Opinion ID: 1211297
Heading Depth: 2
Heading Rank: 4

Heading: Proper Choice of Market Data.

Text: In a related issue, GSTC argues that the commission erred in analyzing market conditions at the time of the hearing and using these as the bases for setting a proper rate of return, because the data was two years beyond the test year used in the tariff revision that it originally filed. The result was that the APUC used May 1983 financial data to support a retroactive refund order dating back to a time of much higher interest rates, and to support the prospective order. We hold that the commission was correct in applying the most recent data to set the prospective rate of return, but that it erred in applying the updated information retroactively to adjust the interim rate award. The New Mexico Supreme Court faced the former issue when a telephone company complained of a power commission's failure to use the latest available figures in setting its rates. Mountain States Telephone v. New Mexico State Corporation Commission, 90 N.M. 325, 563 P.2d 588 (1977). The court held that the commission should consider the most recent figures available: Quite obviously the most recent figures would be the most reliable in determining adequate utility rates. This case has been in progress since April of 1975, a period of almost twenty-four months. It would be unreasonable to ignore the actual experience during that period of time in arriving at new rates. Id., 563 P.2d at 603. We agree with the reasoning of Mountain States Telephone. The commission has a duty to set a reasonable rate of return for the utility. A rate of return may be reasonable at one time, and become too high or too low by changes affecting opportunities for investment, the money market, and business conditions generally. In re Rates and Charges of Mountain States Telephone and Telegraph, 99 N.M. 1, 653 P.2d 501, 508 (1982), quoting Bluefield Waterworks & I. Co. v. Public Service Commission, 262 U.S. 679, 693, 43 S.Ct. 675, 679, 67 L.Ed. 1176, 1183 (1923). The APUC was obliged to consider the drop in interest rates in the two years since the tariff was filed; it would have done the public a disservice had it ignored the change. There is no satisfactory justification for applying its updated rate retroactively, however. The commission's task is to set a rate that is fair and reasonable at the time it is applicable. Therefore, on remand the commission should base the rate of return for the interim award on the market conditions that existed at the time the award was granted. [8]