Court Opinion

ID: 9391258
Source: CourtListenerOpinion
Date Created: 2023-05-01 17:07:56.634747+00
Date Added: 2024-06-11T17:18:40.331413
License: Public Domain

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 1          IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

 2    Filing Date: May 1, 2023

 3    EL PASO ELECTRIC COMPANY,
 4          Appellant,

 5    v.                                                        NO. S-1-SC-38874

 6    NEW MEXICO PUBLIC REGULATION
 7    COMMISSION,

 8          Appellee,
 9    and
10    YELLOW BIRD SERVICES, LLC,
11    DOÑA ANA COUNTY, and
12    THE OFFICE OF THE NEW MEXICO
13    ATTORNEY GENERAL,
14          Intervenors-Appellees,
15    CONSOLIDATED WITH

16    CITY OF LAS CRUCES,

17          Appellant,

18    v.                                                        NO. S-1-SC-38911

19    NEW MEXICO PUBLIC REGULATION
20    COMMISSION,

21          Appellee.

22    In the Matter of the Application of El Paso
23    Electric Company for Revision of Its Retail
24    Electric Rates Pursuant to Advice Notice No. 267,
 1   New Mexico Public Regulation Commission
 2   Case No. 20-00104-UT

 3   APPEAL FROM THE NEW MEXICO PUBLIC REGULATION
 4   COMMISSION

 5   Montgomery & Andrews, PA
 6   Jeffrey J. Wechsler
 7   Kari E. Olson
 8   Santa Fe, NM

 9   El Paso Electric Company
10   Nancy B. Burns
11   Jordan Kessler
12   Santa Fe, NM
13   for Appellant El Paso Electric Company

14   Russell R. Fisk, Associate General Counsel
15   Santa Fe, NM
16   for Appellee

17   Stevens Law, LLC
18   Anastasia S. Stevens
19   Santa Fe, NM
20   Jennifer Vega-Brown, City Attorney
21   Robert A. Cabello, Deputy City Attorney
22   Las Cruces, NM

23   for Appellant City of Las Cruces

24   Jason Marks Law, LLC
25   Jason A. Marks
26   Albuquerque, NM
27   for Intervenor-Appellee Yellowbird Services, LLC

                                              2
 1   Stelzner, Winter, Warburton, Flores, Sanchez, Dawes, P.A.
 2   Keith W. Herrmann
 3   Nann M. Winter
 4   Albuquerque, NM

 5   Nelson J. Goodin, Doña Ana County Counsel
 6   Frederick D. Kennon, Doña Ana County Counsel
 7   Las Cruces, NM
 8   for Intervenor-Appellee Doña Ana County

 9   Hector H. Balderas, Attorney General
10   Gideon Elliot, Assistant Attorney General
11   Keven Gedko, Assistant Attorney General
12   Santa Fe, NM
13   for Intervenor-Appellee The Office of the New Mexico Attorney General

14                                      DECISION

15   VARGAS, Justice.

16   {1}   El Paso Electric Company (EPE) appeals from the New Mexico Public

17   Regulation Commission’s (PRC’s) order on EPE’s 2020 Application for Revision

18   of Retail Electric Rates. EPE challenges the order on ten separate grounds that fall

19   into three categories of asserted error: (1) the order improperly denied EPE’s

20   recovery of its cost of service, (2) the order improperly determined EPE’s cost of

21   capital, and (3) the order deprived EPE of its right to due process. Having reviewed

22   the pleadings, the extensive record, and heard oral argument, we conclude that four

23   of EPE’s due process arguments have merit, of which three provide a basis for

                                              3
 1   appellate relief. Because we find error, we vacate and annul the order and remand

 2   for further proceedings. See NMSA 1978, § 62-11-5 (1982) (“The supreme court

 3   shall have no power to modify the action or order appealed from, but shall either

 4   affirm or annul and vacate the same.”); see also Hobbs Gas Co. v. N.M. Pub. Serv.

 5   Comm’n, 1993-NMSC-032, ¶ 6, 115 N.M. 678, 858 P.2d 54 (“Following remand to

 6   the Commission, the Commission may properly enter an order embodying those

 7   provisions in the earlier vacated order that have been declared reasonable and

 8   lawful.”).

 9   {2}   We exercise our discretion to dispose of this appeal by nonprecedential

10   decision. See Rule 12-405(B) NMRA (providing that a case may be disposed of by

11   nonprecedential decision when, for example, “[t]he issues have been previously

12   decided by the Supreme Court”). We therefore assume the parties’ familiarity with

13   the record and summarize the proceedings below only to the extent necessary to

14   explain our reasoning. We summarily affirm on all grounds other than those

15   expressly discussed in this decision.

16   I.    DISCUSSION

17   {3}   We agree with EPE that the PRC violated due process by denying or

18   disallowing four requests made by EPE in its rate application: (1) to include in rate

19   base expenses for major plant additions after the 2019 base period, (2) to include in

                                              4
 1   rate base lease prepayments made years before the 2019 base period, (3) to approve

 2   a proposed reconciliation of adjustment clause costs and revenues for 2017, 2018,

 3   and 2019, and (4) to include in EPE’s capital structure an equity infusion that was

 4   made nine months after the end of the base period.

 5   {4}   “[I]t is well settled that the fundamental requirements of due process in an

 6   administrative context are reasonable notice and opportunity to be heard and present

 7   any claim or defense.” TW Telecom of N.M., LLC v. N.M. Pub. Regul. Comm’n,

 8   2011-NMSC-029, ¶ 17, 150 N.M. 12, 256 P.3d 24 (emphasis, internal quotation

 9   marks, and citation omitted). As a result, “regulatory treatment which radically

10   departs from past practice without proper notice will not be sustained.” Hobbs Gas

11   Co., 1993-NMSC-032, ¶ 7 (internal quotation marks and citation omitted). For

12   notice to be sufficient there must be a “meaningful” opportunity to respond. See TW

13   Telecom, 2011-NMSC-029, ¶ 17 (“The opportunity to be heard should be at a

14   meaningful time and in a meaningful manner.” (internal quotation marks and citation

15   omitted)). “The constitutionality of the PRC’s rulings present this Court with a

16   question of law, which we review de novo.” Albuquerque Bernalillo Cnty. Water

17   Util. Auth. v. N.M. Pub. Regul. Comm’n, 2010-NMSC-013, ¶ 19, 148 N.M. 21, 229

18   P.3d 494.

                                              5
 1   {5}   In addition to the constitutional elements of due process, the Legislature has

 2   added a statutory requirement: “the commission may change its past practices or

 3   procedures, provided that substantial evidence on the record justifies such a change.”

 4   NMSA 1978, § 62-6-14(C) (2009); see also, e.g., Mountain States Tel. & Tel. Co. v.

 5   N.M. State Corp. Comm’n, 1986-NMSC-019, ¶ 26, 104 N.M. 36, 715 P.2d 1332

 6   (holding that a change in how state income taxes are calculated was not arbitrary or

 7   capricious when the utility had prior notice and the record showed a reasonable

 8   justification for the change). We also may annul and vacate an order of the PRC

 9   when its decision is arbitrary and capricious, outside the scope of the agency’s

10   authority, or otherwise inconsistent with law. Pub. Serv. Co. of N.M. v. N.M. Pub.

11   Regul. Comm’n (PNM), 2019-NMSC-012, ¶ 12, 444 P.3d 460.

12   A.    Exclusion of Major Plant Additions From Rate Base

13   {6}   We begin with EPE’s argument that the PRC violated due process by relying

14   on a “new accounting requirement” to disallow an adjustment to EPE’s rate base,

15   contrary to the PRC’s allowance of a similar adjustment in EPE’s last rate case. See

16   In re Application of El Paso Elec. Co. (2015 EPE Rate Case), Case No. 15-00127-

17   UT, ¶¶ 180, 189 (NMPRC June 8, 2016) (allowing a $40.6 million adjustment for a

18   new facility that entered service after the end of the test-year period). In this case,

19   EPE requested approximately $4.2 million in rate base for post test year period (post-

                                               6
 1   TYP) adjustments for “major plant additions . . . closed to plant in service,” during

 2   the three months immediately following the 2019 base period. The hearing examiner

 3   recommended excluding the adjustments because EPE had included only major plant

 4   additions for the three-month period and had not “synchronize[d] all plant-related

 5   balances” for that period. (Emphasis added.) The PRC agreed with the hearing

 6   examiner’s reasoning and adopted the recommendation to exclude the entirety of the

 7   proposed $4.2 million adjustment.

 8   {7}   On appeal, EPE argues that the requirement to synchronize all expenses was

 9   a departure from past practice and was adopted without notice and a reasonable

10   justification in the record. The City of Las Cruces 1 concedes that the PRC did not

11   require synchronization when it approved “EPE’s post-test period capital additions”

12   in EPE’s 2015 rate case. However, the City argues that the requirement was

13   supported by an intervening rate case involving another utility, Southwestern Public

           1
            We granted the PRC’s motion to consolidate EPE’s appeal with the City’s
     cross-appeal from the same order. Order, El Paso Elec. Co. v. N.M. Pub. Regul.
     Comm’n, S-1-SC-38874 (N.M. Aug. 17, 2021) (granting the motion to consolidate
     S-1-SC-38874 and -38891). We later dismissed the City’s cross-appeal as moot.
     Dispositional Order of Dismissal, id. (N.M. Sept. 26, 2022) (dismissing S-1-SC-
     38911). Although the City is no longer an appellant in this proceeding and has not
     moved to intervene in EPE’s appeal, we recognize the City’s right to intervene and,
     under the circumstances, treat the City as an intervenor-appellee for purposes of this
     decision. See Rule 12-601(D)(1) NMRA (providing that a party to an adjudicatory
     proceeding may move to intervene as of right in an appeal from that proceeding).

                                               7
 1   Service Company (SPS). See In re Application of Southwestern Pub. Serv. Co. (SPS

 2   Rate Case), Case No. 17-00255-UT (NMPRC Sept. 5, 2018) In that case, the hearing

 3   examiner recommended including in rate base “plant placed into service” during the

 4   five months immediately after SPS’s base period. Recommended Decision, id. at

 5   117-18 (June 29, 2018). The SPS hearing examiner reasoned that “[w]hile SPS did

 6   not fully synchronize all cost of service elements to match the . . . balance for plant-

 7   in-service, it did synchronize all plant-related balances, which the Commission has

 8   indicated is sufficient when including post TYP plant in rate base.” Id. at 118

 9   (emphasis added). In this case, both the hearing examiner and the PRC agreed that,

10   under the “recent precedent” of the SPS rate case, EPE’s request to include $4.2

11   million for major plant additions “should be denied because EPE did not synchronize

12   all plant-related balances to March 31, 2020.”

13   {8}   Reliance on the SPS rate case is misplaced. That case does not stand for the

14   proposition—and therefore does not provide notice or justification—that post-TYP

15   adjustments for additions to plant will be excluded unless all plant-based balances

16   are synchronized. Put simply, reasoning that a practice is sufficient falls short of

17   announcing that the practice is required, whether in the SPS rate case itself or in any

18   future case. Thus, the SPS rate case does not meaningfully alter the PRC’s past

19   practice of allowing post-TYP plant additions without concern for synchronization.

                                                8
 1   See 2015 EPE Rate Case, No. 15-00127-UT, ¶ 189 (refusing to “depart from [the

 2   PRC’s] practice of allowing into rate base capital projects completed within five

 3   months of the end of the test period and before the filing of a rate case”).

 4   {9}    Similarly, neither the testimony nor the evidence in this case provided notice

 5   or justification for requiring synchronization as a condition of including post-TYP

 6   additions to plant in rate base. As noted by the hearing examiner, AG-witness Crane

 7   and EPE-witness Hancock testified on the issue of EPE’s post-TYP adjustments for

 8   major plant additions. In prefiled testimony, Ms. Crane said nothing about

 9   synchronization and even recommended including the post-TYP additions in rate

10   base because similar additions had been approved in EPE’s 2015 rate case. Similarly,

11   nothing in Mr. Hancock’s cross-examination suggested that plant additions should

12   be excluded unless all plant-based balances were synchronized. The parties have

13   provided no other citations to the record to support the synchronization requirement

14   applied in this case.

15   {10}   The City argues that EPE had sufficient notice and opportunity to respond

16   after the hearing, both in posthearing briefing and in EPE’s exceptions to the

17   recommended decision. That argument is partially contradicted by the record. The

18   issue of synchronization is absent from the posthearing briefing and appears to have

19   been raised for the first time by the hearing examiner in the recommended decision.

                                               9
 1   And while EPE filed an exception to the recommended decision on this issue, the

 2   City cites no authority that such a late opportunity to object—well after the close of

 3   evidence—is sufficient to satisfy due process under these circumstances. Contra,

 4   e.g., Mountain States, 1986-NMSC-019, ¶ 26 (holding that the utility had sufficient

 5   notice of a potential change in methodology based on (1) prefiled testimony from

 6   staff and intervenor witnesses proposing to change the method, (2) the utility’s

 7   rebuttal testimony opposing the change, and (3) the utility’s further testimony at the

 8   hearings). Indeed, the opposite seems true, particularly when the entire $4.2 million

 9   was excluded without affording EPE an opportunity to submit evidence to support,

10   for example, a synchronized adjustment amount. See TW Telecom, 2011-NMSC-

11   029, ¶ 17 (“The opportunity to be heard should be at a meaningful time and in a

12   meaningful manner.” (internal quotation marks and citation omitted)); see also 2015

13   EPE Rate Case, No. 15-00127-UT, ¶¶ 181, 189 (noting that EPE agreed to reduce

14   its post-TYP adjustment by $50,000 to account for evidence of fuel cost savings

15   associated with the new facility).

16   {11}   In sum, the exclusion from rate base of EPE’s requested post-TYP major plant

17   additions violated due process when the PRC approved similar additions in EPE’s

18   2015 rate case without requiring synchronization and when EPE lacked notice that

19   synchronization of all plant-related balances would be required in this instance. See

                                              10
 1   PNM, 2019-NMSC-012, ¶ 65 (“Because the issue . . . appears to have been first

 2   raised by the Commission in its final order, PNM was not afforded an opportunity

 3   to be heard on the issue.”); cf. id. ¶ 65 (holding that the utility was denied due process

 4   when the Commission raised an issue for the first time in its final order).

 5   B.     Exclusion of Unamortized Regulatory Assets From Rate Base (Palo
 6          Verde Water or Effluent Agreement and Newman Buffer Zone Land
 7          Lease)

 8   {12}   We next address EPE’s challenge to the exclusion of two unamortized

 9   regulatory assets from rate base as a violation of due process. The PRC excluded

10   from rate base unamortized portions of prepayments that EPE made (1) in 2008 and

11   2009 to lease land around the Newman Power Plant, and (2) in 2010 through 2013

12   to purchase effluent cooling water for the Palo Verde Nuclear Generating Station.

13   The hearing examiner recommended excluding the prepayments because EPE had

14   failed to provide “any evidence that the prepayment[s] benefit[] ratepayers.” The

15   examiner derived that rule from the following language from a PRC order approving

16   a stipulation in a 2010 rate case involving another utility, Public Service Company

17   of New Mexico (PNM):

18          [T]he Commission has generally required that utilities proposing to
19          prepay expenses must show by a cost-benefit analysis or other evidence
20          that the prepayment benefits ratepayers. PNM has failed to provide any
21          such evidence and has failed to meet its burden to justify this cost.

                                                11
 1   In re Application of Pub. Serv. Co. of N.M. (2010 PNM Rate Case), Case No. 10-

 2   00086-UT, ¶ 109 (NMPRC July 28, 2011). The PRC adopted the hearing examiner’s

 3   recommendation on this issue, expressly noting that the hearing examiner had

 4   “correctly applied Commission precedent.”

 5   {13}   On appeal, EPE argues that (1) the requirement to provide evidence that the

 6   prepayments benefit ratepayers is “a new evidentiary burden” that violated EPE’s

 7   right to notice and an opportunity to respond, (2) EPE actually introduced evidence

 8   that the prepayments benefit ratepayers, and (3) the hearing examiner’s reliance on

 9   the 2010 PNM order was contrary to the PRC’s own regulations. We agree that the

10   prepayments were excluded in violation of EPE’s right to due process.

11   {14}   Based on our review of the record, it once again appears that the hearing

12   examiner invoked an unannounced, unargued evidentiary requirement sua sponte in

13   the recommended decision, without giving EPE an opportunity to introduce

14   evidence to meet the requirement. Indeed, neither EPE nor the City mentioned the

15   2010 PNM order or its purported evidentiary requirement in their posthearing

16   briefing on this issue. EPE argued only that rate base treatment for the prepayments

17   was “not contested and should be approved.” And while the City argued to exclude

18   the prepayments for a variety of reasons, it did not cite the 2010 PNM order or argue

19   that EPE had failed to demonstrate that the prepayments benefit ratepayers.

                                              12
1    Nonetheless, the hearing examiner cited EPE’s failure to satisfy “the precedent from

2    the 2010 PNM Rate Case” as the sole basis to deny EPE’s requests. Therefore, EPE

3    is correct that it lacked notice of the standard that would be applied on this issue and

4    an opportunity to introduce evidence to meet that standard. See TW Telecom, 2011-

5    NMSC-029, ¶ 17 (“[T]he fundamental requirements of due process in an

6    administrative context are reasonable notice and opportunity to be heard and present

7    any claim or defense.” (italics, internal quotation marks, and citation omitted)).

 8   {15}   The City contends on appeal that “EPE should have known of the

 9   Commission’s decade-old precedential standard on prepayments before it requested

10   rate base inclusion of . . . prepayment costs, and should have addressed the

11   appropriate standard for recovery in its case in chief.” That argument actually

12   implicates a second problem with the PRC’s ruling on this issue. The PRC’s own

13   regulations provide that an order approving a stipulation “does not constitute

14   commission approval of or precedent regarding any principle or issue in the

15   proceeding.” 1.2.2.20(D) NMAC. Therefore, sole reliance on the PNM order as

16   “precedent” to exclude the prepayments violates the PRC’s own regulation and thus

17   was unlawful. See, e.g., Miller v. City of Albuquerque, 1976-NMSC-052, ¶ 20, 89

18   N.M. 503, 554 P.2d 665 (holding that the City’s Environmental Planning

19   Commission’s “failure to comply with its own published procedures was fatal to [its]

                                               13
 1   decision”); I Kristin E. Hickman & Richard J. Pierce, Jr., Administrative Law

 2   Treatise § 7.1, at 728 (6th ed. 2019) (“Once an agency adopts a set of procedures by

 3   rule, the agency must comply with its own procedural rules even if the procedures

 4   adopted by the agency exceed those independently required by the Due Process

 5   Clause.”). Moreover, EPE can hardly be charged with notice of a “decade-old

 6   precedential standard” when the only source in the record of such a standard is a

 7   nonprecedential order directed at another utility. Under these circumstances,

 8   exclusion of the prepayments violated EPE’s right to due process.

 9   C.     Refusal to Approve EPE’s Reconciliation of Its Adjustment Clause Costs
10          and Revenues for 2017 Through 2019

11   {16}   We next consider EPE’s argument that the PRC’s refusal to approve its

12   proposed reconciliation of costs and revenues resulting from its fuel and purchased

13   power cost adjustment clause (FPPCAC or adjustment clause) violated due process.

14   As described by the hearing examiner, EPE submitted for approval “a three-page

15   document that shows, for each of 2017, 2018, and 2019, amounts that EPE included

16   in, and recovered through, its FPPCAC.” EPE submitted the proposed reconciliation

17   in reliance on the PRC’s approval of similar reconciliations in EPE’s previous cases.

18   The hearing examiner recommended denying the request because, unlike in EPE’s

19   2009, 2015, and 2018 cases, no staff or intervenor witness “filed testimony

20   addressing EPE’s request that the Commission approve EPE’s reconciliation of its

                                              14
 1   FPPCAC costs and revenues for 2017 through 2019.” The PRC adopted the hearing

 2   examiner’s recommendation, explicitly agreeing that the absence of staff- or

 3   intervenor-witness testimony was dispositive.

 4   {17}   We agree with EPE that the requirement for testimony by a staff or intervenor

 5   witness was arbitrary and capricious and imposed without notice or a reasonable

 6   justification. Although approval of the reconciliation was the subject of extensive

 7   litigation before, during, and after the hearing, the rationale for refusing to approve

 8   the reconciliation is problematic, as was the timing for announcing that rationale. In

 9   a manner that may seem familiar by now, the hearing examiner raised the

10   requirement for staff- or intervenor-witness testimony sua sponte in the

11   recommended decision, after EPE’s opportunity to introduce evidence to meet the

12   requirement had passed. 2 And once again, no party argued before issuance of the

13   recommended decision that the lack of such testimony should be dispositive. Thus,

14   the hearing examiner raised and relied on the requirement without notice and an

            We note that the hearing examiner confirmed at the beginning of day five of
            2

     the evidentiary hearing that PRC staff had not submitted prefiled testimony on the
     subject of EPE’s requested reconciliation. This isolated inquiry was insufficient to
     put EPE on notice that the PRC would rely on the absence of such testimony to
     refuse approval of the proposed reconciliation.

                                               15
 1   opportunity to respond, contrary to the PRC’s previous approvals of EPE’s

 2   adjustment clause reconciliations in its 2009, 2015, and 2018 cases. 3

 3   {18}   The requirement also is arbitrary and capricious in that it does not address the

 4   hearing examiner’s apparent concern about the ambiguous meaning and effect of

 5   approving the reconciliation. The hearing examiner was clearly troubled that, other

 6   than past practice in EPE’s prior cases, EPE had not provided authority in law or

 7   regulation for the PRC to consider or approve an adjustment clause reconciliation,

 8   to identify what standard should govern such an approval, or most importantly, to

 9   clarify what the effect of such an approval would be. Given these significant,

10   unanswered questions, the hearing examiner’s abrupt pivot to the absence of staff-

11   or intervenor-witness testimony is inexplicable. Requiring a staff or intervenor

12   witness to “review[] EPE’s reports and recommend[] approval of EPE’s

13   reconciliations” would not clarify the meaning or effect of the approval any more

14   than such testimony did in EPE’s 2009, 2015, and 2018 cases. Refusing to approve

15   the reconciliation due to EPE’s failure to satisfy a previously unidentified, arbitrary

16   and capricious requirement does not withstand constitutional scrutiny.

            The parties do not question whether approval of EPE’s reconciliation
            3

     amounts to a property right that is protected by due process. We therefore assume
     without deciding that past practice is sufficient to create a due process right and
     analyze the issue accordingly.

                                               16
 1   D.     Exclusion of Known and Measurable Equity Infusion From Test-Year
 2          Period

 3   {19}   We last consider EPE’s challenge to the PRC’s articulation and application of

 4   a new “six-month rule” to exclude a change to EPE’s capital structure that was made

 5   nine months after the end of the base period. Although we defer to the PRC’s broad

 6   discretion to impute a capital structure for the purpose of setting rates, we write to

 7   clarify that any purported reliance on a six-month rule in this case violated due

 8   process.

 9   {20}   The hearing examiner recommended a 51% equity ratio to reflect a $125

10   million equity infusion made by EPE’s parent company nine months after the end of

11   the base period. The hearing examiner noted that in the 2010 PNM rate case, the

12   PRC had approved a known and measurable change to PNM’s capital structure

13   approximately six months after the end of the base period. The examiner also

14   reasoned that a “51% equity ratio [was] within the range of equity ratios” approved

15   by the PRC in other similar rate cases going back at least to 2010. The PRC disagreed

16   and instead approved a 49.21% equity ratio to reflect EPE’s actual ratio at the end

17   of the base period.

18   {21}   The PRC provided two rationales to explain the reduction. To start, the PRC

19   found that a 49.21% equity ratio is “a better policy choice as an imputed capital

20   structure.” That rationale is supported by law and by the record in this case, including

                                               17
 1   testimony by City-witness Garrett who recommended, based on the capital structures

 2   of similarly situated utilities, “apply[ing] a capital structure consisting of a 51% debt

 3   and 49% equity for purposes of computing [EPE’s] awarded rate of return.” See,

 4   e.g., In re Zia Nat. Gas Co. v. N.M. Pub. Util. Comm’n, 2000-NMSC-011, ¶ 8, 128

 5   N.M. 728, 998 P.2d 564 (“Our cases have all but explicitly accepted the imputation

 6   of a capital structure to a utility company in rate making.”); see also id. ¶ 7 (“In rate

7    making, the Commission may set rates based on an optimum, or at least an average,

8    capital structure.”). We therefore do not disturb the PRC’s policy choice to impute

9    a 49.21% equity ratio.

10   {22}   Despite the PRC’s clear authority to impute a capital structure, it nonetheless

11   provided a second rationale for reducing the hearing examiner’s recommended 51%

12   equity ratio that went beyond the evidence and argument presented in this case. To

13   wit, the PRC announced in the final order that “six months after the base period end

14   is a reasonable cut-off point for including known and measurable changes to capital

15   structure to maintain a reasonable relationship between the base period and the test-

16   year period.” Therefore, “at nearly nine months after the end of the base period, the

17   infusion is too remote from the base period to be included in the test-year period.”

18   {23}   We agree with EPE that the PRC’s adoption of a new six-month rule in the

19   final order violated due process, when no party presented evidence or argued in favor

                                                18
 1   of such a rule at any point in the proceedings. See PNM, 2019-NMSC-012, ¶ 65

 2   (“Because the issue . . . appears to have been first raised by the Commission in its

 3   final order, PNM was not afforded an opportunity to be heard on the issue.”). We

 4   further agree that adopting the rule in this case was contrary to past practice and not

 5   supported by the record. See § 62-6-14(C) (“[T]he commission may change its past

 6   practices or procedures, provided that substantial evidence on the record justifies

 7   such a change.”). Indeed, EPE cites a recent case in which the PRC allowed a known

 8   and measurable change made more than sixteen months after the end of the base

 9   period, an allowance that undermines the PRC’s sua sponte adoption of a reflexive

10   six-month rule in this case. See In re EPCOR Water N.M. Inc., Case No. 18-00124-

11   UT, ¶ 12 (NMPRC July 17, 2019). Although we do not disturb the PRC’s approval

12   of an imputed capital structure, we expressly disapprove of the adoption of a six-

13   month rule under the record in this case.

14   II.    CONCLUSION

15   {24}   Finding no other error, we annul and vacate the order and remand for further

16   proceedings consistent with this decision.

17   {25}   IT IS SO ORDERED.

18
19                                                    JULIE J. VARGAS, Justice

                                                 19
1   WE CONCUR:

2
3   C. SHANNON BACON, Chief Justice

4
5   MICHAEL E. VIGIL, Justice

6
7   DAVID K. THOMSON, Justice

8
9   BRIANA H. ZAMORA, Justice

                                      20