Jamshad Madan, consultant with Georgetown Consulting Group, testified Wednesday that the V.I. Telephone Corp. passes the cost of a rate investigation along with a lot of other expenses right back to its customers.
The Public Services Commission's consultant was called to testify before a Committee of the Whole meeting of the V.I. Legislature that was convened by petition to investigate the operations and practices of the PSC.
Georgetown Consultants has done business in the territory for 20 years. Madan said this particular PSC is the only one that has refused to consider a rate reduction for customers of the telephone company.
Georgetown was finally hired to do a report on Vitelco's rate practices after members of the 22nd Legislature appealed to the PSC to consider a 20 percent rate reduction in view of Vitelco's near-total Industrial Development Commission benefits.
Of the report findings, Madan said, "We said a rate reduction is likely called for and recommended an investigation."
The PSC dismissed Georgetown's recommendations.
Sen. Adelbert M. "Bert" Bryan asked Madan how many times clients had rejected his advice.
"Almost never," Madan said, adding, "never without a reason."
PSC Chairman Walter Challenger cited an error in Madan's report as part of the justification for the dismissal.
The error was in a spreadsheet program that failed to calculate gross receipts tax in Vitelco's expenses.
But Madan said under Vitelco's IDC benefits, the company doesn't pay gross receipts tax any more and won't for the five years of IDC benefits, so the error had no bearing on financial projections.
In obtaining IDC benefits, Vitelco said it would invest $100 million in upgrading its services. But Madan said his calculations did not come up with any $100 million investment. "At the current rate of $8 million to $15 million a year, that doesn't add up," he said.
Madan said $600,000 a year is set aside by Vitelco to pay for rate investigations. If no investigation is performed, the money goes back to Vitelco. There has not been a rate investigation done since 1992.
Vitelco maintains it is guaranteed an 11.5 percent rate of return, but Madan said that was agreed to in 1992 for two years only. He said public utilities all over the country have reduced their rates of return because interest rates have gone down. "Money is cheaper," Madan said.
But Madan said PSC Chairman Walter Challenger said that premise didn't apply here.
Sen. Anne Golden said that other areas of the country don't have to contend with hurricanes like the Virgin Islands does. And "money isn't cheaper here," she said.
However, according to Madan, that's not really pertinent either. There is an organization called the National Exchange Carrier Association that assists local telephone companies that have extraordinary circumstances. If the costs of doing business are more than 115 percent over the average of other communities, NECA kicks in 75 percent of the difference.
"In 1988 and 1989 Georgetown suggested a $3 million rate decrease," he said. "Vitelco asked for a $3 million increase." Madan said the PSC decreased rates by $1.3 million. At another juncture Vitelco asked for a $6.75 million increase and then reduced it to $4.8 million. The PSC ordered a rate reduction of $3 million.
As a consultant to the PSC, Madan said he has always received financial statements from Vitelco. He has not received a statement since "September or October of 1998."
In September businessman Jeffrey Prosser filed documents with the Securities and Exchange Commission that would pave the way for Innovative Communications Corp., a private company solely owned by Prosser, to buy the V.I. Telephone Corp., Vitelcom, VitelCellular and SMB Holdings Ltd. from Emerging Communications Corp., a publicly held company.
Under questioning about Georgetown's $73,000 fees for the most recent reports, Madan said he estimates his consultation services and recommendations have saved Vitelco's ratepayers about $75 million over the years.
Madan's testimony capped a day of political posturing that saw a pronounced split between pro-PSC and pro-Vitelco senators versus anti-PSC and Vitelco senators.
Sen. Adlah "Foncie" Donastorg, the leading critic of the PSC and champion of a rate reduction for telephone users, pointed out that the division followed the same lines drawn last month when senators approved the Prosser land-for-tax-breaks bill on an 8-7 vote. Gov. Charles W. Turnbull vetoed that measure.
