PNM Resources : Order Authorizing Merger

Document Accession #: 20210420-3062

Filed Date: 04/20/2021

175 FERC ¶ 61,058

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Richard Glick, Chairman;

Neil Chatterjee, James P. Danly,

Allison Clements, and Mark C. Christie.

Iberdrola, S.A.	Docket No. EC21-25-000
Avangrid, Inc.
Avangrid Networks, Inc.
PNM Resources, Inc.
Public Service Company of New Mexico
NMRD Data Center II, LLC
NMRD Data Center III, LLC
New Mexico PPA Corporation

ORDER AUTHORIZING MERGER, DISPOSITION OF JURISDICTIONAL

FACILITIES AND ACQUISITION OF SECURITIES

(Issued April 20, 2021)

1. On November 23, 2020, pursuant sections 203(a)(1) and 203(a)(2) of the Federal Power Act (FPA)1 and part 33 of the Commission's regulations,2 Iberdrola, S.A. (Iberdrola), Avangrid, Inc. (Avangrid), Avangrid Networks, Inc. (Avangrid Networks, and together with Iberdrola and Avangrid, Avangrid Applicants), PNM Resources, Inc. (PNM Resources), Public Service Company of New Mexico (PNM), NMRD Data Center II, LLC (NMRD II), NMRD Data Center III, LLC (NMRD III), and New Mexico PPA Corporation (PPA Corp., and together with PNM Resources, PNM, NMRD II, and NMRD III, the PNM Resources Applicants) (collectively, Applicants) filed an application requesting authorization for a transaction whereby Avangrid, through an indirect subsidiary, will merge with and into PNM Resources (Proposed Transaction).3

1. 16 U.S.C. § 824b(a)(1) and (a)(2).
2. 18 C.F.R. pt. 33 (2020).
3. Application for Authorization Under Section 203 of the Federal Power Act, Docket No. EC21-25-000 (Nov. 23, 2020) (Application).

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2. We have reviewed the Proposed Transaction under the Commission's Merger Policy Statement.4 As discussed below, we authorize the Proposed Transaction as consistent with the public interest.

1. Background
   A. Description of the Parties

1. 1. Avangrid Applicants
2. Applicants state that Iberdrola is a Spanish corporation whose shares are publicly traded on the Madrid Stock Exchange. Applicants state that Avangrid's common stock is publicly traded on the New York Stock Exchange, and Iberdrola owns 81.5% of Avangrid's stock. Applicants further state that Avangrid, through its subsidiary Avangrid Networks, owns a number of franchised public utilities in the Northeast United States, including: New York State Electric & Gas Corporation; Rochester Gas and Electric Corporation; Central Maine Power Company; and The United Illuminating Company. Applicants additionally state that Avangrid, through its subsidiary Avangrid Renewable Holdings, Inc., owns several subsidiaries that own wind-powered and solar generation facilities.5
3. 1. PNM Resources Applicants
4. Applicants explain that PNM Resources is a holding company that owns PNM, a public utility engaged in the generation, transmission, and sale of electricity at wholesale in New Mexico. Applicants state that PNM owns approximately 2,150 megawatts (MW) of generation and owns or leases approximately 3,200 circuit miles of electric transmission lines in New Mexico and Arizona. Applicants state that PNM provides

• 1. Inquiry Concerning the Commission's Merger Policy Under the Federal Power Act: Policy Statement, Order No. 592, FERC Stats. & Regs. ¶ 31,044 (1996) (cross-referencedat 77 FERC ¶ 61,263) (Merger Policy Statement), reconsideration denied, Order No. 592-A,79 FERC ¶ 61,321 (1997); see also FPA Section 203 Supplemental Policy Statement,
     120 FERC ¶ 61,060 (2007) (Supplemental Policy Statement), order on clarification and reconsideration, 122 FERC ¶ 61,157 (2008); Transactions Subject to FPA Section 203, Order No. 669, 113 FERC ¶ 61,315 (2005), order on reh'g, Order No. 669-A, 115 FERC ¶ 61,097, order on reh'g, Order No. 669-B, 116 FERC ¶ 61,076 (2006); Revised Filing Requirements Under Part 33 of the Commission's Regulations, Order No. 642, FERC Stats.
• Regs. ¶ 31,111 (2000) (cross-referenced at 93 FERC ¶ 61,164), order on reh'g, Order No. 642-A, 94 FERC ¶ 61,289 (2001).
• 1. Application at 3-15.

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open access transmission service pursuant to an Open Access Transmission Tariff (OATT) on file with the Commission.6

1. Applicants explain that NMRD II and NMRD III are direct subsidiaries of NM Renewable Development, LLC (NM Renewable), a 50/50 joint venture between PNM Resources Development and Management Corporation, a wholly owned subsidiary of PNM Resources, and AEP OnSite Partners, LLC, a wholly owned subsidiary of American Electric Power, Inc. Applicants state that the NM Renewable joint venture was formed to invest in, own, and operate renewable power resources, and that NM Renewable formed NMRD II and NMRD III to develop, construct, own and operate two solar electric generating facilities in New Mexico.7
2. Applicants state that PPA Corp. is a wholly owned, special purpose subsidiary of PNM Resources and a power marketer with market-based rate authority outside of the PNM and El Paso Electric Company balancing authority areas.8
3. 1. Description of the Proposed Transaction
4. According to Applicants, pursuant to an Agreement and Plan of Merger (Merger Agreement), NM Green Holdings, Inc., a direct and wholly owned subsidiary of Avangrid created solely for the purpose of effectuating the Proposed Transaction, will merge with and into PNM Resources, with PNM Resources being the surviving entity of the merger. As a result of Proposed Transaction, the PNM Resources Applicants will become subsidiaries of Avangrid and Iberdrola.9

1. Notice of Filing and Responsive Pleadings

8. Notice of the Application was published in the Federal Register, 85 Fed. Reg. 77,205 (Dec. 1, 2020), with interventions and protests due on or before January 22, 2021. Public Citizen, Inc., Westmoreland Mining, LLC, Enchant Energy, Corp. (Enchant), and The City of Farmington, New Mexico (Farmington) filed timely motions to intervene. On January 22, 2021, Farmington and Enchant filed a protest and request for hearing (Farmington-Enchant Protest). On February 8, 2021, Applicants filed a motion for leave to answer and answer (Applicants Answer). On February 18, 2021, Farmington and

1. Id. at 16.
2. Id. at 16-17.
3. Id. at 17.
4. Id. at 17-18.

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Enchant filed a motion for leave to respond and limited response to the Applicants Answer (Farmington-Enchant Answer).

1. Discussion

A. Procedural Matters

9. Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure,

18 C.F.R. § 385.214 (2020), the timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding.

1. Rule 213(a)(2) of the Commission's Rules of Practice and Procedure, 18 C.F.R. § 385.213(a)(2), prohibits an answer to a protest or an answer unless otherwise ordered by the decisional authority. We accept the Applicants Answer and the Farmington- Enchant Answer because they have provided information that assisted us in our decision- making process.
2. 1. Substantive Matters
      1. FPA Section 203 Standard of Review
3. FPA section 203(a)(4) requires the Commission to approve proposed dispositions, consolidations, acquisitions, or changes in control if the Commission determines that the proposed transaction will be consistent with the public interest.10 The Commission's analysis of whether a proposed transaction is consistent with the public interest generally involves consideration of three factors: (1) the effect on competition; (2) the effect on rates; and (3) the effect on regulation.11 FPA section 203(a)(4) also requires the Commission to find that the proposed transaction "will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company, unless the Commission determines that the cross- subsidization, pledge, or encumbrance will be consistent with the public interest."12 The Commission's regulations establish verification and informational requirements for

1. 16 U.S.C. § 824b(a)(4). Approval of the Proposed Transaction is also required by other regulatory agencies pursuant to their respective statutory authorities before the Proposed Transaction may be consummated. See Exhibit L. Our findings under FPA section 203 do not affect those agencies' evaluation of the Proposed Transaction pursuant to their respective statutory authorities.
2. Merger Policy Statement, FERC Stats. & Regs. ¶ 31,044 at 30,111.
3. 16 U.S.C. § 824b(a)(4).

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entities that seek a determination that a proposed transaction will not result in inappropriate cross-subsidization or pledge or encumbrance of utility assets.13

1. 2. Analysis of the Proposed Transaction

   a. Effect on Horizontal Competition

   i. Applicants' Analysis

2. Applicants state that the Proposed Transaction will not have an adverse effect on competition. Applicants explain that none of the generation owned or purchased by the PNM Resources Applicants and their affiliates is located electrically in any markets where the Avangrid Applicants and their affiliates own uncommitted capacity, and correspondingly none of the uncommitted capacity owned by the Avangrid Applicants and their affiliates is located electrically in markets where the PNM Resources Applicants and their affiliates own or control generation. Applicants explain that Avangrid is affiliated with approximately 604 MW of existing and planned generation capacity in the PNM market which is all committed under long-term contracts.14
3. Applicants also performed a Delivered Price Test, also referred to as an Appendix A analysis or Competitive Analysis Screen,15 to analyze the impacts of the Proposed

1. 18 C.F.R. § 33.2(j) (2020).
2. Application at 20.
3. The Delivered Price Test determines the pre- and post-transaction market shares from which the change in market concentration, or the change in the Herfindahl- Hirschman Index (HHI), due to a proposed transaction can be derived. The HHI is a widely accepted measure of market concentration, calculated by squaring the market share of each firm competing in the market and summing the results. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases. Markets in which the HHI is less than 1,000 points are considered to be unconcentrated; markets in which the HHI is greater than or equal to 1,000, but less than 1,800 points, are considered to be moderately concentrated; markets in which the HHI is greater than or equal to 1,800 points are considered to be highly concentrated. In the Merger Policy Statement, the Commission adopted the 1992 Federal Trade Commission/Department of Justice Horizontal Merger Guidelines, which state that in a horizontal merger, an increase of more than 50 HHI points in a highly concentrated market or an increase of 100 HHI points in a moderately concentrated market fails its screen and warrants further review. Merger Policy Statement, FERC Stats. & Regs. ¶ 31,044 at 30,129; see also Analysis of Horizontal Market Power under the Federal Power Act, 138 FERC ¶ 61,109 (2012) (affirming the Commission's use of the thresholds