300M "non-bypassable" plus interest charge that will be on every customers' monthly bill for 25 years.
2. Offer economic development funds of $100M, commensurate with EPE settlement.
3. Include a rate freeze as required by PRC law and precedent.
4. Agreement to install a majority independent Board of Directors.
The Hearing Examiner has already ordered opposition statements from the parties and denied PNM's motion to extend deadlines. [1] “Abandonment” in this context does not mean closure. It means that FCPP will no longer be used to “serve rate base,” also known as, NM ratepayers. [2] PNM’s “sale” plan is to pay NTEC $75M to assume its shares and associated (coal contract) obligations, and for NTEC to pay PNM one dollar. [3] https://www.politico.com/newsletters/the-long-game/2021/03/30/companies-go-green-but-the-planet-doesnt-always-win-492293
Comments