Public Advocate Office Says the Public Utilities Commission's 5-Year Plan for Verizon is Unfair to Consumers

May 9, 2001

On May 8, 2001, the PUC approved a new regulatory plan for Verizon, which will result in higher local exchange rates for Maine’s consumers and which, according to the Public Advocate, is inconsistent with various provisions of Maine law. The PUC’s decision prematurely deregulated most services and allows Verizon to increase its residence and business local rates by $1.65 per month, without going through a full rate case analysis.

In the proceeding, the Public Advocate argued that the cost of providing telephone services will decline every year (by as much as 6.5%). While the PUC cites mandatory access charge reductions as the basis for the new local rate increases, the Public Advocate showed that those access charge losses are small compared to the efficiency gains that Verizon will achieve as a result of its recent merger with GTE and as a result of general productivity. “The PUC should permit local rates to come down,” said Steve Ward, Maine’s Public Advocate. The Public Advocate also demonstrated that Verizon itself was largely responsible for causing reductions in its access revenues, in exchange for line rate increases allowed by the FCC.

In its decision, the Public Utilities Commission disregarded key evidence provided by the Public Advocate. The Public Advocate introduced substantial evidence, including detailed testimony of three expert witnesses, demonstrating that:

Verizon’s losses in the competitive toll market and its decreasing access revenues are small compared to the productivity (efficiency) savings it achieves and will continue to achieve every year. Therefore, rates should be decreasing annually.

Verizon’s residential customers and most business customers have virtually no competitive choices for local telephone service

Without sufficient regulation, Verizon will raise prices well above reasonable rates for those services not subject to competitive forces.

“The Commission’s plan does nothing to lower rates for in-state long distance: those rates have decreased as a result of toll competition and action by the Maine Legislature. The Commission has merely allowed increases to local rates with no offsetting benefits for consumers,” said Steve Ward.

Finally, the Public Advocate asserts that the Commission has failed to live up to two promises it has made in recent cases: to consider requiring Verizon to share savings with consumers that were achieved through two major mergers during the last five years (NYNEX-Bell Atlantic and Bell Atlantic-GTE); and to return $4 million in school and library funds to ratepayers even though rates continue to reflect the costs of that project that Verizon no longer supports with those funds.

For further information contact, Stephen Ward at 287-2445 or at Stephen.G.Ward@state.me.us.