Opinion ID: 1219567
Heading Depth: 3
Heading Rank: 3

Heading: Does the Order Violate the Commerce Clause?

Text: NMIEC maintains that, having found that this was not an area of regulation reserved solely to the federal government, we must consider the implications of the Commission's regulation on the commerce clause, arguing that the exclusion of the M-S-R contract is economic protectionism in its purest form and therefore exactly the type of activity protected against by the commerce clause. See City of Philadelphia v. New Jersey, 437 U.S. 617, 623, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1977). Two problems defeat NMIEC's argument. First, it is not clear that the Commission is regulating interstate commerce. It regulates the activities of PNM, an area incontrovertibly within its jurisdiction and sanctioned by the commerce clause. See Panhandle E. Pipe Line Co. v. Public Serv. Comm'n, 332 U.S. 507, 521, 68 S.Ct. 190, 197, 92 L.Ed. 128 (1947). The exclusion of the M-S-R contract does not directly affect M-S-R; it does not implicate its sales, or affect its decisions in a direct way. See Rochester Gas & Elec. Corp., 754 F.2d at 102-03. The effect on interstate commerce thus cannot be outright protectionism or per se violative of the commerce clause  exclusion of the contract is not regulation directly implicating out-of-state interests. Cf. Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032 (1935) (striking down as violative of the commerce clause New York's denial of a vendor license to a dealer procuring out-of-state milk at a price below the New York minimum fixed price). The second problem is that the burden on interstate commerce, if there is a burden, could only be incidental to legitimate regulation of PNM. To determine whether the Commission's actions have impermissibly burdened interstate commerce, we apply the modern commerce clause balancing test articulated in Arkansas Electric Cooperative Corp., 461 U.S. at 393-94, 103 S.Ct. at 1917-18: Where [a] statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities. (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970)). NMIEC argues that the regulation is not evenhanded  that the final order explains that M-S-R should be excluded over the San Juan capacity owned by PNM, giving precedent to sources simply by virtue of their local ownership. We disagree. The Commission articulated many legitimate reasons for excluding the contract, the most significant being that the contract provided power at a relatively higher rate at the time when it was least needed. The Commission excluded several sources of capacity, only one of which  the M-S-R contract  was owned by out-of-state interests. Moreover, the regulation directly implicated PNM, not M-S-R, and was part of the Commission's resolution of the legitimate and important concern of the excess capacity problem. The purpose of the regulation was not to exclude out-of-state capacity or to protect in-state generating capacity from out-of-state competition; the focus of the regulation was PNM, and it did not affect directly M-S-R or its marketing position. The contract is still intact, and any harm to M-S-R or any other interest seeking to sell power into New Mexico would be prospective. When the regulation is viewed in the context of its purpose, it is apparent that any prospective burden is highly speculative and ephemeral. This is not regulation nefariously poised to protect local interests from interstate competition. It is regulation that, as soon as the excess capacity problem is resolved, will be without effect, even incidentally, on interstate commerce. In addition to the regulation's rational goal  to deal with excess capacity  and its minimal impact on interstate commerce, we must consider the very important New Mexico interest in regulating utilities. Cf. Maine v. Taylor, 477 U.S. 131, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986) (overt discrimination against out-of-state interests upheld when balanced against highly significant state interest). Thus, we conclude that exclusion of the M-S-R contract does not violate the commerce clause.