FairPoint advocacy costs top $500,000

Posted April 18, 2010, at 7:43 p.m.

AUGUSTA, Maine — The Public Utilities Commission and the Public Advocate’s Office have accumulated more than $500,000 in outside legal fees while representing Maine consumers in the FairPoint bankruptcy case, and the bills are still mounting.

“It is a lot of money,” Gov. John Baldacci said Friday. “But the important point here is that the public advocate and the Public Utilities Commission are representing the public’s interest.”

Baldacci said it was very important that ratepayers be “at the table” as the complicated legal proceeding moves forward.

The PUC acted on its own to hire the Bernstein Shur law firm in Portland, and Baldacci approved the public advocate hiring Arent Fox LLP, a Washington, D.C.-based law firm. The PUC, as of last week, had received bills totaling $377,851.25 with the detailed bills indicating more than a dozen lawyers and professional staff at the law firm worked on the case with hourly rates as high as $465.

Six lawyers are listed in the detailed bills from Arent Fox as having worked on the case for the public advocate with hourly rates as high as $525. So far the tab is $153,720.62 and Public Advocate Richard Davies says it will continue to grow until the bankruptcy case is concluded.

“It has slowed down a bit,” he said, “but we know there are more bills on the way. These are highly specialized lawyers, and they are expensive.”

Davies said his office shopped around a number of law firms and believes the state got a good deal. He said one firm told him their lowered rate for government was $980 an hour.

“We said no thanks,” he said. “We worked with Arent Fox and told them we would do the legal work we could in house and that helped lower our overall costs.”

Davies said the agreement signed by FairPoint, the PUC staff and his office will allow the state to get reimbursed by FairPoint for the legal costs, but the bankruptcy court judge in New York has not approve it.

“The commission will also have to approve it as part of the overall bankruptcy,” said Andrew Hagler, director of Telephone and Water Industry Regulation at the PUC. He said while the PUC has several staff attorneys, it does not have expertise with bankruptcy courts.

“It was very important that the commission have the expertise to evaluate the case,” he said. “FairPoint is the largest provider of telephone service in the state.”

Hagler said the participation in the case already has been beneficial to ratepayers. He said there was a dispute over whether the $8 million fine imposed on FairPoint by the PUC for not meeting quality of service benchmarks would be allowed. After discussion with the court, it was allowed and ratepayers are seeing a decrease in their basic phone rate for the next year.

Both Hagler and Davies stressed there is also a public safety component to the case with FairPoint responsible for the telecommunications infrastructure that supports the 911 emergency dispatch service.

“They provide the backbone for that system that people rely on every day,” Davies said. “The state has an important interest in making sure that is maintained and is operating properly.”

That is also one reason lawmakers are watching the case closely. Rep. Jon Hinck, D-Portland, the co-chairman of the Legislature’s Utilities and Energy Committee, said the cost of the bankruptcy could have been considerably less, if FairPoint had filed in Maine instead of New York.

“Their stated reason was the particular expertise of the bankruptcy courts down there,” he said. “I think the federal bankruptcy courts here in Maine could have done just as good a job.”

Hinck, a lawyer, said the logical place for the case was Maine, which has the most miles of FairPoint lines and the largest number of FairPoint customers. He said the committee has held several meetings with FairPoint officials to be updated on the case, and he expects more will be held because of the importance of the case to Maine and its economic development.

“I am sure we will continue to monitor the situation,” said Sen. Barry Hobbins, D-Saco, co-chairman of the committee with Hinck. “We have had a good working relationship, and I think they will continue to keep us informed.”

He said whether the committee holds another meeting with FairPoint officials is up to legislative leaders because the session has adjourned. But, he said leaders understand the need for the committee and the public, to have an open and public discussion about FairPoint as it emerges from bankruptcy.

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