State v. P.U.C.

• Citation: 980 P.2d 55
• Decision Date: 15 March 1999
• Docket Number: 25-523
• Parties: STATE OF NEW MEXICO, ex rel., JERRY W. SANDEL, ROBERTO J. GONZALES, TED HOBBS, LARRY LARRANAGA, SHANNON ROBINSON, JOHN ARTHUR SMITH, STUART INGLE, WILLIAM H. PAYNE, CHRIS FRETZE, and BRUCE E. BARNABY, Petitioners, v. NEW MEXICO PUBLIC UTILITY COMMISSION, WAYNE SHIRLEY, Commission Chairman, BEATRIZ RIVERA, Commissioner, and ROBERT SCHWARTZ, Commissioner, Respondents, and NEW MEXICO INDUSTRIAL ENERGY CONSUMERS, RESIDENTIAL ELECTRIC INCORPORATED, PUBLIC SERVICE COMPANY OF NEW MEXICO, and ATTORNEY GENERAL OF THE STATE OF NEW MEXICO, Intervenors.Opinion Number: 1999-IN THE SUPREME COURT OF THE STATE OF NEW MEXICO Filing Date:
• Court: Supreme Court of New Mexico

STATE OF NEW MEXICO, ex rel., JERRY W. SANDEL, ROBERTO J. GONZALES, TED HOBBS, LARRY LARRANAGA, SHANNON ROBINSON, JOHN ARTHUR SMITH, STUART INGLE, WILLIAM H. PAYNE, CHRIS FRETZE, and BRUCE E. BARNABY, Petitioners v NEW MEXICO PUBLIC UTILITY COMMISSION, WAYNE SHIRLEY, Commission Chairman, BEATRIZ RIVERA, Commissioner, and ROBERT SCHWARTZ, Commissioner, Respondents, and NEW MEXICO INDUSTRIAL ENERGY CONSUMERS, RESIDENTIAL ELECTRIC INCORPORATED, PUBLIC SERVICE COMPANY OF NEW MEXICO, and ATTORNEY GENERAL OF THE STATE OF NEW MEXICO, Intervenors

Docket No. 25,523

Opinion Number: 1999-NMSC-019

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Filing Date: March 15, 1999

ORIGINAL PROCEEDING ON WRIT OF MANDAMUS

consolidated with

Docket No. 25,531

IN THE MATTER OF THE APPLICATION OF AND THE COMPLAINT BY RESIDENTIAL ELECTRIC, INCORPORATED, and IN THE MATTER OF THE APPLICATION OF RESIDENTIAL ELECTRIC, INCORPORATED FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY, PUBLIC SERVICE COMPANY OF NEW MEXICO, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee, and RESIDENTIAL ELECTRIC, INCORPORATED, and NEW MEXICO INDUSTRIAL ENERGY CONSUMERS, Intervenors.

APPEAL FROM THE NEW MEXICO PUBLIC UTILITY COMMISSION

consolidated with:

Docket No. 25,532

IN THE MATTER OF THE APPLICATION OF RESIDENTIAL ELECTRIC, INCORPORATED, FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY, ATTORNEY GENERAL OF THE STATE OF NEW MEXICO, Appellant,

v.

NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee.

APPEAL FROM THE NEW MEXICO PUBLIC UTILITY COMMISSION

Shannon Robinson

Albuquerque, NM, William H. Payne, Albuquerque, NM, Jones, Snead, Wertheim, Wentworth & Jaramillo, P.A., Jerry Wertheim, Arturo L. Jaramillo, Jerry Todd Wertheim, Carol Clifford, John V. Wertheim, Santa Fe, NM, for Petitioners,

Patrick T. Ortiz, Sara D. Smith, Albuquerque, NM, Keleher & McLeod, P.A., Richard B. Cole, Thomas C. Bird, Susan M. McCormack, Albuquerque, NM, for Appellants

Hon. Patricia A. Madrid, Attorney General, Alletta Belin, Jeff Taylor, Assistant Attorneys General, Santa Fe, NM, Intervenor/Appellant

James C. Martin, General Counsel, Santa Fe, NM, for Respondents/Appellee

New Mexico Public Regulatory Commission, (formerly New Mexico Public Utility Commission), Lewis O. Campbell, Diane P. Donaghy, Cynthia A. Fry, L. Bernice Galloway, Albuquerque, NM, for Intervenor

Residential Electric, Inc., Steven S. Michel, Karl O. Wyler, Santa Fe, NM, for Intervenor

New Mexico Industrial Energy Consumers, Rubin, Katz, Salazar, Alley & Rouse, P.C., Donald M. Salazar, Santa Fe, NM, for Intervenor

Texas-New Mexico Power Company, Cohen & Cohen, P.A., David S. Cohen, Santa Fe, NM, Edward H. Comer, Andrew Kartz, Johannes Williams, Laurence Hindin, Washington, DC, for Amicus Curiae, Edison Electric Institute

OPINION

MINZNER, Chief Justice.

{1} On December 21, 1998, several members of the New Mexico Legislature, along with representatives from a labor union and a public utility shareholders group, petitioned this Court for a writ of mandamus vacating two orders issued by the New Mexico Public Utility Commission (NMPUC). One of these orders (the REI Order) approved a request by Residential Electric, Inc. (REI) to charge retail consumers a market-based rate for electricity, required the Public Service Company of New Mexico (PNM) to open its transmission and distribution system to REI, and granted a certificate of public convenience and necessity (CCN) that allows REI to own and operate transmission and distribution facilities that serve the metropolitan areas of Albuquerque, Rio Rancho, and Santa Fe. Among other things, the second NMPUC order that is the subject of the petition (the PNM Order) required PNM to reduce its rates based on a revaluation of PNM's generation costs that employed an estimated market price. Petitioners assert that these two orders of the NMPUC violate the requirement of separation of powers contained in Article III, Section 1 of the New Mexico Constitution because they bring about the deregulation of the retail electric power industry in New Mexico without authorization from the Legislature.

{2} This Court assumed original jurisdiction over the petition under Article VI, Section 3 of the New Mexico Constitution and consolidated Petitioners' case with three appeals that had been filed by PNM and the Attorney General. All of the consolidated cases arise from the two NMPUC orders which are the subject of the petition. After hearing oral argument in these consolidated cases on March 1, 1999, we issued an order granting the petition for a writ of mandamus in part, vacating the REI Order, and dismissing the remaining appeals in the REI case as moot. In an unpublished decision filed concurrently with this opinion, we vacate the PNM Order under NMSA 1978, § 62-11-5 (1982, prior to 1998 amendment), and deny the petition for a writ of mandamus with respect to that order. In this opinion, we explain the reasons for our decision to issue the writ of mandamus with respect to the REI Order.

I.

{3} In 1941, the New Mexico Legislature enacted the New Mexico Public Utilities Act (NMPUA), 1941 N.M. Laws, ch. 84 (codified in its present form at NMSA 1978, §§ 62-1-1 to 62-6-26.1, 62-8-1 to 62-13-14 (1941, as amended through 1997, prior to 1998 amendment). The NMPUA was enacted against the backdrop of a series of state and federal statutes that regulate access to the consumer market, changes in rates, and use of financing and securities by public utilities engaged in the sale of natural gas, water, and electricity. See generally Robert L. Swartwout, Current Utility Regulatory Practice from a Historical Perspective, 32 Nat. Resources J. 289, 300-08 (1992). These federal statutes include the Federal Power Act of 1920 (FPA), 16 U.S.C. §§ 791a to 828c (1994 & Supp. II 1996), the Public Utility Holding Company Act of 1935 (PUHCA), 15 U.S.C. §§ 79 to 79z-6 (1994 & Supp. II 1996), and the Natural Gas Act of 1938 (NGA),15 U.S.C. §§ 717 to 717w (1994).

{4} Under the regulatory regime established by the NMPUA and its federal counterparts in the 1930s and 1940s, electricity and the services required to deliver it were sold in a "bundled" package to retail customers by traditional, "vertically integrated" utilities that owned and operated all components of the electric power industry within a specific geographic area. These components include the generation of electricity at power plants, the transmission of electricity at high voltage from the point of generation to areas of distribution, and the distribution of electricity through substations where high transmission voltage is reduced to a lower voltage and then delivered to retail customers. A utility that is granted exclusive control of all of these components within a specific geographic area under this regulatory regime has been described as a "'regulated monopoly.'" Morningstar Water Users Ass'n v. New Mexico Pub. Util. Comm'n, 120 N.M. 579, 590, 904 P.2d 28, 39 (1995) (quoting Dickinson v. Maine Pub. Serv. Co., 223 A.2d 435, 438 (Me. 1966)). Such a utility is said to acquire its exclusive control of the industry in a particular area, as well as a fair opportunity to secure a reasonable rate of return on approved investments, in exchange for providing reliable, nondiscriminatory service to all ratepayers in that area. See id. at 590-91, 904 P.2d at 39-40.

{5} Beginning in the 1970s, the regulatory regime established in the 1930s and 1940s underwent significant changes at the federal level. Congress introduced competition into the generation component of the electric power industry by enacting the Public Utility Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95-617, 92 Stat. 3117 (codified as amended in scattered sections of 15, 16, 42, and 43 U.S.C.), and deregulated the wellhead price for certain categories of natural gas by enacting the Natural Gas Policy Act of 1978 (NGPA), Pub. L. No. 95-621, 92 Stat. 3350 (codified as amended in scattered sections of 15 U.S.C.). These changes led to the deregulation of the natural gas industry. See, e.g., Federal Energy Regulatory Commission (FERC) Order No. 636, 57 Fed. Reg. 13,267 (1992) (codified as amended at 18 C.F.R. pt. 284 (1998)) (providing open access to any party seeking to move its own natural gas supplies through the nation's privately owned pipeline systems); NMSA 1978, § 62-6-4.1(B) (1993, prior to 1998 amendment) (authorizing the NMPUC to "require the nondiscriminatory and nonpreferential transportation of natural gas by any person subject to [its] jurisdiction"). They also set the stage for generators of electricity to gain access to, and compete in, a nationwide wholesale market through a process known as "wheeling." "Wheeling" has been defined as "[t]he transmission of electricity by an entity that does not own or directly use the power it is transmitting." James D. Elliott, Comment, Electric Utility Regulation Reform in New York: Economic Competitiveness at the Expense of the Environment?, 13 Pace Envtl. L. Rev. 281, 282 n.1 (1995) (alteration in original) (internal quotation marks omitted).

{6} Congress supplemented FERC's authority to order wheeling at the wholesale level by enacting the Energy Policy Act of 1992 (EPA), Pub. L. No. 102-486, 106 Stat. 2776 (codified as amended in scattered sections of 16, 25, 26, 30, and 42 U.S.C.). Under the 1992 legislation, PURPA was amended to provide FERC with the authority to require utilities to justify their refusal to provide transmission service to any party requesting it, see 16 U.S.C. § 824j(d)(1) (1994), and to order utilities to provide transmission service and "network service" to any entity, see id. § 824j(a). "'Network service' allows a third party to utilize all features of a transmission system to the same extent that the transmission facility's owner may utilize the system." Michael Evan Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental...