SEC wants Public Regulation Commission to rescind fines

Socorro Electric Co-operative (SEC) was given until January 9, 2025, to submit its explanation to the state’s Public Regulation Commission (PRC) on why a $948,000 fine should be forgiven for failing to comply with PRC’s orders.

In November, PRC said it would decide based upon three items: provide an accounting of the mis-collected amounts due to SEC’s failure to file their rates; seek SEC’s proposed plan to correct those amounts; and lastly order the cooperative to show why they should not be subject to the Commission’s imposed fines.

Last week, SEC responded to the PRC’s request citing its reasons why it shouldn’t have to pay fines leveled upon them for not following the PRC’s recommendations.

In response to the question of SEC’s accounting of the mis-collected amounts, it cited in its brief stating, “…it did not believe that the rates contained in the Final Order were in the best interest of its members, SEC left it rates in place until the Parties’ Stipulation. SEC has determined that it owed more than $4 million from rate payers in most rate classes. Only two-rate classes are owed a refund (Rate 21 Residential Net Metering and Rate 23 Residential Net Metering less than 10kw).The average refund for Rate Class 21 is about $160 and in Rate Class 23, the average refund is $600.”

SEC’s response on how it plans to credit or bill customers, the attorney’s brief said it’s working with its software provider, Meridian Cooperative, regarding a proposal to charge or credit its members. While no decision has been made regarding the amount of time SEC members will have to pay the balances due. It did, however, provide two options for the PRC to consider. The first option is to post it to the members’ accounts as a one-time balance adjustment due when the bill comes due. This option should take about one month to complete. The second option is to set up a contract for each member to post to their account as a monthly payment due. This process, according to the filed brief, would take significantly longer due to the complexity of entering each member’s contract individuals. SEC’s software provider has not yet determined the likely amount of time this option would require implementing.

The co-op said it proposes to notify its customers by a one-time mailer, a notice in SEC’s Enchantment magazine or SEC Co-op Corner. Finally, the co-op would include a notice in each of its customer’s bills.

Finally, SEC believes there should be no fines leveled against them because it was acting pursuant to its fiduciary duties by filing the appeals and motions to stay. Furthermore, SEC believes the huge fine leveled against the co-op would ultimately place a hardship on all SEC members.

Included in the brief, was an article from June 27, 2024, edition of El Defensor Chieftain, where Socorro Mayor Ravi Bhasker addressed about the where they fines should be imposed again the Co-op. He said, “The city is not in favor of the fine. …Frankly, the users will be the ones paying the bill.”

The brief finally noted the is “no justification to punish SEC for exercising these rights. The penalty should be revoked.

November PRC meeting

During the PRC’s November 2024 meeting, PRC Commissioner Gabriel Aguilera said forgiving the fine could “hold meaningful precedent” because it is a rare situation where the Commission orders something and a company simply refuses.

SEC’s history

In June 2024, the New Mexico Supreme Court ruled rural New Mexico utility companies are not exempt from state regulators’ authority over rates.

The court rejected an argument from Socorro Electric Cooperative that the state’s PRC shouldn’t be able to change and set its rate proposals. The court’s decision made it clear that the PRC has the authority to take such action with all rural electric cooperatives in the state, as set forth by the state Legislature.

The court’s opinion stated, “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.”

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 must 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 the co-op protest a rate change, the PRC can investigate if the change is reasonable. That’s what happened with the Socorro Electric Cooperative back in 2018.

In December 2018, the Socorro Electric Cooperative filed a notice with the PRC that it would soon increase rates by 5% to raise revenue by $1.25 million. After 33 SEC members 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 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 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.