Southern Union Gas Co. v. New Mexico Public Utility Commission

OPINION BACA, Justice. I. 1. Southern Union Gas Company (“Southern Union”) appeals a New Mexico Public Utility Commission (“Commission”) Order dismissing with prejudice Public Service Company of New Mexico’s (“PNM”) application for a gas rate increase. Southern Union raises several issues on appeal, including the allegation that the Commission erred in concluding that it lacked jurisdiction to consider the requested rate increase. We review the Order pursuant to NMSA 1978, Section 62-11-1 (1993) (providing for appeal of Commission orders directly to the Supreme Court). We affirm the Commission’s Order based on its lack of jurisdiction to consider the requested rate increase, rendering resolution of all other appellate issues unnecessary. II. 2. On January 28, 1985, Southern Union sold its New Mexico gas utility assets to PNM. The Commission approved the sale, retaining jurisdiction to the extent permitted by law in order to ensure compliance with the Order authorizing the sale. Under the Purchase and Sales Agreement, Southern Union retained liability for “litigation and claims resulting from any act or omission by Southern Union ... with respect to ... the operation of the businesses.” In addition, PNM agreed to pursue on Southern Union’s behalf, “regulatory applications and proceedings” necessary for the recovery of these excluded obligations. Thus, Southern Union retained liability for the pre-January 28, 1985, claims later made by Unicon Production Company (“Unicon”), in connection with take-or-pay gas purchase contracts entered into by Southern Union and Unicon in the 1950s. 3. In 1989, Southern Union paid approximately $3.4 million to Unicon in accordance with a settlement agreement, which discharged Southern Union from liability for Unicon’s claims arising out of the take-or-pay contracts. Southern Union then requested that PNM file a rate increase application on Southern Union’s behalf so that Southern Union could recover seventy-five percent of the costs of litigation and settlement associated with the Unicon settlement. On October 31,1990, in compliance with the Purchase and Sales Agreement, PNM filed a rate increase request with the Commission on behalf of Southern Union. 4. Initially, the Commission dismissed the rate increase request without prejudice, acknowledging that it had jurisdiction over the subject matter and parties involved, but finding that PNM had failed to meet its burden of proof. On April 28, 1995, PNM again requested a rate increase on behalf of Southern Union. Southern Union intervened in support of PNM’s application. In response to the second request, and following receipt of three motions to dismiss, the Commission entered a dismissal with prejudice without specifying the grounds for the dismissal. PNM did not appeal that Order. However, Southern Union filed both a motion for rehearing with the Commission and this appeal. III. 5. We are asked to review the second Commission Order disposing of PNM’s rate increase application. Although Southern Union raises many issues on appeal, the dispositive issue is whether the Commission has jurisdiction over a public gas utility’s request to recover costs incurred by its predecessor utility. When addressing jurisdictional determinations made by the Commission we conduct a de novo review, giving little deference to the Commission’s jurisdictional determination. United Water N.M., Inc. v. New Mexico Pub. Util. Comm’n, 1996 NMSC 007 ¶ 8, 121 N.M. 272, 274-75, 910 P.2d 906, 908-09 (1996). 6. Southern Union points to the Commission’s Order retaining jurisdiction over matters affecting the Southern Union/PNM Purchase and Sales Agreement as support for the Commission’s determination that it had jurisdiction over PNM, Southern Union, and PNM’s rate increase application. However, the scope of the Commission’s jurisdiction is defined by statute and the Commission cannot enter an order extending the scope of that jurisdiction. See United Water, 1996 NMSC 007 ¶ 8, 121 N.M. 272, 910 P.2d 906; see also Public Serv. Co. of N.M. v. New Mexico Envtl. Improvement Bd., 89 N.M. 223, 227, 549 P.2d 638, 642 (Ct.App.1976) (administrative agency cannot amend or enlarge statutorily defined authority). Thus, the Commission’s jurisdiction over this matter cannot be founded on the language of the Order. 7. Southern Union next argues that the Commission was obligated to assert jurisdiction in this case based on their prior assertion of jurisdiction in similar proceedings. The Commission, according to Southern Union, is prohibited from changing established policies without notice to the affected parties. Without resolving whether the Commission has improperly asserted jurisdiction over matters similar to the instant case, we reiterate that the Commission cannot legitimately exercise jurisdiction over Southern Union unless Southern Union properly falls within the Commission’s statutorily defined jurisdiction. We are not obligated to enforce, nor should we enforce a pattern of erroneous'jurisdictional determinations in order to achieve consistency in the Commission’s assertion of jurisdiction. Cf. Environmental Improvement Bd., 89 N.M. at 227, 549 P.2d at 642. The rule prohibiting the Commission from departing from past practice absent prior notice does not apply to jurisdictional determinations. Cf. Hobbs Gas Co. v. New Mexico Pub. Serv. Comm’n, 115 N.M. 678, 684, 858 P.2d 54, 62 (1993) (holding Commission could not depart from past practice absent notice to utility which relied on past practice in context of ordered refund by gas utility). Thus, regardless of whether the Commission has previously asserted jurisdiction over cases of a similar nature, we must still find a statutory basis for allowing the assertion of jurisdiction in the instant ease. 8. The Commission has jurisdiction only over entities functioning as public utilities. See El Vadito de los Cerrillos Water Ass’n v. New Mexico Pub. Serv. Comm’n, 115 N.M. 784, 788, 858 P.2d 1263, 1267 (1993). The Public Utility Act defines “public utility” as follows: now [do] or hereafter may own, operate, lease or control: ... (2) any plant, property or facility for the manufacture, storage, distribution, sale or furnishing to or for the public of natural or manufactured gas or mixed or liquefied petroleum gas, or light, heat or power or for other uses. NMSA 1978, § 62-3-3(G) (1993) (emphasis added). Furthermore, a public utility is one “affected with the public interest” and where “a substantial portion of their business ... involves the rendition of essential public services to a large number of the general public.” NMSA 1978, § 62 — 3—1(A)(1) (1967). This Court has found that the Commission lacked jurisdiction over parties who were not then operating as public utilities. See, e.g., El Vadito, 115 N.M. at 789, 858 P.2d at 1268 (holding that Commission has no statutorily-conferred jurisdiction over a Sanitary Projects Act association found not to be operating as a public utility). 9. Both parties agree that PNM falls within the jurisdiction of the Commission, having purchased all of Southern Union’s gas utility assets in 1985 in order to furnish New Mexicans with gas. PNM is currently providing a basic public service by providing gas services to New Mexicans. By contrast, Southern Union ceased to be a public utility in 1985, following the sale of its gas utility assets to PNM. The Commission explicitly found that “[u]pon the granting of the abandonment of service by Southern Union, Southern Union is no longer a public utility and therefore our statutory authority over it ends.” Neither party argues that Southern Union is currently functioning as a public utility. There are no applicable exceptions to this jurisdictional parameter which operate to extend the Commission’s jurisdiction in the instant case. Given that Southern Union is not a public utility, the Commission erred in asserting jurisdiction over Southern Union. See Llano, Inc. v. Southern Union Gas Co., 75 N.M. 7, 17, 399 P.2d 646, 654 (1964) (holding that the Commission lacked jurisdiction over company that did not currently fall within statutory definition of public utility). 10. Southern Union next contends that regardless of whether it falls within the Commission’s jurisdiction, the Commission has jurisdiction over the rate increase application. According to Southern Union, PNM’s act of submitting the rate increase application conferred upon the Commission jurisdiction to consider the application. The source of the Commission’s authority to consider a rate increase application submitted by a currently functioning public utility is found in Section 62-6-4(A) of the New Mexico Public Utility Act, which provides that “[t]he commission shall have general and exclusive power and jurisdiction to regulate and supervise every public utility in respect to its rates.” NMSA 1978, § 62-6-4(A) (1996). We have previously noted that in order to grant a rate increase, the Commission must be convinced that the public utility actually incurred the costs for which the rate increase is intended to provide compensation. See Attorney Gen. of N.M. v. New Mexico Pub. Serv. Comm’n, 101 N.M. 549, 552, 685 P.2d 957, 960 (1984) (noting that Public Utility Commission’s consideration of costs incurred by a public utility in assessing propriety of a rate-increase, requires, at a minimum, proof that public utility actually incurred those costs). 11. In the instant case, there is no dispute that the relevant costs are those incurred by Southern Union as a direct result of the Southern Union/Unicon take-or-pay contracts. The findings of fact adopted by the Commission in response to the initial rate increase application indicate that PNM sought to “collect from customers certain costs incurred by its predecessor ... Southern Union.” According to the Commission, “[t]o the extent, the Commission allows these obligations to be recovered by [PNM] in rates, [PNM] will then be obligated to reimburse Southern Union.” Southern Union, through the sales agreement approved by the Commission, explicitly retained liability for the costs it seeks to recuperate through this rate increase. We interpret the Public Utility Act to restrict the Commission’s jurisdiction to consider rate increase applications to those instances where the public utility itself has incurred expenses, and hold that the Commission does not have jurisdiction to consider rate increases for expenses incurred by an entity which is not a public utility, even when the rate increase application is submitted by a public utility. IV. 12. Southern Union is not a public utility over which the Commission may legitimately assert jurisdiction. Although the Commission has jurisdiction over rate increases requested by PNM, that jurisdiction does not extend to rate increases which would compensate an entity which is not currently a public utility for expenses it incurred in fulfilling its function as a public utility. Therefore, we affirm the Commission’s dismissal with prejudice of PNM’s rate increase application, based on the Commission’s lack of jurisdiction over Southern Union and the particular rate increase requested. 13. IT IS SO ORDERED. FRANCHINI, C.J., and SERNA, J., concur. MINZNER and McKINNON, JJ., dissent and file opinions.