ORDER NO. 96-128

ENTERED MAY 16 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UT 128

At its April 30, 1996, public meeting, the Commission Staff asked the Commission to issue an order directing US WEST Communications, Inc. (USWC) to cease and desist from its practice of requiring some customers to pay construction charges in advance of installation of service. The Staff request was made in conjunction with its recommendation to suspend USWC's Advice No. 1636 and Transmittal No. 96-013-PL pending investigation of the propriety and reasonableness of the rates pursuant to ORS 759.180 and 759.185. Staff’s recommendation, presented at the April 30, 1996, public meeting, is an Appendix to this Order. In Order

No. 96-111, the Commission adopted the Staff recommendation and suspended the advice. The Commission also ordered USWC to cease and desist.

OPINION

At the public meeting, Staff reported that the Commission has received a number of complaints from Internet service providers about USWC's practice requiring them to pay construction costs in advance of installation of service. The Commission's files contain five complaints from customers beginning in January 1996. A review of the complaints indicates that USWC has asked some customers to pay the construction costs of installation because the customers requested a number of lines that USWC did not deem appropriate for the size and use of the building. According to the reports in the Commission's files, USWC did not provide any other reasons for requiring the customer to pay construction charges.

USWC points to its construction charge tariff for authority to require customers to pay for construction prior to obtaining service. The tariff provides:

2. Speculative Projects

 

The provisions relative to speculative projects are intended to afford protection to the Company against loss in revenue from service furnished to subscribers engaged in projects of an unusually financially hazardous nature. Such projects include those involving oil wells, mining operations, stock or other promotion schemes, club membership or other drives, sales or election campaigns, resorts, and others of a similar nature. These provisions are also intended to afford protection to the company against loss from either residence or business services, which circumstances indicate to have more than usual liability of loss. The location where the service is to be furnished, the company’s knowledge of a particular customer’s activities, the information furnished by the customer, may all be considered in determining whether an account should be classified as speculative.

 

Each applicant for service may be required to pay to the Company in advance or otherwise, as the Company may elect, the net cost of installing and removing any facilities necessary in connection with furnishing of the service by the Company.

 

Each applicant for service may be required to deposit with the Company, before service will be furnished, a sum of money which the Company considers necessary to obtain adequate protection from loss of revenue, or to otherwise secure, in a manner satisfactory to the Company the payment of any bills which may accrue by reason of such service so furnished or supplied. P.U.C. Oregon No. 25, 4.6.A.2.

 

U S WEST advised Staff that it interprets the tariff to allow the company to require construction costs for commercial sites based on the type of building (i.e. office building, warehouse) and usable square feet in the building. The company states that this practice has been long standing. Staff believes the practice is based on a recent reinterpretation of the tariff.

For a number of reasons, this tariff should be interpreted narrowly. First, USWC is a regulated monopoly imposing its policies on its captured customers. Second, USWC drafted the tariff, which is a contract. Contracts, generally, are interpreted against the drafter. Strictly interpreting the tariff is important because USWC's practice seriously disadvantages customers. As Staff pointed out, basic rates are set to recover overall construction costs. Under this tariff, the customer’s rates are not reduced after the customer pays its own costs up front. Nor is there any provision for return of the customer’s capital during or after the provision of service. In effect, the customer pays the construction costs twice--once when it pays for construction, then again when it pays for service.

The language of the tariff indicates that USWC is attempting to protect itself from customer requests that impose "unusually financially hazardous" risks or customer requests that indicate "more than usual liability of loss." The tariff specifically allows the company to consider the particular circumstances of the customer. The tariff does not specify what conditions constitute financial risk. USWC has limited its inquiry under the statute to the type and square footage of building. We have no evidence to indicate that USWC considers other factors such as the customer’s financial resources, credit history, or other information that would mitigate concerns about loss.

We conclude USWC’s practice is inconsistent with the terms of its tariff. USWC requires all customers, whether they impose a risk of loss on the company or not, to pay construction costs. Ratepayers with exceptional credit history and extensive resources are thrown into the same pot as promoters of oil wells, mining operations, and stock schemes. USWC's decision to arbitrarily impose construction costs on all customers who do not meet its internal standard of appropriate use harms the ratepayers and goes beyond any reasonable claim it might have for protecting itself from financial loss. USWC's practice is not rationally related to purposes outlined in the tariff.

Furthermore, even if we assume that type and square footage of the customer’s building is an appropriate indicator of risk, the company has chosen a type of security that is most harmful to the customer. In those instances when the company does face a legitimate risk of loss, we see no reason why USWC must exact construction charges from the customer without any mechanism to return the amounts to the customer after risk of loss has passed. Our concern over USWC's practice is particularly keen since the tariff, itself, authorizes the company to accept a deposit or other security. The company should require advance payment as a last resort. Performance bonds, term contracts, and other alternatives can provide adequate protection for the company, while imposing less burden on the customer.

For these reasons, USWC should cease and desist from requiring customers to pay construction costs based exclusively on the type and square footage of the customer’s building space. The company should evaluate each customer individually to determine if guarantees regarding payment are necessary. In addition, USWC should consider other means of reducing its risk of loss, including requiring deposits or other manner of security. Such efforts by the company would insure that customers would not have to pay construction costs twice.

This determination shall remain in effect pending the outcome of our investigation of Advice No. 1636 and transmittal No. 96-013-PL, which were suspended in Order No. 96-111.

ORDER

IT IS ORDERED that:

Until completion of the Commission's investigation in UT 128, US WEST Communications, Inc. shall cease and desist from requiring customers to pay special construction charges exclusively based on the square footage and type of the customer’s premises.

 

Unless USWC can document that the customer’s requested service actually presents more than the usual liability of loss, USWC shall install service to customers at nonrecurring charges as specified in its existing tariff pending completion of the formal proceeding and final order in this docket.

 

USWC may be required to refund any construction charges paid by customers upon completion of this investigation.

 

Made, entered, and effective .

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of this order. The request must comply with the requirements of OAR 860-14-095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-13-070(2). A party may appeal this order to a court pursuant to ORS 756.580.