Opinion ID: 891654
Heading Depth: 4
Heading Rank: 2

Heading: Whether the Emergency FPPCAC Violates Section 62-8-6

Text: {60} ABCWUA next claims that the Emergency FPPCAC violates Section 62-8-6 because it establishes and maintains unreasonable differences as to rates of service. Specifically, ABCWUA argues that the Emergency FPPCAC improperly discriminates against efficient-use customers with high load factors and customers who consume [electricity during] off-peak hours because it recovers fuel and purchased power costs through a uniform per kilowatt hour charge. {61} Section 62-8-6 provides, in relevant part, that [n]o public utility shall, as to rates of services, make or grant any unreasonable preference or advantage to any corporation or person within any classification or subject [to] any corporation or person within any classification to any unreasonable prejudice or disadvantage. No public utility shall establish and maintain any unreasonable differences as to rates of service either as between localities or as between classes of service. [This] section does not prohibit variations in rates, nor does it require `equal service.' Rather, it prohibits `unreasonable differences' in rates of service between localities. Section 62-8-6 thus forbids arbitrary variations in rates, while permitting variations due to differing costs of service to different areas. Albuquerque v. N.M. Pub. Serv. Comm'n, 115 N.M. 521, 531, 854 P.2d 348, 358 (1993) (Allowing municipalities to contract with utilities for service rates to their inhabitants does not, ipso facto, violate Section 62-8-6.); see also Albuquerque v. N.M. Pub. Serv. Comm'n, 2003-NMSC-028, ¶ 25, 134 N.M. 472, 79 P.3d 297 (holding, in relevant part, that a utility properly may apportion undergrounding costs to those customers located within the jurisdiction requiring the undergrounding). {62} John D. Olmstead, Rates Manager for PNM, submitted testimony concerning the customer impacts of PNM's Emergency FPPCAC. Olmstead explained that a FPPCAC that implements different rates based on different customer classifications is an inappropriate method of rate recovery because 1) PNM's Emergency FPPCAC proposal specifically requests recovery of increases in fuel expenses above what was allowed in NMPRC Case 07-00077-UT. The amount charged to customers for base fuel does not vary by rate class, and to vary the recovery of those additional expenses by class is not consistent with the rate design adopted in NMPRC Case 07-00077-UT or cost justified. 2) Having an FPPCAC that varies by rate class will cause some customers to change rate classes on the basis of the combined cost of their base rate bill plus their FPPCAC charge. This results in a revenue shortfall to PNM that cannot be corrected under the true-up provision of the Emergency FPPCAC. If a class-by-class FPPCAC were adopted by the [PRC], the amount of the shortfall from rate switching could exceed $0.5 million. 3) An FPPCAC that varies by rate class could result in some rates that exceed the $0.01 per kWh FPPCAC cap that PNM has proposed in this case to limit customer impacts. This would not allow PNM to recover some FPPCAC costs even though they had been approved for recovery at a company level. If a class-by-class FPPCAC were adopted by the [PRC], the amount of the shortfall due to cap limits could exceed $1.7 million. When asked whether the Emergency FPPCAC fairly apportions cost recovery across different rate classes, Olmstead answered, Yes. Increased fuel costs are allocated on a per kWh basis in a manner entirely consistent with cost causation principles. {63} In addition to Olmstead's testimony, the record reflects that the PRC has a long-standing policy . . . to require fuel and purchased power costs to be recovered on a uniform per kWh basis. Indeed, every FPPCAC in effect in New Mexico recovers those costs in that manner. This long-standing policy is reflected in Rule 550, which provides that [t]he Fuel and Purchased Power Cost Adjustment Factor shall be expressed in $ per kWh, and the resultant monthly charge or credit shall be shown on each customer's monthly bill. Rule 550.16. {64} However, ABCWUA points out that John C. Tysseling, Ph.D., President of E3c, Inc. (d/b/a Energy, Economic and Environmental Consultants), testified that a disproportionate impact occurs on the larger customer rate classes when the proposed Emergency FPPCAC surcharge is applied on a per kWh basis. Specifically, Tysseling explained that [t]he larger customer rate classes (generally) have lower fixed cost rate elements (per kWh of usage) . . . than is the case in smaller customer classes. Thus, when these Emergency FPPCAC . . . revenues are recovered on a per kWh basiswithout consideration of the class revenues that are otherwise recovered on a fixed basis (e.g., Customer Charges)there is a significant distortion in the cost responsibilities between rate classes. This is a classic rate design issue. In fact, if the [PRC] were to adopt the per kWh proposal it would send dramatically incorrect price signals to the larger customer classes. {65} Viewing the foregoing evidence in the light most favorable to the PRC's decision, we conclude that the Emergency FPPCAC is supported by substantial evidence. See NMIEC, 2007-NMSC-053, ¶ 24, 142 N.M. 533, 168 P.3d 105 (We view the evidence in the light most favorable to the [PRC]'s decision and draw every inference in support of the [PRC]'s decision, but we will not uphold the decision if it is not supported by substantial evidence. (citation omitted)). Olmstead's testimony, the long-standing policy of the PRC, and the plain language of Rule 550, amply support the PRC's determination that a uniform per kilowatt hour charge is the most equitable and efficient method of cost recovery. Although conflicting evidence existed, it is well established that evidence of two conflicting opinions in the record does not mean that the decision arrived at is unsupported by substantial evidence. Attorney General of N.M. v. N.M. Pub. Serv. Comm'n, 101 N.M. 549, 553, 685 P.2d 957, 961 (1984). Accordingly, we conclude that the Emergency FPPCAC does not violate Section 62-8-6.