PORTLAND (AP) – Maine’s highest court Wednesday set aside telephone rates set through an alternative regulatory process, concluding that the Public Utilities Commission must attempt to compare such rates with those that would have emerged from old-style rate-setting methods.

The Supreme Judicial Court also kept alive a dispute over an increase of $1.78 in the local monthly rate charged to more than 500,000 Verizon customers that took effect in June 2001 as part of the shift to the new process.

The court’s latest ruling in the ongoing legal battle sends the Verizon case back to the PUC for further proceedings.

The unanimous decision did not demand an immediate rollback of the $1.78 increase, and both sides agreed that its fate was left unclear.

Tom Welch, the PUC chairman, said he may convene the various parties to the case and decide how to proceed with the re-examination.

The unanimous opinion came on an appeal brought by the public advocate’s office, which argued that the hike in monthly rates amounted to a $75 million overcharge, and AARP, an advocacy group for Americans over 50.

“Our office is heartened by the law court’s decision that local telephone rates in effect under the current alternate regulation should be as low as the local rates that would be in effect under traditional rate-of-return legislation, said William Black, deputy public advocate.

Welch expressed surprise and disappointment at the court’s conclusion, saying he believed that the commission had interpreted the law correctly and that ratepayers benefited from the new regulatory process.

He cautioned that new consumer-friendly standards for how quickly Verizon handles repairs or responds to service orders could be back on the table if the rate increase ends up being rescinded.

In a 2003 ruling, the supreme court concluded that the PUC acted within its discretion in granting the additional $1.78 a month to Verizon but ordered the commission to reconsider whether it complied fully with the law establishing the new regulatory process.

Unlike the traditional rate-of-return method based on a detailed analysis of a utility’s expenses, debt, revenues and operations, the alternative process adopted by most states permits regulators to offer higher profits as incentives for streamlining their operations.

As a protection to ratepayers, Maine’s law provides that local phone rates set under the alternative process may be no higher than those materializing under the traditional system.

At issue in the case decided Wednesday was whether the commission was required to make a good faith effort to compare rates obtainable under the two systems. The PUC had maintained that it was impossible to calculate the hypothetical outcome of a series of rate-of-return proceedings during the five years covered by the alternative process.

Black expressed no preference for one rate-setting mechanism over the other.

“Our preference is for keeping local phone rates low and affordable under whatever system has been created by legislation, he said.

Welch noted that Verizon’s five-year rate plan was due to expire next year, and that the case has been in the court for most of the period that the plan has been in effect.

“That’s just the nature of litigation,” he said.

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