[Lwvcnmtopics] Information on Avangrid=PNM Resources transaction
George Richmond
geomrich1 at comcast.net
Fri Dec 4 10:17:23 MST 2020
The article below appeared in the Albuquerque Journal this morning.
While I hope that ALL of you read the Journal, perhaps you were too busy
with holiday shopping...or want to share with friends.
So here it is and I have highlighted some points that I feel are important:
PNMR, Avangrid promise benefits in proposed merger
By Kevin Robinson-Avila / Journal Staff Writer
<https://www.abqjournal.com/author/krobinson-avila>
Published: Thursday, December 3rd, 2020 at 10:29pm
Public Service Company of New Mexico customers could
collectively receive a $25 million credit on their electric
bills over three years if state regulators approve the
utility’s merger with Connecticut-based company Avangrid.
That temporary service discount – plus commitments to hire
an additional 100 employees, retain the current workforce
for at least two years, maintain charitable contributions
and programs and pump $2.5 million in new money into local
economic development – are contained in a new filing for
Public Regulation Commission approval of the proposed merger.
Avangrid and PNM’s parent firm, PNM Resources, announced an
agreement Oct. 21 for Avangrid to acquire PNM Resources for
$4.3 billion. But the merger first needs approval from the
PRC, and from state regulators in Texas where PNM Resources
operates a separate utility, Texas New Mexico Power.
The two companies filed documents and testimony for approval
last week with regulators in both states, providing the
opening salvo for public hearings that the companies expect
to culminate in merger approval in the second half of 2021.
If approved, PNM will continue to be regulated by the PRC
after the merger, and the utility will remain locally
managed and headquartered in Albuquerque, said PNM Senior
Vice President for Public Policy Ron Darnell.
“Both PNM and its customers and New Mexico as a whole will
benefit from the proposed merger,” Darnell told the Journal
in an email. “… Avangrid will strengthen PNM’s financial
health, improve PNM Resources’ capital structure, and pay a
fair price to shareholders.”
Environmental and consumer advocacy organizations had mixed
initial reactions. Most are generally upbeat that Avangrid,
an industry leader in renewable energy, will bring critical
expertise and needed capital to New Mexico’s goals for
transitioning from fossil fuels to carbon-free generation
over the next two decades.
But some said they’ll use PRC hearings to push for greater
public benefits beyond what’s contained in the initial
merger filing.
“We need to carefully examine their proposals,” said
Stephanie Dzur, attorney for the Coalition for Clean
Affordable Energy. “We see their filing as an opening offer,
and it’s really not so impressive at this point.”
The companies listed numerous “benefits and protections” in
their filing, including:
• $25 million in collective “rate credits” to customers over
three years following the merger
• $2.5 million in shareholder money for local economic
development over two years
• Continuation of charitable donations at “historical
levels” by PNM for at least three years, with an expectation
that the PNM Resources Foundation will do the same
• Continuation of existing low-income assistance programs
for at least three years
• Creation of 100 new full-time jobs and no involuntary
employee terminations for at least two years, except for
cause or layoffs associated with coal plant closures
• No reduction in wages or benefits for two years
Avangrid also promises to maintain ownership of PNM for at
least five years, extinguish all PNM Resources’ debt after
the merger to improve its credit metrics, and retain control
by local management over operations.
PNM Resources chairman, president and CEO Pat
Vincent-Collawn will step down after the merger, paving the
way for current Chief Financial Officer Don Tarry, a 25-year
PNM employee, to oversee utility operations.
Retaining experienced local management could generate
support for the merger with PNM, a homegrown utility with
century-long roots in the state.
“Avangrid recognizes the value that local management’s
knowledge and expertise bring to serving communities in
which PNM operates,” the company said in the regulatory filing.
Avangrid is a national company with operations in 24 states
and $35 billion in assets. It manages two subsidiaries:
Avangrid Networks, a holding company that owns eight
electric and gas utilities in the Northeast, and Avangrid
Renewables, a wind and solar development firm.
Global energy giant Iberdrola, S.A. – a Spanish firm that
ranks as the world’s third-largest electric company –
controls an 81.5% stake in Avangrid.
That financial muscle, plus Avangrid’s renewable development
experience, could significantly boost PNM’s efforts to
transition to carbon-free generation, the companies said.
“Avangrid is uniquely situated to support PNM’s
transformation of its generation portfolio,” they said. “…
As part of Avangrid, PNM will have the support of a
well-qualified, financially strong parent with greater
access to capital markets.”
That makes the merger attractive to environmental groups.
“The renewable development benefits generated a lot of
initial enthusiasm,” said Dzur of the Coalition for Clean
Affordable Energy. “We’re excited that big companies like
Iberdrola and Avangrid recognize the value of investing here.”
Western Resource Advocates attorney Steve Michel said
Avangrid can help advance the state’s energy transition.
“I’m hopeful that, at the end of the day, it can be approved
with appropriate conditions,” Michel said.
But the CCAE and the Sierra Club Rio Grande Chapter, which
intend to intervene in PRC hearings, said appropriate
conditions mean significantly more public benefits than
what’s been offered so far.
The $25 million credit is one point of contention. The
reduction amounts to a 2.5% discount on customer bills, but
that’s spread over three years, meaning just over $8 million
per year, or less than a 1% annual credit on bills.
“That’s a drop in the bucket,” Dzur said. “They can do better.”
CCAE also wants longer-term guarantees on workforce
retention, and more economic development assistance, such as
funding for low-income consumers to weatherize their homes
to cut electric consumption.
Sierra Club may ask Avangrid and PNM to seek early closure
of the coal-fired Four Corners Power Plant before the
current coal contract ends in 2031. PNM said in late October
that the Navajo Transitional Energy Co. agreed to acquire
PNM’s 13% stake in the plant, allowing PNM to exit Four
Corners in December 2024, but Sierra Club and others
criticized that as offloading its asset onto the Navajo
Nation while allowing the plant to keep operating another
seven years.
PNM will seek PRC approval for the NTEC deal separately from
Avangrid merger proceedings, but Avangrid’s acquisition of
PNM is contingent on PNM having a plan in place to exit Four
Corners before the merger closes.
“If Avangrid is really committed to clean energy and
decarbonization, then it needs to work with PNM to exit the
plant in a way that leads to its closure,” said Sierra Club
Rio Grande Chapter Director Camilla Feibelman. “They need to
find a better way out of the plant that ensures it’s shut down.”
Personally, I expect the transaction to be accomplished
before the end of 2021. Yes, it would be nice to fund low
income consumers to weatherize their houses to cut
consumption and lots of other nice things, but.....
Is doing the transaction important? Or the issues of CCAE?
These additions will add to electric bills and so need to be
carefully priced out.
Best regards,
George Richmond
--
George M. Richmond
152 Juniper Hill Road, NE
Albuquerque, NM 87122-1913
C: 505-280-2105
E: geomrich1 at comcast.net
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