1 IN TH E SUPREME COURT O F THE ST ATE OF NEW MEXICO

2 Opinion N um ber: 3 F ili ng D at e: M ar ch 5, 201 8 4 N O. S -1 -S C -3 5697 5 NEW E NERGY ECONO MY, INC., 6 Appe llant, 7 v

. 8 NEW ME XICO PUBL IC REG ULATI ON COMMI SSI ON, 9 Appellee, 10 an d 11 PUBLI C SERVICE COMPANY OF NEW MEXI CO, 12 NEW MEX ICO IN DU STRIAL E NER GY CON SU MER S, and 13 WESTE RN RE SOU RC E A DV OCA TES, 14 In te rv en or s- Appe lle es . 15 In the Matt er of t he A pplication of 16 P ub lic S er vic e C om pa ny of N ew M ex ic o f

or 17 A pp ro val t o A ba nd on S an Ju an Ge ne ra ti ng 18 Station U nits 2 and 3, Issuance of C ertif icates 19 of P ublic C onvenienc e and N ecessity for 20 Re placem ent Pow er R esources, Issuance of 21 A cc ou nt in g O rd er s an d D et er m in at ion of 22 Re lated R ate-M ak

ing Pr inciples and Treatm ent, 23 NMPRC Case No. 1 3- 00 39 0- UT1 AP PE AL FR OM T HE N EW ME XIC O P UBL IC REGU LAT ION

2 COM MISS ION 3 N e wE n e r g y E c o n o my 4 Mari el N an as i 5 San ta Fe, NM 6 Free dm an Bo y d Ho ll an de r Gol db erg Uria s & W ard , P.A. 7 J o h n Wa rw i c kB o yd 8 Alb uq ue rq ue , NM 9 fo r Appe llant 10 Mi ch ae l C

. S m ith 11 San ta Fe, NM 12 for Appellee 13 PN M Resources, Inc. 14 Patrick V . Apodaca 15 Be nj am in J ohn Ph ill ips 16 St ac ey

J. G oodw in 17 Alb uq ue rq ue , NM 18 Cu dd y

& McC art hy, L LP 19 Patr ic k T

. O rt iz 20 San ta Fe, NM 21 Kele he r & Mc Leo d, P.A. 22 Thom as C. Bird 23 Alb uq ue rq ue , NM 24 Mi ll er St rat ve rt, P.A. 25 Richard L . A lvidrez 26 Alb uq ue rq ue , NM 27 for Inter

venor Public Service C om pany of N ewMexico1 Pe te r Jude G oul d

2 San ta Fe, NM 3 for Inter

venor NewMexico Industrial Energy Consum ers 4 W estern Resource Advocates 5 Steven S. Michel 6 San ta Fe, NM 7 for Inter

venor W estern Resource Advocates 8 Pa ul F

. H ult in 9 San ta Fe, NM 10 Heard Ro bi ns Clo ud LLP 11 Justi n Ross Kaufm an 12 Ro sa lin d B el l B ie nve nu 13 San ta Fe, NM 14 for A m icus Curiae 350 NewMexico1 OPIN ION

2 NA KAM UR

A, Ch ief Justice . 3 { 1} N ewE ne rg y

E co nom y , In c. ( N E E ) ap pe al s f

ro m af ina l or de r iss ue d by

the 4 Ne w Me xico Public Regulation Comm issio n (PRC ). N EE contends th at the PRC 5 vio la te d N ewMe xic o lawby appr ovi ng a

c ont es te d st ipu la tio n gr an tin g the Pu bli c 6 Se rv ic e Co m

pany of N ewMe xic o ( PN M) c er tif ic at es of pub lic c onve nie nc e an d 7 necessity

(CCN s) to acqui re newgeneration resources and by filing a notice 8 propos ing to dism iss the protests to PNM ’ s 2014 inte g ra t ed resource plan (IRP)

. 9 N E E ’ s arg um en ts are pr ed ic at ed on a m ist ak enund er standi ng o f the lawa nd a sk u s 10 to accept fa ctual assertions t h at were re j ected below. W e af

firm the PRC’ s final 11 order. 12 I. BACKGRO UND 13 { 2} T he r ec or d inthi s c as e is c om pr ise d of se ve nty -s ix v olu m es that c ont ai n ne ar ly 14 50, 000 pa ge s. I t i s, a s P N M p oin ts o ut, “ m as siv e. ” A ny a tte m pt at a c om pr eh en siv e 15 account of

t he b a c kg r ound

o f t hi s di r e c tapp e a l w ou l d be unp r od uc t i ve . Ab rief 16 ove rv ie w of the fa ct s and pr oc ed ur e fo llo w s im

m ed ia te ly be low

. Su

ppl em en ta l f

ac ts 17 ar e pr ovi de d a s ne ce ssary in the c our se of

our dis cu ssi on. 18 { 3} T he f

ed er al Cl ean A ir

A ct ( the A ct ) inc lud es pr ovi sio ns d es ign ed to pr es er ve 19 visib ility

standards by

im posin g lim itations on haze-ca using em issio n s . 42 U. S. C.2

1 §§ 7 410, 749 1- 92 ( 2012 ); se e ge ne ral ly A riz ona ex re l. D arw in v. U

. S. E.P.A

. , 815 2 F. 3d 51 9, 524-28 (9th Cir. 2016) (sum m arizing the legi s l at ive and regulatory 3 fram ew ork underly ing th e fe deral governm ent’ s efforts to address re gion al haz e). 4 The Act an d th e reg ul at io ns ad op te d by the Env iro nm en ta l Pr ot ect io n Ag en cy (EPA) 5 to e nf or ce it r equir e state s to de ve lop state im ple m en ta tio n pl an s to c ontro l and 6 m in im iz e so ur ces of h aze- cau si ng em is si on s. Se e ge ne ral lyA riz ona , 815 F

. 3d a t 52 4- 7 27 ( dis cu ssi ng the r es pons ibi lit ie s pl ac ed upo n th e state s by the A ct ). If a state f ai ls 8 to sub m it a state im

plem entation pl an or su b m i t s a plan that is in adequate, the A ct 9 perm its the EP A to im

pose a federal im

plem entation pl an. 42 U. S. C. § 741 0(c)( 1); 10 se e ge ne ral lyA riz ona , 815 F

. 3d a t 52 4- 27. 11 { 4} PN M is a part-ow ner of the San Juan Re gion al G eneration Station (San Juan), 12 a fo ur -unit , c oa l- fi re d po w er plant ne ar Farm ing ton , N ew Me xic o tha t is a sour ce of 13 em iss ion s th at

cau se or c ontri but e to h az e. T he E PAr ej ec te d N ewMe xic o’ s st at e 14 im ple m en ta tio n pl anto co ntr ol and m ini m iz e haz e- ca usi ng em iss ion s a t S anJuan and 15 pr opos ed

af ed er al im ple m en ta tio n pl anthat w oul d r equir e PN M t o in sta ll “ ex tr em el y 16 co stl y ” em iss ionc ontro ls o n a ll fo ur of the S anJuan un its

. 17 { 5} V ar iou s st ak eh old er s, inc lud ing seve ra l N ewMe xic o st at e ag en ci es , the 18 G ove rn or

of N ewMe xic o, tri ba l le ad er shi p, a nd P N M, e nga ge d indis cu ssi ons an d3

1 he ld o pe n publi c m ee tin gs t o id en tif y a n a lte rn at ive t o th e fe de ra l i m ple m en ta tio n 2 plan tha t w oul d en sur e N ew Me xic o’ s co m pli an ce w ith the fe de ra l haze stand ar ds. 3 Ultim ately , an agreem ent was r eached and a revised state im plem entation pl an wa s 4 subm itted to th e E PAproposi ng the following cou rse of a cti o n: PNM would retire 5 San Juan Units Tw o and Three , install less-costly pollu tion con t ro l s o n San Juan 6 U nit s O ne a nd F our , a nd r ep la ce the los t gene ratio n cap ac ity fr om the r et ir em en t of 7 San Juan Units Tw o and Three with genera tion from other resources that m inim ize 8 im pa ct s onvis ibi lity . T he E PAa cc ep te d th e re vis ed state im ple m en ta tio n pl an . 9 Approval and

Prom ulga tion o

f Im plementation Plans New Me xico , 79 F ed

. Re g. 10 2690 9, 269 09- 21 ( May 12, 201 4)

. I n th e w ak e of the E PA ’ s a cc ep tanc e, the f oc us o f 11 the vari ous stake hol de rs tur ne d to w ha t re sour ce s PN M w oul d ut ili ze to re pla ce the 12 ge ne ratio n c ap ac ity

los t a s ac onse que nc e of the r et ir em en t o f th e tw o un its

. T his 13 questio n was e xtensiv ely litigated before the PRC as P NM is r equired to obt ain PRC 14 ap pr ova l t o ab an don, a cquir e, or c onstru ct ge ne ratio n r es our ce s. N MS A 197 8, § 62

- 15 6-12(A)( 4) (1989); NMS A 197 8, § 62-9-1(A) (2005); NMSA1978 , § 62-9-5 (2005). 16 These statutes governing th e PRC ’ s oversight of g eneration resources are e xam ined 17 m or e cl ose ly

in our dis cu ssi on.16 PN M indicated that it could also utilize solar and gas resources and filed 1 17 se parate ind ep en de nt a ppl ic at ion s w iththe P RC to co nstru ct asol ar pho tov olt ai c 18 fa ci lity

a nd a gas pe ak ing plant to m ak e up f or the c ap ac ity

los t du e to the r et ir em en t 19 of the uni ts at S anJuan. 4 1 { 6} In De cem

ber 2013, PN M filed an application w ith the PRC to r etire S an Juan 2 U nit s T w o and T hr ee a nd f or CC N s to uti liz e tw o sour ce s to r ep la ce the ge ne ratio n 3 ca pa ci ty los t f ro m the r etirem en t of

the tw o un its : P al o V er de N uc le ar G en er at ing 4 Station (Palo V erde) Unit T hree and addi tional generation capacity from San Juan 5 U nit F our . T he PRC ap po int ed ahe ar ing e xa m ine r (H E ) to a ddr es s th e m er its of 1 6 PNM’s ap pl ic at io ns . See 1.2. 2.29(B) N MAC (“ In all p ro ceedin gs, the [P RC] m ay 7 designate a h earing exam iner .

. . to preside over the proce eding.”); 17.1. 2.9(C) 8 N MA C ( “ T he [ PR C] , upo n r eceip t of an appl ic at ionf or ac er tif ic at e of pub lic 9 convenience and necessity , shall fix a tim e for a p ublic hearing.”). N EE and sixteen 10 other parties, includi ng several Ne w Me xico gov ernm ental agencies, environm ental 11 advocates, and ind ustrial and consu m er a dvocates, j oined th e proceeding s as 12 int er ve nor s. 13 { 7} In Oc tober 2014 , a fter discovery had been provided and num erous witnesses 14 and subject-m atter e xperts testified at m ultip le hearings, P NM, along with several 15 pa rti es , su bm it te d a st ip ul at io n th at pr op os ed a res ol ut io n to th e pr oc eed in gs . NEE5

1 and several other parties c ontested th e stipul at i on. A dditi onal hearings were 2 co nduc te d and the H E iss ue d a thor ough an d deta ile d r ec om m en da tio n a dvi sin g th e 3 PR C t o r ej ec t the sti pul at ion

. 4 { 8} T he H E co nc lud ed tha t the sti pul at ion w as fata lly fl aw ed be ca use P N M h ad

not 5 shown t h at San Juan Unit Four w as a re liable replacem ent generation resource. 6 N ev er the le ss, the H E c onc luded that P N M s houl d r ec ei ve aCC N to obt ai n 7 re pla ce m en t ge ne ratio n f ro m P al o V er de U nit

T hr ee a nd d et er

m ine d th at

the 8 st i p ulation as a w hole sho uld be approv ed if PN M and the other stipu lating parties 9 de m onstrate d th at

S an Ju an Unit

F our c oul d be r el ie d up on a s ar ep la ce m en t 1 0 g en er at i o n re s o u rc e. PN M an dt h e o t h ers t i p u l at i n g p ar t i es ac t ed o n t h e H E’s 11 gui danc e an d su

bm itt ed asup ple m en ta l st ipu la tio n inA ugus t 2015 tha t addr es se d th e 12 HE ’ s concerns. NE E c ontested th e supplem ental stipul ation, but this tim e w as j oined 1 3 b y o n l y o n e o th e r

p a rt y. 14 { 9} H eari ngs w er e ag ai n c ondu ct ed a nd the H E iss ue d anothe r tho ro ug h and 15 detailed recom

m endation in which all of N EE ’ s objections to the sup plem ental 16 stipu lation were addressed. The H E w as satisfied that PN M had dem onstrated that 17 it ha d ade qua te re pla ce m en t re sour ce s and had re sol ve d th e iss ue s th at ha d pr ev iou sly 18 co nc er

ne d th e H E w ithr es pe ct

to San Juan U nit

F our . T he H E r ec om

m en de d th at

the6

1 PR C a cc ep t the sup ple m en ta l st ipu la tio n w ithm ino r m odi fi catio ns t ha t ar e not 2 re le vant her e. T he H E al so re co m m en de d that the PR C a cc ep t a pr ovi sio n w ith in the 3 supp lem ental stipul ation statin g that “ protests of PNM’ s 2014 IRP shoul d be closed 4 wit ho ut fur th er [PR C] acti on in th atdo ck et .” 5 { 10} Th e P RC i s s u ed a f i n al o rd ero n De ce m

b er 1 6 , 2 0 1 5 ac ce p t i n g t h e H E’s 6 re co m m en da tio ns. N E E ap pe al s the PR C’ s fin al or de r. W e hav e j ur isd ic tio n ov er the 7 ap pe al und er

N MS A 197 8, S ec tio n 62 -1 1- 1 ( 1993 ) (“ A ny party t o any

pr oc ee din g 8 before the c omm issio n m ay file a notice of appeal in the suprem e court asking for a 9 reviewof the com

m issio n’ s final orders. ”). 10 II. DISC US SION 11 { 11} N E E a rg ue s tha t “ [t ] he PR C’ s or de r vio la te s N M statut es an d P RC r eg ula tio ns” 12 because “ [t] he PRC acce pted PNM’ s lim ited alternatives in violation of the law. ” In 13 supp ort of its pos i t i on, N EE m akes m any argum ents that this court finds are 14 unpe rs ua siv e or

e nti re ly w ith out m er it. W e be ginour

dis cu ssi on b y

e xa m in in g th e 1 5 ap p l i c a b l e s t a tu t o ry an dre g u l at o ry s t an d ar d s i m p l i ca t ed b y NEE ’s ar g u m en t s . We 16 then review the adm inistrative record and describe h ow these standards we re a pplied 17 in this c as e. Nex t, w e ide nti fy the standard

of r ev ie wthat go ve rn s our re vie wof 18 NE E’ s argum ents and clarify what w e m eant when w e explained in the collateral7

1 m an da m

us p ro ce ed ing N E E ini tiate d th at we w oul d r ev ie wthi s a ppe al w ith 2 “ he igh te ne d sc ru tin y . ” F ina lly , w e tur n to N E E ’ s sp ec if

ic a rg um en ts. 3 A. Statu tory and R egulatory Stand ards 4 1. IRPs 5 { 12} Th e Ef

ficient U se of E nergy

Ac t, N MSA1978 , §§ 62-17-1 to -11 (200 5, as 6 am en de d t hr ou gh 20 13 ) , r e qu i r e s “ pu bl i c ut i l i t i e s su

pp l y i ng e l e c t r i c or natur a l gas 7 se rv ic e to c ust om er s [ to] pe ri odi ca lly fi le an [I RP ] w ith the [P RC ]

. ” S ec tio n 62 -1 7- 8 10; se e als o § 6 2 -1 7 -2 (I ) (“[P ]ub l i c u t i l i t y re s o u rc e p l an n i n g t o m ee tNe w M ex i co ’s 9 en er gy se rv ic e ne ed s sh oul d be ide nti fi ed a nd e va lua te d on an on go ing ba sis in 10 accordance with the principles of integrated resource plannin g.”)

. These I RPs 11 sha ll ev al ua te ren ew ab le e ne rg y , e ne rg y e ff ic ie nc y , loa d m an ag em en t, 12 dis tr ibu te d ge ne ratio n a nd conve nti ona l su ppl y -s ide r es our ce s ona 13 co nsi ste nt and c om para ble ba sis a nd t ak e int o c onsi de ratio n r isk a nd 14 uncertainty

of fuel supply , pric e volatilityand costs of anticipated 15 en vir onm ental r eg ula tio ns i n or de r to i de nti fy the m ost c ost -e ff ec tiv e 16 portf

oli o of r es our ce s to sup ply

the e ne rg y

ne ed s of c ust om er s. 17 Se ct ion62- 17- 10. “ T he pr ep ar at io n of r es our ce plans s ha ll inc or por at e a publ ic 18 advisory

process.” Id

. T he PRC has prom

ulgated regulation s to effec tuate the IRP 19 provisi ons. 17.7.3 N MAC (04/16/2 007, as am ended throug h 08/2 9/20 17). 20 { 13} Un de r 17

. 7. 3. 9 N M A C , ut i l i t i e s m us t f i l e a n I R P w i t h t he c om

m i ss i on e very 21 th ree ye a r s . Each IR P is to em pl oy a twen ty-y ear p la nn in g h or iz on . 17 .7.3 .7(K)8

1 N MA C. A n I RP sho uld se ek to ide nti fy “ re sour ce opt ion s” an d de te rm ine “ the m ost 2 co st e ff

ec tiv e re sour ce portf

oli o and a lte rn at ive portf oli os [.]” 17

. 7. 3. 9( B) (4 ), (7 ) 3 N MA C. A ddi tio na lly , 17. 7. 3. 9( G )( 1) N MA C p ro vid es a s f oll ow s: 4 T o id en tif

y the m ost c ost -e ff ec tiv e re sour ce portf

oli o, uti lit ie s sh al l 5 evaluate all fe asible supp ly , energy storage, and dem and-side resource 6 opt ion s onac onsi ste nt and c om parab le ba sis , a nd t ak e int o 7 co nsi de rat io n ri skan d u nc ert ai nt y (in cl ud in g b ut no t l im it ed to fi na nc ia l, 8 co m

pe tit ive , r el ia

bil ity , ope rationa l, f

ue l su ppl y , pr ic e vol at ili ty

a nd 9 an tic ipa te d e nvi ro nm en ta l r eg ula tio n )

. T h e uti lity sha ll ev al ua te the c ost 10 of eac h resource t h ro ugh it s proje cted life w ith a life-cy cle or sim ilar 11 an al y sis

. T he uti lity sha ll al so c onsi de r an d de sc ri be w ay s to m iti ga te 12 rate pay er

r isk

. 13 O the r statut es gov er

n th e ci rc um stanc es und er w hic h auti lity

m ay pr oc ur e, c onstru ct , 14 or abandonge ne ratio n r es our ce s. 15 2. CCNs 16 { 14} U til iti es m

ust obt ai n PR C ap pr ova l w he ne ve r the y se ek to ac qui re ane xis tin g 17 ge ne ratio n r es our ce or abandon a gen er at ion re sour ce . S ec tio n 62 -6 -1 2( A )( 4) ( “ W ith 18 the pr ior

e xpr es s auth or iz at ionof

the c om m iss ion , but

not oth er w ise

. . . a ny

pub lic 19 uti lity m ay se ll, le as e, r en t, pur ch as e or a cquir e an y

pub li c ut il it y plant o r pr ope rty 20 co nst itu tin g an op er at ing uni t or sy ste m or an y sub stanti al part

the re of [. ] ”) ; S ec tio n 21 62- 9- 5 ( “N o ut ili ty sha ll ab an don al l or an y portio n of it s f ac ili tie s . . . w ith out

f ir st 22 obt ai nin g th e pe rm iss iona nd a ppr ova l of

the c om m iss ion

. T he c om

m iss ionsha ll9

1 gr an t su chpe rm iss iona nd a ppr ova l, af

te r not ic e an d he ar ing , upo n f ind ing that the 2 co nti nua tio n of

se rv ic e is unw ar

rante d or that the pr es en t and f uture pub lic 3 convenience and necessity d o not oth erw ise require the continuation of the service 4 or use of the f ac ili ty [. ] ”)

. U til iti es m

ust obt ai n a CCN fr om the PR C t o c onstru ct or 5 ope rate a ny

ne wge ne ratio n r es our ce . S ec tio n 62 -9 -1 (A ) (“ N o publi c uti lity

sha ll 6 be gin the co nstru ct ionor ope ratio n of

a ny pub lic uti lity

plant o r sy ste m

. . . w ith out 7 fi rs t ob ta ini ng fro m the c om m iss ionac er

tif ic at e tha t pu

bli c co nve nie nc e an d 8 necessity

require or will re quire such const ru ct ion or operation.”). T he PRC has 9 in te rp ret ed“ pu bl ic co nv en ie nc e an d n eces si ty” to en ta il a ne t p u b l i c be ne fit

. In re 10 V all e V ista W ate r U til

. Co

. , 212 P. U. R. 4th 30 5, 309 (2001). 11 { 15} T hr ough out

it s br ie fi ng, N E E c ite s to the statut es a nd a dm in is tra tive 12 re gul at ion s go ve rn ing the I RP pr oc es s as suppo rt fo r its ar gum en ts tha t the H E a nd 13 PR C c om

m itt ed e rr or in the sti pul at iona nd s uppl em en ta l st ipu la tio n pr oc ee din gs, 14 w hic h w er e ini tiate d to r es olv e PN M’ s C CNappl ic ation s. N E E pr ovi de d no 15 ex plana tio n w hy

it w as c iti ng the I RP r eg ula tio ns in its ch al le nge to the c onc lus ion s 16 re ac he d inthe CC N pr oc ee din gs. I t w as onl y a ft er we rev ie we d th e adm ini str at ive 17 reco rd s i n t h e p r oc eed in gs ari si ng fro m PNM’s 2 01 1 a nd 20 14 IRPs th atwe 18 understoo d why

NE E point s to the IRP standards as grounds to objec t to the CCN10

1 de te rm ina tio n. N E E did not dir ec t us to the se re co rd s and, y et , the y a re e sse nti al to 2 un de rs ta nd in g NEE’s arg um en ts an d th e p ro ceed in gs be lo w. The ag reem en ts PNM 3 an d the sti pul at ing part ie s re ac he d in the CC N pr oc ee din gs to ensure co m pli an ce w ith 4 t h e r ev i s ed s t at e i m

p l emen t at i o n p l an p ro p o s ed t o re s o l v e t h e 2 0 1 4 IR P p ro t es t s . We 5 nowr ev ie wtho se r ec or ds and the a dm ini str at ive pr oc ee din gs. 6 B. The A dm inistrative R ecord 7 { 16} PN M f

ile d it s 20 11 I RP w iththe P RC i n Ju ly201 1. N E E a nd s ev er al of the 8 interven o rs i n the present appeal filed protests, and in August 201 1 the PRC set 9 hearings on th ose protests. A t a prehearing conference, P NM an d several other 10 parties m ade a r equest for m ediation, which was granted. Mediation wa s scheduled 11 for June 2012 ; however, at the end of May 2012 , P NM and several of the protestors 12 fi l ed an unop posed m otion to vacate the m ediation. T he m otion explained that 13 “ co nti nua tio n of

the m ed ia tio n pr oc es s a t this ti m e w oul d no t b e pr oduct ive

. ” T he 14 m ovants a ske d N E E it s po sit ionon the m oti on and N E E did not opp ose it

. 15 { 17} In Sep te m

be r 20 13 , PNM file d a no ti ce o f m at eri al ch an ge wit h t he PRC. See 16 17. 7. 3. 10 N MA C ( “ T he uti lity sha ll pr om ptl y not if y the co m m iss ion an d part ic ipants 1 7 o f mat er i al ev en t s t h at wo u l dh av e t h e e ff ec to f c h an g i n g t h e r es u l t s o f t h e u t i l i t y’ s 18 IRP had those events been recognized when the IRP was develop ed.”)

. PN M stated11

1 t h a tt h e E P A ’s a c c e p t a n c e o f t h e r e v i s e ds t a t e i mp l e me n t a t i o n p l a n c o n s t i t u t e d“a 2 m at er ia l c hange in ci rc um stanc e tha t has the ef fe ct of c hangi ng c er

ta in r es ult s of

the 3 2011 IRP .” PN M further state d that the m aterial c hange prom pted it to “ acce lerate[ ] 4 as p ec ts of the developm ent of its 201 4 IRP” and to seek approval of a “ regulatory 5 plan to com

ply with the [r evised s t ate im plem entation pl an] , including any needed 6 revisions to the four-y ear action plan in th e 2011 IRP. ” T wo day s after PN M filed 7 this no tice of m aterial c hange, the PR C (upon its own m o t ion) filed a notice 8 pr oposin g to d ism iss the 201 1 I RP pr ote st p ro ce ed ing s f or la ck of a ct ivi ty

. T he 9 part ie s pr ote sti ng the 201 1 I RP w er e pe rm itt ed a n op port un it y

to fi le am oti on 10 ex pla ini ng w hy

the 2011 IRP pr ote st doc ke t shou ld re m ai n ope n, but no s uc h m oti on 11 w as f ile d and the 201 1 I RP he ar ing s w er e cl ose d. 12 { 18} T he CC N pr oc ee din gs fr om w hic h NE E pur sue d this pr es en t appe al be gan in 13 D ec em

be r 2013 w he n P N M f

ile d it s ap pli catio n f

or the CC N s r equir ed

to co m ply 14 with the revised state im plem entation pl an. PN M subm itted its 20 14 IRP to the PRC 15 in July

201 4, w hil e the CC N pr oc ee din gs w er e ongo ing

. N E E a nd s ev er al of the 16 int er ve nor s inthi s pre se nt app ea l fil ed pr ote sts to PN M’ s 20 14 I RP

. N E E ’ s pr ote st 17 ac know le dge d th e ove rl ap be tw ee n th e iss ue s inthe CC N pr oc ee din gs and the 201 4 18 IRP pr ote st p ro ce ed ing s and co nte nde d th at the pub lic ’ s in te re st i n e ff ic ie nt12

1 adj udication would be best served b y addressing th e 2014 IRP m atters af ter the CC N 2 ca se w as r es olv ed

. T he PR C agr ee d and con cl ude d that the 201 4 I RP pr ote st h eari ngs 3 w oul d be he ld i n a

be y an ce unt il the CC N pr oc ee din gs w er e fi na liz ed

. 4 { 19} A t the c onc lus ionof the CC N pr oc ee ding s, th e H E de te rm ine d th at the 5 re pla ce m en t gene ratio n re sour ce portf oli o iden tif

ie d in the supp le m en ta l st ipu la tio n 6 pr ovi de d ane t publi c ben ef it— the ap pli ca

ble standard

P N M h ad

to sa tis fy to re ce ive 7 a CC N

. T he m odi fi ed

sti pul at ion 8 (1 ) al low s PN M and the state of N ewMe xic o to c om

ply w ithf ed er al lawby 9 retiring San Juan Units T wo and T hree; 10 (2) elim inates a significant amo unt of coal-fired gener ation at San 11 Juan—h al f the pow er plant’ s c ap ac ity

—the re by

c utt ing gr ee nhou se ga s e m iss ion s, 12 dust em issio ns, and water use in half; 1 3 (3 ) saves PN M cus t o m er s ap p ro x i m at el y $ 3 4 0 m i l l i o n b y i n co rp o ratin g new 14 ow ne rs hip a nd c oa l su ppl y a gr ee m en ts; 15 (4) y ields additi onal saving s for ratepay ers o f u p to $3 8 m illion due to an 16 agreed r eduction in the rate- base value of Palo V erde U nit Three; 1 7 ( 5 ) u t i l i z e s e x i s t i n g r e s o u r c e s t o ma i n t a i n t h e r e l i ab i l i t y o f P N M ’s s ys t e m;13

1 (6 ) co m

m its P N M t o in co rp or at ing m or e re ne w ab le en er gy pr oduc tio n init s 2 en e r g y s up p l y a n dr e qu i r e s P N M ( s t a rt i n g i n 2 0 2 0 ) t o a c qu i r e s o l a r o r w i n dc r e d its 3 or allowance s, w hich will h elp satisfy requirem ents of b oth the federa l Clean Pow er 4 Pl an an d Ne w Me xic o Ren ew ab le E ne rg y A ct , N MS A 1978 , Se ct ion62- 16- 1 to - 10 5 (2004, as am ended throug h 201 4); 6 (7 ) re qui re s P N M t o is sue a nd e va lua te a re que st fo r pr opos al s f or a ll en er gy 7 sour ce s id en tif

ie d inthe 201 7 I RP usi ng a hy pothe tic al as sum

pti on tha t San Juanw ill 8 no l onge r ope rate a ft er 202 2; 9 (8) pro v i d es for a 2018 PRC reviewof the future of S an Juan in New 10 Me xic o’ s en er gy supp ly tha t w ill al low fo r the r es olutio n of unc er ta int ie s r eg ar din g 11 lon ge r- te rm

c oa l co sts , en vir onm en ta l re gul at ion s, an d San Juan ow ne rs hip int er es ts 12 be y ond the e xpi ratio n of the c ur re nt o w ne rs hip c om

m itm en ts i n 20 22; 13 (9 ) re qui re s P N M t o ob ta in f irm pr ic ing a nd o the r te rm s be for e ex te ndi ng 14 its e xis tin g c oa l- supp ly a gr ee m en t be y ond 2022 ; 15 (1 0) m ini m iz es the im pact cl osing S anJuan w ill ha ve on S anJuan C ounty 16 an d no rthw es t N ew Me xic o, w hic h de pe nd on San Juan a s asourc e of e m plo ym en t 17 by “ pr ovi d[ ing ] a n a dd it ion al 4 1/ 2 y ears be y ond the 201 7 [ part ia l] c los ur e fo r the14

1 region and PNM c ustom ers to econom ically prepare and adj ust” in the event th at 2 PN M s hut s do w n, or

part ia lly shu ts d ow n, the r em ai nin g S anJuan un its ; and 3 (11) requires PN M t o contribute $250 ,000 at shareholder expense rather than 4 rate pay er

e xpe nse to a G ood N ei ghbo r Fund tha t as sis ts l ow -i nc om e cu sto m er s w ith 5 the ir uti lity bil ls. 6 { 20} T he H E a lso r ec om m en de d th at

the P RC ap pr ove th e pr ovi sio n inthe 7 supp le m en ta l st ipu la tio n r ec om m en din g di sm iss al of

the 201 4 I RP pr ote st 8 pr oc ee din gs and state d “ tha t the re w ill li ke ly be no v al id p ur

pose to pr oc ee d w iththe 9 2014 I RP pr oc ee din g. ” T his de te rm ina tio n is sup porte d by se ve ra l f ind ing s: ( 1) 10 “ [e] ach o f [PNM’ s] 20-y ear analy ses showed that the replacem ent [generation] power 11 portfolio th at includes the 13 4 MWof Palo Verde Unit 3 and th e additional 13 2 MW 12 of San Juan Unit 4 is the m ost cost effective portfolio of the alternatives analy zed”; 13 (2) “ the reviewconducted fo r t h e CCN s requested in this proceeding has been 14 equiv al en t t o an I RP r ev ie w ”; ( 3) the CC N s a t i ssu e in P N M’ s a ppl ic at ion“ re sol ve 15 PN M’ s ne w r esour ce ne ed s f or the f our y ea r pe ri od o f the a ct ionplan inthe 201 4 16 IRP” ; and (4) th e su pplem ental stipu lation requires PNM to com m it to certain future 1 7 re s o u r c e p l a n n i n g o b l i g a t i o n s . T h e s e f u tu r e o b l i g a t i o n s w i l l r e qu i r e P N M t o f i le 18 “ w iththe [P RC , af

te r Jul y 1, 201 8 bu t no la te r than D ec em be r 31, 201 8, ] to de te rm ine15

1 the e xte nt t o w hic h th e San Ju anstatio n sh oul d c ont inu e se rv ing PNM’ s r et ai l 2 cu sto m er s’ ne ed s a ft er Jun e 30, 202 2[ , ] ” an d w ill r equir e PN M t o c ondu ct ar eque st 3 fo r pr opos al s a s so on a s pr ac tic ab le a fte r the f ili ng o f its 201 7 I RP to ide nti fy the 4 m ost c ost -e ff ec tiv e re sour ce portf

oli o us ing the a ssu m

pt io n th at S anJuan wi ll not 5 co nt in ue to op erat e be y on d 20 22

. The se fu tu re o bl ig at io ns are i m po se d u po n P NM 6 not because the stipu lating parties wished to delay review, but because crucial 7 inform ation regarding the future of coal supplyfor S an Juan would likely be resolved 8 by 2018 and this, in turn, w ould perm it the m ultip le owner s of San Juan to have a far 9 clear er sense a

bout whether

they each, indiv idually , w ish to con tinue op eration of San 10 Juan. 11 { 21} D es pit e the ab undanc e of ev ide nc e supp ortin g clos ur e of PN M’ s 2014 IRP, the 12 HE em

phasized that “ the [PRC ] cannot properly act in this [CCN ] docket to close a 13 se parate doc ke t” a nd i nst ea d r ec om m en de d “ tha t the [ PR C] , ba s e d u p o n th e ap pr ova ls 14 it will have granted here , issue a No tice of Pr opos ed Dism issal in th e 2014 IRP 15 doc ke t, a s it

did in the 2011 IRP ca se . ” T he P RC a cc ep te d th is r ec om m en da tio n and 16 a not ic e of

pr opos ed dis m iss al w as fi le d in the 2014 I RP doc ke t. N E E f ile d ar eque st 17 to h old

the 2014 IRP pr oc ee din gs in abe y an ce or dis m iss the m w ith out pr ej udi ce , but16

1 the PR C has not fi le d an orde r gr an tin g or deny ing thi s re que st. T he la st f ili ng i n th e 2 2014 I RP doc ke t w as anot ic e of m at er ia l e ve nt f

ile d by P N M i n Ju ly

201 6. 3 C. Stand ard of R eview 4 { 22} This appeal ar ises from a final order

approving a contested sup plem ental 5 stipu lation. T he Ne w Me xico Adm inistrative Code identi fies the procedures the PRC 6 m ust f oll oww he n a dj udi catin g ac ont es te d st ipu la tio n. 1. 2. 2. 20( B) N MA C. O ur c as e 7 lawpr ovi de s th e subs tanti ve le ga l st an dard s th at m ust be m et to pe rm it the P RC to 8 approve a contested stipu lation. O ur case law instructs that the PRC 9 can a dopt

a co nte ste d stipu la tio n by , fi rs t, af fo rd ing a ny

non -s tip ula tin g 10 party

a n op portun ity

to be he ar d on the m er its of the sti pul at ion

. . . a nd 11 second, m aki n g an independ ent finding , supported by subst antial 12 ev ide nc e in the r ec or d, that the sti pul at iondoe s in de ed r es olv e the 13 m atte rs in dis put e in a w ay that is fai r, jus t and re as ona ble a nd i n th e 14 publ ic int er es t. 15 Attorney Ge n. v. N.M

. Pub. Serv . Co mm ’n , 199 1- N MS C- 028, ¶ 15, 111 N

. M. 636 , 16 808 P. 2d 606. T he he ar ing s be loww er e co nduc te d inc onf orm ity w iththe gov er

nin g 17 regulation and th e H E c orrectly identified the sub stantive legal standards necessary 18 to resolve the m erits o f th e contest and determ ined that bo th prong s of the two-part 19 te st w er e m et

. T he P RC a cc ep te d th e H E ’ s de te rm ina tio n. 20 { 23} N E E doe s no t arg ue that i t w as de nie d an op portun ity to be he ar d onthe m er its 21 of the contested sup plem ental stipul ation, and this is for good rea son. All intere sted17

1 stake hold ers were giv enm or e than a de qua te opp ortun ity to part ic ipa te in the 2 extensive adm inistrative proce edings below. NE E’ s argum ents are directed solely at 3 the f ac tua l ba sis upo n w hic h th e H E ’ s and P RC ’ s de ci sions r es t and the law fu lne ss 4 of the PRC’s decision to accept the HE rec omm endation to approve the contested 5 supp lem ental stipul ation. T he s t an d ards we apply to these ty

pes of argum ents are 6 w el l- se ttl ed

. 7 { 24} Ge ne ra l l y speaking , w e re view the P RC’ s determ ination s to decide whether 8 the y a re “ ar bitrary an d ca

pr ic iou s, not

sup porte d by

sub stanti al e vid en ce , out sid e the 9 scope of the agency ’ s authority , or otherwise inconsistent with l aw , with the burden 10 on the appellant to m ake this sho wing[. ] ” N

. M

. I n du s . Ene rg

y Co ns ume rs v. N.M. 11 Pub. Re

gula tion Comm’ n (NM

IE C) , 200 7- N MS C- 053, ¶ 13, 142 N

. M. 533, 168 P. 3d 12 10 5 (int er

na l qu ota tio n m ar

ks and c itatio n om itt ed ); see N M S A 1 97 8, § 6 2- 11 -4 13 (1 965)

. T his ge ne ra l r ule is subj ec t t o f

urthe r re fi ne m en t. 14 { 25} W e m

us t as se ss whet he r th e PRC ’s dec is io n p res en ts a q u e st io n o f fac t, a 15 qu es ti on of l aw, orso m e co m bi na ti on of th e two

. Albuquerqu e B ernalill o Cty. W ater 16 Uti l. Au th . v. N. M

. Pub. R eg ul at io n C

omm’n (ABCW

UA) , 201 0- N MS C- 013, ¶

17, 148 1 7 N

. M

. 2 1 , 2 2 9 P

. 3 d 4 9 4

. “ W i t h r e s p e c t t o qu e s t i o n s o f f a c t , w e l o o k t o the w hol e 1 8 re co rd t o d et er m i n e w h et h ers ub s t an t i al ev i d en ce s up p o rt s t h e C o m m i s s i o n ’s18

1 decision.” NMIEC , 2007 -N MS C- 053, ¶ 24. “ W e vie wthe e vid en ce in the li ght m ost 2 favor ab le to the [ PR C’ s] de ci sio n and draw ev er y inf er en ce in supp ort of

the [ PR C’ s] 3 decision[.] ” Id

. ( ci ta tio n om itt ed ). Whe n f ac t f ind ing is ne ce ssari ly

pr ed ic at ed

on 4 m at te rs r e q u i rin g e xp ert is e, ou r de fere nc e is su bs ta nt ia l. Se e ABCW UA , 5 2010 -N MSC- 013, ¶ 50 (“ The PRC’ s decisions requiring expertise in high ly technical 6 area s, s uc h a s u ti li ty rate d et erm in at io ns , are ac co rd edco ns id erab le de fere nc e.” 7 (internal quotation m arks and citation o m i t t ed ))

. As to m atters of law , if it is clear 8 tha t our L eg isl at

ur e de le ga te d to the PR C (e ith er ex pli ci tly or im pli ci tly ) the ta sk o f 9 g i v i ng m eaning to in terpretive gaps in a statute, w e w ill defer to the PR C’s 10 co nst ruct io n o f th e st atut e as th e PRC ha s b een de le ga te d p ol ic y -m ak in g a ut ho rit y and 11 po ss es se s th e ex pe rti se ne ces sa ry to m ak e so un d p ol ic y . Se e ge ne ral lyI Ri ch ar d J. 12 Pi erce , Jr., A dm ini

strati ve L awT

re ati se § § 3

. 2

- 3

. 3 , a t1 5 9

- 6 1 ( 5 t h e d

. 2 0 1 0) 13 (d es cr ibi ng the natur e of j udi ci al r ev ie wof

a ge nc y pol ic y de ci sio ns) ; ac co rd Cityof 14 Albuquerqu e v. N. M. Pub. Re gula tion Comm’ n , 2003-NMS C- 0 2 8 , ¶ 16, 134 N. M. 15 472, 79 P. 3d 297 (“ [I ] t is pr es um ed , in the co nte xt of adm ini str at ive m atte rs that the 16 Le gislature has delegated to an agency , that the Le gislature intended for the agency 17 to i nte rp re t l eg isl at ive langua ge , in a re as onabl e m anne r co nsi ste nt w ithle gis la tiv e 18 int en t, in or de r to d ev el op th e nece ssary pol ic y to re spon d to una ddr es se d or19

1 unf or es ee n is sue s. ”)

. “ H ow ev er , w e ar e not bound b y the [ PR C’ s] int er

pr et at iona nd 2 w e m ay

sub sti tut e our

ow n in de pe nde nt j udgm en t for tha t of the [ PR C] if the [ PR C’ s] 3 interpretation . .

. is unreasonable or unlawful.” ABCW UA , 201 0- N MS C- 013, ¶ 51 4 (om issio n in origin al) (inter nal quot ation m arks and citation om itted). 5 { 26} N E E ’ s ar g u m e n t s r e qu i r e u s t o o v e r l a y t h e s e w e l l

- s e t t l e d s t a n d a r d s t o th e 6 PR C ’ s de t e rm i nat i on t o a c c e pt t he c on t e st e d st i pu l a t i on . I n pr a c t i c a l t e rm s and as 7 w ill be m ad e ev ide nt i n the co ur se of our dis cu ssi on o f N E E ’ s sp ec if ic a rg um en ts, thi s 8 m eans w e m

ust de te rm ine w he the r the f ind ing s th at

pr om pte d th e PR C t o a cc ep t the 9 co n t es t ed s t i p u l at i o n ar e su p p o rt ed b y s ub s t an t i al ev i d en ce an d wh et h er t h e PR C’s 10 de ci sio n to a cc ep t the co nte ste d sti pul at ion as a re as ona ble a nd j ust

r es olu tio n of

the 11 CCN proceedings was a lawf ul and per m issib le exercise of its discretion. O ne final 12 pr el im inary

m atte r re qui re s our atte nti on b ef or e tur nin g to N EE’ s argum en ts: our 13 st at em en t t ha t we wo ul d re vi ew th is cas e wit h “ he ig ht en edscrut in y .” 14 { 27} D ur ing the c our se of the adm ini str at ive pr oc ee din gs, N E E f ile d ape tit ionf

or 15 a w ri t of m an da m

us as kin g thi s Co urt to or de r se ve ra l of the PR C C om m iss ion er s to 16 re cu se the m se lve s f

ro m part icip at io n in the CC N pr oc ee din gs o n gr ound s th at the 17 co m m iss ion er s a lle ge dly

e nga ge d inina

ppr opr ia te e x part e comm un ic at ion s w ith 18 PN M and w er e pur

porte dly bia se d inf

av or of PN M. W e re

j ec te d N E E ’ s pe tit ion , did20

1 not a cc ep t i ts c ont en tio n th at the c om m iss ion ers were bia se d, but ne ve rthe le ss 2 ind ic at ed

that w e w oul d re vie w the re co rd in the sti pul at ionpr oc ee din gs, w he n and 3 if a n a ppe al w as take n, w ith“ he igh te ne d sc ru tin y . ” W e ha ve don e j ust that. 4 { 28} NE E’ s argum ents and the factual predicates upon which th ose argum ents are 5 ba se d have be enc ar ef ull y sc ru tin iz ed

. N E E is en tit le d to nothin g m or e. N E E is 6 m ist ak enw he n it

sug ge sts that our de ci sio n to appl y “ he igh te ne d sc ru tin y ” shi ft ed the 7 bur de n inthi s a

ppe al to PNM an d the P RC to de m onstrate the va lid ity of the 8 adm ini str at ive a ct ion

. T his is n ot the c as e. S im ilarl y , N E E ’ s a sse rt ionthat w e w ill 9 not , in thi s c as e, “ ac co rd the de fe re nc e tr ad iti ona lly a cc or de d” to th e PR C i s a lso 10 inc or re ct

. 11 D. NEE ’s A rgum ents 12 1. PR C O versight 13 { 29} N E E c ont ends that “ [t] he final order that approved the m odified stip ulation wa s 14 arbitrar

y and capricious because it rem oved PRC oversigh t or p ostpo ned it.” Mor e 15 specifically , N EE protests that the PRC im perm issib ly “ treated the CCN hearing as 16 a re pla ce m en t fo r the re qui re d IRP stake hol de r en ga ge m en t an d r es our ce e va lua tio n 17 pr oc es s. ” N E E obj ec ts that this a m ount s to li ttl e m or e than “ ane nd r un aro und the 1 8 l a w . ” Th e s e c l a i ms d o n o twi t h s t a n ds c r u t i n y.21

1 { 30} The IRP provi sions require PNM to dem onstrate the m erits of its 2014 IRP as 2 m ea sur ed bythe standard s art ic ula te d inS ec tio n 62 -1 7- 10 and c lari fi ed in the 3 ap pli ca ble pr ovi sio ns o f the a dm ini str at ive c ode a nd r equir e the P RC to pe rm it publ ic 4 pa rti ci pa ti on in it s re vi ew of PNM’s 2 01 4 I R P

. Sect io n 6 2- 17 -1 0; 17 .7.3 .9(H) 5 N MA C. I n th e CC N pr oc ee din gs, the H E e xpr es sly de te rm ine d th at

the r ep la ce m en t 6 ge ne ratio n re sour ce portf oli o iden tif

ie d in the supp le m en ta l stip ula tio n sati sf ie d th e 7 statut or

y a nd r eg ula tor

y I RP standard s an d th e pr oc es s by w hic h th is d et er

m ina tio n 8 wa s m ade incorporated am ple publ ic participation. The PRC did not viol ate or shirk 9 its s t a tu t o r i l y - i m

p o s e d r e s p o n s i b i l i t i e s b y p r o p o s i n g , i n t h e C C N p r o c e e d i ngs, to 10 dism iss the protests to PNM ’ s 2014 IRP

. All p ar t ies recognized that the issues 11 ad dr es se d inthe CC N pr oc ee din gs we re the ve ry sa m e iss ue s a t the he ar

t of the 201 4 12 IRP prot e st

p r oc e e di ng s. N E E g i ve s us n o r e a so n t o c on c l ud e t hatt he P R C w as 13 re qui re d to hol d du

pli cativ e pr oc ee din gs. T he f ina l or de r di d no t “ re m ove ” or 14 “ postp one” the PRC’ s reviewof PN M’ s 2014 IRP

. 15 2. St ra te gis t 16 { 31} N E E a rg ue s th at the H E er

re d in de te rm ini ng tha t the r ep la ce m en t ge ne ratio n 17 re sour ce portf

oli o id en tif

ie d inthe sup ple m en ta l st ipu la tio n w as the m ost c ost 18 ef fe ct ive be ca

use the H E r elied o n da taf ro m P N M tha t w as in tur

n pr oduc ed

by22

1 PN M’ s a lle ge d m an ipu la tio n of S tr at eg ist , the sof

tw ar e sui te P N M u se d to de te rm ine 2 the m ost cost-effective r eplacem ent generation resource portfolio. N EE insists that 3 “ [i ] t i s im

poss ibl e to exam ine P N M’ s su bm iss ion s and f

ind a ny e xpl an at ionor 4 quanti fi catio n of

the r el at ive c ost s of

f ea sib le r es our ce s, a s the lawr equir es . ” T he se 5 cl ai m s are inc onsi ste nt w iththe r ec or d. 6 The H E f

ound that 7 PN M’ s Strategist analy ses in the January and Oc tober hearings assessed 8 the costs to o perate and m aintain a larg e n u m b er of potential resource 9 portf

oli os t o r ep la ce S anJuan U nit s 2 and 3

. [ PN M’ s e xpe rt w itn es s] 10 Mr. O ’ C on ne l l s t a t e d t hatt he S t r a t e gi st m od e l i ng c on si de r e d so lar, 11 wind, natura l gas, coal and nu clear generation alternatives and assum ed 12 the co nt i nu e d gr ow t h of P N M ’ s e ne r gy

e f f i c i e nc y a nd d i str i bu t ed 13 generation p rogram s. H e said the Strate gist m odeling evaluated 14 tho usands of

pot en tia l c om

bin at ion s of

the se r es our ce s. 15 PN M’ s Strategist runs also eval u at ed replace m ent power 16 portf

oli os for a

thr ee - an d f

our -unit shu tdo w n. T he e va lua tio n of the 17 three-unit shutd own wa s perform ed in r espons e to a b ench 18 [m em or an dum ] r eque st i ssu ed dur ing the January

he ar ing s. 19 T he H E spe ci fi ca lly

li ste d e ac h of

the vary ing ty

pe s of re sour ce s PN M c onsi de re d in 20 its m ode lin g. T he H E ’ s f ind ing s w er e supp orte d by the te stim on y

of P atri ck J. 21 O ’ Co nne ll, P N M’ s di re ct or of planni ng and r es our ce s. T he H E ha d th e dis cr et ionto 2 2 ac ce pt o r

r e j e c tM r . O ’ C o n n e l l ’ s t e s t i m o n y a n dh e r d e t e rm i n a t i o n t h a tt he23

1 replace m ent generation resource portfolio was the m ost cost ef fective w as suppo rted 2 by sub stanti al e vid en ce in the r ec or d. 3 { 32} N E E a lso a rg ue s th at P N M u til iz ed

S tr at eg ist to eva de the re qui re m en t tha t i t 4 co nsi de r the co st of re sour ce s on a “ co nsi ste nt and co m para ble ” ba sis

. N E E c ont en ds 5 tha t P N M u se d di ff

er ing va lue s f

or P al o V er de U nit

T hr ee in dif

fere nt Strate gis t 6 ev al ua tio ns and tha t the H E e rr ed by a cc ep tin g th es e ev al uatio ns . W e re j ec t this 7 cl ai m . T he H E ac ce pte d PN M’ s use of dif fe re nt val ue s for dif

fe re nt Strate gis t r

uns 8 because she concluded that “ it wa s reasonable to consid er c ost savin gs realized under 9 the stipu lations s olely

for the stipulation portfolio.” T he HE ’ s determ ination that 10 PN M’ s S tr at eg ist

m ode lin g c or

re ct ly inc lud ed the c ost sa vin gs i s ade te rm in at ion 11 re qui ri ng e xpe rt ise a nd t ec hni ca l c om pe te nc y w e ar e in n o po sit ion to s ec ond- gue ss. 12 3. Conside ration of R enewa ble R esources 13 { 33} NE E argues that “ PN M failed to consider or reasonabl y assess resources such 14 as w ind , sol ar

a nd ga s, w hic h ar e le ss co stl y an d le ss r isky than c oa l or

nuc le ar [, ] ” an d 15 contends that solar an d wind are less expensiv e re sources than either the nuclear 16 pow er pr oduc ed

by Pal o V er de or

the c oa l po w er

pr oduc ed

by S anJuan. A s th e 17 discuss ion in the previous section shows, P NM did consider renew able resources 18 w he n a tte m

pti ng t o de te rm ine the m ost c ost -e ff ec tiv e re pla ce m en t ge ne ratio n24

1 re sour ce s. T he ev ide nc e pr es en te d pe rs ua de d th e H E that ut ili zi ng P al o V er de U nit 2 T hr ee an d obt ai nin g ad dit ion al pow er fr om San Juan U nit Fo ur w as th e m os t cost3 ef fe ct ive c hoi ce . W e w ill not se co nd- gue ss this de te rm ina tio n. 4 4. Re source C osts 5 { 34} NE E argues that “ sol ar and wind generation facilities produce energy at a low er 6 co st than c oa l- fi re d and nuc le ar pow er plants [. ] ” N E E the n di sc uss es w ha t c ost s 7 shou ld have been assigned to vary ing re sources at a “ levelized cost” to establish th at 8 “ wind, solar and gas . . . are less costly

. . . than coal or nuclear. ” PN M responds th at 9 le ve liz ed

c ost a na ly se s are ina

ppr opr ia te “ w he n com

pari ng t ec hnol ogi es w ith 10 dif fe re nt p ro duc tio n pr of

ile s, suc h a s di spa tc hable ge ne ratio n to varia bl e or 11 int er m itt en t ge ne ratio n. ” T he que sti on of w ha t cost the H E shou ld or shou ld not h av e 12 assigned to any

given resource is a para digm atic fact inquiry that requires technical 13 ex pe rt ise to co m

pr eh en d and r es olv e. N E E ’ s arg um en ts g ive us n o r ea son to s ec ond14 guess th e H E’ s cost assessm ent for any given resource. 15 5. V an Wi nk

le 16 { 35} N E E a rg ue s tha t the “ onl y co ge nt, ac curate an d unde rs tanda ble as se ssm en t of 17 relative generation resource costs on a con sistent and com parable basis in the record 18 w as pr ovi de d by N E E ’ s D av id V an W ink le

. ” T his ar gum en t ign or es the f ac t tha t the25

1 H E e xpr es sly

de te rm ine d th at V an W ink le ’ s opi nio n is “ not c onvi nc ing ” an d th at

his 2 an al y sis “ ove r- sim

pli f[ ie d] the re sour ce se le ct ion pr oc es s an d e xc lud e[ d] sig nif ic an t 3 co sts

. ” T he H E w en t f urthe r an d e xpr es sly

not ed that, w hil e 4 N E E w itn es s, Mr

. V an W ink le ha s educ at ion al an d wor k expe ri en ce in 5 el ec t ri ca l en g i n ee ri n g an dan i m p re s s i v e f

amil i ar i t y wi t h PN M ’s 6 finances and generati o n re sources[, h] e does not have profession al 7 ex pe ri en ce in the e le ctri c pow er ind ustry planni ng . . . suc h th at

the 8 de pt h of hi s ex pe ri en ce is not suf fi ci en t t o a cc ep t hi s op ini ons on the 9 design o f a sy stem over the opin ions of w itnesses with such experience. 10 The H E a lso pointed out that “ on c ross-exam ination , [Mr. Van W inkle] agreed that 1 1 h i s al t ern at i v es m i g h tn o tb e f ea s i b l e. ” T h e P RC wa s n o tb o u n db y Va n Win k l e’s 12 opi nio n and i ts d ec isi on w as oth er w ise sup porte d by

sub stanti al evide nc e in the 13 reco rd

. See Attorn ey Gen. v. N. M. Pub. Serv. Comm ’n , 198 4- N MS C- 081, ¶ 15, 101 14 N

. M. 549 , 685 P

. 2d 9 57 ( “ T he [ PR C] is not bound b y the opi nio ns o f ex pe rt s so lon g 15 as the Com

m issio n’ s ultim ate decision is sup ported by subst antial evidence.” ). 16 6. Burd en S hiftin g 17 { 36} NEE argu es th at“ th e PRC un la wfu ll y sh ift edth e b u r d e n o f p ro of .” NEE 18 cl ar if ie s th at the H E “ ef

fe ct ive ly ex cu se d PN M’ s f ai lur e to c ar

ry it s burd enof

pr oof 19 re gard ing co st and

f ea sib ili ty by c onc lud ing ( inc or

re ct ly ) tha t NE

E wi tness Van 20 W ink le f

ai le d to pr ove the e xis te nc e of oth er f ea sib le [ al te rn at ive s]

. ” A cc or din g to 21 N E E , PN M wr ongl y de cl ine d to e va lua te V anW ink le ’ s pr opos ed a lte rn at ive s us ing26

1 Strate gis t and, in fa ili ng to do so, P N M n ev er m eanin gf

ull y c onsi de re d th e co sts of 2 ce rt ai n a lte rn at ive e ne rg y r es our ce s th at N E E sup porte d a s r ep la ce m en t po rt fo lio 3 candi da te s. A cc or din g to N E E , the H E “ e f fe ct ive ly tur ne d th e re gul at or

y pr oc es s c as e 4 on its h ead, m aking PN M t he regulator, by allowing PN M to decide what a lternatives 5 it is g oin g to pr es en t t o th e [P RC ] a nd a llo wit to co nsi de r, w hil e dis m iss ing a ny 6 ef fo rt b y an i n t er v en o r t o s u g g es tt h at o t h er al t er n at i v es s h o u l d b e co n s i d er ed .” We 7 do n ot a cc ep t this li ne of r ea soni ng. 8 { 37} PN M wa s not re quired to assist the witnesses of its adversary

. The H E r ej ected 9 Van W in kl e’s op in io n and sh e was free to do so . Se e Att orne y G en . , 10 1984 -N MSC- 081, ¶ 15. P NM a lso prov ed that t h er e we re significant benefits that 11 flowed f

rom the suppl em ental stipul ation and th e re placem ent generation resources 12 ide nti fi ed

the re . T hose m an y

be ne fi ts are s um m ari ze d a bove a nd n ee d no t be 13 resta te d. T he H E de te rm ine d th at the se m an y

be ne fi ts e sta

bli she d th at

the CCNs 14 requested by

PN M provided a net public benefit. T he HE did no t turn the regulatory 15 fr am ew ork onit s he ad

. 16 7. Reque st for Prop os al s (RFP) 17 { 38} NE E obj ects t h at PN M “ unilaterally decided to not in vestigate the m arket 18 through an appropriate com petitive [RFP] process to identify

. . . alternatives [to San27

1 Juan U nit

F our a nd P al o V er de U nit

T hr ee ]

. ” N E E c ont en ds tha t an RFP “ is the 2 norm al, we ll-established and Com m issio n-acce pted m ethod for utilit ies to sho w that 3 t h e i r r e s o u r c e p r o p o s a l s a r e t h e mo s tc o s t

- e f f e c t i v e o p t i o n s a v a i l ab l e t o s a t i s f y a 4 de m onstrate d servic e ne ed

. ” N E E f urthe r cl ai m s th at

the P RC ’ s de ci sio n to not 5 re qui re P N M t o c ondu ct a n RFP ne ce ssari ly

m eans tha t the PR C “ la ck ed r el ia ble a nd 6 ‘ subs tanti al e vid en ce ’ to re as ona bly c onc lud e PN M[ ’ s] pr opos al s we re the m ost c ost 7 ef fe ct ive opt ion s c ur

re ntl y a va ila ble to sa tis fy

P N M’ s serv ic e nee ds” a nd tha t the 8 PRC “ fai le d t o e xe rci se it s au th or it y . . . to reas on a b l y pro te ctth e p ub li c in te res t.” 9 T he e vid ence pr es en te d and a cc ep te d by the H E a nd P RC und er m ine s th es e 10 ar gum en ts. 11 { 39} T he H E r ej ec te d th e ar gum en t tha t PN M w as r equir ed to co nduc t an RFP a nd 12 the PRC a ccepted this determ ination

. The PRC poin ted out th at N EE had not “ cited 13 an y lawthat r equir es or au tho ri ze s the [P RC ] to o rd er auti lity to iss ue a n RFP

. ” Bo th 14 the P RC a nd the H E a lso de te rm ine d, ba se d onthe te sti m ony pr es ente d in the 15 stipu lation and su pplem ental stipul ation proceedings , that r equiring PNM to conduct 16 an RFP would have been counterproductiv e and could have steered the parties away 1 7 fr o m t h e “ m o s t p r e f

e r ab l e s o l u t i o n . ” T h e H E e x p r e s s l y qu e s t i o n e d a n d h addou bts28

1 ab out the te sti m ony

of Ro na ld L eh r, N E E ’ s w itn es s and “ [t ] he pr im ar y w itn es s ur gin g 2 th e [PR C] to re qu ire th e u se of R FPs .” 3 { 40} L eh r, the H E poi nte d ou t, ha d ve ry li ttl e know le dge about

the de ta ils of

the 4 resources proposed in th e supplem ental stipul ation, N ew Mexico law, or the resource 5 needs of PN M’ s sy stem . The P RC, in turn, em phasized the testim ony

of N ewMexico 6 Attorney

Ge neral w itness Andrea Cr ane. Crane testified t h at i t would have been 7 im practical to order PN M to undertake an RFP and NE E’ s sugg estion to the contrary 8 gr eatly ove rs im pli fi ed the co m

ple xity of w ha t P N M and the oth er part ie s j oin ing in 9 the sti pul at iona nd m odi fi ed sti pul at ionw er e tr

y ing to ac hie ve . T his ev ide nc e re fl ec ts 10 that the HE and PRC determ ined that an RFP was neith er required nor appropriate. 11 W e w ill not

se co nd- gue ss this de te rm ina tio n. 12 8 . R a t e p a y e r R i s ks 13 { 41} N E E co nte nds tha t “ the PR C did not re qui re PN M to ad equa te ly ass es s and 14 m iti ga te r at ep ay er

r isk s[

. ] ” N E E sub m its that “ sig nific an t un knowns and 15 unqu antified risks that inclu de financial, reliability , operational, and anticipated 16 en vir onm en ta l re gul at ion s exis t wi th both San Juan co al an d Pa lo V er de nuc le ar a nd 1 7 w e r e v i rtu a l l y i g n o r e d , c o n t r a ry t o N M s t a tu t e a n d P R C r e g u l a t i o n . ” T he se29

1 argum ents are inconsi stent w ith the record and insis t that the PRC em b ra ce policy 2 ch oic es the P RC w as f re e to r ej ec t. 3 { 42} The H E e xplicitl y noted the va ryi ng m echanism s in the sup plem ental 4 sti pul at ionthat am el ior ated the r isk s a sso ci at ed w ithnuc le ar

pow er ge ne ratio n and 5 u t i l i z a t i o n o f P a l o V e r d e U n i t Th r e e s p e c i f i c a l l y. I ti s n e c e s s a ry t o r e f e r e n c e o n l y a 6 fe wof tho se m ec hanis m s. T he sup ple m en ta l st ipu la tio n r equir es P N M t o c ontri but e 7 $11 m illion to the decom m issio ning trust for Pa lo Ver d e Unit Three and addresses 8 howc ost s w ill be share d be tw ee n r at ep ay er s and i nve sto rs in the e ve nt 9 de co m m iss ion ing c ost s e xc ee d ac er ta in thr es hol d. I t “pr ohi bit s P N M f ro m 10 re co ve ri ng the c ost s asso ci at ed w ith the sto ra ge an d dispos al of spe nt f ue l f ro m the 11 operation prior to Janu ary 1, 2018.” I t also r equires PN M to pass alon g to ratepay ers 1 2 ce rt ai n re fu n d s PN M re ce i v es fr o m t h e U n i t ed St at es De p ar t m en to f E n er g y. NEE’s 13 contentio n that PNM should not be perm itted to derive a dditi onal capacity from San 14 Juan Unit Four because there is sim ply too m uch risk associated with coal power 15 gene ratio n igno res the fa ct that the rea son PNM applied for a CCN for additional 16 pow er f ro m S an Ju an Uni t Fo ur

w as to cl ose S anJuan U nit s T w o and T hr ee a nd 17 elim inate the risks and adverse im pacts associated with con tinued use of all four San 18 Juan un its

.30

1 { 43} T he H E w as f

re e to p er fo rm

he r ow n c al cu la tio n of

the c ost s and be ne fi ts o f the 2 supp le m en ta l st ipu la tio n and d id s o. T he PRC’s de ci sio n to a cc ep t the H E ’ s c ost 3 be ne fi t a n a l y s i s i s a qu i n t e s s e n t i a l p o l i c y d e t e rm i n a t i o n w i t h w h i c h w e w i l l no t 4 in te rfer e. See D oña A na M ut. D om es tic W

ate r C onsu m er s A ss’ n v . N. M

. P ub. 5 Re gula tion Comm’ n , 2006-NMS C-032, ¶ 16, 140 N. M. 6, 139 P.3d 166 (“ [T ] he PRC 6 has been granted policy -m aking auth ority in several ar eas. ”). 7 9. David R ode 8 { 44} N E E c ont en ds tha t the P RC e rr ed w he n it reject ed the t es tim ony of D av id 9 Ro de , aw itn es s c al le d by the P RC sta ff

to te st ify as to “ the r isk a nd p ortf

oli o 10 se le ct iona na ly se s pr ep ar ed by P N M. ” N E E a sse rt s th at “ [n ] one of

[ Ro de ’ s] 11 challenges to PNM’ s lim ited ev al u at ion process and self-serving adop tion o f [S an 12 Juan U nit

F our ] a nd [ Pa lo V er de U nit T hr ee ] w as e ve r ad dr es se d by the [H E ] or the 13 [P RC ]

. ” T his c la im

is inc onsi ste nt w iththe r ec or d. 14 { 45} In its final order, the PRC expressly noted that Rode’ s pre-filed testim ony wa s 15 pr ep ar ed

pr ior to the le ngthy

pr oc eedi ng s th at le d to the m odi fi ed sti pul at iona nd 16 determ ined that his testim ony wa s not re levant. Moreover, the record refle cts that 1 7 PN M d i d co n s i d er an d ad d re s s Ro d e’s co n ce rn s ; i n fa ct , O’C o n n el l ad d re s s ed Ro d e’s 18 co nc er

ns at so m e le ngth. Ul ti m at el y , th e PR C w as pe rs ua de d th at , to the e xte nt31

1 Ro de ’ s te sti m ony

w as r el ev an t a t a ll, it supp orte d the sti pul at ing part ie s’ a sse ssm en t 2 tha t the sup ple m en tal st ip ul at ionw as the be st o utc om e. W e w ill not se co nd- gue ss 3 thi s de ci sio n. 4 III. CON CLU SION 5 { 46} T he P RC a cc ep te d the H E ’ s conc lus ionthat the sup ple m en ta l st ipu la tio n f ai rl y 6 an d j ust ly

r es olv ed the CC N pr oc ee din gs. T his c onc lus ion w as pr ed ic at ed on the 7 H E ’ s f ind ing that the resour ce portf oli o id en tif

ie d inthe sup ple m en ta l st ipu la tio n 8 provides a net publ ic b enefit. As ou r di scussio n shows, th is finding wa s supp orted 9 by a n a bund an ce of

e vid en ce . T he P RC ’ s de ci sio n to f ile a not ic e pr opos ing to 1 0 d i s m i s s t h e p ro t es t s t o PN M ’s 2 0 1 4 IR P w as a l aw fu l ex e r c i s e o f t h e P RC ’s 11 discretion. T he m erits of PN M’ s 2014 IRP, as m easured by the appropriate statutory 12 an d r eg u l at o r

y s t an d ar d s , w e r e c o m

p r e h e n s i v e l y

c onsi de re d duri ng the sti pul at iona nd 13 supp l e m e n t a l s t i p u l at i o np r o c e e d i n g s an d th o s e pr oc ee din gs w er e ope n and a cc es sib le 14 to a ll. T he P RC ’ s f

ina l or de r is a ff

irm ed

. 15 { 47} IT IS S O ORDERE D.

16

____ ____ ____ ____ ____ ____ ____ ____ ___ 17 JUD ITH K. NA KAM UR A, Ch ief Justice32

1 WE CO NCUR:

2

____ ____ ____ ____ ____ ____ ____ ____ __ 3 PE TRAJIMEN EZMA ES, Justice

4

____ ____ ____ ____ ____ ____ ____ ____ __ 5 EDWA RD L. CH ÁV EZ , Just ice

6

____ ____ ____ ____ ____ ____ ____ ____ __ 7 BARBAR

A J. VIGIL, Justice

8

____ ____ ____ ____ ____ ____ ____ ____ ___ 9 J. M IL ES HA N IS EE , Ju dg e, sit ti ng in d es ign at ion