Sw. Pub. Serv. Co. v. N.M. Pub. Regul. Comm'n

• Court: New Mexico Supreme Court
• Decided: March 18, 2024
• Status: Unpublished

Opinion

The slip opinion is the first version of an opinion released by the Chief Clerk of the Supreme Court. Once an opinion is selected for publication by the Court, it is assigned a vendor-neutral citation by the Chief Clerk for compliance with Rule 23- 112 NMRA, authenticated and formally published. The slip opinion may contain deviations from the formal authenticated opinion.

1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

2 Opinion Number:

3 Filing Date: March 18, 2024

4 NO. S-1-SC-38815

5 SOUTHWESTERN PUBLIC 6 SERVICE COMPANY,

7 Appellant,

8 v.

9 NEW MEXICO PUBLIC 10 REGULATION COMMISSION,

11 Appellee,

12 and

13 NEW MEXICO LARGE 14 CUSTOMER GROUP, 15 PUBLIC SERVICE COMPANY 16 OF NEW MEXICO, EL PASO 17 ELECTRIC COMPANY, 18 OCCIDENTAL PERMIAN LTD., 19 WESTERN RESOURCE ADVOCATES, 20 and LOUISIANA ENERGY SERVICES, L.L.C.,

21 Intervenors-Appellees. 1 In the Matter of Potential 2 Amendments to NMPRC Rule 3 17.9.572 NMAC, Entitled Renewable 4 Energy for Electric Utilities, 5 Case No. 19-00296-UT

6 CONSOLIDATED WITH 7 NO. S-1-SC-39149

8 SOUTHWESTERN PUBLIC 9 SERVICE COMPANY,

10 Appellant,

11 v. 12 NEW MEXICO PUBLIC 13 REGULATION COMMISSION, 14 Appellee.

15 In the Matter of Southwestern Public 16 Service Company’s Annual 2022 Renewable 17 Energy Portfolio Procurement Plan and 18 Requested Approvals Therein; Proposed 2022 19 Renewable Portfolio Standard Cost and 20 Reconciliation Riders; Application for an RPS 21 Incentive; and Other Associated Relief 22 Case No. 21-00172-UT

23 APPEAL FROM THE NEW MEXICO PUBLIC REGULATION 24 COMMISSION

25 Hinkle Shanor, LLP 26 Dana S. Hardy 27 Jaclyn M. McLean 28 Jeremy I. Martin 29 Timothy B. Rode 30 Santa Fe, NM 1 XCEL Energy Services, Inc. 2 Zoe E. Lees 3 Santa Fe, NM 4 Francis W. Dubois 5 Austin, TX

6 for Appellant

7 Judith E. Amer, Associate General Counsel 8 Santa Fe, NM

9 for Appellee

10 PNM Resources, Inc. 11 Leslie M. Padilla 12 Stacey J. Goodwin 13 Albuquerque, NM

14 Miller Stratvert, P.A. 15 Richard L. Alvidrez 16 Samantha E. Kelly 17 Albuquerque, NM

18 for Intervenor Public Service Company of New Mexico

19 El Paso Electric Company 20 Nancy B. Burns 21 Santa Fe, NM

22 Montgomery & Andrews, P.A. 23 Jeffrey J. Wechsler 24 Kari E. Olson 25 Jocelyn Barrett-Kapin 26 Santa Fe, NM

27 for Intervenor El Paso Electric Company 1 O’Melveny & Myers, LLP 2 Katherine L. Coleman 3 Phillip G. Oldham 4 Austin, TX

5 for Intervenor Occidental Permian, Ltd.

6 Holland & Hart LLP 7 Larry J. Montaño 8 Santa Fe, NM 9 Nikolas Stoffel 10 Austin Jensen 11 Denver, CO

12 for Intervenor The New Mexico Large Group

13 Western Resource Advocates 14 Cydney Beadles 15 Steven S. Michel 16 Santa Fe, NM

17 Keleher & McLeod, P.A. 18 Thomas C. Bird 19 Albuquerque, NM

20 for Intervenor Western Resource Advocates

21 Modrall, Sperling, Roehl, Harris & Sisk, P.A. 22 Joan E. Drake 23 Albuquerque, NM

24 for Intervenor Louisiana Energy Services, LLC 1 OPINION

2 THOMSON, Justice.

3 {1} In this consolidated appeal, we first consider whether the New Mexico Public

4 Regulation Commission (the PRC) misconstrued the financial incentive provision of

5 the Renewable Energy Act to deny Southwestern Public Service Company’s (SPS’s)

6 2021 application for an incentive. See NMSA 1978, § 62-16-4(D) (2019) (providing

7 for the award of “financial or other incentives”); Renewable Energy Act, NMSA

8 1978, §§ 62-16-1 to -10 (2004, as amended through 2021) (the REA or the Act)1.

9 We then consider SPS’s numerous facial challenges to the PRC’s April 2021 order.

10 That order adopted 2021 amendments to Rule 572 (the Amended Rule)⸺regulations

11 implementing the PRC’s duties under the REA’s 2019 amendments, including the

1 The REA’s 2019 amendment is relevant to this opinion. The current (2021) REA consists of two statutes from 2007, seven from 2019, and one⸺ Section 62- 16-5⸻enacted in 2019 and amended in 2021 by the addition of Subsection (B)(1)(d) (on which this opinion does not rely). Accordingly in this opinion, all nondated references to the REA or to the Act and all citations of statutes therein are supported fully by the current enactments. 1 duty to award an incentive when appropriate.2 See Renewable Energy for Electric

2 Utilities, 17.9.572 NMAC (5/4/2021, as amended through 2/28/2023); 17.9.572.22

3 NMAC (5/4/2021) (setting forth requirements to apply for an incentive).

4 {2} We hold that SPS’s proposed retirement of banked, renewable energy

5 certificates (RECs) to exceed the Renewable Portfolio Standard (RPS) was

6 insufficient to qualify for an incentive under the REA because the proposed

7 retirement would not have “produce[d] or acquire[d] renewable energy” as required

8 by Section 62-16-4(D). 3 See § 62-16-3(G) (“‘[REC]’ means a certificate or other

9 record . . . that represents all the environmental attributes from one megawatt-hour

10 of electricity generated from renewable energy.”); § 62-16-3(I) (“‘[RPS]’ means the

11 minimum percentage of retail sales of electricity by a public utility . . . that is

12 required by the [REA] to be from renewable energy . . . .”). Our conclusion is based

2 SPS has filed two additional appeals that separately challenge the PRC’s subsequent orders denying SPS’s application for a financial incentive for 2023 and approving further amendments to Rule 572 in February 2023 (the Second Amended Rule). See S-1-SC-39733; S-1-SC-39796; see also 17.9.572 NMAC (2/28/2023). We have consolidated and held in abeyance those appeals pending the outcome of this proceeding. 3 We use the phrase “banked REC” throughout this opinion to refer to an REC that represents renewable energy generated in a year before the year in which the REC is retired. See § 62-16-5(B)(4) (providing that an REC “may be carried forward for up to four years from the date of issuance to establish compliance with the [RPS], after which [the REC] shall be deemed retired”).

2 1 on the statute’s plain language, which is consistent with the REA’s clear legislative

2 intent to require public utilities to procure sufficient renewable energy resources to

3 reduce carbon emissions and achieve the zero carbon resource standard by 2045. See

4 § 62-16-4(A) (providing public utilities with a sequence of increasingly renewable,

5 energy benchmarks to achieve by 2045); § 62-16-3(K) (“‘[Z]ero carbon resource’

6 means an electricity generation resource that emits no carbon dioxide into the

7 atmosphere . . . as a result of electricity production.”).

8 {3} We also hold that the challenged provisions of the Amended Rule (1) do not

9 exceed the scope of the REA; (2) are not arbitrary, capricious, or void for vagueness;

10 and (3) are not otherwise unreasonable or unlawful. We therefore affirm the PRC in

11 all respects. See NMSA 1978, § 62-11-5 (1982) (“The supreme court shall vacate

12 and annul the order complained of if it is made to appear to the satisfaction of the

13 court that the order is unreasonable or unlawful.”).

14 I. BACKGROUND

15 {4} SPS’s primary objection is to the PRC’s approach to awarding incentives

16 under the REA and the Amended Rule and the resulting denial of SPS’s incentive

17 application. We therefore begin with an overview of the REA and its incentive

18 provision and the PRC’s 2021 amendments to Rule 572, before summarizing SPS’s

3 1 incentive request and the PRC’s reasons for denial. We then address SPS’s

2 arguments in turn.

3 A. Overview of the REA and the 2021 Amendments to Rule 572

4 {5} Section 62-16-4 is the heart of the REA. Among other things, the provision

5 establishes the RPS and the related requirements for public utilities to meet that

6 standard. See id.; see also § 62-16-3(I). Before 2019, Section 62-16-4 set forth a

7 series of increasing RPS benchmarks culminating in a requirement for public utilities

8 to supply at least twenty percent of retail electricity sales from renewable energy by

9 2020. See § 62-16-4(A)(1)(a)-(d) (2014); see also § 62-16-3(F) (“‘[R]enewable

10 energy’ means electric energy generated by use of renewable energy resources and

11 delivered to a public utility.”). In 2019, the Legislature extended the sequence of

12 RPS benchmarks intended to achieve the ambitious zero carbon resource standard

13 by 2045. See § 62-16-4(A)(1)-(6); see also § 62-16-3(L) (“‘[Z]ero carbon resource

14 standard’ means providing New Mexico public utility customers with electricity

15 generated from one hundred percent zero carbon resources.”). At present, renewable

16 energy must make up at least twenty percent of a utility’s retail sales, which will

17 increase to a minimum of forty percent by 2025, fifty percent by 2030, and eighty

18 percent by 2040. See § 62-16-4(A)(2)-(5). In addition to these intermediate

19 benchmarks, the Legislature mandated that “[r]easonable and consistent progress

4 1 shall be made over time toward [the] requirement” of supplying one hundred percent

2 of retail electricity sales in New Mexico from zero carbon resources by 2045. Section

3 62-16-4(A)(6).

4 {6} Section 62-16-4 also prescribes the manner in which a public utility must

5 comply with the RPS. To comply, a utility must retire enough RECs annually to

6 “meet the [RPS] requirements” relative to the utility’s total retail sales of electricity.

7 See § 62-16-4(A); see also § 62-16-5(A)(1) (providing that the PRC shall establish

8 “a system of [RECs] that can be used by a public utility to establish compliance with

9 the [RPS]”). One REC represents one megawatt-hour of electricity generated from

10 renewable energy and “may be carried forward for up to four years from the date of

11 issuance to establish compliance with the [RPS], after which [the REC] shall be

12 deemed retired.” Section 62-16-5(B)(4); see § 62-16-3(G). Thus, any excess RECs

13 that are not retired in the same year they are earned may be banked for up to four

14 years and used to meet a utility’s annual RPS obligation during that period. In

15 addition, excess RECs “may be traded, sold or otherwise transferred by their owner,

16 unless the certificates are from a rate-based public utility plant, in which case the

17 entirety of the [RECs] from that plant shall be retired by the utility on behalf of itself

18 or its customers.” Section 62-16-5(B)(2).

5 1 {7} Of particular importance to this appeal, Section 62-16-4 also provides for the

2 award of “financial or other incentives” for exceeding the Act’s minimum

3 requirements. See § 62-16-4(D). Before 2019, the REA tasked the PRC with

4 “provid[ing] appropriate performance-based financial or other incentives to

5 encourage public utilities to acquire renewable energy supplies that exceed the

6 applicable annual [RPS].” Section 62-16-4(A)(4) (2007); see also § 62-16-2(A)(5)

7 (2007) (“The legislature finds that . . . a public utility should have incentives to go

8 beyond the minimum requirements of the [RPS] . . . .”). The 2019 amendments to

9 Section 62-16-4 elaborated on the bases for which an incentive may be awarded:

10 [T]he commission shall . . . develop and provide financial or other 11 incentives to encourage public utilities to produce or acquire renewable 12 energy that exceeds the applicable annual [RPS] set forth in this section; 13 results in reductions in carbon dioxide emissions earlier than required 14 by Subsection A of this section; or causes a reduction in the generation 15 of electricity by coal-fired generating facilities, including coal-fired 16 generating facilities located outside of New Mexico.

17 Section 62-16-4(D). Where the pre-2019 Act allowed incentives “to encourage

18 public utilities to acquire renewable energy supplies that exceed the applicable

19 annual [RPS],” § 62-16-4(A)(4) (2007), the Act now allows incentives “to encourage

20 public utilities to produce or acquire renewable energy” that exceeds the RPS, results

21 in early reductions in carbon dioxide emissions, or reduces coal-fired generation, §

22 62-16-4(D).

6 1 {8} In response to the 2019 amendments to the REA, the PRC developed and

2 approved significant amendments to Rule 572, including by adding provisions that

3 govern the availability of incentives. See 17.9.572.22 NMAC (5/4/2021).4 Among

4 other things, the Amended Rule restates the general requirements set forth in Section

5 62-16-4(D) and articulates other, more specific requirements that a proposed course

6 of action must satisfy to qualify for an incentive. For example, an incentive is

7 available, by definition, “to encourage certain behaviors or actions that would not

8 otherwise have occurred in order to further the outcomes described in Section 62-

9 16-4 . . . .” See 17.9.572.7(F) NMAC (5/4/2021) (emphasis added).5 Similarly, an

10 incentive “must be related to measures implemented by the utility after the effective

11 date of this rule.” 17.9.572.22(B) NMAC (5/4/2021) (emphasis added). 6 And an

12 incentive will not be awarded “with respect to a particular investment if the cost of

4 Previous versions of Rule 572 did not address the incentive provisions of the Act. See generally 17.9.572 NMAC (5/31/2013); 17.9.572 NMAC (8/30/2007). 5 The 2023 amendments to Rule 572 do not affect this provision. See 17.9.572.7(F) NMAC (2/28/2023). 6 The Second Amended Rule amended this language as follows: “A financial or other incentive proposed under [this section] shall be to encourage the public utility to produce or to acquire renewable energy to accomplish, in the future, at least one of the following purposes: . . . .” 17.9.572.22(B) NMAC (2/28/2023) (emphasis added); see also 17.9.572.7(F) NMAC (5/4/2021) (“The financial incentive . . . motivates certain behaviors or actions.”).

7 1 that investment exceeds the demonstrable value of the corresponding reduction in

2 carbon dioxide or other emissions.” 17.9.572.22(D) NMAC (5/4/2021). 7 The

3 Amended Rule also provides that an “interested person” may apply for an exemption

4 or variance from any of the rule’s requirements when inter alia a “proposed

5 alternative is in the public interest.” 17.9.572.21(G) NMAC (5/24/2021). 8 As these

6 provisions exemplify, the Amended Rule clarifies the circumstances in which an

7 incentive may be awarded under the REA. Whether that clarity is consistent with the

8 REA itself is one of the principal questions in this appeal.

9 B. Procedural Background

10 {9} The PRC approved the Amended Rule in an April 2021 order, after an

11 eighteen-month rulemaking aimed at implementing the 2019 amendments to the

12 REA. SPS participated throughout the rulemaking process along with Public Service

13 Company of New Mexico (PNM), El Paso Electric Company (EPE), PRC Utility

14 Division Staff, and various nonutility entities and individuals. SPS timely appealed

15 from the order adopting the Amended Rule, alleging numerous legal infirmities and

16 asking the Court to vacate and annul the order.

The Second Amended Rule renumbered this provision and made minor 7

changes that do not affect its substance. See 17.9.572.22(E) NMAC (2/28/2023). 8 The Second Amended Rule made minor changes to this provision that do not affect its substance. See 17.9.572.21(A), (B)(7) NMAC (2/28/2023).

8 1 {10} Weeks later, SPS filed an application with the PRC under the REA and the

2 Amended Rule, seeking approvals of its 2022 Annual Renewable Energy Act Plan

3 and of several proposed rate riders for the same year. These matters were

4 uncontested and eventually approved by the PRC.

5 {11} In the same application, SPS requested a financial incentive for which it

6 proposed to exceed its twenty percent RPS obligation and meet the forty percent

7 standard three years before it becomes mandatory as of 2025. Specifically, SPS

8 proposed to retire enough RECs in 2022, 2023, and 2024 to meet 2025’s forty

9 percent standard in each of those years. In return, SPS requested a rate rider that

10 would allow it to charge customers one dollar for each REC that it would retire over

11 the twenty percent standard. If approved, SPS projected that it would collect from

12 ratepayers the additional amounts of $1.65 million in 2022; $1.74 million in 2023;

13 and $1.84 million in 2024, for a three-year total incentive of approximately $5.23

14 million. SPS represented that it would not retire “excess RECs early without an

15 incentive to do so.” SPS also maintained that retiring excess RECs to meet the 2025

16 standard “will necessitate that SPS procure more renewable energy resources earlier

17 than would otherwise be needed in order to comply with the REA’s [RPS].”

18 {12} As a final part of the application, SPS requested a variance from the Amended

19 Rule’s requirement to demonstrate that the cost of retiring extra RECs would not

9 1 exceed “the demonstrable value of the corresponding reduction in carbon dioxide or

2 other emissions.” 17.9.572.22(D) NMAC (5/4/2021). Conceding that the proposal

3 failed to meet that requirement, SPS argued that the requirement “is inconsistent

4 with the REA” and therefore requested a variance.

5 {13} PRC Staff and three of the intervenors in the application proceeding9

6 “vigorously contested” SPS’s incentive proposal and variance request, both of which

7 the PRC later denied in an order filed in December 2021. The PRC was careful to

8 explain in the order that—although the request failed several provisions of the

9 Amended Rule—the denial was not based on the rule’s requirements. Rather, SPS

10 failed to meet the threshold statutory requirement to qualify for an incentive: SPS

11 “did not propose to ‘produce or acquire’ any renewable energy.” Section 62-16-

12 4(D). The PRC found that SPS introduced “no evidence of any firm plans to acquire

13 or produce any additional renewable energy.” Instead, “SPS only proposed to retire

14 banked excess RECs earlier than it otherwise would [have].” That proposal was

15 insufficient because, in the PRC’s view, “the retirement of RECs is a paper exercise

16 or method by which RPS compliance is demonstrated” and not a proposal to produce

9 The three intervenors that opposed the incentive and variance were the New Mexico Large Customer Group, Occidental Permian Ltd. (Occidental), and Louisiana Energy Services. Having intervened in this appeal, these same parties filed a joint answer brief in support of the PRC’s orders challenged by SPS.

10 1 or acquire renewable energy that exceeds the RPS “as required to be eligible for an

2 incentive under the statute.”

3 {14} In addition to finding failure under Section 62-16-4(D), the PRC separately

4 concluded that SPS’s incentive application failed to satisfy the provisions of the

5 Amended Rule summarized above. Specifically, the PRC concluded that SPS’s

6 proposal did not merit an incentive because the RECs in question “are associated

7 with . . . existing renewable energy facilities, all of which [1] pre-date Rule 572.22

8 (contrary to Rule 572.22.B) and [2] were acquired for reasons other than those

9 contemplated in . . . Section 62-16-4(D) or Rule 572.22.” See 17.9.572.22(B)

10 NMAC (5/4/2021) (providing that an incentive “must be related to measures

11 implemented by the utility after the effective date of this rule” (emphasis added));

12 17.9.572.7(F) NMAC (5/4/2021) (defining “financial incentive” as “money or

13 additional earnings . . . to encourage certain behaviors or actions that would not

14 otherwise have occurred in order to further the outcomes described in Section 62-

15 16-4” (emphasis added)). The request also failed the Amended Rule’s requirement

16 that the costs associated with retiring RECs must not exceed “the demonstrable value

17 of the corresponding reduction in carbon dioxide or other emissions.”

18 17.9.572.22(D) NMAC (5/4/2021). And as for SPS’s requested variance from the

19 latter requirement, the PRC denied the variance as moot because the incentive

11 1 request “failed on many other grounds.” As previously noted however, these

2 conclusions were ancillary to the PRC’s determination that SPS’s incentive request

3 failed to produce or acquire renewable energy, as required by Section 62-16-4(D).

4 {15} SPS timely appealed from the order denying its incentive request, and we

5 granted its subsequent motion to consolidate the appeal with its pending appeal

6 challenging the Amended Rule. We now proceed to the merits of both appeals.

7 II. DISCUSSION

8 {16} SPS’s core objection to both the Amended Rule and the denial of its incentive

9 request is the PRC’s interpretation of Section 62-16-4(D) to preclude the award of

10 an incentive for exceeding the RPS by retiring RECs earlier than required by the

11 Act. Because our resolution of this issue effectively disposes of SPS’s appeal by

12 denial of its incentive application, we address it first. We then address SPS’s many

13 remaining arguments against the Amended Rule. 10 As the party challenging the

14 PRC’s orders, SPS has the burden of establishing that the orders are unreasonable or

10 The presentation of the issues in this appeal provides a case study as to why the limitations the Legislature has placed on our review encourage trivial argument. See § 62-11-5 (“The supreme court shall have no power to modify the action or order appealed from, but shall either affirm or annul and vacate the same.”). We caution parties that the better approach to advocacy is advancing only credible and discernible claims of error. Tossing in the kitchen sink with the hope of vacating an entire administrative ruling is an ill-conceived strategy that is wasteful of judicial resources.

12 1 unlawful. NMSA 1978, § 62-11-4 (1965); see also, e.g., Pub. Serv. Co. of N.M. v.

2 N.M. Pub. Regul. Comm’n, 2019-NMSC-012, ¶ 12, 444 P.3d 460 (observing that the

3 party challenging the PRC’s order has the burden of showing that the order was

4 “arbitrary and capricious, not supported by substantial evidence, outside the scope

5 of the agency’s authority, or otherwise inconsistent with law.” (internal quotation

6 marks and citation omitted)).

7 A. The PRC’s Denial of SPS’s Incentive Application Under Section 62-16- 8 4(D) Was Not Unreasonable or Unlawful

9 {17} SPS challenges the denial of its incentive application under Section 62-16-

10 4(D) on three grounds. First, SPS argues that the PRC’s interpretation of the statute

11 “ignores the purpose and language of the REA and is consequently arbitrary and

12 capricious, contrary to law, and an abuse of discretion.” In particular, SPS argues

13 that conditioning the award of an incentive on a proposal that would “produce or

14 acquire renewable energy,” § 62-16-4(D), “would lead to absurd results and thwart

15 the Legislature’s intent to incentivize utilities to exceed the RPS.” Second, SPS

16 argues that the availability of incentives under the REA since at least 2007 supports

17 SPS’s proposed reading of the statute. Third, SPS argues that the PRC lacked

18 sufficient evidence to support the hearing examiner’s finding of “speculative” that

19 SPS’s early retirement of extra RECs would result in acquiring additional renewable

20 energy resources earlier than otherwise necessary. We address each argument in

13 1 turn, and because our resolution of these issues is sufficient to affirm, we decline to

2 address SPS’s additional arguments related to the denial of its incentive application.

3 1. The plain language of Section 62-16-4(D) conditions the award of an 4 incentive on a proposal “to produce or acquire renewable energy”

5 {18} Whether the PRC erred by construing Section 62-16-4(D) to limit the award

6 of incentives to proposals that would “produce or acquire renewable energy”

7 presents a question of statutory interpretation, “which we review de novo.” N.M.

8 Indus. Energy Consumers v. N.M. Pub. Regul. Comm’n, 2007-NMSC-053, ¶ 19, 142

9 N.M. 533, 168 P.3d 105. “Where as here an agency is construing the same statutes

10 by which it is governed, we accord some deference to the agency’s interpretation,”

11 particularly for “legal questions that implicate special agency expertise or the

12 determination of fundamental policies within the scope of the agency’s statutory

13 function.” Id. (internal quotation marks and citation omitted). Nevertheless, we are

14 “not bound by the agency’s interpretation and may substitute [our] own independent

15 judgment for that of the agency because it is the function of the courts to interpret

16 the law.” Morningstar Water Users Ass’n v. N.M. Pub. Util. Comm’n, 1995-NMSC-

17 062, ¶ 11, 120 N.M. 579, 904 P.2d 28.

18 {19} “When construing statutes, our guiding principle is to determine and give

19 effect to legislative intent.” N.M. Indus. Energy Consumers, 2007-NMSC-053, ¶ 20.

20 We begin with “the plain meaning of the words at issue, often using the dictionary

14 1 for guidance.” N.M. Att’y. Gen. v. N.M. Pub. Regul. Comm’n, 2013-NMSC-042, ¶

2 26, 309 P.3d 89. We must give effect to the statute as written “without room for

3 construction unless the language is doubtful, ambiguous, or . . . would lead to

4 injustice, absurdity or contradiction, in which case the statute is to be construed

5 according to its obvious spirit or reason.” Id. (internal quotation marks and citation

6 omitted).

7 {20} SPS does not argue that the PRC’s interpretation of Section 62-16-4(D) is

8 contrary to the statute’s plain language—nor could it reasonably do so. The language

9 and structure of the statute support the PRC’s conclusion that Section 62-16-4(D) is

10 “unequivocally clear” that an incentive must encourage a public utility, first and

11 foremost, to “produce or acquire renewable energy.” The statute is similarly clear

12 on exceeding the RPS, the focus of SPS’s argument, as a secondary objective that

13 must be accomplished by the threshold requirement of producing or acquiring

14 renewable energy. Under the statute’s plain language, an incentive will be provided

15 to encourage a public utility “to produce or acquire renewable energy that exceeds

16 the applicable annual [RPS]” or that accomplishes one of the other secondary

17 objectives listed in the statute. See § 62-16-4(D) (providing an incentive “to produce

18 or acquire renewable energy” that reduces carbon emissions earlier than required or

19 that reduces the coal-fired generation of electricity).

15 1 {21} Instead of offering an alternative construction of Section 62-16-4(D), SPS

2 argues that a literal interpretation “would lead to absurd results and thwart the

3 Legislature’s intent to incentivize utilities to exceed the RPS.” SPS points to two

4 other provisions to illustrate the purported absurdity that would result from a literal

5 reading of Section 62-16-4(D): (1) the Legislature’s finding that “a public utility

6 should have incentives to go beyond the minimum requirements of the [RPS],” § 62-

7 16-2(A)(5); and (2) the mandate that “[a] public utility shall meet the [RPS] . . . as

8 demonstrated by its retirement of [RECs],” § 62-16-4(A). Based on these provisions,

9 SPS insists that retiring RECs must be worthy of an incentive to exceed the RPS

10 because retiring RECs is the only way to “establish compliance with the [RPS].”

11 Section 62-16-5(A)(1); see also § 62-16-4(A). The SPS maintains that otherwise,

12 “the Legislature chose to incentivize utilities to exceed the RPS but then failed to

13 provide any mechanism for them to do so.”

14 {22} We will depart from a statute’s literal meaning when the statute is shown to

15 be ambiguous by “one or more provisions giving rise to genuine uncertainty as to

16 what the legislature was trying to accomplish.” State ex rel. Helman v. Gallegos,

17 1994-NMSC-023, ¶ 23, 117 N.M. 346, 871 P.2d 1352. We see no “genuine

18 uncertainty” about the purpose or meaning of Section 62-16-4(D) in relation to the

19 statute’s plain language. To the contrary, providing an incentive to encourage a

16 1 public utility “to produce or acquire renewable energy” is entirely consistent with

2 the overarching purpose of Section 62-16-4, particularly after the 2019 amendments

3 to the REA.

4 {23} As previously explained, Section 62-16-4(A) was amended in 2019 to

5 mandate that public utilities keep pace with a series of increasing RPS benchmarks

6 and make “[r]easonable and consistent progress” toward supplying one hundred

7 percent of all retail sales of electricity in New Mexico from zero carbon resources

8 by the year 2045. Section 62-16-4(A)(6). These demanding requirements signal a

9 clear legislative intent to reduce and eliminate from the electricity provided to New

10 Mexico public utility customers the use of any electricity generation resources that

11 emit carbon dioxide into the atmosphere. Section 62-16-3(K) (defining a “zero

12 carbon resource,” in part, as “an electricity generation resource that emits no carbon

13 dioxide into the atmosphere” (emphasis added)). As a necessary corollary, these

14 requirements also signal an intent to compel public utilities to procure sufficient zero

15 carbon resources to meet the zero carbon resource standard by 2045. Against this

16 backdrop, an incentive clearly acts as a carrot “to encourage” a public utility to

17 increase its renewable energy portfolio and reduce carbon dioxide and other harmful

18 emissions faster than the REA requires. See § 62-16-4(D). Conditioning an incentive

19 on a proposal that will produce or acquire renewable energy ensures that a proposed

17 1 measure will not qualify for an incentive unless, at minimum, it advances a utility’s

2 progress toward achieving the zero carbon resource standard. Id. In short, the

3 statute’s purpose supports and does not undermine its literal meaning.

4 {24} To read Section 62-16-4(D) as SPS suggests would elevate form over

5 substance. The act of retiring RECs alone does nothing to further the statute’s

6 objectives. SPS’s proposal for an incentive illustrates the point. SPS characterized

7 its proposal as a plan “to supply no less than 40% of [its] New Mexico retail energy

8 sales [from renewable energy] three years early.” But SPS’s supporting

9 documentation showed that in 2020, it actually generated and purchased renewable

10 energy in an amount that was substantially equivalent to its RPS obligation—twenty

11 percent of its retail electricity sales.11 Section 62-16-4(A)(2) (setting forth an RPS

12 of twenty percent, effective January 1, 2020). SPS also admitted that it was not

13 proposing to produce or acquire additional renewable energy or renewable energy

14 resources. Rather, SPS proposed only to retire banked RECs from its sizeable

15 balance of RECs carried forward from renewable energy generated in previous

SPS generated and purchased approximately 1.46 million MWh of 11

renewable energy in 2020, which exceeded its RPS compliance requirement by approximately 4,910 MWh or 0.34%. Notably, at SPS’s proposed incentive rate of $1 per MWh, its excess renewable energy for 2020 would have supported an incentive of $4,911, far less than the $1.65 million incentive that it requested for 2022.

18 1 years. 12 SPS’s proposal thus would have done nothing to expand SPS’s renewable

2 energy portfolio or reduce carbon emissions during the three years that its requested

3 incentive would have been in effect. We see nothing in the REA to suggest that the

4 Legislature intended the award of an incentive under these circumstances. We

5 therefore find no ambiguity that would lead us to ignore the plain meaning of Section

6 62-16-4(D), and we affirm the PRC’s interpretation of the statute according to its

7 plain language.

8 2. The availability of incentives under the REA since at least 2007 does not 9 require the award of an incentive in this case

10 {25} We are similarly unpersuaded by SPS’s argument that the availability of

11 incentives under the REA since 2007 compels a different result. SPS offered

12 testimony in support of its incentive application that “almost all renewable

13 procurements on SPS’s system were constructed before 2019 with the knowledge

14 that SPS could be eligible for an incentive under the Act.” This testimony reveals a

15 basic misunderstanding of what the Legislature intended an incentive to accomplish.

12 SPS has represented throughout this proceeding that, unless it receives an incentive to retire its banked RECs early, it has enough banked RECs to allow it to continue meeting its RPS obligations without procuring new renewable resources “until at least 2030.” And even if it receives an incentive to retire RECs early, SPS estimates that it will remain compliant with its existing resources until some time between 2026 and 2029.

19 1 {26} Although the REA does not define the term incentive, common definitions

2 describe it as something that “incites,” “induces,” “motivates,” or “encourages” one

3 to take action. See, e.g., Merriam-Webster Collegiate Dictionary (11th ed. 2020),

4 (defining “incentive” as “something that incites or has a tendency to incite to . . .

5 action”); New Oxford American Dictionary (3d ed. 2010) (defining “incentive” as

6 “a thing that motivates or encourages one to do something”); American Heritage

7 Dictionary (5th ed. 2011) (defining “incentive” as “[s]omething, such as the fear of

8 punishment or the expectation of reward, that induces action or motivates effort”).

9 These definitions align closely with the plain language of Section 62-16-4(D), which

10 provides that the PRC shall award an incentive “to encourage public utilities to

11 produce or acquire renewable energy.” (Emphasis added.)

12 {27} Given that one cannot encourage past behavior, the problem for SPS is simply

13 a matter of timing. We agree that incentives have been available since at least 2007,

14 and had SPS requested an incentive before it constructed the “renewable

15 procurements” in question, it may well have qualified for an incentive to

16 “encourage” the associated investments. Section 62-16-4(D); see also § 62-16-

17 4(A)(4) (2007) (providing for an incentive to “encourage public utilities to acquire

18 renewable energy supplies that exceed the applicable annual [RPS]”). But at this

19 stage, SPS seeks a reward—not an incentive—for renewable resources or energy

20 1 that it already has produced or acquired beyond the REA’s demands. Section 62-16-

2 4(D) does not authorize the PRC to reward SPS’s past behavior. Having failed to

3 request an incentive before exceeding its obligations under the REA, SPS’s actions

4 vis-à-vis Section 62-16-4(D) were voluntary. Those actions do not support

5 additional compensation from SPS’s customers beyond the reasonable rate of return

6 that SPS already has earned through the ratemaking process for the electricity

7 associated with SPS’s banked RECs.

8 3. Substantial evidence supports the PRC’s finding that SPS did not 9 propose to produce or acquire renewable energy to support its incentive 10 request

11 {28} As a final point in our review of the denial of SPS’s incentive application, we

12 address SPS’s argument that the PRC lacked substantial evidence to support the

13 following finding:

14 [T]he Commission concurs with the [Recommended Decision’s] 15 finding that it was speculative that SPS’s early retirement of excess 16 RECs would result in the early acquisition of resources to meet SPS’s 17 RPS in the future because there was no evidence of any firm plans to 18 acquire or produce any additional renewable energy and because future 19 acquisitions or procurements would only meet its RPS for compliance 20 purposes, not exceed its RPS for the purposes required by the financial 21 incentive statute.

22 SPS argues that the finding is unsupported because “SPS presented uncontroverted

23 testimony that the proposed retirement of RECs to exceed the RPS in 2022 through

21 1 2024 would accelerate SPS’s need to acquire additional resources by approximately

2 two to four years.”

3 {29} “[W]e will affirm the Commission’s order if it is supported by substantial

4 evidence, which is evidence that is credible in light of the whole record and that is

5 sufficient for a reasonable mind to accept as adequate to support the conclusion

6 reached by the agency.” Citizens for Fair Rates & the Env’t v. N.M. Pub. Regul.

7 Comm’n, 2022-NMSC-010, ¶ 13, 503 P.3d 1138 (internal quotation marks and

8 citation omitted)). We address SPS’s substantial-evidence challenge only to the

9 extent that it may implicate our conclusion that the PRC properly denied SPS’s

10 incentive application under Section 62-16-4(D) because SPS “did not propose to

11 ‘produce or acquire’ any renewable energy.” Our concern therefore is whether the

12 PRC had substantial evidence to find that “there was no evidence of any firm plans

13 to acquire or produce any additional renewable energy.”

14 {30} As we have previously noted, SPS admitted at the hearing on its application

15 that its incentive proposal did not include a “specific plan” to produce or acquire any

16 additional renewable energy or renewable energy resources. The “uncontroverted

17 testimony” cited by SPS does not suggest otherwise. It merely explains that, based

18 on SPS’s projections,

19 if SPS continues to retire the minimal amount of RECs required to 20 comply with the RPS, SPS is projecting compliance through 2030 to

22 1 beyond 2031 . . . . However, if SPS’s plan to meet the 40% requirement 2 three years early is approved, SPS is projecting compliance through 3 2026 and 2029. In other words, if SPS’s plan is approved, SPS would 4 be required to accelerate the acquisition of additional renewable 5 resources to maintain RPS compliance.

6 This testimony underscores the PRC’s finding that SPS did not actually propose to

7 produce or acquire renewable energy, let alone renewable energy that would exceed

8 the RPS as required for an incentive under Section 62-16-4(D); rather, SPS merely

9 offered projections about when it would need to acquire “additional renewable

10 resources to maintain RPS compliance” after expiration of SPS’s incentive at the

11 end of 2024. Based on our review, we hold that substantial evidence supports the

12 PRC’s finding that SPS did not propose to produce or acquire renewable energy to

13 support its request for an incentive.

14 {31} In sum, with no proposal to produce or acquire renewable energy that exceeds

15 the RPS, the PRC’s denial of SPS’s incentive application under Section 62-16-4(D)

16 was neither unreasonable nor unlawful. Because we affirm the denial under the

17 statute, we need not reach SPS’s arguments that the PRC improperly denied the

18 application under the various provisions of Rule 572.

19 B. The Amended Rule Is Not Unreasonable or Unlawful

20 {32} We turn now to SPS’s many challenges to the Amended Rule itself. SPS

21 argues that various provisions of the Amended Rule exceed the scope of the REA,

23 1 are arbitrary and capricious and void for vagueness, and suffer from a litany of other

2 legal and procedural deficiencies. After the completion of briefing the PRC filed a

3 motion to dismiss as moot four of the issues raised by SPS in its appeal from the

4 order approving the Amended Rule. The PRC argued that its subsequent order filed

5 on December 7, 2022, which approved the Second Amended Rule after the instant

6 appeals were filed, revised certain language in the Amended Rule that SPS had

7 challenged in this appeal. We agree that three of SPS’s arguments are moot, and we

8 address those issues at the end of our analysis. But first, we consider SPS’s

9 arguments that are properly before us.

10 {33} SPS brings a facial challenge to the rule and therefore must establish that the

11 rule is invalid in all of its applications, not merely “under some specific set of

12 circumstances.” Gila Res. Info. Project v. N.M. Water Quality Control Comm’n,

13 2018-NMSC-025, ¶ 6, 417 P.3d 369 (“Petitioners must establish that no set of

14 circumstances exist where the . . . [r]ule could be valid.”); see also Bounds v. State

15 ex rel. D’Antonio, 2013-NMSC-037, ¶ 14, 306 P.3d 457 (“In a facial challenge to a

16 statute, we consider only the text of the statute itself, not its application.” (brackets,

17 internal quotation marks, and citation omitted)). We emphasize the point because

18 many of SPS’s arguments suffer from the lack of a factual record or any suggestion

19 of an actual injury resulting from the application of the Amended Rule. See Bounds,

24 1 2013-NMSC-037, ¶ 13 (“[Where the petitioner] was unable to show any actual

2 injury, . . . [he] was unable to pursue an as-applied challenge in which specific facts

3 would be relevant and was left with only a facial challenge.”).

4 1. The Amended Rule’s cost-benefit requirement does not exceed the scope 5 of the REA and is not otherwise unreasonable or unlawful

6 {34} SPS first challenges the cost-benefit requirement set forth in the Amended

7 Rule, specifically Rule 572.22(D), which precludes the award of an incentive for a

8 “particular investment if the cost of that investment exceeds the demonstrable value

9 of the corresponding reduction in carbon dioxide or other emissions.” SPS argues

10 that the provision (1) ignores the scope of REA-authorized incentives by limiting

11 incentives to investments that result in a reduction in carbon dioxide or other

12 emissions when Section 62-16-4(D) also allows incentives for measures that exceed

13 the RPS or reduce the coal-fired generation of electricity; (2) exceeds the scope of

14 the REA by requiring a cost-benefit analysis that is not required under the REA; (3)

15 is void for vagueness and arbitrary and capricious; and (4) was adopted without

16 notice and comment in violation of due process.

17 a. Rule 572.22(D) does not preclude an incentive for measures that would 18 exceed the RPS or reduce coal-fired electricity-generation

19 {35} SPS argues that Rule 572.22(D) limits incentives “only to investments that

20 result in a reduction in carbon dioxide or other emissions” and effectively writes out

25 1 of existence the other two bases under Section 62-16-4(D) for earning an incentive,

2 namely, exceeding the RPS and reducing the coal-fired generation of electricity.13

3 This argument is overstated and does not withstand scrutiny.

4 {36} Despite SPS’s repeated assertions to the contrary, Rule 572.22(D) does not

5 necessarily preclude an incentive for measures that would exceed the RPS or reduce

6 coal-fired generation. Like Section 62-16-4(D), Rule 572.22 expressly provides that

7 a utility may seek an incentive for implementing measures “to accomplish at least

8 one of the following purposes: (1) exceeding the public utility’s annual RPS

9 requirements; (2) reducing carbon dioxide emissions earlier than required by [the

10 RPS]; or (3) reducing the generation of electricity by coal-fired generating

11 facilities.” See 17.9.572.22(A), (B) NMAC (5/4/2021) (emphasis added). The cost-

12 benefit requirement ensures that an investment proposed to accomplish any of these

13 purposes—including exceeding the RPS or reducing the coal-fired generation of

14 electricity—is cost-effective relative to “the demonstrable value of the

15 corresponding reduction in carbon dioxide or other emissions.” 17.9.572.22(D)

16 NMAC (5/4/2021). That the metric for measuring cost-effectiveness overlaps with

17 the purpose of reducing carbon emissions does not exclude an incentive for

The PRC argues that this issue is moot for largely semantic reasons, which 13

we decline to address because we are unpersuaded by SPS’s argument.

26 1 exceeding the RPS or reducing the coal-fired generation of electricity. Nor does the

2 metric guarantee an incentive for reducing carbon emissions alone. The cost-benefit

3 requirement applies equally to any of the purposes for earning an incentive.

4 {37} As a fallback to its categorical argument, SPS argues that the cost-benefit

5 requirement “renders meaningless the provisions of the Rule that purport to allow

6 incentives for exceeding the RPS or reducing coal-fired generation.” (Emphasis

7 added.) To illustrate the point, SPS provides the single example of biomass

8 resources, which the Legislature included in the definition of a renewable energy

9 resource that can be used to meet and exceed the RPS. See § 62-16-3(H)(3)

10 (providing that biomass resources under the REA are “limited to agriculture or

11 animal waste, small diameter timber, not to exceed eight inches, salt cedar and other

12 phreatophyte or woody vegetation removed from river basins or watersheds in New

13 Mexico”). SPS argues that Rule 572.22(D) precludes a utility from using biomass

14 resources to earn an incentive for exceeding the RPS because “biomass fuel results

15 in substantial carbon emissions and the increased use of biomass fuel to generate

16 electricity would likely not result in a decrease in carbon emissions.”

17 {38} This argument fails for at least two reasons. First, SPS’s assertions about the

18 “likely” carbon-related effects of biomass resources are not supported by the record

19 and thus are merely the arguments of counsel and not evidence. See, e.g., State v.

27 1 Hall, 2013-NMSC-001, ¶ 28, 294 P.3d 1235 (“It is not our practice to rely on

2 assertions of counsel unaccompanied by support in the record.” (internal quotation

3 marks and citation omitted)). Second, SPS’s assertions are contradicted by the REA

4 itself, which has provided since 2019 that REC-eligible biomass resources must

5 come from a facility certified to “have zero life cycle carbon emissions.” Section 62-

6 16-3(H)(3)(b). This lone example therefore does not establish that Rule 572.22(D)’s

7 cost-benefit requirement precludes an incentive for exceeding the RPS, even when

8 using biomass resources to do so. To the contrary, any measure that otherwise

9 qualifies for an incentive can satisfy Rule 572.22(D)—as long as the cost would be

10 less than the value of the corresponding reduction in carbon dioxide or other

11 emissions. 14 We thus disagree that Rule 572.22(D) exceeds the scope of the REA by

12 limiting incentives only to investments that would result in a reduction of carbon

13 dioxide or other emissions.

14 We also note that, although this is a facial challenge, SPS’s evidence to support its own incentive request similarly failed to show that Rule 572.22(D) precludes the award of an incentive for SPS’s proposal for an incentive. Although SPS admitted that the cost of retiring extra RECs would be greater than the value of the corresponding reduction in carbon dioxide or other emissions, it also volunteered that it had declined to use a different methodology that “could have generated a better result for the cost-benefit analysis required by the rule.” Thus, SPS’s own evidence was inconclusive about whether Rule 572.22(D) “renders meaningless the provisions of the REA that allow incentives for exceeding the RPS.”

28 1 b. Rule 572.22(D) is a reasonable exercise of the PRC’s overarching duties 2 under the Public Utility Act

3 {39} SPS next argues that Rule 572.22(D) exceeds the scope of the REA by

4 requiring a cost-benefit analysis that is not explicitly required by statute. SPS argues

5 that, because the REA expressly includes a cost-benefit analysis for measures taken

6 to meet the 2040 and 2045 RPS levels of eighty percent and one hundred percent,

7 the exclusion of such an analysis for complying with earlier RPS requirements was

8 purposeful, such that Rule 572.22(D) is contrary to legislative intent. See § 62-16-

9 4(B)(3) (“In administering the [eighty percent and one hundred percent RPS

10 standards], the commission shall . . . prevent unreasonable impacts to customer

11 electricity bills, taking into consideration the economic and environmental costs and

12 benefits of renewable energy resources and zero carbon resources . . . .”).

13 {40} We are not persuaded. This argument fails to consider Rule 572.22(D) in the

14 context of both the REA and the PRC’s broader regulatory duties. Cf. Baker v.

15 Hedstrom, 2013-NMSC-043, ¶ 15, 309 P.3d 1047 (“We must examine [the

16 plaintiffs’] interpretation in the context of the statute as a whole, including the

17 purposes and consequences of the . . . Act.”). The PRC adopted Rule 572.22

18 pursuant to its statutory duty to “promulgate rules to implement the provisions of the

19 [REA],” § 62-16-9, including “to develop and provide financial or other incentives

20 to encourage public utilities to” carry out the purposes of the REA, § 62-16-4(D).

29 1 See also § 62-16-7(A)(1) (providing that the PRC “shall adopt rules regarding the

2 [RPS]”). However, the REA provides minimal guidance for determining whether a

3 requested incentive may be justified, leaving the PRC to apply its broad policy-

4 making authority and expertise to fill in the legislative gaps to effectuate the

5 purposes of the REA. See, e.g., New Energy Econ., Inc. v. N.M. Pub Reg. Comm’n,

6 2018-NMSC-024, ¶ 25, 416 P.3d 277 (“[I]f it is clear that our Legislature delegated

7 to the PRC (either explicitly or implicitly) the task of giving meaning to interpretive

8 gaps in a statute, we will defer to the PRC’s construction of the statute as the PRC

9 has been delegated policy-making authority and possesses the expertise necessary to

10 make sound policy.”). Under these circumstances, the PRC necessarily falls back on

11 its overarching duty to regulate public utilities in a manner that balances the interests

12 of the public, consumers, and investors to ensure “that reasonable and proper

13 services shall be available at fair, just and reasonable rates.” NMSA 1978, § 62-3-1

14 (B) (2008); see also NMSA 1978, § 62-8-1 (1941) (“Every rate made, demanded or

15 received by any public utility shall be just and reasonable.”); cf. § 62-16-2(A)(4)

16 (“[P]ublic utilities should be able to recover their reasonable costs incurred to

17 procure or generate energy from renewable energy resources . . . .”).

18 {41} Against this backdrop, Rule 572.22 first ensures that any incentive awarded

19 under the REA will comply with the statute by encouraging a utility to produce or

30 1 acquire renewable energy that accomplishes one or more of the REA’s statutory

2 bases for an incentive. See 17.9.572.22(A), (B) NMAC (5/4/2021); see also § 62-

3 16-4(D). The utility then must demonstrate “that the terms and duration of the

4 proposed incentive . . . are just and reasonable in light of the utility’s costs, its

5 authorized return, and the magnitude of any other incentives that have been

6 authorized by the commission.” 17.9.572.22(C) NMAC (5/4/2021). The utility also

7 must show that the measure proposed to support the incentive will be a cost-effective

8 investment as compared with the “value of the corresponding reduction in carbon

9 dioxide or other emissions.” 17.9.572.22(D) NMAC (5/4/2021).

10 {42} This framework implements the REA’s incentive and rulemaking

11 requirements in a manner that comports with the PRC’s broad mandate to regulate

12 public utilities to ensure “that reasonable and proper services shall be available at

13 fair, just and reasonable rates.” Section 62-3-1(B). Given that an incentive will

14 compensate a utility at the expense of ratepayers, we hold that the PRC acted within

15 its authority by requiring an incentive to be just and reasonable and based on a cost-

16 effective investment. Cf. Att’y Gen. v. N.M. Pub. Regul. Comm’n, 2011-NMSC-034,

17 ¶¶ 11, 13, 150 N.M. 174, 258 P.3d 453 (concluding that an “adder” that allows a

18 utility to “receive additional revenue as compensation for reducing the consumption

19 of their energy” is a rate and therefore requires a balancing of interests to ensure that

31 1 it is “‘just and reasonable’” (quoting Section 62-8-1)). Moreover, we defer to the

2 PRC’s chosen standard for evaluating the cost-effectiveness of an investment—the

3 cost of the investment versus the value of the corresponding reduction of carbon

4 dioxide or other emissions—as a reasonable exercise of policy-making authority that

5 promotes the legislative directive to make “[r]easonable and consistent progress”

6 toward reaching the zero carbon resource standard by 2045. Section 62-16-4(A)(6);

7 see also New Energy Econ., 2018-NMSC-024, ¶ 25.

8 {43} The cases cited by SPS do not compel a different conclusion. In particular,

9 SPS cites State ex rel. Sandel v. N.M. Pub. Util. Comm’n, 1999-NMSC-019, ¶ 26,

10 127 N.M. 272, 980 P.2d 55, to argue that the PRC “usurp[ed] the Legislature’s law-

11 making and policy-setting authority” by adopting Rule 572.22(D). We held in

12 Sandel that the PRC’s predecessor, the Public Utility Commission, violated Article

13 III, Section 1 of the New Mexico Constitution “by undertaking to deregulate the

14 electric power industry in New Mexico in a manner that is beyond the scope of the

15 authority granted . . . by the Legislature.” Sandel, 1999-NMSC-019, ¶ 26. We

16 reached that conclusion based on the Commission’s actions to “carry out broad

17 changes in public policy by replacing regulation under the ‘just and reasonable’

18 standard with competition in an open marketplace,” id. ¶ 19, at a time when

19 deregulation was being debated at both the state and federal levels, id. ¶ 8. Here, the

32 1 PRC has not attempted a controversial change in public policy vis-à-vis its

2 fundamental responsibility to ensure just and reasonable rates. Rather, the PRC has

3 adopted a rule that implements the REA’s incentive provision, consistent with the

4 PRC’s traditional exercise of its regulatory authority. Sandel is thus inapposite.

5 {44} In sum, the PRC must carry out its duty to establish just and reasonable rates

6 absent a clear statement to the contrary. See, e.g., Hobbs Gas Co. v. N.M. Pub. Serv.

7 Comm’n, 1980-NMSC-005, ¶ 4, 94 N.M. 731, 616 P.2d 1116 (“The law . . . charges

8 the Commission with the responsibility of [e]nsuring that every rate made or

9 received by a public utility shall be just and reasonable.”). The cost-benefit analysis

10 requirement in Section 62-16-4(B)(3) does not relieve the PRC from ensuring that

11 an incentive awarded at ratepayers’ expense is just and reasonable. To the contrary,

12 it mandates that the PRC consider “unreasonable impacts to customer electricity

13 bills” in achieving the 2040 and 2045 RPS standards. Id. (emphasis added). That

14 mandate is broad enough to encompass a cost-benefit requirement that precludes the

15 award of an incentive unless the utility demonstrates a benefit to ratepayers that

16 ensures progress toward the zero carbon resource standard.

17 c. SPS’s remaining challenges to Rule 572.22(D) fail

18 {45} SPS’s two remaining challenges to Rule 572.22(D) also fail. First, SPS argues

19 that the cost-benefit provision in Rule 572.22(D) was adopted without notice and

33 1 comment, in violation of due process. We readily dispense with this argument. The

2 PRC’s Notice of Proposed Rulemaking included a draft of proposed Rule 572.22

3 that “request[ed] that all comments include a proposal on how best to calculate a

4 financial incentive.” SPS proposed a method of calculating a financial incentive that

5 the PRC ultimately declined to adopt. Instead, the PRC adopted the cost-benefit

6 requirement that was proposed by Occidental Permian Limited, Ltd. (Occidental) in

7 its initial comment to the proposed rule. Significantly, SPS submitted a written

8 comment on Occidental’s proposed requirement, stating that it “is an ambiguous,

9 arbitrary, and capricious limitation found nowhere in the statute.” SPS thus had

10 notice that the PRC was considering a method of calculating a financial incentive,

11 had an opportunity to propose its own method, and had an opportunity to comment

12 on the very language that the PRC eventually adopted. Under these circumstances,

13 SPS’s claimed due process violation rings hollow. See, e.g., Rivas v. Bd. of

14 Cosmetologists, 1984-NMSC-076, ¶ 9, 101 N.M. 592, 686 P.2d 934 (“Case law

15 suggests that the minimum protections upon which administrative action may be

16 based, [are] according to interested parties a simple notice and right to comment.”

17 (alteration in original) (internal quotation marks and citation omitted)).

18 {46} Second, SPS argues that Rule 572.22(D) provisions for calculating the costs

19 and benefits supporting an incentive application are void for vagueness. In

34 1 particular, SPS challenges the requirement to provide “the cost of the measures

2 implemented by the utility that resulted in the lower carbon dioxide emissions.”

3 17.9.572.22(D)(4) NMAC (5/4/2021). SPS similarly challenges the requirement to

4 provide “the estimated value of the reduction in carbon dioxide emissions . . . based

5 on an analysis of relevant carbon dioxide markets.” 17.9.572.22(D)(3) NMAC

6 (5/4/2021). SPS argues that, without greater specificity, the rule “requires utilities to

7 guess at its meaning and is impermissibly vague.” We disagree. “A court

8 entertaining a pre-enforcement challenge to a regulation that does not implicate

9 constitutionally protected conduct such as the First Amendment right to freedom of

10 expression may sustain a vagueness challenge only if the law ‘is impermissibly

11 vague in all of its applications.’” N.M. Petroleum Marketers Ass’n v. N.M. Env’t

12 Improvement Bd., 2007-NMCA-060, ¶ 16, 141 N.M. 678, 160 P.3d 587 (quoting

13 Vill. of Hoffman Ests. v. The Flipside, Hoffman Ests., Inc., 455 U.S. 489, 495

14 (1982)). Here, by SPS’s own account, it understood Rule 572.22(D) well enough to

15 submit “all the information required by that subsection” to support its proposal for

16 an incentive. SPS’s ability to comprehend the rule’s requirements undermines its

17 argument that the rule “is impermissibly vague in all of its applications.”

35 1 2. SPS’s void-for-vagueness challenges lack merit

2 {47} Continuing with the void-for-vagueness theme, SPS challenges three other

3 provisions of Rule 572 on vagueness grounds. First, SPS argues that the rule’s

4 definition of the term “financial incentive” is unconstitutionally vague. See

5 17.9.572.7(F) NMAC (5/4/2021). SPS maintains that the definition’s use of the

6 terms “capital investment opportunities,” “certain behaviors or actions,” and “would

7 not otherwise have occurred” are confusing, ambiguous, and require utilities to guess

8 at their meanings. Second, SPS argues that the definition of “procure” and

9 “procurement” is ambiguous “to the extent it does not comport with the Amended

10 Rule’s actual use of the term ‘procurement.’” See 17.9.572.7(P)(4) NMAC

11 (5/4/2021). SPS argues that the Amended Rule “defines procurement to mean a

12 bidding process, but the rule subsequently uses the term to refer to the cost of the

13 generation purchased rather than the bidding process itself” and then cites, as an

14 example, “17.9.572.12(C) NMAC (5/4/2021) (‘To the extent a procurement is

15 greater than the reasonable cost threshold and results in excess costs . . . .’).” SPS

16 argues that the actual use of the term procurement relative to the definition provided

17 in the rule is “inconsistent and confusing” and “renders the definition vague and

18 unenforceable.” Third, SPS challenges the provision that requires a public utility to

19 give a preference to renewable energy generated in New Mexico in limited

36 1 circumstances. See 17.9.572.10(A) NMAC (5/4/2021) (“Other factors being equal,

2 preference shall be given to renewable energy generated in New Mexico.”). SPS

3 argues that the requirement for a preference when “[o]ther factors [are] equal” fails

4 to identify what those factors may be and as such, the provision requires utilities to

5 guess at its meaning and is impermissibly vague. See id.

6 {48} Although these provisions have not been drafted with perfect clarity, they are

7 sufficient for due process purposes. As our Court of Appeals has cogently explained,

8 “An agency drafting regulations is not required to write for the benefit of deliberately

9 unsympathetic or willfully obtuse readers: for purposes of due process, a

10 governmental agency attempting to give notice to members of the public may

11 assume a hypothetical recipient desirous of actually being informed.” N.M.

12 Petroleum Marketers, 2007-NMCA-060, ¶ 18 (internal quotation marks and citation

13 omitted). Here, SPS objects to language that readily informs a public utility about

14 the PRC’s intended meaning. SPS itself was able to understand the PRC’s intended

15 meaning and was able to apply the first two provisions it challenges⸻financial

16 incentives and procurements⸺in its incentive application without difficulty. We are

17 thus unpersuaded that the challenged provisions are “impermissibly vague in all of

18 [their] applications.” Id.

37 1 3. The Amended Rule’s preference for renewable energy generated in New 2 Mexico is not unlawful

3 {49} SPS challenges the Amended Rule’s preference for renewable energy

4 generated in New Mexico, 17.9.572.10(A) NMAC (5/4/2021), as (1) exceeding the

5 scope of the REA, (2) unlawfully discriminating against citizens of other states in

6 violation of the Privileges and Immunities Clause, U.S. Const, art. IV, § 2, cl. 1, and

7 (3) violating the dormant Commerce Clause, U.S. Const. art. I, § 8, cl. 3.

8 {50} As for exceeding the scope of the REA, we reiterate that the PRC is not

9 precluded from exceeding the REA’s requirements on matters of public policy

10 specifically entrusted to the PRC’s discretion and expertise. See New Energy Econ.,

11 2018-NMSC-024, ¶ 25. The REA directs the PRC to promulgate rules to implement

12 the Act and its objectives, § 62-16-9, including rules to implement the legislative

13 finding that “the use of renewable energy by public utilities subject to commission

14 oversight in accordance with the [REA] can bring significant economic benefits to

15 New Mexico,” § 62-16-2(A)(2). Stating, in 17.9.572.10(A) NMAC (5/4/2021), a

16 narrow preference for renewable energy generated in New Mexico—in the unlikely

17 circumstance of “[o]ther factors being equal”—is a reasonable exercise of the PRC’s

18 mandate to implement the Act in a manner that is economically beneficial to New

19 Mexico when lawful and appropriate.

38 1 {51} Turning to SPS’s unlawful discrimination argument, we note that this

2 argument is largely undeveloped and is not supported by SPS’s lone citation of

3 United Building & Construction Trades Council v. Mayor & Council of City of

4 Camden, 465 U.S. 208 (1984). Unlike the requirement in United Building that at

5 least forty percent of the employees of city contractors and subcontractors must be

6 local residents, see id. at 210, the Amended Rule’s preference does not require any

7 of a utility’s renewable energy to be generated in New Mexico. “Other factors being

8 equal,” 17.9.572.10(A) NMAC (5/4/2021), the preference merely acts as a tie-

9 breaker. SPS cites no authority that such a tie-breaker amounts to unlawful

10 discrimination against the citizens of other states under the Privileges and

11 Immunities Clause, and we therefore assume that none exists. See Lee v. Lee (In re

12 Doe), 1984-NMSC-024, ¶ 2, 100 N.M. 764, 676 P.2d 1329 (“We assume where

13 arguments in briefs are unsupported by cited authority, counsel after diligent search,

14 was unable to find any supporting authority.”).

15 {52} That the challenged preference is a mere tie-breaker also distinguishes it from

16 the cases cited by SPS in support of its similarly undeveloped argument under the

17 dormant Commerce Clause. See Wyoming v. Oklahoma, 502 U.S. 437, 440-41, 461

18 (1992) (holding that the Commerce Clause was violated by a statute requiring ten

19 percent of coal burned in Oklahoma power plants to be mined in-state); New England

39 1 Power Co. v. New Hampshire, 455 U.S. 331, 339, 344 (1982) (holding that the

2 Commerce Clause was violated by an order prohibiting a utility from selling

3 hydroelectric energy outside the State of New Hampshire); New Energy Co. of Ind.

4 v. Limbach, 486 U.S. 269, 273, 280 (1988) (holding that the Commerce Clause was

5 violated by a statute awarding tax credits to ethanol producers only if the ethanol

6 was produced in Ohio or in a state that granted similar tax advantages to ethanol

7 produced in Ohio). Unlike the statutes in those cases, the Amended Rule’s

8 preference neither discriminates against interstate commerce nor imposes a burden

9 on such commerce that “is clearly excessive in relation to the putative local

10 benefits.” See Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). Again, SPS

11 cites no authority that a mere tie-breaker discriminates against or unlawfully burdens

12 interstate commerce. Assuming no such authority exists, we conclude that the

13 Amended Rule’s preference is not unreasonable or unlawful. See In re Doe, 1984-

14 NMSC-024, ¶ 2.

15 4. Rule 572.22(E) does not exceed the scope of the REA by including a cost 16 cap on incentives

17 {53} SPS argues that the Amended Rule’s cost cap on incentives exceeds the scope

18 of the REA. Specifically, SPS challenges Rule 572.22(E), which provides, “The total

19 financial incentive authorized for recovery in rates pursuant to this section shall not

20 exceed the product (expressed in dollars) of: (1) the utility’s annual weighted

40 1 average cost of capital (expressed as a percent)[] and (2) the cost of the measures

2 described in Subsection B of this section.” 17.9.572.22(E) NMAC (5/4/2021). SPS

3 argues that this cap unduly limits the availability of incentives beyond the lone cost

4 cap actually established in the statute, which “protect[s] public utilities and their

5 ratepayers from renewable energy costs that are above a reasonable cost threshold.”

6 Section 62-16-2(B)(3); see also § 62-16-3(E) (establishing a reasonable cost

7 threshold of $60 per megawatt-hour of renewable energy with adjustments for

8 inflation after 2020).

9 {54} As an initial matter, we note that the challenged provision does not establish

10 a cap at all; rather, it ensures that any incentive is cost-based and justly and

11 reasonably related to a utility’s approved weighted average percentage cost of

12 capital. See, e.g., N.M. Att’y Gen., 2011-NMSC-034, ¶ 18 (holding that the adoption

13 of rates was “arbitrary and unlawful in that they were not evidence-based, cost-

14 based, nor utility specific”). We further note that SPS proposed an arbitrary incentive

15 cap of $10 million in its initial comments to the proposed rule as part of its proposed

16 method of calculating a financial incentive. SPS never withdrew its proposed cap or

17 otherwise alerted the PRC to the argument that it raises on appeal. We therefore

18 decline to address this argument further.

19 5. Rule 572.11 does not unreasonably or unlawfully restrict the application 20 of the REA

41 1 {55} SPS next challenges the PRC’s adoption of Rule 572.11 as unreasonable and

2 unlawful. Rule 572.11 codifies one of the seven requirements set forth in Section

3 62-16-4(B) that govern how the PRC shall administer the eighty percent and one

4 hundred percent RPS requirements. Specifically, Rule 572.11 codifies the

5 requirement that the PRC shall, “in consultation with the department of environment,

6 ensure that the standard does not result in material increases to greenhouse gas

7 emissions from entities not subject to commission oversight and regulation.” Section

8 62-16-4(B)(6); see 17.9.572.11 NMAC (5/4/2021) (“After consultation with the

9 department of environment, the commission may not approve a public utility’s

10 annual [REA] plan that result[s] in material increases to greenhouse gas emissions

11 from entities not subject to commission oversight and regulation.”). SPS argues that,

12 because the PRC did not codify the other six requirements set forth in the statute, the

13 Amended Rule “selectively implement[s] the REA” and “limit[s] the application of

14 [the REA] through the adoption of a regulation.” Intervenors, in their Joint Answer

15 Brief, agree that the PRC’s “unexplained inclusion of one consideration in Section

16 62-16-4(B) and exclusion of the remainder is unreasonable and should be annulled

17 and vacated.”

18 {56} We disagree with the position of SPS and Intervenors that the PRC’s inclusion

19 of only one of the requirements set forth in Section 62-16-4(B) requires annulling

42 1 and vacating the order approving the Amended Rule. Neither SPS nor Intervenors

2 cite authority requiring the PRC to take an all-or-nothing approach to codifying

3 multiple requirements set forth in a single, relevant statute. We therefore assume that

4 no such authority exists. See In re Doe, 1984-NMSC-024, ¶ 2 (“Issues raised in

5 appellate briefs which are unsupported by cited authority will not be reviewed by us

6 on appeal.”). Moreover, the Amended Rule’s language does not contradict or

7 otherwise conflict with the substantially identical language in the statute and does

8 not relieve the PRC from the remainder of its duties under the statute. Cf. NMSA

9 1978, § 14-4-5.7(A) (2017) (“A conflict between a rule and a statute is resolved in

10 favor of the statute.”).

11 6. The PRC did not act unreasonably or unlawfully by “adopting the 12 Amended Rule after it bifurcated critical matters from the rulemaking”

13 {57} SPS argues that the PRC acted arbitrarily and capriciously when it “bifurcated

14 critical matters from the rulemaking” and it “transfer[ed] controversial issues to a

15 separate rulemaking and subject[ed] utilities to a confusing, ambiguous, and vague

16 rule.” Specifically, SPS contends that the PRC lacked authority to adopt the

17 Amended Rule without addressing (1) the definition of the phrase “capital

18 investment opportunities” in the definition of financial incentive, (2) whether a

19 financial incentive would be available to advance the closure of the four corners

20 nuclear facility, (3) whether the one hundred percent zero carbon standard includes

43 1 the 2040 RPS standard of eighty percent renewables and limits nuclear to twenty

2 percent, (4) whether Arizona Public Service could apply for a financial incentive as

3 a nonregulated entity for the four corners nuclear facility, and (5) how the “average

4 annual levelized cost” of energy should be calculated for purposes of the reasonable

5 cost threshold definition set forth in Section 62-16-3(E).

6 {58} The lone authority that SPS cites in support of this argument is a federal

7 district court case that granted a preliminary injunction against the implementation

8 of a rule that was adopted through a “staggered rulemaking” process. See Centro

9 Legal de la Raza v. Exec. Off. for Immigr. Rev., 524 F. Supp. 3d 919, 954-55 (N.D.

10 Cal. 2021). The circumstances of Centro Legal de la Raza are clearly

11 distinguishable. In particular, the rulemaking in this case and the subsequent

12 rulemaking that resulted in the Second Amended Rule were held in a sequential,

13 orderly manner with full public notice of both proceedings and ample opportunity

14 for public participation. Contra id. at 958 (holding that the agency’s rushed and

15 overlapping rulemakings and decisions “deprived the public of the opportunity to

16 consider how these rules intersected and impacted the Rule, and also raise[d] serious

17 questions about whether the agency meaningfully addressed the interaction of these

18 rules.” (internal quotation marks and citation omitted)). SPS’s contention does not

19 withstand scrutiny.

44 1 7. SPS’s remaining arguments are moot

2 a. A reasonable cost threshold analysis is not required for existing 3 procurements

4 {59} SPS challenges the provision of the Amended Rule that implemented the

5 REA’s “reasonable cost threshold” (RCT) of sixty dollars per megawatt-hour that

6 was established by the Legislature in 2019. See § 62-16-4(E) (providing that a

7 “public utility shall not be required to incur” costs above the RCT to procure or

8 generate renewable energy to comply with the RPS); § 62-16-3(E) (defining

9 “reasonable cost threshold”). SPS argues that the Amended Rule’s requirement to

10 include an RCT analysis for existing renewable energy procurements applies the

11 RCT retroactively and is therefore unlawful. See 17.9.572.12(B) NMAC (5/4/2021)

12 (providing that a public utility “shall include in its annual [REA] plan [an RCT]

13 analysis by procurement, existing or proposed, for the plan year” (emphasis added));

14 see also, e.g., Howell v. Heim, 1994-NMSC-103, ¶ 17, 118 N.M. 500, 882 P.2d 541

15 (“New Mexico law presumes that statutes and rules apply prospectively absent a

16 clear intention to the contrary.”). However, the Second Amended Rule removed the

17 reference to “existing” procurements and now requires an RCT analysis only for

18 “proposed” procurements. Compare 17.9.572.12(A) NMAC (2/28/2023) with

19 17.9.572.12(B) NMAC (5/4/2021). And as we have already determined, the PRC

20 denied SPS’s incentive application under Section 62-16-4(D) and did not rely on

45 1 Rule 572.12(B). A ruling on this issue therefore would not “grant actual relief,” and

2 accordingly the issue is moot. Gunaji v. Macias, 2001-NMSC-028, ¶ 9, 130 N.M.

3 734, 31 P.3d 1008 (internal quotation marks and citation omitted); see also KOB-

4 TV, L.L.C. v. City of Albuquerque, 2005-NMCA-049, ¶ 37, 137 N.M. 388, 111 P.3d

5 708 (“[W]hen legislation is enacted that resolves a conflict, a question concerning

6 the conflict addressed to a court will be moot.”).

7 b. The typographical error in Rule 572.12(C) has been corrected

8 {60} SPS argues that the order approving the Amended Rule must be vacated and

9 annulled because of a typographical error in the Amended Rule that “states the exact

10 opposite of the REA.” Compare § 62-16-4(E) (“The provisions of this subsection do

11 not preclude a public utility from accepting a project with a cost that would exceed

12 the [RCT].” (emphasis added)) with 17.9.572.12(C) NMAC (5/4/2021) (“The

13 provisions of this rule do preclude a public utility from accepting a project with a

14 cost that would exceed the [RCT].” (emphasis added)). However, the Second

15 Amended Rule corrected the error such that the current rule is now consistent with

16 the statute. See 17.9.572.12(B) NMAC (2/28/2023). Nonetheless, SPS continues to

17 press the issue because the PRC denied SPS’s incentive application based on the

18 “flawed rule.” We disagree. The PRC reasonably and lawfully denied SPS’s

19 incentive application irrespective of the Amended Rule’s “flawed” RCT provision,

46 1 which has now been corrected. This issue is therefore moot. See Gunaji, 2001-

2 NMSC-028, ¶ 9; KOB-TV, 2005-NMCA-049, ¶ 37.

3 c. No controversy exists about whether the Amended Rule requires a new 4 competitive selection process for existing resources

5 {61} SPS challenges the Amended Rule’s provision implementing a new

6 competitive bidding requirement established by the 2019 amendments to the REA

7 that applies to procurements for “new renewable energy” beginning on July 1, 2020.

8 See 17.9.572.13 NMAC (5/4/2021); see also § 62-16-4(G)(1), (3). SPS argues, “To

9 the extent the rule allows for application of the competitive procurement requirement

10 to existing, previously approved resources, it is inconsistent with the REA.”

11 (Emphasis added.) The PRC agrees that the competitive procurement requirement

12 does not apply to “previously approved procurements” and maintains that neither

13 the Amended Rule nor the Second Amended Rule provides otherwise. See

14 17.9.572.13 NMAC (5/4/2021 & 2/28/2023). We see no actual controversy on this

15 issue. We agree with the parties that Section 62-16-4(F) and (G) impose distinct and

16 different requirements on renewable-energy procurements proposed before and after

17 July 1, 2020—with only the latter subject to a competitive procurement process. The

18 Amended Rule does not provide to the contrary and does not require us to disturb

19 the order adopting the Amended Rule. See, e.g., Tenneco Oil Co. v. N.M. Water

20 Quality Control Comm’n, 1987-NMCA-153, ¶ 14, 107 N.M. 469, 760 P.2d 161

47 1 (“Rules and regulations enacted by an agency are presumed valid and will be upheld

2 if reasonably consistent with the statutes that they implement.”), superseded by

3 statute on other grounds as stated in N.M. Mining Ass’n v. N.M. Water Quality

4 Control Comm’n, 2007-NMCA-010, ¶ 19, 141 N.M. 41, 150 P.3d 991.

5 III. CONCLUSION

6 {62} SPS has failed to meet its burden to show that the PRC’s orders adopting the

7 Amended Rule and denying SPS’s 2021 request for a financial incentive were

8 unreasonable or unlawful. We therefore affirm both orders.

9 {63} IT IS SO ORDERED.

10 11 DAVID K. THOMSON, Justice

12 WE CONCUR:

13 14 C. SHANNON BACON, Chief Justice

15 16 MICHAEL E. VIGIL, Justice

17 18 JULIE J. VARGAS, Justice

19 20 BRIANA H. ZAMORA, Justice