2 - The New York Telephone Company Case: A Case Study of Wages in a Regulated Industry

Abstract

This chapter presents how utility commissions can examine the issue of whether public utilities' labor costs are just and reasonable. A fundamental issue that state public utility commissions must resolve is what levels of labor and nonlabor costs should be considered, when a regulated utility files a rate increase request, as just and reasonable. In judging the just and reasonable nature of labor costs, one would want to evaluate not only the level of wage rates, but also the levels of employment, fringe benefits, and hiring, training, and other turnover costs. In addition, it may be argued that if the utility's employees are unionized, the costs borne by consumers of service disruptions caused by strikes should be included. The chapter focuses only on the level of the utility's wage scales. Only the minimum wage scales needed to attract a given quality and number of employees should be considered by a utility commission to be just and reasonable.