S.W. Pub. Serv. Co. v. N.M. Pub. Regul. Comm'n

Office of the
New Mexico
Director Compilation
Commission
2024.05.14
'00'06- 16:07:34
IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2024-NMSC-012

Filing Date: March 18, 2024

No. S-1-SC-38815

SOUTHWESTERN PUBLIC
SERVICE COMPANY,

Appellant,

v.

NEW MEXICO PUBLIC
REGULATION COMMISSION,

Appellee,

and

NEW MEXICO LARGE
CUSTOMER GROUP,
PUBLIC SERVICE COMPANY
OF NEW MEXICO, EL PASO
ELECTRIC COMPANY,
OCCIDENTAL PERMIAN LTD.,
WESTERN RESOURCE ADVOCATES,
and LOUISIANA ENERGY SERVICES, L.L.C.,

Intervenors-Appellees.

In the Matter of Potential
Amendments to NMPRC Rule
17.9.572 NMAC, Entitled Renewable
Energy for Electric Utilities,
Case No. 19-00296-UT

CONSOLIDATED WITH
No. S-1-SC-39149

SOUTHWESTERN PUBLIC
SERVICE COMPANY,

Appellant,
v.

NEW MEXICO PUBLIC
REGULATION COMMISSION,

Appellee.

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

APPEAL FROM THE NEW MEXICO PUBLIC REGULATION COMMISSION

Hinkle Shanor, LLP
Dana S. Hardy
Jaclyn M. McLean
Jeremy I. Martin
Timothy B. Rode
Santa Fe, NM

XCEL Energy Services, Inc.
Zoe E. Lees
Santa Fe, NM
Francis W. Dubois
Austin, TX

for Appellant

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

for Appellee

PNM Resources, Inc.
Leslie M. Padilla
Stacey J. Goodwin
Albuquerque, NM

Miller Stratvert, P.A.
Richard L. Alvidrez
Samantha E. Kelly
Albuquerque, NM
for Intervenor Public Service Company of New Mexico

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

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

for Intervenor El Paso Electric Company

O’Melveny & Myers, LLP
Katherine L. Coleman
Phillip G. Oldham
Austin, TX

for Intervenor Occidental Permian Ltd.

Holland & Hart LLP
Larry J. Montaño
Santa Fe, NM
Nikolas Stoffel
Austin Jensen
Denver, CO

for Intervenor The New Mexico Large Group

Western Resource Advocates
Cydney Beadles
Steven S. Michel
Santa Fe, NM

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

for Intervenor Western Resource Advocates

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

for Intervenor Louisiana Energy Services, LLC
OPINION

THOMSON, Justice.

{1} In this consolidated appeal, we first consider whether the New Mexico Public
Regulation Commission (the PRC) misconstrued the financial incentive provision of the
Renewable Energy Act to deny Southwestern Public Service Company’s (SPS’s) 2021
application for an incentive. See NMSA 1978, § 62-16-4(D) (2019) (providing for the
award of “financial or other incentives”); Renewable Energy Act, NMSA 1978, §§ 62-16-
1 to -10 (2004, as amended through 2021) (the REA or the Act) 1. We then consider
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SPS’s numerous facial challenges to the PRC’s April 2021 order. That order adopted
2021 amendments to Rule 572 (the Amended Rule)⸺regulations implementing the
PRC’s duties under the REA’s 2019 amendments, including the duty to award an
incentive when appropriate. 2 See Renewable Energy for Electric Utilities, 17.9.572
1F

NMAC (5/4/2021, as amended through 2/28/2023); 17.9.572.22 NMAC (5/4/2021)
(setting forth requirements to apply for an incentive).

{2} We hold that SPS’s proposed retirement of banked, renewable energy
certificates (RECs) to exceed the Renewable Portfolio Standard (RPS) was insufficient
to qualify for an incentive under the REA because the proposed retirement would not
have “produce[d] or acquire[d] renewable energy” as required by Section 62-16-4(D). 3 2F

See § 62-16-3(G) (“‘[REC]’ means a certificate or other record . . . that represents all the
environmental attributes from one megawatt-hour of electricity generated from
renewable energy.”); § 62-16-3(I) (“‘[RPS]’ means the minimum percentage of retail
sales of electricity by a public utility . . . that is required by the [REA] to be from
renewable energy . . . .”). Our conclusion is based on the statute’s plain language,
which is consistent with the REA’s clear legislative intent to require public utilities to
procure sufficient renewable energy resources to reduce carbon emissions and achieve
the zero carbon resource standard by 2045. See § 62-16-4(A) (providing public utilities
with a sequence of increasingly renewable, energy benchmarks to achieve by 2045); §
62-16-3(K) (“‘[Z]ero carbon resource’ means an electricity generation resource that
emits no carbon dioxide into the atmosphere . . . as a result of electricity production.”).

1The 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.
2SPS 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.
3We 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”).
{3} We also hold that the challenged provisions of the Amended Rule (1) do not
exceed the scope of the REA; (2) are not arbitrary, capricious, or void for vagueness;
and (3) are not otherwise unreasonable or unlawful. We therefore affirm the PRC in all
respects. See NMSA 1978, § 62-11-5 (1982) (“The supreme court shall vacate and
annul the order complained of if it is made to appear to the satisfaction of the court that
the order is unreasonable or unlawful.”).

I. BACKGROUND

{4} SPS’s primary objection is to the PRC’s approach to awarding incentives under
the REA and the Amended Rule and the resulting denial of SPS’s incentive application.
We therefore begin with an overview of the REA and its incentive provision and the
PRC’s 2021 amendments to Rule 572, before summarizing SPS’s incentive request and
the PRC’s reasons for denial. We then address SPS’s arguments in turn.

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

{5} Section 62-16-4 is the heart of the REA. Among other things, the provision
establishes the RPS and the related requirements for public utilities to meet that
standard. See id.; see also § 62-16-3(I). Before 2019, Section 62-16-4 set forth a series
of increasing RPS benchmarks culminating in a requirement for public utilities to supply
at least twenty percent of retail electricity sales from renewable energy by 2020. See §
62-16-4(A)(1)(a)-(d) (2014); see also § 62-16-3(F) (“‘[R]enewable energy’ means
electric energy generated by use of renewable energy resources and delivered to a
public utility.”). In 2019, the Legislature extended the sequence of RPS benchmarks
intended to achieve the ambitious zero carbon resource standard by 2045. See § 62-16-
4(A)(1)-(6); see also § 62-16-3(L) (“‘[Z]ero carbon resource standard’ means providing
New Mexico public utility customers with electricity generated from one hundred percent
zero carbon resources.”). At present, renewable energy must make up at least twenty
percent of a utility’s retail sales, which will increase to a minimum of forty percent by
2025, fifty percent by 2030, and eighty percent by 2040. See § 62-16-4(A)(2)-(5). In
addition to these intermediate benchmarks, the Legislature mandated that “[r]easonable
and consistent progress shall be made over time toward [the] requirement” of supplying
one hundred percent of retail electricity sales in New Mexico from zero carbon
resources by 2045. Section 62-16-4(A)(6).

{6} Section 62-16-4 also prescribes the manner in which a public utility must comply
with the RPS. To comply, a utility must retire enough RECs annually to “meet the [RPS]
requirements” relative to the utility’s total retail sales of electricity. See § 62-16-4(A); see
also § 62-16-5(A)(1) (providing that the PRC shall establish “a system of [RECs] that
can be used by a public utility to establish compliance with the [RPS]”). One REC
represents one megawatt-hour of electricity generated from renewable energy and “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.” Section 62-16-5(B)(4);
see § 62-16-3(G). Thus, any excess RECs that are not retired in the same year they are
earned may be banked for up to four years and used to meet a utility’s annual RPS
obligation during that period. In addition, excess RECs “may be traded, sold or
otherwise transferred by their owner, unless the certificates are from a rate-based public
utility plant, in which case the entirety of the [RECs] from that plant shall be retired by
the utility on behalf of itself or its customers.” Section 62-16-5(B)(2).

{7} Of particular importance to this appeal, Section 62-16-4 also provides for the
award of “financial or other incentives” for exceeding the Act’s minimum requirements.
See § 62-16-4(D). Before 2019, the REA tasked the PRC with “provid[ing] appropriate
performance-based financial or other incentives to encourage public utilities to acquire
renewable energy supplies that exceed the applicable annual [RPS].” Section 62-16-
4(A)(4) (2007); see also § 62-16-2(A)(5) (2007) (“The legislature finds that . . . a public
utility should have incentives to go beyond the minimum requirements of the
[RPS] . . . .”). The 2019 amendments to Section 62-16-4 elaborated on the bases for
which an incentive may be awarded:

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

Section 62-16-4(D). Where the pre-2019 Act allowed incentives “to encourage public
utilities to acquire renewable energy supplies that exceed the applicable annual [RPS],”
§ 62-16-4(A)(4) (2007), the Act now allows incentives “to encourage public utilities to
produce or acquire renewable energy” that exceeds the RPS, results in early reductions
in carbon dioxide emissions, or reduces coal-fired generation, § 62-16-4(D).

{8} In response to the 2019 amendments to the REA, the PRC developed and
approved significant amendments to Rule 572, including by adding provisions that
govern the availability of incentives. See 17.9.572.22 NMAC (5/4/2021). 4 Among other 3F

things, the Amended Rule restates the general requirements set forth in Section 62-16-
4(D) and articulates other, more specific requirements that a proposed course of action
must satisfy to qualify for an incentive. For example, an incentive is available, by
definition, “to encourage certain behaviors or actions that would not otherwise have
occurred in order to further the outcomes described in Section 62-16-4 . . . .” See
17.9.572.7(F) NMAC (5/4/2021) (emphasis added). 5 Similarly, an incentive “must be
4F

related to measures implemented by the utility after the effective date of this rule.”
17.9.572.22(B) NMAC (5/4/2021) (emphasis added). 6 And an incentive will not be
5F

4Previous 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).
5The 2023 amendments to Rule 572 do not affect this provision. See 17.9.572.7(F) NMAC (2/28/2023).
6The 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.”).
awarded “with respect to a particular investment if the cost of that investment exceeds
the demonstrable value of the corresponding reduction in carbon dioxide or other
emissions.” 17.9.572.22(D) NMAC (5/4/2021). 7 The Amended Rule also provides that
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an “interested person” may apply for an exemption or variance from any of the rule’s
requirements when inter alia a “proposed alternative is in the public interest.”
17.9.572.21(G) NMAC (5/24/2021). 8 As these provisions exemplify, the Amended Rule
7F

clarifies the circumstances in which an incentive may be awarded under the REA.
Whether that clarity is consistent with the REA itself is one of the principal questions in
this appeal.

B. Procedural Background

{9} The PRC approved the Amended Rule in an April 2021 order, after an eighteen-
month rulemaking aimed at implementing the 2019 amendments to the REA. SPS
participated throughout the rulemaking process along with Public Service Company of
New Mexico (PNM), El Paso Electric Company (EPE), PRC Utility Division Staff, and
various nonutility entities and individuals. SPS timely appealed from the order adopting
the Amended Rule, alleging numerous legal infirmities and asking the Court to vacate
and annul the order.

{10} Weeks later, SPS filed an application with the PRC under the REA and the
Amended Rule, seeking approvals of its 2022 Annual Renewable Energy Act Plan and
of several proposed rate riders for the same year. These matters were uncontested and
eventually approved by the PRC.

{11} In the same application, SPS requested a financial incentive for which it
proposed to exceed its twenty percent RPS obligation and meet the forty percent
standard three years before it becomes mandatory as of 2025. Specifically, SPS
proposed to retire enough RECs in 2022, 2023, and 2024 to meet 2025’s forty percent
standard in each of those years. In return, SPS requested a rate rider that would allow it
to charge customers one dollar for each REC that it would retire over the twenty percent
standard. If approved, SPS projected that it would collect from ratepayers the additional
amounts of $1.65 million in 2022; $1.74 million in 2023; and $1.84 million in 2024, for a
three-year total incentive of approximately $5.23 million. SPS represented that it would
not retire “excess RECs early without an incentive to do so.” SPS also maintained that
retiring excess RECs to meet the 2025 standard “will necessitate that SPS procure
more renewable energy resources earlier than would otherwise be needed in order to
comply with the REA’s [RPS].”

{12} As a final part of the application, SPS requested a variance from the Amended
Rule’s requirement to demonstrate that the cost of retiring extra RECs would not exceed
“the demonstrable value of the corresponding reduction in carbon dioxide or other
emissions.” 17.9.572.22(D) NMAC (5/4/2021). Conceding that the proposal failed to

7The Second Amended Rule renumbered this provision and made minor changes that do not affect its
substance. See 17.9.572.22(E) NMAC (2/28/2023).
8The 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).
meet that requirement, SPS argued that the requirement “is inconsistent with the REA”
and therefore requested a variance.

{13} PRC Staff and three of the intervenors in the application proceeding 9 “vigorously 8F

contested” SPS’s incentive proposal and variance request, both of which the PRC later
denied in an order filed in December 2021. The PRC was careful to explain in the order
that—although the request failed several provisions of the Amended Rule—the denial
was not based on the rule’s requirements. Rather, SPS failed to meet the threshold
statutory requirement to qualify for an incentive: SPS “did not propose to ‘produce or
acquire’ any renewable energy.” Section 62-16-4(D). The PRC found that SPS
introduced “no evidence of any firm plans to acquire or produce any additional
renewable energy.” Instead, “SPS only proposed to retire banked excess RECs earlier
than it otherwise would [have].” That proposal was insufficient because, in the PRC’s
view, “the retirement of RECs is a paper exercise or method by which RPS compliance
is demonstrated” and not a proposal to produce or acquire renewable energy that
exceeds the RPS “as required to be eligible for an incentive under the statute.”

{14} In addition to finding failure under Section 62-16-4(D), the PRC separately
concluded that SPS’s incentive application failed to satisfy the provisions of the
Amended Rule summarized above. Specifically, the PRC concluded that SPS’s
proposal did not merit an incentive because the RECs in question “are associated with
. . . existing renewable energy facilities, all of which [1] pre-date Rule 572.22 (contrary
to Rule 572.22.B) and [2] were acquired for reasons other than those contemplated in
. . . Section 62-16-4(D) or Rule 572.22.” See 17.9.572.22(B) NMAC (5/4/2021)
(providing that an incentive “must be related to measures implemented by the utility
after the effective date of this rule” (emphasis added)); 17.9.572.7(F) NMAC (5/4/2021)
(defining “financial incentive” as “money or additional earnings . . . to encourage certain
behaviors or actions that would not otherwise have occurred in order to further the
outcomes described in Section 62-16-4” (emphasis added)). The request also failed the
Amended Rule’s requirement that the costs associated with retiring RECs must not
exceed “the demonstrable value of the corresponding reduction in carbon dioxide or
other emissions.” 17.9.572.22(D) NMAC (5/4/2021). And as for SPS’s requested
variance from the latter requirement, the PRC denied the variance as moot because the
incentive request “failed on many other grounds.” As previously noted however, these
conclusions were ancillary to the PRC’s determination that SPS’s incentive request
failed to produce or acquire renewable energy, as required by Section 62-16-4(D).

{15} SPS timely appealed from the order denying its incentive request, and we
granted its subsequent motion to consolidate the appeal with its pending appeal
challenging the Amended Rule. We now proceed to the merits of both appeals.

9The 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.
II. DISCUSSION

{16} SPS’s core objection to both the Amended Rule and the denial of its incentive
request is the PRC’s interpretation of Section 62-16-4(D) to preclude the award of an
incentive for exceeding the RPS by retiring RECs earlier than required by the Act.
Because our resolution of this issue effectively disposes of SPS’s appeal by denial of its
incentive application, we address it first. We then address SPS’s many remaining
arguments against the Amended Rule. 10 As the party challenging the PRC’s orders,
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SPS has the burden of establishing that the orders are unreasonable or unlawful. NMSA
1978, § 62-11-4 (1965); see also, e.g., Pub. Serv. Co. of N.M. v. N.M. Pub. Regul.
Comm’n, 2019-NMSC-012, ¶ 12, 444 P.3d 460 (observing that the party challenging the
PRC’s order has the burden of showing that the order was “arbitrary and capricious, not
supported by substantial evidence, outside the scope of the agency’s authority, or
otherwise inconsistent with law.” (internal quotation marks and citation omitted)).

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

{17} SPS challenges the denial of its incentive application under Section 62-16-4(D)
on three grounds. First, SPS argues that the PRC’s interpretation of the statute “ignores
the purpose and language of the REA and is consequently arbitrary and capricious,
contrary to law, and an abuse of discretion.” In particular, SPS argues that conditioning
the award of an incentive on a proposal that would “produce or acquire renewable
energy,” § 62-16-4(D), “would lead to absurd results and thwart the Legislature’s intent
to incentivize utilities to exceed the RPS.” Second, SPS argues that the availability of
incentives under the REA since at least 2007 supports SPS’s proposed reading of the
statute. Third, SPS argues that the PRC lacked sufficient evidence to support the
hearing examiner’s finding of “speculative” that SPS’s early retirement of extra RECs
would result in acquiring additional renewable energy resources earlier than otherwise
necessary. We address each argument in turn, and because our resolution of these
issues is sufficient to affirm, we decline to address SPS’s additional arguments related
to the denial of its incentive application.

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

{18} Whether the PRC erred by construing Section 62-16-4(D) to limit the award of
incentives to proposals that would “produce or acquire renewable energy” presents a
question of statutory interpretation, “which we review de novo.” N.M. Indus. Energy
Consumers v. N.M. Pub. Regul. Comm’n, 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168
P.3d 105. “Where as here an agency is construing the same statutes by which it is

10The 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.
governed, we accord some deference to the agency’s interpretation,” particularly for
“legal questions that implicate special agency expertise or the determination of
fundamental policies within the scope of the agency’s statutory function.” Id. (internal
quotation marks and citation omitted). Nevertheless, we are “not bound by the agency’s
interpretation and may substitute [our] own independent judgment for that of the agency
because it is the function of the courts to interpret the law.” Morningstar Water Users
Ass’n v. N.M. Pub. Util. Comm’n, 1995-NMSC-062, ¶ 11, 120 N.M. 579, 904 P.2d 28.

{19} “When construing statutes, our guiding principle is to determine and give effect to
legislative intent.” N.M. Indus. Energy Consumers, 2007-NMSC-053, ¶ 20. We begin
with “the plain meaning of the words at issue, often using the dictionary for guidance.”
N.M. Att’y. Gen. v. N.M. Pub. Regul. Comm’n, 2013-NMSC-042, ¶ 26, 309 P.3d 89. We
must give effect to the statute as written “without room for construction unless the
language is doubtful, ambiguous, or . . . would lead to injustice, absurdity or
contradiction, in which case the statute is to be construed according to its obvious spirit
or reason.” Id. (internal quotation marks and citation omitted).

{20} SPS does not argue that the PRC’s interpretation of Section 62-16-4(D) is
contrary to the statute’s plain language—nor could it reasonably do so. The language
and structure of the statute support the PRC’s conclusion that Section 62-16-4(D) is
“unequivocally clear” that an incentive must encourage a public utility, first and
foremost, to “produce or acquire renewable energy.” The statute is similarly clear on
exceeding the RPS, the focus of SPS’s argument, as a secondary objective that must
be accomplished by the threshold requirement of producing or acquiring renewable
energy. Under the statute’s plain language, an incentive will be provided to encourage a
public utility “to produce or acquire renewable energy that exceeds the applicable
annual [RPS]” or that accomplishes one of the other secondary objectives listed in the
statute. See § 62-16-4(D) (providing an incentive “to produce or acquire renewable
energy” that reduces carbon emissions earlier than required or that reduces the coal-
fired generation of electricity).

{21} Instead of offering an alternative construction of Section 62-16-4(D), SPS argues
that a literal interpretation “would lead to absurd results and thwart the Legislature’s
intent to incentivize utilities to exceed the RPS.” SPS points to two other provisions to
illustrate the purported absurdity that would result from a literal reading of Section 62-
16-4(D): (1) the Legislature’s finding that “a public utility should have incentives to go
beyond the minimum requirements of the [RPS],” § 62-16-2(A)(5); and (2) the mandate
that “[a] public utility shall meet the [RPS] . . . as demonstrated by its retirement of
[RECs],” § 62-16-4(A). Based on these provisions, SPS insists that retiring RECs must
be worthy of an incentive to exceed the RPS because retiring RECs is the only way to
“establish compliance with the [RPS].” Section 62-16-5(A)(1); see also § 62-16-4(A).
The SPS maintains that otherwise, “the Legislature chose to incentivize utilities to
exceed the RPS but then failed to provide any mechanism for them to do so.”

{22} We will depart from a statute’s literal meaning when the statute is shown to be
ambiguous by “one or more provisions giving rise to genuine uncertainty as to what the
legislature was trying to accomplish.” State ex rel. Helman v. Gallegos, 1994-NMSC-
023, ¶ 23, 117 N.M. 346, 871 P.2d 1352. We see no “genuine uncertainty” about the
purpose or meaning of Section 62-16-4(D) in relation to the statute’s plain language. To
the contrary, providing an incentive to encourage a public utility “to produce or acquire
renewable energy” is entirely consistent with the overarching purpose of Section 62-16-
4, particularly after the 2019 amendments to the REA.

{23} As previously explained, Section 62-16-4(A) was amended in 2019 to mandate
that public utilities keep pace with a series of increasing RPS benchmarks and make
“[r]easonable and consistent progress” toward supplying one hundred percent of all
retail sales of electricity in New Mexico from zero carbon resources by the year 2045.
Section 62-16-4(A)(6). These demanding requirements signal a clear legislative intent to
reduce and eliminate from the electricity provided to New Mexico public utility customers
the use of any electricity generation resources that emit carbon dioxide into the
atmosphere. Section 62-16-3(K) (defining a “zero carbon resource,” in part, as “an
electricity generation resource that emits no carbon dioxide into the atmosphere”
(emphasis added)). As a necessary corollary, these requirements also signal an intent
to compel public utilities to procure sufficient zero carbon resources to meet the zero
carbon resource standard by 2045. Against this backdrop, an incentive clearly acts as a
carrot “to encourage” a public utility to increase its renewable energy portfolio and
reduce carbon dioxide and other harmful emissions faster than the REA requires. See §
62-16-4(D). Conditioning an incentive on a proposal that will produce or acquire
renewable energy ensures that a proposed measure will not qualify for an incentive
unless, at minimum, it advances a utility’s progress toward achieving the zero carbon
resource standard. Id. In short, the statute’s purpose supports and does not undermine
its literal meaning.

{24} To read Section 62-16-4(D) as SPS suggests would elevate form over
substance. The act of retiring RECs alone does nothing to further the statute’s
objectives. SPS’s proposal for an incentive illustrates the point. SPS characterized its
proposal as a plan “to supply no less than 40% of [its] New Mexico retail energy sales
[from renewable energy] three years early.” But SPS’s supporting documentation
showed that in 2020, it actually generated and purchased renewable energy in an
amount that was substantially equivalent to its RPS obligation—twenty percent of its
retail electricity sales. 11 Section 62-16-4(A)(2) (setting forth an RPS of twenty percent,
10F

effective January 1, 2020). SPS also admitted that it was not proposing to produce or
acquire additional renewable energy or renewable energy resources. Rather, SPS
proposed only to retire banked RECs from its sizeable balance of RECs carried forward
from renewable energy generated in previous years. 12 SPS’s proposal thus would have
11F

11SPS generated and purchased approximately 1.46 million MWh of 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.
12SPS 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 sometime
between 2026 and 2029.
done nothing to expand SPS’s renewable energy portfolio or reduce carbon emissions
during the three years that its requested incentive would have been in effect. We see
nothing in the REA to suggest that the Legislature intended the award of an incentive
under these circumstances. We therefore find no ambiguity that would lead us to ignore
the plain meaning of Section 62-16-4(D), and we affirm the PRC’s interpretation of the
statute according to its plain language.

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

{25} We are similarly unpersuaded by SPS’s argument that the availability of
incentives under the REA since 2007 compels a different result. SPS offered testimony
in support of its incentive application that “almost all renewable procurements on SPS’s
system were constructed before 2019 with the knowledge that SPS could be eligible for
an incentive under the Act.” This testimony reveals a basic misunderstanding of what
the Legislature intended an incentive to accomplish.

{26} Although the REA does not define the term incentive, common definitions
describe it as something that “incites,” “induces,” “motivates,” or “encourages” one to
take action. See, e.g., Merriam-Webster Collegiate Dictionary (11th ed. 2020), (defining
“incentive” as “something that incites or has a tendency to incite to . . . action”); New
Oxford American Dictionary (3d ed. 2010) (defining “incentive” as “a thing that motivates
or encourages one to do something”); American Heritage Dictionary (5th ed. 2011)
(defining “incentive” as “[s]omething, such as the fear of punishment or the expectation
of reward, that induces action or motivates effort”). These definitions align closely with
the plain language of Section 62-16-4(D), which provides that the PRC shall award an
incentive “to encourage public utilities to produce or acquire renewable energy.”
(Emphasis added.)

{27} Given that one cannot encourage past behavior, the problem for SPS is simply a
matter of timing. We agree that incentives have been available since at least 2007, and
had SPS requested an incentive before it constructed the “renewable procurements” in
question, it may well have qualified for an incentive to “encourage” the associated
investments. Section 62-16-4(D); see also § 62-16-4(A)(4) (2007) (providing for an
incentive to “encourage public utilities to acquire renewable energy supplies that exceed
the applicable annual [RPS]”). But at this stage, SPS seeks a reward—not an
incentive—for renewable resources or energy that it already has produced or acquired
beyond the REA’s demands. Section 62-16-4(D) does not authorize the PRC to reward
SPS’s past behavior. Having failed to request an incentive before exceeding its
obligations under the REA, SPS’s actions vis-à-vis Section 62-16-4(D) were voluntary.
Those actions do not support additional compensation from SPS’s customers beyond
the reasonable rate of return that SPS already has earned through the ratemaking
process for the electricity associated with SPS’s banked RECs.
3. Substantial evidence supports the PRC’s finding that SPS did not propose
to produce or acquire renewable energy to support its incentive request

{28} As a final point in our review of the denial of SPS’s incentive application, we
address SPS’s argument that the PRC lacked substantial evidence to support the
following finding:

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

SPS argues that the finding is unsupported because “SPS presented uncontroverted
testimony that the proposed retirement of RECs to exceed the RPS in 2022 through
2024 would accelerate SPS’s need to acquire additional resources by approximately
two to four years.”

{29} “[W]e will affirm the Commission’s order if it is supported by substantial evidence,
which is evidence that is credible in light of the whole record and that is sufficient for a
reasonable mind to accept as adequate to support the conclusion reached by the
agency.” Citizens for Fair Rates & the Env’t v. N.M. Pub. Regul. Comm’n, 2022-NMSC-
010, ¶ 13, 503 P.3d 1138 (internal quotation marks and citation omitted). We address
SPS’s substantial-evidence challenge only to the extent that it may implicate our
conclusion that the PRC properly denied SPS’s incentive application under Section 62-
16-4(D) because SPS “did not propose to ‘produce or acquire’ any renewable energy.”
Our concern therefore is whether the PRC had substantial evidence to find that “there
was no evidence of any firm plans to acquire or produce any additional renewable
energy.”

{30} As we have previously noted, SPS admitted at the hearing on its application that
its incentive proposal did not include a “specific plan” to produce or acquire any
additional renewable energy or renewable energy resources. The “uncontroverted
testimony” cited by SPS does not suggest otherwise. It merely explains that, based on
SPS’s projections,

if SPS continues to retire the minimal amount of RECs required to comply
with the RPS, SPS is projecting compliance through 2030 to beyond
2031 . . . . However, if SPS’s plan to meet the 40% requirement three
years early is approved, SPS is projecting compliance through 2026 and
2029. In other words, if SPS’s plan is approved, SPS would be required to
accelerate the acquisition of additional renewable resources to maintain
RPS compliance.
This testimony underscores the PRC’s finding that SPS did not actually propose to
produce or acquire renewable energy, let alone renewable energy that would exceed
the RPS as required for an incentive under Section 62-16-4(D); rather, SPS merely
offered projections about when it would need to acquire “additional renewable resources
to maintain RPS compliance” after expiration of SPS’s incentive at the end of 2024.
Based on our review, we hold that substantial evidence supports the PRC’s finding that
SPS did not propose to produce or acquire renewable energy to support its request for
an incentive.

{31} In sum, with no proposal to produce or acquire renewable energy that exceeds
the RPS, the PRC’s denial of SPS’s incentive application under Section 62-16-4(D) was
neither unreasonable nor unlawful. Because we affirm the denial under the statute, we
need not reach SPS’s arguments that the PRC improperly denied the application under
the various provisions of Rule 572.

B. The Amended Rule Is Not Unreasonable or Unlawful

{32} We turn now to SPS’s many challenges to the Amended Rule itself. SPS argues
that various provisions of the Amended Rule exceed the scope of the REA, are arbitrary
and capricious and void for vagueness, and suffer from a litany of other legal and
procedural deficiencies. After the completion of briefing the PRC filed a motion to
dismiss as moot four of the issues raised by SPS in its appeal from the order approving
the Amended Rule. The PRC argued that its subsequent order filed on December 7,
2022, which approved the Second Amended Rule after the instant appeals were filed,
revised certain language in the Amended Rule that SPS had challenged in this appeal.
We agree that three of SPS’s arguments are moot, and we address those issues at the
end of our analysis. But first, we consider SPS’s arguments that are properly before us.

{33} SPS brings a facial challenge to the rule and therefore must establish that the
rule is invalid in all of its applications, not merely “under some specific set of
circumstances.” Gila Res. Info. Project v. N.M. Water Quality Control Comm’n, 2018-
NMSC-025, ¶ 6, 417 P.3d 369 (“Petitioners must establish that no set of circumstances
exist where the . . . [r]ule could be valid.”); see also Bounds v. State ex rel. D’Antonio,
2013-NMSC-037, ¶ 14, 306 P.3d 457 (“In a facial challenge to a statute, we consider
only the text of the statute itself, not its application.” (brackets, internal quotation marks,
and citation omitted)). We emphasize the point because many of SPS’s arguments
suffer from the lack of a factual record or any suggestion of an actual injury resulting
from the application of the Amended Rule. See Bounds, 2013-NMSC-037, ¶ 13
(“[Where the petitioner] was unable to show any actual injury, . . . [he] was unable to
pursue an as-applied challenge in which specific facts would be relevant and was left
with only a facial challenge.”).

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

{34} SPS first challenges the cost-benefit requirement set forth in the Amended Rule,
specifically Rule 572.22(D), which precludes the award of an incentive for a “particular
investment if the cost of that investment exceeds the demonstrable value of the
corresponding reduction in carbon dioxide or other emissions.” SPS argues that the
provision (1) ignores the scope of REA-authorized incentives by limiting incentives to
investments that result in a reduction in carbon dioxide or other emissions when Section
62-16-4(D) also allows incentives for measures that exceed the RPS or reduce the coal-
fired generation of electricity; (2) exceeds the scope of the REA by requiring a cost-
benefit analysis that is not required under the REA; (3) is void for vagueness and
arbitrary and capricious; and (4) was adopted without notice and comment in violation of
due process.

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

{35} SPS argues that Rule 572.22(D) limits incentives “only to investments that result
in a reduction in carbon dioxide or other emissions” and effectively writes out of
existence the other two bases under Section 62-16-4(D) for earning an incentive,
namely, exceeding the RPS and reducing the coal-fired generation of electricity. 13 This 12F

argument is overstated and does not withstand scrutiny.

{36} Despite SPS’s repeated assertions to the contrary, Rule 572.22(D) does not
necessarily preclude an incentive for measures that would exceed the RPS or reduce
coal-fired generation. Like Section 62-16-4(D), Rule 572.22 expressly provides that a
utility may seek an incentive for implementing measures “to accomplish at least one of
the following purposes: (1) exceeding the public utility’s annual RPS requirements; (2)
reducing carbon dioxide emissions earlier than required by [the RPS]; or (3) reducing
the generation of electricity by coal-fired generating facilities.” See 17.9.572.22(A), (B)
NMAC (5/4/2021) (emphasis added). The cost-benefit requirement ensures that an
investment proposed to accomplish any of these purposes—including exceeding the
RPS or reducing the coal-fired generation of electricity—is cost-effective relative to “the
demonstrable value of the corresponding reduction in carbon dioxide or other
emissions.” 17.9.572.22(D) NMAC (5/4/2021). That the metric for measuring cost-
effectiveness overlaps with the purpose of reducing carbon emissions does not exclude
an incentive for exceeding the RPS or reducing the coal-fired generation of electricity.
Nor does the metric guarantee an incentive for reducing carbon emissions alone. The
cost-benefit requirement applies equally to any of the purposes for earning an incentive.

{37} As a fallback to its categorical argument, SPS argues that the cost-benefit
requirement “renders meaningless the provisions of the Rule that purport to allow
incentives for exceeding the RPS or reducing coal-fired generation.” (Emphasis added.)
To illustrate the point, SPS provides the single example of biomass resources, which
the Legislature included in the definition of a renewable energy resource that can be
used to meet and exceed the RPS. See § 62-16-3(H)(3) (providing that biomass
resources under the REA are “limited to agriculture or animal waste, small diameter
timber, not to exceed eight inches, salt cedar and other phreatophyte or woody

13The PRC argues that this issue is moot for largely semantic reasons, which we decline to address
because we are unpersuaded by SPS’s argument.
vegetation removed from river basins or watersheds in New Mexico”). SPS argues that
Rule 572.22(D) precludes a utility from using biomass resources to earn an incentive for
exceeding the RPS because “biomass fuel results in substantial carbon emissions and
the increased use of biomass fuel to generate electricity would likely not result in a
decrease in carbon emissions.”

{38} This argument fails for at least two reasons. First, SPS’s assertions about the
“likely” carbon-related effects of biomass resources are not supported by the record and
thus are merely the arguments of counsel and not evidence. See, e.g., State v. Hall,
2013-NMSC-001, ¶ 28, 294 P.3d 1235 (“It is not our practice to rely on assertions of
counsel unaccompanied by support in the record.” (internal quotation marks and citation
omitted)). Second, SPS’s assertions are contradicted by the REA itself, which has
provided since 2019 that REC-eligible biomass resources must come from a facility
certified to “have zero life cycle carbon emissions.” Section 62-16-3(H)(3)(b). This lone
example therefore does not establish that Rule 572.22(D)’s cost-benefit requirement
precludes an incentive for exceeding the RPS, even when using biomass resources to
do so. To the contrary, any measure that otherwise qualifies for an incentive can satisfy
Rule 572.22(D)—as long as the cost would be less than the value of the corresponding
reduction in carbon dioxide or other emissions. 14 We thus disagree that Rule 572.22(D)
13F

exceeds the scope of the REA by limiting incentives only to investments that would
result in a reduction of carbon dioxide or other emissions.

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

{39} SPS next argues that Rule 572.22(D) exceeds the scope of the REA by requiring
a cost-benefit analysis that is not explicitly required by statute. SPS argues that,
because the REA expressly includes a cost-benefit analysis for measures taken to meet
the 2040 and 2045 RPS levels of eighty percent and one hundred percent, the
exclusion of such an analysis for complying with earlier RPS requirements was
purposeful, such that Rule 572.22(D) is contrary to legislative intent. See § 62-16-
4(B)(3) (“In administering the [eighty percent and one hundred percent RPS standards],
the commission shall . . . prevent unreasonable impacts to customer electricity bills,
taking into consideration the economic and environmental costs and benefits of
renewable energy resources and zero carbon resources . . . .”).

{40} We are not persuaded. This argument fails to consider Rule 572.22(D) in the
context of both the REA and the PRC’s broader regulatory duties. Cf. Baker v.
Hedstrom, 2013-NMSC-043, ¶ 15, 309 P.3d 1047 (“We must examine [the plaintiffs’]
interpretation in the context of the statute as a whole, including the purposes and

14We 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.”
consequences of the . . . Act.”). The PRC adopted Rule 572.22 pursuant to its statutory
duty to “promulgate rules to implement the provisions of the [REA],” § 62-16-9, including
“to develop and provide financial or other incentives to encourage public utilities to”
carry out the purposes of the REA, § 62-16-4(D). See also § 62-16-7(A)(1) (providing
that the PRC “shall adopt rules regarding the [RPS]”). However, the REA provides
minimal guidance for determining whether a requested incentive may be justified,
leaving the PRC to apply its broad policy-making authority and expertise to fill in the
legislative gaps to effectuate the purposes of the REA. See, e.g., New Energy Econ.,
Inc. v. N.M. Pub Reg. Comm’n, 2018-NMSC-024, ¶ 25, 416 P.3d 277 (“[I]f it is clear that
our Legislature delegated to the PRC (either explicitly or implicitly) the task of giving
meaning to interpretive gaps in a statute, we will defer to the PRC’s construction of the
statute as the PRC has been delegated policy-making authority and possesses the
expertise necessary to make sound policy.”). Under these circumstances, the PRC
necessarily falls back on its overarching duty to regulate public utilities in a manner that
balances the interests of the public, consumers, and investors to ensure “that
reasonable and proper services shall be available at fair, just and reasonable rates.”
NMSA 1978, § 62-3-1 (B) (2008); see also NMSA 1978, § 62-8-1 (1941) (“Every rate
made, demanded or received by any public utility shall be just and reasonable.”); cf. §
62-16-2(A)(4) (“[P]ublic utilities should be able to recover their reasonable costs
incurred to procure or generate energy from renewable energy resources . . . .”).

{41} Against this backdrop, Rule 572.22 first ensures that any incentive awarded
under the REA will comply with the statute by encouraging a utility to produce or acquire
renewable energy that accomplishes one or more of the REA’s statutory bases for an
incentive. See 17.9.572.22(A), (B) NMAC (5/4/2021); see also § 62-16-4(D). The utility
then must demonstrate “that the terms and duration of the proposed incentive . . . are
just and reasonable in light of the utility’s costs, its authorized return, and the magnitude
of any other incentives that have been authorized by the commission.” 17.9.572.22(C)
NMAC (5/4/2021). The utility also must show that the measure proposed to support the
incentive will be a cost-effective investment as compared with the “value of the
corresponding reduction in carbon dioxide or other emissions.” 17.9.572.22(D) NMAC
(5/4/2021).

{42} This framework implements the REA’s incentive and rulemaking requirements in
a manner that comports with the PRC’s broad mandate to regulate public utilities to
ensure “that reasonable and proper services shall be available at fair, just and
reasonable rates.” Section 62-3-1(B). Given that an incentive will compensate a utility at
the expense of ratepayers, we hold that the PRC acted within its authority by requiring
an incentive to be just and reasonable and based on a cost-effective investment. Cf.
Att’y Gen. v. N.M. Pub. Regul. Comm’n, 2011-NMSC-034, ¶¶ 11, 13, 150 N.M. 174, 258
P.3d 453 (concluding that an “adder” that allows a utility to “receive additional revenue
as compensation for reducing the consumption of their energy” is a rate and therefore
requires a balancing of interests to ensure that it is “‘just and reasonable’” (quoting
Section 62-8-1)). Moreover, we defer to the PRC’s chosen standard for evaluating the
cost-effectiveness of an investment—the cost of the investment versus the value of the
corresponding reduction of carbon dioxide or other emissions—as a reasonable
exercise of policy-making authority that promotes the legislative directive to make
“[r]easonable and consistent progress” toward reaching the zero carbon resource
standard by 2045. Section 62-16-4(A)(6); see also New Energy Econ., 2018-NMSC-
024, ¶ 25.

{43} The cases cited by SPS do not compel a different conclusion. In particular, SPS
cites State ex rel. Sandel v. N.M. Pub. Util. Comm’n, 1999-NMSC-019, ¶ 26, 127 N.M.
272, 980 P.2d 55, to argue that the PRC “usurp[ed] the Legislature’s law-making and
policy-setting authority” by adopting Rule 572.22(D). We held in Sandel that the PRC’s
predecessor, the Public Utility Commission, violated Article III, Section 1 of the New
Mexico Constitution “by undertaking to deregulate the electric power industry in New
Mexico in a manner that is beyond the scope of the authority granted . . . by the
Legislature.” Sandel, 1999-NMSC-019, ¶ 26. We reached that conclusion based on the
Commission’s actions to “carry out broad changes in public policy by replacing
regulation under the ‘just and reasonable’ standard with competition in an open
marketplace,” id. ¶ 19, at a time when deregulation was being debated at both the state
and federal levels, id. ¶ 8. Here, the PRC has not attempted a controversial change in
public policy vis-à-vis its fundamental responsibility to ensure just and reasonable rates.
Rather, the PRC has adopted a rule that implements the REA’s incentive provision,
consistent with the PRC’s traditional exercise of its regulatory authority. Sandel is thus
inapposite.

{44} In sum, the PRC must carry out its duty to establish just and reasonable rates
absent a clear statement to the contrary. See, e.g., Hobbs Gas Co. v. N.M. Pub. Serv.
Comm’n, 1980-NMSC-005, ¶ 4, 94 N.M. 731, 616 P.2d 1116 (“The law . . . charges the
Commission with the responsibility of [e]nsuring that every rate made or received by a
public utility shall be just and reasonable.”). The cost-benefit analysis requirement in
Section 62-16-4(B)(3) does not relieve the PRC from ensuring that an incentive
awarded at ratepayers’ expense is just and reasonable. To the contrary, it mandates
that the PRC consider “unreasonable impacts to customer electricity bills” in achieving
the 2040 and 2045 RPS standards. Id. (emphasis added). That mandate is broad
enough to encompass a cost-benefit requirement that precludes the award of an
incentive unless the utility demonstrates a benefit to ratepayers that ensures progress
toward the zero carbon resource standard.

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

{45} SPS’s two remaining challenges to Rule 572.22(D) also fail. First, SPS argues
that the cost-benefit provision in Rule 572.22(D) was adopted without notice and
comment, in violation of due process. We readily dispense with this argument. The
PRC’s Notice of Proposed Rulemaking included a draft of proposed Rule 572.22 that
“request[ed] that all comments include a proposal on how best to calculate a financial
incentive.” SPS proposed a method of calculating a financial incentive that the PRC
ultimately declined to adopt. Instead, the PRC adopted the cost-benefit requirement that
was proposed by Occidental Permian Ltd. (Occidental) in its initial comment to the
proposed rule. Significantly, SPS submitted a written comment on Occidental’s
proposed requirement, stating that it “is an ambiguous, arbitrary, and capricious
limitation found nowhere in the statute.” SPS thus had notice that the PRC was
considering a method of calculating a financial incentive, had an opportunity to propose
its own method, and had an opportunity to comment on the very language that the PRC
eventually adopted. Under these circumstances, SPS’s claimed due process violation
rings hollow. See, e.g., Rivas v. Bd. of Cosmetologists, 1984-NMSC-076, ¶ 9, 101 N.M.
592, 686 P.2d 934 (“Case law suggests that the minimum protections upon which
administrative action may be based, [are] according to interested parties a simple notice
and right to comment.” (alteration in original) (internal quotation marks and citation
omitted)).

{46} Second, SPS argues that Rule 572.22(D) provisions for calculating the costs and
benefits supporting an incentive application are void for vagueness. In particular, SPS
challenges the requirement to provide “the cost of the measures implemented by the
utility that resulted in the lower carbon dioxide emissions.” 17.9.572.22(D)(4) NMAC
(5/4/2021). SPS similarly challenges the requirement to provide “the estimated value of
the reduction in carbon dioxide emissions . . . based on an analysis of relevant carbon
dioxide markets.” 17.9.572.22(D)(3) NMAC (5/4/2021). SPS argues that, without greater
specificity, the rule “requires utilities to guess at its meaning and is impermissibly
vague.” We disagree. “A court entertaining a pre-enforcement challenge to a regulation
that does not implicate constitutionally protected conduct such as the First Amendment
right to freedom of expression may sustain a vagueness challenge only if the law ‘is
impermissibly vague in all of its applications.’” N.M. Petroleum Marketers Ass’n v. N.M.
Env’t Improvement Bd., 2007-NMCA-060, ¶ 16, 141 N.M. 678, 160 P.3d 587 (quoting
Vill. of Hoffman Ests. v. The Flipside, Hoffman Ests., Inc., 455 U.S. 489, 495 (1982)).
Here, by SPS’s own account, it understood Rule 572.22(D) well enough to submit “all
the information required by that subsection” to support its proposal for an incentive.
SPS’s ability to comprehend the rule’s requirements undermines its argument that the
rule “is impermissibly vague in all of its applications.”

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

{47} Continuing with the void-for-vagueness theme, SPS challenges three other
provisions of Rule 572 on vagueness grounds. First, SPS argues that the rule’s
definition of the term “financial incentive” is unconstitutionally vague. See 17.9.572.7(F)
NMAC (5/4/2021). SPS maintains that the definition’s use of the terms “capital
investment opportunities,” “certain behaviors or actions,” and “would not otherwise have
occurred” are confusing, ambiguous, and require utilities to guess at their meanings.
Second, SPS argues that the definition of “procure” and “procurement” is ambiguous “to
the extent it does not comport with the Amended Rule’s actual use of the term
‘procurement.’” See 17.9.572.7(P)(4) NMAC (5/4/2021). SPS argues that the Amended
Rule “defines procurement to mean a bidding process, but the rule subsequently uses
the term to refer to the cost of the generation purchased rather than the bidding process
itself” and then cites, as an example, “17.9.572.12(C) NMAC (5/4/2021) (‘To the extent
a procurement is greater than the reasonable cost threshold and results in excess
costs . . . .’).” SPS argues that the actual use of the term procurement relative to the
definition provided in the rule is “inconsistent and confusing” and “renders the definition
vague and unenforceable.” Third, SPS challenges the provision that requires a public
utility to give a preference to renewable energy generated in New Mexico in limited
circumstances. See 17.9.572.10(A) NMAC (5/4/2021) (“Other factors being equal,
preference shall be given to renewable energy generated in New Mexico.”). SPS argues
that the requirement for a preference when “[o]ther factors [are] equal” fails to identify
what those factors may be and as such, the provision requires utilities to guess at its
meaning and is impermissibly vague. See id.

{48} Although these provisions have not been drafted with perfect clarity, they are
sufficient for due process purposes. As our Court of Appeals has cogently explained,
“An agency drafting regulations is not required to write for the benefit of deliberately
unsympathetic or willfully obtuse readers: for purposes of due process, a governmental
agency attempting to give notice to members of the public may assume a hypothetical
recipient desirous of actually being informed.” N.M. Petroleum Marketers, 2007-NMCA-
060, ¶ 18 (internal quotation marks and citation omitted). Here, SPS objects to language
that readily informs a public utility about the PRC’s intended meaning. SPS itself was
able to understand the PRC’s intended meaning and was able to apply the first two
provisions it challenges⸻financial incentives and procurements⸺in its incentive
application without difficulty. We are thus unpersuaded that the challenged provisions
are “impermissibly vague in all of [their] applications.” Id.

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

{49} SPS challenges the Amended Rule’s preference for renewable energy generated
in New Mexico, 17.9.572.10(A) NMAC (5/4/2021), as (1) exceeding the scope of the
REA, (2) unlawfully discriminating against citizens of other states in violation of the
Privileges and Immunities Clause, U.S. Const, art. IV, § 2, cl. 1, and (3) violating the
dormant Commerce Clause, U.S. Const. art. I, § 8, cl. 3.

{50} As for exceeding the scope of the REA, we reiterate that the PRC is not
precluded from exceeding the REA’s requirements on matters of public policy
specifically entrusted to the PRC’s discretion and expertise. See New Energy Econ.,
2018-NMSC-024, ¶ 25. The REA directs the PRC to promulgate rules to implement the
Act and its objectives, § 62-16-9, including rules to implement the legislative finding that
“the use of renewable energy by public utilities subject to commission oversight in
accordance with the [REA] can bring significant economic benefits to New Mexico,” §
62-16-2(A)(2). Stating, in 17.9.572.10(A) NMAC (5/4/2021), a narrow preference for
renewable energy generated in New Mexico—in the unlikely circumstance of “[o]ther
factors being equal”—is a reasonable exercise of the PRC’s mandate to implement the
Act in a manner that is economically beneficial to New Mexico when lawful and
appropriate.

{51} Turning to SPS’s unlawful discrimination argument, we note that this argument is
largely undeveloped and is not supported by SPS’s lone citation of United Building &
Construction Trades Council v. Mayor & Council of City of Camden, 465 U.S. 208
(1984). Unlike the requirement in United Building that at least forty percent of the
employees of city contractors and subcontractors must be local residents, see id. at
210, the Amended Rule’s preference does not require any of a utility’s renewable
energy to be generated in New Mexico. “Other factors being equal,” 17.9.572.10(A)
NMAC (5/4/2021), the preference merely acts as a tie-breaker. SPS cites no authority
that such a tie-breaker amounts to unlawful discrimination against the citizens of other
states under the Privileges and Immunities Clause, and we therefore assume that none
exists. See Lee v. Lee (In re Doe), 1984-NMSC-024, ¶ 2, 100 N.M. 764, 676 P.2d 1329
(“We assume where arguments in briefs are unsupported by cited authority, counsel
after diligent search, was unable to find any supporting authority.”).

{52} That the challenged preference is a mere tie-breaker also distinguishes it from
the cases cited by SPS in support of its similarly undeveloped argument under the
dormant Commerce Clause. See Wyoming v. Oklahoma, 502 U.S. 437, 440-41, 461
(1992) (holding that the Commerce Clause was violated by a statute requiring ten
percent of coal burned in Oklahoma power plants to be mined in-state); New England
Power Co. v. New Hampshire, 455 U.S. 331, 339, 344 (1982) (holding that the
Commerce Clause was violated by an order prohibiting a utility from selling
hydroelectric energy outside the State of New Hampshire); New Energy Co. of Ind. v.
Limbach, 486 U.S. 269, 273, 280 (1988) (holding that the Commerce Clause was
violated by a statute awarding tax credits to ethanol producers only if the ethanol was
produced in Ohio or in a state that granted similar tax advantages to ethanol produced
in Ohio). Unlike the statutes in those cases, the Amended Rule’s preference neither
discriminates against interstate commerce nor imposes a burden on such commerce
that “is clearly excessive in relation to the putative local benefits.” See Pike v. Bruce
Church, Inc., 397 U.S. 137, 142 (1970). Again, SPS cites no authority that a mere tie-
breaker discriminates against or unlawfully burdens interstate commerce. Assuming no
such authority exists, we conclude that the Amended Rule’s preference is not
unreasonable or unlawful. See In re Doe, 1984-NMSC-024, ¶ 2.

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

{53} SPS argues that the Amended Rule’s cost cap on incentives exceeds the scope
of the REA. Specifically, SPS challenges Rule 572.22(E), which provides, “The total
financial incentive authorized for recovery in rates pursuant to this section shall not
exceed the product (expressed in dollars) of: (1) the utility’s annual weighted average
cost of capital (expressed as a percent)[] and (2) the cost of the measures described in
Subsection B of this section.” 17.9.572.22(E) NMAC (5/4/2021). SPS argues that this
cap unduly limits the availability of incentives beyond the lone cost cap actually
established in the statute, which “protect[s] public utilities and their ratepayers from
renewable energy costs that are above a reasonable cost threshold.” Section 62-16-
2(B)(3); see also § 62-16-3(E) (establishing a reasonable cost threshold of $60 per
megawatt-hour of renewable energy with adjustments for inflation after 2020).

{54} As an initial matter, we note that the challenged provision does not establish a
cap at all; rather, it ensures that any incentive is cost-based and justly and reasonably
related to a utility’s approved weighted average percentage cost of capital. See, e.g.,
N.M. Att’y Gen., 2011-NMSC-034, ¶ 18 (holding that the adoption of rates was “arbitrary
and unlawful in that they were not evidence-based, cost-based, nor utility specific”). We
further note that SPS proposed an arbitrary incentive cap of $10 million in its initial
comments to the proposed rule as part of its proposed method of calculating a financial
incentive. SPS never withdrew its proposed cap or otherwise alerted the PRC to the
argument that it raises on appeal. We therefore decline to address this argument
further.

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

{55} SPS next challenges the PRC’s adoption of Rule 572.11 as unreasonable and
unlawful. Rule 572.11 codifies one of the seven requirements set forth in Section 62-16-
4(B) that govern how the PRC shall administer the eighty percent and one hundred
percent RPS requirements. Specifically, Rule 572.11 codifies the requirement that the
PRC shall, “in consultation with the department of environment, ensure that the
standard does not result in material increases to greenhouse gas emissions from
entities not subject to commission oversight and regulation.” Section 62-16-4(B)(6); see
17.9.572.11 NMAC (5/4/2021) (“After consultation with the department of environment,
the commission may not approve a public utility’s annual [REA] plan that result[s] in
material increases to greenhouse gas emissions from entities not subject to commission
oversight and regulation.”). SPS argues that, because the PRC did not codify the other
six requirements set forth in the statute, the Amended Rule “selectively implement[s] the
REA” and “limit[s] the application of [the REA] through the adoption of a regulation.”
Intervenors, in their Joint Answer Brief, agree that the PRC’s “unexplained inclusion of
one consideration in Section 62-16-4(B) and exclusion of the remainder is unreasonable
and should be annulled and vacated.”

{56} We disagree with the position of SPS and Intervenors that the PRC’s inclusion of
only one of the requirements set forth in Section 62-16-4(B) requires annulling and
vacating the order approving the Amended Rule. Neither SPS nor Intervenors cite
authority requiring the PRC to take an all-or-nothing approach to codifying multiple
requirements set forth in a single, relevant statute. We therefore assume that no such
authority exists. See In re Doe, 1984-NMSC-024, ¶ 2 (“Issues raised in appellate briefs
which are unsupported by cited authority will not be reviewed by us on appeal.”).
Moreover, the Amended Rule’s language does not contradict or otherwise conflict with
the substantially identical language in the statute and does not relieve the PRC from the
remainder of its duties under the statute. Cf. NMSA 1978, § 14-4-5.7(A) (2017) (“A
conflict between a rule and a statute is resolved in favor of the statute.”).

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

{57} SPS argues that the PRC acted arbitrarily and capriciously when it “bifurcated
critical matters from the rulemaking” and it “transfer[red] controversial issues to a
separate rulemaking and subject[ed] utilities to a confusing, ambiguous, and vague
rule.” Specifically, SPS contends that the PRC lacked authority to adopt the Amended
Rule without addressing (1) the definition of the phrase “capital investment
opportunities” in the definition of financial incentive, (2) whether a financial incentive
would be available to advance the closure of the four corners nuclear facility, (3)
whether the one hundred percent zero carbon standard includes the 2040 RPS
standard of eighty percent renewables and limits nuclear to twenty percent, (4) whether
Arizona Public Service could apply for a financial incentive as a nonregulated entity for
the four corners nuclear facility, and (5) how the “average annual levelized cost” of
energy should be calculated for purposes of the reasonable cost threshold definition set
forth in Section 62-16-3(E).

{58} The lone authority that SPS cites in support of this argument is a federal district
court case that granted a preliminary injunction against the implementation of a rule that
was adopted through a “staggered rulemaking” process. See Centro Legal de la Raza v.
Exec. Off. for Immigr. Rev., 524 F. Supp. 3d 919, 954-55 (N.D. Cal. 2021). The
circumstances of Centro Legal de la Raza are clearly distinguishable. In particular, the
rulemaking in this case and the subsequent rulemaking that resulted in the Second
Amended Rule were held in a sequential, orderly manner with full public notice of both
proceedings and ample opportunity for public participation. Contra id. at 958 (holding
that the agency’s rushed and overlapping rulemakings and decisions “deprived the
public of the opportunity to consider how these rules intersected and impacted the Rule,
and also raise[d] serious questions about whether the agency meaningfully addressed
the interaction of these rules.” (internal quotation marks and citation omitted)). SPS’s
contention does not withstand scrutiny.

7. SPS’s remaining arguments are moot

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

{59} SPS challenges the provision of the Amended Rule that implemented the REA’s
“reasonable cost threshold” (RCT) of sixty dollars per megawatt-hour that was
established by the Legislature in 2019. See § 62-16-4(E) (providing that a “public utility
shall not be required to incur” costs above the RCT to procure or generate renewable
energy to comply with the RPS); § 62-16-3(E) (defining “reasonable cost threshold”).
SPS argues that the Amended Rule’s requirement to include an RCT analysis for
existing renewable energy procurements applies the RCT retroactively and is therefore
unlawful. See 17.9.572.12(B) NMAC (5/4/2021) (providing that a public utility “shall
include in its annual [REA] plan [an RCT] analysis by procurement, existing or
proposed, for the plan year” (emphasis added)); see also, e.g., Howell v. Heim, 1994-
NMSC-103, ¶ 17, 118 N.M. 500, 882 P.2d 541 (“New Mexico law presumes that
statutes and rules apply prospectively absent a clear intention to the contrary.”).
However, the Second Amended Rule removed the reference to “existing” procurements
and now requires an RCT analysis only for “proposed” procurements. Compare
17.9.572.12(A) NMAC (2/28/2023) with 17.9.572.12(B) NMAC (5/4/2021). And as we
have already determined, the PRC denied SPS’s incentive application under Section
62-16-4(D) and did not rely on Rule 572.12(B). A ruling on this issue therefore would not
“grant actual relief,” and accordingly the issue is moot. Gunaji v. Macias, 2001-NMSC-
028, ¶ 9, 130 N.M. 734, 31 P.3d 1008 (internal quotation marks and citation omitted);
see also KOB-TV, L.L.C. v. City of Albuquerque, 2005-NMCA-049, ¶ 37, 137 N.M. 388,
111 P.3d 708 (“[W]hen legislation is enacted that resolves a conflict, a question
concerning the conflict addressed to a court will be moot.”).

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

{60} SPS argues that the order approving the Amended Rule must be vacated and
annulled because of a typographical error in the Amended Rule that “states the exact
opposite of the REA.” Compare § 62-16-4(E) (“The provisions of this subsection do not
preclude a public utility from accepting a project with a cost that would exceed the
[RCT].” (emphasis added)) with 17.9.572.12(C) NMAC (5/4/2021) (“The provisions of
this rule do preclude a public utility from accepting a project with a cost that would
exceed the [RCT].” (emphasis added)). However, the Second Amended Rule corrected
the error such that the current rule is now consistent with the statute. See
17.9.572.12(B) NMAC (2/28/2023). Nonetheless, SPS continues to press the issue
because the PRC denied SPS’s incentive application based on the “flawed rule.” We
disagree. The PRC reasonably and lawfully denied SPS’s incentive application
irrespective of the Amended Rule’s “flawed” RCT provision, which has now been
corrected. This issue is therefore moot. See Gunaji, 2001-NMSC-028, ¶ 9; KOB-TV,
2005-NMCA-049, ¶ 37.

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

{61} SPS challenges the Amended Rule’s provision implementing a new competitive
bidding requirement established by the 2019 amendments to the REA that applies to
procurements for “new renewable energy” beginning on July 1, 2020. See 17.9.572.13
NMAC (5/4/2021); see also § 62-16-4(G)(1), (3). SPS argues, “To the extent the rule
allows for application of the competitive procurement requirement to existing, previously
approved resources, it is inconsistent with the REA.” (Emphasis added.) The PRC
agrees that the competitive procurement requirement does not apply to “previously
approved procurements” and maintains that neither the Amended Rule nor the Second
Amended Rule provides otherwise. See 17.9.572.13 NMAC (5/4/2021 & 2/28/2023). We
see no actual controversy on this issue. We agree with the parties that Section 62-16-
4(F) and (G) impose distinct and different requirements on renewable-energy
procurements proposed before and after July 1, 2020—with only the latter subject to a
competitive procurement process. The Amended Rule does not provide to the contrary
and does not require us to disturb the order adopting the Amended Rule. See, e.g.,
Tenneco Oil Co. v. N.M. Water Quality Control Comm’n, 1987-NMCA-153, ¶ 14, 107
N.M. 469, 760 P.2d 161 (“Rules and regulations enacted by an agency are presumed
valid and will be upheld if reasonably consistent with the statutes that they implement.”),
superseded by statute on other grounds as stated in N.M. Mining Ass’n v. N.M. Water
Quality Control Comm’n, 2007-NMCA-010, ¶ 19, 141 N.M. 41, 150 P.3d 991.
III. CONCLUSION

{62} SPS has failed to meet its burden to show that the PRC’s orders adopting the
Amended Rule and denying SPS’s 2021 request for a financial incentive were
unreasonable or unlawful. We therefore affirm both orders.

{63} IT IS SO ORDERED.

DAVID K. THOMSON, Justice

WE CONCUR:

C. SHANNON BACON, Chief Justice

MICHAEL E. VIGIL, Justice

JULIE J. VARGAS, Justice

BRIANA H. ZAMORA, Justice