EVERETT — Verizon Communications is asking state regulators to allow the monthly rate for basic telephone service to rise by at least 27 percent, and possibly much more.
If approved, it would mean that residential customers would pay $3.54 more a month for phone service. And the bills could go even higher later.
With an accompanying request to review its overall rate structure, Verizon is asking to increase the revenue it collects in Washington by up to 70 percent.
But state regulators and the Attorney General’s Office promise the company will have to prove that the hefty rate request is warranted.
"They have the right to come in and file a case, but we think this is a pretty shocking request," said Simon ffitch, public counsel with the Attorney General’s Office. "We’re going to be taking a real hard look at this."
The filing with the Washington Utilities and Transportation Commission would raise basic monthly residential rates from $13 to $16.54. The total monthly bill would be significantly higher because of a variety of extra fees added to the basic rate.
Business customers would see their per-line rate rise from $29.70 a month to $33.24.
That proposed rate adjustment, however, is just part of Verizon’s request to ramp up its annual gross revenues in Washington state by about 70 percent, or $240 million.
In dollar amounts, that’s the largest request by a telecommunications firm in this state, said ffitch, whose office represents customers in utility cases.
How that might further affect rates is not yet known, as Verizon hasn’t detailed that in its filing, said Glenn Blackmon, acting director of regulatory services for the state utilities commission.
But even the interim rate request is enough to cause "sticker shock" among phone customers, ffitch said.
"We’re very, very skeptical about (Verizon’s) ability to show they need that 25 percent revenue increase upfront," he said.
Verizon argues that it needs both the interim rate increase and the larger revenue adjustment to begin making a reasonable profit again from basic in-state phone service. The company operates about 850,000 lines in several areas of the state, including Snohomish County and Camano Island.
Kevin Laverty, a spokesman at Verizon’s regional headquarters in Everett, said the request filed on Friday is the first general increase specifically asked for by the company in more than two decades, although rates have fluctuated up and down over that time.
The existing rate structure isn’t enough to cover the cost of providing service and allowing for a profit, Laverty said. Despite that, Verizon has invested heavily in upgrading local phone lines, to the tune of $589 million between 2000 and the end of 2003, he added.
Additionally, the Utilities and Transportation Commission ruled last year that Verizon needed to cut in half the fees it charged long-distance carriers for carrying in-state toll calls on the company’s network. That ruling stemmed from a 2002 complaint by AT&T that the fees were excessive.
"When the commission made that decision, we actually went into a position where we began losing money on our landline business in Washington state," Laverty said.
Verizon estimates the commission’s ruling reduced its gross revenue by $29.7 million a year — the amount that the interim rate increase would provide. The company wants the interim rate to take effect within four months.
The commission would then complete a more thorough analysis of the company’s revenue needs. Under that part of the request, Verizon said it needs to increase its gross revenues by nearly $210 million a year to make a reasonable profit.
For the year ended Sept. 30, 2003, Verizon’s revenue from its state-regulated phone service totaled about $336 million, according to the company and the state. From that, Laverty said, the company recovered a profit of about 1.5 percent.
The utilities commission is expected to take up the issue at its May 12 meeting, said Tim Sweeney, a commission spokesman.
There is no guarantee that the commission will allow an increase. When Qwest asked for a large rate hike in the mid-1990s, the commission determined instead that some of its rates were already too high.
To make its case, Verizon will have to open its financial books to prove it is suffering a shortfall.
"The first big question the utilities commission is going to answer is whether Verizon really faces that circumstance," Blackmon said.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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