Order 15522 - Bell Atlantic: Second Annual Filing under the Price Regulation Plan

 

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

PUBLIC UTILITIES COMMISSION

Report and Order

On October 31, 1997, the New England Telephone & Telegraph Company, d/b/a Bell Atlantic - Rhode Island ("Bell Atlantic") made its second annual filing with the Public Utilities Commission ("Commission"), pursuant to the Price Regulation Plan ("Plan") approved by the Commission on June 25, 1996. The filing, with an effective date of January 15, 1998, followed the methodology set forth in the Plan, which regulates Bell Atlantic's prices according to certain rules and the application of a formula containing three levels of consumer safeguards.

On the aggregate level, Bell Atlantic's overall average prices are allowed to increase by inflation (measured by the Gross Domestic Product Price Index, or "GDP-PI"), minus the productivity factor of 4%, plus or minus exogenous costs (capped at $2,500,000 per annum), adjusted by the service quality adjustment factor.  [1 The service quality adjustment factor reflects Bell Atlantic's service performance in installation, maintenance, operator services, and customer surveys.]  The overall average prices for tariffed services, as reflected in the Actual Price Index ("API"), must be equal to or less than the Price Regulation Index ("PRI").

Bell Atlantic tariffed services are separated into four Service Groups. With the exception of Service Group 4, each service group is subject to a service group PRI. Service Group 1 consists of Residence and Business Basic Exchange Services. It is capped through the year 1999, allowing for no price increases in any rate elements in the service group. Service Group 2 consists of all discretionary local calling services. It must adhere to a service group formula, and is not required to lower rates even if the PRI falls below the API. Service Group 3 consists of interconnection services, such as switched access. In addition to adhering to a service group formula, it must have its prices reduced on a cent-for-cent basis with average business toll prices. Service Group 4 consists of all other tariffed services, and has no service group pricing restrictions except for the limitations imposed by the aggregate price indices.

Individual prices for each rate element within Service Groups 1, 2 and 3 also have pricing rules. Rate elements in Service Group 1 cannot be increased by more than the CPI or 5%, whichever is less, in any one year. In Service Groups 2 and 3, rate elements cannot be increased by more than twice the CPI or 5%, whichever is less.

Bell Atlantic proposed only two changes in its October 31 filing. In Service Group 1, the Company proposed to reduce the message unit rate from $0.1071 to $0.1041 for measured Business and Residence subscribers. The estimated annual revenue effect associated with this price decrease is $1,050,000. The unlimited Statewide Calling Plan, currently priced at $22.00 per month, will increase to $25.00. (This increase is not calculated into the API determination.) Bell Atlantic contended that an increase was necessary because the annual revenue shortfall of the Statewide Calling Plan is $6,164,361. There were no rate changes proposed for Service Groups 2, 3, or 4.

On December 2, 1997, a hearing was conducted at the offices of the Commission, 100 Orange Street, Providence. The following appearances were entered at that time:

FOR BELL ATLANTIC:         Jeffrey J. Binder, Esq.

FOR THE DIVISION:             Paul J. Roberti, Esq.

Special Assistant Attorney General

FOR THE COMMISSION:     Adrienne G. Southgate

General Counsel

Public comment was made by J.R. Ouellette.

Bell Atlantic called Theresa L. O'Brien, Director of Regulatory Affairs, Peter L. Shepherd and Arthur Silvia, Directors of State Regulatory Planning, and Robert Perry, Director of Consumer Calling Services for New England, to support the filing. Ms. O'Brien noted that the Statewide Calling Plan could have been increased to $40.00 per month, based upon the lost revenues. The Commission posed a series of record requests regarding in-state toll revenues, dialing patterns, and the feasibility of providing a toll indicator announcement for customers who are using seven-digit dialing to access a telephone number beyond the local calling area.

The Division did not oppose the filing. In closing, Mr. Roberti reminded the Commission that the Statewide Calling Plan "losses" were extrapolations, and do not account for possible stimulation of use. He also encouraged the Commission to initiate an investigation of public interest pay telephones.

The Commission considered the second annual Plan filing at an open meeting on December 10, 1997. The commissioners observed that the formula provides guidance as to the manner in which rate changes may be accomplished. The instant filing properly conforms to the tenets of the Plan.

The discussion focused on exogenous costs and the General Assembly's July 3, 1995 action requiring seven digit dialing capability. The Company's intrastate toll revenues had declined for nine years preceding that legislative action, but rose by more than $2,500,000 in the year following the change. There was some concern about the impact of the rate change to the Statewide Calling Plan, and the Commission agreed to look closely at this issue in the next annual filing.

The Commission continues to have concerns about the absence of a toll indicator. On December 12, 1997, the Company filed its responses to the Commission's requests for further information. Record Request No. 5 states that, "A toll indicator announcement or tone is not currently available and is not feasible," citing a number of reasons. Because this matter affects the wider concern regarding calling areas, the Commission will continue to seek a solution which gives customers appropriate information about their toll calling.

The Commission unanimously agreed that the filing complied with the Commission's previous order, and was reasonable and in the best interests of ratepayers.

Accordingly, it is

(15522) ORDERED:

The Price Regulation Plan filing of October 31, 1997, is hereby approved as filed.

EFFECTIVE AT PROVIDENCE, RHODE ISLAND PURSUANT TO AN OPEN MEETING DECISION ON DECEMBER 10, 1997. WRITTEN ORDER ISSUED FEBRUARY 10, 1998.

PUBLIC UTILITIES COMMISSION