Term of proposed Sprint rate increase under review

Wednesday, May 15, 2002 | 11:03 a.m.

The compromise stipulation on Sprint Corp.'s proposed rate increase has hit a snag as the presiding officer for the case has asked the company and intervenors to reconsider the length of the agreement.

Public Utilities Commissioner Adriana Escobar Chanos asked Sprint, the Bureau of Consumer Protection, the PUC staff and four competitors that are intervenors in the case to review the planned three-year term of the deal. In a hearing Tuesday, the commissioner said the way she interprets state rate regulations, Sprint should be required to keep new rates in effect for at least five years.

Representatives of Sprint and Consumer Advocate Tim Hay said late Tuesday that they'd meet with the other intervenors and consider their options. It was unclear whether changing the length of term would be a deal-breaker. Chanos asked the parties to return Friday morning.

The parties are hoping the three-member PUC would act on the proposal by the commission's scheduled meeting May 30 and the new rates would take effect July 1.

Hay said he and the intervenors were caught off guard by Chanos raising the term issue, focusing most of their time developing compromises on rates and other features of the stipulation.

"I don't think anybody was anticipating those kinds of questions," Hay said, adding a five-year term would be advantageous to consumers because it locks in rate stability for a longer period.

However, he said his interpretation of the regulations is the parties have the flexibility to set shorter terms.

Lou Emmert, general manager of Sprint in Las Vegas, said the company wants a shorter term because of the possibility of market conditions changing rapidly with the advancement of technology. A shorter term would enable Sprint to seek another rate increase quicker if changes in technology make Sprint's rates less competitive.

Otherwise, Emmert said, the company is satisfied with the compromise stipulation, even though the company would receive less than half of what it originally asked for in the rate increase.

"It was the best thing for everybody involved," Emmert said. "(The proposed new rate) closes the gap between what we would receive and what it costs to provide the service."

Under the compromise stipulation presented Tuesday, Sprint would be allowed to collect $43.5 million annually from customers instead of the $90 million initially proposed.

The proposal would allow Sprint to raise its basic monthly residential phone rate 15 percent to $10.40 before taxes and the basic business service rate would increase by $2.50 to $20.75 a month.

Under the rate request Sprint presented earlier to the PUC, rates for basic residential service would increase 76 percent, from $9.05 to $15.95 a month and the basic business rate from $18.25 to $22.95 a month.

Hay's office originally had filed documents saying the company should get no increase. The PUC staff had originally recommended reducing the increase to $24.7 million, which would have resulted in a monthly increase of $1.05 on residential phone bills and no increase on business lines.

The compromise stipulation also expands eligibility for Lifeline, a federal program Sprint participates in that provides discounts to the monthly charge for basic local residential service to qualifying low-income subscribers.

Under the new eligibility parameters, about 40,000 additional Nevadans could participate in the Lifeline program, which currently has a basic line charge of $6.19 a month that would be reduced to $5.77 under the new rates covering most Southern Nevada communities. Lifeline rates are slightly lower in Laughlin and Mount Charleston. About 22,000 Nevadans currently are eligible for the program.

The compromise stipulation would make more people eligible by changing the income level at which an individual or family could apply from 150 percent of poverty level to 175 percent.

For example, the federal poverty level for a family of three currently is an annual income of $14,630. Under the current rules, Lifeline eligibility would be reached at $23,774 or less a year, but under the proposed new rule, it would change to $25,602 or less a year.

"Sprint's willingness to expand Lifeline benefits to more people makes this more workable for consumers at or below the poverty level," said Larry Spitler, Nevada associate director of advocacy for the American Association of Retired Persons in Nevada.

"We also think the proposed rate increase is something that is much more in line with what is reasonable," Spitler said. "The first proposal was a substantial increase."

Spitler said many of the low-income retirees he represents already were reeling after a series of Nevada Power Co. rate increases.

"We've seen some big increases," Spitler said. "This seems reasonable."