Dive Brief:

• The New Mexico Public Regulation Commission (PRC) should reject Avangrid's proposed $8 billion acquisition of PNM Resources, a hearing examiner recommended in a Monday order, citing risks to reliability and fears that the benefits of the merger could be overestimated.
• "The potential harms outweigh the promised benefits," Hearing Examiner Ashley Schannauer wrote. "The benefits are not meaningful if PNM's customers do not have reliable service." 
• The full PRC must still rule on the merger, and local reporting indicates a decision could come in December.  Officials at PNM said they remain "hopeful" the deal will go through. 

Dive Insight:

Two months ago the Avangrid-PNM merger appeared to be heading for approval, with the utilities agreeing to new reliability standards and penalties should service degrade. The PRC's utility division had promised not to oppose the deal, and most intervenors were on board.

Now, all that is up in the air.

The deal "will require protections that are adequate to prevent the diminishment of service, the potential slowing of the development of New Mexico's renewable energy resources and higher prices for PNM's customers," Schannauer wrote. The applicants "have not proposed adequate protections to address the issues."

Among the concerns, is that Avangrid owns four electric utilities in the Northeast and three fare poorly in terms of service. Schannauer's order notes that J.D. Power in 2020 ranked Avangrid's Central Maine Power in last place for residential customer satisfaction among 128 investor-owned utilities nationally, and in New York the company has paid millions in penalties for poor service quality.

Avangrid is the U.S. subsidiary of Spanish power giant Iberdrola, and Schannauer also expressed concerns over the potential for insufficient oversight by the PRC, as well as a criminal investigation into the chief executive and chair of Iberdrola for possible bribery and other violations.

"The criminal investigation is relevant as it may reflect the culture" of the parent company, Schannauer wrote. "PNM needs to maintain its culture of respect for state and federal law."

PNM spokesman Ray Sandoval said in a statement to media that the company is reviewing the hearing officer's recommendation and is planning to respond. "We remain hopeful that the numerous benefits of this merger are realized in the Commission's final decision," he said.

Customer advocates opposed to the deal celebrated the hearing examiner's recommendation. New Mexico-based New Energy Economy (NEE) was the last major opponent of the deal.

“The public interest has prevailed," NEE Executive Director Mariel Nanasi said in a statement. "The potential risks of unreliability, corruption, diminished service quality, and local control significantly outweigh any benefits claimed by PNM and Avangrid."