COMMENTARY:
What happens when the owner of a public utility also becomes its dominant customer?
Private equity behemoth Blackstone will own New Mexico’s largest utility, PNM, by year end if it receives PRC approval. It has publicly declared a strategy to aggressively expand its global data center business while buying public utilities to serve tech’s huge energy needs. Ten years from now, up to 70% of the energy generated by Blackstone-owned PNM could be serving data centers also owned by Blackstone.
Hugely profitable Blackstone-owned data centers would drive PNM strategy and operations as de-facto owner-managers. Residential and small commercial ratepayers stand to be big losers as their needs become an afterthought. If data centers fail, or chip technology advances to the point that data center energy needs collapse, small ratepayers could be on the hook for billions in excess investment in plants and transmission never intended to serve them.
The only sure protection for small PNM ratepayers is to require data centers to supply their own power at their own expense and for the legislature to enact appropriate environmental and safety requirements to govern these private generation facilities.
Blackstone claims it has no current plans for New Mexico data centers, but doesn’t comment on how that might change if it acquires PNM. Not comforting.
Blackstone ownership poses similar issues when PNM works with suppliers. Blackstone’s portfolio includes many companies that supply equipment and services to the utility industry, and the company is actively pursuing the purchase of more. Sweetheart deals between these companies and PNM become an additional risk. Folks often assume these can be tracked easily. Not so. By conducting transactions through a tangle of subsidiaries, acting as a sub-contractor for large projects, or creating complicated deal structures, Blackstone affiliate transactions could easily be concealed.
Blackstone’s application to buy PNM tacitly assumes the PRC will protect small customers from potential abuse. Theoretically true, but unachievable. In recent years the PRC failed to enforce NM Gas commitments after it was acquired by Emera, took no action after EPE’s failure to report $150 million in planned transmission investments until well after they were underway, and was oblivious to TXNM’s failure to gain required commission approval before the sale of $800 million in stock. A recent proceeding discovered PRC staff failed to review monthly fuel and power purchase reports representing a significant portion of customer billings for years!
Blackstone’s proposed acquisition of PNM creates massive temptations for self-dealing by a mammoth corporation known for its ruthless pursuit of profit. It would demand that an undermanned and overwhelmed PRC take on exponentially larger regulatory burdens.
No regulator can, or should, control everything. Sound regulation best protects the public by reducing opportunities and temptations to cheat. Blackstone ownership of PNM increases both these threats. It creates the impossible task of monitoring potential sweetheart deals not only with Blackstone owned data centers, but with the many Blackstone owned affiliates that supply utilities.
The PRC must face reality and let go of this tiger’s tail before small ratepayers get mauled.
Tell Blackstone no!
Steve Fischmann is former Chair of the PRC and former New Mexico State Senator District 37.
Steve Fischmann's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.