According to the Arizona Court of Appeals, the state Corporation Commission has violated an agreement with U S WEST Communications, Inc., governing the spinoff of the company's Yellow Pages publishing business as an unregulated enterprise.
The court agreed with U S WEST that the commission erred when it imputed $60.684 million in directory publishing profits to the carrier's regulated operations (em a move that had captured all profits earned by the publishing company above the rate of return of 11.4 percent authorized for regulated services.
According to the court, the commission had agreed earlier to take no further action in challenging a spinoff of yellow pages from the local exchange telephone carrier (LEC) to U S WEST Direct, the carrier's publishing affiliate. Moreover, said the court, the commission had agreed to calculate future profits based on fees and services received by the LEC from its publishing affiliate. Thus, to impute any supposed excess profits to regulated operations "pretends that the transfer did not occur," the court said.
A prior settlement agreement had used a 1984 rate-case figure of $43 million to set a baseline for revenues, based on fees then received by the LEC under its publishing agreement with U S WEST Direct. The $43-million figure contained in the original settlement order could be adjusted up or down, the court said, but the adjustment must be supported with evidence of actual fees received and the value of associated services, not merely the level of profits earned by the publishing company. Re U S WEST Communica., Inc. v. Arizona Corp. Comm'n, No. 1 CA-CC 95-0001, Feb. 8, 1995 (Ariz.Ct.App.).