|
Telecom Letter Decision
|
|
Ottawa, 30 March 1993
|
|
Telecom Letter Decision CRTC 93-5
|
|
To: Bell Canada
|
|
Interested Parties
|
|
Re: Interim Rate Increases, 1993
|
|
In its 5 February 1993 application for a general increase in rates, Bell Canada (Bell) proposed interim increases in certain monthly rates, installation charges and other rates to be in effect from 1 April 1993 to 31 August 1993. Bell advised that it expected the interim increases to generate $69 million. The company submitted that, with approval of both interim and final rates, it would be able to earn a regulated return on average common equity (ROE) of 12.3% in 1993, whereas with approval of final rates only, it would earn a regulated ROE of 11.7%.
|
On 12 February 1993, the Commission issued Telecom Public Notice CRTC 93-25 requesting comment on Bell's application for interim rate increases. The Public Notice also invited comment on whether, in the alternative, all existing rates should be made interim.
|
|
The test used by the Commission in considering interim rate increases was first enunciated in Bell Canada - General Increase in Rates, Telecom Decision CRTC 80-7, 25 April 1980, as follows:
|
|
The Commission considers that, as a rule, general rate increases should only be granted following the full public process contemplated by Part III of its Telecommunications Rules of Procedure. In the absence of such a process, general rate increases should not in the Commission's view be granted, even on an interim basis, except where special circumstances can be demonstrated. Such circumstances would include lengthy delays in dealing with an application that could result in a serious deterioration in the financial condition of an applicant absent a general interim rate increase.
|
|
No party supported Bell's request for interim increases. Essentially, parties were of the view that Bell had not demonstrated that special circumstances exist or that it would experience a serious deterioration in its financial condition without interim rate increases. Six parties commented on the matter of whether existing rates should be made interim effective 1 April 1993, with three opposing the proposal, two supporting it, and one finding it acceptable.
|
|
In its reply, Bell submitted that its evidence demonstrates that there is a severe deterioration in its financial condition and that recent trends and developments serve to underline this fact. With respect to the test established by the Commission for considering applications for interim relief, Bell stated that the example of "special circumstances" set out in Decision 80-7 was not intended to be an exhaustive and exclusive list. Specifically, Bell submitted that the forecast deterioration in its financial condition will continue in the absence of interim rate relief. Furthermore, given rapid changes in the company's competitive situation and business risk, serious financial deterioration can occur far more quickly than the Commission could have envisioned at the time of Decision 80-7. Bell argued that, given the company's financial condition and current competitive conditions, the normal time frames for dealing with its application for a general rate increase are simply too long to address and correct the financial deterioration. Bell submitted that it has established that "special circumstances" exist to warrant an interim rate increase.
|
|
Bell did not support making all its existing rates interim, submitting, among other things, that this could potentially broaden the scope of the hearing and lead to significant practical difficulties in the event that a final order varied rates for all services.
|
|
In the Commission's view, the information filed in this proceeding does not demonstrate that Bell would suffer serious deterioration in its financial condition in 1993 absent interim rate increases. The Commission finds that, if existing rates are made interim, it will be in a position, after a full review of the evidence as contemplated by Part III of the Telecommunications Rules of Procedure, to take rate action if appropriate, to ensure that the company has an opportunity to earn a reasonable appropriate ROE for the 1993 test period and to maintain its financial ratios at such a level that its ability to access capital markets is not prejudiced to any material extent. Further, the Commission is not persuaded that the scope of the proceeding would be broadened by making existing rates interim or that practical difficulties would arise in the implementation of a final order. Accordingly, Bell's request for interim rate increases is denied. Rather, all tariffed rates approved prior to 1 April 1993 are made interim effective that date.
|
|
Allan J. Darling
Secretary General
|
|