Aug. 15, 2003 – Innovative Telephone customers will soon see their bills for local service go up by more than 17 percent.
At a hearing on Friday, the Public Services Commission voted to approve a new tariff for the company, formerly known as V.I. Telephone Corp., or Vitelco, that will increase rates by that much.
The commission also voted to dismiss a petition for reconsideration of its April decision to leave Innovative's maximum allowable rate of return at 11.5 percent.
Attorney Maria Tankenson Hodge brought the petition before the PSC at its May meeting on behalf of her client Justine Flashman, a concerned consumer. Hodge also asked the commission to deny the tariff request by the company, which will translate to the increase of more than 17 percent on monthly bills.
To get an idea of how the approved tariff will impact on the costs of various customer services, see "How much Innovative wants to hike phone fees".
Hodge had taken issue with three main aspects of the commission's April decision: the treatment of advisory fees paid by the telephone company to its parent firm, Innovative Communication Corp.; the treatment of the company's Economic Development Commission tax benefits; and the allowable rate of return. (See "PSC to study phone company rate increase bid".)
The fees paid to ICC should not have been calculated as part of its operating costs in determining the company's rate base, Hodge told the PSC. "Advisory fees are not to be charged to the consumer," she said. "They're not even supposed to be booked by the company without your approval."
In April, the PSC had also decided to not include Innovative's EDC tax benefits in calculating its rate of return, despite hearing examiner Frederick Watts' recommendation that they be included. The benefits are due to expire in September, which was the reason given by the commission for deciding not to include them in determining the company's level of profit.
Hodge argued that the benefits should be "flowed through" to ratepayers. "It is improper for a utility to expect customers to pay for taxes that it will never have to pay," she said. "Consumers should not be charged for imaginary taxes."
With regard to the company's allowable rate of return, Hodge contended that the PSC should have accepted Watts' recommendation that the rate be reduced to 10.6 percent.
"We all know that the cost of debt has gone down," Hodge said. "By keeping the 11.5 percent rate of return, you're essentially giving the phone company an overpayment. The overall 11.5 percent rate of return was fair in 1992, but it's not fair now."
Innovative's attorney, Julia Johnson, told the commission members that their decision was a "fair decision," although the company had requested an increase in the allowable rate of return to 13.84 percent. She accused the complainant of being "deeply enrolled in a blame game."
In response to Hodge's claim regarding advisory fees, Johnson said the PSC had moved to allow the inclusion of such fees in calculating the rate base in a 1992 settlement agreement between the commission and Vitelco.
The agreement states in this regard: "The company will be permitted to include as local expense the total amount of $600,000 per year for (A) services rendered by its parent companies …"
Johnson said the issue of the EDC benefit is moot because the benefits will expire on Sept. 30.
PSC member Alecia Wells made the motion for the commission to dismiss Hodge's petition and to put the new tariffs into effect. It passed on a 4-0 vote with Jerris Browne, PSC chair Valencio Jackson, Alric Simmonds and Wells in favor. Verne David, who attended the meeting, was absent at the time of the vote.
"We try awfully hard to be fair both to the consumers and the utilities," commission member Simmonds said, "and I think we have succeeded in this regard."
Sen. Adlah "Foncie" Donastorg disagreed. "The PSC is supposed to look out for the interest of this territory's consumers and yet 99 percent of its actions favor the utility companies," he said in a news release. "I had hoped things were improving at the PSC, but I am sickened by reports of what went on Friday."
Donastorg has been at odds with the phone company and ICC over rates and other matters for several years in the Senate, before the PSC and in litigation. In the release he said that the phone company "includes in its operating costs a 6 percent advisory fee on gross earnings" and the fee "this year totaled more than $3 million."
He also said the EDC has yet to issue a report on an investigation into alleged violations of the phone company's tax benefits agreement, "although it has been years since these infractions were documented." He added that he "will not be surprised" if Innovative Telephone asks for a renewal of its EDC benefits, which were granted in the Schneider administration.
In addition to Browne, David, Jackson, Simmonds and Wells, Sen. Shawn-Michael Malone, a non-voting member, was present at Friday's hearing. Voting member Desmond Maynard was absent, as was the other non-voting member, Sen. Luther Renee.
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