2005 Legislation
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HOUSE BILL NO. 69 – Telephone corp, service, basic rate

HOUSE BILL NO. 69

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H0069.........................................by ELLSWORTH, JAQUET AND WOOD
TELEPHONES - Amends existing law to modify the procedure for establishing
the maximum rate to be charged for basic local exchange service by
telephone corporations and for nonrecurring charges for related services by
incumbent telephone corporations; to authorize realignment of prices
between residential and small business telephone services; and to provide
Public Utility Commission authority to establish a minimum price for basic
local exchange service upon complaint by another telephone corporation
relating to below variable cost pricing for such services by telephone
corporations not subject to Title 61, Idaho Code.
                                                                        
01/28    House intro - 1st rdg - to printing
01/31    Rpt prt - to St Aff

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 69
                                                                        
                               BY ELLSWORTH, JAQUET AND WOOD
                                                                        
  1                                        AN ACT
  2    RELATING TO THE REGULATION OF TELEPHONE CORPORATION BASIC LOCAL EXCHANGE RATE;
  3        AMENDING SECTION 62-622, IDAHO CODE, TO MODIFY THE  PROCEDURE  FOR  ESTAB-
  4        LISHING  THE  MAXIMUM  RATE TO BE CHARGED FOR BASIC LOCAL EXCHANGE SERVICE
  5        AND FOR NONRECURRING CHARGES FOR SERVICES  RELATED  THERETO  BY  INCUMBENT
  6        TELEPHONE  CORPORATIONS,  TO AUTHORIZE REALIGNMENT OF PRICES BETWEEN RESI-
  7        DENTIAL AND SMALL BUSINESS SERVICES UPON A FINDING BY THE PUBLIC UTILITIES
  8        COMMISSION THAT SUCH REALIGNMENT IS NOT CONTRARY TO  THE  PUBLIC  INTEREST
  9        AND  IS  REVENUE NEUTRAL TO THE TELEPHONE CORPORATION, AND TO PROVIDE THAT
 10        ESTABLISHMENT OF MAXIMUM ALLOWABLE BASIC LOCAL EXCHANGE RATES PURSUANT  TO
 11        THIS ACT SHALL BE IN LIEU OF FURTHER RATE REGULATION EXCEPT AS PROVIDED BY
 12        THIS ACT; AND AMENDING CHAPTER 6, TITLE 62, IDAHO CODE, BY THE ADDITION OF
 13        A  NEW  SECTION  62-622A, IDAHO CODE, TO PROVIDE PUBLIC UTILITY COMMISSION
 14        AUTHORITY TO ESTABLISH A MINIMUM PRICE FOR BASIC  LOCAL  EXCHANGE  SERVICE
 15        UPON COMPLAINT BY ANOTHER TELEPHONE CORPORATION RELATING TO BELOW VARIABLE
 16        COST  PRICING  FOR  SUCH SERVICES BY TELEPHONE CORPORATIONS NOT SUBJECT TO
 17        TITLE 61, IDAHO CODE.
                                                                        
 18    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 19        SECTION 1.  That Section 62-622, Idaho Code, be, and the  same  is  hereby
 20    amended to read as follows:
                                                                        
 21        62-622.  REGULATION  OF  BASIC  LOCAL  EXCHANGE  RATES, SERVICES AND PRICE
 22    LISTS. (1) The commission shall regulate the prices for basic  local  exchange
 23    services for incumbent telephone corporations in accordance with the following
 24    provisions:
 25        (a)  At the request of the an incumbent telephone corporation, the commis-
 26        sion  shall  establish  maximum  just and reasonable rates for basic local
 27        exchange service. Maximum basic local exchange rates shall  be  sufficient
 28        to recover the costs incurred to provide the services. Costs shall include
 29        authorized  depreciation, a reasonable portion of shared and common costs,
 30        and a reasonable profit. Authorized depreciation lives shall use  forward-
 31        looking  competitive  market lives. Authorized depreciation lives shall be
 32        applied prospectively and to undepreciated balances.
 33        (b)  (i)   At the request of the an incumbent telephone corporation  which
 34             had  not, prior to January 1, 2005, elected to be subject to the pro-
 35             visions of chapter 6, title 62, Idaho Code, the commission  may  find
 36             that  existing rates for basic local exchange services, and nonrecur-
 37             ring charges for services relating thereto, shall constitute the max-
 38             imum rates for such services. The commission may, or at  the  request
 39             of  the  incumbent  telephone  corporation shall, conduct proceedings
 40             pursuant to paragraph (a) of this subsection to establish  a  maximum
 41             basic  local  exchange  rate.  The  commission  shall issue its order
 42             establishing maximum basic local  exchange  rates,  and  nonrecurring
 43             charges  for services in connection therewith, no later than one hun-
                                                                        
                                       2
                                                                        
  1             dred eighty (180) days after the filing of a request by  such  incum-
  2             bent  telephone corporation unless the telephone corporation consents
  3             to a longer period.
  4             (ii)  If an incumbent telephone corporation had, prior to January  1,
  5             2005, elected to be subject to the provisions of chapter 6, title 62,
  6             Idaho  Code, the telephone corporation may file with the commission a
  7             notice that it elects to adopt its existing  rates  for  basic  local
  8             exchange service, and nonrecurring charges for services in connection
  9             therewith, as the maximum rate it may thereafter charge for such ser-
 10             vices.  Such  election  shall be effective ten (10) days after filing
 11             notice thereof with the commission.
 12        (c)  The commission shall issue its order establishing  maximum  rates  no
 13        later  than  one hundred eighty (180) days after the filing of the request
 14        unless the telephone corporation consents to a longer period.
 15        (dc)  (i)   An incumbent telephone corporation whose maximum  basic  local
 16             exchange rates have been established as set forth in paragraph (b)(i)
 17             or  (b)(ii) of this subsection may charge prices lower than the maxi-
 18             mum basic local exchange rates established by  the  commission.  Pro-
 19             vided  however,  as  authorized  by  this  section but may not charge
 20             prices for such service in excess of the  established  maximum  basic
 21             local  exchange rate. The prices charged by the telephone corporation
 22             for each class of service shall be uniform  for  all  customers  sub-
 23             scribing  to  such  class of service within the wire center providing
 24             service to such customer.
 25                  Provided however, the telephone  corporation  may  petition  the
 26             commission  for  authority  to  realign  the  prices  of  basic local
 27             exchange service between residential  and  small  business  customers
 28             within  the  wire  center serving such customers on a revenue neutral
 29             basis. If the commission finds that such price realignment would  not
 30             be contrary to the public interest and that the realignment plan will
 31             be revenue neutral to the telephone corporation, the commission shall
 32             approve  such  petition. Upon approval of the price realignment plan,
 33             the maximum basic local exchange rate for each affected class of ser-
 34             vice shall be adjusted to reflect the approved plan.  The  commission
 35             may,  in  addition, at the request of an incumbent telephone corpora-
 36             tion, adjust maximum basic local exchange rates in an amount the com-
 37             mission determines to be appropriate, to  reflect  commission-ordered
 38             deaveraging  of prices of unbundled network elements used in the pro-
 39             vision of  basic  local  exchange  service.  Provided  however,  such
 40             adjustment,  to the extent practicable, shall not result in either an
 41             increase or a decrease in total revenues  derived  by  the  incumbent
 42             telephone corporation from the provision of basic local exchange ser-
 43             vice.
 44             (ii)  Uupon the petition of a nonincumbent telephone corporation, the
 45             commission shall establish a minimum price for the an incumbent tele-
 46             phone  corporation's  basic  local exchange service if the commission
 47             finds, by a preponderance of the evidence, that the  incumbent  tele-
 48             phone  corporation's  prices for basic local exchange services in the
 49             local exchange area are below the incumbent  telephone  corporation's
 50             average variable cost of providing such services.
 51        (ed)  After  the  commission  has established maximum basic local exchange
 52        rates, aAn incumbent telephone corporation may shall change its tariffs or
 53        price lists reflecting to reflect  changes  in  the  availability,  price,
 54        terms and conditions for basic local exchange service, which changes shall
 55        not  result  in  a  rate for basic local exchange service in excess of the
                                                                        
                                       3
                                                                        
  1        maximum basic local exchange rate established in accordance with this sec-
  2        tion. Such changes shall be effective not less than ten  (10)  days  after
  3        filing  with  the commission and giving notice to affected customers. Pro-
  4        vided however, cChanges to tariffs or price lists that are  for  nonrecur-
  5        ring  services  and that are quoted directly to the customer when an order
  6        for service is placed, or changes that  result  in  price  reductions  for
  7        basic local exchange services or state the price of new service offerings,
  8        shall  be  effective  immediately  upon  filing with the commission and no
  9        other notice shall be required.
 10        (e)  An incumbent telephone corporation that has elected  to  establish  a
 11        maximum basic local exchange rate shall not, from and after the establish-
 12        ment  of  such rate, be subject to further price regulation of basic local
 13        exchange services provided by the telephone corporation,  except  as  pro-
 14        vided in subsections (1)(b) through (1)(d) of this section.
 15        (2)  The commission shall not regulate the prices for basic local exchange
 16    services for telephone corporations that were not providing such local service
 17    on  or  before  February 8, 1996. Provided however, such telephone corporation
 18    providing basic local exchange services shall file price lists with  the  com-
 19    mission  that  reflect  the availability, price, terms and conditions for such
 20    services. Changes to such price lists shall be effective  not  less  than  ten
 21    (10)  days after filing with the commission and giving notice to affected cus-
 22    tomers. Changes to price lists  that are for nonrecurring  services  and  that
 23    are  quoted  directly  to the customer when an order for service is placed, or
 24    changes that result in price reductions or new  service  offerings,  shall  be
 25    effective  immediately  upon  filing  with  the commission and no other notice
 26    shall be required.
 27        (3)  The commission shall cease regulating basic local exchange rates in a
 28    local exchange calling area upon a showing by an incumbent telephone  corpora-
 29    tion  that  effective  competition  exists  for  basic  local exchange service
 30    throughout the local  exchange  calling  area.  Effective  competition  exists
 31    throughout a local exchange calling area when either:
 32        (a)  Actual  competition from a facilities-based competitor is present for
 33        both residential and small business basic local exchange customers; or
 34        (b)  There are functionally equivalent, competitively  priced  local  ser-
 35        vices  reasonably available to both residential and small business custom-
 36        ers from a telephone corporation unaffiliated with the incumbent telephone
 37        corporation.
 38        (4)  Telephone corporations shall not resell:
 39        (a)  A telecommunications service that is available at retail  only  to  a
 40        category of subscribers to a different category of subscribers;
 41        (b)  A means-tested service to ineligible customers; or
 42        (c)  A  category  of  service  to  circumvent  switched  or special access
 43        charges.
 44        (5)  The commission shall determine the  noneconomic  regulatory  require-
 45    ments for all telephone corporations providing basic local exchange service or
 46    designated  as  an  eligible  telecommunications  carrier pursuant to sections
 47    62-610A through 62-610F, Idaho Code, including, but not limited to, such  mat-
 48    ters  as  service quality standards, provision of access to carriers providing
 49    message telecommunications service, filing of price lists, customer notice and
 50    customer relation rules.
                                                                        
 51        SECTION 2.  That Chapter 6, Title 62, Idaho Code,  be,  and  the  same  is
 52    hereby  amended by the addition thereto of a NEW SECTION, to be known and des-
 53    ignated as Section 62-622A, Idaho Code, and to read as follows:
                                                                        
                                       4
                                                                        
  1        62-622A.  COMMISSION AUTHORITY TO ESTABLISH MINIMUM PRICING OF BASIC LOCAL
  2    EXCHANGE SERVICE. A telephone corporation may file a petition with the commis-
  3    sion alleging that another telephone corporation, not  subject  to  regulation
  4    pursuant  to title 61, Idaho Code, is offering basic local exchange service to
  5    customers in a local exchange calling area at a price below its average  vari-
  6    able  cost  of  providing such service in the local exchange calling area. The
  7    commission shall, if after hearing it finds by a preponderance of the evidence
  8    that the allegations contained in the petition are true, establish  a  minimum
  9    price  for  basic  local  exchange service of the telephone corporation in the
 10    local exchange calling area, which minimum price shall reflect  the  telephone
 11    corporation's average variable cost of providing such service.

Statement of Purpose / Fiscal Impact


                       STATEMENT OF PURPOSE

                            RS 14711C1

The proposed legislation authorizes Idaho s rate regulated telephone
corporations to elect to cap their rates for residential and small
business customers at levels approved by the Idaho Public Utilities
Commission. Price caps, which constitute the maximum rate that can be
charged by the telephone company for such services, would, under this
proposal, serve as an alternative to existing rate of return
regulation. The legislation establishes the procedure for rate
regulated telephone corporations to elect to utilize price caps as an
alternative form of rate regulation. This legislation will not affect
pricing by telephone corporations that began offering local
residential or small business telephone service after January 1, 1988,
because such companies are not presently subject to state price
regulation. For the consumer, the utilization of price caps by rate-
regulated telephone companies provides stability and predictability of
pricing. For the telephone corporation, the use of price caps, rather
than rate of return regulation, encourages investments in the
infrastructure and rewards efficiency in business management. This
legislation will allow regulated telephone corporations to better
manage their business operations and infrastructure investments,
address competitive issues, and permit the free marketplace to work.
At the same time, the consumer will be assured of price protection
through utilization of Commission established maximum rates until such
time as the customer has choices as to products and prices as a result
of competitive forces within the customer s local exchange area.



                           FISCAL NOTE

There is no fiscal impact associated with this legislation.


Contact
Name:   Rep. Julie Ellsworth, Rep. Wendy Jaquet, Rep. JoAn Wood
Phone:  (208) 332-1000

STATEMENT OF PURPOSE/FISCAL NOTE                           H 69