PUC rejects NYNEX cost plan for Maine

AUGUSTA (AP) — State utility regulators have rejected a NYNEX plan to reduce the cost of in-state long-distance calls in Maine while increasing rates for basic residential telephone service.

But the Public Utilities Commission said the case does underscore the need to give NYNEX more flexibility in the increasingly competitive telecommunications industry — so long as basic rates remain stable.

A NYNEX spokesman said he was not aware of any plans to appeal the ruling and that the company welcomes the commission’s promise to explore an “incentive regulation” agreement that would relax PUC control over certain NYNEX services and products.

“We still need to get intrastate long-distance rates down,” John McCatherin said Tuesday.

The rate restructuring that the commission rejected called for local residential rates, now around $12 a month, to increase by 25 percent or about $3 a month, to more accurately reflect the cost of providing that service. Basic business exchange rates would have remained stable.

At the same time, the company proposed to reduce the cost of in-state toll calls by as much as 15 percent. The average intrastate toll bill is currently about $14, McCatherin said.

In its unanimous decision, the commission said the proposed boost in basic rates was not justified by the cost analyses NYNEX presented. The three-member panel also said the increase could violate a voter-approved 1986 law requiring that local rates be kept at “as low a cost as possible.”

“At the least, (the law) requires that any increase in basic rates be supported by a strong showing that such increases are in the public interest,” the PUC said in a 56-page decision issued last week. “Vague claims of benefits to the economy from lower toll rates are insufficient.”

Of NYNEX’s nearly 600,000 Maine customers, about 85 percent are residential.

Both the PUC staff and the state public advocate’s office opposed offsetting a reduction in toll rates with higher basic rates. But both appeared to agree on the need for lowering toll rates and suggested raising the price of other services — private-line charges, Caller ID and line hunting were mentioned as possibilities — to make up the revenue.

The commission was vague about how any “incentive regulation” system would be structured but hinted strongly that regulators would demand that controls be placed on local rates as part of any agreement.

“A plan that, at a minimum, caps local exchange rates at current levels for a significant period of time would undoubtedly have a greater likelihood of acceptance by the parties and endorsement by the commission,” the PUC said.

The PUC said it would open a separate proceeding on incentive regulation “in the near future.” It cited the difficulty of regulating NYNEX in an increasingly market-driven field and a recent legislative directive aimed at encouraging a state-of-the art telecommunications system in Maine.