Opinion ID: 2582369
Heading Depth: 4
Heading Rank: 2

Heading: the commission exceeded its authority by characterizing epe's rec costs as closely related to purchased power and thus recoverable through epe's automatic adjustment clause

Text: {29} The Commission determined that EPE's REC costs were so closely related to purchased power so as to constitute purchased power and thus be automatically recoverable. Both the Commission and EPE rested on the argument that REC costs are so closely related to and an integral part of purchased power because (i) RECs represent renewable energy; (ii) RECs would not exist unless renewable energy were generated; and (iii) the Commission has wide latitude to determine what constitutes purchased power and what is appropriate for automatic adjustment clause recovery. At oral argument, Commission counsel stated the Commission's reasoning as follows: EPE's REC costs are in fact closely enough related to literally energy or literally power that [they] w[ere] appropriately included in that clause. Having concluded that EPE's REC costs do not constitute purchased power, we review the Commission's decision that it has the authority and discretion to determine that EPE's REC costs are closely related to purchased power and thus recoverable through EPE's automatic adjustment clause. {30} At the outset, we note this Court's long recognition of the broad authority of the Commission in setting utility rates. N.M. Indus. Energy Consumers v. N.M. Pub. Serv. Comm'n (In re Ratemaking Methodology), 111 N.M. 622, 635, 808 P.2d 592, 605 (1991) (The Commission is vested with broad discretion to pursue its statutory mandate to set just and reasonable rate or rates. (internal quotation marks and quoted authority omitted)); Att'y Gen. of N.M. v. N.M. Pub. Serv. Comm'n., 101 N.M. at 553-54, 685 P.2d at 961-62 (The Legislature has vested exclusive rate-making authority in the Commission. Furthermore, in a rate case, the Commission is vested with considerable discretion in determining the justness and reasonableness of utility rates. . . . Thus, the Commission is statutorily and constitutionally free to use any ratemaking formula it chooses. (quoted authority and internal citations omitted)). The Commission's broad rate-making authority involves the making of pragmatic adjustments. Hobbs Gas Co. v. N.M. Pub. Serv. Comm'n, 94 N.M. 731, 733-34, 616 P.2d 1116, 1118-19 (1980) (quoted authority omitted). Indeed, the result reached, not the method employed is what controls. Id. at 734, 616 P.2d at 1119; see also N.M. Indus. Energy Consumers, 104 N.M. at 569-70, 725 P.2d at 248-49 (noting that the Court has consistently construed the [PUA] broadly rather than to limit the Commission to any one particular method; the touchstone is the reasonableness of the ultimate decision). However, the instant case does not implicate the Commission's expertise and discretion in setting utility rates, as both the Commission and EPE paint the issue. Rather, our inquiry centers on the Commission's construction of the related provisions of the REA and the PUA, a matter not within the Commission's expertise and to which we accord little deference. {31} 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. In addition, the Commission's own Rule 550 and Rule 550 Form I for calculating the automatic cost adjustment factor specifically enumerate only these four costs for automatic recovery. The Legislature authorized automatic cost recovery for only limited types of costs in order to regulate the use of automatic adjustment clauses and to avoid the massive abuses of the past. Commission rate cases involving notice, hearing, and approval remain the general rule for cost recovery, while automatic adjustment clause recovery is a narrow exception. {32} The Legislature never amended the PUA provisions regarding automatic adjustment clauses when it approved the REA, nor did it create any exceptions in the REA itself to the limitations on automatic adjustment clause recovery. Indeed, the Commission has not amended its own Rule 550 to make special provision for REA compliance costs. We acknowledge that the Commission has the authority to promulgate rules regarding which costs should be included in an adjustment clause, procedures to avoid the inclusion of costs in an adjustment clause that should not be included and methods by which the propriety of costs that are included may be determined by the commission in a timely manner. Section 62-8-7(E)(3). However, this provision does not authorize the Commission to expand the list of costs eligible for automatic adjustment clause recovery. Otherwise, the limitation language of Section 62-8-7(E) would be rendered meaningless, and the abuses that the Legislature was concerned about could come to fruition. Rather, we read Section 62-8-7(E)(3) as granting the Commission the authority to promulgate rules that safeguard against abuses and thus fulfill the intent of the Legislature that automatic cost recovery be limited to the specifically enumerated costs set forth in Section 62-8-7(E). Likewise, the fact that the Commission has in the past allowed automatic recovery of gas hedging agreements and other costs not enumerated in Section 62-8-7(E) does not mean that we will sanction such a practice in the instant case. {33} In light of its plainly exclusive language, we interpret Section 62-8-7(E) narrowly and decline to read into it `language which is not there, particularly if it makes sense as written.' Pub. Serv. Co. of N.M., 1999-NMSC-040, ¶ 18 (quoting Burroughs v. Bd. of County Comm'rs, 88 N.M. 303, 306, 540 P.2d 233, 236 (1975)). Based on the fact that EPE did not purchase the renewable energy associated with the RECs as well as the admissions of both the Commission and EPE that EPE's REC costs are not, in fact, purchased power, we conclude that the Commission exceeded its authority by allowing EPE to recover its REC costs through its automatic adjustment clause by categorizing them as closely related to purchased power. Consequently, the Commission's Order is unlawful. Because EPE did not purchase the renewable energy represented by the RECs, we do not pass on the propriety of automatic adjustment clause recovery for the costs of RECs which represent actual renewable energy purchased by the utility. {34} In closing, we note that the Commission and EPE focused, in part, on the efficiency and cost-effectiveness of automatic adjustment clause recovery of EPE's REC costs, particularly in light of the mandatory nature of REA compliance. The Commission determined that automatic adjustment clause recovery would be the most efficient and cost-effective method for recovering EPE's REC costs, both for EPE and for consumers. While cost-effectiveness and efficiency are important goals, they are not the standard for automatic adjustment clause recovery which the Legislature has set forth in the PUA. In the final analysis, EPE may recover the reasonable costs of complying with the REA through a general rate case. Nevertheless, this case highlights the need for the Legislature to harmonize the antecedent PUA with the related provisions of the REA. However, until the Legislature does so, we will continue to read the PUA as written and allow for automatic recovery only of the costs specifically enumerated in Section 62-8-7(E), taxes or cost of fuel, gas or purchased power.