A proposed financial reorganization of Central Maine Power (CMP), the state’s dominant electric company, is generating fierce consumer opposition at the Maine Public Utilities Commission.
Augusta-based Avangrid (NYSE:AGR), CMP’s owner since 2015, is 81.6% owned by Spanish energy conglomerate Iberdrola, which wants the state regulators to rubber stamp a deal where Iberdrola would acquire the remaining 18.4% of Avangrid for $2.5 billion.
Iberdrola said, “The objective of this transaction is to increase exposure to the networks business in the United States at a key moment for Iberdrola, which wants to grow in markets with strong credit ratings and in regulated businesses such as networks.”
Iberdrola in May asked the MPUC to waive a provision of state law that give the commission the authority over reorganizations of state public utilities, essentially letting the deal go forward without full review, including public hearings.
Avangrid argues that because Iberdrola already effectively owns the utility, the new transaction doesn’t represent a significant change and the regulators should simply let it go into effect.
The state’s savvy and well-organized utility consumer organization Our Power as well as Maine’s Office of the Public Advocate, the official state consumer advocate, are challenging the decision. They argue it is a way for CMP, already highly unpopular, to avoid regulation by reducing the ability of the state and consumers to access crucial company financial information.
The Public Advocate filing argued, “In this case there is clearly the potential for harm to Maine utility ratepayers….While Petitioners claim the proposed transaction will have no impact on Maine utility customers, that is a factual question that should be resolved after carefully weighing the evidence to be gathered in the case, it should not be assumed at the outset by way of exemption. At a minimum, the transaction has the potential to reduce transparency as Avangrid will no longer be required to make SEC filings required of publicly traded companies. This is at least a potential harm that could impact customers of the Maine utilities.”
Our Power, the state-wide consumer protection group, was the leader of last November’s failed ballot initiative to create a public power system, Pine Tree Power, to take over both CMP and the much smaller Versant Power. Our Power said in its brief that “the key to this transaction is not its size, $2.5 Billion, not the proportion of Avangrid’s share owners that would be selling, 18.4%, but is the fact that all of Avangrid’s outstanding publicly-owned shares would be acquired, thus taking Avangrid private – making it the wholly owned creature of Iberdrola and ‘taking it dark.’”
Our Power hired veteran Washington consumer advocate lawyer Scott Hempling to make its detailed case against giving the Iberdrola plan a green light. Hempling most recently was an administrative law judge at the Federal Energy Regulatory Commission.
In his August 12 direct testimony, Hempling argued that “the proposed transaction has, for the Maine utilities’ ratepayers, multiple detriments but no benefits. Iberdrola will give up $2.5 billion of its scarce capital to eliminate thousands of small shareholders – shareholders whose conservative investment goals act as a brake on Iberdrola’s and Avangrid’s risk-taking. That is a detriment. Avangrid will then go private, depriving this Commission, it staff, and the many financial analysts expert in assessing the business risks that affect Maine’s utilities, of the extensive financial reporting that Avangrid makes (and that the utilities, before their takeover by Avangrid and Iberdrola, made) to the Securities and Exchange commission. That is another detriment.”
Hempling added, “All that Petitioners offer in return is a nonfactual, noncommittal assertion that an Iberdrola that owns 100% rather than 81.6% of Avangrid ‘will improve’ Avangrid and Iberdrola’s access to capital. What matters to this Commission is not Avangrid’s or Iberdrola’s access to capital. In the U.S. utility world, what ensures a utility’s access to capital is proper rate-setting by its state commission. A state commission is bound, by statutory and constitutional law, to set rats sufficient to provide the utility a return on equity – specifically, equity invested to provide obligatory service equal to what the utility’s shareholders would earn on investment in businesses of comparable risk….”
“That Iberdrola’s and Avangrid’s access to capital is even an issue here is only because Iberdrola and Avangrid take nonutility risks with the capital they have. If the Commission has concerns about those risks, the answer is to eliminate the risks; the answer is not to eliminate the minority shareholders whose presence helps to limit those risks.”
CMP is the state’s dominant electric company, with some 653,000 customers. Maine’s other investor-owned utility is Bangor-based Versant Power, with some 165,000 customers. Its owner is ENMAX Corp. of Calgary, Alberta, Canada.
–Kennedy Maize