Opinion ID: 891654
Heading Depth: 4
Heading Rank: 1

Heading: Whether the Emergency FPPCAC Violates Section 62-8-7(E)

Text: {53} ABCWUA and NMIEC claim that the Emergency FPPCAC violates Section 62-8-7(E) because it fails to ensure reasonable and proper service at fair, just and reasonable rates. Section 62-8-7(E). Specifically, ABCWUA and NMIEC argue that the Emergency FPPCAC unlawfully permits PNM to pass on increased fuel and purchased power costs without an examination of the other areas in which its costs may have decreased or its revenues increased, thereby requiring consumers to pay increased costs while PNM enjoys increased profits. {54} Section 62-8-7(E) plainly and unambiguously provides that taxes or cost of fuel, gas or purchased power may be recovered automatically via a FPPCAC. Section 62-8-7(E); see also NMIEC, 2007-NMSC-053, ¶ 31, 142 N.M. 533, 168 P.3d 105. The purpose of a [FPPCAC] is to flow through to the users of electricity the increases or decreases in Applicable Fuel and Purchased Power costs per kilowatt-hour of delivered energy above or below a Base Cost. Rule 550.6(D). FPPCACs provide for the stability of utility earnings when electric fuel costs and purchased power costs are rising and permit prompt credits to customers when electric fuel costs and purchased power costs are declining. Rule 550.6(B). Thus, utilities only collect through the FPPCAC the amount actually expended for fuel and purchased power costs. Rule 550.6(C). {55} Automatic cost recovery is a narrow exception to the general rule requiring notice, hearing, and approval in rate cases. NMIEC, 2007-NMSC-053, ¶ 31, 142 N.M. 533, 168 P.3d 105. In determining whether a FPPCAC is appropriate in a particular case, Section 62-8-7(E) requires the PRC to consider, inter alia, whether the existence of a particular adjustment clause is consistent with the purposes of the Public Utility Act, including serving the goal of providing reasonable and proper service at fair, just and reasonable rates to all customer classes. See also § 62-3-1(B) (It is the declared policy of the state that the public interest, the interest of consumers and the interest of investors require the regulation and supervision of such public utilities to the end that reasonable and proper services shall be available at fair, just and reasonable rates. . . .). {56} FPPCACs, by their very nature, authorize the direct and automatic recovery of a utility's actual fuel, gas, and purchased power costs. Indeed, the purpose of a FPPCAC is to place the burden of volatile fuel costs on the consumer; thereby providing the public utility with a stable income stream, while at the same time ensuring that the consumer only pays for the fuel and purchased power costs actually incurred. See Rule 550.6(B)-(D). To require a utility to offset its fuel and purchased power costs against cost-savings in other areas would undermine the direct and automatic nature of the cost recovery system inherent in FPPCACs. By enacting Section 62-8-7(E), which explicitly permits FPPCACs, the Legislature plainly has determined that the benefits of such an efficient cost recovery system outweigh the possible burdens that it might impose on consumers and is consistent with the purposes of the Public Utility Act, including serving the goal of providing reasonable and proper service at fair, just and reasonable rates to all customer classes. {57} ABCWUA and NMIEC claim, however, that Section 62-8-7(E) must be construed narrowly to prohibit the cost-shifting mechanism inherent in a FPPCAC. In support of their claim they rely on NMIEC, in which this Court held that renewable energy certificates are not eligible for automatic cost recovery because Section 62-8-7(E) plainly and unambiguously limits allowable costs to taxes or cost of fuel, gas or purchased power. NMIEC, 2007-NMSC-053, ¶ 31, 142 N.M. 533, 168 P.3d 105 (internal quotation marks and citation omitted). In light of [this] plainly exclusive language, we interpret[ed] Section 62-8-7(E) narrowly and decline[d] to read into it language which is not there. . . . Id. ¶ 33 (internal quotation marks and citation omitted). {58} NMIEC did not hold, as ABCWUA and NMIEC suggest, that the entire statutory scheme governing FPPCACs is subject to narrow construction. Rather, it simply held that the statutory phrase taxes or cost of fuel, gas or purchased power must be construed narrowly, consistent with its plain and unambiguous language. Id. ¶¶ 31-33. Because the Emergency FPPCAC, in the present case, limits automatic cost recovery to taxes or cost of fuel, gas or purchased power, we reject ABCWUA's and NMIEC's claim. {59} However, ABCWUA claims in its reply brief that the Emergency FPPCAC violates Section 62-8-7(E) because it relies on forecasted increases in PNM's fuel and purchased power costs, rather than the historical test year method, whereby the PRC evaluates a utility's operating costs for a specified preceding twelve-month period and uses the utility's past experience as a guide to the utility's future revenue requirement. In re PNM Gas Servs., 2000-NMSC-012, ¶ 6, 129 N.M. 1, 1 P.3d 383. During the pendency of this appeal, the PRC filed a motion to strike ABCWUA's claim, arguing that it had not been raised in ABCWUA's brief-in-chief. Our review of ABCWUA's brief-in-chief reveals that, although ABCWUA raised this argument in support of its procedural due process and substantial evidence claims, [4] it failed to raise the issue as a separate basis for reversal of the PRC's Final Order. It is well established that we will not address issues raised for the first time in the reply brief. State v. Fairweather, 116 N.M. 456, 463, 863 P.2d 1077, 1084 (1993). Accordingly, the PRC's motion to strike is hereby granted.