ALB. BERNALILLO CO. WATER UTILITY v. NMPRC

• Decision Date: 19 March 2010
• Docket Number: No. 31,273.,268,31
• Citation: 229 P.3d 494
• Parties: ALBUQUERQUE BERNALILLO COUNTY WATER UTILITY AUTHORITY, Appellant, v. NEW MEXICO PUBLIC REGULATION COMMISSION, Appellee, and Public Service Company of New Mexico, et al., Intervenors. New Mexico Industrial Energy Consumers, Appellant, v. New Mexico Public Regulation Commission, Appellee, and Public Service Company of New Mexico and Attorney General of the State of New Mexico, Intervenors.
• Court: New Mexico Supreme Court

229 P.3d 494

2010-NMSC-013

2010-NMSC-013

ALBUQUERQUE BERNALILLO COUNTY WATER UTILITY AUTHORITY, Appellant, v. NEW MEXICO PUBLIC REGULATION COMMISSION, Appellee, and Public Service Company of New Mexico, et al., Intervenors.

New Mexico Industrial Energy Consumers, Appellant, v. New Mexico Public Regulation Commission, Appellee, and Public Service Company of New Mexico and Attorney General of the State of New Mexico, Intervenors.

Nos. 31,268, 31,273.

Supreme Court of New Mexico.

March 19, 2010.

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Sheehan, Sheehan & Stelzner, P.A., Nann M. Winter, Albuquerque, NM, for Appellant Albuquerque Bernalillo County Water Utility Authority.

Peter Jude Gould, Santa Fe, NM, for Appellant New Mexico Industrial Energy Consumers.

Robert Y. Hirasuna, Margaret Caffey-Moquin, David P. Barton, Santa Fe, NM, for Appellee.

Patrick T. Ortiz, Benjamin Phillips, Albuquerque, NM, Miller Stratvert, P.A., Robert H. Clark, Albuquerque, NM, for Intervenor Public Service Company of New Mexico.

OPINION

MAES, Justice.

{1} Albuquerque Bernalillo County Water Utility Authority (ABCWUA) and New Mexico Industrial Energy Consumers (NMIEC) appeal from the Final Order of the New Mexico Public Regulation Commission (the PRC), claiming that the PRC improperly awarded an emergency fuel and purchased power cost adjustment clause to the Public Service Company of New Mexico (PNM) under NMSA 1978, Section 62-8-7(E)(1) (2003, as amended through 2007) and 17.9.550.1 to 550.17 NMAC (Recompiled 12/30/2001) (hereinafter Rule 550). We affirm the Final Order of the PRC.

I. FACTS AND PROCEDURAL HISTORY

{2} On February 21, 2007, PNM filed a rate case with the PRC seeking a rate increase and a fuel and purchased power cost adjustment clause (FPPCAC) pursuant to Section 62-8-7(E)(1) and Rule 550. A FPPCAC "flows through to the users of electricity the increases or decreases in Applicable Fuel and Purchased Power costs," Rule 550.6(D) NMAC and, therefore, "provides for the stability of utility earnings when electric fuel costs and purchased power costs are rising and permits prompt credits to customers when electric fuel costs and purchased power costs are declining." Rule 550.6(B). Rule 550.17(A)(1)-(3) provides that "no utility shall have a FPPCAC included in its tariff" unless the utility demonstrates that

(1) the cost of fuel and purchased power are a significant percentage of the total cost of service;

(2) the cost of fuel and purchased power contains costs which periodically fluctuate and cannot be precisely determined in a rate case;

(3) the utility's fuel and purchased power policies and practices are designed to assure that electric power is generated and purchased at the lowest reasonable cost.

See also § 62-8-7(E)(1) (providing that FPPCACs must be "consistent with the purposes of the Public Utility Act, including serving the goal of providing reasonable and proper service at fair, just and reasonable rates to all customer classes").

{3} The PRC assigned the case to a hearing examiner. See NMSA 1978, § 8-8-4(C)(3)(a) (1998). On March 6, 2008, following extensive discovery and two weeks of hearings, the hearing examiner issued a Recommended Decision, which included proposed findings and a recommendation that PNM's request for a FPPCAC should be denied because PNM had failed to fulfill the regulatory requirements set forth in Rule 550. Specifically, the hearing examiner found that (1) it is doubtful whether PNM's fuel and purchased power costs constitute a significant percentage of the total cost of service, (2) PNM failed to establish that its fuel mix "consists of fuels with volatile or fluctuating prices" and that "its fuel and purchased power costs are so unpredictable that they cannot be calculated in a rate case and call for an FPPCAC instead," and (3) the proposed FPPCAC fails to provide reasonable and proper service at fair, just and reasonable rates and is not designed to ensure that electric power is generated and purchased at the lowest reasonable cost. See Rule 550.17(A)(1)-(3). Thirteen days later, PNM filed exceptions to the Recommended Decision, claiming, in relevant part, that it was entitled to a FPPCAC under Rule 550. See 1.2.2.37(C)(1)(a) NMAC (09/01/2008).

{4} On March 20, 2008, PNM and the International Brotherhood of Electrical Workers, Local No. 611, filed a joint motion requesting an Emergency FPPCAC.¹ Attached to the joint motion was the affidavit of Charles N. Eldred, Executive Vice President and Chief Financial Officer of PNM. Eldred averred that, following the issuance of the Recommended Decision rejecting PNM's request for a FPPCAC, PNM's credit rating was downgraded, its stock price hit a fifty-two week low, and it was unable "to access the commercial paper market" or "to issue long term debt." Eldred expressed his belief that a FPPCAC "is absolutely necessary if PNM is to avoid further deterioration of its credit rating to junk bond status."

{5} The Emergency FPPCAC differed materially from the FPPCAC previously submitted to the hearing examiner. Specifically, the Emergency FPPCAC contained the following conditions suggested by the Attorney General and the PRC's Utility Division Staff (Staff): "(a) . . . prior approval of purchased power agreements (`PPAs') with terms greater than one year; (b) replacement power due to plant outages would not be recovered through the FPPCAC; and, (c) demand charges would not be recovered through the FPPCAC." Additionally, the Emergency FPPCAC contained other

conditions which are designed to mitigate the impact on customer bills during peak periods and provide additional incentives to PNM management to control costs to the extent they are controllable. Among them are that the fuel factor charged pursuant to the Emergency FPPCAC will be capped at $.01 per kilowatt and that replacement power costs due to plant availability lower than a weighted average plant availability factor cannot be recovered without prior approval of the PRC. Also included in the Emergency FPPCAC is a condition that all costs recovered through it will be subject to audit and refund if the costs are determined by the PRC to have been imprudently incurred.

{6} In light of the serious financial concerns raised by PNM, the PRC established the following expedited procedural schedule for the consideration and review of the Emergency FPPCAC.

                Public Notice                   March 31, 2008
                PNM Direct Testimony            March 28, 2008
                Deadline for intervention       April 8, 2008
                Staff/Intervenor Testimony      April 9, 2008
                PNM Rebuttal Testimony          April 14, 2008
                Hearing                         April 15, 2008
                

Additionally, the PRC severed the Emergency FPPCAC from the underlying rate case, reasoning that "the Emergency FPPCAC essentially is a new FPPCAC that is significantly different from the FPPCAC previously proposed by PNM" and that "the record in the rate case is now closed."² Although the PRC established a new docket number for the Emergency FPPCAC, No. 08-00092-UT, it noted that it would, "of course, take administrative notice of any evidence relevant to the Joint Motion and the Emergency FPPCAC that is in the rate case to the extent permitted by 17.1.2.37(D) NMAC." The PRC also ordered PNM to address certain issues in its direct testimony and suspended the implementation of the Emergency FPPCAC "until and including May 7, 2008."

{7} ABCWUA and NMIEC filed objections to the expedited procedural schedule and a joint motion for extension of time, requesting sixty days from the filing of PNM's direct testimony to file a response. Essentially, they requested "that the deadline for the filing of their testimony be extended to at least May 27, 2008, or approximately 48 days beyond the original April 9 deadline." ABCWUA and NMIEC claimed that the expedited procedural schedule did "not allow the Staff and Intervenors sufficient time to propound discovery and adequately analyze PNM's responses before the filing deadline for their own testimony," thereby effectively denying them due process of law. The PRC entered a procedural order extending the deadline five days, to April 14. Following oral argument, the PRC entered a second procedural order extending the deadline an additional twenty-five days, to May 9. The PRC found that "a 30-day, rather than the requested 48-day, extension of time from the original April 9 deadline for the filing of Staff and Intervenor testimony, should give Staff and Intervenors sufficient time, consistent with their due process rights, to take discovery and prepare their testimony."

{8} After holding public hearings from May 12 through May 17, 2008, a majority of the PRC Commissioners issued a Final Order granting PNM's request for an Emergency FPPCAC. First, the PRC found that PNM's fuel and purchased power costs constitute 20.167% of its total costs of service. Although the PRC had "not yet determined what constitutes a `significant percentage' of a utility's total cost of service for the purposes of 17.9.550.17(A)(1)," applying the ordinary meaning of the term "significant," the PRC determined that "20% is a significant percentage of PNM's total cost of service." The PRC noted that its conclusion was bolstered by the fact that PNM's "Base Fuel Cost is the second largest category of cost" and, therefore, "a relatively small percentage change in those costs can have a significant impact on PNM."

{9} Second, the PRC found that PNM had "made the requisite showing that its purchased power and fuel costs periodically fluctuate and cannot be precisely determined in a rate case." See Rule 550.17(A)(2). The PRC held that "Rule 550 does not require a showing that purchase power and fuel costs are `volatile', or fluctuate more than some other cost of providing service." Accordingly, "although PNM's coal and nuclear costs historically have fluctuated...