A $10.6 million rate reduction order for US WEST Communications may force the telephone utility to re-evaluate its request for an incentive rate plan later this year.
The Utah Public Service Commission on Friday ordered the interim reduction, which will lower average monthly telephone bills by 60 cents. The reduction is nearly $2 million more than the request made by the Utah Division of Public Utilities during a May 24 hearing. In April, the division filed for a $5.7 million reduction but increased that request to $8.6 million during the hearing.The division's request followed a review of US WEST accounts which the division said indicated the utilities' earnings exceeded the 11.8 percent profit margin authorized following rate hearings last fall. The Utah Committee of Consumer Services had pushed for a $16.9 million reduction.
During the hearing, telephone officials conceded that company earnings exceeded the authorized profit margin. But, they argued, the excess was less than $5 million and did not justify an interim reduction since a full rate hearing was already scheduled for December.
"This order will probably force the incentive hearing to be forward-looking and based on 1991 earning projections," said Public Service Commission Chairman Ted Stewart. "More than anything, I think people need to realize this is an interim order and could be affected by the rate case in December."
US WEST spokesman Dennis Wood said company officials were disappointed by the order.
"We are still in the process of evaluating the order," Wood said. "Our biggest concern is in the standards used for this process. We believe the standards for interim increases and decreases should be the same."
During the May hearing, US WEST pointed to a 1985 interim rate increase order that said interim changes should be used sparingly. US WEST officials argued that current circumstances did not warrant an interim change.
Wood said the companies' request for an incentive rate plan is still on the table. However, the proposal could be modified by the interim order.
US WEST's plan asks the company be allowed to keep excess earnings up to a level that will be specified by the commission. The excess earnings will act as an incentive for the company to become more efficient. Earnings above the specified limit would be shared 50/50 between the company and ratepayersthrough future rate reductions. In return for the incentives, the company proposes to freeze rates at current levels for four years.
The company said the incentive plan is needed to encourage investors to provide $100 million to finance switching office improvements and installation of a statewide fiber optic trunk line.
Opponents argue the planned upgrade will occur naturally as needed and that the incentive plan is a ploy to allow the company to keep excess earnings.
The December hearings will combine the incentive proposal with a full review of the company's rate structure. Stewart said he believes basing the plan on 1991 expectations will insure future excess earnings are the result of improved company efficiency.