Chuck Totto says Hawaiian Tel's justification is so out of whack that the utility should be forced to reduce rates 5.88 percent - not raise them 32.6 percent as it proposes.
Among items the company is using in its justification: $2.7 million for executive bonuses and $1.4 million for national advertising and other image-building services.
The national marketing includes ads touting GTE Corp., Hawaiian Tel's parent, as a communications provider for the National Football League and as sponsors of art exhibits and public television programs.
The company included such items even though the state Public Utilities Commission, which must approve any rate increase, has repeatedly told Hawaiian Tel in previous cases that national advertising and executive bonus expenses can't be used to justify increases.
The company also wants all customers to pay about $2 million to cover losses resulting when Hawaiian Tel lowered interisland rates to special private-line customers - mostly big businesses and other large users, Totto said. The company locked in the lower rates for at least three years to keep those customers from switching to other interisland carriers entering the market, he said.
"(Hawaiian Tel) lost $2 million in giving these discounts," Totto said. "Now it wants the rest of us to pay for that ... This shows again that the company thinks of ratepayers as the deep pockets or guarantors of any losses."
Hawaiian Tel spokesmen defended the cost items, saying they reflect legitimate expenses that regulators have allowed mainland utilities to recover through rate increases.
They said the consumer advocate's office is taking an unreasonable position in challenging such expenses.
Regarding the $2 million for interisland calls, spokesman Calvin Tadaki said the utility adjusted its rates to reflect the competitive market and to come closer to matching the cost of providing such services.
"We see nothing wrong with that," Tadaki said, noting that the PUC approved the special contract rates.
For the overall rate case, Hawaiian Tel last year asked the PUC for permission to raise rates 32.6 percent, or enough to generate $74 million in additional revenue.
But the Division of Consumer Advocacy, in a filing with the PUC Friday, challenged $90 million of the justification costs, saying rates actually should be lowered to reflect the lower revenue requirements.
Hawaiian Tel's proposal would raise Oahu residential rates from $14.40 monthly to $19.09, while Totto's recommendation would lower the tab to $13.55.
In arguing for the reduction, Totto said Hawaiian Tel's authorized profit levels should be reduced by about $1.5 million until it improves substandard service in several areas.
Totto noted that Hawaiian Tel, for instance, falls far short of the standard the PUC has adopted for restoring service within 24 hours to customers suffering phone interruptions.
In 1995, he said, the company met the 24-hour standard for 78 percent of affected customers, nowhere near the 95 percent threshold the PUC and other mainland regulators use. In 1993, the utility met the standard in only 53 percent of cases.
Tadaki said Hawaiian Tel's quality of service has been improving, and the company now has one of the highest customer-satisfaction levels among GTE's phone markets nationwide.
Though Totto found much to question in the company's rate case, he said Hawaiian Tel to its credit didn't include such expenditures as Dallas Cowboy football tickets and Super Bowl activities. Those were among the items the PUC rejected when Hawaiian Tel filed its previous request for a rate increase, which the commission denied.
Totto also said the utility, criticized by regulators in the past for not being forthcoming with information, was more cooperative this time.
Clay Nagao, the PUC's chief counsel, said Hawaiian Tel is free to include whatever costs it deems appropriate to justify a rate increase - even those previously disallowed by the commission.
But "if they use the same arguments (to justify previously disallowed expenses), I doubt the commission will change its position," Nagao said.
The PUC will hold hearings on Hawaiian Tel's rate proposal in late July.