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

Heading: Whether the Independent Audit Lacks Sufficient Regulatory Oversight

Text: {71} ABCWUA claims that the independent audit lacks sufficient regulatory oversight because the PRC failed to specify any details, it did not indicate how the audit would be conducted to protect ratepayers, and it did not explain or describe the timing or mechanics of the audit process. Without sufficient regulatory oversight, ABCWUA argues that the Emergency FPPCAC violates Rule 550 because it fails to ensure that the utility's fuel and purchased power policies and practices are designed to assure that electric power is generated and purchased at the lowest reasonable cost. Rule 550.17(A)(3). {72} The following additional background is necessary to our resolution of this claim. After the issuance of the PRC's Final Order, the PRC submitted a seventy-seven page Request for Proposals (RFP) in Case No. 08-00330-UT. The purpose of the RFP was to select a qualified [auditor] to provide professional auditing and prudence review services of PNM's fuel and purchased power costs, fuel clause filings and related documentation for the period of June 1, 2008 through May 31, 2009. The RFP summarized the scope of the audit as follows:  All cost elements of PNM's fuel clause shall be audited and reviewed for accuracy and compliance by the [auditor] selected by the [PRC] to ensure that only appropriate costs are being recovered from retail ratepayers. PNM files Rule 550 Form 1 on a monthly basis along with a number of supporting schedules showing the fuel clause related expenses and the balancing account.  Data shall be collected, organized and maintained so that future audits can be conducted by the [PRC] staff.  Written reports and presentations shall be made to the [PRC] each quarter and at the end of the audit time period. Additional reports and presentations may be requested by the [PRC] or its designated agent or recommended by the [auditor].  The [auditor] may be required to prepare and submit written testimony and to stand for cross examination on its work related to the audit and prudence review. As needed, the [auditor] is to be available as a witness, assist with the drafting of direct testimony, cross-examination questions, briefs and motions, and other regulatory activities. {73} The RFP summarized the scope of the prudence review as follows:  The major elements of the utility fuel clause shall be reviewed for prudence by an [auditor] selected by the [PRC] to ensure that reasonable and accurate costs are being recovered from retail ratepayers. The [auditor] should review PNM practices and policies, procedures and compliance with regulations on all major components of fuel costs included in the fuel clause.  Data shall be collected, organized and maintained so that future prudence reviews can be conducted by the [PRC] staff.  A status report should be made to the [PRC] each month outlining key activities and summarizing current prudence review findings. At the end of the review, a report summarizing the prudence review and areas of concern will be required. Additional reports and presentations may be requested by the [PRC] or its designated agent or recommended by the [auditor].  The [auditor] may be required to prepare and submit written testimony and to stand for cross examination on its work related to the audit and the prudence review. As needed, the [auditor] is to be available as a witness, assist with the drafting of direct testimony, cross-examination questions, briefs and motions, and other regulatory activities. {74} As the foregoing record reflects, the independent audit is subject to extensive regulatory oversight in Case No. 08-00330-UT. We therefore reject ABCWUA's claim that the Emergency FPPCAC violates Rule 550. {75} Nonetheless, ABCWUA argues, for the first time in its reply brief, that waiting until after the emergency hearing and the Final Order to set forth the details of the audit significantly impaired the parties' ability to ensure that the audit will result in a meaningful review of PNM's policies and practices and that its electric power is generated and purchased at the lowest reasonable cost. As previously explained, we will not address issues raised for the first time in the reply brief. Fairweather, 116 N.M. at 463, 863 P.2d at 1084. We therefore decline to review ABCWUA's claim.