City of Las Cruces v. N.M. Pub. Regul. Comm'n

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IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Filing Date: December 16, 2021

No. S-1-SC-37458

CITY OF LAS CRUCES,

Appellant,

v.

NEW MEXICO PUBLIC
REGULATION COMMISSION,

Appellee,

and

EL PASO ELECTRIC COMPANY,
FOUR PEAKS ENERGY, LLC, and
ENERGYneering SOLUTIONS, INC.,

Interveners-Appellees.

In the Matter of the Application
for Approval of El Paso Electric
Company’s 2018 Renewable
Energy Plan Pursuant to the
Renewable Energy Act and
17.9.572 NMCA, and Revised
Rate No. 38-RPS Cost Rider,
New Mexico Public Regulation
Commission Case No. 18-00199-UT

APPEAL FROM THE NEW MEXICO PUBLIC REGULATION COMMISSION

Stevens Law LLC
Anastasia S. Stevens
Santa Fe, NM

Jennifer Vega-Brown, City Attorney
Marcia B. Driggers, Assistant City Attorney
Las Cruces, NM

for Appellant

Russell R. Fisk,
Associate General Counsel
Santa Fe, NM

for Appellee

Nancy Brook Burns
Santa Fe, NM

for Intervener-Appellee El Paso Electric Company

Keleher & McLeod, P.A.
Thomas C. Bird
Albuquerque, NM

for Intervenors-Appellees Four Peaks Energy, LLC and
ENERGYneering Solutions, Inc.

DECISION

VIGIL, Chief Justice.

{1} Under the Renewable Energy Act (Act), NMSA 1978, §§ 62-16-1 to -10 (2004, as
amended through 2021), a public utility must have a certain percentage of its retail sales
to electric consumers come from renewable energy. Sections 62-16-3(G) (2007,
amended 2019), 62-16-4(A) (2014, amended 2019).1 This percentage is called a
renewable portfolio standard (Portfolio Standard). Section 62-16-3(G) (2007). If a public
utility cannot generate enough of its own renewable energy to meet this Portfolio
Standard, it can procure renewable energy certificates (Certificates). Each Certificate
represents a certain amount of electricity generated from a renewable energy
resource—like a currency by which public utilities’ compliance with the Portfolio
Standard may be measured. Section 62-16-3(F) (2007); § 62-16-5(A) (2007, amended
2019). Costs associated with procuring Certificates are then passed on to electric
consumers, or “ratepayers.” See § 62-16-2(B)(3); 17.9.572.12 NMAC (5/31/2013).

{2} Because ratepayers incur the financial burden of procuring Certificates, public
utilities cannot be required to procure renewable energy to meet the Portfolio Standard
if it is above a reasonable cost threshold (Threshold). See § 62-16-2(B)(3) (providing
that one purpose of the Act is to protect ratepayers from renewable energy costs above
the Threshold); see also § 62-16-4(B) (2014) (“If . . . , in any given year, the cost of
renewable energy that would need to be procured or generated for purposes of

1We issue this disposition by decision rather than precedential opinion because the relevant statutes and
regulations have since been amended.
compliance with the [Portfolio Standard] would be greater than the [Threshold] . . . , the
public utility shall not be required to incur that cost.”). As a result, the Threshold serves
as “a customer protection mechanism that limits the customer bill impact.” 17.9.572.12
NMAC (5/31/2013).

{3} In this case, the City of Las Cruces (City) appeals a final order from the New
Mexico Public Regulation Commission (Commission), Case No. 18-00109-UT, which
approved the 2018 Annual Renewable Energy Plan (2018 Plan) between El Paso
Electric Company (El Paso Electric) and the Camino Real Landfill to Energy Facility
(Camino Real). The 2018 Plan allowed El Paso Electric to purchase Certificates
generated by Camino Real despite El Paso Electric’s costs for complying with the
Portfolio Standard being well above the Threshold.2

{4} We conclude that the final order approving of the 2018 Plan to exceed the
Threshold is in violation of the consumer protection provisions of the Act. See § 62-16-
2(B)(3); § 62-16-4(B) (2014). We reverse and remand.

I. BACKGROUND

{5} Camino Real is a biogas plant that uses methane gas from a landfill to generate
renewable energy. Camino Real is also a “qualified facility” as defined by the federal
Public Utility Regulatory Policies Act of 1978, 16 U.S.C. §§ 2601-2645 (2006). As a
qualifying facility, it may interconnect with a public utility. This creates an obligation for
the utility to purchase all of the energy produced by Camino Real at the utility’s avoided
cost of generation. 17.9.570.9(A) NMAC.

{6} Here, Camino Real and El Paso Electric are interconnected, meaning El Paso
Electric must purchase all the energy Camino Real produces at El Paso Electric’s
avoided cost. Because of this, El Paso Electric was also the owner of any Certificates
generated by Camino Real and, as a result, when Camino Real was originally included
in El Paso Electric’s portfolio, El Paso Electric claimed all Certificates at no cost. Section
62-16-5(B)(1)(a) (2007); see 17.9.572.17(C)(1)(b) NMAC (5/31/2013) (providing that if
the generator is a qualifying facility, the Certificates are owned by the public utility
unless retained by the generator through a specific agreement).

{7} Although El Paso Electric could claim the Certificates at no cost, in 2009, the
Commission approved of an agreement that allowed Camino Real to retain its
Certificates and then sell them to El Paso Electric, with El Paso Electric voluntarily
offering $15 per Certificate through December 31, 2018. This was made possible
because at the time of the agreement El Paso Electric’s cost of compliance with the
Portfolio Standard was below the Threshold. This is no longer the case.

{8} In its 2018 Plan, El Paso Electric requested approval of a ten-year agreement to
pay Camino Real $30 per Certificate. The reasons offered by El Paso Electric for the
$30 amended Certificate price were to allow Camino Real to continue New Mexico

2The Threshold in effect for the 2018 Plan was 3% of the plan year total revenues. 17.9.572.12(B) NMAC
(5/31/2013). El Paso Electric projected renewable costs of 6.54% in 2018.
operations and to maintain compliance with Portfolio Standard. But because El Paso
Electric’s costs for compliance of the Portfolio Standard were more than double the
Threshold, the Commission could not make El Paso Electric incur the costs associated
with purchasing the Certificates. See § 62-16-4(B) (2014). Thus, the only real reason for
the $30 Certificate price was to ensure the viability of Camino Real.

{9} Following a public hearing on the 2018 Plan, a hearing examiner issued a
recommended decision. The hearing examiner recommended that the procurement by
El Paso Electric of Certificates from Camino Real was “not supported by the law or the
evidence and should be denied.” Following receipt of the recommendation, the
Commission considered the matter in an open meeting. During the meeting, some
Commissioners proposed an alternative agreement asking whether El Paso Electric and
Camino Real were willing to enter an agreement at a price of $25 per Certificate or
some other price lower than $30. The alternative agreement was issued to El Paso
Electric that same day in the form of a bench request. El Paso Electric submitted a
response to the bench request, stating that it would be “willing to enter into a contract
extension at $25 per [Certificate] assuming [Camino Real] confirms that [it] believe[s]
the contract will make the project viable going forward.”3 However, in that same
response, El Paso Electric relayed the answer from Camino Real’s owner that the
“project is not amenable to a lower [Certificate] rate as the difference would be directly
attributable to the ability to support proper wages for technical operations labor.”

{10} A few days after receiving El Paso Electric’s response, the Commission issued a
final order approving of the 2018 Plan with the price of $30 per Certificate, despite El
Paso Electric’s costs exceeding the Threshold. The Commission concluded that the
2018 Plan should be approved because “[El Paso Electric] states that the owner of
[Camino Real] stated that a [Certificate] price of $25 . . . jeopardizes the viability of the
project.” The City filed a motion for a rehearing which the Commission denied. The City
appealed.

II. DISCUSSION

{11} On appeal, the City makes three arguments: (1) the final order violates the
consumer protection provisions of the Act, (2) the final order contradicts Commission
precedent interpreting the Act, and (3) the final order violates the legal residuum rule
because the Commission relied solely on hearsay evidence. Because we conclude that
the final order violates the consumer protection provisions of the Act, we do not address
the City’s remaining arguments.

A. Statutory Construction and Standard of Review

{12} We review the Commission’s final order to determine whether it is in accordance
with law. N.M. Att’y. Gen. v. N.M. Pub. Regul. Comm’n, 2013-NMSC-042, ¶ 9, 309 P.3d
89. Our review begins by looking at two interconnected factors: (1) “whether the
decision presents a question of law, a question of fact, or some combination of the two”;

3The “project” is the Camino Real project of converting landfill gas to energy.
and (2) “whether the matter is within the agency’s specialized field of expertise.” Alb.
Bernalillo Co. Water Util. Auth. v. N.M. Pub. Regul. Comm’n, 2010-NMSC-013, ¶ 17,
148 N.M. 21, 229 P.3d 494 (internal quotation marks and citation omitted).

{13} Whether the final order violates the consumer protection provisions of the Act is a
question of statutory interpretation which we review de novo. State v. Nick R., 2009-
NMSC-050, ¶ 11, 147 N.M. 182, 218 P.3d 868. As statutory interpretation is not within
the Commission’s expertise, we afford “little, if any, deference to the [Commission] on
issues of statutory interpretation.” Marbob Energy Corp. v. N.M. Oil Conservation
Comm’n, 2009-NMSC-013, ¶ 7, 146 N.M. 24, 206 P.3d 135. Further, we are “less likely
to defer to [the Commission’s] interpretation of the relevant statute if the statute is clear
and unambiguous.” Id.

{14} When looking at a statute, our primary goal “is to ascertain and give effect to the
intent of the Legislature.” Nick R., 2009-NMSC-050, ¶ 11. We “determine and give effect
to the Legislature’s intent” by looking “first to the plain language of the statute.” Marbob
Energy Corp., 2009-NMSC-013, ¶ 9 (internal quotation marks and citation omitted). We
strive to view the statute “in its entirety and construe each part in connection with every
other part to produce a harmonious whole.” Key v. Chrysler Motors Corp., 1996-NMSC-
038, ¶ 14, 121 N.M. 764, 918 P.2d 350.

B. Analysis

{15} The City argues that the final order violates the plain language of the Act by
ignoring consumer protection provisions. The City contends that because one of the
purposes of the Act is to “protect public utilities and their ratepayers from renewable
energy costs that are above” the Threshold, see § 62-16-2(B)(3), the Legislature
intended for the Threshold to be a customer protection mechanism. The City suggests
that this intent is reflected by the language in Section 62-16-4(B) (2014) which states
that if the cost of renewable energy needed “for purposes of compliance with the
[Portfolio Standard] would be greater than the [Threshold] . . . the public utility shall not
be required to incur that cost,” but if “a public utility can generate or procure renewable
energy at or below the [Threshold], it shall be required to add renewable energy
resources.” Thus, the City argues that the Legislature intended for utilities to procure
renewable resources but only up until the Threshold. Thereafter, a utility would be
excused from the Portfolio Standard requirements until it could procure renewable
resources and not exceed the Threshold. By concluding otherwise, the Commission
violated the rules of statutory construction.

{16} In response, El Paso Electric argues that the Threshold is not an absolute cap, it
is just the point at which the Commission cannot require utilities to purchase renewable
energy. El Paso Electric contends that the City focuses on only one purpose of the
Act—to protect ratepayers from costs over the Threshold—and minimizes the other two
purposes of the Act: to prescribe the amount of renewable energy a utility shall include
in their electric energy portfolios, and to allow utilities to recover costs for procuring
renewable energy. El Paso Electric suggests that because nothing specifically prohibits
a utility from exceeding the Threshold, it was meant to be flexible to accommodate the
“central purposes” of the Act—promotion of renewable energy while allowing a utility to
recover the reasonable costs of procurement.

{17} The Act has three purposes: (1) to prescribe the amount of renewable energy
resources that public utilities shall include in their Portfolio Standard plans, (2) to allow
public utilities to recover costs through the rate-making process, and (3) to protect
public utilities and their ratepayers from renewable energy costs above the Threshold.
Section 62-16-2(B)(1)-(3). Unless otherwise indicated by the plain language of the
statute, it is not proper to elevate one purpose above another. See Pueblo of Picuris v.
N. M. Energy, Mins. & Nat. Res. Dep’t, 2001-NMCA-084, ¶ 14, 131 N.M. 166, 33 P.3d
916 (“We indulge in the assumption that when the [L]egislature has before it all sections
of a statute at the same time, it intends to give equal weight to each section.”). By
having the purposes all listed together, the Legislature intended each purpose to carry
the same weight; nothing in the language of Section 62-16-2(B)(1)-(3) indicates
otherwise. DeWitt v. Rent-A-Center, Inc., 2009-NMSC-032, ¶ 29, 146 N.M. 453, 212
P.3d 341 (“The first and most obvious guide to statutory interpretation is the wording of
the statutes themselves.”). We conclude the only interpretation that gives equal weight
to each purpose is that the Threshold must operate as the point in which utilities may
not incur new renewable energy costs.

{18} To “protect public utilities and their ratepayers from renewable energy costs that
are above a [Threshold,]” the Threshold must act as a limit for utilities to incur new
renewable energy costs. Section 62-16-2(B)(3) (emphasis added). This is because if
utilities could indiscriminately exceed the Threshold, ratepayers would not be protected
from those costs and the Act’s purpose would go unfulfilled. The plain language of
Section 62-16-2(B)(3) does not elevate either utilities or ratepayers; it treats them
equally. Id. Because of this, both utilities and ratepayers should be shielded from
renewable energy costs above the Threshold. That said, to carry out the other two
purposes—proscribing the amount of renewable energy public utilities shall include in
their portfolios and allowing utilities to recover costs through the rate-making process—
the Legislature needed to make it mandatory for utilities to procure renewable energy if
the costs for doing so would not exceed the Threshold. This is done by Section 62-16-
4(B) (2014).

{19} Section 62-16-4(B) (2014) provides,

If . . . , in any given year, the cost of renewable energy that would need to
be procured or generated for purposes of compliance with the [Portfolio
Standard] would be greater than the [Threshold] as established by the
[C]ommission pursuant to this section, the public utility shall not be
required to incur that cost . . . . When a public utility can generate or
procure renewable energy at or below the [Threshold], it shall be required
to add renewable energy resources to meet the [Portfolio Standard]
applicable.

(Emphasis added.) By requiring public utilities to procure renewable energy “at or
below” the Threshold, the Legislature could ensure that the Portfolio Standard would be
met. Id. But if the cost of renewable energy would “be greater than” the Threshold, the
public utility “shall not be required” to incur the cost. Id. El Paso Electric’s argument that
the “shall not be required” language reflects that the Commission cannot require utilities
to procure renewable energy if the costs would exceed the Threshold, but utilities have
discretion to do so, is unpersuasive. This would elevate utilities above ratepayers and
render the Act’s purpose to protect ratepayers from costs above the Threshold obsolete.
See State v. Herrera, 1974-NMSC-037, ¶ 8, 86 N.M. 224, 522 P.2d 76 (“We attempt to
construe statutes so that meaning and effect will be given to every part thereof.”).
Furthermore, Commission regulations do not support such an interpretation.

{20} 17.9.572.12 NMAC (5/31/2013) provides that the Threshold “is a customer
protection mechanism that limits the customer bill impact.” Under 17.9.572.12(D) NMAC
(5/31/2013) if a public utility believes the procurement of renewable energy will exceed
the Threshold it “shall file with the [C]ommission a request for waiver of the [Portfolio
Standard.]” (Emphasis added.) This creates a process by which a utility is mandated to
request a Commission issued waiver for the Portfolio Standard if the procurement of
renewable energy would push costs over the Threshold. Id. This mandatory waiver is a
way to implement the Threshold and ensure ratepayers are protected from any costs
that would exceed it.

{21} By approving of new renewable energy costs when El Paso Electric’s costs for
compliance of the Portfolio Standard were more than double the percentage allowed by
the Threshold, the final order violated the consumer protection provisions of the Act.

III. CONCLUSION

{22} The Commission’s final order is reversed and the case is remanded to the
Commission.

{23} IT IS SO ORDERED.

MICHAEL E. VIGIL, Chief Justice

WE CONCUR:

C. SHANNON BACON, Justice

DAVID K. THOMSON, Justice