Opinion ID: 1219567
Heading Depth: 2
Heading Rank: 3

Heading: are the issues ripe for judicial resolution?

Text: The Commission has directed us to consider the scope of the hearing at issue, examining its decision in the final order to determine exactly which issues this inventory case finally resolved and which this case considered as only threshold determinations with final resolution deferred to the prudence and rate cases. This is an essential concern of the ripeness doctrine, and we consider it a point well taken with regard to many of the issues before us. [A]n appellate court will not review the proceedings of an administrative agency until the agency has taken final action. Harris v. Revenue Div. of Taxation & Rev. Dep't, 105 N.M. 721, 722, 737 P.2d 80, 81 (Ct.App.1987). In this case, of course, the Commission has issued its final order. However, as is apparent from examination of many of the issues raised here, a final order is not necessarily determinative of whether final action has been taken. The determination of finality must be based on pragmatic consideration of the matters at issue and analysis of whether the administrative body has in fact finally resolved the issues. See Abbott Laboratories, 387 U.S. at 149-51, 87 S.Ct. at 1515-17. In this context, the Commission's admonition that we should closely examine which issues it decided and which it reserved for later consideration in the two sibling cases has raised significant issues regarding the role of this court in reviewing administrative activity. The basic purpose of ripeness law is and always has been to conserve judicial machinery for problems which are real and present or imminent, not to squander it on abstract or hypothetical or remote problems. 4 K. Davis, Administrative Law Treatise § 25.1 (2d ed. 1983). In Abbott Laboratories, the Court explained the basic rationale of the ripeness doctrine as being: to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. The problem is best seen in a twofold aspect, requiring us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration. 387 U.S. at 148-49, 87 S.Ct. at 1515-16. [3] Thus, several issues of direct relevance to this appeal are raised. We must determine whether certain issues will be revisited by the Commission in its subsequent hearings and thus should be reserved for its initial discretionary determination. Our analysis involves whether further fact finding by the Commission will elicit more evidence illuminating the issues, whether further agency decisions may moot some of the contentions, and whether the parties will suffer imminently the effects of the final order. The ultimate question, however, is whether agency action is sufficiently final or definitive so that there is no judicial interest in awaiting a more concrete formulation of the issues. See Midwestern Gas Transmission Co., 589 F.2d at 618. We will not wait for the Commission's final decision if the issue will return to us without alteration. One factor that weighs heavily on our resolution of these issues is what the Commission has said it has done and will do. See id. at 620. Because of the Commission's great discretion in initially determining the issues before it, see Attorney General v. New Mexico Pub. Serv. Comm'n, 101 N.M. 549, 553, 685 P.2d 957, 961 (1984), we believe that, if it reasonably states that it has not finally resolved an issue or will return to it, it should be allowed the opportunity to exercise its discretion. Prefacing its discussion of the statement of the law in the final order, the Commission stated: In determining the law that applies to the circumstances of this case, we have kept a paramount fact in mind (of which we were called upon with some frequency to remind the participants): This is neither a prudence nor a rate case. As the caption to this case clearly shows, this proceeding is limited to the adjudication of alternatives to the Inventory ratemaking methodology, and/or plans for the phasing in of PNM's excess generating capacity. Final Order, 101 Pub.Util.Rep. (PUR) 4th at 144. In its answer brief, the Commission described as a key determination in its resolution of the excess capacity problem whether all or some portion of the excess capacity should be retained for use in the future, or whether it should be completely and permanently cut loose from Commission jurisdiction because such excess capacity is not presently needed by, and is too costly for, today's ratepayers. The final order, too, makes clear that in some ways the decision constituted a threshold determination of what capacity would not possibly be required to insure stability for New Mexico's energy future; inclusion in this sense did not indicate a determination that the capacity was needed immediately, but that exclusion and permanent loss of jurisdiction over the capacity would not be prudent. In essence, the Commission decided not to exclude permanently that capacity whose effect on rates appropriately yet may be considered in the rate case. See Final Order, 101 Pub.Util.Rep. (PUR) 4th at 175. In the final order the Commission concluded that the inventory stipulation should be terminated and [certain] capacity should be excluded from New Mexico jurisdictional rates. Id. at 178. It determined that the amount excluded was within its previously determined acceptable range, and that the exclusion of more would not be in the best interests of either ratepayers or investors. Id. The Commission finds that PVNGS Units 1 and 2 are not presently used and useful in rendering service to PNM's ratepayers, but that the exclusion of both these units should be rejected for the previously stated reasons [that the Commission is not bound solely by what capacity is now used and useful; it must consider factors affecting financial health and balance investor and ratepayer interest]. This finding takes into account PNM's possible future load growth. The record in this proceeding, however, is not sufficient for the Commission to decide the rate treatment that will be applied to these units. The forthcoming rate case will establish, in conjunction with [the prudence case], the valuation of generating capacity sources being added in base rates (PVNGS Units 1 and 2 and 147 MW of SJ-4) and the ratemaking treatment to be given these units. For example, it has been determined in this case that PVNGS Units 1 and 2 will be included in base rates, but it has not yet been determined whether these units will start recovery of investment immediately or whether the recovery of asset investment will be phased in over a period of time. It is also undetermined whether there will be full return on the included PVNGS investment or whether all or a portion of return on the investment will be disallowed for some period of time in the rate case. It has been determined in this case that 147 MW of SJ-4 will be included in rate base on the effective date for new rates [in the rate case]. A full return on the 147 MW share of investment will begin at that time. Id. at 179. The Commission's statements that the record before it was insufficient to allow it to determine rate treatment for the included capacity, and its express reservation of the timing of phasing in of the investment and the determination of whether all of the investment will be phased in are significant to our disposition of these issues.

The attorney general argues that the Commission improperly relied on the CFM submitted by PNM to conclude that corporate earnings would be too low under total exclusion, raising several claims regarding the validity of the model, its underlying assumptions, and its fitness for the purpose for which it was used. The merits of this issue are not yet ripe for our review. The question of corporate earnings will be considered again, and in greater depth, in the rate case, where PNM's financial health will be considered as a factor in determining reasonable rates. See Final Order, 101 Pub.Util.Rep. (PUR) 4th at 159-60. Thus, the issues of the return to investors and earnings under different capacities will recur, giving the attorney general and others the opportunity to contest the model's efficacy, offer alternatives, and present new evidence on the issue. Although the question can be presented solely in legal terms, i.e., was the Commission's reliance arbitrary, capricious, and unsupported by substantial evidence, fact finding has not been completed on the issue, additional evidence may change the tenor of the arguments or moot them entirely, and the Commission has not yet exercised the full breadth of its discretion. Critical to this question is that, although the Commission has determined not to exclude the capacity, it has not yet determined either its prudence or the timing of its inclusion (the phase-in issue). See id. The attorney general contends that: While it is true that the Commission did not use the CFM's to set rates, they were using them to conclude, in effect, that rates set under this particular alternative would produce earnings which were too low. This, however, is precisely why this issue is not fit for review  it will come into much greater focus after the Commission has decided what the rates will be and how capacity will be phased in. Under the Abbott test, a court also must determine the potential hardship to the parties caused by postponing review. For this issue, as for the others to be examined, no harm results from delayed review. The final order has no immediate effect on consumers  no rates will go into effect until after the conclusion of the final hearing of this trilogy. See, e.g., Toilet Goods Ass'n v. Gardner, 387 U.S. 158, 87 S.Ct. 1520, 18 L.Ed.2d 697 (1967) (case not ripe despite final agency action, when regulations, prior to enforcement, did not force a change in petitioner's position); Midwestern Gas Transmission Co., 589 F.2d at 622-25 (D.C.Cir.1978) (administrative action not cause of hardship when effect will not be felt until conclusion of entire agency proceedings; preliminary order did not cause parties to alter position).
The attorney general and NMIEC argue that the Commission based its decision in part on fairness to shareholders without defining fairness. By relying on an undefined standard, the Commission is alleged to have acted arbitrarily and capriciously when it applied the standard to the facts that it found. Much of the final order is devoted to explanation of why shareholder interest is not paramount and to analysis of risk allocation whereby the risk of investment in excess capacity is assumed by investors, as well as to why the Commission is not required to provide rates that compensate for loss caused by PNM's own actions. Nonetheless, the Commission concluded that the return to investors would be too low and unfair under total exclusion, and this decision is asserted to have been in error. Our analysis indicates that this issue, too, is not yet ripe for review. The ultimate question of fairness to shareholders cannot be resolved until rates are set. [4] After the Commission has finally determined rates, having again entertained evidence on the issue, if the parties still believe that the Commission has not properly defined its standards, the issue will be reviewable to determine whether the conclusions were arbitrary and capricious. Until that time, although a legal issue has been presented, we have no basis to determine if the Commission's decision was arbitrary or capricious, because no final decision has been made. The Commission merely determined that, as a threshold matter, total exclusion would be unfair. It has not determined, however, what rates will be fair, and we do not feel it appropriate at this point interfere with its exercise of discretion. [5] In Duquesne Light Co. v. Barasch, 488 U.S. 299, 109 S.Ct. 609, 619, 102 L.Ed.2d 646 (1989), the Court, with respect to an alleged confiscatory rate methodology, stated: [A]n otherwise reasonable rate is not subject to constitutional attack by questioning the theoretical consistency of the method that produced it. It is not theory, but the impact of the rate order which counts. The economic judgments required in rate proceedings are often hopelessly complex and do not admit of a single correct result. The Constitution is not designed to arbitrate these economic niceties. Errors to the detriment of one party may well be canceled out by countervailing errors or allowances in another part of the rate proceeding. The Constitution protects the utility from the net effect of the rate order on its property. Inconsistencies in one aspect of the methodology have no constitutional effect on the utility's property if they are compensated by countervailing factors in some other aspect. (quoting Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 288, 88 L.Ed. 333 (1944)); see also State v. Mountain States Tel. & Tel. Co., 54 N.M. 315, 337, 224 P.2d 155, 170 (1950) (adopting end results test as articulated in Hope ). This analysis is relevant to whether the fairness issue is properly before us at this time. Although we do not face the question of whether a rate is confiscatory  the issue is whether the Commission was overly generous to investors without adequately explaining its reasoning  we cannot evaluate a rate until it is set. The Commission, in further exercise of its discretion may balance out or alter, in the face of new evidence, the perceived error in its methodology, and we leave to it that opportunity to exercise its good judgment.
The attorney general has combined several claims under this general assertion. He argues that the Commission determined fairness and acceptability of an excess capacity plan without considering the prudence of investment decisions that created the excess. The attorney general contends that `fairness' is necessarily dependent upon the prudence of the plant in question and the decision was therefore arbitrary and capricious. He also alleges a violation of due process in that he was unable to present evidence on this point. We resolve this issue through a combination of our deference to the Commission's discretion and the ripeness doctrine. The Commission decided to trifurcate the proceedings based on the magnitude of the evidence and the size of the record generated by the proceeding. See Final Order, 101 Pub.Util.Rep. (PUR) 4th at 131. The Commission acted reasonably in breaking this case into manageable parts, and we will not review further the decision to sever in light of its legislative mandate to determine reasonable rates within statutory time constraints. See NMSA 1978, §§ 62-8-1, -7(C) (Repl.Pamp. 1984); Otero County Elec. Coop., Inc. v. New Mexico Pub. Serv. Comm'n, 108 N.M. 462, 465, 774 P.2d 1050, 1053 (1989); see also NMSA 1978, Section 62-10-6 (Repl. Pamp.1984) (Commission has discretion to order separate hearings on separate matters). Moreover, the ongoing nature of these proceedings makes our review at this juncture inappropriate. The Commission expressly stated in the final order that the prudence hearing will continue and that the impact of this case on the prudence analysis cannot be determined until that case is heard. 101 Pub.Util.Rep. (PUR) 4th at 180-81. We do not perceive any due process violations when, as here, the attorney general will be able to present evidence on the question of prudence at the prudence hearing. We find the attorney general's other claims speculative  the Commission has not yet determined if and to what extent investment in any plant is imprudent, or how imprudence would effect its rate treatment. It certainly has not, by its actions in this case, determined that ratepayeris must pay for imprudent investment. Consequently, we find that the factual record is not adequately developed on this question to allow review, and we leave it to the Commission to determine in the first instance its treatment of this matter. The attorney general also argues that the Commission improperly changed its methodology by bringing plant into rates in a manner other than based on the most recent in-service date. We find it impossible to evaluate this alleged change in methodology, because the phase-in of specific capacity into rates has not yet been determined. It is true that the Commission excluded 130 MW of SJ-4, which the attorney general argues was more recent than PVNGS and should therefore not be excluded before PVNGS. It is not clear that the Commission is bound to a first-in methodology. Even if it were, however, we cannot discern any arbitrary or capricious action at this time, because the Commission has not yet determined how, or even if, PVNGS Units 1 and 2 will be phased into rate base.

The attorney general asserts that the Commission: determined without ample evidence in the record that total exclusion would not provide sufficient generating capacity over a reasonable planning period to maintain an acceptable reserve margin of twenty percent; changed its definition of the reasonable planning period of ten years by adding an extra year to the period; ignored evidence of the availability of alternative sources to be purchased, and relied on a PNM forecast that it has previously characterized as unreliable. These issues ask us to apply substantial evidence review when the Commission has not yet finished taking evidence on these questions. What these contentions ignore is that the Commission has not yet determined how capacity will be phased into rates. The timing of inclusion has not yet been finally determined. Thus, the argument that the Commission changed its definition of the relevant time period to determine sufficient capacity fails as premature  it is not yet apparent to what purpose this alleged extension was used. Because this hearing was in essence a threshold determination, binding over certain capacity for further examination to determine if it was necessary to protect New Mexico's energy future, the Commission acted only to protect its options by considering future possibilities. At this time, however, it has not taken any final action that implicates the alleged extra year, and we cannot determine whether it acted improperly. This conclusion is bolstered by the lack of evidence showing that the Commission relied in any way on evidence regarding the extra year. The same concerns, namely the lack of final Commission action regarding phasing in of capacity and the narrow scope of the final order as a threshold determination pending the outcome of the prudence and rate hearings, dispose of the other two arguments. The attorney general claims that reliance on PNM's August 1988 load forecast was misplaced in light of the Commission's skepticism regarding the forecast's reliability. See Final Order, 101 Pub.Util.Rep. (PUR) 4th at 165. First, it is not clear that the Commission abused its discretion in considering a forecast that was submitted on the record and subject to examination by the parties. See, e.g., Attorney General v. New Mexico Pub. Serv. Comm'n, 101 N.M. 549, 553, 685 P.2d 957, 961 (1984) (Commission has discretion in considering conflicting evidence). More importantly, no final action in reliance on the forecast has been made, and any decision we would make on this issue at this point would be premature and would subject us to potentially duplicative or unnecessary decision making. Similarly, any argument that more contract purchases, rather than use of PNM's own available resources, should be used can be presented at the subsequent hearings.
The Commission stated, as a further reason militating against total exclusion, that if it had determined that total exclusion of PVNGS was appropriate, in fairness to PNM it would have had to decertify the units, thus forever losing jurisdiction. The attorney general contends that the determination is wrong  that the Commission would not be required to decertify the PVNGS units. The attorney general has not shown, however, how it would be beyond the Commission's discretion to decide that decertification would be appropriate in these circumstances. Moreover, the Commission has not made any decision in this regard. It only stated, as one factor, that decertification would have been fair. It has not determined that decertification should be done, in which case we would be able to evaluate the reasonableness of its decision, and it has not decided that total exclusion was inappropriate because of decertification. Accordingly, we find no reviewable decision before us.
NMIEC contends that the Commission acted arbitrarily and capriciously and without support of substantial evidence when it adopted the mix of generating plant to be included in rates, arguing that no party advocated the specific mix chosen by the Commission and that no evidence was presented with regard to the impact of the mix chosen on ratepayers, investors or earnings. Rather than relying on methodologies and proposals for exclusion advocated by various witnesses, NMIEC maintains that the Commission unilaterally formulated its own proposal, combining aspects of the various proposals presented, without a methodology supporting the mix chosen and without regard to the diverse theoretical underpinnings of the testimony upon which it relied. Having rejected all of the proposals offered, NMIEC contends that the Commission was compelled to reopen the record rather than to unilaterally formulate its own position. We resolve this issue based on the scope of the Commission's authority and discretion, as well as in part on ripeness grounds. In a hearing on rates, if the commission finds any such proposed rate or rates to be unjust, unreasonable or in any wise in violation of law, the commission shall determine the just and reasonable rate or rates to be charged or applied by the utility for the service in question and shall fix the same by order to be served upon the utility. NMSA 1978, Section 62-8-7(D) (Repl. Pamp.1984). [6] The Commission is vested with broad discretion to pursue its statutory mandate to set just and reasonable rate or rates, and it must exercise that discretion when proposed rates are found to be unjust or unreasonable. NMSA 1978, Section 62-8-7(D) (Repl.Pamp.1984); see Attorney General v. New Mexico Pub. Serv. Comm'n, 101 N.M. 549, 553-54, 685 P.2d 957, 961-62 (1984). As we stated in Mountain States Telephone and Telegraph Co. v. New Mexico State Corp. Commission, 90 N.M. 325, 331, 563 P.2d 588, 594 (1977): The Commission has a duty to be a prime mover in the procedure to see that the public interest is protected by establishing reasonable rates and that the utility is fairly treated so as to avoid confiscation of its property. Considering this broad mandate it could hardly be envisioned that the Commissioners would sit as spectators, like Roman Emperors in the coliseum, and simply exhibit a thumbs-up or thumbs-down judgment after the dust of battle settles in the arena. [7] Although the Commission cannot arbitrarily reject the testimony of any particular witness, neither is it required to accept testimony. It must weigh the conflicting evidence of witnesses, using its discretion to ultimately reach a decision within its mandate. See Alto Village Servs. Corp. v. New Mexico Pub. Serv. Comm'n, 92 N.M. 323, 587 P.2d 1334 (1978). When it weighs the evidence, accepting certain testimony while rejecting. other, the Commission's decision nevertheless may be supported by substantial evidence. [E]vidence of two conflicting opinions in the record does not mean that the decision arrived at is unsupported by substantial evidence. Attorney General v. New Mexico Pub. Serv. Comm'n, 101 N.M. at 553, 685 P.2d at 961. We are mindful that under this analysis, the parameters set by the various plans that the parties supported by evidence may not be effective when the methodologies upon which those plans are set are altered. Thus, choosing various portions of disparate plans may make the assumptions regarding costs and returns inherent in any one or another methodology inappropriate. However, to reiterate our ripeness analysis, this was not a rate hearing. We are not in the position where we can evaluate the decisions made in the hearing as they affect rates, because the Commission has not yet determined rates. This question remains open before the Commission, and we will not act upon it until the Commission has made a final determination and considered all of the evidence. Accordingly, we affirm the Commission's final order. As our discussion has indicated, should the issues that we deem not yet ripe for our consideration recur, we will entertain their appeal when the factual record is fully developed and after the Commission has exercised its discretion in considering them. IT IS SO ORDERED. SOSA, C.J., and RANSOM, J., concur.