New Mexico regulators shot down Avangrid’s (NYSE:AGR) proposed $8.3 billion acquisition of PNM Resources (NYSE:PNM) after some officials pointed to Avangrid’s “demonstrated record of poor performance” in other states.

The New Mexico Public Regulation Commission (PRC) voted 5-0 on Wednesday to reject a stipulation — an agreement among parties with an interest in the proposal — thereby sinking the acquisition.

The commission’s order stated that “the potential harms resulting from the proposed transaction outweigh its benefits.”

The two companies had said the acquisition would bring more than $300 million of near-term benefits to PNM customers and the state. That would have included $94 million for customers in rate credits, program funding and forgiveness of unpaid bills.

The companies said the creation of 150 or more long-term jobs would bring $225 million in economic development benefits. And the deal would triple the clean energy electrification plan at PNM, which is New Mexico’s largest electricity provider with 530,000 customers.

Performance Issues

But PRC Chairman Stephen Fischmann said the purported benefits could be counteracted if Avangrid’s performance in New Mexico continues the company’s “demonstrated record of poor performance” in states such as Maine, Connecticut and New York.

“All of those so-called benefits will be soaked up in reliability issues and higher rates — if they perform as we’ve seen elsewhere — quite rapidly,” Fischmann said.

And Fischmann wasn’t convinced that the deal was a one-time opportunity. PNM could find “another suitor that’s more appropriate,” he said, or the PRC or state legislature could take action to accomplish some of the same objectives.

Avangrid said in a statement following the PRC vote that it is evaluating its next steps and hopes to “one day welcome New Mexico into the Avangrid family.”

Conservation and community groups on Wednesday lamented the loss of $300 million in benefits to the state, calling the commission’s decision unfortunate.

Cara Lynch, attorney for the Coalition for Clean Affordable Energy, said the agreement would have provided hundreds of millions of dollars in shareholder funds for customers and the environment.

“No other legal avenue exists to extract shareholder dollars for New Mexicans to conserve energy in their homes, to New Mexicans with arrearages due to the pandemic, or to provide valuable apprenticeships,” Lynch said in a release.

Nonprofit Fights Acquisition

New Energy Economy (NEE), a Santa Fe-based nonprofit, argued in PRC filings that Avangrid and its Northeast affiliates racked up more than $63 million in fines and violations over the last five years. NEE said reliability and performance issues at Avangrid subsidiaries in Maine, New York and Connecticut have resulted in regulatory actions.

NEE said Avangrid’s experience in renewables is primarily with wind power and that the company has little experience in solar.

In addition, NEE accused Avangrid of violating discovery rules in the PRC proceeding by giving incomplete responses and designating as confidential more information than necessary. The company said it acted in good faith in responding to discovery requests. Still, a PRC hearing examiner recommended $10,000 in sanctions against Avangrid and PNM as a result of the discovery issues.

The order that the commission approved on Wednesday also expressed concern about Avangrid and its parent company Iberdrola “in light of the ongoing criminal investigation in Spain involving high level officers.”

Some of the concerns regarding Avangrid were aired during the PRC’s meeting on Dec. 1. (See Bid-rigging Allegation Clouds Avangrid Bid for PNM.) PNM Resources and Avangrid hosted a news conference the next day to discuss the issues.

Avangrid has “always stressed the highest levels of ethics and accountability in everything we do,” said Robert Kump, the company’s deputy CEO.

In addition, Kump noted that Iberdrola was named one of the most ethical companies in the world for the last seven years in a row.

The companies also acknowledged in filings that Avangrid subsidiary Central Maine Power (CMP) experienced service issues between 2016 and 2019, but that the issues have been addressed.

“Avangrid and CMP moved quickly to add resources, implement system changes, and promote new leaders to improve customer service,” the companies said.

Since then, “CMP has addressed these issues and has satisfied, and continues to satisfy and exceed the Maine Public Utilities Commission’s stringent customer service metrics,” they added.