Bell should have been pleased with the decision; it got most of what it probably wanted. It got to impose 200 for pay phones and charges for directory assistance. It got increases for all services it requested except private lines. And it got a $70 million increase in total revenues. This last figure needs explaining. The PUC order granted $57 million. What it failed to reckon on, however, was Bell’s reduced costs resulting from the approval of directory assistance charges. A Bell estimate put the cost reduction at $26 million for its requested plan; for the PUC’s modified plan, the net after taxes would probably be about $13 million. The total increase in revenue: $70 million. The $70 million puts the actual rate of return well above the 12.75 percent granted in the order, effectively the highest ever granted by any utility commission to a Bell company. There is irony in the decision to grant a $65 million increase for long-distance service. Bell requested only $43 million and failed to justify any amount, just as it failed or refused to justify the $45 million request in 1975. The state supreme court had upheld Hill’s contention that the company’s request was not based on any objective evidence: It is recognized that in fixing an intrastate rate there must be a separation or allocation of ratemaking factors . . . between intrastate and interstate operations is essential .. . this essential prerequisite to the fixing of the intrastate rates under attack was not observed by Bell. . . . [T]he testimony of representatives of Bell that the amount of the increase $45,000,000 annually was arbitrarily developed in the St. Louis office of Bell. . . . The PUC gave away what the court wouldn’t. In the absence of a cost of service study, local rates should have born a proportionate share of any increase. Since local service generated about 60 percent of Bell’s total revenues, ordinarily they should have been increased by abut $35 million. Obviously, the $65 million decrease was the spoonful of sugar to make the medicine the $65 million long-distance increse and $57 million net go down. Finally, the order required Bell to revise its rates to conform with the decision, refile the tariffs, and begin charging the new rates. Bell filed the new rates and put them into effect on Dec. 20. The next day, the company asked for a rehearing \(as did nearly all parties to the Audacious to the end The PUC, meanwhile, forgot how much gall Bell has. Many of the new rates bore more resemblance to those it originally requested than those granted. The intervenors were on to the phone company immediately. They asked the PUC for a rehearing to review the new tariffs and reconsider some of the objectionable findings of facts. Ron Greening, counsel for GSA, asked the PUC which set of tariffs would apply in the interim the old ones or the new and excessive tariffs of Dec. 21. The PUC ruled that the unauthorized rates of Dec. 21 could remain in effect until Bell filed a new schedule. The PUC amended its order on Jan. 10 and revised the findings of fact. During the hearings, the commission failed to look into the $833 million Bell paid Western Electric in 1975 and did not query the company about the payment. At Bell’s request, the PUC added a secfact that adjudged the Western Electric payment “reasonable.” Bell’s two lawyers from Baker and Botts attended the Jan. 10 hearing and the same afternoon filed the appeal .that Bell had been threatening. Audacious to the end, the company asked Dist. Judge James R. Meyers to enjoin the PUC decision, set aside the order, and authorize the entire $297 million rate hike request. To support its plea, Bell cited the pre1975 law governing utility rate cases on appeals from city council decisions. The company claimed it would suffer “irreparable loss” every day it failed to collect rates based on the $297 million increase in gross receipts it requested. John Hill, who is obligated by the Texas constitution to defend the PUC in court, called the irreparable loss a “naked [unsupported] assertion.” He claimed that the company had argued its full case before the PUC and had failed to justify its need for an additional $297 million in revenue. Further, he said, the Public Utility Regulatory Act had established the PUC as the authority for rates, and not the courts. Judge Meyers denied Bell’s motion, and the supreme court upheld Hill and Meyers. The next move is up to Bell. Jim Ashley told me how Bell decides the amount to request in a rate case. In 1972, while he was general commercial manager for the San Antonio area, the executive whose responsibility it was to win a rate increase in Austin, he planned to ask for $1.5 million. There was no factual basis for that sum: “Dallas just decided the company needed that much more from Austin.” Then, before the request was filed, it was jacked up to $3 million, then finally to $5 million. It got $1.2 million. Chutzpah, gall, audacity, whatever you call it Bell has it by the yellowand-blue-striped truckload. And why not, such nerve obviously has its rewards. December’s award is the biggest increase Southwestern Bell has ever gotten. Jack Hopper is a consulting economist living in Austin. Bell’s turn You have been accused of being antibusiness, but never “anti-common sense.” Right after filing, the Bell rate case became an hysterical, emotional, often political issue. Some politicians, I’m told, thought they could ride the critter right into the governor’s office. I understand Jack Hopper has written a piece on the rate case. Jack is one of many professionals in the ratesetting business. As you may have guessed, there is no single magical formula for setting utility rates. Jack’s opinion is one of many. I’d like to give you some of the data the Bell professionals considered: In February, 1949, the cost of single party residence service in Austin was $3.25. In August, 1976, more than 25 years later, the price was $7.35. \(By the way, when the PUC finished up, I’d like to invite a comparison to gasoline, food, clothing, entertainment, housing and rent. The utility commission granted Bell less than one-fifth of its request. The actual increase in revenues granted was less than 3 percent of total revenues for the mid-1975 to mid-1976 test year period. It is now 1977, and the rate of inflation continues by at least 6 percent. Incidentally, while the charge for residential service in Austin is $6.50 a month, the actual cost of providing this service is around $13 per month. Bell asked the commission to consider raising the average customer’s monthly bill by around $2, which would depend largely on long-distance usage. This would be true for the vast majority of our residential users. Telephone service doesn’t come cheap. Texas is growing by leaps and bounds. Bell’s 1977 construction budget is close to $1 billion. That’s the only large figure I want to throw at you. Peter Feldman, public relations supervisor, Southwestern Bell Telephone Co., Austin.
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