The New Mexico Supreme Court ruled on April 24 that El Paso Electric Company cannot recover financial losses it experienced under rates later invalidated on appeal. The unanimous decision upholds a longstanding legal precedent in the state that prohibits retroactive ratemaking.
This ruling is significant because it confirms that utilities cannot charge customers to make up for past revenue shortfalls when previous rates are overturned. The case centers on El Paso Electric’s attempt to recoup losses incurred between June 2021 and June 2023, before those rates were vacated by a separate Supreme Court decision in 2023.
Chief Justice Julie J. Vargas wrote the opinion, stating, “We agree with the Commission that the rule against retroactive ratemaking prohibits EPE’s request to book a regulatory asset in its January 2024 Rates for the losses incurred between June 2021 and June 2023.” The court further explained that parties wishing to avoid unrecoverable losses during an appeal should seek a stay of the commission’s order or ask regulators to set interim rates subject to refund or surcharge while appeals are pending. In this case, El Paso Electric did not pursue those options when it appealed the Public Regulation Commission’s (PRC) June 2021 order.
The original PRC order was reversed by the court in a previous opinion after finding due process violations related to how certain costs and assets were excluded from El Paso Electric’s rate base. Afterward, EPE proposed recovering its prior losses but was denied by both regulators and now the state’s highest court.
In its latest opinion, the court stated: “If state regulators were to allow EPE to recover these amounts in rates with a January 2024 effective date, then the Commission would retroactively change the price of transactions occurring between June 2021 and June 2023. This is precisely what the rule against retroactive ratemaking was designed to prevent.” The justices also wrote that prohibiting such practices “promotes principles of fairness and protects parties’ due process rights by ensuring that rates paid for past transactions cannot be changed without prior notice to the parties.”
The full decision can be found at the New Mexico Compilation Commission’s website.
