PUBLIC SERV. CO. V. NEW MEXICO PUB. SERV. COMM'N, 1987-NMSC-124, 106 N.M. 622, 747
P.2d 917 (S. Ct. 1987)
Public Service Company of New Mexico,
Appellant,
vs.
New Mexico Public Service Commission, Appellee, and New
Mexico Industrial Energy Consumers and The Attorney
General of the State of New Mexico,
Intervenors-Appellees
SUPREME COURT OF NEW MEXICO
1987-NMSC-124, 106 N.M. 622, 747 P.2d 917
APPEAL FROM PUBLIC SERVICE COMMISSION
Keleher & McLeod Robert H. Clark,
Richard B. Cole, Albuquerque, for Appellant.
Steven F. Asher, Charles F. Noble, Santa
Fe, for Appellee.
Hal Stratton, Attorney General, Gary
Epler, Assistant Attorney General, for Intervenor-appellee Attorney General.
Campbell, Pica & Olson, Lewis O.
Campbell, Wayne Shirley, for Intervenor NM Industrial Energy Consumers.
{1} In February, 1986, Public
Service Company of New Mexico (PNM) filed an application with the New Mexico
Public Service Commission (Commission) which, along with other requests, sought
Commission approval of a general diversification plan to restructure PNM into a
public utility holding company. In the summer of 1986, the Commission conducted
hearings and issued a final order disapproving the restructuring plan. PNM has
appealed to this Court for a review of that final order.
{2} At issue is whether the
Commission had the statutory authority to disapprove a restructuring prior to
its completion and, if it did, whether the Commission abided by its regulations
in making its decision. Also at issue is whether there was substantial evidence
to support the Commission's order.
{3} We interpret NMSA 1978,
Section
62-2-19 (Repl. Pamp.1984) to allow the Commission to disapprove a
public utility holding company restructuring prior to its completion. Further,
we find that the Commission complied with its applicable regulations and that
there was substantial evidence to support the Commission's order of
disapproval. We affirm.
{4} PNM contends that Section
62-6-19 should be construed to grant the Commission only the power to issue
remedial orders to rectify the adverse effects of a completed holding company
restructuring. PNM reads Section 62-6-19 to preclude the Commission from
investigating the formation
{*624} of
the holding company until it is a completed event.
{5} PNM bases its
interpretation on the verb tense employed by the legislature in drafting
Subsections 62-6-19(B) and (C) relating to Class II transactions, defined as
including "the formation * * * of a * * * public utility holding company
by a public utility or its affiliated interest * * *." NMSA 1978,
62-3-3(K) (Repl. Pamp.1984). PNM maintains that if the legislature intended the
Commission to have the power of prior approval over holding company
restructurings, then Subsections 62-6-19(B) and (C) would have been written in
the future tense. Subsection 62-6-19(B) provides that:
In order to assure reasonable and proper utility service at fair,
just and reasonable rates, the commission may investigate:
(2) Class II transactions or the resulting effect of such
Class II transactions on the financial performance of the public utility to
determine whether such transactions or such performance have an adverse
and material effect on such service and rates.
Similarly, Subsection (C) requires a public utility company
engaging in a Class II transaction to demonstrate that such transaction has
not materially and adversely affected the utility's ability to provide
service at reasonable rates.
{6} PNM claims that use of
the present tense indicates that the Class II transaction must already have
taken place before the Commission may investigate. According to PNM, if the legislature
had contemplated prior approval of holding company restructurings, it would
have used words such as "
will have an adverse and material
effect" and "
will not affect."
{7} "Unless a contrary
intent is clear, courts will read and give effect to statutes as written,
attributing to the words their plain meaning."
Waksman v. City of
Albuquerque,
102 N.M. 41, 43,
690 P.2d 1035, 1037 (1984). Subsection
62-6-19(B) authorizes the Commission to investigate Class II transactions such
as the
formation of a holding company. "Formation" entails the
act of giving form or shape to something or of taking form.
Webster's Third
New International Dictionary 893 (1971). Clearly, PNM was engaged in the
formation of its holding company structure when the Commission investigated to
determine any adverse and material effect on service and rates. The formation
of PNM's holding company involved several steps, one of which was to seek
Commission approval. Additionally, PNM had to obtain approval from the
Securities and Exchange Commission (SEC) and from PNM's shareholders. Prior to
the Commission hearing, PNM had filed its SEC registration statement and had
presented its corporate reorganization proposal to its stockholders.
{8} Use of the present tense
within Section 62-6-19 does not establish that the legislature only intended
the Commission to investigate completed Class II transactions. On the contrary,
the statute grants the Commission the authority to investigate the act of
giving form or shape to a public utility holding company to determine the
formation's adverse and material effect on service and rates.
{9} Further, Section 62-6-19
speaks of Class II transactions
or their resulting effect. The word
"or" is given a disjunctive meaning unless the context of the statute
demands otherwise.
First Nat'l Bank v. Bernalillo County Valuation Protest
Bd., 90 N.M. 110, 112,
560 P.2d 174, 176 (Ct. App.1977). By using the
disjunctive, the legislature intended the Commission to investigate either the
formation itself or the resulting effect. Consequently, Subsection (B) allows
the Commission to either investigate the act of giving form or shape to the
holding company or its resulting effect.
{10} Finally, Subsection (E)
of Section 62-6-19 contains a legislative mandate that the Commission
"promulgate rules * * * to implement the provisions of Subsections B, C
and D of this section, including the manner of conducting such investigations
and making such determinations * * * as may be reasonably necessary and as are
consistent with the provisions of this 1982 act."
{*625}
In response, the Commission issued General Order 39 (Rules regarding Class
I and Class II utilities transactions) in November 1982. General Order 39,
Section 3.1(A) states that "No public utility may engage in a Class II
transaction * * * without first obtaining written approval of a general
diversification plan from the Commission."
{11} Both parties have
structured arguments based upon the events which have transpired since the
promulgation of General Order 39. The Commission points to the failure of the
legislature to express dissatisfaction with General Order 39 as indicative of
legislative endorsement. PNM counters that unsuccessful amendments to Section
62-6-19, which would expressly authorize prior Commission approval of Class II
transactions, demonstrates that the legislature does not interpret the statute
to give the Commission the right of prior approval and that, therefore, General
Order 39 is void because it is outside the scope of the statutory authority granted
the Commission by Section 62-6-19.
See Rivas v. Board of Cosmetologists,
101 N.M. 592, 594,
686 P.2d 934, 936 (1984).
{12} In this instance, we
construe no intent from legislative inaction. However, it is well settled that
courts should accord deference to the interpretation given to a statute by the
agency to which it is addressed.
Borrego v. United States, 577 F. Supp.
408, 412 (D.N.M.1983).
See also Groendyke Transport, Inc. v. New Mexico
State Corp. Comm'n,
101 N.M. 470, 477,
684 P.2d 1135, 1142 (1984).
{13} Furthermore, PNM's
interpretation of Section 62-6-19 would strip the Commission of its ability to
protect ratepayers from the adverse effects of the holding company
restructuring until the impact has occurred. This Court must interpret statutes
in a way which will not render their application unreasonable nor defeat the
intended objective of the legislature.
State v. Garcia,
93 N.M. 51, 53,
596 P.2d 264, 266 (1979). To ascertain the legislative intent we read the
entire act as a whole, each part construed in connection with every other part.
General Motors Acceptance Corp. v. Anaya,
103 N.M. 72, 76,
703 P.2d 169,
173 (1985).
{14} Read in light of the
Public Utility Act's statutory framework, Section 62-6-19 gives the Commission
the authority to promulgate General Order 39. The legislature gave the
Commission the right to formulate the means reasonably necessary to investigate
any Class II transaction.
See § 62-6-19(E). Further, with certain
exceptions not applicable here, Section 62-6-4(A) grants the Commission the
exclusive power to supervise every public utility in respect to its rates and
service regulations and to do all things
necessary and convenient in the
exercise of its power. In conformity with this legislative mandate, the
Commission decided to require prior approval of any holding company
restructuring. We find General Order 39 to be neither plainly erroneous nor
inconsistent with the Act,
see Bokum Resources Corp. v. New Mexico Water
Quality Control Comm'n,
93 N.M. 546, 555,
603 P.2d 285, 294 (1979), and we
defer to the Commission's determination that prior approval of Class II
transactions is necessary to perform the Commission's investigatory task under
Section 62-6-19.
See Groendyke Transport, Inc., 101 N.M. at 477, 684
P.2d at 1142.
{15} Even if the Commission
has the power of prior approval, PNM maintains that the Commission failed to
follow General Order 39 and, consequently, PNM was denied due process. PNM
argues that the Commission had no basis to disapprove the restructuring because
PNM fully complied with the regulation. Further, PNM contends that the
Commission based its disapproval on regulatory concerns not addressed in
General Order 39.
{16} Upon examination of the
regulation, we cannot agree with PNM's allegations. Section 3.1(C) of General
Order 39 provides in part: "The Commission shall approve the general
diversification plan * * * if the Commission finds that such approval is in the
public interest. Approval is in the public interest if the Commission finds * *
* that it appears that the utility's ability to provide reasonable and proper
utility service at fair, just and reasonable rates will
{*626}
not be adversely affected by [the Class II transaction] * * *."
{17} The Commission's
disapproval of PNM's holding company was primarily based on its determination
that the holding company structure would impair the Commission's ability to
supervise PNM to ensure reasonable rates and services. Specifically, the
holding company structure proposed by PNM would preclude the Commission's
access to records of companies within the holding company with whom PNM would
engage in business transactions.
{18} Section 62-6-17 grants
the Commission access to the books and records of an "affiliated
interest" of a utility. An "affiliated interest" as defined by
statute includes, among other entities, a subsidiary of a utility. § 62-3-3(A).
As long as PNM's diversified activities would continue to be performed by
entities that are subsidiaries of PNM, the Commission would continue to have
access to information needed to ensure that no cross-subsidies are occurring
between PNM and an affiliate. The danger of cross-subsidization has been given
extensive analysis by this Court in
Gas Co. v. New Mexico Public Service
Commission,
100 N.M. 740,
676 P.2d 817 (1984).
{19} PNM's restructuring
would change the corporate relationship of the diversified entities to PNM. The
restructuring would change the status of certain subsidiaries of PNM to a
status which can be called "sisters" of PNM. A "sister" of
a utility is a subsidiary of a holding company of which the utility also is a
co-equal subsidiary. Under Section 62-3-3(A) the definition of an
"affiliated interest" excludes a company which is in a
"sister" relationship to the utility in the holding company
structure. Therefore, the holding company structure proposed by PNM would
prevent the Commission's access to the books and records of the
"sister" necessary to ensure the reasonableness of transactions
between that "sister" and PNM. Consequently, the Commission was
unable to find that PNM's ability to provide reasonable and proper utility
service at fair, just and reasonable rates would not be adversely and
materially affected by the proposed restructuring.
{20} This Court's role in
reviewing orders of an administrative agency is to ensure that the order is
neither arbitrary nor capricious, that the order is supported by substantial
evidence, and that the order is within the agency's scope of authority.
See
Elliott v. New Mexico Real Estate Comm'n,
103 N.M. 273, 275,
705 P.2d 679,
681 (1985). Examination of both the applicable statutes and regulations,
together with the record, reveals that the final order disapproving the
restructuring fell within the scope of Section 62-6-19, followed the dictates
of General Order 39, and was supported by substantial evidence. We affirm.
WE CONCUR: Dan Sosa, Jr., Senior Justice, Harry E. Stowers,
Jr., Justice.