1

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2010-NMSC-048

Filing Date: October 26, 2010

Docket No. 32,183

EL PASO ELECTRIC COMPANY,

Appellant,

v.

NEW MEXICO PUBLIC REGULATION COMMISSION,

Appellee,

and

DOÑA ANA COUNTY AND OTERO COUNTY,

Intervenors.

APPEAL FROM THE NEW MEXICO PUBLIC REGULATION COMMISSION

Law Offices of Randall W. Childress, P.C.

Randall W. Childress

Stacey J. Goodwin

Santa Fe, NM

Tucker Law Firm, P.C.

Steven L. Tucker

Santa Fe, NM

for Appellant

Robert Y. Hirasuna

Santa Fe, NM

for Appellee

Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A.

Nann M. Winter
1

This Opinion will refer to the Public Regulation Commission as well as its

predecessors, the Public Utility Commission and the Public Service Commission, as the

Commission.

2

EPE has franchise agreements with at least two other counties, Luna and Sierra;

these agreements were not addressed by the Commission in this case. Nor did the

Commission investigate whether other utilities have similar franchise agreements with

counties in New Mexico.

2

Albuquerque, NM

Thomas R. Figart,

Las Cruces, NM

Bryant, Schneider-Cook Law Firm, P.A.

Daniel A. Bryant

Ruidoso, NM

for Intervenors

OPINION

SERNA, Justice.

{1} This opinion resolves a direct appeal by El Paso Electric Company (EPE) of a Final

Order issued by the New Mexico Public Regulation Commission (Commission1). In re An

Investigation into El Paso Elec. Co.’s Recovery of Cnty. Franchise Fees from Its Ratepayers,

No. 09-00421-UT ( PRC Jan. 26, 2010). The Final Order required EPE to stop including

franchise fee charges on the bills of customers in Doña Ana and Otero counties and to refund

over five million dollars to customers in those counties. We hold that franchise fee charges

fall outside the Commission’s jurisdiction and vacate and annul the Final Order.

BACKGROUND

{2} EPE is an electric utility company that operates in southern New Mexico. At issue

in this case are agreements EPE has with Doña Ana and Otero counties (Counties) regarding

franchises granted for the use of county rights-of-way to deliver electricity to county

residents and businesses.2 These franchise agreements, codified as county ordinances,

impose upon EPE fees for the rights granted. Prior to 1999, EPE passed on franchise fees

to all of its customers as part of the base rate for electricity. Since 1999, franchise fees have

been collected by EPE through line item charges to customers within the jurisdictions of the

respective counties.
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{3} The franchise agreement between EPE and Doña Ana County, signed March 9, 1999,

requires EPE to pay annually two percent of gross receipts and $105,000 “for and in

consideration of the granting of this Agreement, and as rental and/or tax for the occupation

and use or easement and right of way over, upon, and beneath the County Property[.]” The

Otero County agreement requires EPE to pay annually, “[f]or and in consideration of the

right, privilege and franchise herein granted,” “a street rent which is equal to two (2%)

percent of the gross receipts of the sale of electricity[.]” The total amounts collect from

ratepayers and paid to the Counties by EPE since 2004, and at issue in this appeal, are

$288,987 in Otero County and $5,366,804 in Doña Ana County.

{4} The Commission initiated an investigation into these two franchise agreements and

issued an order to show cause, dated December 10, 2009, requiring EPE to demonstrate

“why the Commission should not find that the franchise fees or taxes imposed under the

[Counties’] franchise ordinances are unlawful under New Mexico statutes, and if so, why the

Commission should not” require EPE to immediately stop collecting the fees from customers

and refund any fees already collected. No public hearing was ever scheduled on this matter.

The Commission issued the Final Order on January 26, 2010, concluding that it had

jurisdiction because “franchise fees are rates that are charged in connection with it [sic]

utility service and thus are subject to the jurisdiction of the Commission.” The Final Order

required EPE to stop passing through franchise fee charges and to refund to the ratepayers

the amounts collected since 2004.

{5} On February 22, 2010, a panel of this Court granted an emergency stay of the

Commission’s order pending resolution of this appeal on the merits and granted the

Counties’ motion to be added as parties. This case is before us pursuant to NMSA 1978,

Section 62-11-1 (1993). We address only the dispositive question in the case of whether the

Commission had jurisdiction over the fees collected by EPE pursuant to franchise

agreements with the Counties.

DISCUSSION

Standard of Review

{6} The Commission, though a constitutionally created body, N.M. Const. art. XI, § 1,

may exercise only its statutorily authorized jurisdiction. Plains Elec. Generation &

Transmission Coop., Inc. v. N.M. Pub. Util. Comm’n, 1998-NMSC-038, ¶ 9, 126 N.M. 152,

967 P.2d 827. We review the Commission’s determination of its jurisdiction, an issue of

law, de novo. United Water N.M., Inc. v. N.M. Pub. Util. Comm’n, 1996-NMSC-007, 121

N.M. 272, 274-75, 910 P.2d 906, 908-09 (“[W]e review anew the question of the

[Commission]’s jurisdiction.”); Morningstar Water Users Ass’n v. N.M. Pub. Util. Comm’n,

120 N.M. 579, 583, 904 P.2d 28, 32 (1995) (concluding that an agency’s determination of

its own jurisdiction is a question of law that deserves “little deference” from the courts

(quoting El Vadito de los Cerrillos Water Ass’n v. N.M. Pub. Serv. Comm’n, 115 N.M. 784,

787, 858 P.2d 1263, 1266 (1993))); see also Rule 12-216(B) NMRA (stating that
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jurisdictional challenges may be raised for the first time on appeal); Sims v. Mechem, 72

N.M. 186, 188, 382 P.2d 183, 184 (1963) (same). We vacate and annul a Commission order

as “unreasonable or unlawful” if the Commission wrongfully exerted jurisdiction over a

case. NMSA 1978, § 62-11-5 (1982); see also N.M. Indus. Energy Consumers v. N.M. Pub.

Reg. Comm’n (NMIEC), 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168 P.3d 105 (“We will

reverse the agency’s interpretation of law if it is unreasonable or unlawful.”). 

{7} Our de novo review of the Commission’s jurisdiction requires us to engage in

statutory construction. “When construing statutes, our guiding principle is to determine and

give effect to legislative intent.” NMIEC, 2007-NMSC-053, ¶ 20. “[W]e strive to read

related statutes in harmony so as to give effect to all provisions[.]” Id. Unless an ambiguity

exists, we apply statutes as written. Albuquerque Bernalillo Cnty. Water Util. Auth. v. N.M.

Pub. Reg. Comm’n (ABCWUA), 2010-NMSC-013, ¶ 52, 148 N.M. 21, 229 P.3d 494.

Commission Jurisdiction Over Public Utility Rate Making

{8} The Legislature mandated public utility regulation in the Public Utility Act (PUA),

NMSA 1978, Sections 62-1-1 to -6-26.1 and -8-1 to -13-14 (1953, as amended through

2009). The policy of the PUA includes ensuring that utility services are provided at “fair,

just and reasonable rates.” Section 62-3-1(B). The Commission enforces this policy through

its “general and exclusive power and jurisdiction to regulate and supervise every public

utility in respect to its rates and service regulations and in respect to its securities[.]” Section

62-6-4(A). Additionally, the Commission has jurisdiction over tax, fuel, gas, and purchased

power adjustment clauses. Section 62-8-7(E); see also NMIEC, 2007-NMSC-053, ¶ 22

(stating that the rate-making process jurisdiction conferred on the Commission by the PUA

includes jurisdiction over general rate cases and automatic adjustment clauses). 

{9} The PUA defines “rate” as 

every rate, tariff, charge or other compensation for utility service rendered

or to be rendered by a utility and every rule, regulation, practice, act,

requirement or privilege in any way relating to such rate, tariff, charge or

other compensation and any schedule or tariff or part of a schedule or tariff

thereof. 

Section 62-3-3(H). The factors used by the Commission when reviewing proposed rates are

based on the utility’s revenue requirements. Section 62-8-7(D) (stating that reasonable rates

“are designed to produce annual revenues no greater than those determined by the

[C]ommission . . . to be just and reasonable”); PNM Gas Servs. v. N.M. Pub. Util. Comm’n

(In re Petition of PNM Gas Servs.), 2000-NMSC-012, ¶ 6, 129 N.M. 1, 1 P.3d 383. “The

traditional elements of the rate-making process and the establishment of the total revenue

requirement are (1) determination of the costs of the operation, (2) determination of the rate

base which is the value of the property minus accrued depreciation, and (3) determination

of the rate of return.” Hobbs Gas Co. v. N.M. Pub. Serv. Comm’n, 94 N.M. 731, 733, 616
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P.2d 1116, 1118 (1980). “A reasonable rate of return is one that provides a fair opportunity

for the utility to receive just compensation for its investments, and that . . . enabl[es] the

utility to attract new capital to maintain, improve, and expand its services in response to

consumer demand.” In re Petition of PNM Gas Servs., 2000-NMSC-012, ¶ 8 (internal

quotation marks and citations omitted). Income taxes are included in the base rate, see, e.g.,

Zia Natural Gas Co. v. N.M. Pub. Util. Comm’n (In re Zia Natural Gas Co.), 2000-NMSC011, ¶ 13, 128 N.M. 728, 998 P.2d 564, but gross receipts taxes are excluded from the base

rate and must be stated separately on customer bills. Section 62-6-4.5(B). The

reasonableness of rates is analyzed on a state-wide level. See City of Albuquerque v. N.M.

Pub. Reg. Comm’n, 2003-NMSC-028, ¶ 8, 134 N.M. 472, 79 P.3d 297.

{10} This Court does not interfere when the Commission exercises its expertise in rate

cases. See id. ¶¶ 18, 19 (concluding that the Commission had jurisdiction over tariff filed

because the Legislature “has specifically provided that the [Commission] may review local

land use laws affecting utilities” when reviewing rate cases); Cnty. of Bernalillo v. N.M. Pub.

Reg. Comm’n (In re Adjustments to Franchise Fees), 2000-NMSC-035, ¶ 18, 129 N.M. 787,

14 P.3d 525 (holding that the Commission had jurisdiction to review rates, and thus delay

implementation of NMSA 1978, Section 62-3A-18(A) (1999) (replaced by Section 62-6-4.5

in 2003), because the removal of franchise fee charges from the rate base necessarily

required a modification of rates); In re Zia Natural Gas Co., 2000-NMSC-011, ¶¶ 10, 13

(finding that the Commission properly used a hypothetical capital structure to ensure rates

were fair to both ratepayers and investors but did err by not including all federal taxes

actually paid in expense calculations); N.M. Indus. Energy Consumers v. N.M. Pub. Serv.

Comm’n, 111 N.M. 622, 627, 808 P.2d 592, 597 (1991) (upholding the Commission’s

exclusion of the utility’s capacity contract from the rate amount because the Commission

exercised jurisdiction over the rates, not the contract itself). 

{11} We have vacated, however, Commission orders issued in excess of its jurisdiction.

See N.M. Elec. Serv. Co. v. N.M. Pub. Serv. Comm’n, 81 N.M. 683, 685, 472 P.2d 648, 650

(1970) (finding no implied authority for the Commission to treat monies refunded to utility

as a rate that the Commission could order passed through to customers); see also Plains

Elec., 1998-NMSC-038, ¶ 12 (stating that the conveyance of land “which does not affect the

utility services provided by” the utility was outside the Commission’s jurisdiction over the

sale of utility facilities); United Water, 1996-NMSC-007, 121 N.M. at 275, 280, 910 P.2d

at 909, 914 (concluding that the Commission improperly exercised jurisdiction over a

municipality that had “not elected to submit itself to . . . regulation”); Morningstar Water,

120 N.M. at 585, 904 P.2d at 34 (holding that the Commission may only exercise jurisdiction

over utilities expressly included in the scope of the PUA); Summit Props., Inc. v. Pub. Serv.

Co. of N.M., 2005-NMCA-090, ¶¶ 11, 13, 138 N.M. 208, 118 P.3d 716 (stating that the

Commission has no jurisdiction over “contracts a utility enters into with private parties” as

the claims arising under those contracts “are not related to the reasonableness of any rates

established by the Commission”). The disposition of this case turns, therefore, on whether

or not franchise fee charges are properly considered rates and thus fall within the

Commission’s jurisdiction.
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Franchise Agreements and Franchise Fee Charges Are Not Rates

{12} Under Section 62-1-3, county commissioner boards (and municipal authorities) may

permit public utilities to use county land for the structures necessary to transmit power and

“are authorized to grant franchises . . . for such purposes within their respective

jurisdictions.” Counties are “authorized to impose charges for reasonable actual expenses

incurred in the granting of any franchise pursuant to this section.” Id. Since 1999, franchise

fee charges have been stated separately on customer bills: “A franchise fee charge shall be

stated as a separate line entry on a bill sent by a public utility . . . to a customer and shall

only be recovered from a customer located within the jurisdiction of the government

authority imposing the franchise fee.” Section 62-6-4.5(A); see also In re Adjustments to

Franchise Fees, 2000-NMSC-035, ¶ 2 (quoting Commission Order 3071 that stated, “[m]ost

electric utilities regulated by the Commission have included franchise fees in base rates in

the past”). 

{13} While Section 62-6-4.5 refers to a franchise fee “charge,” a term in the list of words

used to define rate, see § 62-3-3(H), these charges are distinct from those that comprise rates.

As discussed above, a utility’s rate is based on its revenue requirements: the costs of

supplying the fuel and profit for the utility in an amount sufficient to encourage investment.

In contrast, a franchise fee is paid by the utility to the county for use of the county’s rightsof-way; the utility retains none of the monies collected as franchise fee charges but simply

passes them through to the counties. See In re Adjustments to Franchise Fees, 2000-NMSC035, ¶ 2. In City of Albuquerque v. New Mexico Public Service Commission, this Court

described the purposes of a franchise in the context of one issued by a municipality:

A franchise granted by a municipality to a public utility merely

entitles the utility to use the municipality’s streets and rights of way to

construct and operate its facilities and distribution system—that is, to run its

pipes, poles, wires, and cables, and to operate its towers, transformer stations,

and other necessary structures. . . . In exchange for granting a franchise, a

municipality may exact consideration from the utility, usually in the form of

a franchise fee. . . . If the municipality chooses to forego some or all of this

financial remuneration . . . that is up to the municipality and the utility and

is a matter of local concern.

115 N.M. 521, 533, 854 P.2d 348, 360 (1993) (internal citations omitted). Unlike rates,

franchise agreements and the fees imposed thereby are a matter of local concern, whether

that locality is a county or municipality. Franchise fees are not expenses measured on a

state-wide scale that contribute to a utility’s profit; they are monies collected by the utility,

in an amount contracted for with a local government, and passed through to that local

government.

{14} The similar treatment of franchise fee charges and gross receipts taxes supports the

conclusion that the Legislature intended to remove franchise fee charges from the utility
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rates. Section 62-6-4.5 requires utilities to pass through both gross receipts taxes and

franchise fee charges as separate line items on customer bills. When this statute was enacted

in 2003, the Commission was not treating gross receipts taxes as part of the rates over which

it had jurisdiction. See 17.1.330.9-.10 NMAC (12/30/01). We assume the Legislature is

aware of existing law, El Vadito, 115 N.M. at 789, 858 P.2d at 1268, including

administrative regulations, which have the force of law. Truong v. Allstate Ins. Co.,

2010-NMSC-009, ¶ 24, 147 N.M. 583, 227 P.3d 73. By addressing treatment of gross

receipts taxes and franchise fee charges in the same statute, the Legislature intended them

to be treated similarly by the Commission. We conclude, therefore, that the Legislature

intended for franchise fee charges to be distinct from rates—and thus outside of the

Commission’s jurisdiction.

{15} Nor are franchise fees taxes that the Commission may consider when setting rates.

Section 62-1-3 explicitly limits franchise fees imposed by counties to “charges for

reasonable actual expenses incurred in the granting of any franchise.” While taxes, other

than gross receipts taxes, are among the monies collected by utilities over which the

Commission has jurisdiction, franchise fee charges are not taxes. A tax is a charge imposed

that is not related to the services rendered. See N.M. Mining Ass’n v. N.M. Mining Comm’n,

1996-NMCA-098, ¶ 23, 122 N.M. 332, 924 P.2d 741. In contrast, a fee is related to a

particular benefit or service. Id. ¶ 22 (“Generally, a ‘fee’ is a charge intended to defray, in

whole or in part, the expense of regulating or providing a service, benefit or privilege.”).

The limitations placed on franchise agreements fees by Section 62-1-3 indicate that the

Legislature contemplated the charges as fees, not as taxes, thus excluding them from the

scope of the Commission’s power to consider taxes when setting rates. Cf. City of

Chattanooga, Tenn. v. BellSouth Telecomm., Inc., 1 F. Supp. 2d 809, 814 (E.D. Tenn. 1998)

(concluding that monies raised from franchise fees imposed on utilities that are used for

general purposes and not only for the upkeep of the rights-of-way for which the franchise

was imposed are taxes, not fees, under 28 U.S.C. § 1341). 

{16} Contrary to the Commission’s suggestion, franchise fees also do not come within the

Commission’s jurisdiction by analogy to fuel and purchased power adjustment clauses, over

which the Commission does have jurisdiction under Section 62-8-7(E). “The language of

Section 62-8-7(E) is plain and unambiguous: only ‘taxes or cost of fuel, gas or purchased

power’ may be recovered automatically.” NMIEC, 2007-NMSC-053, ¶ 31. Where the

Legislature has explicitly removed franchise fee charges from the Commission’s rate

jurisdiction, and the charges are outside the definition of Section 62-8-7(E), we will not

permit the Commission to expand its jurisdiction through false analogy. See State ex rel.

Sandel v. N.M. Pub. Util. Comm’n, 1999-NMSC-019, ¶ 17, 127 N.M. 272, 980 P.2d 55

(noting that the Commission does not have the power to “pour any meaning it desires into

the [jurisdictional] statute” (internal quotation marks and citation omitted)).

{17} Our conclusion today does not leave franchise agreements and related charges passed

on to public utility customers free from review. The proper method for challenging the costs

imposed by the ordinances is the local democratic political process. See City of Sunland
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Park v. N.M. Pub. Reg. Comm’n, 2004-NMCA-024, ¶ 25, 135 N.M. 143, 85 P.3d 267

(stating that the Commission “was created to serve as a watchdog for the public interest” but

that it did not have jurisdiction where not vested by the Legislature, which entrusted the

public good to a municipality). Additionally, the validity of the ordinance itself may be

challenged in a court properly vested with jurisdiction, as noted by the Commission in its

Final Order. See, e.g., Chavez v. City of Albuquerque, 1998-NMCA-004, ¶ 34, 124 N.M.

479, 952 P.2d 474 (noting that the proper venue for challenging an ordinance is the district

court). If the franchise agreements between EPE and the Counties are unlawful or

unreasonable, it is for a body other than the Commission to decide.

CONCLUSION

{18} The Commission improperly construed its jurisdiction over rates to include franchise

fee charges, pursuant to local franchise fee ordinances, on ratepayer bills. The Final Order

is hereby vacated and annulled. 

{19} IT IS SO ORDERED.

____________________________________

PATRICIO M. SERNA, Justice

WE CONCUR:

____________________________________

CHARLES W. DANIELS, Chief Justice

____________________________________

PETRA JIMENEZ MAES, Justice

____________________________________

RICHARD C. BOSSON, Justice

____________________________________

EDWARD L. CHÁVEZ, Justice

Topic Index for El Paso Elec. Co. v. N.M. Public Relations Comm'n, Docket No.

32,183

ST STATUTES

ST-AP Applicability

ST-IP Interpretation

ST-LI Legislative Intent

PU PUBLIC UTILITIES
9

PU-EL Electric

PU-RM Rate Making

AL ADMINISTRATIVE LAW AND PROCEDURE

AL-AA Administrative Appeal

AL-LI Legislative Intent