ABSTRACT
In March 1975, the New Mexico Public Service Commission (NMPSC) announced the acceptance of the Cost of Service Index (CSI) approach to setting electric service rates. The CSI requires a quarterly review of the investment, operating expenses, and revenues for electric service under the jurisdiction of the NMPSC. The CSI was designed to reduce regulatory lag to a reasonable period, to minimize revenue requirements of the utility, to promote efficiency in all areas of company operation, and to improve the ability of the regulatory commission to regulate efficiently. Testimony presented in April 1977 by officers of Public Service Company of New Mexico and expert witnesses in NMPSC case 1330 showed that both the cost of equity and the cost of debt have been favorably affected by the CSI. The CSI was in fact designed to accomplish four primary goals: cope with regulatory lag, minimize revenue requirements, encourage company efficiency and promote regulatory efficiency.
