Request for rate hike challenged

Tuesday, April 16, 2002 | 11:14 a.m.

Nevada's consumer advocate says Sprint Corp., Las Vegas' dominant local telephone service provider, shouldn't get any of the $90 million rate increase it has requested.

Consumer Advocate Tim Hay said the state Bureau of Consumer Protection has filed documents with the Public Utilities Commission of Nevada recommending against Sprint's Corp.'s 76 percent rate increase, its first in three years.

Sprint's proposal would raise the basic residential phone rate from $9.05 to $15.95 a month and the basic business rate from $18.25 to $22.95 a month.

The three-member PUC, which late last month completed hearings and voted a partial increase of electricity rates for Nevada Power Co., is scheduled to hear what is expected to be a two-week Sprint case beginning May 13 and, if approved, the new rate would take effect July 1.

Hay said today that several factors contributed to his office's recommendation to disallow the entire rate increase.

"There are several issues, some of them confidential, that added up leads us to recommend disallowing very nearly all of it (the rate increase)," Hay said.

Hay said about one-third of the increase could be eliminated by including revenue generated by Yellow Pages advertising to calculate local rates. Sprint has established a separate affiliate to handle the publication, and about $28 million generated by the company isn't counted in the rate case.

Hay also recommended disallowing allocations for expenses relating to digital subscriber line technology and other technology advancements. He said many of the costs were allocated against residential rates, which he said is improper because these new services are a nonregulated, competitive offering not subject to local rate regulation.

A lower rate of return on equity for company investors also was recommended by Hay. He suggested a rate of between 8.75 percent and 9.25 percent, compared with a 10.1 percent rate proposed by the company.

Hay said he could not discuss details of another area in which he recommended a reduction because it involves competitive issues considered confidential by Sprint.

In addition to the consumer advocate's filing Monday, the PUC staff recommended reducing Sprint's rate increase to $24.7 million, or $1.05 a month instead of the $6.90-a-month increase sought for residential customers.

The PUC staff also has recommended disallowing some of Sprint's proposed increases. A spokesman for the office said the staff recommended adding Yellow Pages revenue into the request and suggested other adjustments that would result in a total increase that is 27.4 percent of what the company is seeking.

Under such a plan, a residential customer's bill would climb to $10.10 a month, an 11.6 percent increase.

The staff also suggested a $6.4 million adjustment on depreciation, an $8 million adjustment on competitive services, a $3.5 million adjustment in advertising and sales agency revenue and a $6 million adjustment in services the PUC considers interstate and not intrastate. State regulators do not oversee Sprint's interstate services.

The staff recommendation also allows for a 9.25 percent rate of return for investors.

"We're reviewing the testimony (from the PUC staff and the consumer advocate) that we received late Monday," Detra Page, a spokeswoman for Sprint in Las Vegas, said today. "We're still very confident in our case."

Sprint officials have said their push for a rate increase has been spurred by the fact that one in five Nevadans uses a cellular phone and has no traditional telephone lines, resulting in a disparity between revenues and capital construction needs.

Sprint has invested more than $1 billion in Southern Nevada since it entered the market in 1993 and plans to spend another $869 million over the next five years building out its telephone and data systems.

The PUC has conducted a series of consumer comment sessions at which customers were skeptical over whether raising rates would help the company, since many said they would drop service and go to cellular phones rather than pay higher traditional line rates.