First Substitute S.B. 13

1

TELECOMMUNICATION AMENDMENTS
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: David H. Steele
5 AN ACT RELATING TO PUBLIC UTILITIES; MODIFYING EFFECTIVE DATES
6 RELATING TO TELECOMMUNICATIONS DEREGULATION; CLARIFYING TYPE OF
7 RATE PROCEEDING TO BE INITIATED; PROVIDING FOR REBALANCE OF RATES OF
8 PARTICULAR SERVICES; DEFINING EXOGENOUS FACTORS INCLUDED IN THE
9 PRICE INDEX; AND MAKING TECHNICAL CORRECTIONS.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 54-8b-2.4, as enacted by Chapter 269, Laws of Utah 1995
13 Be it enacted by the Legislature of the state of Utah:
14 Section 1. Section 54-8b-2.4 is amended to read:
15 54-8b-2.4. Price regulation -- Maximum prices.
16 (1) The Legislature finds that:
17 (a) traditional rate of return regulation cannot guarantee that customers who do not have
18 the choice of alternative providers will be protected from the economic responsibility for making
19 up for an incumbent telephone corporation's competitive losses or from providing for the recovery
20 of past, regulated investments;
21 (b) the method of regulation set forth in this section will provide better protection to
22 customers who lack competitive choices than does traditional rate of return regulation; and
23 (c) before moving from traditional rate of return regulation, it is essential the commission
24 address issues relating to the movement of prices towards cost and removing subsidies in the
25 existing price structure of incumbent telephone corporations to encourage competition for all
26 telecommunications services.
27 (2) (a) Effective May 1, 1997, any incumbent telephone corporation with more than 30,000

1 access lines in the state shall be regulated pursuant to this section and may not be regulated on the
2 basis of rate of return or any similar method of regulation that is based on the earnings of the
3 incumbent telephone corporation, except as provided in this section.
4 (b) Any incumbent telephone corporation serving fewer than 30,000 access lines in the
5 state may petition the commission to be regulated under price regulation rather than traditional
6 rate of return regulation. In adopting price regulation for incumbent telephone corporations with
7 fewer than 30,000 access lines, the commission may modify the provisions of this section taking
8 into consideration the individual circumstances of the incumbent telephone corporation seeking
9 price regulation.
10 (3) (a) Any general rate proceeding for an incumbent telephone corporation with more than
11 30,000 access lines in the state initiated before May 1, 1997, shall be conducted under the
12 principles of traditional rate of return regulation, even though the final order in the case is not
13 issued until May 1, 1997, or thereafter.
14 (b) A rate proceeding for an incumbent telephone corporation with more than 30,000
15 access lines in the state may be initiated after April 30, 1997, and before May 1, 1998.
16 (i) The rate proceeding shall be revenue neutral, except that the commission may increase
17 the revenue anticipated from all rates to account for changes in the following factors which are
18 known and measurable at the time of hearings in the case:
19 (A) amortization of any reserve deficiency allowance remaining after the prior general rate
20 case;
21 (B) costs incurred by the incumbent telephone corporation in complying with the
22 requirements of the Federal Telecommunications Act of 1996 and Section 54-8b-2.2 relating to
23 the interconnection of competing telecommunications corporations, including the cost of network
24 additions and enhancements in order to handle additional network demands resulting from
25 interconnection, not otherwise recovered by the incumbent telephone corporation;
26 (C) any removal of subsidies in the existing price structure of the incumbent telephone
27 corporation required by federal or state law or approval by the commission; and
28 (D) changes in rules of the Federal Communications Commission, including rules with
29 regard to the separation of interstate and intrastate revenues, expenses, or investments.
30 (ii) In the rate proceeding, the commission may also rebalance rates of particular services
31 to move rates of those services toward cost.

- 2 -

1 (4) (a) The prices of tariffed telecommunications services offered by an incumbent
2 telephone corporation with more than 30,000 access lines in the state may not increase during the
3 three-year period commencing with the date of the final order in the last rate case initiated before
4 May 1, 1997. The prices of services offered pursuant to a price list or competitive contract shall
5 be governed by Section 54-8b-2.3.
6 (b) Notwithstanding Subsection (4)(a), prices may increase pursuant to any prices
7 established in a final order of the commission for a [general] rate proceeding initiated before May
8 1, [1997] 1998, or the adjustment of those prices as a result of an appeal or remand of the final
9 order.
10 (5) (a) Effective at the end of the three-year period specified in Subsection (4), the
11 commission shall regulate the maximum prices for the tariffed public telecommunications services
12 of the incumbent telephone corporation according to an aggregate price index or price indices
13 associated with groups of services. The aggregate price index or price indices shall be adjusted
14 annually to reflect the effects of inflation, productivity, and exogenous factors and to maintain an
15 appropriate level of service quality. The precise manner of annual adjustment shall be developed
16 by the commission after notice and a hearing and before the end of the three-year period.
17 (b) Exogenous factors in the price index or price indices shall include:
18 (i) any removal of subsidies in the existing price structure of the incumbent telephone
19 corporation required by federal or state law or approved by the commission;
20 (ii) the impact of alteration in asset lives to better reflect changes in the economic lives of
21 plant and equipment approved by the commission consistent with Section 54-7-12.1; and
22 (iii) changes in rules of the Federal Communications Commission, including rules with
23 regard to the separation of interstate and intrastate revenues, expenses, or investments adopted by
24 the commission.
25 (6) (a) The incumbent telephone corporation may decrease the price of a tariffed
26 telecommunications service subject to the limitation in Section 54-8b-3.3.
27 (b) Any decrease in price shall be made by filing a tariff with the commission. The
28 decrease shall become effective 30 days after filing.

- 3 -