ORDER NO. 96-107

ENTERED APR 24 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UT 80

DISPOSITION: STIPULATION TERMINATING AFOR ADOPTED

Background

In Order No. 91-1598, the Commission adopted an alternative form of regulation (AFOR) plan for U S WEST Communications, Inc. (U S WEST). Under the terms of the plan, the Commission granted U S WEST pricing flexibility within specified constraints for certain non-essential services, such as call waiting and centrex-type services. The plan also granted U S WEST the ability to earn rates of return within a broad range before rate action would be taken, and provided revenue sharing credits to customers. The Commission adopted the AFOR to help the company better respond to dramatic changes in the telecommunications industry that resulted from the emergence of competition and rapid technological advancement.

To ensure that U S WEST would maintain adequate service levels for its customers, the AFOR contained a number of technical service quality standards. This part of the plan requires U S WEST to file monthly or semi-annual information with the Commission to allow the monitoring of technical service quality. If U S WEST fails to comply with this or other provisions, the Commission is authorized to terminate or modify the AFOR prior to its expiration.

Service Quality Problems

During the past four years, U S WEST has experienced a severe increase of service quality problems, relating to both customer service and technical service. In December 1995, the Commission Staff (Staff) determined that U S WEST was in violation of one of the technical service quality standards set forth in the AFOR. Staff concluded that the number of customers reporting problems with their phone service exceeded a prescribed limit for 24 of U S WEST’s 77 central offices. In January 1996, Staff concluded that U S WEST had violated a second technical service standard relating to transmission loss level variation.

Pursuant to procedures adopted in Order No. 91-1598, Staff convened a settlement conference in February 1996 to discuss resolution of the technical service quality violations. Staff also scheduled a special public meeting to address those issues for March 27, 1996.

Staff Recommendation

On March 26, 1996, Staff submitted a report to the Commission indicating that, as a result of settlement discussions, the parties had agreed to certain remedies to improve U S WEST’s service quality standards. These remedies included: (1) the termination of the company’s AFOR effective May 1, 1996; (2) the provision of a cellular phone loaner option for U S WEST customers who do not receive requested phone service in a timely manner, effective June 1, 1996; (3) adoption of an automatic out-of-service credit for U S WEST customers who experience unreasonable delays in receiving telephone service repairs; and (4) rulemaking to review utility service standards set forth in OAR 860-23-055.

Staff further indicated, however, that the parties had not had the opportunity to develop either a comprehensive set of service quality standards or a formal stipulation incorporating them in time for the special public meeting. Accordingly, Staff requested that the Commission adopt the proposed actions in principle, with the understanding that Staff would present a formal stipulation for approval at the Commission’s April 16, 1996, public meeting. Staff subsequently submitted the proposed stipulation on April 11, 1996, and recommended its adoption. The stipulation and Staff’s accompanying report are attached as Appendix A.

Stipulation

The stipulation is generally intended to cover orders for access lines or out-of-service repairs pending with U S WEST on May 1, 1996, or submitted thereafter up to and including October 31, 1996. It has been signed by Staff, U S WEST, TRACER, Teleport Internet Services, and the Citizens Utility Board.

The first six sections detail the negotiated remedies designed to improve U S WEST’s service quality standards. U S WEST agrees that all remedies shall be funded entirely by stockholders.

Section 1 terminates U S WEST’s AFOR on May 1, 1996, including the revenue sharing portion of the plan. It provides that the company’s current rates will become interim rates on May 1, 1996, subject to refund with interest, at a rate of 11.2 percent per annum. Any party may seek, by May 31, 1996, a declaratory ruling from the Commission regarding how the refund amount should be determined pursuant to the applicable provisions of the AFOR agreement.

Section 2 provides that a rulemaking shall be initiated to review the utility service standards set forth in OAR 860-23-055.

Section 3 requires U S WEST to continue to provide technical service quality reports until the above noted rulemaking has been completed.

Section 4 establishes a cellular telephone loaner program for primary lines. On June 1, 1996, U S WEST shall provide a cellular phone to customers who do not receive requested primary lines within five business days from the due date. Customers who do not want a cellular phone, or who already have one, may instead receive up to a $100 credit for each month they are without service.

This section also acknowledges that the implementation of a cellular loan program is contingent on the approval by the Federal Communications Commission and the successful negotiation and award of contracts to cellular vendors. In the event that the cellular loan program is implemented after June 1, 1996, U S WEST shall provide customers a pro-rated basic exchange credit of $100 per month. If the cellular loaner program is implemented after June 17, 1996, U S WEST shall provide customers a pro-rated basic exchange credit of $150 per month.

Section 5 provides remedies for business customers with multiple-line held orders. Customers with less than ten delayed lines will receive a waiver of non-recurring charges associated with the requested lines. They will also receive credits equal to the monthly rate they would have paid for the lines, until the requested lines are installed. Customers with more than ten delayed lines are entitled to the same remedies, or may obtain from U S WEST a written confirmation of the installation due date and negotiate their own remedies with the company.

Section 6 provides a remedy for existing customers who experience unreasonable delays in having service restored. If service is not restored within 48 hours, customers will automatically receive an out-of-service credit equal to one-thirtieth of their normal fixed monthly charge for the first five days they are without service. If U S WEST does restore service within five days, the out-of-service credit amount escalates.

Disposition

This matter came before the Commission at its March 27, 1996, and April 16, 1996, public meetings. After consideration, the Commission accepts Staff’s recommendation and adopts the stipulation in its entirety. U S WEST’s AFOR is terminated effective May 1, 1996, pursuant to the terms and conditions contained therein. U S WEST’s rates for services thereafter shall be considered interim rates subject to refund with interest, at a rate of 11.2 percent.

The service quality remedies detailed in the stipulation and summarized above are adopted, with one clarification. As noted above, Section 5 provides that a business customer requesting ten or more lines may obtain a written confirmation of an installation date from U S WEST and then negotiate with the company for damages if service is not installed by that date. If the customer and U S WEST are unable to agree on damages, the customer shall be entitled to waiver of the nonrecurring charges and credits provided to business customers requesting less than ten lines. The Commission clarifies that, under that provision, U S WEST is not entitled to an additional 30-day period before the customer is entitled to such remedies.

The Commission agrees with Staff that the remedies detailed in the stipulation will provide U S WEST strong incentive to improve its service quality. The Commission acknowledges, however, that necessary improvements will take considerable time and that, unfortunately, the re-establishment of high quality service will only come gradually. The Commission also notes the impact of U S WEST’s actions on economic development. The company’s delays in providing businesses with new or additional lines has, in effect, created an "economic drag" that ratepayers should not be required to tolerate.

Furthermore, a rulemaking docket shall be initiated to review and amend OAR 860-23-055 to enhance solutions to future customer service concerns. Until such rulemaking is complete, U S WEST shall continue to provide all technical service quality reports currently provided under the AFOR.

In making this decision, the Commission acknowledges that, pursuant to the terms of the AFOR, U S WEST has filed numerous price listings with the Commission. Upon the termination of the AFOR, U S WEST need not re-file these listings as tariffs. Rather, the Commission will consider any price list filing with an effective date of May 1, 1996, as a fully-regulated tariff, subject to all suspension and investigation procedures set forth in ORS 759.180 to 759.190.

ORDER

IT IS ORDERED that the Stipulation Terminating the AFOR, attached as part of Staff’s April 11, 1996, report in Appendix A, is adopted in its entirety with clarification stated above.

Made, entered, and effective _____________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A party may appeal this order to a court pursuant to ORS 756.580.