Friday, September 17, 1999

State of Hawaii

HawTel told
to resubmit

Thousands of work hours
go to waste after the state
says data is now too old

By Rob Perez


GTE Hawaiian Tel Five years ago GTE Hawaiian Tel filed a request with the state to substantially change phone rates throughout Hawaii.

This week the Public Utilities Commission issued a final ruling: the data supporting the request is so dated and so much has changed since 1995 that GTE must file a new request.

That means thousands of hours that GTE and others devoted to the case in many respects went for naught. Thousands of pages of research the utility and others produced basically can be trashed.

GTE must start over from scratch.

"We are disappointed," said Laura Matsuo, the company's manager for regulatory and government affairs.

The company had expressed some urgency in changing its rates because the existing ones, according to GTE, were artificially high for some services, giving competitors an unfair advantage.

The request GTE filed five years ago has been revised a number of times. The latest version calls for a substantial rebalancing of existing phone rates so they more closely match the cost of providing the service, according to GTE. Oahu residential rates, for instance, would increase nearly 17 percent, and those on the neighbor islands would rise between 27 percent and 62 percent. The business rate on Oahu would drop 21.5 percent; elsewhere, it would jump between 26 percent and 84 percent.

The case has dragged on largely because of timing and circumstance. It is such a complicated case that regulators early on agreed with GTE and the state consumer advocate to divide the proceedings into two parts. Such a division ensured the case would take longer than usual.

Also, the request was filed during a period in which the industry -- locally and nationally -- was going through unprecedented, tumultuous changes related to deregulation. A landmark federal telecommunications act that was adopted in 1996 led to even greater changes.

Consequently, the telecom market today is far different from the market just five years ago -- a major point cited by the commission.

For much of those five years, the PUC and telecom companies devoted considerable time and resources debating issues and rules for opening local markets to competition.

"I don't think anyone anticipated the extent to which (that process) would preoccupy everyone's time," said Tony Valdez, a PUC attorney.

One consequence, Valdez added, was that the rate case became a lesser priority, partly because regulators believed decisions about competitive issues would provide a proper context for evaluating various rate issues.

Another factor affecting timing: commission turnover. Two of the three commissioners weren't on the panel when the original case was filed, and the agency's top executive also has since changed.

Major decisions typically take longer when key players are replaced during the evaluation process, industry executives say.

When the PUC divided the case into two parts, it had to deal first with the issue of whether GTE needed to raise additional money, based on the 1995 data.

Once the commission agreed in 1996 that more money was in order, it prepared to take up the second issue: whether GTE should be given permission to rebalance its rates.

The latter question was pending until this week's decision, which effectively ended the case without deciding the merits of a rate increase. In calling for an entirely new filing, the commission said so much has changed since 1995 that the supporting data GTE cites no longer reflects current conditions.

"We acknowledge that there is some urgency to rebalance GTE's rates," the commission wrote. But it said it wouldn't approve significant increases in residential rates without first thoroughly reviewing the company's current revenue requirements under current operating conditions.

Matsuo said GTE had hoped a final decision would have been made using the information already on file, like the PUC has done with previous rulings in this case. If new concerns needed to be addressed, Matsuo said, that could have been handled in a subsequent filing.

As it is, GTE likely will take months to compile a new rate request. In the past, those filings typically took eight months to one year to develop, Matsuo said.

The company also is evaluating other options, including whether to challenge the commission's ruling, she said.

A surcharge -- now at 11.23 percent -- that the commission temporarily approved several years ago while the rate case was being evaluated will remain in effect.

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