1998 -NMSC- 17, PNM Elec. Services, Div. of Public Service Co. of New Mexico, Application of

• Decision Date: 18 March 1998
• Docket Number: No. 24007,24007
• Citation: 1998 NMSC 17,961 P.2d 147,125 N.M. 302
• Parties: , Util. L. Rep. P 26,670, 1998 -NMSC- 17 In the Matter of The APPLICATION OF PNM ELECTRIC SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO, for Approval to Provide Certain Optional Services on an Experimental Basis, PNM ELECTRIC SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee, and New Mexico Industrial Energy Consumers and Attorney General of the State of New Mexico, Intervenors. In the Matter of The APPLICATION OF PNM GAS SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO, for Approval to Provide Certain Optional Utility Services on an Experimental Basis, PNM GAS SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee, and New Mexico Industrial Energy Consumers, Intervenors.
• Court: New Mexico Supreme Court

Page 147

961 P.2d 147

125 N.M. 302, Util. L. Rep. P 26,670, 1998

-NMSC- 17

In the Matter of The APPLICATION OF PNM ELECTRIC SERVICES, A

DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO,

for Approval to Provide Certain Optional

Services on an Experimental Basis,

PNM ELECTRIC SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY

OF NEW MEXICO, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee, and New Mexico Industrial Energy Consumers and Attorney General

of the State of New Mexico, Intervenors.

In the Matter of The APPLICATION OF PNM GAS SERVICES, A

DIVISION OF PUBLIC SERVICE COMPANY OF NEW MEXICO,

for Approval to Provide Certain Optional

Utility Services on an

Experimental Basis,

PNM GAS SERVICES, A DIVISION OF PUBLIC SERVICE COMPANY OF

NEW MEXICO, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee, and New Mexico Industrial Energy Consumers, Intervenors.

No. 24007.

Supreme Court of New Mexico.

March 18, 1998.

Rehearing Denied July 1, 1998.

Keleher & McLeod, P.A., Robert H. Clark, Clyde F. Worthen, Albuquerque, for Appellant.

Lee W. Huffman, Anastasia Stevens, Santa Fe, for Appellee.

Hon. Tom Udall, Attorney General, Charles F. Noble, Assistant Attorney General, Steven G. Michel, A.J. Grant LaCerte, Jr., Santa Fe, for Intervenors.

Rubin, Katz, Salazar, Alley & Rouse, Donald M. Salazar, Serina M. Garst, Santa Fe, for Amicus Curiae Texas New Mexico Power Company.

Cohen & Cohen, P.A., David S. Cohen, Santa Fe, for Amicus Curiae El Paso Electric Company.

OPINION

BACA, Justice.

¶1 In these consolidated appeals, Appellant Public Service Company of New Mexico (PNM), pursuant to Rule 12-102(A) NMRA 1997, appeals decisions of the Appellee New Mexico Public Utility Commission (Commission) in Case Nos. 2655 and 2668. In its decisions, the Commission denied the applications of PNM to institute gas and electric "optional service programs." This Court now considers the propriety of the application denials. After careful review, we uphold the Commission decisions denying PNM's applications.

I.

¶2 In Commission Case 2655, PNM Gas Services ¹ filed an application with the Commission seeking approval, on an experimental basis, of a new tariff that would allow PNM to offer certain gas optional services to retail customers. Specifically, PNM sought approval for a new food service management program for its business customers who operate food service facilities.

¶3 Similarly, in Commission Case 2668, PNM Electric Services ² petitioned for approval of a new tariff which would allow PNM, on an experimental basis, to offer electric optional services to retail electric customers. These services included four basic programs: 1) transient voltage surge suppression; 2) maintenance and repair services; 3) energy information services; and 4) power quality solutions.

¶4 Participation in these programs was optional in that each eligible customer would have the choice of whether or not to contract with PNM for the service. Also, neither of these services were considered essential components of PNM's Commission-regulated gas or electric utility services. PNM contemplated that either PNM utility personnel or contractors retained by PNM would provide the optional services. PNM sought authority to offer the optional services under tariffed pricing provisions that were flexible. This would allow PNM to adjust prices between a floor and a ceiling price. The floor price would be PNM's incremental cost of providing the service and the ceiling price would be a multiple of the floor price intended to reflect the upper range of the estimated market value of the service.

¶5 PNM Gas Services presented its optional service program before a Commission hearing examiner on December 12, 1995. Although the hearing examiner recommended approval of the tariffs for PNM Gas Services' optional service programs, on May 30, 1996, the Commission entered its final order on the application, rejecting most elements of the petition. A Commission hearing examiner also held a hearing addressing PNM Electric Services' application on March 4, 1996. The hearing examiner recommended against approving the tariffs proposed by PNM Electric Services due to a conflict with an earlier stipulation by PNM. Eventually, the Commission rendered a final order regarding this petition on August 5, 1996, rejecting most elements of PNM Electric Services' proposal as well.

¶6 PNM Gas and Electric Services delineated the following goals for the optional service programs: to continue to be responsive to customer needs by offering services that are complementary to the existing utility businesses; to improve PNM's relations with its customers and hence its competitiveness; to improve safety and provide choice in the marketplace; and to build upon the core business of providing utility services by offering new energy-related options to eligible customers who would enter into contracts with PNM for the optional services.

¶7 However, the Commission responded with similar reasons in both Cases 2655 and 2668 for rejecting the optional service plans. Primarily, the Commission stated that the optional services consisted of "utility-related non-utility services." As such, the Commission held that it would be inappropriate to treat these non-utility services as tariffed utility services under the New Mexico Public Utility Act, NMSA 1978, §§ 62-3-1 to 62-3-5 (1967, as amended through 1996). Therefore, the Commission disapproved of PNM's applications and proposed rates. The Commission reasoned that treating optional service programs as tariffed utility services created several possible problems, including a concern about real or potential cross-subsidies, potential liabilities, and claims of antitrust or unfair trade practices.

¶8 While the Commission rejected the applications to carry out these optional service plans as utility-related programs, the Commission suggested in its final orders that an unregulated entity, such as a PNM corporate subsidiary, still might implement and offer the optional service programs. The Commission informed PNM that it could reapply for approval to offer its proposed optional services as non-utility services, possibly by seeking implementation of these programs through a subsidiary. However, the Commission noted that PNM would have to make a proper filing as required by the Public Utility Act and Commission Rule 450, which require prior Commission approval before a utility can form a subsidiary or financially assist a non-utility activity.

¶9 Upon denial of PNM's applications for diversification, this Court is asked to review: 1) whether the Commission had jurisdiction to deny PNM's applications; and 2) whether the Commission, by denying the application, unduly intruded upon matters of management prerogative. We hold that the Commission acted within its statutorily granted jurisdiction in denying PNM's applications and conclude that the denials did not constitute an impermissible intrusion upon management prerogative.

II.

¶10 Statutes create administrative agencies, and agencies are limited to the power and authority that is expressly granted and necessarily implied by statute. See New Mexico Elec. Serv. Co. v. New Mexico Pub. Serv. Comm'n, 81 N.M. 683, 684, 472 P.2d 648, 649 (1970). Where a question of Commission jurisdiction is involved, courts afford little deference to the agency's determination of its own jurisdiction. See United Water New Mexico, Inc. v. New Mexico Pub. Util. Comm'n, 121 N.M. 272, 274-275, 910 P.2d 906, 908-09 (1996).

¶11 However, when the Commission acts within its jurisdiction, this Court may not substitute its judgment for that of the agency, see Public Serv. Co. v. New Mexico Pub. Serv. Comm'n, 92 N.M. 721, 722, 594 P.2d 1177, 1178 (1979). We must also view the evidence in the light most favorable to the Commission's decision. See New Mexico Indus. Energy Consumers v. New Mexico Pub. Serv. Comm'n, 104 N.M. 565, 570, 725 P.2d 244, 249 (1986). The burden is on the party appealing to demonstrate that the order appealed from is unreasonable or unlawful. See NMSA 1978, § 62-11-4 (1965); see also Maestas v. New Mexico Pub. Serv. Comm'n, 85 N.M. 571, 574, 514 P.2d 847, 850 (1973). The issues we resolve are: 1) whether the action of the administrative body was within its authority; 2) whether the order was supported by substantial evidence, and; 3) whether the administrative body acted fraudulently, arbitrarily, or capriciously. Id. at 574, 514 P.2d at 850 (quoting Llano, Inc. v. Southern Union Gas. Co., 75 N.M. 7, 11-12, 399 P.2d 646, 649 (1964)).

III.

¶12 We first review whether the Commission acted within its jurisdiction when it rejected PNM's applications. In this appeal, PNM characterizes the Commission's orders as exercising jurisdiction over its non-utility activities and contends that under NMSA 1978, § 62-3-4(B) (1992), the Commission lacks such jurisdiction. We disagree with PNM's characterization of the issue and conclude that the Commission's orders did not constitute interference with PNM's non-utility activities.

¶13 Because the Commission acted pursuant to its power to ensure that utilities provide fair and just rates, the orders issued in this case were permissible. It is undisputed that PNM is a public utility. See NMSA 1978, § 62-3-3(G) (1996). As a public utility, PNM has a duty to provide adequate service at just and reasonable rates. See NMSA 1978, §§ 62-8-1 to 62-8-2 (1941). The Commission has "general and exclusive power and jurisdiction to regulate and supervise every public utility in respect to its rates[,] ... service[s,] ... and ... securities ... and to do all things necessary and convenient in the exercise of its power and jurisdiction." NMSA 1978, § 62-6-4(A) (1996). Furthermore, it is the stated policy of New Mexico that the public interest and the interest of consumers and investors require the regulation of utilities so that service is available at just and fair rates. See NMSA 1978,...