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PSC TO STUDY PHONE COMPANY RATE INCREASE BID

May 23, 2002 – A month after the Public Services Commission rejected a recommendation to reduce Innovative Telephone's allowed rate of return, the phone company's president appeared before the commission on Thursday to ask that the utility be allowed to increase its consumer rates because it is operating at a deficit.
After also hearing two objections, PSC members voted to suspend action on the request for up to eight months. And it voted to hire a consultant to assess the impact of the requested tariff increases and submit its findings within 60 days.
David Sharp, president of Innovative Telephone, formerly V.I. Telephone Corp. — Vitelco, told the commission that the company currently is showing a deficit of about $9.7 million and that it is seeking to recoup $4.5 million of that amount through the requested rate increases.
"We believe the tariffs we have filed are fair," Sharp said.
Sharp said the rate increases would allow the telephone company to attain its allowed rate of return and to provide better services to consumers. While the current allowed rate of return is 11.5 percent, he said, earnings are 6.1 percent.
At its April meeting, the commission rejected recommendations by hearing examiner Frederick Watts to reduce Innovative Telephone's authorized rate of return to 10.62 percent and to include the phone company's Economic Development Commission tax benefits in calculating the rate of return. The commission voted to keep the allowed rate of return at 11.5 percent and not to include the EDC benefits, because they expire in September.
On Thursday, attorney Maria Tankenson Hodge filed a petition on behalf of her client Justine Flashman asking the PSC to reconsider its decision made at the April meeting. "We would ask that you suspend this rate increase," Hodge said, referring to Sharp's request.
Watts also recommended Thursday that the commission suspend action on the rate increase request.
The PSC moved to grant Hodge's petition and to suspend action on the increase.
By law, the PSC can suspend action on a rate increase request for up to eight months but can choose to deny or allow the increase at any time within that period. If the commission had not suspended the request, the new rates sought by the company would have gone into effect by their inaction. The suspension allows the PSC to do further analysis.
In other business, commission members told the Water and Power Authority that they are still dissatisfied with the lighting situation on the territory's highways.
At the April meeting, the PSC ordered WAPA and the Public Works Department to begin repairing and installing the highway streetlights on May 8 and to have the job completed in 60 days. However, no work has been done.
WAPA's executive director, Alberto Bruno-Vega, told the PSC on Thursday that the authority has contracted Best Construction to repair the lights along Melvin Evans Highway on St. Croix. However, "the work cannot be done expeditiously because we have not been given a listing of the equipment and material needed," he said.
Under an agreement with Public Works, WAPA is responsible for hiring a contractor and purchasing the equipment needed for the repairs. But Bruno-Vega said Public Works has yet to provide a list of what's needed.
Commission member Alric Simmonds urged WAPA to get moving on the project. "We've been delaying this matter too long now," he said.
Also at the meeting, Georgetown Consulting Group presented a report of its investigation into WAPA's levelized energy adjustment clause surcharge. The surcharge is tied to the fluctuating market costs of fuel and is subject to review every six months.
WAPA filed a petition on May 15 seeking an increase in the potable water surcharge of $3.81 per thousand gallons and proposing to keep its electricity LEAC surcharge at $0.0882 per kilowatt hour. Utility officials said they were seeking the water increase in order to recoup losses from the underbilling of consumers over the current six-month period.
Georgetown recommended that the PSC leave the electric LEAC surcharge at $0.0882 and reduce the water LEAC surcharge to $0.39 per thousand gallons. Georgetown also recommended that the underbilling of consumers be recouped over a 12-month period. The PSC approved Georgetown's recommendations.
Present at the meeting were the PSC chair, Valencio Jackson; and commission members Jerris Browne, Verne David, Desmond Maynard and Simmonds. Not present were Alecia Wells and the two non-voting members, Sens. Luther Renee and Shawn-Michael Malone, who were attending the Senate special session.

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