Opinion ID: 891619
Heading Depth: 1
Heading Rank: 4

Heading: Commission Jurisdiction Over Public Utility Rate Making

Text: {8} The Legislature mandated public utility regulation in the Public Utility Act (PUA), NMSA 1978, Sections 62-1-1 to -6-26.1 and -8-1 to -13-14 (1953, as amended through 2009). The policy of the PUA includes ensuring that utility services are provided at fair, just and reasonable rates. Section 62-3-1(B). The Commission enforces this policy through its general and exclusive power and jurisdiction to regulate and supervise every public utility in respect to its rates and service regulations and in respect to its securities[.] Section 62-6-4(A). Additionally, the Commission has jurisdiction over tax, fuel, gas, and purchased power adjustment clauses. Section 62-8-7(E); see also NMIEC, 2007-NMSC-053, ¶ 22, 142 N.M. 533, 168 P.3d 105 (stating that the rate-making process jurisdiction conferred on the Commission by the PUA includes jurisdiction over general rate cases and automatic adjustment clauses). {9} The PUA defines rate as every rate, tariff, charge or other compensation for utility service rendered or to be rendered by a utility and every rule, regulation, practice, act, requirement or privilege in any way relating to such rate, tariff, charge or other compensation and any schedule or tariff or part of a schedule or tariff thereof. Section 62-3-3(H). The factors used by the Commission when reviewing proposed rates are based on the utility's revenue requirements. Section 62-8-7(D) (stating that reasonable rates are designed to produce annual revenues no greater than those determined by the [C]ommission . . . to be just and reasonable); PNM Gas Servs. v. N.M. Pub. Util. Comm'n (In re Petition of PNM Gas Servs.), 2000-NMSC-012, ¶ 6, 129 N.M. 1, 1 P.3d 383. The traditional elements of the rate-making process and the establishment of the total revenue requirement are (1) determination of the costs of the operation, (2) determination of the rate base which is the value of the property minus accrued depreciation, and (3) determination of the rate of return. Hobbs Gas Co. v. N.M. Pub. Serv. Comm'n, 94 N.M. 731, 733, 616 P.2d 1116, 1118 (1980). A reasonable rate of return is one that provides a fair opportunity for the utility to receive just compensation for its investments, and that . . . enabl[es] the utility to attract new capital to maintain, improve, and expand its services in response to consumer demand. In re Petition of PNM Gas Servs., 2000-NMSC-012, ¶ 8, 129 N.M. 1, 1 P.3d 383 (internal quotation marks and citations omitted). Income taxes are included in the base rate, see, e.g., Zia Natural Gas Co. v. N.M. Pub. Util. Comm'n (In re Zia Natural Gas Co.), 2000-NMSC-011, ¶ 13, 128 N.M. 728, 998 P.2d 564, but gross receipts taxes are excluded from the base rate and must be stated separately on customer bills. Section 62-6-4.5(B). The reasonableness of rates is analyzed on a statewide level. See City of Albuquerque v. N.M. Pub. Reg. Comm'n, 2003-NMSC-028, ¶ 8, 134 N.M. 472, 79 P.3d 297. {10} This Court does not interfere when the Commission exercises its expertise in rate cases. See id. ¶¶ 18, 19 (concluding that the Commission had jurisdiction over tariff filed because the Legislature has specifically provided that the [Commission] may review local land use laws affecting utilities when reviewing rate cases); Cnty. of Bernalillo v. N.M. Pub. Reg. Comm'n (In re Adjustments to Franchise Fees), 2000-NMSC-035, ¶ 18, 129 N.M. 787, 14 P.3d 525 (holding that the Commission had jurisdiction to review rates, and thus delay implementation of NMSA 1978, Section 62-3A-18(A) (1999) (replaced by Section 62-6-4.5 in 2003), because the removal of franchise fee charges from the rate base necessarily required a modification of rates); In re Zia Natural Gas Co., 2000-NMSC-011, ¶¶ 10, 13, 128 N.M. 728, 998 P.2d 564 (finding that the Commission properly used a hypothetical capital structure to ensure rates were fair to both ratepayers and investors but did err by not including all federal taxes actually paid in expense calculations); N.M. Indus. Energy Consumers v. N.M. Pub. Serv. Comm'n, 111 N.M. 622, 627, 808 P.2d 592, 597 (1991) (upholding the Commission's exclusion of the utility's capacity contract from the rate amount because the Commission exercised jurisdiction over the rates, not the contract itself). {11} We have vacated, however, Commission orders issued in excess of its jurisdiction. See N.M. Elec. Serv. Co. v. N.M. Pub. Serv. Comm'n, 81 N.M. 683, 685, 472 P.2d 648, 650 (1970) (finding no implied authority for the Commission to treat monies refunded to utility as a rate that the Commission could order passed through to customers); see also Plains Elec., 1998-NMSC-038, ¶ 12, 126 N.M. 152, 967 P.2d 827 (stating that the conveyance of land which does not affect the utility services provided by the utility was outside the Commission's jurisdiction over the sale of utility facilities); United Water, 1996-NMSC-007, 121 N.M. at 275, 280, 910 P.2d at 909, 914 (concluding that the Commission improperly exercised jurisdiction over a municipality that had not elected to submit itself to . . . regulation); Morningstar Water, 120 N.M. at 585, 904 P.2d at 34 (holding that the Commission may only exercise jurisdiction over utilities expressly included in the scope of the PUA); Summit Props., Inc. v. Pub. Serv. Co. of N.M., 2005-NMCA-090, ¶¶ 11, 13, 138 N.M. 208, 118 P.3d 716 (stating that the Commission has no jurisdiction over contracts a utility enters into with private parties as the claims arising under those contracts are not related to the reasonableness of any rates established by the Commission). The disposition of this case turns, therefore, on whether or not franchise fee charges are properly considered rates and thus fall within the Commission's jurisdiction.