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Hearing examiners for the state Public Regulation Commission recommended approval of the $1.25 billion acquisition of New Mexico Gas Co. by a private equity firm, even as redacted portions of their report reflected uncertainty about how effectively regulators could oversee the utility鈥檚 future owners.

In a May 20 report, hearing examiners Patrick Schaefer and Elizabeth Hurst recommended that commissioners approve the sale of New Mexico Gas Co. to Bernhard Capital Partners, saying publicly they found 鈥渟ufficient evidence that the Commission鈥檚 jurisdiction would be preserved.鈥�

But passages hidden by redactions and reviewed by the Journal show the hearing examiners expressing doubts about that conclusion and questioning whether the commission would know enough about the ownership structure to effectively regulate the utility after the deal closes.

One condition imposed by the hearing examiners requires Bernhard to disclose all funds involved in the ownership chain.

鈥�(E)ffective jurisdiction requires the Commission to know which entities actually bear the equity contribution obligations and whether any entity outside the proposed participating ownership chain continues to hold material rights or obligations connected to the acquisition financing,鈥� the hearing examiners wrote in one redacted passage.

The contradiction goes to the heart of one of six legal tests utility acquisitions must satisfy: whether the commission鈥檚 jurisdiction will be preserved.

If approved, Bernhard would acquire New Mexico Gas Co. through a multilayered ownership structure common in private equity transactions. The firm鈥檚 investment funds would own interests in the utility through a series of intermediate companies.

The firm capitalizes those funds with money raised from accredited investors through placement advisers.

Bernhard, a private equity firm based in Louisiana, has declined to identify investors in six funds involved in the transaction 鈥� though filings show the New Mexico Educational Retirement Board committed $30 million to one of the firm鈥檚 funds in 2018.

Critics of the deal argue that state regulators often lack the resources and authority to oversee the layers of limited liability companies, partnerships and holding companies that make up such ownership structures.

鈥淏eyond their financial influence, the proposed new owners are connected to and surrounded by various non-participating BCP funds,鈥� the hearing examiners wrote.

In the public version of the report, the phrase 鈥渂eyond their financial influence鈥� was redacted.

The companies characterize the transaction as a change in upstream ownership. Emera Group, a publicly traded Canadian energy company, would sell NMGC to Bernhard鈥檚 funds. The private equity firm would assume $550 million of utility debt, take on an additional $250 million from roughly eight creditors and provide nearly $450 million in equity through its investment funds.

Bernhard has argued that the ownership structure protects NMGC鈥檚 assets 鈥� and ratepayers 鈥� from liabilities incurred elsewhere in the corporate chain.

Jeff Baudier, a senior managing director at Bernhard Capital Partners, told regulators in July 2025 that there is 鈥渘o inherent inconsistency between the objectives of private equity firms and the objectives of public utilities.鈥�

鈥淭hese investors are not seeking a quick or excessive return,鈥� Baudier said. 鈥淭he objectives of these investors include a well-managed utility that continues to provide safe, reliable and affordable gas services for customers.鈥�

Baudier said Bernhard鈥檚 investors are committed to not selling their interests in the New Mexico utility for at least 10 years.

Presented with the redacted passages and a detailed list of questions, a Bernhard spokesperson said the firm could not comment on confidential information. NMGC declined to comment. Emera said it looks 鈥渇orward to receiving a positive final order from the Commissioners in the near future.鈥�

Therese Walker, a spokesperson for Bernhard, said the equity sponsors 鈥渨ill not have any role, decision-making authority, nor any ownership of NMGC.鈥�

鈥淚f the transaction closes, NMGC will be indirectly owned by the investment funds who are the applicants in this case, owning Saturn HoldCo,鈥� Walker said, referring to a limited liability company set up for the sale. 鈥淚nvestors in those funds are institutions such as government and union retirement and pension funds and insurance companies.鈥�

She added that investors 鈥渨ill have no say in NMGC operations.鈥�

A PRC decision is expected soon.

Secret conditions

The commission sent a statement to the Journal that described conditions imposed by the hearing examiners 鈥� some of which were redacted from public view 鈥� as routine in lengthy cases. The docket opened in 2024.

Opponents of the deal see them differently.

After nearly two years of hearings and discovery, they argue, regulators still appear uncertain about who will ultimately hold financial interests in New Mexico鈥檚 largest gas utility.

The hearing examiners ordered Bernhard to disclose whether any equity sponsors had withdrawn from the deal and identify every entity that will hold a direct or indirect equity interest in Saturn HoldCo at closing.

The filing must also disclose whether any equity sponsor or guarantor has been released and how much each Bernhard fund will contribute.

The Journal showed the redacted passages to Mariel Nanasi, executive director of New Energy Economy, an intervenor in the case. Nanasi said she had not previously seen them.

Nanasi said preservation of jurisdiction means regulators retain meaningful oversight of monopoly utilities.

鈥淲e鈥檙e trading,鈥� she said. 鈥淭hey get a monopoly, and in exchange we鈥檙e supposed to get regulatory oversight.鈥�

鈥淎nd it says in this redacted portion, it says we don鈥檛 know who the owners will be,鈥� Nanasi said. 鈥淗ow can we say that we have actually overseen them?鈥�

Matt Parr, a spokesperson for the Private Equity Stakeholder Project, said private equity firms have increasingly targeted utility and infrastructure investments. In New Mexico, the proposed $11.5 billion sale of TXNM Energy Inc. to Blackstone Inc. is also pending before state regulators.

Parr said taking utilities private can reduce transparency because private companies are not subject to the same disclosure requirements as publicly traded firms.

鈥淪o it鈥檚 inherently more opaque just because of the type of transaction happening,鈥� Parr said.

That issue surfaced repeatedly in the case. Bernhard successfully opposed efforts to require SEC-style financial disclosures after the acquisition.

Attorney General Ra煤l Torrez also raised concerns. In a June 3 filing, he said $250 million in acquisition debt from eight creditors is 鈥渃oncerning鈥� because it is being used to purchase equity in the holding company of New Mexico Gas Co. If creditors execute liens on the holding company, NMGC could be exposed, Torrez argued.

鈥淭his is especially concerning because, not only will the execution of these liens be outside the jurisdiction of the PRC, it will be outside the jurisdiction of New Mexico鈥檚 legal system altogether,鈥� Torrez said, pointing to a debt commitment letter that is under New York鈥檚 jurisdiction.

The applicant companies dismissed those concerns on June 11 as 鈥渋magined hypotheticals,鈥� arguing that state law would require commission approval before any change in upstream ownership.

The companies also said they could comply with the hearing examiners鈥� conditions listed behind the redactions.

Protective order

The PRC declined to identify who made the redactions. Patrick Rodriguez, a spokesperson, sent a statement that was attributed to the PRC.

The statement pointed instead to a protective order signed by the commission. The Journal reviewed the unredacted language in a file briefly posted on the PRC鈥檚 online docket before it was replaced with a more secure version.

The PRC said the report 鈥渨as redacted in accordance with the protective order issued under New Mexico law and without objection from any party.鈥�

Last year, however, Schaefer and Hurst rejected an effort by Bernhard to keep information about the equity sponsors confidential.

鈥淭he documents which the BCP applicants are moving to withhold from public view provide unique insight into how both the transaction and post-closing dynamics may and will affect NMGC,鈥� the hearing examiners wrote in April 2025. 鈥淲ithout the ability to review the documents, the public will have no other way of knowing under what terms NMGC is being acquired and who possesses a financial or proprietary interest in the company.鈥�

Commissioners Gabriel Aguilera, Greg Nibert and Patrick O鈥機onnell later overruled the hearing examiners and sealed certain records, including private placement memorandums and limited partnership agreements.

鈥淚n short, New Mexico authorities 鈥� even those that embody the state鈥檚 broad policy of disclosure 鈥� protect trade secrets,鈥� the commissioners wrote in June of 2025.

Justin Horwath covers tech and energy for the Journal. You can reach him at jhorwath@abqjournal.com.