PRC & KCEC Screw Taosenos

By: Bill Whaley
7 December, 2016

(Explanations will follow later the decision posted below but read it and weep because your electricity bill at home is about to take a big leap. Remember Virgil Martinez: the only trustee, who voted no! And a representative of the board laid him out like a sack of potatoes. Now the Trustees are coming for your purse and pocketbook! Viva Virgil!)

Virgil

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE FILING OF PROPOSED NEW RATES BY KIT CARSON ELECTRIC COOPERATIVE, INC.

KIT CARSON ELECTRIC COOPERATIVE, INC.,
Applicant.

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) Case No. 15-00375-UT
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FINAL ORDER ADOPTING RECOMMENDED DECISION

THIS MATTER comes before the New Mexico Public Regulation Commission (Commission) upon the Application filed by Kit Carson Electric Cooperative on December 3, 2015 for new rates (Application) and the Recommended Decision (RD) issued by Heating Examiner Elizabeth Hurst on October 31, 2016; whereupon, bein g duly advised in the premises,

THE COMMISSION FINDS AND CONCLUDES:

1. Pursuant to the New Mexico Constitution, the New Mexico Public Utility Act and other applicable law, the Commission has juri sdiction over the parties and subject matter of this proceeding .

 

2. Due and proper notice of this case has been provided.

 

3. On December 3, 2015, Kit Carson Electric Cooperative (KCEC or Kit Carson) submitted Advice Notice No. 60 for proposed new rates pursuant to Rule 17.9.540.8 NMAC, including proposed rate increases for the following types of service: residential service, residential seasonal service, commercial service, power service, irrigation, and special contract.

 

4. On December 23, 2015 the Commission entered its Order Suspending Proposed Rate in KCEC’s Advice Notice No. 60.1 The Order Suspending Proposed Rates suspended all of
the rates proposed in Advice Notice 60, not only the residential rates.

 

5. On January 20, 2016, the Commission issued its Initial Order which directed Kit Carson to file a complete rate application, including cost of service studies and supp01iing testimony, by February 20, 2016. The Initial Order also continued the suspension of all of KCEC’s proposed rates contained in Advice Notice No. 6 for a period of nine months after the filing of such a complete rate application.

 

6. On February 22, 2016, Kit Carson filed its Rate Application for Revision of Retail Electric Rates.

 

7. On March 2, 2016, the Commission issued its Order on KCEC’s Motion for Rehearing and Reconsideration and Order on Motion to Narrow the Scope of Rate Hearing and it limited the scope of the proceeding issues related to residential class rates.2

 

8. On July 25, 2016, KCEC filed a Notice of Filing of Stipulation between KCEC and the Commission’s Utility Division Staff.

1 Pursuant to NMSA 1978, Section 62-8-7 (B) and (G) and Rule 1

 

7.

1.210.10 (D) NMAC. Order Suspending Proposed Rates, p. 3, OrderingiiA.

2 Is the proposed spl it in cost recovery for the residential class between fixed monthly charges and volumetric charges a just and reasonable rate design?

ii. l s KCEC’s proposed elimination of the inverted block structure for residential rates ju st and reasonable?

iii. i. Does KCEC’s proposed rate design punish people in the residential class that are willing to conserve energy, so­ called “low users”?

iv. Does KCEC’s proposed rate design for the residential class discourage energy conservation and the installation of renewable generation technologies?

v. ls the increase in the monthly fixed charge for the residential class j ust and reasonable?

vi. Is the amount of the cost of service allocated to the residential class just and reasonable?

 

9. On August 18, 2016, the HE issued her Sixth Procedural Order which determined that the Stipulation should not be certified, and the hearing scheduled regarding the Stipulation should be vacated 3 and rescheduled the hearing to begin on September 19, 2016.

10. On August 22, 2016, KCEC filed its Motion for expedited order to terminate suspension of non-residential rates which requested that the Commission expeditiously issue an order tenninating the suspension of the six (6) non-residential rates.

11. On September 7, 2016, the Commission granted the Motion to terminate suspension of non-residential rates restated that and affirmed that there would be no review of the non-residential revised rates proposed and ordered that the suspension of Advice Notice No. 60 should be lifted as to the six (6) non-residential rates Rate Nos. 3, 4, 16, 19, 22 and 29 as noticed 4 and that the suspension of Advice Notice No. 60 remained in effect as to the four (4) residential rates, Rate Nos. 1, 2, 17 and 18, until November 23, 2016.

 

12. The public hearing was held between September 19, 2016 and September 23, 2016.

 

13. On October 31, 2016, the Hearing Examiner issued her Recommended Decision.

 

14. The Commission, on November 2, 2016, extended the suspension period from November 23, 2016 to December 9, 2016, so that the Commission could adequately and completely determine the reasonableness of the rates proposed by Kit Carson’s Application.

 

3 Her decision was based upon the Initial Order that ruled that non-resid ential rates contained in the Stipulation were beyond the scope of the HE’s authority which was limited to the residential rates. See, Sixth Procedural Order, pp. 8-10.

4 See KCEC’s Affidavit of Mailing and the Notice to KCEC’s Members in accordance with the first Procedural Order that was
required to be sent by KCEC to each of its ratepayers which evidences that KCEC provided full notice in according with Section
62-8-7 (G) NMSA 1978.

 

15. The Intervenors in this case are Carl Rosenberg, Fabi Romaro, Jerome Lucero, William Whaley, A. Eugene Sanchez, Link Summers, Arsenio Cordova, Peggy Nelson and Rose Des Georges. The following intervenors filed motions to intervene, direct/rebuttal testimony and/or exceptions to the RD in this case as follows.

 

16. Intervenor Link Summers file Direct Testimony and Exceptions to the RD5 generally objecting to the electric rate increase as follows: 1) KCEC has sufficient revenues to fulfill its electric utility only revenue requirement because the Commission already approved the non- residential rate increase; KCEC “willfully and deliberately undisclosed income from the Chevron Superfund Site;” and KCEC has increased income from the tennination of the Tri States Contract and its replacement with the Guzman; 2) KCEC’s consolidated reporting and failure to isolate its electric-only accounts has made determining electric-only expenses difficult and made this determination a “fluid target” according to PRC Staff and Staff is still not certain that all non-electrical expenses have been made and removed from KCEC’s original application;63) Staff adjustments of known non-electrical expenses to KCEC’s original requested increase are appropriate; 4) Ineligible, non-electric expenses, such as allocation of loan payments for the KCEC Command Center, ”unnecessary upgrades of telephone poles where the cost should be split 50/50 between the electric utility and broadband, specific broadband infrastructure, donations and advertising; all of which should be not be assessed as legitimate electrical
expense;” 5) the non-electric, diversified businesses of KCEC have diverted resources, capital, availability of credit, and personnel time from the electrical business, and have caused KCEC to

 

5 The quotes are from Summers’ Response to RD filed in the docket on Nov. 9, 20 16.

6 Transcript Volume 4, Page 241, Line I 3;Reynolds. seek a rate increase;

 

6) KCEC’s proposed elimination of the inverted block rate design is contrary to Commission policy and would “punish people in the residential class who are willing to conserve energy, and is designed to discourage energy conservation and correspondingly, to encourage energy usage;”

 

7) KCEC’s proposed 41.38% increase in the fixed costs, flat rate for Rate No. 1 -Residential Service,7 would result in “rate shock” and is otherwise out of line with a more gradual, incremental approach; and 8) low income customers in Taos County, one of the poorest counties in New Mexico, a state which ranks among the poorest in the country, will be negatively affected by any increase, and will be even more affected by the rate increases proposed by KCEC.

 

17. Summers requests the Commission order the following because KCEC’s proposed rate increases would detrimentally affect poor people in Taos County and KCEC’s service area: 1) No residential rate increase, or in the alternative, if the Commission orders a rate increase, it should be based on electric utility only costs and RUS loan based TIER and OTIER ratios found in RUS/KCEC loan documents; 2 A TIER and OTIER target of 1.1 and 1.25 as required by RUS for the electric utility only business of KCEC; 3) no elimination of the inverted block rate design, as it is contrary to goals of energy conservation; 4) disallow KCEC’s requested fixed cost, flat rate because it would punish low income customers; and 5) order that KCEC’s use of 2014 as the test year was not valid and KCEC should have used a future test year rather than a historic test year as more valid and reliable.

 

18. Arsenio Cordova’ s direct testimony and Rose Des Georges direct testimony all reiterated Mr. Summers’ contentions.

7 Application for Revision of Retail Electrical Rates, filed February 22,20

 

16. Attachment entitled “STATEMENT OF
COMPARISON BETWEEN NEW RATESPROPOSED RATES”.

 

19. Intervenors Carl Rosenberg and Fabi Romaro state that KCEC has taken on subsidiary projects, and in doing so, has placed the financial footing of its primary business – supplying electricity -in jeopardy. They contend that since kilowatt hour sales have not decreased substantially, and those sales should provide sufficient revenues for electrical service, without a double-digit increase in the sale of kilowatt hours, as proposed by KCEC

 

20. Intevenor William Whaley submitted testimony in which he stated KCEC is $100 million in debt, and, by this rate increase, wants to borrow another $8 million to complete the $64 million broadband project, and intends an additional investment of $33 million for infrastructure upgrades, and proposes to buy out its $37 million dollar contract with Tri-State.  He asserts that the reason that KCEC is failing due to its investments in and distractions of diversification. He states that the history of the KCEC’s broadband project has been fraught with poor service, limited numbers of consumers, languishes after four or five years old, is behind schedule and out of money. He also states that the Command Center, costing members $118,000 a year on a mortgage, is vacant except for KCEC’s dispatch team of two or three employees who were relocated. He states that the Trustees collect meeting fees, per diem for travel, but neglect their fiscal stewardship. He claims KCEC appears to have diverted $6.3 million from the electric side to diversification to the broadband project, the Command Center, and propane businesses. Whaley points out that Mr. Seelye stated: “No. Kit Carson has too little margins and equity.” Whaley maintains that if Kit Carson reduced debt to finance on-income producing diversification , the ratio of equity to debt would improve.

 

Whaley concludes that the PRC, the USDA/RUS, and the CEO/Trustees have a duty to confront the pattern of failed diversification
of the last fifteen years and right the sinking ship.

 

21. Intervenor Peggy Nelson ‘s testimony and Exceptions detailed the poverty in Taos County which she states has an economy that is heavily dependent on service jobs and low paying wages. Nelson informs that a recent report (FS Assessment) put the percentage of people living below the poverty line in Taos County at (24%), the highest in the state. She states that many people cannot afford to pay their monthly water bills and others struggle with day-to-day necessities. Nelson maintains that the large majority of fixed income consumers is made up of people who during the course of their working lives got by, but whose retirement incomes are barely sufficient to make all ends meet. She contends, contrary to Mr. Reyes, that it is e1rnneous to think that there is a direct relationship between higher income consumers and low consumption. Nelson asserts that many people with marginal incomes, even if above the poverty line conserve in every possible way, including electricity and while she agrees with Mr. Reyes’ statement that some low income people may not be able to afford more energy efficiency appliances, insulation and other means are necessary to help with conserve, she believes that it would make far more sense to increase programs that assist people in reducing their usage and improving their homes rather than eliminate the inverted block structure and that the policy of conservation needs to be promoted. Nelson points out that poor people are hurt most by the requested rate increase because the overall rate increase requested is 9.2%, and yet, residential customers will pay any an average 14% increase, and some will pay considerably more. Nelson expresses the fear among many consumers and interveners that raising the OTIER essentially means that KCEC will be in a better position to take on more debt in order to try to solve its immediate financial insecurities but she believes that KCEC has taken on more debt than it can  afford, and for services other than the provision of electricity, and the extent of its long term debt is reflected in the OTIER.

 

22. On November 9, 2016, Staff filed its Exceptions to the RD’s conclusion that, based upon the record in this case, an Operating TIER of 1.64 (between Staff s 1.5 and KCEC’s 1.9) constituted the low end of the zone of reasonableness. Staff maintains that the Commission should determine the appropriate Operating TIER for Kit Carson by utilizing Staff s New Mexico peer group average to set the lower boundary of 1.5 as the zone of reasonableness. Staff also objected to the RD’s rejection of Staff s proposed adjustment to KCEC ‘s loan interest expense of $305,463 to eliminate interest expenses related to broadband and propane operations. The RD found and concluded that there is sufficient credible evidence to establish that the interest on debt as set forth by KCEC was for electric operations only.8 However, Staff maintains that this determination misstates the evidence in the record, and ignores the obligation of KCEC did not meet its burden to prove that the interest expense Staff sought to remove was for electric- only operations.

 

Staff’s Recommendation: Staff maintained that the Commission should clearly establish that KCEC ‘s electric rates are set to recover only the costs of electric utility operations and should direct KCEC to provide a more detailed audited expense data. Staff pointed out that Kit Carson’s diversified activities created a unique and significant challenge for Staff in
analyzing KCEC’s electric rate request.9 Staff requests that the Commission make an unambiguous statement that only electric expenses are to eligible expenses be recovered through electric rates to Staff in processing subsequent rate proceedings of Kit Carson and any similarly

8 Recommended Decision, pp. 70-71.

9 Reynolds Direct , page 8-1 1. situated entities. In light of Staff’s challenges and in order to provide transparency on this issue in the future, Staff recommends that KCEC should be ordered to provide an annual statement that ties audited interest expense by loan for all of its activities to interest expense reported on RUS Form 7 for electric loans only. This infonnation should be granular enough to tie interest expense for each loan by loan purpose (i.e., electric, broadband, propane).

 

23. The Commission finds that it concurs with the RD’s conclusion to reject Staff’s disallowance of $281,076 interest expense (arguing it was for broadband) and that there is sufficient credible evidence to, establish that the interest on debt as set forth by KCEC was for
electric operations only10. Nevertheless, the Commission concurs with Staff and unambiguously finds that electric expenses only are to be recovered through electric rates. Further, the Commission concurs with the intervenors that subsidiary expenses and loans should not be included as part of KCEC’s cost of providing electric service.

 

24. The Commission finds, based upon Staff s expressed statements of how challenging it was for them to understand KCEC’s documents that were provided as proof that KCEC had only included electric expenses in its cost of service and, in order to provide transparency on this issue in the future, the Commission finds that KCEC should also be ordered to provide an annual statement that ties audited interest expense by loan for all of its activities to interest expense reported on RUS Form 7 for electric loans only and should provide clear, easy to understand, separated, detailed information to tie interest expense for each loan by loan

10 See, RD pages 69-71 , which found that: “[b]ased upon the explanation at the hearing of how the infonnation is set forth in the RUS Forni 7, the testimony of Mr. Reyes and Mr. Seelye, and KCEC’s Response to the hearing Examiner’s September 19, 2016 Bench Request, Hearing Examiner finds that there is sufficient credible evidence to establish that the interest on debt as set forth by KCEC was for electric operations only. Based upon this find, the Hearing Examiner declines to accept Staff s $281,076 interest disallowance, as it would result in an inappropriat e disallowance of a legitimate expense. purpose (i.e., electric, broadband, propane). Section 62-15-3.1 NMSA 1978, Subsidiary business activities, of the Rural Electric Cooperative Act, permits cooperatives to acquire and operate subsidiary businesses, such as broadband and propane, as long as the cooperatives strictly comply with each requirement of 62-15-3.1 (A) 1, 2, 3 and 4 NMSA 1978. Towards that end, Section 62-15-3.1 (C) NMSA 1978 explicitly authorizes the Commission to “inspect the books and records of such other business entitles and the cooperatives” in order to ensure that subsidiary business activities fully compensate the cooperative for the use of personnel, services, equipment tangible, personal property, and the cost of capital and to ensure that the subsidiary is not financed with the loans from the RUS unless the RUS authorizes the purpose of the loan.

 

25. On November 9, 2016, KCEC filed Exceptions to the RD. As a general Exception, KCEC asserts, while acknowledging that the Commission has considerable discretion to fix rates charged by jurisdictional utilities, that the Commission’s authority does not provide a separate or independent grant of power authorizing the Commission to make a determination that intrudes into the self-governing authority held by rural electric cooperatives in New Mexico. In support of that proposition, Kit Carson cites to NMSA 1978, § 62-3-2(A)(3), which provides that
“electric cooperatives are substantially different from investor-owned utilities, particularly ative to

.
settmg

rates.,,11

 

26. The Commission disagrees with KCEC’s general Exception and specifically finds that the RD provides the necessary balance between ensuring the opportunity for KCEC to earn

11 That statute, Kit Carson points out, goes on to state that “Experience has proven that the costs to rural electric cooperatives and the public at large in complete government regulation of their rates is greatly disproportion ate to the need and benefits of complete rate regulation and interferes with the setting of fair,ju st and reasonable rates to all utilities.

sufficient revenues to cover its costs, provides a reasonable return and encourages energy conservation and reduces energy consumption. The Commission finds that a number of New Mexico Supreme Court decisions confinn the Commission’s “considerable discretion in a rate case to determine the justness and reasonableness of rates. Atty’ Gen. v. NMPSC, 101 N.M. 549, 685P.2d 957 (1984); Hobbs Gas Company, 94 N.M. 731, 616 P.2d 1116 (1980). In Mountain States Tel. & Tel, Co. v. New Mexico State Corporation Co mission, 90 N.M. 325, 332, 563 P.2d 588, 595 (1977) (hereinafter cited as “Mountain States”), where it held “If… it is found that the rates are too high, the commission must then necessarily either indicate a proper charge or furnish a basis which will enable the utility to file a proper tariff. Otherwise there would be no end to the controversy …”

 

In response to Kit Carson’s specific contention that the Commission cannot override the decision of Kit Carson’s duly elected Trustees, the Commission finds that if that were true, the members’ right to Commission review of a coop’s proposed rates upon sufficient protest would be nullified or meaningless.

 

The Commission agrees with Kit Carson that the Commission’s authority to fix the rates of rural electric cooperatives is more limited than its authority over the rates of investor owned utilities because coop members have direct control over the cooperative’s rates through an elected board.

 

However, once the requisite number of protests has been filed and the Commission finds that the protests set forth ju st cause for the review of the issues raised in the protests in a hearing, as is the case here, the coop bears the same burden of proof that is borne by investor-owned utilities that its proposed rates are just and reasonable. If the coop fails to meet that burden, then it is the Commission’s duty and obligation to set the rates it finds to be just and reasonable if there is substantial evidence in the record to do so. Mountain States, 90 N .M. at 333, 563 P.2d at 596 (The Commission has a duty to fonnulate rates if there is substantial evidence from which the Commission could have promulgated rates consistent with the Commission’s discretion on public policy issues involved with regard to apportionment). None of the cases or statutory provisions relied upon by Kit Carson in its Exceptions leads to a contrary conclusion. The Commission also agrees with Staff that if the Commission could not override Kit Carson’s Trustees in a case that has been set for hearing pursuant to Section 62-8- 7.G., the members’ right to Commission review the coop’s rates under that statute would be rendered meaningless. As determined by the Court in Mountain State, in cases where a utility has failed to show that its proposed rates are just and reasonable, the Commission has the duty and obligation to promulgate just and reasonable rates if there is substantial evidence to make that detennination . Mountain States, 90 N.M. at 333,563 P.2d at 596. KCEC argues that the Commission may not “after the fact exert authority over such [non-electric] loans by prohibiting Kit Carson from collecting revenues in electric rates to make debt service payments on such loans. However, the Commission concurs with Staff who disagreed with this argument. Staff is correct that such statements fly in the face of the clear mandate of the Commission to review the electric rates of utilities in the state. Staff argued that taking KCEC’s assertions to their logical conclusion, the Commission would not have jurisdiction to review any increase in rates since any decrease to KCEC’s proposed cost of service would harm their ability to repay loans that have nothing to do with providing electric service.

 

27. KCEC argued two more specific Exceptions to the RD as follows: Exception #1: The RD’s determination to continue the inverted block rate structure on KCEC notwithstanding uncontroverted evidence in the record that such rate design ensures KCEC will not recover its costs of providing electric service violates New Mexico law and is arbitrary and capricious because a) the inverted block rate structure is not cost based and violates the fundamental rate design standard of cost causation; b) when the inverted block rate structure is applied to Kit Carson’s declining kWh Usage for its residential customers, KCEC will not recover its cost of service; c) the continued use of the inverted block rate structure is harmful to “low income” members of KCEC; and d) if the Commission applies the inverted block rate structure to KCEC as a matter of policy, then the Commission is selecting on KCEC to treat differently than other cooperative which is in violation of equal protection standards. Exception #2: The RD’s acceptance of the Staff s redactions in the revenue requirement should be rejected because the reductions were not based upon substantial evidence, sound analysis, statutory authority, the NMPRC’s rules or prior practice, and the reductions by Staff contradict the statutory policy to treat rural electric cooperatives differently than IOUs for ratemaking purposes. Specifically KCEC objects to the RD’s elimination of: a) $43,309.20 in expenses based on Staff s erroneous determination that these expenses were related to the non-utility broadband business;. b) $91,513.59 from the revenue requirement for expenses related to the Tri-State Rate Case without any basis in statutes, the NMPRC Rules or prior commission practice; c) $93,571.20 in expenses related to donations, membership dues and contributions based on Staff s claim that KCEC did not meet its burden of proof; and d) $15,290.86 in advertising expenses based upon Staff s claim that KCEC did not meet is burden of proof.

 

28. Regarding Exception #1, the Commission finds that the Hearing Examiner’s Analysis and the decision to not eliminate the inve1ied block rate structure are based upon substantial evidence in the record and the sound public policy of encouraging energy conservation and is in accordance with the case law on ratemaking. 12 See, RD pages 83-84 for the Analysis. A number of New Mexico Supreme Court decisions confirm that the Commission has “considerable discretion in a rate case to determine the justness and reasonableness of rates. Atty’ Gen. v. NMPSC, 101 N.M. 549, 685 P.2d 957 (1984); Hobbs Gas Company, 94 N.M. 731,
616 P.2d 1116 (1980). The Commission concurs with the RD that the evidence supports a consolidated residential revenue requirement increase of $2,020,046 13 for a new total residential revenue requirement of $22,196,901. The Commission concurs with the RD that it is within the zone of reasonableness to approve KCEC’s request for customer charge increases — $20.50 – residential Rate 1 (current $14.50); $24.00 -residential seasonal Rate 2 (current $14.50); $22.50 – residential time of use Rate 17 (current $16.50) and $26.00 – residential seasonal time of use Rate 18 (current $16.50). These fixed customer changes are supported by evidence in the record that it will provide sufficient revenue for KCEC to recover its costs of service for the residential customers in conjunction with maintaining the inverted block structure (monthly use) 0-750 kWh at $0.11349, 750-1250 kWh at $0.12430 and over 1150 kWh at $0.135411.

 

Further, the RD’s inverted block rate structure is reasonable since the first block includes a majority of the residential customers given the fact that the average residential customer consumes far less than 750 kWh per month. 14 12

The New Mexico Supreme Court has declared that the Commission “is not required to rely on any one rate-design method.” Attorney General v. New Mexico Corporation Commission. 121N.M. 156, 165, 909 P.2d 716 (1995).The Court has recognized that “there is a great measure of public policy that enters into the apportionment of rates ….” Mountain States. 90 N.M. at 333. The Court concluded that the “Commission’s discretion on public policy issues” is invol ved in the apportionment. Id. Further, the Court has acknowledged that the exercise of the Commission’s discretion on public policy matters may result in subsidies.

13 Compared to KCEC’s proposed consolidated residential revenue of $23,095,971 and Staff s$22,039,291. Compared to KCEC
increase of $2,919,316 and Staff’s increase of $ l,863,036.
14 For the 2014 Test Period, the average monthly usage for a residential customer was 462 kWh. Seelye Direct at p. 18.

 

29. Regarding the arguments made in Exception #2, KCEC’s proposed revenue requirement, and Staff s recommended revenue requirement, the Commission concurs with the RD that the overall revenue requirement should be $40,533,785 for the reasons as stated in the RD, after the Hearing Examiner’s adjustments. As stated in the RD pages 68-69, based on the evidence presented in this case, KCEC’s overall requested revenue of $42,116,068 is not reasonable because Staff s testimony provided sufficient credible evidence that certain expenses are not legitimate costs related to the provision of electric service. Further, for the reasons stated in the RD, Staff s recommended revenue requirement of $40,249,485 (that included a deduction of $281,076 for interest, a deduction of $2773 .66 for survey and a $540 donation/trustee fee) and OTIER of 1.5 are also not reasonable . KCEC’s Exception #2 is without merit because under the RD’s revenue requirement of $40,533,785, OTIER of 1.64, inverted block rate structure starting at 750 Kwh, and $20.50 customer charge, KCEC will recover the RD’s costs of service for the residential customer class (54.76% of the total customers), and in addition, will recover from the
· non-residential customer classes· based upon KCEC’s proposed $42,116,068 revenue requirement based upon the fact that the Commission only had jurisdiction to review the rates of the residential customer class.

 

30. Regarding the OTIER, the Commission concurs with the RD that the evidence supports the conclusion that a 1.64 OTIER 15 should provide KCEC an opportunity to improve its financial condition including its debt-equity ratio and the opportunity improve its margins as

15 Compared to KCEC’s proposed OTI ER of I .9 and Staff and the Intervenor’s proposed OTI ER of 1.5. testified was needed by Dr. Seelye.16 As stated in the RD at page 78: “This OTIER more closely resembles OTIER’s of other New Mexico cooperatives whose characteristics are known to the Commission, and not based upon national averages of potentially dissimilar cooperatives.”

 

31. Based upon the record in this case, the Commission finds the RD is supported by substantial evidence in the record and therefore incorporates the RD in its entirety by reference as if fully set forth in this Order, and the statement of the case, discussion, and all findings of fact and conclusions of law and Decretal paragraphs contained in the RD, are ADOPTED, APPROVED , and ACCEPTED as Findings and Conclusions and Decretal Paragraphs of the Commission.

 

IT IS THEREFORE ORDERED:

 

A. The orders contained in the RD are ADOPTED, APPROVED, and ACCEPTED as orders of the Commission.

 

B. The RD is ADOPTED , APPROVED and ACCEPTED in its entirety.

 

C. KCEC shall provide to the Commission an annual statement, filed in the docket each January 1, that ties audited interest expenses by loan for all of its activities to interest expense on RUS Form 7 for electric loans only and provides clear, easy to understand, separated, detailed information to tie interest expense for each loan by loan purpose (electric, broadband , propane).

 

D. A revised Advice Notice No. 60 shall be filed with revised rates consistent with the terms of this Final Order within three (3) days of this Final Order. Within three (3) days of Seelye Direct Testimony, page 12 and 23. Transcript pages 597-599. Mr. Seelye testified that KCEC has interest coverage ratios that are dangerously low and if KCEC is not allowed to increase its rates soon, it will experience a growing risk of having insufficient revenue to cover its expenses. filing the revised Advice Notice, Staff shall review the revised Advice Notice and, unless otherwise notified by Staff the revised rates shall go into effect within seven (7) days of this Final Order.

 

E. This Order is effective immediately.

F. Copies of this Order shall be e-mailed to all persons on the attached Certificate of Service if their email addresses are know, and otherwise shall be sent via regular mail.

ISSUED under the Seal of the Commission at Santa Fe, New Mexico, this 11 day of December, 2016.

NEW MEXICO PUBLIC REGULATION COMMISSION

PATRICK H.LYONS, COMMISSIONER

ComISSIONER

S J .ComMISSIONER

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE FILING OF )
PROPOSED NEW RATES BY KIT CARSON )
ELECTRIC COOPERATIVE, INC. ) Case No. 15-00375-UT
) KIT CARSON ELECTRIC COOPERATIVE, ) INC., APPLICANT )

OFFICIAL CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the Final order Adopting Recommended Resolution issued on December 7, 2016, was sent via email to the parties listed below:

Link Sunm1ers Jerome Lucero
William E. (Bill) Whaley Carl Rosenberg
Peggy Nelson Fabi Romero Rose Des Georges
A. Eugene Sanchez Arsenio Cordova Jeff Northrop

linksummers@hotmail .com; jflucero9-l 2@q.com; bwhaley@newmex.com; Carlr@taosnet .com;
pjnelson@taosnet.com ; Fabrom@taosnet.com ; rdesgeorges@gmaiI.com; genesanchez@centurylink.net; arseniocordova@hotmai l.com; Jeffn@taosnet.com ;

Charles V . Garcia Laura E. Sanchez-Rivet

John Reynolds Bradford Borman Jack Sidler
Milo Chavez Vincent De Cesare Judith Arner

cgarcia@cuddymccarthy.com; lsanchez- rivet@cuddymccarthy.com ; John.reynolds @state.nm.us; Bradford.Borman@state.nm.us; Jack.Sidler@state.nm.us; Milo.Chavez@state.nm.us; Vincent.Decesare@state.nm.us; Judith.Arner@state.nm.us;

DATED on December 7, 2016 .

NEW MEXICO PUBLIC REGULATION COMMISSION

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