Opinion ID: 2616177
Heading Depth: 2
Heading Rank: 2

Heading: legality of inventorying

Text: On this point, NMIEC contends that the Commission, in approving the Stipulation, failed to follow the used and useful standard in evaluating investments made by public utilities. NMIEC argues that excess capacity can meet this standard only upon a showing that the decision to build the plant was prudent when made. NMIEC argues that the Commission made no such findings, and, therefore, it erred in adopting the inventorying Stipulation. We find this argument unconvincing, both in law and in fact. By statute the Commission is to decide whether to include utility property in the rate base in light of a broad context of facts and circumstances: When in the exercise of its powers and jurisdiction it is necessary for the commission to consider or ascertain the valuation of the properties or business of a public utility, or make any other determination involved in the fixing or setting of rates for a utility, the commission shall give due consideration to the history and development of the property and business of the particular public utility, to the original cost thereof, to the cost of reproduction as a going concern, to the revenues, investment and expenses of the utility in this state and otherwise subject to the commission's jurisdiction and to other elements of value and rate-making formulae and methods recognized by the laws of the land for rate-making purposes. NMSA 1978, § 62-6-14(A) (Repl.Pamp. 1984). Our case law confirms that the used and useful concept is but one factor among many to be considered by the Commission in its rate base analysis. We have consistently construed the statute broadly rather than to limit the Commission to any one particular method; the touchstone is the reasonableness of the ultimate decision. Hobbs Gas, 94 N.M. at 734, 616 P.2d at 1119 (1980). NMIEC has failed to show how the Commission may have abused its discretion by the manner in which it adopted the proposed Stipulation. Secondly, even accepting NMIEC's premises, we note that NMIEC has not challenged the Commission's Finding No. 4, which states explicitly that PNM's decisions to construct these additional plants were reasonable when made and had previously received approval by the Commission. This finding clearly meets the prudent management contention claimed by NMIEC. Finally, the very essence of the inventorying concept is that the expense of new plant construction will be deferred in inventory, and will only be added into the rate base as the generating capacity comes into actual service. At that time, moreover, the Commission will again hold hearings to assure that the new rates are just and reasonable. NMSA 1978, § 62-8-1 (Repl.Pamp.1984). In other words, inventorying guarantees that ratepayers will only pay for construction that is used and useful.