City of Albuquerque v. New Mexico Public Service Com'n

Decision Date21 April 1993
Docket NumberNo. 20254,20254
Citation1993 NMSC 21,854 P.2d 348,115 N.M. 521
PartiesThe CITY OF ALBUQUERQUE, a municipal corporation, Appellant, v. NEW MEXICO PUBLIC SERVICE COMMISSION, Public Service Company of New Mexico, and El Paso Electric Company, Appellees.
CourtNew Mexico Supreme Court
OPINION

MONTGOMERY, Justice.

In 1989, the citizens of Albuquerque, New Mexico, voted to add an unusual provision to their municipal charter.1 The provision Article XV of the Albuquerque City Charter, is entitled "Competitive Bidding for Electrical Franchises" and provides:

The City of Albuquerque shall have no power to grant or extend any franchises, licenses or other rights to provide electricity to the public or to wholesalers unless the franchise, license or right has been awarded by competitive bid to the lowest cost suppliers. The total term of any franchise, license or right shall not exceed 25 years. The City shall have the power and the mandatory duty to implement this Article through legislation. Such legislation shall maximize actual competition in the selection process, in fact as well as form. This Article shall not prohibit the grant of multiple franchises, licenses or rights for all or part of the City.

According to one of the City's briefs, this provision came about because the voting public of Albuquerque was "[f]rustrated with high electric rates, the market monopoly of the local electric supplier and the perceived inability of state regulators to adequately address rates," and thought that "competition was the answer."

This appeal was taken by the City from a "Final Declaratory Order" of the New Mexico Public Service Commission,2 entered at the conclusion of a proceeding brought by Albuquerque's certificated electric utility, Public Service Company of New Mexico ("PNM"), to determine the validity of Article XV in light of the provisions of the New Mexico Public Utility Act ("the PUA" or "the Act").3 The Commission's order declared that there was no facial conflict between Article XV and the PUA and that a ruling on any possible conflict between the charter amendment and the Act as applied was premature. 127 P.U.R.4th at 483-84. The order did rule on several other points, mostly concerning the Commission's jurisdiction to entertain PNM's petition and other issues disputed by the parties to the proceeding, only one of which is involved in this appeal. Construing Section 62-6-15 of the PUA, the proper interpretation of which is at the heart of this appeal, the Commission ruled that "there is nothing in the [PUA] ... that would support a theory that municipalities may, through franchises or contracts with public utilities, negotiate or procure rates for any retail utility customer other than for the municipal corporation itself." 127 P.U.R.4th at 487 (emphasis added).

On appeal from the Commission's order,4 the City argues for a more expansive interpretation of Section 62-6-15, under which a municipality is authorized to contract with a utility for rates not only to the municipality itself but also to its inhabitants. The City's position is resisted by the Commission, by PNM, and by El Paso Electric Company ("EPE"), an intervenor in the proceeding below ("the appellees"). The appellees argue that the City's position would contravene the Act by converting its scheme of statewide, centralized public utility regulation into one of localized, municipality-by-municipality establishment of rates through individually negotiated contracts.

For the reasons that follow, we hold that Section 62-6-15 does authorize a municipality to enter into contracts for public utility rates not only to itself for municipal purposes but also to its inhabitants. In the course of our discussion, however, we seek to make clear that our holding in no way infringes upon or diminishes the Commission's general and exclusive power to establish rates and conditions for the service rendered by a utility certificated under the PUA to provide that service within the municipality's boundaries. We hold, in other words, that the concerns of the Commission and the utility-appellees are misplaced: While Section 62-6-15 permits a municipality to contract for service rates to the municipality's inhabitants, any such contractually established rates must, before they become effective, be approved by the Commission, which retains plenary authority to approve, disapprove, or modify them.

I.

PNM and its predecessor companies have provided electric utility service to the City and its residents since 1882. 127 P.U.R.4th at 479. PNM is therefore the holder of a certificate of public convenience and necessity to render service within the City of Albuquerque under the grandfather clause of Section 62-9-1 (Cum.Supp.1992). 127 P.U.R.4th at 479. Expressing uncertainty about its rights and duties under the PUA and Article XV, PNM filed in December 1990 a petition under the Commission's rules for a declaratory order determining whether Article XV was inconsistent with the PUA in various respects. Id. at 477.5 As previously stated, the Commission declared that Article XV and the PUA are not facially inconsistent and made various other rulings, including the one challenged on this appeal--that Section 62-6-15 contemplates only a contract between a public utility and a municipality for the latter's own purposes, not a contract for the benefit of the municipality's residents.

In making its determination, the Commission relied on the absence of language in Section 62-6-15 expressly authorizing a municipality to contract "on behalf of its inhabitants." It rejected the City's reliance on an earlier, pre-PUA opinion of this Court, Town of Gallup v. Gallup Electric Light & Power Co., 29 N.M. 610, 225 P. 724 (1924), which recognized the power of a municipality to contract with a public utility for electric rates to the municipality's inhabitants. The Commission found Town of Gallup inapplicable because it was decided at a time when municipalities possessed the express power to regulate utility rates on behalf of their citizens. 127 P.U.R.4th at 489 & n. 6. The Commission also found that allowing municipalities to contract for rates to their inhabitants would conflict with the PUA's centralized regulatory scheme and would thwart the specific prohibition in Section 62-8-6 (Cum.Supp.1992) against establishment or maintenance by utilities of unreasonable differences in rates of service between localities. Id. at 489.

This appeal presents a challenge by the City to the Commission's determination that a municipality does not have the power to contract for utility rates to its inhabitants and the related issue of the impact of this power, if it exists, on the Commission's regulatory authority.

II.

Section 62-6-15, headed "Contract rate with the municipality and utilities; how established," provides in pertinent part:

Rates and service regulations may be established by contract between the municipality and the utility for a specified term not exceeding twenty-five years, but only by and with the approval of the commission to be expressed by its order. Whenever any such contract shall be made, it shall, before becoming effective, be submitted to the commission. Unless the commission shall find the provisions of any such contract inconsistent with the public interest, the interest of the consumers and the interest of investors, it shall approve the same, otherwise it shall disapprove the same, and, unless and until so approved, such contract shall be of no effect, but if it be approved, it shall be in all respects lawful.... For the purpose of determining whether any such contract hereafter made is consistent with public interest, the commission shall hold such hearings, after notice, as may be necessary to its determination.

The parties submit two different interpretations of this provision. The City argues that Section 62-6-15 expressly preserves a municipality's power, recognized in Town of Gallup, to contract for utility rates on behalf of its inhabitants. It maintains that the purpose of Section 62-6-15 was to recognize this power within the PUA and to ensure that contract rates would not take effect until approved by the Commission. Appellees, on the other hand, contend that Section 62-6-15 authorizes municipalities to contract for rates for utility service to municipal facilities only. While appellees proffer several arguments, based on the language of the section, to support their interpretation, they rely primarily on the purpose of the Act. They essentially argue that allowing municipalities to contract for utility rates on behalf of their inhabitants would result in a decentralized scheme of utility regulation conflicting with the centralized, statewide regulatory system established by the PUA--even if, as the City acknowledges is true, the contract rates are subject to ultimate approval by the Commission.

None of the parties disputes that prior to enactment of the PUA municipalities in New Mexico had the power to contract on behalf of their inhabitants for utility rates. The issue debated is the effect passage of the PUA had on this power to contract. The appellees argue that the PUA abrogated the power of municipalities to contract for utility rates on behalf of their citizens; the City argues that this contractual power survived passage of the PUA. Our resolution of the issue requires us first to examine the nature and source of the municipal power to contract prior to enactment of the PUA; then we examine whether and to what extent the PUA altered that power.

A.

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