Oct. 20, 2003 – Attorney Maria Tankenson Hodge of behalf of her client Justine Flashman has filed an appeal in Territorial Court of the Public Services Commission's recent decision to grant Innovative Telephone rate increases.
In May, Hodge had filed a petition on Flashman's behalf asking the PSC to reconsider its April decision to leave Innovative Telephone's maximum allowable rate of return at 11.5 percent, although its hearing examiner for the phone company had recommended reducing that rate.
Hodge had also asked at that time that the PSC suspend action on the company's request for an increase of about 17 percent in its tariff, or rate schedule. (See "How much Innovative wants to hike phone rates".) The commission voted to do so at that May meeting; however, at its August meeting, it voted deny Flashman's petition and to approve the tariff increase.
The appeal to Territorial Court "was the only way to attempt to obtain a fairer and more equitable outcome for the public, since the commission had obviously decided not to reconsider its action," Hodge said. In the appeal petition, she states that by law the PSC may not allow a public utility a return in excess of 8 percent of its net investment, except where it is "imperative" to do so "in order to be fair to the consumer interest and to the investor interest."
Hearing examiner Frederick Watts had recommended that the PSC reduce the maximum rate of return to 10.62 percent from 11.5 percent.
"The PSC's proceedings have been inherently unfair to the consumer interest and have left the investigation to be conducted as if by default, with only the phone company's interests protected, and without any advocate for the consumer's rights," Hodge stated in the appeal. She added that the commission's use of Watts, PSC's legal counsel, as hearing examiner deprived the body of the benefit of Watts' legal advice when considering its decision.
There are two other issues that Hodge and her client take issue with in the appeal.
One is the PSC's allowing Innovative Telephone to treat millions of dollars in "advisory fees" paid to the sole stockholder of its parent company, Innovative Communication Corp., as an operating expense in calculating the company's rate of return. That "directly contravened long-standing PSC and judicial precedents prohibiting such fees from being included above the line, except upon prior PSC approval," Hodge stated.
The other is of the PSC agreeing to allow the company to ignore its Economic Development Commission tax benefits and to have its rates calculated as if it were paying the taxes. "The PSC's technical consultants recommended that these imaginary taxes not be recovered from ratepayers and that the tax exemptions be accurately reflected in the calculation of rates, as they have been in the past," she said.
Hodge, a former PSC legal counsel, resigned in 1998 after the commission ignored a resolution passed by the 22nd Legislature calling for a reduction of phone rates because of the EDC tax breaks granted the utility, as well as the recommendations of its outside consultant and of Hodge. She is representing her client without charge.
She said no date has been set for a court hearing on the petition.
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