SOUTHERN NEW MEXICO

Supreme Court affirms PRC decision on nuclear power costs during 2021 storm

Las Cruces loses appeal of regulators’ decision

New Mexico’s Supreme Court unanimously affirmed state regulators’ decision in a rate dispute brought by the city of Las Cruces after El Paso Electric charged customers for energy the utility purchased from an Arizona nuclear power plant in 2021.

“There is no reasonable basis for this Court to reweigh the evidence or substitute our own judgment for that of the Commission on the factual matters at issue during the administrative proceedings,” the court stated in an opinion authored by Justice David Thomson.

The Texas-based utility, whose service area includes a swath of southern New Mexico, procured electricity from the Palo Verde Nuclear Generating Station in February 2021 during a winter storm that brought snow, ice and freezing temperatures across the U.S., including heavy snow and winds in New Mexico.

The conditions also affected natural gas production even as demand soared during the storm, driving energy prices sky-high. The utility relied on the nuclear facility’s power to maintain uninterrupted power for customers and recouped the expense by charging ratepayers over 12 months, instead of a single month, on a schedule approved by New Mexico’s Public Regulation Commission, which regulates utility companies and the rates customers pay.

The payment schedule was a means of protecting customers from “rate shock” for the spike in energy costs using a formula called proxy pricing based on natural gas prices. Approximately $5.7 million in costs were passed on to customers under the formula.

The city of Las Cruces, whose residents receive electricity from El Paso Electric, challenged the PRC’s decision, claiming regulators failed to determine whether less expensive solutions were available.

The court treated the PRC’s multiple past authorizations for El Paso Electric’s use of Palo Verde’s energy and proxy pricing as a valid precedent.

The city had argued that the authorization only applied to the PRC’s decision in a 2009 rate case, but the justices rejected the assertion as a “misplaced freeze frame analysis” and found that “EPE has consistently relied on the PV3 proxy price formula for the better part of two decades.”

PV3 is an abbreviation for Palo Verde Nuclear Generating Station Unit 3 used throughout the opinion.

The ruling also establishes for the first time that the state’s high court accords the PRC “a high level of deference” in how it interprets and applies its own historic orders.

El Paso Electric expressed its satisfaction over the ruling in a statement Monday afternoon, saying it “affirms the Public Regulation Commission’s application of its rules and appropriately defers to the Commission’s expertise.” The utility also said the outcome “reinforces the importance of regulatory certainty and recognizes that El Paso Electric’s diverse generation portfolio helps ensure reliability for our customers, even during extreme weather events.”

In its own statement, the PRC welcomed the decision it said “validates the steps the New Mexico Public Regulation Commission took to ensure our utilities were able to keep the grid running during winter storm Uri and shield New Mexico ratepayers from sudden price increases. This ruling gives us a clear path forward as we continue the challenging work of ensuring New Mexicans continue to benefit from affordable, reliable utilities.”

Algernon D’Ammassa is the Journal’s southern New Mexico correspondent. He can be reached at adammassa@abqjournal.com.