The Legislature, Public Service Commission and the Division of Public Utilities all helped US WEST make "unreasonable and unjustified profits" at the public's expense for the past four years, according to a Utah Supreme Court ruling.
The strongly worded ruling struck down as unconstitutional a law passed by the 1990 Legislature that allowed US WEST to veto improvements the PSC required it to make. The law also allowed US WEST to make a greater profit in exchange for improving phone service.But US WEST has made "exorbitant profits" in Utah in recent years, the court noted. The phone company may have exceeded authorized profits by as much as $91 million between 1987 and 1990, the court noted.
The court ruled that the PSC erred when it allowed US WEST to further increase its rate of return - legally approved profits - in exchange for improving Utah's phone system.
"We're disappointed in the ruling," said Duane Cooke, spokesman for US WEST.
The court ordered the PSC to hold hearings to see if US WEST should be required to return some of the profits allowed by the law.
US WEST doesn't know how much money that might be, Cooke said. "We haven't done an analysis and aren't ready to speak in terms of numbers," he said.
The court further ordered US WEST to pay the attorneys' fees for the few ratepayers who challenged the law.
The 1990 law, sponsored by former lawmaker and attorney Fred Finlinson, gave US WEST power to have a higher statutory rate of return in exchange for improving the phone service. US WEST lobbyists told lawmakers the company couldn't afford the improvements without more profits, Finlinson said.
Lawmakers overwhelmingly passed the bill that allowed US WEST to make half a percent more in profit in exchange for unspecified improvements.
The law further gave US WEST unprecedented power to veto any plan for improvements that the PSC proposed, the ruling said.
"We specifically put that in the bill because some of the utilities figured they may be asked to do something by the commission in the area of improvements that they couldn't live with," Finlinson explained.
By doing that, the Legislature did something the Supreme Court couldn't live with.
The court found the law unconstitutional because it illegally gives legislative and judicial power to a private business so that business can profit at the public's expense, the court ruled 4-1.
US WEST promptly used its veto power after the 1990 session. When the PSC drafted an incentive plan that required US WEST to make certain improvements, US WEST refused to implement it, according to the ruling.
US WEST proposed its own plan, which, among other things, would ban the PSC from lowering telephone rates for four years no matter how much profit US WEST was making.
The PSC authorized a rate of return increase from 11.8 percent to 12.2 percent. It also required US WEST to make the following improvements with that additional money: upgrade 41 central offices and lay fiber optic cable in various parts of the state.
US WEST appealed those requirements to the Utah Supreme Court. The court combined US WEST's appeal with the ratepayers' challenge of the law.
US WEST said the PSC didn't have evidence to order US WEST to make the upgrades. The court disagreed.
"The PSC is clearly pleased with that ruling," said PSC attorney Dave Stott.
"The ruling is moot because we have virtually completed those improvements anyway, nearly a year ahead of the order deadline of 1993," Cooke said.
The ruling may fuel the growing public concern over lobbyists' influence over Utah lawmakers. It also raises questions about who looks out for the public interest when utilities seek to increase their profits.
The court dwelt on that question, noting that no one stepped in on behalf of the public.
"A handful of ratepayers acting entirely on their own, took on US WEST, the PSC and the Division of Public Utilities and have succeeded in having the commission's rate of return set aside as unlawful, (a state law) declared unconstitutional, and the commission's `incentive plan' held invalid.
"It is significant that the Committee of Consumer Services, which by statute is charged with the responsibility of representing consumer interests, made no appearance at all on this appeal and that the commission and the Division of Public Utilities have opposed the ratepayers on all issues," Associate Chief Justice I. Daniel Stewart wrote.
"We take umbrage at the implication that the PSC was derelict in its duty," Stott said.