Rep. Berry Seeks to Close

Loophole, Require Up To $800

Rebate to All Verizon Customers

 

Due to a loophole in utility law, says Rep. Seth Berry (D-Bowdoinham), Verizon consumers and small businesses in Maine have paid excessive charges of as much as $800 per line to every since the year 2000.  Berry announced today (1/18) that he planned to present a bill next Tuesday that would close the loophole, increase transparency in utility rate cases, and seek redress for past overcharges.

 

The bill, LD 2104, is titled “An Act to Provide for Fairness and Accuracy in Utility Rate Setting.” It has been scheduled for a Public Hearing at 1 pm on January 22, 2008, before the Joint Standing Committee on Utilities and Energy. 

 

The Problem:

 

Unlike telecoms, all other large utilities such as gas and electric must have a complete financial checkup before an AFOR (alternate form of regulation) is established to set rates over the next five to ten years.  This financial checkup, or rate case, is conducted by the Maine Public Utilities Commission.  The purpose of a rate case is to let the PUC set rates that will give utility monopolies a reasonable, guaranteed profit, but without overcharging their customers.

 

In 1995, the PUC conducted a rate case, and then ordered a five-year Verizon AFOR, or long-term rate arrangement.  Five years later, the PUC then renewed the AFOR – this time without a rate case to evaluate Verizon profits and changing market conditions.

 

Decrying the skipped rate case, Maine’s Office of the Public Advocate then took the PUC to the Maine Supreme Court.  The law was not entirely clear on this point, but after several years the Public Advocate prevailed.  The Court found the PUC had violated the law by not reviewing rates in 2000, and ordered the PUC to do so.

 

By late 2007, the PUC was under new leadership and the resulting rate case was nearing completion.  In a major step toward resolution, the PUC’s Staff Examiner agreed with evidence presented by the Public Advocate and AARP that Verizon was overearning by  roughly 25% of the basic service landline bill, or about $32.4 million per year.  If adopted by the Commissioners, this overearnings recommendation could have resulted in a rate decrease of nearly $8 per month.

 

Just after this announcement, however, the case was delayed due to the pending Verizon-FairPoint merger case.  To avoid taking up the overearnings issue at a critical time, Verizon agreed to a one-time investment of $12 million in high-speed internet buildout. 

 

Since then, the Public Advocate, Verizon, and Fairpoint have reached a settlement in the merger case, and the PUC has approved it.  This settlement would address the issue of future overearnings by reducing current landline rates by $18 million per year, providing an estimated $4.25 per line in monthly rate relief for the next five years. 

If the Verizon-Fairpoint merger is approved by New Hampshire as well as Vermont and Maine, the settlement will stick.  If not, the settlement fails, the rate case is back on the PUC table, and a different level of rate reduction is possible.  In this event, if the PUC agreed with its examiner, the reduction could be nearly $8 per line per month – or almost $100 per line per year. 

 

“Because the PUC has not investigated the previous eight years, it is difficult to estimate the total amount overpaid by Maine telephone users, ” said Berry.  “If we use the examiner´s figures and estimate backwards based on that amount, the total would come close to $800 in excessive rates, paid by every Verizon telephone customer. At that rate, we are talking about well over $300 million total. ”

 

The Solution:

 

Berry believes the most important and measure in his bill is to close the loophole against future overcharges.  Part 2 of the bill would require the Public Utilities Commission to conduct a rate case before the adoption or renewal of a long-term rate arrangement.

 

In addition, the bill seeks to be sure the PUC has complete and accurate information.  For this reason, Part 1 provides for penalties, in case a regulated utility should ever make a material misrepresentation or omission of fact.  Such a circumstance may not have already occurred, but the provision is about deterrence.  Were it to occur, the penalty would be no less than the excess charges resulting from the misrepresentation, omission or misconduct -- and would be a direct refund to ratepayers.

 

In an effort to recover what may be over $800 per line in overcharges to Maine´s Verizon customers, Part 3 also requires that the Commission determine whether rates have been excessive with respect to the Verizon AFOR.  If rates are found to be excessive, the PUC must then order a refund to customers for the amount in excess.  Normally, the PUC does not have the authority to order refunds.

 

Rep. Berry expects the bill’s provision enabling a refund of as much as $800 per line to be attractive to consumers and small businesses, but strongly opposed by utilities lawyers.  “A good government learns from past mistakes,” says Berry.  “We need to ensure that Maine’s small businesses and residents are given every chance to be made whole – and never again overcharged so egregiously.”

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Bill text

http://janus.state.me.us/legis/LawMakerWeb/externalsiteframe.asp?ID=280027612&LD=2104&Type=1&SessionID=7

 

Public hearing information

http://janus.state.me.us/legis/LawMakerWeb/externalsiteframe.asp?ID=280027612&LD=2104&Type=2&SessionID=7