ORDER NO. 96-286

ENTERED NOV 05 1996

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UT 80(1)

DISPOSITION: PETITION FOR RECONSIDERATION DENIED

Introduction

U S WEST Communications, Inc., (USWC) seeks reconsideration of our clarification of the refund procedures to be used following the premature termination of the company’s alternative form of regulation (AFOR) plan. In Order No. 96-183, we concluded that the amount subject to refund would be equal to "the difference between the permanent rate level established in pending docket UT 125, and the current interim level, assuming that the latter amount of revenues is greater than the former."

In its petition for reconsideration, USWC contends that our clarification of the refund procedures was in error, asserting that a refund determination must be based on an examination of the company’s actual earnings during the period rates are interim. Staff agrees that we should revise our analysis, but adhere to the conclusion that the refund procedure is similar to that used in ORS 757.215(4) and 759.185(4).

Discussion

In November 1991, we offered USWC an AFOR plan under terms and conditions set forth in Order No. 91-1598. The relevant language in that order provides:

The Commission finds that the [AFOR] stipulation should be modified to include a provision which protects USWC and its customers in the event the Plan is terminated prematurely[.] We propose that Paragraph 10 should be amended to include the following language[:]

 

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(2) If the Commission declares the plan terminated, it may also order USWC to refrain from making any further changes in rates or terms of price-listed services. * * * The Commission may also initiate an investigation to determine the rates and terms of service which should be placed in effect on a permanent basis.

 

(3) Unless otherwise ordered by the Commission, rates authorized under [section] (2) of this subparagraph after the plan has been terminated shall be considered interim rates subject to refund. The amount subject to refund with interest shall be that portion of USWC’s earnings which the Commission finds have exceeded a reasonable rate of return, commencing with the date of the order terminating the plan and ending with the date that permanent rates are set and are in effect. For purposes of determining the amount of the refund, the Commission shall not be bound by the provisions of this paragraph or any other provision of the Plan.

 

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These amendments proposed by the Commission are intended to remove any uncertainty regarding the procedures to be followed in the event the Plan is prematurely modified or terminated. The changes will also prevent USWC from over or under earning while proceedings are held to establish new permanent rates. To clarify:

 

Subparagraph (2) provides that the Commission may freeze the rates charged by USWC at the levels in effect on the date the plan is terminated. * * * Lastly, subparagraph (2) permits the Commission to initiate a separate proceeding to determine the permanent rates to be charged.

 

Subparagraph (3) specifies that the rates in effect from the date the plan is terminated until the date new permanent rates are set shall be interim rates subject to refund. A refund will take place only where USWC has been determined to have been overearning.²⁴ The amount of any refund will equal the difference between the amount USWC is actually earning and the amount subsequently found to be reasonable. Any refunds will accrue interest at USWC’s authorized rate of return on rate base.

Order No. 91-1598 at 27-29 (emphasis added).

 

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²⁴ If USWC seeks to terminate the Plan because it is underearning, the company would file proposed tariff rates at the time that it requests authority to terminate the Plan. If the Commission terminates the Plan, the proposed rates would then go into effect on an interim basis. In that case, USWC would be liable for a refund only if the permanent rate level established by the Commission are (sic) less than the interim rates. * * *

 

 

In its previous motion for clarification, USWC relied on the italicized language above to argue that the refund determination must be based on an examination of the company’s actual earnings during the period rates are interim. We rejected that argument in Order No. 96-183, citing language in subparagraph (3) that provides: "For purposes of determining the amount of the refund, the Commission shall not be bound by the provisions of this paragraph or any other provision of the Plan." Accordingly, we concluded that the terms of the accepted plan expressly authorized the Commission to determine the amount of refund through any legal process that reasonably protects USWC and its customers. Order No. 96-183 at 3.

In its motion for reconsideration, USWC contends that our reliance on language contained in subparagraph (3) was misplaced. It argues that the words "this paragraph or any other provision of the Plan" make clear that the paragraph referred to is a paragraph within the Plan. Thus, it contends that the Commission cannot rely on that language to disregard language of Order No. 91-1598 clarifying those paragraphs.

USWC’s argument is apparently based on the assumption that Order No. 91-1598 simply adopted the AFOR plan and was not a part of it. We are not convinced that distinction is accurate, and Staff does not address it. Nonetheless, even if we were to adopt that restrictive interpretation, we adhere to our prior conclusion that the refund procedure is similar to that used in ORS 757.215(4) and 759.185(4).

As Staff notes, USWC fails to address footnote 24 of Order No. 91-1598, which immediately precedes the language on which it relies. In that footnote, we raised the possibility that USWC might seek to terminate the plan because of underearning and stated: "In that case, USWC would be liable for a refund only if the permanent rate level established by the Commission are (sic) less than the interim rates." Order No. 91-1598 at 28. The method for determining the amount of refund described in that footnote is similar to that utilized in ORS 757.215(4) and ORS 759.185(4). Although the footnote addressed a situation in which USWC seeks termination of the AFOR, we find no reason to conclude that a different refund procedure would be used if the Commission, rather than USWC, seeks termination of the plan.

Accordingly, for reasons previously stated in Order No. 96-183 and those set forth above, we conclude that the term "interim rates," as used in Order No. 91-1598, was used in conjunction with the term’s commonly understood method of refund determination under ORS 757.215(4) and ORS 759.185(4). The use of such a refund procedure is logical and understandable in light of the fact that, under the terms of the AFOR, the Commission granted USWC pricing flexibility for price-listed services, including some freedom to increase rates for those services. Moreover, as we previously stated, we believe that this method reasonably protects both USWC and its ratepayers now that the AFOR has been terminated prematurely due to USWC’s noncompliance with its terms.

ORDER

IT IS ORDERED that the annualized test year from January 1 to September 30, 1995, as modified by adjustments ordered in docket UT 125, shall be used to determine whether U S WEST Communications, Inc., overearned during the period from May 1, 1996, to the effective date of rates established in docket UT 125.

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.