Nevada regulators won’t review Mpower rate hike

Friday, April 26, 2002 | 10:14 a.m.

Mpower Communications Corp. customers in Las Vegas, angered that a residential rate increase this month will nearly double their telephone bills, are being told by Nevada utility regulators they don't oversee the company's rates.

Rick Hackman, manager of the consumer complaint resolution division of the Public Utilities Commission of Nevada, said that means the best option for people who think Mpower's new rates are too high is to find a new phone company.

Hackman explained Mpower and several other telephone companies serving Southern Nevada are competitive local exchange carriers that buy phones lines from the incumbent local exchange carrier Sprint Corp. and sell service to their customers at a profit.

Mpower buys lines from Sprint in bulk amounts at a discount rate and sells service at rates that normally are below Sprint's.

But competitive local exchange carriers have minimal contact with the PUC and never go before the regulatory board for rate increases. Normally, the PUC approves a company's agreement with the incumbent carrier -- Sprint in Southern Nevada and Nevada Bell in the north -- and then has little further contact after the company has received certification.

Mpower began notifying its customers in April bills of a rate restructuring plan that would increase rates for about a third of its residential users beginning May 15. The new rate plan was first revealed in testimony Mpower executives submitted last week to the PUC in support of Sprint's proposed $90 million rate increase.

Mpower won't say how many customers it has in Las Vegas, but the company services about 28,000 residential and 35,000 business lines.

Under Mpower's new rate plan, customers with basic residential service will be converted to "Residential Plus" service that has call waiting, call forwarding, anonymous call rejection and Caller ID services for $28 a month.

Customers who already have Residential Plus service would be upgraded to "Complete Connections" service which has additional features for $30 a month.

Mpower officials said most of their customers already have at least some of the premium services so the rate increase is minimal. Some customers could see a rate decrease.

But for those with Mpower's basic residential service, the rate increase is dramatic. With tax, customers paying $14.30 a month will pay $28 a month after the increase.

"We got about 50 calls about it in the last couple of weeks," Hackman said. "The general tone was that callers wanted to know if the PUC had approved the rate increase. The answer to that, obviously, is no. Then they asked if we could do something. The answer to that is, 'See (the first) answer.' "

Hackman said because the PUC's regulatory authority over competitive local exchange companies is minimal, the free market dictates rates.

"People who are dissatisfied with the rate can vote with their feet," he said.

Consumer Advocate Tim Hay said his office examined whether Mpower used deceptive trade practices in its rate-increase plans but found the company had made all disclosures properly.

Hay said the company, which filed for Chapter 11 bankruptcy protection earlier this month, appears to be retrenching its business plan to focus more on the small commercial market, which is more lucrative than the residential market.

He said the strength of incumbent phone companies such as Sprint have kept deregulated competitors such as Mpower from gaining much market share among residential users.

In the Las Vegas residential market, Mpower is a distant No. 2 behind dominant Sprint.

Hay said market conditions led Mpower to take the unusual position of supporting Sprint's rate increase, which was the PUC testimony in which the company first mentioned it was raising its prices.

S. Gregory Clevenger, executive vice president and chief strategy and planning officer for Pittsford, N.Y.-based Mpower, said unless Sprint raised its rates, Mpower would not be able to compete in the residential market in Las Vegas and he expected his customers would defect to Sprint.

Hay's office recommended Sprint's entire rate increase be rejected while the PUC staff recommended the increase be reduced to $24.7 million, or a monthly increase of about $1.05 on the average residential bill.

Because the Sprint rate proposal is in limbo until the PUC takes up the issue May 13, Hackman recommends Mpower customers not bolt to Sprint until a decision has been reached.