11-13-1984 Council Packet - Laserfiche WebLink

Home Browse Search

MEMORANDUM TO: SRA Board of. Director - FROM: LeFevere, Lefler, Kennedy, O'Brien & Drawz DATE: October 17, 1984 RE: Summary - 1983 Northwestern Bell Rate Case RATE OF RETURN On September 29, 1983, Northwestern Bell filed a Petition for a general rate increase with the PUC. Bell's final requested increase in annual revenue was $107.6 million, on a 16.9% return on common equity and a capital structure of 57.80h equity and 42.2% debt. By its Order of July 27, 1984, the PUC granted Bell a $57.5 million increase. It allowed Bell a 14.5% return on common equity with a capital structure of 56.150 equity and 43.85% debt. The overall rate of return is 11.71%. In a Sup- plementary Order dated September 26, 1984, the PUC reduced Bell's authorized revenue increase by $363,000. This was the result of a corporate reorganization undertaken by Bell di_iring the course of this rate case that was not reflected in the record ev:;dence. RATE DESIGN As reported in the July 18, 1984 Board meeting, the metropolitan Tier ratios were cut in half. The net effect to metropolitan residential and business customers is nearly a $2 million shift in the annual revenue burden from the outer Tiers to Tier I. The PUC also stated in its Order that further Tier System rate adjustments may be forthcoming. The PUC rejected Bell's proposal that anproximate17 77% of the total revenue increase be borne by residential customers. Bell had argued that business rates should be based on cost of ser- vice, not residual pricing, that existing rates were alreadv too high to compete with non -regulated communicaticns firms, and that accordingly, business rates should be lowered while residential rates are raised. The PUC fount: that Bell had not adequately supported this position and it ordered a 3 to 1 ratio between business and residential rates, down slightly from the existinq 3.3 to 1 ratio. The PUC also rejected Bell's proposal to eli- minate multi -parties: anc+ metered • rvices in favor of local measured service as the only alt tive to flat rate service.