VITELCO, PSC TARGETED FOR SENATE PANEL HEARING

Sen. Adlah "Foncie" Donastorg is urging the public to attend Wednesday's 10 a.m. meeting of the Senate Government Operations Committee on St. Thomas to hear testimony on a bill requiring the Public Services Commission to investigate local telephone rates.
"Call or write your senators, the people you elected," Donastorg said in a press release, "or come to the meeting and testify."
Donastorg has been fighting an uphill battle for an investigation into V.I. Telephone Corp. rates. Almost three years ago, the Senate voted unanimously to petition the PSC to reduce phone rates. Since then, the commission has blocked all efforts at investigation.
The legislation Donastorg has proposed conforms, he said, to recommendations made last December by V.I. Inspector General Steven Van Beverhoudt, who noted that many states require periodic telephone rate investigations. Van Beverhoudt is expected to testify Wednesday, according to Nicole Bollentini, Donastorg's spokesperson.
PSC executive director Keithly Joseph said the last investigation of Vitelco rates was in August 1992. Bollentini said that was the conclusion of a probe begun in 1990.
Joseph said Government Operations Committee chair Gregory Bennerson wrote asking PSC board chair Walter Challenger to attend the hearing. "I have forwarded the letter to the chairman, but I haven't had a response," Joseph said, adding, "I will definitely be going, myself."
Vitelco president Samuel Ebbesen is also among those invited to testify.
In a Senate hearing a year ago convened to investigate PSC practices, Jamshed Madan of Georgetown Consulting Group testified that Vitelco passes a regular charge to cover the costs of rate investigations on to its customers, regardless of whether investigations are done.
Madan's company served as a PSC consultant for many years. Its last undertaking for the commission was to prepare a report on Vitelco rate practices after the 22nd Legislature asked the PSC to consider reducing phone rates in view of the company's having been granted full Industrial Development Commission tax benefits. Madan recommended an investigation. The PSC, with Challenger as chair, rejected the recommendation.
Challenger's continuing chairmanship of the commission is an issue in itself. His term expired June 2, 1999, but PSC members whose terms expire can continue to serve until their successors are confirmed.
In his press release, Donastorg said he has "a tremendous amount of information about Vitelco's questionable practices and corruption within the PSC." He cited as his major areas of concern:
– Phone rates have not been reviewed since 1990, and the last two rate investigations, in 1990 and 1988, each resulted in a rate decrease.
– Current Vitelco profits are estimated at over 25 percent, when by law the utility's maximum allowed rate of return is 11.5 percent.
– Earnings more than tripled, from $6.2 million in 1996 to $20.5 in 1997, after the company was granted 100 percent tax breaks, and estimated earnings continue to skyrocket.
– Vitelco has more than doubled "advisory fees" and dividends paid to owner Jeffrey Prosser and his Innovative Communication Corp., Vitelco's parent company. Donastorg said annual dividend payments to Prosser increased from $3.5 million in 1996 to $7.6 million in 1997.
– Vitelco billed customers more than $2 million a year for hurricane insurance it never purchased, then used a claim of financial hardship due to its lack of insurance as the basis for seeking more tax breaks. Donastorg said the company has not provided the PSC with documentation of its hurricane losses.
– Georgetown Consulting Group's preliminary report a year ago stated that Vitelco had overcharged consumers by more than $20 million.
– Vitelco has added more than 50 employees from other ICC companies to its payroll who do no work for the phone company.
– The Inspector General has recommended that the PSC conduct a telephone rate investigation and that the territory join the many states that mandate periodic rate reviews.
– Vitelco has, Donastorg said, used a relationship with the PSC to block competition and engage in anti-business practices, including passing on illegal costs to private local pay-phone operators.
– The PSC has, Donastorg said, failed the public by not investigating Vitelco, not requiring the company to file regular reports, ignoring procedures for electing a new chair and trying through favors "to influence officials."

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