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News Analysis

Fortnightly Magazine - March 1 1999

New PRC might revisit PUC orders. By Bruce W. Radford

"The PRC has not necessarily decided what position it will take," said PRC counsel Stacy Goodwin.

"I believe the majority of the PRC will take a slightly different position than the PUC, but there are some legal questions," confirmed Lynda Lovejoy, the newly elected chairman of the Public Regulation Commission.

These comments came in mid-January, as the New Mexico Supreme Court faced a petition for a writ of mandamus, filed by a coalition of state legislators, organized labor and utility shareholders, all backing Public Service Co. of New Mexico (PNM) in efforts to overturn two orders issued by the state Public Utility Commission late last year, before it expired under a sunset law.

The court now expects to act by March 1, but we could see the cases thrown back to an uncertain fate at the hands of the newly created Public Regulation Commission.

ON JAN. 12, IN ITS FIRST OFFICIAL ACT, the new Public Regulation Commission reopened PUC Case No. 2847, the net metering rule for customer-owned renewable energy, distributed generation and alternative generation technologies, and effectively killed it. The PRC suspended the rule on an emergency basis, even though the time for rehearing had passed. It defended the move as "necessary for the preservation of the general welfare." Case No. 2847, Jan. 12, 1999 (N.M.P.R.C.), suspending order issued Nov. 30, 1998, Case No. 2847 (N.M.P.U.C.).

And now comes Santa Fe attorney Jerry Wertheim, with the firm Jones, Snead, Wertheim, Wentworth & Jacamilla, who sees perhaps a similar fate for two larger cases that he's involved with, representing PNM shareholder interests.

In the first of those two cases, which set rates for PNM, the PUC had cut revenue requirement drastically by abandoning embedded cost valuation and switching to a market-based value for the utility's generation assets, based on an assumed regional price for generation of 3.82 cents per kilowatt-hour, compared with the PNM's estimated embedded cost of 5.118 cents per kWh. Case No. 2761, Nov. 30, 1998 (N.M.P.U.C.).

In the second, the PUC had granted a certificate of convenience to Residential Electric Inc. to sell power as a public utility in three cities already served by PNM, forcing the utility to provide unbundled transmission, distribution, ancillary and customer services to REI. Case Nos. 2867, 2868, Nov. 30, 1998 (N.M.P.U.C.).

In each case, the PUC also had ruled that stranded costs must by definition stem from inefficiency; therefore, state law absolutely prohibits any recovery of stranded costs. That position appeared to undermine draft legislation under consideration in the state house, angering some legislators. Eventually, PNM shareholders joined with a bipartisan group of state legislators and a local of the International Brotherhood of Electrical Workers, seeking a writ of mandamus to compel the PRC to revoke the orders. (Wertheim, representing the PNM coalition, explains that New Mexico law allows a writ of mandamus to compel action where a state agency has acted improperly in a legislative capacity.)

Now, however, the supreme court has consolidated all three - rate case, REI certificant and writ