AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

PNM Gas Services (PNMGS), a division of the Public Service Company of New Mexico, sought a $13.3 million rate increase, citing various operational costs. After a hearing, the New Mexico Public Utility Commission (Commission) found PNMGS's existing rates unjust and ordered a $6.9 million rate reduction instead. PNMGS appealed, challenging the Commission's decisions on multiple cost disallowances, including debt retirement costs, rate discounts, reservation fees, litigation expenses, and rate case expenses (paras 1-2).

Procedural History

• New Mexico Public Utility Commission: Denied PNMGS's requested rate increase and ordered a $6.9 million rate reduction, finding the existing rates unjust and unreasonable (para 1).

Parties' Submissions

• Appellant (PNMGS): Argued that the Commission's disallowances of various costs, including debt retirement, rate discounts, reservation fees, litigation expenses, and rate case expenses, were unlawful and unsupported by evidence. PNMGS also challenged the Commission's adoption of a 30-year weather normalization and its rate of return determination (paras 2-3, 18-20, 55-56, 63-66, 67-70, 78-80, 83-88).
• Appellee (New Mexico Public Utility Commission): Defended its decisions, asserting that PNMGS failed to meet its burden of proof for cost recovery and that its determinations were supported by substantial evidence. The Commission also argued that its rate design and weather normalization adjustments were reasonable (paras 17, 36-37, 55, 63-64, 78-80).
• Cross-Appellant (New Mexico Attorney General): Supported some of the Commission's decisions, including the denial of Rate Rider 12 and the adoption of a 30-year weather normalization, but opposed the Commission's increase in the residential access fee (paras 36-37, 90-98).

Legal Issues

• Was the Commission's denial of recovery for losses on reacquired debt supported by substantial evidence?
• Did the Commission act arbitrarily in denying recovery of reservation fees and litigation expenses?
• Was the Commission's denial of rate case expenses reasonable and lawful?
• Did the Commission err in adopting a 30-year weather normalization adjustment?
• Was the Commission's rate of return determination supported by the evidence?
• Did the Commission err in its rate design, including the denial of Rate Rider 12 and the increase in the residential access fee?

Disposition

• The Supreme Court of New Mexico vacated and annulled the Commission's final order, finding several of its decisions unreasonable and unsupported by substantial evidence (para 105).

Reasons

Per Serna J. (Minzner C.J., Baca, Franchini, and Maes JJ. concurring):

• Reacquired Debt: The Commission's denial of recovery for losses on reacquired debt was not supported by substantial evidence. PNMGS demonstrated that the debt retirement benefited ratepayers by lowering the cost of capital, and the Commission's reliance on changed circumstances and shareholder benefit was arbitrary (paras 18-25).
• Reservation Fees: The Commission's finding that reservation fees were imprudent was supported by evidence. However, its decision to foreclose recovery of these fees as PTOP costs in a separate proceeding was arbitrary, as the issue was not resolved in prior stipulations (paras 55-58).
• Mewbourne Settlement: The Commission's denial of recovery for PTOP costs related to one contract was supported by evidence, but its denial for another contract was based on conjecture and lacked substantial evidence (paras 63-66).
• Rate Case Expenses: The Commission's complete denial of rate case expenses was unreasonable. While PNMGS failed to prove the full amount was prudent, the Commission should have determined a reasonable amount based on the evidence (paras 67-77).
• Weather Normalization: The Commission's adoption of a 30-year weather normalization adjustment was supported by substantial evidence, as it provided a more stable and accurate prediction of future revenue requirements (paras 78-82).
• Rate Design: The Commission's denial of Rate Rider 12 was reasonable due to insufficient evidence of transportation customers' responsibility for reliability costs. However, the dramatic increase in the residential access fee was unsupported by evidence and violated principles of rate stability (paras 90-102).
• End Result: The Commission's order hindered PNMGS's ability to achieve a reasonable rate of return, rendering the overall result unreasonable and unlawful (paras 103-104).