The death match between US West and the state Public Utility
Commission finally appears headed for resolution. Moreover,
the average phone user in Oregon should benefit--so long as
legislators insist that an important condition is added.
From the beginning of this legislative session, US West
has maneuvered to get the PUC off its back--with Senate
Bill 142 as its chosen vehicle.
In its original form, SB 142 would have allowed US West
to keep hundreds of millions of dollars potentially due
customers from a rate case currently under review by the
Oregon Court of Appeals. The bill also would have stripped
the PUC of much of its authority to regulate the state's
phone companies.
US West has pursued similar legislation throughout its
14-state service territory. Both here and elsewhere, many
observers believe, the company has overreached. The result
is that while US West was able to get a watered-down version
of SB 142 past the state Senate, it may not have the votes
it needs in the House.
That may explain why Larry Huss, a former trial lawyer
now in charge of US West's Oregon operations, privately
offered a compromise to Joan Smith, the public utility commissioner
who leads her agency's dealings with the phone company.
"A business abhors uncertainty," Huss told WW. "I'm
trying to avoid uncertainty."
The tentative compromise struck by Huss and Smith would
result in major revisions of SB 142:
1) The rate case will be taken out of the bill. It will
be up to the Court of Appeals or the parties in the case--and
not the Legislature--to fashion a settlement.
2) US West will accept a price cap on every phone service
save wireless, accompanied by a pricing floor to prevent
predatory conduct.
3) US West will participate in a Universal Service Fund
to help equalize the cost of basic service in rural and
urban areas alike.
4) US West will spend an additional $30 million a year
for the next four years to improve network infrastructure
in rural Oregon.
5) The PUC will have the authority to levy fines for poor
service without court review.
In return, US West may keep whatever it earns on its Oregon
operations. Such a change should end what Huss terms "the
disincentive effect" of rate-of-return regulation.
Only one additional ingredient is needed to make the deal
complete. As things currently stand in Oregon, the PUC has
the authority to approve electric utility company mergers,
but not telecommunications mergers. Utility commissions
in other states in which US West operates have such authority,
giving them leverage to set conditions about rates, service
and investment.
To appreciate the value of such oversight, hark back to
Enron's acquisition of PGE, in which hands-on PUC involvement
created significant customer benefits.
Until May 17, the PUC's lack of merger-approval authority
would have seemed more theoretical than real. That day,
however, US West announced its intention to merge with Global
Crossing, a relatively untested outfit based in Bermuda
but operating out of offices in Beverly Hills. Now Oregonians
have concrete reason to be concerned about US West's larger
intentions.
The governor, the Legislature and the PUC cannot ignore
the potential consequences of the US West-Global Crossing
merger while negotiating to deregulate the company's Oregon
operations. Failure to give the PUC authority over mergers
would set the stage for continued service difficulties in
the very areas of the state SB 142 was intended to help.
On the other hand, the addition of such authority would
bring this matter close to a win-win outcome.
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Willamette Week | originally
published May 26, 1999 |
