Title: Maestas v. New Mexico Public Service Commission
Citation: 514 P.2d 847, 85 N.M. 571
Docket Number: 9759
State: new-mexico
Issuer: new-mexico Supreme Court
Date: September 28, 1973

514 P.2d 847 (1973) 85 N.M. 571 Robert MAESTAS and Alice B. Nunn, Petitioners-Intervenors-Appellants, v. NEW MEXICO PUBLIC SERVICE COMMISSION, Respondent-Appellee, Southern Union Gas Company, Respondent-Intervenor-Appellee. No. 9759. Supreme Court of New Mexico. September 28, 1973. Peter C. Mallery, Albuquerque, for appellant. David L. Norvell, Atty. Gen., James L. Parmelee, Jr., Agency Asst. Atty. Gen., Santa Fe, for Public Service Commission. Montgomery, Federici, Andrews, Hannahs &amp; Morris, Seth D. Montgomery, Santa Fe, Jack Hertz, Dallas, Tex., for Southern Union Gas. McMANUS, Chief Justice. On June 14, 1971 Southern Union Gas Company (Company) filed an advice notice with the Public Service Commission (Commission) which gave notice to the public and to the Commission of certain revised rate schedules. The purpose of this filing was to propose that the Company's proferred rule 20 (Adjustment of Rates to Compensate for Changes in Cost of Purchased Gas) should govern the Company's rate schedules, excepting therefrom seven special contract customers. The rule was properly filed with the Commission and its contents are as follows: As further background, the Company purchases its gas from several sources, including two wholly-owned subsidiaries, Southern Union Producing Company and Southern Union Gathering Company. The record reflects that these subsidiary companies provide the Company with approximately 26% of its natural gas needs. On January 4, 1972 the Commission issued its order allowing Company rule 20 to become a part of the Company's rules and regulations, and modifying the general service rate schedules, making them subject to rule 20. Following an exhaustion of administrative procedures, intervenors Maestas and Nunn appealed to the district court which found for the Commission and affirmed its order of January 4, 1972. Intervenors then appealed to this Court from the lower court's decision. The appellants base their appeal on two points, reading as follows: To begin with, the stated purpose of the Company's proposed rule 20 is to increase or decrease its revenues from time to time as is necessary to compensate for increases or decreases in its actual average cost of purchased gas. The consumers of gas will be required to pay the increase in the cost of gas if, and only if, an increase occurs, and they will be given the benefit of a decrease in such cost if a decrease occurs. A majority of commissions have found great practical justification for approving adjustment clauses similar to these. See Foy, Cost Adjustment in Utility Rate Schedules, 13 Vand.L.Rev. 663, 668 (1960); Trigg, Escalator Clauses in Public Utility Rate Schedules, 106 U.Pa.L.Rev. 964, 996 (1958). Furthermore, the courts of several jurisdictions have not seen fit to invalidate such commission-approved clauses. See City Of El Dorado v. Arkansas Public Service Com'n., 235 Ark. 812, 362 S.W.2d 680 (1962); City of Chicago v. Illinois Comm. Comm'n, 13 Ill. 2d 607, 150 N.E.2d 776 (1958); United Gas Corp. v. Mississippi Public Service Com'n, 240 Miss. 405, 127 So. 2d 404 (1961); City Of Akron v. Public Util. Comm'n, 5 Ohio St.2d 237, 215 N.E.2d 366 (1966); City Of Norfolk v. Virginia Elec. Light &amp; Power Co., 197 Va. 505, 90 S.E.2d 140 (1955). As to appellants' first contention, a summary of the Commission's findings reflects the following: because of supply and demand, the wholesale price of gas will increase more rapidly than it has in the past; the Company's net income will not be changed by the operation of rule 20; the rule will have no adverse effect upon the Commission's supervisory control over the Company's rates; and no more than the actual increased cost of purchased gas will be passed on to the customers. The record reflects that all of these findings are supported by substantial evidence. Appellants argue that while the Company is subject to regulation by the Commission, its Producing and Gathering subsidiaries are subject to neither Commission nor Federal Power Commission regulation. Therefore, appellants argue that there is a potential for abuse in that the Company could negotiate contracts with its subsidiaries at favorable rates, and thereby accrue hidden profits. We disagree. Section 68-5-4(A), N.M.S.A. 1953 (Supp. 1971), provides that the "* * * commission shall have general and exclusive power and jurisdiction to regulate and 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 and jurisdiction." Section 68-5-4(B), N.M.S.A. 1953 (Supp. 1971), amplifies this power with respect to the specific subject of contracts between utilities and suppliers, as follows: The above provision makes it abundantly clear that the Commission can disallow, for rate-making purposes, any portion of a price paid by a utility which the Commission finds to be unreasonable unless well head transactions are involved. Here, the subsidiary Producing Company is involved *850 in such well head transactions and thus is not covered by Commission regulation. However, since the legislature has not seen fit to extend the Commission's rate-making jurisdiction to such transactions, we, too, should not interfere unless there is shown to be some public harm involved. No harm was shown to have been present here. In fact, prices paid to the subsidiaries by the parent Company were shown to have been lower than the average wholesale cost of gas. It is true that there might be some potential for abuse here between the parent and its producing subsidiary, but the record indicates that it is unlikely to occur. The parent Company buys gas from non-affiliated companies, and the subsidiaries sell gas to non-affiliated companies. Therefore, unless both choose to illegally break their binding long-term contracts with the non-affiliated companies, it will not be possible for the parent and its subsidiaries to increase dealings with each other, and thereby increase the possibility of abuse. [Note: at the present time, the parent purchases 3/4 of its gas from non-affiliated suppliers and the subsidiaries sell 70-80% of their gas to non-affiliated purchasers.] Furthermore, it is unlikely that increased dealings between the parent and its subsidiaries can be physically achieved since the record indicated that the Company is not geographically connected with the subsidiaries through interstate pipelines. Appellants' second contention that the Commission's finding that rule 20 is in the public interest is not supported by substantial evidence is refuted by the record. That the Company had the burden of proof at the hearing cannot be denied. International Min. &amp; C. Corp. v. New Mexico P.S. Com'n, 81 N.M. 280, 466 P.2d 557 (1970). However, that burden was carried when the Company presented a prima facie case. In New Mexico, the requirement for annulling an order of the Commission is to establish, to the satisfaction of the reviewing court, that the order is unreasonable or unlawful. § 68-9-5, N.M.S.A. 1953 (Repl.Vol. 10, pt. 1, 1961). The burden of so establishing is on the party appealing from the order. § 68-9-4, N.M.S.A. 1953 (Supp. 1971). As stated in Llano, Inc. v. Southern Union Gas Company, 75 N.M. 7, 11-12, 399 P.2d 646, 649 (1964): Here, the potential for abuse is a matter of fact and we hold that the Commission had substantial evidence from which to make its findings, i.e., that there was such relevant evidence as a reasonable man might find adequate to support a conclusion. See Otero v. New Mexico State Police Bd., 83 N.M. 594, 495 P.2d 374 (1972); Young v. Board of Pharmacy, 81 N.M. 5, 7, 462 P.2d 139, 141 (1969). In other words, the Commission did not act fraudulently, arbitrarily or capriciously, and the order was supported by substantial evidence. We therefore agree with the trial court and are of the opinion that under rule 20, at least as far as the facts presented are concerned, the public interest against abuse will be protected. Affirmed. It is so ordered. OMAN and MARTINEZ, JJ., concur.