Supreme Court: PRC can overrule rural electric co-ops' rates
Jun. 10—Rural New Mexico utility companies aren't exempt from state regulators' authority over rates, the New Mexico Supreme Court has ruled.
The Supreme Court released an opinion on Monday that rejects an argument from Socorro Electric Cooperative that the state's Public Regulation Commission shouldn't be able to change and set its rate proposals.
The court's decision makes it clear that the PRC has the authority to take such action with all rural electric cooperatives in the state, as set by the state Legislature.
"The Legislature has not distinguished between rural electric cooperatives and other public utilities with respect to the substance or nature of the Commission's ratemaking powers," the opinion states.
Rural electric co-ops, which have a board of trustees elected by cooperative members, work differently from the major investor-owned utilities that serve most of the state.
While investor-owned utilities have to seek permission from the PRC to enact new rates, rural electric co-ops' rates generally go into effect as soon as a company proposes them, per the state's Public Utility Act.
However, if enough members of a co-op protest a rate change, the PRC can look into if the change is reasonable. That's what happened with the Socorro utility case, which dates back six years.
In December 2018, the company filed a notice with the PRC that it would soon increase rates by 5% to raise revenue by $1.25 million. After members of the utility objected, the PRC conducted a hearing on the matter.
Ultimately, state regulators decided to reject the rate-increase proposal, adopting an argument from their hearing examiner that the utility wanted the price increase to advance the objectives of its board of trustees rather than needing it financially to operate.
The Socorro Electric Cooperative appealed the ruling to the New Mexico Supreme Court, arguing the PRC had exceeded its scope of authority.
"The Legislature has expressly recognized that the Commission may regulate a rural electric cooperative's rates and that the regulation of these rates is a matter of public concern," the opinion states.
The Public Utility Act lays out the authority and mandate for the PRC to change rates following a hearing, according to the court.
"If the Commission finds those rates are unreasonable, then the Commission may fix just and reasonable rates for that cooperative," the opinion states.
The court also found that the PRC provided enough evidence to prove the Socorro utility's rate increase wasn't in the public interest.
Since the court ruled that the PRC has the authority to change the rates, it deferred to the PRC's "discretion and expertise in concluding that increased revenues would not benefit" the customers or members of the Socorro utility.
The PRC's rate design change for the Socorro Electric Cooperative from 2019 stands, which denied the proposed $25 million revenue requirement and included reallocations for different service classes, like residential, commercial and irrigation classes.
