Modernization of 41 rural central switching offices must be tied to a proposed incentive regulation plan proposed by US WEST Communications, the company said Tuesday in a brief filed with the Utah Public Service Commission.
And, the company added, an alternative plan offered by the Utah Division of Public Utilities does not meet revenue needs to finance proposed improvements and creates a scenario that could force termination of the plan at its midpoint.The filing of legal briefs on Tuesday signaled the end to months of hearings, debates and legal maneuverings that have surrounded US WEST's proposed incentive rate plan since it was filed in March 1990. It is now up to the commission to review the briefs along with mounds of written testimony and transcripts from the hearings themselves to determine whether the proposed plan will be approved.
US WEST argues that an incentive plan, whereby the company keeps a share of excess earnings generated by improved company efficiency and shares the rest with ratepayers in the form of billing credits, is needed to persuade investors to put up the money needed to finance the proposed system improvements.
Those improvements include continued installation of a fiber-optic backbone network, upgrading rural switching offices to state-of-the-art electronics and providing a fiber-optic loop network to rural public schools and colleges to enhance the state's distance learning offerings.
The division argues that the US WEST plan offers the company an unfair share of the anticipated incentive revenues. The division says its alternative plan provides a better and more just system for sharing revenues and includes a review mechanism to ensure the plan is working properly. The division also argues that a clause that lets the company "veto" any plan it does not like gives the company unfair leverage in pushing its plan.
The Utah Committee of Consumer Services said it believes neither incentive plan is justified at this time and that the commission should reject the plan in favor of traditional rate-making based on cost of services. The committee argues that testimony provided during the hearings does not provide sufficient evidence to believe that ratepayers would benefit equally with the company under the incentive approach.
The committee cited Utah law requiring the commission to set rates that are "just and reasonable," and laws requiring utilities to provide the lowest possible rates.
Both the committee and division argued that the modernization issue should be separate from the incentive issue and that upgrades should be ordered even if the commission rejects the incentive plans offered by US WEST and the division.
Legally, the commission is under no time restraints in making its decision. Most observers believe it will be several weeks before the commission makes its ruling.