Dive Brief:

• Avangrid and New Mexico-based PNM Resources say they have won over or secured the neutrality of “almost all” of the groups, organizations and government agencies that had raised concerns about their proposed multibillion-dollar merger.
• At the top of the list is staff at the utility division of New Mexico’s Public Regulation Commission, which has agreed to not oppose the merger in exchange for specific regulatory commitments by Avangrid related to service quality, according to a filing with the PRC.
• Avangrid has reportedly agreed to automatic penalties in the hundreds of thousands if the utility, the U.S. subsidiary of Spanish power giant Iberdrola, violates a new set of service and reliability standards it has pledged to hammer out with New Mexico regulators.

Dive Insight:

PRC hearing examiner Ashley Schannauer last month wrapped up nearly two weeks of hearings on the proposed merger, with the transaction expected to go before the five-member Public Regulation Commission in the fall for a final decision.

Avangrid has faced questions over the course of the regulatory review process in New Mexico on service issues the utility encountered in other states, including Maine.

A July 16 filing by Evan Evans of Integrity Power Consulting laid out the position of PRC's utility division staff.

Of particular concern, is "declining service quality at PNM since 2005," combined with "penalties and fines due to service and reliability issues" issued by the state regulatory commissions that regulate Avangrid-owned utilities in Connecticut, Maine and New York, Evans wrote in the filing, submitted on behalf of the PRC staff.

In a recent filing with the commission, the PRC’s utility division staff indicated it has reached an agreement with Avangrid and PNM under which it will no longer oppose the merger.

The exact details of the agreement are not clear, though they reportedly include both a set of service standards and automatic penalties ranging from $250,000 to $500,000.

The PRC’s utility division staff had called for “system-wide service reliability performance standards” based on the utility’s average System Average Frequency Interruption and System Average Interruption Duration indexes, from 2013 through 2017. 

PNM would then face penalties if performance on either the SAIFI or SAIDI indices exceed the base or average by more than 10% for two or more consecutive years, according to an Aug. 30 filing. 

The penalties start at $340,000 for each reliability index that tops the 10% mark, rising by $34,000 for each added percentage point for each year, according to the staff proposal.

The penalties would rise again if PNM’s service and reliability track record exceeds that 10% mark for a third consecutive year, rising to $510,000 for that year alone, while hitting 11% would push the amount PNM would be forced to pay to $561,000.

“These amounts would continue to grow for each subsequent consecutive year in which the standard is exceeded,” according to PRC staff in a filing with the commission.

Overall, Avangrid and PNM have reached some form of agreement with 23 of the 24 various intervenors in the regulatory review process, with the groups and organizations having either agreed to support the merger proposal or to not oppose it, according to the utility companies.

Supporters now include the Attorney General of the State of New Mexico, Western Resource Advocates, the International Brotherhood of Electrical Workers Local 611, Diné Citizens Against Ruining Our Environment, NAVA  Education Project, San Juan Citizens Alliance, Tó Nizhóní Ání, the Coalition for Clean Affordable Energy, Interwest Energy Alliance, Walmart, Inc., Onward Energy, M-S-R Public Power Agency, and Los Alamos County, Avangrid stated in a press release. 

The agreements also come after Avangrid and PNM boosted the amount of money in customer rate credits and economic development funding it has committed to spending after the merger, raising the total to $133.5 million.

That includes an additional $10 million in economic development funding, raising that line item to $25 million.

New Energy Economy (NEE) now remains the last major opponent of the deal. NEE has raised a number of objections, arguing plans put forth by Avangrid and PNM for a local board to oversee the subsidiary in New Mexico remain insufficient.

“The promise of an independent board as Joint Applicants have proposed is illusory,” the group wrote in an Aug. 30 filing with the PRC.