New Mexico regulators will be watching closely from now through the early days of the new year to see if the conditioned approval they gave last Thursday to PNM Resources sale of its natural gas utility business will avoid a request for rehearing or a challenge to the New Mexico Supreme Court.
While unanimous, the decision by the Public Regulation Commission (PRC) was not an unequivocal endorsement of the sale to New Mexico Gas Co., an owned subsidiary of Continental Energy Systems.
The New Mexico regulators approved the $620 million cash sale of Albuquerque-based PNM ‘s gas distribution utility operations, the state’s largest gas distributor. Struggling of late financially, PNM earlier this year announced its intent to get out of the gas business and concentrate on its electric investments, including its electric utility operations in the state (see Daily GPI, Dec. 15).
If there are no challenges, the PRC action will allow PNM to sell its gas facilities and service customer base to New Mexico Gas, allowing the new operator to receive a certificate of public convenience and necessity to own and operate those facilities and provide gas utility service as a public utility, a spokesperson for the PRC said.
“Ultimately, it was the commission’s responsibility to determine whether New Mexico would be better off under the proposed sale or with the status quo,” said PRC Chairman Jason Marks, who acknowledged that there was a lot of support for a dedicated gas company carved out of PNM. “We had to weigh that against the financial factors and risk. Based on all the factors, including the impacts [positive and negative] on customers of the PNM electric utility, and with the additional protections we demand, I believe that this sale satisfies the public interest test.”
After an initial application asking for the sale’s approval in January, a settlement among the stakeholders, including the PRC staff and the New Mexico Attorney General’s Office, was filed with the regulatory commission last August. As part of that agreement, PNM and Continental agreed to several conditions the PRC said were designed to protect consumer interests, including additional assurances of the financial solvency of the new gas utility and a three-year rate freeze.
The PRC added some conditions that it said are designed to “further insulate New Mexico Gas and its customers from risk under the proposed holding company structure.” The PRC also included the condition that PNM work with parties to try to obtain a favorable ruling from the Internal Revenue Service on the energy holding company’s ability to transfer about $500,000 worth of tax credits to New Mexico Gas customers’ benefit at the end of the three-year rate freeze.
The PRC said PNM and New Mexico Gas could reject the added conditions, but it they do, the regulators’ approval will be withdrawn.
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