Opinion ID: 1356002
Heading Depth: 2
Heading Rank: 7

Heading: airplane expense

Text: {26} The burden of proving the reasonableness, as an operating expense to be included in the rate base, of expenses associated with the use of an airplane, was on Zia. NMSA 1978, § 62-8-7(A) (1991 prior to 1998 amendment), see Otero County Elec. Coop. v. New Mexico Pub. Serv. Comm'n (In re Otero County Elec. Coop.), 108 N.M. 462, 465, 774 P.2d 1050, 1053 (1989) (stating utility is in the best position to explain fairness of proposed metering scheme). Zia presented evidence to the Commission that commercial flight time to any of three destination cities in New Mexico was one day and that the private plane could make the trip in three hours. Zia showed the commercial fare from Worland, Wyoming to Hobbs, New Mexico was $1165, and that there are typically between two and four, and sometimes five employees on the company's plane. At the time of filing, Zia had owned a new plane only for a few months. Thus the relevant reported expenses pertained to an older plane and totaled $32,792. To justify allocation for the new plane, Zia estimated 300 hours of flight time for the year at $700 an hour, the charter rate for the new plane. After applying an allocation factor among the units of Zia some of which are outside New Mexico, the amount attributable to the New Mexico unit of the utility was $155,308, according to Zia. The staff witness used figures of 400 hours (the number of hours flown by the prior aircraft) and $350 (the hourly charter rate for a plane of the older type) for a recommended expense of $140,000. Despite this, the Commission Order allowed only $24,252.96, the portion of the $32,792 attributable to use in New Mexico. {27} The hearing officer recommended $140,000 in aircraft expenses. Zia argues that the deletion of over $115,700 from these aircraft expenses is not supported by substantial evidence and is a denial of due process. Zia's due process argument is that the commission should have been limited to exactly the same type of finding concerning aircraft expense that was used in Zia's last rate-making procedure. Zia presented proof of both commercial airline ticket costs and per-hour charter rates as evidence of the reasonableness of its aircraft expense. Use of a per-hour charter rate was not incumbent on the Commission and could be judged more probative in one case than in another. We note the prior case was a stipulated case and the present one is not. Thus there was no denial of due process. {28} In its Order, the Commission stated that if Zia is to recover the costs of owning and operating its new aircraft in a future rate case, Zia will have to provide certain information, including a log of all travel (business and non-business) showing all passenger names, destinations, dates and business purposes of all trips, each leg of multi-destination trips, any leasing of the aircraft to others, or any other aircraft activity resulting in economic benefit to Zia. In any future rate case, Zia is to request approval to place the purchase of its new aircraft in the rate base, allocate it by state, prove that the purchase saves money over commercial flights and that it benefits ratepayers, and prove actual expenses and aircraft use. {29} We said in State ex rel. Sandel v. New Mexico Public Utility Commission, 1999-NMSC-019, ¶ 15, 127 N.M. 272, 980 P.2d 55, that the Public Utility Commission is vested with considerable discretion in determining the justness and reasonableness of utility rates. We believe this discretion includes the power to refuse a utility operating in New Mexico an airplane as an operating expense unless the Commission is provided with details as to the need therefor and the use thereof, including a cost-benefit analysis, and not just an estimate of hours of use and the per-hour cost of a charter. However, there was nothing in the record in this case to support the conclusion reached by the Commission which departed from the Recommended Decision of the Hearing Examiner. All of the figures proposed by the parties were higher amounts than the figure reached by the Commission, which happened to be the same as that spent on the older plane multiplied by the percentage of use allocated to the New Mexico unit. Thus, even though it may require a cost-benefit analysis in the future, the Commission's conclusion was not based on substantial evidence. {30} The portion of the new airplane cost which Zia allocated to Zia utility customers was $155,308. Staff witnesses argued this figure should be reduced to $140,000 based on a lower per-hour charter rate. In its Brief in Chief to the Commission, Zia accepted the lower figure of $140,000. The Commission's order for $24,252.96 in aircraft expense was not based on substantial evidence.