Albuquerque, NM-based PNM Resources Inc. announced Wednesday it had reached agreement with New Mexico Attorney General Gary King and union workers regarding the company’s pending $620 million sale of its natural gas utility operations in the state. The agreement comes a month after PNM’s broader sales agreement with Texas-based Continental Energy Systems LLC was narrowed to only include the natural gas assets.

As part of the settlement, PNM and the attorney general will drop their separate pending appeals of a 2007 New Mexico Public Regulation Commission (PRC) gas rate decision at the New Mexico Supreme Court.

The settlement was filed Wednesday with the PRC, which is expected to make a decision on the deal following public hearings that will be held in September on the transaction, the utility holding company said. The deal includes a stipulation signed by New Mexico Gas Co., the PRC staff and the International Brotherhood of Electrical Workers Local 611, in addition to PNM and King.

PNM CEO Jeff Sterba called the stipulation “fair to everyone involved, most importantly our gas customers.” Sterba said it was a major step needed to put the company “closer to its goal of closing the sale by the end of this year.”

In late July, PNM and Continental agreed to terminate PNM’s pending acquisition of Cap Rock Energy Corp., an electric distribution and transmission company serving 36,000 customers in 28 counties in North, West and Central Texas, which was a second part of the original sales agreement between the two companies (see Daily GPI, July 23). At that time, the companies committed to focusing their efforts on completing the pending acquisition by Continental of the natural gas business of PNM Resources’ utility subsidiary PNM. Both of the deals originally were announced in January (Daily GPI, Jan. 16).

Continental CEO George Schreiber said the settlement should help get the ultimate regulatory approval needed, and he tried to assure his prospective natural gas customers in New Mexico that his company is “committed to maintaining the highest standard of customer service and to continuing to be a solid corporate citizen.”

As part of the stipulation, PNM will be allowed to retain all of the gain on sale as is consistent with the PRC current rules. It also requires the new entity, New Mexico Gas, to freeze base retail rates for three years and to make average annual capital expenditures of at least $21.6 million for major gas utility projects and replacements during the freeze period.

The deal also specifies some pension and salary guarantees for the approximately 600 utility employees under the new ownership, and for Continental to keep the headquarters in Albuquerque. Other offices and work force totals will have to be maintained for at least three years.

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