PNM Resources : Joint Applicants' Exceptions

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE JOINT APPLICATION	)
OF IBERDROLA, S.A. AVANGRID, INC., AVANGRID	)
NETWORKS, INC., NM GREEN HOLDINGS, INC.,	)
PUBLIC SERVICE COMPANY OF NEW MEXICO	)
AND PNM RESOURCES, INC. FOR APPROVAL OF	)
THE MERGER OF NM GREEN HOLDINGS, INC.	)
WITH PNM RESOURCES, INC.; APPROVAL OF A	)
GENERAL DIVERSIFICATION PLAN; AND ALL	) Case No. 20-00222-UT
OTHER AUTHORIZATIONS AND APPROVALS	)
REQUIRED TO CONSUMMATE AND IMPLEMENT	)
THIS TRANSACTION	)
	)
IBERDROLA, S.A., AVANGRID, INC., AVANGRID	)
NETWORKS, INC., NM GREEN HOLDINGS, INC.,	)
PUBLIC SERVICE COMPANY OF NEW MEXICO AND	)
PNM RESOURCES, INC.,	)
	)
JOINT APPLICANTS.	)
	)

JOINT APPLICANTS' EXCEPTIONS

TO

CERTIFICATION OF STIPULATION

NOVEMBER 12, 2021

TABLE OF CONTENTS
SUMMARY .......................................................................................................................	1
ARGUMENT IN SUPPORT OF EXCEPTIONS ..........................................................	2
EXCEPTION I: THE CS DID NOT ACKNOWLEDGE THE
SUBSTANTIAL AGREEMENT OF THE PARTIES AND ERRED IN
FINDING THAT POTENTIAL HARMS OUTWEIGHED
CONCRETE BENEFITS. (CS AT 37-53,65-66).............................................	3

1. There is Substantial Agreement that the Proposed Transaction Should

be Approved. ...............................................................................................

3

1. The Proposed Transaction and Regulatory Commitments Provide Substantial Benefits for PNM's Customers, Stakeholders and New

Mexico. ........................................................................................................	4
C. The Risks Cited in the CS are Outweighed by the Benefits..............................	11
EXCEPTION II: THE JOINT APPLICANTS URGE THE COMMISSION
NOT TO IMPOSE THE CS PROPOSED SANCTIONS. (CS AT 180-	16
181).................................................................................................................
RELIABILITY METRICS AND PENALTIES IN REGULATORY	18
COMMITMENT NO. 36 (CS AT 224-239) ...................................................
INDEPENDENT BOARD REQUIREMENTS IN REGULATORY	19
COMMITMENT NO. 17 (CS AT 195-219) ...................................................
POSITIONS IN UPSTREAM AFFILIATE INTERESTS IN REGULATORY	20
COMMITMENT NO. 17 (CS AT 221) ..........................................................

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TABLE OF AUTHORITIES

New Mexico Cases

Hess Corp. v. N.M. Taxation & Revenue Dep't, 2011-NMCA-043

Mattox v. Mattox,

1987-NMCA-021, 105 N.M. 479

Mountain States Tel. & Tel. Co. v. New Mexico State Corp. Comm'n, 1977-NMSC-032,90 N.M. 325

Peters Corp. v. N.M. Banquest Investors Corp., 2008-NMSC-039,144 N.M. 434

New Mexico Regulatory Cases

In the Matter of the Application of TECO Energy, Inc., New Mexico Gas Co., Inc. and Continental Energy Systems, LLC for Approval of TECO Energy, Inc.'s Acquisition of New Mexico Gas Intermediate, Inc., NMPRC Case No. 13-00231-UT(2014)

In the Matter of the Application of New Mexico Gas Co., Inc.; TECO Energy, Inc.; Emera Inc.; Emera US Holdings, Inc.; and Emera US Inc. for Approval of the Merger of Emera US, Inc. with TECO Energy Inc.,

NMPRC Case No. 15-00327-UT (2016)

In the Matter of the Application of El Paso Elec. Co., Sun Jupiter Holdings LLC, and IIF Us Holding 2 LP for Approval of the Acquisition of El Paso Elec. Co.,

NMPRC Case No. 19-00234-UT (2020)

New Mexico Statutes and Rules

NMSA 1978 §§ 62-1-1 to 62-6-28 and 62-8-1 to 62-13-15 (1909, as amended through 2020) (Public Utility Act)

1.2.2.35(D)

1.2.2.35(D)(1)(a), (c), (d)

1.2.2.35(F)

1.2.2.37(A)(3)

Rule 11-201(B), NMRA

Rule 16-107(B), NMRA

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Public Service Company of New Mexico ("PNM"), PNM Resources, Inc. ("PNMR"), Iberdrola, S.A. ("Iberdrola"), Avangrid, Inc. ("Avangrid"), Avangrid Networks, Inc., and NM Green Holdings, Inc. (collectively, the "Joint Applicants"), file their Exceptions to the Certification of Stipulation ("CS") issued on November 1, 2021. While the Joint Applicants very much disagree with the conclusions in the CS about the Joint Applicants and the potential harms of the merger transaction proposed by the Joint Applicants (the "Proposed Transaction"), in order to assure the New Mexico Public Regulation Commission ("NMPRC" or the "Commission") that the Proposed Transaction will indeed greatly benefit New Mexico and New Mexicans, the Joint Applicants are willing accept all of the recommended modifications to Second Amended Stipulation filed on June 4, 2021 ("June 4 Stipulation") in Appendix 2 of the CS, as discussed herein.

SUMMARY

The Commission has everything it needs to approve the Proposed Transaction with the regulatory commitments in the June 4 Stipulation, as modified by the other agreements with parties and the CS recommendations, as discussed herein ("Regulatory Commitments").

While the Joint Applicants accept the recommendations modifications to the June 4 Stipulation contained in the CS, Joint Applicants take exception to the recommended findings that 1) the potential risks outweigh the concrete benefits of the Proposed Transaction, and 2) that the majority of the parties are not in agreement that the Proposed Transaction should be approved based on the totality of benefits and protections agreed to by Joint Applicants. 1 Joint Applicants are not submitting any exceptions to the modifications to the June 4 Stipulation contained in the CS, but offer limited discussion of three of the modifications to the June 4 Stipulation in the CS, as summarized below:

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1 Joint Applicants also urge the Commission not to adopt the sanctions in the CS.

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• The Joint Applicants believe that the Commission has discretion to address the potential for an unduly punitive outcome resulting from adoption of the reliability metrics and automatic penalties in Regulatory Commitment No. 36 of Appendix 2 proposed in the CS;
• While the Joint Applicants believe that requiring a majority of independent directors at PNM is neither necessary nor beneficial to customers, if the Commission determines that such a requirement is necessary, Joint Applicants will accept all of these modifications regarding independent directors as and to the extent in Appendix 2; and
• The Joint Applicants understand that the suggested Regulatory Commitment prohibiting PNM employees from holding positions with upstream affiliated interests applies to affiliated entities above PNMR, which would preserve the current management structure that includes PNMR.

Based on the record before it, the Commission can and should approve the Proposed Transaction with the CS modifications to the June 4 Stipulation as described herein, so that customers and the State of New Mexico can start to receive the benefits of the Proposed Transaction - benefits that are significantly higher than any other utility merger in the State's history. These benefits greatly outweigh the risks the CS identified.

ARGUMENT IN SUPPORT OF EXCEPTIONS

The Commission is not limited to simply approving or rejecting a stipulation, and can make its own judgment as to what is in the public interest based on the record, including modifying the stipulation.2 Where a CS recommends modifications to a stipulation, the Commission is also not

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2 Mountain States Tel. & Tel. Co. v. New Mexico State Corp. Comm'n, 1977-NMSC-032,¶ 19.

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