Smoke billows from the San Juan Generating Station in Waterflow. / Don J. Usner for Searchlight New Mexico

Powerful ties
New Mexico attorney general accused of violating state ethics laws in negotiating utility merger
July 16, 2021


Editor’s Note: On Aug. 6, the Public Regulation Commission’s hearing examiner ruled that Marcus Rael should be disqualified from representing Iberdrola, due to a conflict of interest. The examiner, Ashley Schannauer, noted that most of Rael’s work took place early on in the merger negotiations, making the “development of an adequate remedy difficult.” The ruling came the Friday before public hearings on the merger were set to begin.

Schannauer said that he did not have the legal authority to conclude whether or not Attorney General Hector Balderas’s relationship with Rael was improper. He said that matter would need to be tried in court. However, he said, the commission would consider Balderas’ and Iberdrola’s actions with Rael when deciding whether or not the merger should go forward. 

Attorney General Hector Balderas’ cozy relationship with a local law firm is under scrutiny amid allegations that Albuquerque-based attorney Marcus Rael Jr. used his influence with the attorney general to convince Balderas to sign off on a multi-billion-dollar utility merger. The merger between a global energy giant and New Mexico’s largest utility could drastically change electricity distribution in the state, with hundreds of millions of dollars for New Mexico utility customers hanging in the balance.

For eight months, the state has been involved in negotiations over a proposed merger between Connecticut-based Avangrid and Public Service Company of New Mexico (PNM), the state’s largest utility. Rael, who frequently represents the state, was hired to represent Avangrid’s parent company in the negotiations.

Five civic and environmental justice groups have filed a complaint with the State Ethics Commission, the State Auditor and the disciplinary board of the New Mexico Supreme Court, alleging that Rael used his influence to push the attorney general into signing on early to the merger deal. The move saved the companies money that would otherwise have gone into New Mexicans’ pockets via credits on their electricity bills and economic development funding. Balderas, who has participated in negotiations on behalf of consumers, initially critiqued the deal before changing course, after meetings with Rael.

“Balderas agrees that the [merger deal] is magically in the public interest, despite his own experts’ testimony detailing why the merger is bad for New Mexicans because it doesn’t adequately protect their rights,” said Mariel Nanasi, the executive director of New Energy Economy, one of the complainants. The groups are calling for an investigation.

The story behind the complaint is a complicated one involving a sprawling merger and questions about whether it would serve New Mexicans or was instead commandeered to profit utility companies. 


Close ties

While the name Marcus Rael Jr. is likely unknown to most New Mexicans, the attorney and lawyers at his law firm — Robles, Rael & Anaya — have likely been involved in a legal case that affects their daily lives. 

Since taking office in 2015, Balderas has hired Rael or others at his firm to help represent the state in at least 19 cases, which is at least triple the number of cases farmed out to any other private law firm, a review by Searchlight New Mexico showed. Balderas and Rael both graduated from the University of New Mexico law school in 2001 and briefly worked together before Balderas ran for public office. 

19

— the number of cases the attorney general has sent to Robels, Rael & Anaya, at least three times as many as any other private law firm

Rael’s legal appointments have involved him in cases with broad implications for the state, including Texas vs. New Mexico, a Supreme Court case concerning groundwater rights that could cost New Mexico $1 billion in damages and reduce the state’s future water supply. Lawyers at Rael’s firm are also involved in the landmark Yazzie-Martinez case, which is focused on widespread inequities in education funding.

In 2018, then-state auditor Wayne Johnson opened an investigation into the relationship between Balderas and Rael and the bidding process for outside firms, following an anonymous tip about the overwhelming amount of work that the attorney general’s office was sending to Robles, Rael & Anaya. The results of the investigation were never made public.

Now, the five groups — New Energy Economy, Democracy Rising, Indivisible Nob Hill, Renewable Taos and Retake Our Democracy — argue that Balderas awarded Rael’s law firm lucrative contracts without considering the lawyers’ experience or expertise for the case — a violation of state ethics law. They say that Balderas’ close relationship with Rael presented a conflict of interest in the merger case.

Balderas declined repeated requests for an interview with Searchlight regarding the merger. In a written statement to Searchlight, Matt Baca, a spokesman for the attorney general’s office, said the claims about favoritism or a conflict of interest are entirely false. “New Energy Economy has reached a new low in attacking another party in this case with such a baseless complaint,” the statement said. 

“With respect to his relationship to Mr. Rael, the Attorney General has friendships with many of the attorneys in the case and at the PRC,” Baca said in a separate statement. 

Rael said in an email that he had not seen the complaint, but that his firm specializes in representing local and state governments. “All the firm’s public contracts, including those with the Office of the Attorney General, were awarded in accordance with the stringent requirements of the State Procurement Code and the Governmental Conduct Act.  It also goes without saying that the attorneys of my firm strictly adhere to the New Mexico Rules of Professional Conduct,” the statement said.

Avangrid is the U.S. subsidiary of the Spanish energy giant Iberdrola, and if the merger goes forward — which could happen as early as this fall — the state’s electricity infrastructure would become a part of Iberdrola’s massive global energy portfolio. The company would likely export large amounts of New Mexico-generated electricity to other states. 

For PNM and Avangrid, billions of dollars are at stake. 


An uneven deal

Iberdrola hired Rael in February, prior to a hearing with the Public Regulation Commission. Over the past eight months parties involved in the hearing have filed thousands of pages of documents for review in the case and presented arguments before the hearing examiner. This administrative process with the PRC is expected to end in a series of public hearings in August, after which the five elected PRC board members will ultimately decide whether or not to allow the merger to go forward. The attorney general participates in this process by providing testimony to determine whether or not the merger is in the public interest.

Hearing documents show that Rael held 18 meetings at the Attorney General’s office between his hiring and April 5. For his services, Iberdrola paid him $400 an hour, almost double his regular rate with the attorney general’s office. 

$400 per hour

— almost double his normal rate with the attorney general’s office

At the time Rael was hired, the attorney general’s office was pushing for changes to the merger deal that would better serve the public, such as money for infrastructure projects and credits on utility bills. 

On April 2, Balderas told the Albuquerque Journal that he had concerns about the merger’s lack of benefits for utility customers and worried about utility profits leaving the state. Experts for the state recommended massive changes, including doubling customers’ credits, making a 30-fold increase to the economic development funds paid to New Mexican communities, and placing the cost for dumping the Four Corners Coal Plant on shareholders, rather than customers.  

Days after those recommendations were filed with the PRC, Rael paid one last visit to Balderas’ office. Hearing documents do not reveal what they discussed, but a few weeks later, Balderas signed onto a tentative merger deal that fell dramatically short of what expert witnesses had suggested — a pivot from his earlier critiques.

The complaint alleges that this about-face is evidence that Rael pushed Balderas into the deal on behalf of his client, Iberdrola.

“We were satisfied that the [new agreement] improved significantly from the opening application, including increased economic development, rate credits, a full commitment to transition to clean energy, and investing in tribal communities and frontline workers,” Balderas wrote in an emailed statement to Searchlight. 

The revised agreement includes some additional benefits for the state, customers, tribal communities and union workers — but it saves PNM and Avangrid-Iberdrola $395 million that would have gone to customers and communities if the experts’ suggestions had been adopted in full. 


A long relationship

Documents obtained by Searchlight show that Rael and Balderas’ ties to each other have continued, at least financially, since they left law school.

More than $3 million

— in direct payments from the attorney general’s office to Robles, Rael, & Anaya

Lawyers and other employees at Robles, Rael & Anaya have donated more than $36,000 to Balderas since his first run for public office in 2005 — more contributions than from almost any other entity. Balderas, in turn, has retained the law firm to represent the state in lucrative cases and paid out millions in fees and expenses to the firm.

Invoices and contracts from the attorney general’s office obtained by New Energy Economy and shared with Searchlight show more than $3 million in direct payments of fees and expenses to Robles, Rael & Anaya. Searchlight’s investigation found many other cases with Rael listed as co-counsel, which include everything from consumer fraud cases to a major lawsuit against opioid manufacturers. 

Of those cases, 11 were class-action suits where Robles, Rael & Anaya would be awarded a fee based on the percentage of the case settlement — likely amounting to millions of dollars based on the settlement amounts.

Annabella Farmer contributed reporting to this story.