A Primer On All That Is Wrong with the Proposed PNM/Avangrid Merger
There are so many things wrong with the proposed PNM/Avangrid utility merger, it is hard to know where to begin. And since perhaps you are a bit overwhelmed by all the charges and countercharges, we spent days poring over published articles on Avangrid in Maine, Spain, and South America, and hundreds of pages of PRC testimony to create this summary page.
First below, we present in broad strokes why this merger is a terrible deal for New Mexico and PNM ratepayers.
Second, we offer excerpts from sworn testimony from one of the nation’s foremost merger experts, Scott Hempling. His testimony further validates our concerns and concludes by stating unequivocally that the merger is not in the public interest. His damning testimony is crystal clear and directly cites actual merger proposal language and PNM board meeting merger discussions. The conclusion drawn from Hempling’s testimony is inescapable: This is a very bad deal.
Then, we present A/V recordings of interviews with key stakeholders and individuals with direct experience with Avangrid — interviews that validate the broad stroke concerns we present.
Lastly, we offer info on how to submit oral and/or written comment at the Aug. 9 PRC hearing. Public comment is so important on this merger that we are not providing easy cut-and-paste speaking points. Instead, we are asking everyone to take a bit of time to digest the info here and prepare your own comments.
Broad Strokes: Why this merger is so bad for NM and PNM ratepayers
The primary problems with the proposed merger include Avangrid’s:
- abysmal customer satisfaction history
- history of outages and failed reliability
- failed billing system
- shut-off notices sent during COVID pandemic, against Maine state law
- complete absence of consideration of ratepayer and public benefit in the merger proposal.
1. Abysmal Customer Satisfaction History
As described in a News Center Maine report, Central Maine Power (CMP)/Avangrid/Iberdrola has ranked last among all large and mid-sized electric utilities for customer satisfaction in 2018, 2019 and 2020 surveys by JD Power and Associates. In 2013, prior to Avangrid’s acquisition of CMP, it was ranked among the highest in the nation.
There is a reason for this precipitous decline in customer satisfaction in Maine and it begins with the unreliability of CMP/Avangrid’s delivery of electricity and the high number of outages experienced across the state.
2. History of Outages and Failed Reliability
Based on data collected from 2015 – 2019, Maine saw the highest average number of power outages at nearly four per year. This is significantly higher than the runner up, West Virginia, which experienced an average of 2.8 outages per year. (“The Most & Least Power Outages by U.S. States,” by Joe Kaminski, March 3, 2021, MRO Electric & Supply Co., Inc.)
Interestingly, Maine not only experienced the highest average number of outages per year but also held the second most average annual downtime in the country. According to the data to the right, downtime in Maine averaged 14.1 hours, beaten only by Florida’s 14.6 hours.
Even more damning than their poor reliability ratings and customer satisfaction is Avangrid’s clear disregard for customers, as manifest in their billing fiasco and their sending shut-off notices during the COVID pandemic against state law.
3. Failed Billing System
From a Feb. 2020 article in Maine’s Portland Press Herald: “For customers, the bad news began in the fall of 2017, after the company switched over from an aging, data management system. Within days, customers were receiving erroneous bills. Soon, 97,000 of the company’s roughly 620,000 customers were sent bills at least 50 percent higher than for the same three-month period a year earlier. Many residential and commercial ratepayers got no bills at all – and were shocked when the eventual balance became more than they could afford… In all, 59 distinct types of billing errors affecting more than 100,000 customers were discovered, according to the PUC.”
4. Shut-Off Notices Sent During COVID Pandemic, Against State Law
In Maine, utilities are prohibited from turning off a residential customers’ power each winter prior to April 15 without approval from the Maine Public Utilities Commission (PUC), which is rarely granted. Despite that prohibition, CMP/Avangrid/Iberdrola issued thousands of misleading disconnect notices to Maine residents during the 2020-21 winter months in the midst of the COVID pandemic and the resulting economic hardship faced by so many. The Maine PUC issued an Order on August 5, 2020, finding that CMP had violated a PUC rule and requiring payment of an administrative penalty of $500,000 in civil penalties, the maximum allowed under Maine law. To learn more, read the article at this link: Maine PUC Issues Order Involving Central Maine Power, Aug. 6, 2020, Energy Central News.
5. Complete Absence of Consideration of Ratepayer and Public Benefit In the Merger Proposal
To understand just how egregious this proposed merger is for our state, we turn to expert testimony submitted to the PRC by Scott Hempling, an attorney who specializes in utility regulation and mergers. Hempling’s legal treatise, Regulating Public Utility Performance: The Law of Market Structure, Pricing and Jurisdiction, was published by the American Bar Association in 2013. It has been described as a “comprehensive regulatory treatise [that] warrants comparison with Kahn and Phillips.” A second edition will be published by Fall 2021. His book Regulating Mergers and Acquisitions of U.S. Electric Utilities: Industry Concentration and Corporate Complication was published by Edward Elgar Publishing in Fall 2020.
First, we’ll look at Hempling’s testimony on the purpose of the merger and both parties’ real motivations for the proposed the deal. The testimony throughout refers to PNMR (PNM Resources), the investor-owned holding company that owns PNM and that led the negotiations for the merger:
“PNMR chose Iberdrola/Avangrid based on price. And Iberdrola/Avangrid didn’t choose PNMR so it could make PNM a better utility. Iberdrola/Avangrid chose PNMR to get a Southwestern “platform”—a government protected monopoly platform from which to make more acquisitions and sell more renewable energy.
Moreover, Avangrid has no plan for creating benefits. It has performed no studies on cost savings or management improvements. It has identified no economic or engineering inefficiencies for the transaction to improve. By the Applicants’ own words, this transaction has no public interest purpose.” (from p. 56 of testimony)
Clearly, PNMR was focused exclusively on getting the highest possible financial gain for shareholders without a whit of consideration for ratepayer benefit. And Avangrid is only seeking a means of profiting from New Mexico’s solar and wind power.
To underscore the degree to which PNMR did not give a thought to ratepayer benefit, we return to Hempling’s testimony, which includes an excerpt from PNMR’s Proxy Statement on the merger:
“Customer benefit was nearly irrelevant. The Proxy Statement says that the negotiations focused on these items:
• the size of purchase price;
• the form of the purchase price (cash vs. all stock vs. mix of cash and stock);
• the penalty PNMR would pay Iberdrola/Avangrid if PNMR backed out to take a higher offer from a different acquirer;
• the fee Iberdrola/Avangrid would pay PNMR if Iberdrola/Avangrid backed out;
• a dissenters’ rights closing condition;
• whether and which PNMR individuals would have seats on Avangrid’s Board; and
• PNM’s exit from Four Corners.
None of these terms has any connection to customer benefits.” (from p. 18 of testimony)
In response to the question, Is there other evidence that customer benefit was not PNMR’s purpose?” Hempling replied:
“Yes, two major examples. First, at no point in the narrative did PNMR’s executives and advisors demand, or even ask, that prospective acquirers offer any serious customer benefits. (Respectfully, I don’t consider $24.6 million a serious benefit, especially when compared to the PNMR shareholders’ $713 million gain.) PNMR bargained over price, cash-stock ratio, breakup fees, Board membership and executives’ location, but never over customer benefits. No one gathered or presented serious information, conducted serious analyses or made any serious plans, about improving PNM’s performance. Customer benefits were beside the point.” (from p. 18 of testimony)
Considering how much Avangrid and PNM spend on continuous ads describing their concern for ratepayers and the public, one would think there would be at least a mention of public benefit in the merger documents.
Hempling points out that PNM shareholders are the true beneficiaries of this proposed merger:
“Iberdrola/Avangrid has agreed to pay PNMR shareholders a $713 million control premium. This situation—PNMR receiving so large a gain for doing so little, with the customers who created the value underlying the premium getting so little—is contrary to the public interest.” (from p. 23 of testimony)
Hempling’s conclusion to his testimony is compelling:
“My testimony is complex because this transaction is complex. But the message is not. Iberdrola/Avangrid wants to control PNM to get a platform; PNMR wants to sell control of PNM’s public franchise to get $713 million. Nothing about this transaction benefits consumers; much about this transaction will harm them. There are no reasons to approve this transaction, and many reasons to reject it.” (from p. 76 of testimony)
As Hempling notes, his testimony and the merger are complex. There is much more we would have liked to include, but out of consideration for our time and yours, we provide a link to the full testimony below. It is full of compelling reasons not to support this merger.
Video Commentary on Proposed PNM/ Avangrid Merger
Mariel Nanasi, Executive Director, New Energy Economy
(To skip intro, start at 4:30.)
This is very important information, as the “Mainers” spell out clearly how Avangrid has treated ratepayers in Maine. It provides compelling evidence of how Avangrid treats its customers and offers a strong rebuttal to the endless ads portraying Avangrid as a strong renewable energy advocate who cares about its customers.
To skip intro, start at 6:45.
How to Submit Public Comment at Aug. 9 PRC Hearing
We don’t think that repeated, identical comments will be effective at the Aug. 9 PRC hearing, which begins at 9 a.m., so instead of offering speaking points we ask that you create your own 3-minute oral and/or written comments focusing on the five themes outlined above under Broad Strokes, including the excerpts from Scott Hempling’s testimony.
You may register to give oral comment during the Monday hearing or you can submit written comment. Oral comments are limited to three minutes. At this point we have no info on word limit for written comment, but it’s best to keep it concise.
To give oral comment at the hearing, you must register in advance by emailing Ana.Kippenbrock@state.nm.us before 8:30 a.m. on Aug. 9. New Energy Economy advises you to include this subject line: “20-00222-UT public comment.” NEE also recommends that your email should say: “I ________________(YOUR NAME), would like to give public comment in NM PRC Case No. 20-00222-UT. Please provide a Zoom link so that I can participate. Thank you.”
Written comments may be submitted prior to the Commission’s final action in the case by sending an email to firstname.lastname@example.org. Please send your written comments prior to Weds., Aug. 11 because we don’t know how long the hearing will last. The PRC’s formal evidentiary hearing begins Weds., Aug. 11, at 9:00 a.m., and continues thereafter as necessary. Public oral comment will not be taken during the evidentiary hearings. The hearing will be streamed live on YouTube, and a link to the livestream will be posted on the PRC Public Hearings Page several minutes before the start of each day of the hearing.