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HomeMy WebLinkAbout5307I RESOLUTION NO. 5307 A RESOLUTION AUTHORIZING THE CITY OF PUEBLO TO PARTICIPATE THROUGH THE COLORADO MUNICIPAL LEAGUE IN PROCEEDINGS BEFORE THE COLORADO PUBLIC UTILITIES COMMISSION INVOLVING INVESTIGATION AND SUSPENSION DOCKET NO. 1665 AND MOUNTAIN BELL ADVICE LETTER NOS. 1930 AND 1931, AND AUTHORIZING THE EXPENDITURE OF $5,977.14 IN CONNECTION THEREWITH. BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, COLORADO, that: gRrTTnM i _ The Colorado Municipal League is hereby authorized to proceed and participate on behalf of the City of Pueblo in Public Utilities Commission Investigation and Suspension Docket No. 1665 and other proceedings relating to Mountain Bell Advice Letter Nos. 1930 and 1931, in furtherance of municipal interests and consumers. SFCTTnN 2_ The City of Pueblo is hereby authorized and empowered to expend not more than $5,977.14 in connection with the participation described in Section 1 hereof, and in no event shall the City be liable to the Colorado Municipal League or any person acting on behalf of the League for any amount in excess of this authorization. ATTEST: INTRODUCED: December 27, 1983 By MIKE SALARDINO Councilman APPROVED: i Ci y Clerk Vice es ent of t e city Counci 1 4 Colorado Municipal TO: FROM: SUBJECT: DATE: Mayors and Managers or Clerks Ken Bueche, Executive Director > i_�00, Gr it Street, Suite 200 ver, CO 80203 h 03) 831 -6411 Participation in Mountain Bell Rate Increase Proceedings December 23, 1983 Mountain Bell filed on November 28 three Advice Letters and accompanying tariff sheets requesting approval from the Colorado Public Utilities Commission (PUC) of proposed telephone rate hikes. Specifically, in Advice Letter No. 1930 Mountain Bell proposes to collect $51 million through contractual arrangements between it and AT &T or, in the alternative, authority for a "monthly residual access charge billing" element which would be applied on a "bulk basis" to bring the total monthly access charge from Mountain Bell to AT &T to the equivalent of $51,400,000, which Mountain Bell says it is losing. In Advice Letter No. 1932 the request is for an interim increase of $33,200,000 with a flat rider surcharge of 7.38% for monthly rates under tariffs effective October 1, 1983, excluding local coin calls and non - recurring (one -time) charges. This Advice Letter is filed as a contingency in the event that Advice Letter No. 1931, which calls for a permanent rate hike of $151 million, is suspended pending hearings. The proposed $151 million rate hike, and the one which the League is most concerned with at this time, is Advice Letter No. 1931. This Advice Letter was suspended by the PUC on December 16, 1983, and will be heard as INS docket No. 1665. Under this proposal Mountain Bell rates would be increased by 46.08 %, (except for intrastate long distance message telecommunications and related service and local coin calls, which would increase from 20 cents to 25 cents, or a 25% increase). The pending rate proceedings are of particular importance because of (1) the magnitude of rate hikes requested and (2) uniqueness of these proceedings which constitute the first major rate hikes proposed since the divestiture of AT &T. Furthermore, Mountain Bell's major rate hike is not based upon historical test year figures but rather on company "estimates" for 1984 of what Mountain Bell claims it would have earned in 1984 had divestiture not occurred. It is the understanding of our legal counsel that the rate of return on equity proposed by Mountain Bell would be 16 1/2% which, with a return on rate base of 13.06% is higher than ever previously authorized by the PUC. League Participation The League Executive Board has authorized the League to participate on behalf of municipal interests and consumers generally in the 1983 Mountain Bell rate increase proceedings and in related proceedings. 1 League participation will focus both on reducing the proposed rate hike generally and on protecting the interests of municipalities as telephone users. League participation is expected to address (1) preventing the Company from obtaining an excessive rate of return, (2) preventing the Company from making unwarranted pro forma accounting adjustments to operating expenses approved by the Commission, and (3) preventing the Company from utilizing an inflated rate base. The League may also address questions relating to cost allocations for certain services and equipment of particular interest to municipalities as telephone users (such as private line service for traffic signalization and PBX and Centrex service and equipment), if disproportionate increases are proposed for those services. At this time the League does not know whether certain services utilized extensively by municipalities will be singled out for large increases. While Mountain Bell has not proposed a Phase II hearing to restructure rates, our legal counsel believes that a restructuring of rates or another filing is almost an inevitable outcome of the first proceeding. Such a restructuring could be particularly onerous to municipalities if it involved certain municipal services, such as private lines for controlling traffic control devices. The Board voted to finance League participation by requesting a contribution of 6 cents per capita from all member cities and towns which voluntarily decide to participate. Subject to the availability of funds, League involvement will include participating in hearings and other proceedings before the PUC, and possibly in related litigation and judicial review proceedings. The Executive Board also directed that, after conclusion of all proceedings and after deduction of accumulated interest, any balance remaining from these 1983 voluntary assessments be returned to participating municipalities on a pro rata basis if such balance is in excess of 10 percent of the total amount received. If such balance is 10 percent or less of the total amount, the balance will be transferred to the League general fund. As it has in the past, the League anticipates seeking reimbursement for fees and expenses incurred in participating in the rate increase. While there is no certainty of reimbursement of the League's expenses, the League has in some prior PUC proceedings obtained partial reimbursement which has been refunded to participating municipalities when not needed for payment of fees of expert witnesses or attorneys. CML Representation Special Counsel Leonard Campbell and his colleague, Dudley Spiller, have been retained to represent the League. As we have mentioned in the past, special counsel in utility rate matters is needed since proper representation in these cases requires expertise in utility rate law and proceedings, and League staff attorneys do not have such expertise. Additionally, the time of the League attorneys is already fully committed to other League assignments, and utility rate proceedings involve extensive time commitments. The League also plans, subject to availability of funds, to retain one or more utility experts to testify on behalf of municipal and consumer interests. Previous CML Participation in Mountain Bell Rate Hearings CML first participated in PUC rate hearings involving Mountain Bell in 1953. Appearance by the League in other rate increase applications of Mountain Bell (1968, 1970, 1972 1973, 1974, 1975, 1977 1980 and 1982) have helped reduce rate increases which otherwise might have been approved. 2 By way of recent examples, the League participated in a comprehensive manner in a rate increase case filed by Mountain Bell in 1980. In that case the PUC rejected the entire $78 million rate hike sought by Mountain Bell. The Commission's order is now pending before the Colorado Supreme Court. In a 1982 rate proceeding, Mountain Bell requested authority to increase rates to produce additional revenues of $127.4 million. The League and other intervenors protested the amount of Mountain Bell's proposed hike and in November, 1982, the PUC issued its decision authorizing an overall rate increase of $38,510,000. The Phase II proceeding focused on how the $38,510,000 increase would be spread among rate payers. The PUC decided that the rate increase authorized in Phase I should be spread on an across —the— board basis, as urged by the League, rather than through a major price restructuring as had been requested by Mountain Bell. The decision was a major victory for municipalities which would have experienced large increases in charges in private line usage for traffic signalization and similar services, as well as for some PBX services. Under Mountain Bell's proposal, traffic signalization rates would have increased by as much as 1800 percent. The PUC's decision authorized a 6.79 percent across— the —board increase to be effective on September 1, 1983, together with a few other rate adjustments authorized in the order. Reasons for Your Muni to Participate in 1983 Rate Proceedings 1. Participation collectively by municipalities will help ensure that your citizens, as customers of Mountain Bell, will have a strong voice before the PUC to oppose the prospects of large increases in telephone rates. 2. In addition to the direct impact upon your citizens, the potential increased costs of telephone service for your municipal government far exceeds the 6 cents per capita contribution by your municipality. 3. Your participation with other municipalities and the Municipal League will again provide local officials with a united approach to address a common concern. Action Enclosed with this memo to the manager or clerk is a statement indicating your municipality's financial share based u on r capita,,. - using 1982 population estimates prepared by the Colora Department of Local Affairs. (These are the same population figures used for proceeds distributed in 1983 and for 1984 CML dues.) We request that those municipalities electing to participate remit their p ayment to the L eague office as soon as possible Your prompt cooperation is needed so that the amount of available funds for participation can be ascertained. Your voluntary financial participation will be appreciated. Questions If there are any questions concerning League involvement, please feel free to write or call Katy Priest, office manager, or me. 3