Staff of the Arizona Corporation Commission on Friday recommended the commission impose an immediate cut of $33.4 million in US WEST Communication rates while they consider whether to double the figure.
The recommendation is contingent on the state Supreme Court lifting a temporary stay and letting the commission proceed with the rate case next month, said Gary Yaquinto, director of the commission's utilities division.US WEST, formerly Mountain Bell, said it still considers the rate case illegal and believes that Yaquinto might have violated Justice James Cameron's order by making his recommendation Friday.
US WEST spokesman George Miraben said he believed that Cameron's order "stayed any activity whatsoever" on the rate case, including Yaquinto's new recommendation.
But Yaquinto said he had not actually filed the recommendation with the commission and had only had it printed and distributed to parties in the case after consultation with commission lawyers.
Cameron "stayed proceedings, that's what he did," commission chief counsel Tim Hogan agreed. "I don't think he stayed announcements."
Yaquinto had recommended last week before Cameron issued the stay that US WEST rates be cut $66.7 million on a permanent basis after a full hearing but had not suggested an interim cut for implementation before the hearing is complete.
"Due to changed economic conditions affecting US WEST, its customers are due substantial rate relief immediately," Yaquinto said in a prepared statement Friday. "If the Supreme Court on Jan. 17, 1989, allows the commission to proceed with an interim hearing, we are prepared to ask the commission to implement a $33.4 million reduction immediately, with a further $33.4 million reduction to be decided in the permanent hearing scheduled for May 15, 1989."
US WEST officials said earlier this week that the $66.7 million overall cut proposed by Yaquinto's division would amount to confiscation of 70 percent of the company's operating profit for 1987.
"It is silly for US WEST as a monopoly provider of telephone services, to suggest that the staff's recommendation is to confiscate profits," Yaquinto replied. "The staff proposal is neither illegal nor unfair as claimed by US WEST. It is based upon the same procedures and principles that were last used in considering Mountain Bell's request for a rate increase in 1984, including the use of historical test-year data to set future rates."
Yaquinto also accused the company of mischaracterizing the issue when it said it would be willing to make a one-time refund based on 1987 test-year figures but wanted future rates to be based on 1988 data.
"Such one-time refunds, without more, would deprive customers of monthly rate reductions to which they are entitled," he said. "Under current capital market conditions we believe that the return on equity capital that US WEST is entitled to earn is 11.74 percent."