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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:
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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.
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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
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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.
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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.
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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.
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