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NM Supreme Court Upholds Commission Oversight Over Energy Efficiency and Load Management Utility Expenditures in Decoupling Case

The Supreme Court today issued its decision on decoupling and determined that the Efficient Use of Energy Act requires a “full revenue decoupling mechanism.” Public Service Company of New Mexico’s (PNM) argument, however, that full revenue decoupling removes the Public Regulation Commission’s discretion to balance the interests of the public, consumers and investors, to modify a utility's request or to determine if a request is just or reasonable - key oversight functions to protect the public interest - was denied. 

Contrary to PNM’s reading of the law the New Mexico Supreme Court found: “The utility may not prove its need for the [decoupling] mechanism based on revenue losses due to other facts or business risks” and only utility expenditures in energy efficiency and load management. (p. 30) PNM had argued that the legislative change in 2019 guaranteed them profits regardless of customer usage, meaning that PNM should be guaranteed profits of its anticipated revenue whether the reduction in profit came from poor service, a pandemic, weather, or “whatever the reason.” The NM Supreme Court held that the Commission is entitled to, and is in fact required to, oversee and review the utility’s request for any related necessary cost adjustments.

The court further found that this balancing must take place in the context of a rate case, and the burden lies with PNM to prove that the decoupling mechanism does what it is intended to do under the Efficient Use of Energy Act. (p. 30)

The Court determined that full revenue decoupling was authorized by the Legislature, but as New Energy Economy argued with NM AREA, the Albuquerque Bernalillo County Water Utility Authority and the NM Dept of Justice, the Commission retains its authority for oversight, including the ability to determine reasonableness and justness and its authority to balance the interests between utility shareholder investors and consumers, and can determine that a utility request that is not based on utility expenditures on energy efficiency and load management is contrary to law.

In other words, the Court said - No, the legislature did not give PNM carte blanche to receive cost recovery for ANY projected revenue. The Commission has to review whether those costs were properly related to energy efficiency and load management in a properly adjudicated rate case before approving cost recovery.


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