February 7, 2020

PRC reform bill advances with big concerns

A bill to make big changes to the Public Regulation Commission (PRC) passed its first committee despite lingering questions over the proposal. After a length debate, the House Energy, Environment and Natural Resources Committee passed the bill Thursday with a vote of 8-5 along party lines.

Democratic Reps. Nathan Small of Las Cruces and Rep. Linda Trujillo of Santa Fe presented HB 11 to the committee. The legislation would restructure the PRC with the aim of streamlining operations and improving efficiencies that Small and Trujillo contend are holding the state back and hurting New Mexico residents.

“House Bill 11 is all about first recognizing the incredibly important role that our Public Regulation Commission plays in our state. This is across energy resources, including in the transition to renewable energy resources, but also it includes development of critical telecommunications infrastructure, duties in transportation and pipeline safety, and other important features,” Small said.

“The structure of our Public Regulation Commission inhibits their ability to do these needed roles. It has led to the high funded vacancy rate, difficulty in hiring and retaining positions,” he said. “That’s not academic. Those difficulties mean longer wait times for our private sector stakeholders when they’re coming before the Public Regulation Commission for needed investments across these areas.”

Gov. Michelle Lujan Grisham made reforming the PRC one of her top priorities for the 2020 legislative session, after the commission wavered on applying the Energy Transition Act (ETA) to PNM’s plans to close down the coal-fired San Juan Generating Station. Ultimately, the governor asked the state Supreme Court to force the PRC to implement the ETA for the San Juan case.

RELATED: State Supreme Court: PRC must apply ETA to San Juan case

But the commissioners aren’t too pleased with the proposal. PRC chair Theresa Becenti-Aguilar spoke out against the bill, arguing that it was unconstitutional, and said three of the five commissioners oppose the bill.

Structural changes

Small repeatedly argued that staffing issues and structural ambiguity at the PRC as the chief source of difficulties in its commissioners and staff performing their duties.

“Some of those structural issues, which have existed across commissions, regardless of whom is elected, those, we believe, have disadvantaged the state of New Mexico. And we’re not alone in that,” Small said.

He pointed to two recent studies that highlighted staffing and operations issues at the PRC. A 2016 study conducted by the National Regulatory Research Institute found there was little research on major issues, such as new industry developments, ratemaking and integrated resource planning. The report also noted a tendency for the PRC to make decisions based on factors outside the evidence provided by parties in a proceeding. Small also mentioned a 2019 S&P Global Market report that gave the PRC a “below average” rating, citing the length of time it took to conclude rate cases, a lack of follow-up on state laws and an insufficient budget needed to support the expertise needed.

“We have seen this play out. New Mexico has fallen behind on energy, integrated resource [management] and broadband infrastructure,” Small said.

HB 11 would restructure the staff of the PRC significantly. It would create a new stand-alone agency, entitled the Office of Public Regulation Commission Regulatory Affairs, and move five divisions under the PRC to the new agency, including the the legal division, the utility division, the transportation division, the administrative services division, and the consumer relations division.

That office will represent the public interest in cases before the PRC, thereby removing potential conflict of interests between the commissioners, the PRC hearing examiner and the PRC staff. The new office would be administratively attached to the existing state Regulation and Licensing Department, though the employees would not physically move to a new office. Under New Mexico state law, administratively-attached agencies operate as independent bodies, and are only attached to other departments for administration purposes. The chief-of-staff of the office would be appointed and removed by the governor.

The bill would also create the Commission Resources Division within the PRC, which would consist of staff necessary for carrying out the duties and responsibilities of the commission. The bill proposes the division chief-of-staff also be appointed by the governor.

“The bill brings us into conformance with the way virtually every other state public utility commission operates, and certainly here within the Western states like Utah, Colorado and Nevada, which are recognized by many experts in the field as having exemplary public utility commissions,” said expert witness Doug Howe, a former PRC commissioner. “I believe that our staff at the PRC, whom I have very high opinions of, are underpaid and often undervalued, and seriously overworked — particularly now with all that the Energy Transition Act has placed on them to do.”

“We’ve had a serious brain drain at our Public Regulation Commission, and I believe HB 11 is part of what will address the problems we see happening there,” Howe said.

PRC staffing problems

There are a number of staffing issues that Small and Trujillo said their bill addresses. 

Small talked about the number of funded vacancies on the PRC staff due to difficulties in recruiting and maintaining staff. They said the commission has trouble hiring qualified individuals to serve in roles that require expertise.

“Those high funded vacancies and the uncertain structure that currently exists in the Public Regulation Commission also make it difficult, when you don’t have enough folks, and you don’t have all the right folks, to do the deep dive into an investor-owned utility’s books, into the ratecase, finding everything that needs to be looked at, in order to get the best deal for our consumers,” Small said.

The bill would address some of those staffing issues by ensuring division directors are afforded more stability and certainty in their employment, said Pam Coleman, Director of the State Personnel Office. Coleman also served as an expert witness in the presentation.

“In the bill we look for classified division directors as opposed to exempt division directors, in order to provide a long-term opportunity for people to grow into their roles and provide stability to the staff and public at large,” she said.

Trujillo also emphasized the importance of removing the exempt designation on key staff positions. Exempt employees are state employees that are appointed and can be dismissed with a leadership change.

“It makes it very difficult for talented individuals to go someplace, move their family into a new community, and take up residency, when they don’t know tomorrow if they’re going to be in the position,” she said.

Trujillo added that none of the current staff would be displaced if the legislation were enacted.

“This is an opportunity to give consistency and stability to those jobs where we truly need professionals,” she said.

Constitutional amendment

Committee members were quick to point out that the timing of the legislation could pose problems down the road. During last year’s session, both the House and the Senate passed a resolution proposing a constitutional amendment that would see the PRC transition from a five-member elected body to a three-member body, with commissioners appointed by the governor and approved by the Senate. New Mexico residents will vote on the proposal on the November ballot.

Rep. Rod Montoya, R-Farmington, said the bill demonstrates a “blatant unconstitutional nature.”

“I think the real problem here is we have a resolution before the voters in November. This not only usurps the PRC’s authority, it usurps the voters’ authority, and I think they’re going to be very aware of that come November,” he said.

Fellow Republicans on the committee were also concerned about whether the legislation would infringe on the autonomy of the voters’ decision later this year.

Rep. Phelps Anderson, R-Roswell, reminded the committee that the PRC itself was the result of a constitutional amendment in the 1990s to replace two boards appointed by the governor.

“We changed because the people of New Mexico passed a constitutional amendment creating the PRC. That is why we left the old model,” Anderson said. “It is on that point that I have a concern whether HB 11 is dictating to a constitutionally created authority how they must govern themselves in the future.”

What’s next

After a three-hour discussion, the bill ultimately passed 8-5 without any Republican support. But members on both sides of the aisle had concerns with the legislation.

Republican Rep. James Strickler of Farmington said he was concerned that the legislation wasn’t fully supported by the current PRC.

“Three of our commissioners oppose this bill, and two commissioners support this bill. I’m sensitive to that. My elected commissioner opposes this bill, and I take that very seriously. I think she’s doing a good job for our region,” he said.

Artesia Republican, and House Minority Leader, Jim Townsend said he was in favor of reform but didn’t like the execution of the legislation.

“I agree that change must occur at the PRC. There are many of us that have been frustrated by the lack of efficiencies,” Townsend said. “I think we owe the elected officials within the PRC the responsibility to set a bar for them but then get out of the way and let them do it. I think we’re missing the boat not by demanding change, but by describing how the change should occur.”

“The public ratepayer is at risk in this bill,” he said.

Albuquerque Democrat Melanie Stansbury also had reservations with the legislation.

“What I see this legislation is trying to do is try to pull apart these distinct functions into different households so we don’t have conflicts of interest. For that reason, I very much support the spirit and goal of this legislation,” she said. “I am concerned about many of the issues that have been raised here today.”

Stansbury asked if the sponsors would be open to amendments.

“We’re both open for trying to ensure that whatever legislation goes forward is the best legislation we can do,” Trujillo said.

“This bill needs more work and it needs more consultation with the staff of the PRC,” Stansbury later said.

The bill heads to the House Judiciary Committee next.