A. When in the exercise of its powers and jurisdiction it is necessary for the commission to consider or ascertain the valuation of the properties or business of a public utility, or make any other determination involved in the fixing or setting of rates for a utility, the commission shall give due consideration to the history and development of the property and business of the particular public utility, to the original cost thereof, to the cost of reproduction as a going concern, to the revenues, investment and expenses of the utility in this state and otherwise subject to the commission's jurisdiction, to construction work in progress and to other elements of value and rate-making formulae and methods recognized by the laws of the land for rate-making purposes.

B. For the purpose of making such valuation or determinations, the members of the commission and its duly authorized agents and employees shall at all reasonable times have free access to the property, accounts, records and memoranda of the utility whose property and rights are being valued, and the utility shall aid and cooperate with the commission and its duly authorized agents and employees to the fullest degree for the purpose of facilitating the investigation.

C. In making any determination involving the rates or service of a utility, the commission may change its past practices or procedures, provided that substantial evidence on the record justifies such a change.

D. The commission shall set rates based on a test period that the commission determines best reflects the conditions to be experienced during the period when the rates determined by the commission take effect. If a future test period is proposed, the commission shall give due consideration that the future test period may best reflect those conditions.

E. Upon a request to include construction work in progress in the rate base, the commission shall grant the request only upon a finding that a project's costs are reasonable. The commission shall not include the associated allowance for funds used during construction in income. The projects for which the commission shall grant a request include environmental improvement projects and generation and transmission investments for which the utility has obtained a certificate of public convenience and necessity; provided that the projects are anticipated to be in service no later than five months after the end of a utility's test period, but in no event later than twenty-four months after the filing date of a utility's rate proceeding.

History: Laws 1941, ch. 84, § 26; 1941 Comp., § 72-514; 1953 Comp., § 68-5-14; Laws 1983, ch. 250, § 2; 2009, ch. 113, § 2.

Compiler's notes. — Sections 62-6-4 to 62-6-26.1 of the Public Utility Act are still effective as the repeal of Chapter 62, Article 6 by Laws 1998, Chapter 108, Section 82, effective July 1, 2003 Chapter 108, Section 82 was repealed prior to taking effect by Chapter 23, Section 1, Laws 2003. Although Laws 2003, Chapter 336, Section 8, amended Laws 1998, Chapter 82, as amended, an amendment of a repealed section is ineffective. See Quintana v. N.M. Dep't of Corrs., 100 N.M. 224, 668 P.2d 1101 (1983). Laws 2003, Chapter 416, Section 5 also repealed Laws 1998, Chapter 108, Section 82, as amended, a second time, however, that repeal is of no effect as the section had previously been repealed by Chapter 23, Section 1, Laws 2003.

Cross references. — For definition of "commission," see 62-3-3 NMSA 1978.

The 2009 amendment, effective June 19, 2009, in Subsection A, after "commission's jurisdiction", added "to construction work in progress" and added Subsections D and E.

The 1983 amendment divided the formerly undivided language into Subsections A and B and, in Subsection A, substituted "is necessary" for "shall be necessary" and "or make any other determination involved in the fixing or setting of rates for a utility, the commission shall" for "it shall, in arriving at such valuation" and inserted "to the revenues, investment and expenses of the utility in this state and otherwise subject to the commission's jurisdiction" and "and rate-making formulae and methods." The 1983 amendment also inserted "or determinations" in Subsection B and added Subsection C.

Commission's remedy for utility's imprudent decision was reasonable. — Where PNM appealed the New Mexico public regulation commission's (commission) denial of recovery in its rate base for the repurchase of 64.1 MW of capacity and certain lease renewals at Palo Verde nuclear generating station (Palo Verde), and where the commission found that PNM's decisions were imprudent on the basis that PNM had failed to demonstrate that it considered alternative courses of action, the commission's remedy of disallowing recovery for the amount PNM paid for the 64.1 MW over the net book value of that capacity and allowing PNM to recover the costs of the five renewed leases was reasonable and lawful. The commission established valuations for the 64.1 MW and the renewed lease, which it considered appropriate to protect ratepayers and result in just and reasonable rates, and such an approach is a lawful and reasonable exercise of the commission's authority to determine the rate base of a utility and its obligation to ensure that rates are just and reasonable. It was reasonable and lawful for the commission to conclude that a total disallowance was not justified. Public Serv. Co. of N.M. v. N.M. Pub. Regulation Comm'n, 2019-NMSC-012.

Method does not violate the statutory rate caps. — Where the New Mexico public regulation commission (commission) ordered PNM to revise its method for calculating fuel costs, specifically ordering PNM to remove renewable energy from its fuel and purchased power cost adjustment clause calculation, and where PNM proposed a method of calculating fuel costs which would partially correct the fuel cost misallocation by more accurately charging customers for the true costs of their conventional energy usage, the commission lawfully exercised its authority in adopting the new method, because the new method did not impose additional charges for renewable energy usage on large and exempt customers, but rather increased their fuel costs to more accurately reflect the true costs of their conventional energy usage. The new method for calculating fuel costs does not violate the statutory rate caps set forth in this section, and its adoption was consistent with due process. Public Serv. Co. of N.M. v. N.M. Pub. Regulation Comm'n, 2019-NMSC-012.

Commission not limited in method of valuating utility or setting rates. — Neither New Mexico case law nor the Public Utility Act imposes any one particular method of valuation upon the commission in ascertaining the rate base of a utility; nor does the spirit of the statute tie the commission down to the consideration of a single factor in establishing rates. Hobbs Gas Co. v. N.M. Pub. Serv. Comm'n, 1980-NMSC-005, 94 N.M. 731, 616 P.2d 1116.

If plant acquisition adjustment is included as legitimate plant cost, it becomes a part of the rate base upon which a rate of return is to be computed. Hobbs Gas Co. v. N.M. Pub. Serv. Comm'n, 1980-NMSC-005, 94 N.M. 731, 616 P.2d 1116.

New Mexico is not "original cost" jurisdiction, but a "fair value" jurisdiction. Hobbs Gas Co. v. N.M. Pub. Serv. Comm'n, 1980-NMSC-005, 94 N.M. 731, 616 P.2d 1116.

"Used and useful" concept is but one factor among many to be considered by the commission in its rate base analysis. New Mexico Indus. Energy Consumers v. N.M. Pub. Serv. Comm'n, 1986-NMSC-059, 104 N.M. 565, 725 P.2d 244.

Utility may not capitalize capital investments previously treated as operating expenses. — Where prior capital investments were charged to operating expenses and the rate apparently fixed on that basis, a utility cannot later capitalize such amounts in determining original cost for ratemaking purposes. Moyston v. N.M. Pub. Serv. Comm'n, 1966-NMSC-062, 76 N.M. 146, 412 P.2d 840.

Commission may deduct deferred tax reserve from rate base. — The court did not err in failing to hold unreasonable and unlawful the commission's deduction from rate base of the company's reserve for deferred taxes because the statute does not compel inclusion of value of the latter type in the rate base and because the laws of the land do lend support for the commission's action. Southern Union Gas Co. v. N.M. Pub. Serv. Comm'n, 1972-NMSC-072, 84 N.M. 330, 503 P.2d 310.

Law reviews. — For article, "The Regulation of Public Utilities," see 10 Nat. Res. J. 827 (1970).

For note, "The Public Service Commission: A Legal Analysis of an Administrative System," see 3 N.M.L. Rev. 184 (1973).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 64 Am. Jur. 2d Public Utilities §§ 138 to 172.

Valuations for rate making as affected by advance in price conditions due to war, 20 A.L.R. 555.

Propriety of considering capital structure of utility's parent company or subsidiary in setting utility's rate of return, 80 A.L.R.4th 280.

73B C.J.S. Public Utilities §§ 18 to 33.