TITLE economic-regulation

Part II. Public Utility Commission

Chapter 23. Substantive Rules

Subchapter H. Telephone

16 TAC §23.91

(Editor’s note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Public Utility Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Public Utility Commission of Texas (commission) proposes the repeal of §23.91, relating to Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services. Project Number 20102 has been assigned to this proceeding. The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. As a result of this reorganization, §23.91 will be duplicative of proposed new §26.215 of this title (relating to Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services) in Chapter 26, Substantive Rules Applicable to Telecommunications Service Providers. 

Martin Wilson, assistant general counsel, Office of Regulatory Affairs, has determined that for each year of the first fiveyear period the repeal is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the repeal. 

Mr. Wilson has determined that for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the elimination of a duplicative rule. There will be no effect on small businesses as a result of repealing this section. There is no anticipated economic cost to persons as a result of repealing this section. 

Mr. Wilson has determined that the proposed new section should not affect the local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022. 

Comments on the proposed repeal (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 N. Congress Avenue, P.O. Box 13326, Austin, Texas 78711- 3326, within 30 days after publication. All comments should refer to Project Number 20102, repeal of §23.91. 

This repeal is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction. 

Cross Reference to Statutes: Public Utility Regulatory Act §14.002. 

§23.91. Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900519 

Rhonda Dempsey 

Rules Coordinator 

Public Utility Commission of Texas 

Earliest possible date of adoption: March 7, 1999 

For further information, please call: (512) 936–7308

 


16 TAC §23.104

(Editor’s note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Public Utility of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Public Utility Commission of Texas (commission) proposes the repeal of §23.104, relating to Telecommunications Pricing. Project Number 18846 has been assigned to this proceeding. The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1)satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. As a result of this reorganization, §23.104 will be duplicative of proposed new §26.213 of this title (relating to Telecommunications Pricing) in Chapter 26, Substantive Rules Applicable to Telecommunications Service Providers. 

Martin Wilson, assistant general counsel, Office of Regulatory Affairs, has determined that for each year of the first fiveyear period the repeal is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the repeal. 

Mr. Wilson has determined that for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of the repeal will be the elimination of a duplicative rule. There will be no effect on small businesses as a result of repealing this section. There is no anticipated economic cost to persons as a result of repealing this section. 

Mr. Wilson has determined that the proposed new section should not affect the local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

Comments on the proposed repeal (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 N. Congress Avenue, P.O. Box 13326, Austin, Texas 78711- 3326, within 30 days after publication. All comments should refer to Project Number 18846, repeal of §23.104.

This repeal is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction.

Cross Reference to Statutes: Public Utility Regulatory Act §14.002.

§23.104. Telecommunications Pricing. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900482 

Rhonda Dempsey 

Rules Coordinator 

Public Utility Commission of Texas 

Earliest possible date of adoption: March 7, 1999 

For further information, please call: (512) 936–7308

 


Chapter 26.
Substantive Rules Applicable to Telecommunications Service Providers

Subchapter J. Costs, Rates and Tariffs

16 TAC §26.213

The Public Utility Commission of Texas (commission) proposes new §26.213, relating to Telecommunications Pricing, as well as the repeal of §23.104. Project Number 18846 has been assigned to this proceeding. The new section will replace §23.104 of this title (relating to Telecommunications Pricing) and implements Public Utility Regulatory Act (PURA) §60.101, which requires the commission to adopt a pricing rule to ensure that each price for a monopoly service remains affordable; that each price for a competitive service is not unreasonably preferential, prejudicial, or discriminatory, directly or indirectly subsidized by a noncompetitive service, or predatory or anticompetitive; and requires that each service recover the appropriate costs, including joint and common costs, of each facility and function used to provide the service. 

The Appropriation Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. Chapter 26 has been established for all commission substantive rules applicable to telecommunications service providers. The duplicative sections of Chapter 23 will be proposed for repeal as each new section is proposed for publication in the new chapter. 

General changes to rule language: 

All but one of the definitions in this section have been deleted because they have been moved to proposed §26.5 of this title (relating to definitions). The definition for "service" as defined in §26.213(b) is specific to this section. 

Other changes specific to each section: 

Subsection (f)(3), which addresses price ceilings applicable to a DCTU electing into PURA Chapter 58 incentive regulation, is revised. The commission proposes to use the initial rate approved by the commission as the price ceiling for a service initially offered after September 1, 1995, in place of the current requirement of stand-alone cost as the price ceiling for discretionary services. This proposal would establish a reasonable price ceiling for discretionary services consistent with the requirement in PURA §58.102, and would expedite the review process for applications by a DCTU to provide discretionary telecommunication services. 

Bih-Jau Sheu, senior economist, Office of Regulatory Affairs, and Mr. Martin Wilson, assistant general counsel, have determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Ms. Sheu and Mr. Wilson have also determined that for each year of the first five years the section is in effect, the public benefit anticipated as a result of enforcing this section will be (1) to establish principles for the pricing of telecommunications services that foster economic efficiency and the public welfare, and (2) to expedite the review process for applications by DCTU for provision of discretionary telecommunication services. There will be no effect on small businesses as a result of enforcing this section. There is no anticipated economic cost to persons who are required to comply with the proposed new section. 

Ms. Sheu and Mr. Wilson have determined that the proposed new section should not affect the local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

The Texas Register will publish §26.213 as all new text. Interested persons may obtain a redline comparing proposed §26.213 to existing §23.104 at the Public Utility Commission of Texas, Central Records Division, under Project Number 18846. 

Comments on the proposed section (16 copies) may be submitted to Filing Clerk, Public Utility Commission of Texas, 1701 N. Congress Avenue, P.O. Box 13326, Austin, Texas, 78701-3326, within 30 days after publication. 

The commission invites specific comments regarding whether this proposed amendment provides the intended pricing flexibility for the electing DCTU. The commission also solicits comments on the following two questions: 

1. For existing discretionary service offered after September 1, 1995, should the price ceiling be the rate in effect as of the effective date of the rule in the event that initial price is different from current price? 

2. For discretionary service initially offered after the effective date of this rule, should the price ceiling be established at a level that is 10% higher than the initial rate proposed? 

If the staff, after reviewing the comments, deems a public hearing to be appropriate, or if requested by a commenter, a public hearing will be held and parties who have filed comments will be notified. 

The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the section. The commission also invites specific comments regarding the Section 167 requirement as to whether the reason for adopting §23.104 continues to exist in adopting the new section. All comments should refer to Project Number 18846, §26.213 relating to Telecommunications Pricing. 

This new section is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission of Texas with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and specifically §52.001(b), which provides the Public Utility Commission of Texas with the authority to formulate and apply rules to protect the public interest and provide equal opportunity to each telecommunications utility in a competitive marketplace; and §60.101 which requires the commission to adopt a rule on telecommunications pricing. 

Cross Index to Statutes: Public Utility Commission of Texas §§14.002, 52.001(b), 58.102 and 60.101. 

§26.213. Telecommunications Pricing. 

(a) Purpose. The purpose of this section is to establish principles to foster economic efficiency and the public welfare in the pricing of telecommunications services. 

(b) Application. Except as otherwise provided herein, the provisions of this section shall apply to dominant certificated telecommunications utilities (DCTUs). Unless the DCTU has elected to be regulated under the terms of the Public Utility Regulatory Act (PURA) Chapter 58, the provisions of this section may be applied to a DCTU serving 31,000 or more but fewer than one million access lines only on a bona fide request by a holder of a certificate of operating authority or service provider certificate of operating authority. 

(c) Definition. As used in this section, a "service" is a tariffed or contract offering which a customer may purchase to the exclusion of other offerings. For example: the various mileage bands for standard toll services are rate elements, not services; individual optional calling plans that can be purchased individually and which are offered as alternatives to each other are services, not rate elements. 

(d) General principles. 

(1) Subsidy-free pricing. 

(A) Telecommunications prices should be subsidyfree. Subsidy-free prices prevent one service or group of services from subsidizing or being subsidized by another. This language is not meant to preclude the use of explicit universal service support mechanisms to maintain affordable rates. 

(B) Pricing all services produced by a DCTU above long run incremental cost (LRIC) will ensure subsidy-free pricing. 

(C) In a subsidy-free pricing environment, support for universal basic telecommunications service must come from an explicit subsidy, such as a Universal Service Fund. 

(D) The transition to subsidy-free pricing should be undertaken in stages, in coordination with implementation of state and federal universal service support mechanisms and initiatives to reform pricing of access services. 

(2) Customer-specific pricing. When set above incremental cost and not used in an anticompetitive manner, customer-specific pricing can benefit the general body of ratepayers and foster economic efficiency by encouraging utilization of under- utilized facilities. 

(3) Inefficient or uneconomic costs. The commission has no obligation to ensure that a DCTU recovers inefficient or uneconomic costs. 

(e) Basic network services. Except as provided by paragraph (2) of this subsection, a DCTU may not exercise pricing flexibility for a basic network service. 

(1) The following services are initially classified as basic network services: 

(A) flat-rate residential and business local exchange telephone service, including primary directory listings and the receipt of a directory and any applicable mileage or zone charges; 

(B) tone dialing service; 

(C) lifeline and tel-assistance services; 

(D) service connection for basic services; 

(E) direct inward dialing service for basic services; 

(F) private pay telephone access service; 

(G) call trap and trace service; 

(H) access to 911 service, where provided by a local authority, and access to dual party relay service; 

(I) switched access service; 

(J) interconnection to competitive providers; 

(K) mandatory extended area service arrangements; 

(L) mandatory extended metropolitan service or other mandatory toll-free calling arrangements; 

(M) interconnection for commercial mobile service providers; 

(N) directory assistance; and 

(O) 1+ intraLATA message toll service. 

(2) An electing local exchange company (LEC) may lower the rate for a basic network service to the service’s price floor. For an electing LEC that is required by the commission to perform long run incremental cost studies or elects to perform those studies, the price floor for switched access service or for any basic local telecommunications service shall be LRIC. For any other electing LEC, the price floor for basic local telecommunications service shall be the appropriate cost of the service. Packaging basic network services with discretionary or competitive services is not permitted. 

(3) In setting the price of a basic network service, the commission shall pursue the goal of maintaining basic services at affordable rates for customers. 

(f) Discretionary services. Except as provided by paragraph (5) of this subsection, a DCTU may not exercise pricing flexibility for a discretionary service. 

(1) The following services shall initially be classified as discretionary services. 

(A) 1+ intraLATA message toll services, where intraLATA equal access is available; 

(B) 0+, 0- operator services; 

(C) call waiting, call forwarding, and custom calling features not classified as competitive services; 

(D) call return, caller ID, and call control options not classified as competitive services; 

(E) central office-based PBX-type services; 

(F) billing and collection services; 

(G) integrated services digital network (ISDN) services; and 

(H) new services. 

(2) The price for a discretionary service shall not be set below LRIC or the price floor prescribed by §23.102 of this title (relating to Imputation), whichever is higher. An electing LEC may request the establishment of a price floor for a discretionary service that is above LRIC. 

(3) For services initially offered after September 1, 1995, the price ceiling shall be the initial rate approved by the commission. 

(4) The price ceiling for a discretionary service provided by an electing LEC may not be set below or above the rate in effect on September 1, 1995, without regard to proceedings pending under PURA §§12.004, 15.001, 15.002, 53.151 and 53.152 or under Government Code, Chapter 2001, Subchapter G. The ceiling may be raised only after the proceedings required under PURA, Chapter 60. Thereafter, on application by the DCTU or on the commission’s own motion, the commission may change the price ceiling but may not increase the ceiling more than 10% annually. 

(5) Within the range of the floor and the ceiling established pursuant to this subsection, an electing LEC may change the price of a discretionary service but shall notify the commission of each change. Such price changes may include volume and term discounts, zone density pricing, packaging of services, customer specific pricing, and other promotional pricing flexibility. Packaging of services may include packaging of an installation service or charge with provision of the corresponding service. An electing LEC lowering the price of any component of a package of services, including an installation charge, shall demonstrate that the package of services affected by the price change recovers its LRIC within one year of the price change. 

(6) Discounts and other forms of pricing flexibility for discretionary services may not be preferential, prejudicial, or discriminatory. 

(g) Competitive services. Except as provided by paragraphs (2) and (4) of this subsection, a DCTU may not exercise pricing flexibility for a competitive service.

(1) The following services shall initially be classified as competitive services: 

(A) services described in theWATS tariff as of January 1, 1995; 

(B) 800 and foreign exchange services; 

(C) private line service; 

(D) special access service; 

(E) services from public pay telephones; 

(F) paging services and mobile services (IMTS); 

(G) 911 premises equipment; 

(H) speed dialing; and 

(I) three-way calling. 

(2) The price for a competitive service shall not be set below LRIC or the price floor prescribed by §23.102 of this title, whichever is higher. An electing LEC may request the establishment of a price floor for a competitive service that is above the floor prescribed by this paragraph. 

(3) An electing LEC may set the price for a competitive service at any level above the floor prescribed in this subsection. Permissible pricing flexibility includes volume and term discounts, zone density pricing, packaging of services, customer specific contracts, and other promotional pricing flexibility, subject to the requirements of PURA §60.001 and §60.002. However, an electing LEC may not increase the price of a service in a geographic area in which that service or a functionally equivalent service is not readily available from another provider. The pricing flexibility allowed by this subsection permits the packaging of a competitive service with one or more discretionary services only if the DCTU demonstrates that the rate for the package of services is greater than the sum of the LRIC of the competitive service and the tariffed rates of the discretionary services included in the package. 

(4) Prices for competitive services may not be unreasonably preferential, prejudicial, or discriminatory. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900481 

Rhonda Dempsey 

Rules Coordinator 

Public Utility Commission of Texas 

Earliest possible date of adoption: March 7, 1999 

For further information, please call: (512) 936–7308

 


16 TAC §26.215

The Public Utility Commission of Texas (commission) proposes new §26.215, relating to Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services. The proposed section will replace §23.91 of this title (relating to Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services). The proposed section requires DCTUs to determine and provide to the commission the long run incremental costs (LRIC) incurred in the provision of telecommunications services. Project Number 20102 has been assigned to this proceeding. 

The Appropriations Act of 1997, HB 1, Article IX, Section 167 (Section 167) requires that each state agency review and consider for readoption each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The commission held three workshops to conduct a preliminary review of its rules. As a result of these workshops, the commission is reorganizing its current substantive rules located in 16 Texas Administrative Code (TAC) Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules no longer needed; (3) update existing rules to reflect changes in the industries regulated by the commission; (4) do clean-up amendments made necessary by changes in law and commission organizational structure and practices; (5) reorganize rules into new chapters to facilitate future amendments and provide room for expansion; and (6) reorganize the rules according to the industry to which they apply. Chapter 26 has been established for all commission substantive rules applicable to telecommunications service providers. The duplicative sections of Chapter 23 will be proposed for repeal as each new section is proposed for publication in the new chapter. 

General changes to rule language: 

The proposed new section reflects different section, subsection, and paragraph designations due to the reorganization of the rules. Citations to the Public Utility Regulatory Act have been updated to conform to the Texas Utilities Code throughout the sections and citations to other sections of the commission’s rules have been updated to reflect the new section designations. Some text has been proposed for deletion as unnecessary in the new section because the dates and requirements in the text no longer apply due to the passage of time and/or fulfillment of the requirements. The Texas Register will publish this section as all new text. Persons who desire a copy of the proposed new section as it reflects changes to the existing section in Chapter 23 may obtain a redlined version from the commission’s Central Records under Project Number 20102. 

Other changes specific to each section: 

The following terms from §23.91(c) of this title have not been included in proposed §26.215, as they were moved to §26.5 of this title (relating to Definitions): "depreciation expenses"; "expenses"; "least cost technology"; "long run"; "long run incremental cost (LRIC)"; "unit cost"; "volume insensitive costs"; and "volume sensitive costs". In reviewing §23.91(c)(10) it was found that subparagraph (B) was inadvertently left out of the copy of the rule distributed by the commission’s print shop. This subparagraph has been added back in, but does not constitute a change in the rule. Subparagraph (B) was included in the rule as adopted and published in the Texas Register (18 TexReg 5723). 

Subsections (j), (k), (m) and (p) of §23.91 have not been included in proposed §26.215, as the requirements of these sections have already been fulfilled. 

Subsections (f)(5), (g)(8), (h)(7), (i)(5) relating to cost of money are revised to set a forward looking cost of capital for the companies. The revisions state that when the company uses the most recent commission-approved rate of return for the company, determined either in a rate proceedings as described in §23.21(d) of this title (relating to Cost of Service) or a commission arbitration proceeding defined under §251 of the federal Telecommunication Act of 1996, there will be a rebuttable presumption of reasonableness. The company shall justify the use of any other forward-looking-looking rate. Nothing in this revision shall, by itself, cause an updated cost study to be performed. The introduction of the reasonableness of the rate of return (or equivalently, cost of capital) determined in the above mentioned commission arbitration proceeding is to avoid the use of embedded cost data, and therefore to be consistent with subsection (d)(3) of this section. 

Subsection (l)(1) is also changed. Instead of requiring the DCTUs to update its cost studies every six months, a DCTU may be required to update the filings only for those studies where significant changes have occurred. 

Bih-Jau Sheu, senior economist, Office of Regulatory Affairs, has determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Ms. Sheu has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be: (1) the ability of the commission to prevent cross-subsidization and to eliminate predatory pricing behaviors; and (2) the ability of the commission to adopt the most recent commission approved rate of return for the companies, whether it is determined in a rate proceeding or in an arbitration proceeding. There will be no effect on small businesses as a result of enforcing this section. There is no anticipated economic cost to persons who are required to comply with the section as proposed. 

Ms. Sheu has determined that the proposed new section should not affect the local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

Comments on the proposed new section (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 N. Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, within 30 days after publication. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the section. The commission also invites specific comments regarding the Section 167 requirement as to whether the reason for adopting or readopting the rule continues to exist. All comments should refer to Project Number 20102.

This new section is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction; and specifically, PURA §52.059 which grants the commission authority to adopt standards necessary to ensure that a rate established under this subchapter covers appropriate costs as determined by the commission. PURA §52.053 requires the commission to ensure that a rate established under this subchapter may not be (1) unreasonably preferential, prejudicial, or discriminatory; (2) subsidized either directly or indirectly by a regulated monopoly service; or (3) predatory of anticompetitive. PURA §52.053 hence calls forth the commission to review and approve LRIC cost studies. 

Cross Index to Statutes: Public Utility Regulatory Act §§14.002, 52.053, 52.059. 

§26.215. Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility (DCTU) Services. 

(a) Application. This section shall apply to DCTUs with annual revenues from regulated telecommunications operations in Texas of $100 million or more for five consecutive years. An incumbent local exchange carrier that is not a Tier 1 local exchange company as of September 1, 1995, at that company’s option, may adopt the cost studies approved by the commission for a Tier 1 local exchange company. 

(b) Purpose. This section shall be used to determine the long run incremental costs incurred by DCTUs in the provision of telecommunications services. The costs determined in this section shall not be used to determine a company’s revenue requirement during a proceeding pursuant the Public Utility Regulatory Act, Chapter 53, Subchapters C and D or E. 

(c) Definitions. The following words and terms when used in this section shall have the following meaning unless the context clearly indicates otherwise. 

(1) Ancillary services - The category of basic network functions (BNFs) (as defined in paragraph (2) of this subsection) that provide for certain activities that either support or otherwise are adjuncts to other BNFs or finished services. This category of BNFs consists of three subcategories of BNFs: Billing and Collection; Measurement; and Operator Services. 

(A) Billing and collection - The subcategory of BNFs that provide for the function of compiling the information needed for customer billing, preparing the customer bill statement, disbursing the bill and collecting the customer payments. 

(B) Measurement - The subcategory of BNFs that provide the functions of assembling, collating and transmitting end office switch recorded call data (occurrence and duration). 

(C) Operator services - The subcategory of BNFs that provide for the provision of a number of live or mechanized assistance functions to aid customers in the following ways: obtaining customer telephone number, street address and ZIP code information (directory assistance); providing new telephone numbers or explanatory information to callers who dial numbers which have been changed or disconnected (intercepts); providing assistance to customers in completing operator handled toll or local calls (collect, credit card, third party, station-to-station or person-to- person); checking busy lines to make sure the line is not out of service (busy line verification); and interrupting busy lines (busy line interruption). These operator services are provided to end user customers as well as local exchange and interexchange carriers. 

(2) Basic network function (BNF) - A discrete network function, which is useful either as a stand-alone function or in combination with other functions, for which costs can be identified. 

(3) Capital costs - The recurring costs that result from expenditures for plant facilities that are capitalized. The annual capital costs consist of depreciation, cost of money, and income taxes. 

(4) Categories of BNFs - All BNFs shall fall into one of four categories of BNFs. The categories are: network access (as defined in paragraph (13) of this subsection); switching and switch functions (as defined in paragraph (16) of this subsection); dedicated and switched transport (as defined in paragraph (10) of this subsection); and ancillary services (as defined in paragraph (1) of this subsection). 

(5) Common costs - Costs that are not directly attributable to individual cost objects. For the purposes of this section there are three types of common costs: general overhead costs; costs common to BNFs; and costs common to services. 

(A) General overhead costs - Costs incurred in operating and managing the company that are not directly attributable to BNFs or services. 

(B) Costs common to BNFs - Costs incurred in the provision of BNFs that can not be directly attributed to any one BNF individually but only to a category or subcategory of BNFs collectively. 

(C) Costs common to services - Costs incurred in the provision of two or more services that do not vary with changes in the relative proportions of the outputs of those services. Common costs are not directly attributable to any one service individually but only to a group of services collectively. In the event a BNF is used in the provision of two or more services then the volume insensitive cost of the BNF is a cost common to the services that use the BNF. However, if the technological requirements for the provision of one service alter the least cost technology choice for common BNFs or common facilities, then the increase in costs caused by the requirements for more advanced technologies is not a common cost but a cost directly attributable to the service that alters the least cost technology choice. 

(6) Cost causation principle - The principle that only those costs that are caused by an activity (such as a network function, service, or group of services) in the long run are directly attributable to that activity. Costs are caused by an activity, in the long run, if the costs are brought into existence as a direct result of the activity. 

(7) Cost driver - A specific condition, under which a BNF is provided, whose change causes significant and systematic changes in the cost of providing a BNF. For example, if the cost of providing a network access channel varies with the density and size of a wire center, then density and size are cost drivers for that BNF. 

(8) Cost of debt - The rate of interest paid on borrowed money. 

(9) Cost of money - The weighted annual cost to the DCTU of the debt and equity capital invested in the company. 

(10) Dedicated and switched transport - The category of BNFs that provide for dedicated or shared transmission transport between two or more DCTU switching offices or wire centers. This BNF category consists of two subcategories of BNFs: Dedicated Transport and Switched Transport. 

(A) Dedicated transport - The subcategory of BNFs that provide for full period, bandwidth specific (e.g., DS-0, DS- 1, DS-3) interoffice transmission paths between the originating and terminating points of channel connection. 

(B) Switched transport - The subcategory of BNFs that provide for shared interoffice transmission paths between originating and terminating points of switching. 

(11) Group of services - A number of separately tariffed services that share significant common costs (as defined in paragraph (5) of this subsection) that are necessary and unique to the provision of those services and are not directly attributable to any one service individually. This term also refers to a situation in which two or more groups of services are part of a larger group of services because of significant common costs that are necessary and unique to the provision of all the services in the group but are not directly attributable to any one group or service individually. 

(12) Measure of unit cost - The measure of usage used to calculate unit cost for a particular BNF (for example, a minute of use of a switching function, or a quarter mile of a DS-1 network access channel). The measure of unit costs may be multidimensional; for example, it may have both time and distance components. The measure of unit cost chosen for a BNF shall correspond to the basis upon which the costs of that BNF are incurred. 

(13) Network access - The category of BNFs that accommodate access to other network functions provided by DCTUs. Access is accomplished by transmission paths between customers and DCTU wire centers. This category consists of three subcategories of BNFs: network access channel; network access channel connection; and channel performance and other features and functions. 

(A) Network access (NA) channel - The subcategory of BNFs that provide the transmission path between the point of interface at the customer location and the main distribution frame, or equivalent (e.g., DSX-1, DSX-3), of a DCTU wire center. 

(B) Network access (NA) channel connection - The subcategory of BNFs that provide the interface between the network access channel and the DCTU wire center switching equipment, subsequent dedicated transport equipment (dedicated interoffice circuits), or subsequent channel equipment (dedicated intraoffice circuits). 

(C) Channel performance and other features and functions - The subcategory of BNFs that provide the channel functions associated with transmission or service type (e.g., analog, digital, coin, ISDN), bandwidth conversion, signaling, multiplexing, amplification, and channel performance. 

(14) Significant - For the purposes of this section, the qualifying term significant is used to refer to instances in which costs or changes affect total study results by at least five percent. This general guideline for when costs or changes are significant may be relaxed by considering the cumulative effect of either including or excluding costs or changes from a study. 

(15) Subcategories of BNFs - Groupings of closely related BNFs in a category of BNFs. 

(16) Switching and switch functions - The category of BNFs that provide for switched access between two or more network access channels or between network access channels and other BNFs, such as interoffice transport. This function is accomplished through the establishment of a temporary transmission path between network access channels in the same switching office; between a network access channel and the interoffice facilities that interconnect switching offices; or between a network access channel and other BNFs. This BNF category shall cover the first point of switching for a customer. This BNF category consists of three subcategories of BNFs: interoffice switching; intraoffice switching; and switching features. 

(A) Interoffice switching - The subcategory of BNFs that provide for: switching between network access channels and switched transport facilities which are connected to different wire centers; and switching between network access channels and switched transport facilities when a tandem switch is used as the first point of interface to the DCTU switched network (e.g., connection of facilities from an interexchange carrier’s point of network interface).

(B) Intraoffice switching - The subcategory of BNFs that provide for switching between two or more network access channels within the same wire center. 

(d) General principles. 

(1) Underlying the construction and application of this section is the recognition that the DCTU network consists of a finite number of BNFs that, when bundled in various combinations, can be used to deliver and market a vast variety of telecommunications services. Therefore, the determination of the cost of a service and the costs of a group of services under this section shall involve the identification and costing of BNFs. 

(2) The LRIC studies that the DCTU is required to file under this section shall assume that the company is operating in the long run and employs least cost technologies, as those terms are defined in subsection (c) of this section. 

(3) In order to obtain accurate LRIC study results, the DCTU shall avoid the use of embedded cost data; expense items and capital costs shall reflect long run incremental costs and the DCTU shall justify any instance in which embedded cost data are used. Further, the fact that the costs determined under this section may differ from the company’s embedded costs as determined during proceedings under the Public Utility Regulatory Act, Chapter 53, Subchapters C and D or E, should in no way cause the company to attribute any of this cost discrepancy to LRIC studies for BNFs, services, or groups of services. 

(4) When a BNF is used in the provision of two or more services then the volume insensitive cost of the BNF is a cost common to the services (as defined in subsection (c)(5)(C) of this section) that use the BNF. 

(5) When services share significant common costs (as de- fined in subsection (c)(5)(C) of this section), none of the common costs shall be included in the LRIC studies for the services individually; instead, the company shall identify which services share the common costs and attribute the cost recovery responsibility of these costs to the group of services collectively. Specifically, the individual LRIC studies for residential and business basic local exchange service, as these services are tariffed on the effective date of this section, shall exclude any volume insensitive costs associated with the use of the network access channel basic level (as defined in subsection (e)(1)(A) of this section) and network access channel connection basic level (as defined in subsection (e)(2)(A) of this section). 

(6) When two or more groups of services share common costs, none of the common costs shall be included in the LRIC studies for groups individually; instead, the company shall identify which groups share the common costs and assign the common cost recovery responsibility of these costs to these groups collectively. 

(7) Nothing in this section is intended to either endorse or reject the DCTU’s current rate and tariff structures. 

(e) Identification of basic network functions. The DCTU shall identify for each subcategory of BNFs the relevant and separately identifiable BNFs. The determination of the appropriate degree of aggregation of network components, functions, or activities into separately identifiable BNFs shall be consistent with the principles described in subsection (d) of this section. Furthermore, in choosing BNFs, the DCTU shall seek to minimize the number of network components, functions, or activities that are not included in BNFs. In addition to BNFs the company identifies under this subsection, the company shall identify for each subcategory of BNFs the following prescribed BNFs: 

(1) Required BNFs for subcategory network access (NA) channel: 

(A) NA channel basic level: A transmission path which provides less than 1.544 Mbps digital capability. This includes 300 to 3,000 Hz analog voice service. 

(B) NA channel DS-1 level: A transmission path which has 1.544 MBPS digital capability. 

(C) NA channel DS-3 level: A transmission path which has 45 MBPS digital capability. 

(2) Required BNFs for subcategory NA Channel Connection: 

(A) NA channel connection basic level: An interface for channels which provide less then 1.544 Mbps digital capability. This includes the interface for 300 - 3,000 Hz analog voice service which is the basic interface for most voice grade services such as: basic local residential and local business service, PBX trunks, centrex-type access lines and voice grade dedicated transport service. In addition, this category includes the interface for four frequency bandwidths provided for audio channels such as: 200 to 3,500 Hz, 100 to 5,000 Hz, 50 to 8,000 Hz and 50 to 15,000 Hz. Also included in this BNF are the interfaces for low speed data transmission at speeds of 2.4, 4.8, 9.6, 56 Kbps and all other speeds below the T-1 rate of 1.544 Mbps. This interface is for narrowband service. 

(B) NA channel connection DS-1 level: An interface for 1.544 MBPS digital transmission channels. This interface connects high capacity wideband transmission channels which operate in a full duplex, time division (digital) multiplexing mode. 

(C) NA channel connection DS-3 level: An interface for 45 MBPS digital transmission channels. This interface connects broadband transmission channels which operate in full duplex, time division (digital) multiplexing mode. 

(3) Required BNFs for subcategory Channel Performance and Other Features and Functions: 

(A) Standard signaling and transmission level capabilities. Signaling and transmission level capabilities suitable for a wide variety of network services and applications associated with the BNF NA channel basic level, as defined in paragraph (1)(A) of this subsection. 

(B) Nonstandard signaling and transmission level capabilities and other features. Signaling and transmission level capabilities and other features and functions, other than those defined in subparagraph (A) of this paragraph, such as high voltage protection, multiplexing, and bridging. The company is encouraged to disaggregate this BNF into smaller BNFs that capture the variety of features and functions available to customers. 

(4) Required BNFs for subcategory interoffice switching: interoffice switching. The type of switching that provides for: switching between network access channels and switched transport facilities which are connected to different wire centers; and switching between network access channels and switched transport facilities when a tandem switch is used as the first point of interface to the switched network (e.g., connection of facilities from an interexchange carrier’s point of network interface). 

(5) Required BNFs for subcategory intraoffice switching: intraoffice switching. Switching between two or more network access channels served from the same wire center. 

(6) Required BNFs for subcategory switching features: 

(A) Hunting arrangements. An optional function available to customers with multiple local exchange access lines in service. 

(B) Custom calling features. Various optional features which provide added calling convenience. 

(C) Central office automatic call distribution. The provision of call distribution as an integrated function of certain electronic central offices equipped to provide this capability. This function permits an equal distribution of a large volume of incoming calls to predesignated groups of answering positions, referred to as agent positions. 

(D) Central office based PBX-type functions. A business communications system furnished from stored program control central offices that provides the equivalent of customer premises PBX services through the use of central office hardware and software as well as through network access facilities from the central office to the customer premises. Included in this BNF shall be only hardware specific to this type of service, processor or memory usage involved in special features for this type of service, and any software or software right to use fees associated with this type of service. This BNF should exclude any network functions that are already identified as other BNFs. 

(7) Required BNFs for subcategory dedicated transport: 

(A) Dedicated transport termination. An interface which provides for the transmission conversions (e.g., multiplexing) required between channel connection and dedicated transport facilities. 

(B) Dedicated transport facility. The full period, bandwidth specific (e.g., DS-0, DS-1, and DS-3), interoffice transmission paths established between two points of dedicated transport termination. 

(8) Required BNFs for subcategory switched transport: 

(A) Switched transport termination. An interface which provides for the transmission conversion (e.g., multiplexing) required between the switching function and switched transport facilities. 

(B) Switched transport facility. The temporary interoffice transmission paths established between two points of switched transport termination. 

(C) Switched transport tandem switching. The intermediate points of switching used as an economic surrogate to direct routing of interoffice facilities in the provision of switched transport. 

(9) Required BNFs for subcategory billing and collection: billing and collection. The function of compiling the information needed for customer billing, preparing the customer bill statement, disbursing the bill and collecting the customer payments (this includes any collection activities required for late payment or non-payment of billing amount due). 

(10) Required BNFs for subcategory measurement: measurement. The function of assembling, collating and transmitting end office switch recorded call data (occurrence and duration). 

(11) Required BNFs for subcategory operator services: operator services. The role of providing a number of live or mechanized assistance functions to aid customers in the following ways: obtaining customer telephone number, street address and ZIP code information (directory assistance); providing new telephone numbers or explanatory information to callers who dial numbers which have been changed or disconnected (intercepts); providing assistance to customers in completing operator handled toll or local calls (collect, credit card, third party, station-to-station or person-to-person); checking busy lines to make sure the line is not out of service (busy line verification); and interrupting busy lines (busy line interruption). These operator services are provided to end user customers as well as local exchange and interexchange carriers. 

(f) LRIC studies for individual BNFs. The DCTU shall perform a LRIC study for each of the BNFs identified under subsection (e) of this section. The company shall perform the LRIC studies consistent with the principles described in subsection (d) of this section. Additionally, the company shall use the following instructions in determining the LRIC for individual BNFs. 

(1) Relevant increment of output. For the purposes of this subsection, the relevant increment of output, as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the level of output necessary to satisfy total current demand levels for all services using the BNF in question. Adjustments to total service output may be made to reflect the presence of new services for which demand levels can demonstrably be anticipated to increase significantly over the course of six months. 

(2) Relating expenses to BNFs. The company shall avoid the use of embedded cost data and shall determine expenses consistent with the principles of long run incremental costing. 

(A) Common expenses. Common expenses that are not directly attributable, using the cost causation principle, to the BNF shall be excluded. 

(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified. 

(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be excluded from the LRIC study for individual BNFs. Specifically, taxes associated with the provision of services that use more than one BNF shall not be included in the BNF LRICs. 

(3) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of least cost technologies, however, shall: 

(A) be restricted to technologies that are currently available on the market and for which vendor prices can be obtained; 

(B) be consistent with the level of output necessary to satisfy current demand levels for all services using the BNF in question; and 

(C) be consistent with overall network design and topology requirements. 

(4) Network topology. LRIC studies shall use the existing or planned network topology. 

(5) Cost of money. When the company uses the most recent commission approved rate of return for the company, determined either in a rate proceeding as described in §23.21(d)(1) of this title (relating to Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its reasonableness. The company may use any other forward-looking rate, but shall justify its use. The DCTU is not required to update its filing only to reflect the most recently approved cost of money. 

(6) Rate of depreciation. When the company uses the most recent commission approved rate of depreciation for the company there will be a presumption of reasonableness. The company shall justify the use of any other rate. 

(7) Measure of unit cost. LRIC studies shall identify the appropriate measure of unit cost for a BNF (e.g., minutes of use, access line). The measure of unit cost chosen for a BNF shall correspond to the basis upon which the costs of the BNF are incurred. The measure of unit cost may be multidimensional; for example, it may have both time and distance components. In identifying the appropriate measure of unit cost, the company shall ignore the current rate structure for tariffed services using the BNF. 

(8) Determination of unit cost. Using the measure of unit cost identified under paragraph (7) of this subsection, the company shall calculate unit cost for the BNF based on the assumption of full capacity utilization of the BNF, which should allow for any spare capacity due to lumpy investments or technical requirements, such as spare capacity needed for testing. The unit cost shall be calculated based on the volume sensitive costs of the BNF and exclude all costs that are volume insensitive (as those terms are defined in §26.5 of this title). 

(9) Determination of volume insensitive costs. The company shall calculate the volume insensitive costs (as defined in §26.5 of this title) for the BNF. 

(10) Cost drivers. LRIC studies shall identify and account for all relevant cost drivers. LRIC studies for certain BNFs shall at a minimum account for the cost drivers specified below. 

(A) Cost drivers for NA channel basic level, NA channel DS-1 level, and NA channel DS-3 level. The LRICs for these BNFs shall systematically account for variations in costs caused by variations in: 

(i) the density of a wire center; 

(ii) the size of a wire center; and 

(iii) the distance. 

(B) Cost drivers for NA connection basic level, NA connection DS-1 level, and NA connection DS-3 level. The LRICs for these BNFs shall systematically account for variations in costs caused by variations in: 

(i) the density of a wire center; and 

(ii) the size of a wire center. 

(C) Cost drivers for intraoffice switching and interoffice switching. The LRICs for these BNFs shall systematically account for variations in costs caused by variations in: 

(i) the density of a wire center; 

(ii) the size of a wire center; and 

(iii) the time of day. 

(D) Cost drivers for dedicated transport facilities and termination. The LRICs for these BNFs shall systematically account for variations in costs caused by variations in: 

(i) the size of a wire center; and 

(ii) the distance. 

(E) Cost drivers for switched transport facilities, termination and tandem switching. The LRICs for these BNFs shall systematically account for variations in costs caused by variations in: 

(i) the size of a wire center; 

(ii) the distance; and 

(iii) time of day. 

(F) Cost drivers for measurement. The LRIC for this BNF shall systematically account for variations in costs caused by variations in: 

(i) the density of a wire center; 

(ii) the size of a wire center; 

(iii) the time of day; and 

(iv) the duration of a call. 

(G) Cost drivers for operator services. The LRIC for this BNF shall systematically account for variations in costs caused by variations in the type of operator services calls. 

(g) LRIC studies for tariffed services. The DCTU shall perform a LRIC study for each tariffed service, except those services for which a waiver has been granted under the workplan approved by the commission. Each LRIC study for a tariffed service shall be calculated as the sum of the costs caused by that a service’s use of BNFs and any other service specific costs associated with functions not identified as separate BNFs, such as expenses of billing, service specific advertising and marketing, and service specific taxes. Each LRIC study for a tariffed service shall be consistent with the principles described in subsection (d) of this section. Additionally, the company shall use the following instructions in determining the LRIC for individual tariffed services: 

(1) Mapping of BNFs and costs to tariffed services. The LRIC study shall identify the BNFs that are used in the provision of the tariffed service; the long run incremental costs for the tariffed service shall include the costs associated with this usage. The costs associated with the service’s use of a BNF shall be calculated as the product of the unit cost for the BNF (as determined under subsection (f)(8) of this section) and the demand of the service for that BNF. 

(2) Identification of other costs. The LRIC study for an individual tariffed service shall include all service specific costs (e.g., expenses of billing, marketing, customer service or service specific taxes) related to the provision of the service that are not included in the costs for the BNFs. 

(3) Exclusion of common costs. The LRIC study for an individual tariffed service shall exclude any costs that are common costs (as defined in subsection (c)(5) of this section). Specifically, the individual LRIC studies for residential and business basic local exchange service, as these services are tariffed on the effective date of this section, shall exclude any volume insensitive costs associated with the use of the network access channel basic level (as defined in subsection (e)(1)(A) of this section) and network access channel connection basic level (as defined in subsection (e)(2)(A) of this section). 

(4) Relevant increment of output. For the purposes of this subsection, the relevant increment of output, as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the level of output necessary to satisfy current demand levels for the service. Adjustments to total service output may be made to reflect the presence of new services for which demand levels can demonstrably be anticipated to increase significantly over the course of six months. 

(5) Relating expenses to services. The company shall avoid the use of embedded cost data and shall determine expenses consistent with the principles of long run incremental costing. 

(A) Common expenses. Common expenses that are not directly attributable, using the cost causation principle, to the service shall be excluded. 

(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified. 

(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be excluded from the LRIC study for individual services. 

(6) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of least cost technologies, however, shall: 

(A) be restricted to technologies that are currently available on the market and for which vendor prices can be obtained; 

(B) be consistent with the level of output necessary to satisfy current demand levels for all services using the BNF in question; and 

(C) be consistent with overall network design and topology requirements. 

(7) Network topology. LRIC studies shall use the existing or planned network topology. 

(8) Cost of money. When the company uses the most recent commission approved rate of return for the company, determined either in a rate proceeding as described in §23.21(d)(1) of this title (relating to Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its reasonableness. The company may use any other forward-looking rate, but shall justify its use. The DCTU is not required to update its filing only to reflect the most recently approved cost of money. 

(9) Rate of depreciation. When the company uses the most recent commission approved rate of depreciation for the company there will be a presumption of reasonableness. The company shall justify the use of any other rate. 

(h) Identification of BNFs and groups of services that share significant common costs and calculation of such common costs. The company shall identify all instances in which BNFs and groups of services share significant common costs and calculate such common costs. 

(1) Costs common to BNFs. The company shall identify and calculate for each subcategory of BNFs and category of BNFs significant costs that are common to BNFs (as defined in subsection (c)(5)(B) of this section). Costs common to BNFs shall only be identified and calculated at the level of subcategories of BNFs and/ or categories of BNFs. 

(2) Costs common to groups of services. The company shall identify and calculate all significant common costs and the groups of services that share those common costs (as defined in subsection (c)(5)(C) of this section). The calculation of common costs required under paragraphs (1)- (2) of this subsection shall be consistent with the principles described in subsection (d) of this section and the instructions listed below. 

(3) Relevant increment of output. When common costs are computed for BNFs or services, the relevant increment of output, as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the level of output necessary to satisfy current demand levels for the BNFs or the services. Adjustments to total service output may be made to reflect the presence of new services for which demand levels can demonstrably be anticipated to increase significantly over the course of six months. 

(4) Expenses. The company shall avoid the use of embedded cost data and shall determine expenses consistent with the principles of long run incremental costing. 

(A) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified. 

(B) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be excluded from the cost studies for common costs. 

(5) Least cost technology. The studies shall assume the use of least cost technology. The choice of least cost technologies, however, shall: 

(A) be restricted to technologies that are currently available on the market and for which vendor prices can be obtained; 

(B) be consistent with the level of output necessary to satisfy current demand levels for the BNFs or services in question; and 

(C) be consistent with overall network design and topology requirements. 

(6) Network topology. Cost studies shall use the existing or planned network topology. 

(7) Cost of money. When the company uses the most recent commission approved rate of return for the company, determined either in a rate proceeding as described in §23.21(d)(1) of this title (relating to Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its reasonableness. The company may use any other forward-looking rate, but shall justify its use. The DCTU is not required to update its filing only to reflect the most recently approved cost of money. 

(8) Rate of depreciation. When the company uses the most recent commission approved rate of depreciation for the company there will be a presumption of reasonableness. The company shall justify the use of any other rate. 

(i) LRIC studies for groups of tariffed services that share significant common costs. The DCTU shall perform a LRIC study for each group of services identified under subsection (h)(2) of this section. Each group LRIC shall be calculated as the sum of the LRICs (as determined under subsection (g) of this section) for the services in the group and the common costs for those services (as identified under subsection (h)(2) of this section). Each LRIC study shall be consistent with the principles described in subsection (d) of this section. Additionally, the company shall use the following instructions in determining the LRIC for groups of services. 

(1) Relevant increment of output. When the LRIC is computed for a group of services, the relevant increment of output, as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the level of output necessary to satisfy current demand levels for the services in the group. Adjustments to total service output may be made to reflect the presence of new services for which demand levels can demonstrably be anticipated to increase significantly over the course of six months. 

(2) Relating expenses to groups of services. The company shall avoid the use of embedded cost data and shall determine expenses consistent with the principles of long run incremental costing. 

(A) Common expenses. Common expenses that are not directly attributable, using the cost causation principle, to the group of services shall be excluded. 

(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified. 

(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be excluded from the LRIC study for the group of services. 

(3) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of least cost technologies, however, shall: 

(A) be restricted to technologies that are currently available on the market and for which vendor prices can be obtained; 

(B) be consistent with the level of output necessary to satisfy current demand levels for all services using the BNF in question; and 

(C) be consistent with overall network design and topology requirements. 

(4) Network topology. LRIC studies shall use the existing or planned network topology. 

(5) Cost of money. When the company uses the most recent commission approved rate of return for the company, determined either in a rate proceeding as described in §23.21(d)(1) of this title (relating to Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its reasonableness. The company may use any other forward-looking rate, but shall justify its use. The DCTU is not required to update its filing only to reflect the most recently approved cost of money. 

(6) Rate of depreciation. When the company uses the most recent commission approved rate of depreciation for the company there will be a presumption of reasonableness. The company shall justify the use of any other rate. 

(j) Requirements for subsequent filings of LRIC studies. The LRIC studies required by this subsection shall be consistent with the principles, instructions and requirements set forth in this section and the workplan approved by the commission and shall be reviewed in accordance with the procedures established in subsection (k) of this section. 

(1) Updated studies. A DCTU may be required to update the filings required by this section, other than the workplan, for those studies where no significant changes have occurred. 

(2) Provisions for new BNFs. When significant technological or other changes occur that necessitate a change in the definition of current BNFs or the identification of new BNFs, the DCTU shall file with the commission and the Office of Public Utility Counsel (OPUC) updated versions for all affected LRIC studies or new studies as appropriate. 

(3) Provisions for new services. For each application for a service filed pursuant to this title, the DCTU shall file with the commission and OPUC a LRIC study for the service consistent with the principles described in subsection (d) of this section and the specific requirements set forth in subsection (g) of this section. 

(4) Unbundling of existing tariffed services. When an application filed pursuant to this title proposes a service that previously had been bundled with other BNFs into a tariffed service, the DCTU shall carefully reexamine the identification of groups of services that share significant common costs (as required under subsection (h) of this section). If the new service significantly changes the identification of groups of services and the identification of common costs, the DCTU should update all studies required under this section that are affected by these changes. 

(k) Review process for LRIC studies. A LRIC study considered under this section shall be reviewed administratively to determine whether the DCTU’s LRIC study is consistent with the principles, instructions and requirements set forth in this section. 

(1) Sufficiency. The LRIC study shall be examined for sufficiency. To be sufficient, the LRIC study shall conform to the prototype studies developed under the workplan approved by the commission. If the presiding officer or the commission staff concludes that material deficiencies exist in the LRIC study, the DCTU shall be notified within 15 days of the filing date of the specific deficiency in its LRIC study. The DCTU shall have 15 days from the date it is notified of the deficiency to file a corrected LRIC study. 

(2) Time schedule. 

(A) No later than 45 days after the filing date of the sufficient LRIC study, any party that demonstrates a justiciable interest may file with the presiding officer written comments or recommendations concerning the LRIC study. 

(B) No later than 55 days after the filing date of the sufficient LRIC study, OPUC may file with the presiding officer written comments or recommendations concerning the LRIC study. 

(C) No later than 65 days after the filing date of the sufficient LRIC study, the commission staff shall file with the presiding officer written comments or recommendations concerning the LRIC study. 

(D) No later than 75 days after the filing date of the sufficient LRIC study, any party that demonstrates a justiciable interest, OPUC, or the DCTU may file with the presiding officer a written response to the commission staff’s recommendation. 

(E) No later than 85 days after the filing date of the sufficient LRIC study, the presiding officer shall complete an administrative review to determine whether the DCTU’s LRIC study is consistent with the principles, instructions and requirements set forth in this section. The presiding officer shall approve the LRIC study or order the DCTU to refile the LRIC study incorporating all modifications recommended by the presiding officer. 

(F) Any party may appeal to the commission an administrative determination by a presiding officer within five days after the date of notification of the determination. The commission shall rule on the appeal within 30 days after the date it receives the appeal. If the commission or a presiding officer orders a cost study to be changed, the dominant certificated telecommunications utility shall be ordered to make those changes within a period that is commensurate with the complexity of the LRIC study. 

(3) Requests for information. While the LRIC study is being administratively reviewed, the commission staff, OPUC, and any party that demonstrates a justiciable interest may submit requests for information to the DCTU. Three copies of all answers to such requests for information shall be provided within ten days after receipt of the request by the DCTU to the commission staff, OPUC and any party that demonstrates a justiciable interest. 

(4) Suspension. At any point within the first 45 days of the review process, the presiding officer, the commission staff, OPUC, the DCTU, or any party that demonstrates a justiciable interest may request that the review process be suspended for 30 days. The presiding officer may grant a request for suspension only if he or she has determined that the party has demonstrated that good cause exists for such suspension. 

(5) Effective date of the LRIC study. The effective date of the LRIC study shall be the date it is approved by the presiding officer. 

(l) Notice requirements. At least ten days before a DCTU files any workplan or LRIC study pursuant to this section, the DCTU shall file with the commission and OPUC a notice of its intent to file such workplan or LRIC study and the expected filing date. The DCTU’s notice shall indicate that the filing is being made pursuant to this section. The commission shall then publish notice of the DCTU’s intent to file the workplan or LRIC study in the Texas Register. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900518 

Rhonda Dempsey 

Rules Coordinator 

Public Utility Commission of Texas 

Earliest possible date of adoption: March 7, 1999 

For further information, please call: (512) 936–7308

 


Part VI.
Texas Motor Vehicle Board 

Chapter 103. General Rules

16 TAC §103.3 

The Motor Vehicle Board of the Texas Department of Transportation proposes amendments to §103.3, General Rules, concerning Amended License. The Board previously proposed amendments to §103.3 which change the reference from Motor Vehicle Commission to Motor Vehicle Board and which would more clearly reflect the licensing process for dealers that sell and/or assign an interest in franchises or franchised entities and allow written notice to the Board of certain changes, instead of requiring an application for amended license. The Board considered comments on the proposal at its January 14, 1999 meeting and determined that proposed additional changes are so significant that the rule should be withdrawn and republished. In addition to the changes previously proposed, this republication includes a provision that a dealership may be operated by a manufacturer, distributor or representative only on a temporary basis and defines "temporary" as one year or less. 

Brett Bray, Director, Motor Vehicle Division, has determined that for the first five-year period the sections are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the sections. There will be no significant impact on local economies or overall employment as a result of enforcing or administering the sections. 

Mr. Bray also has determined that for each of the first five years the amendments are in effect the public benefit anticipated as a result of the amended rules will be to provide licensing guidelines that are more clear and understandable to the regulated entities. There will be no effect on small businesses.  The anticipated additional cost to persons required to comply with these sections as proposed is not determinable. 

Comments on the proposed rules may be submitted to Brett Bray, Director, Motor Vehicle Division, P.O. Box 2293, Austin, Texas 78768. Please submit 15 copies. The Texas Motor Vehicle Board will consider the final adoption of the proposed rules at its meeting on April 22, 1999. The deadline for proposed amendments is 5:00 p.m., March 5, 1999. 

The amendments are proposed under the Texas Motor Vehicle Commission Code, §3.06, which provides the Board with authority to adopt rules necessary and convenient to effectuate the provisions of this act. 

Texas Motor Vehicle Commission Code §§ 1.03, 4.01(a), 4.02, 4.03, 5.02(b) and 5.04(a) are affected by the proposed amendments. 

§103.3. Amended License. 

(a) To effectuate the Texas Motor Vehicle Commission Code, §4.02(d), every licensed dealer who proposes to conduct business under a franchise which is additional to or which differs from the franchise or franchises on which the license is then based shall file an application to amend the license on the form prescribed by the Board [commission], attaching a copy of the franchise agreement. The amended application will be considered as if it were an original application to operate under the additional franchise as to all matters except those reflected by the license as issued. 

(b) Every licensed dealer who proposes to sell and/or assign to another an interest in one or more franchises for which the license is issued, or an interest in the franchised entity, whether a corporation or otherwise, so long as the physical location of the franchise remains the same, shall notify the Board and the franchisor of the identity and ownership interest of the purchaser/assignee in writing. If the sale or assignment of the business results in the franchise(s) being held by an entity different from the existing licensee, then the purchasing/ assignee entity must apply for and obtain a new license. If the purchaser/assignee is a manufacturer, distributor, or representative, then the dealership may only be operated and licensed on a temporary basis. "Temporary" means for one year or less. [equivalent to 10% or more in one or more franchises on which the license is then based or an equivalent interest in the business of the dealership, whether the same is a corporation, partnership, sole proprietorship, or otherwise, shall file an application to amend the license providing the requested information as to the proposed assignee. If the interest involved exceeds 50%, the amended license may be issued in the name of such assignee.

(c) In the event of a change in management reflected by a change of the general manager or other person who is in charge of a licensee’s business activities, whether a managing partner, officer, or director of a corporation, or otherwise, the licensee shall notify the Board and the franchisor in writing with 10 days of the change. [commission shall be advised by means of an application for an amended license.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900507 

Brett Bray 

Division Director 

Texas Motor Vehicle Board 

Proposed date of adoption: April 22, 1999 

For further information, please call: (512) 416–4899


Part VIII.
Texas Racing Commission 

Chapter 309. Operation of Racetracks 

Subchapter C. Greyhound Racetracks 

Division 2. Operations 

16 TAC §309.353 

The Texas Racing Commission proposes an amendment to §309.353, concerning the dismissal of kennels. The amendment is the result of discussions between agency staff and representatives of the greyhound racetracks and the Texas Greyhound Association. The amendment clarifies the reasons for which a kennel contract may be dismissed from a greyhound racetrack. In order for new kennels to be given a chance at Texas greyhound racetracks, the amendment provides that for five years after a kennel is dismissed, the association cannot book another kennel that is owned substantially by the dismissed kennel’s owners. 

Roselyn Marcus, General Counsel for the Texas Racing Commission, has determined that for the first five-year period the amendment is in effect there will be no fiscal implications for state or local government as a result of enforcing the proposal. 

Ms. Marcus has also determined that for each of the first five years the amendment is in effect the public benefit anticipated as a result of enforcing the proposal will be the assurance that pari-mutuel greyhound racing will be conducted with utmost integrity and with fairness to all licensees. There will be no fiscal implications for small businesses as a result of enforcing this section. There is no anticipated economic cost to an individual required to comply with the amendment as proposed. The proposal has no effect on the state’s agricultural, horse breeding, or horse training industries. The proposal may have a positive effect on the state’s greyhound breeding and greyhound training industries. 

Comments on the proposal may be submitted on or before March 15, 1999, to Roselyn Marcus, General Counsel for the Texas Racing Commission, P.O. Box 12080, Austin, Texas 78711-2080. 

The amendment is proposed under the Texas Civil Statutes, Article 179e, §3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and §6.06, which authorizes the Commission to adopt rules on all matters relating to the operation of racetracks. 

The proposed amendment implements Texas Civil Statutes, Article 179e. Sec. 

§309.353. Dismissal of Kennel. 

(a) (No change.) 

(b) A contract between an association and a kennel owner must provide a uniform dismissal clause. The clause must state the following [that]: 

(1) if a kennel has been continuously booked at the association for more than two year, the association shall dismiss a kennel if the kennel’s win record is [that finishes] in the bottom four positions at the end of a race meeting for two of the past three years and the associaton may not rebook the kennel for a period of five years; 

(2) the association may place a kennel on probation by written notice if the kennel’s win record is in the lowest three positions during each of the three preceding months; [and

(3) an association may place a kennel on probation by written notice if the kennel is in breach of the kennel contract in a manner that materially affects the rights or privileges of the association; and 

(4) [(3)] an association may dismiss a kennel on probation if during the three-month period following the beginning of probation, the kennel fails to cure the breach or fails to place [has not placed] higher than at least three other kennels [during the 90 day period following the beginning of the probation]. 

(c) (No change.) 

(d) For a five-year period after a kennel is dismissed pursuant to this section, an association may not book another kennel that is owned substantially by the same owners as the dismissed kennel. For purposes of this subsection, "substantially" means more than a 50% ownership interest in the kennel. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900486 

Paula C. Flowerday 

Executive Secretary 

Texas Racing Commission 

Proposed date of adoption: March 26, 1999 

For further information, please call: (512) 833–6699


Chapter 321.
Pari-mutuel Wagering 

Subchapter A. Regulation and Totalisator Operations 

Division 2. Mutuel Tickets 

16 TAC §321.38 

The Texas Racing Commission proposes an amendment to §321.38, concerning the cancellation of mutuel tickets. This proposal changes the focus of the section from regulating the cancellation of mutuel tickets to the cancellation of win wagers on mutuel tickets. The amendment provides a win wager over $500 may not be cancelled. The amendment also adds clarity and additional circumstances under which a win wager may be cancelled. Lastly, it provides for the association to post notice of these standards. 

Roselyn Marcus, General Counsel for the Texas Racing Commission, has determined that for the first five-year period the amendment is in effect there will be no fiscal implications for state or local government as a result of enforcing the proposal. 

Ms. Marcus has also determined that for each of the first five years the amendment is in effect the public benefit anticipated as a result of enforcing the proposal will be that pari-mutel wagering will be fair to the patrons, while maintaining its high integrity. There will be no fiscal implications for small businesses as a result of enforcing this proposal. There is no anticipated economic cost to an individual required to comply with the proposal. The proposal has no effect on the state’s agricultural, horse breeding, horse training, greyhound breeding, or greyhound training industries. 

Comments on the proposal may be submitted on or before March 15, 1999, to Roselyn Marcus, General Counsel, for the Texas Racing Commission, P.O. Box 12080, Austin, Texas 78711-2080. 

The amendment is proposed under the Texas Civil Statutes, Article 179e, §3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; §11.01, which authorizes the commission to adopt rules to regulate pari-mutuel wagering; and §11.011, which authorizes the commission to adopt rules to regulate parimutuel wagering on simulcast races. 

The proposed amendment implements Texas Civil Statutes, Article 179e. 

§321.38. Cancellation of Win Wagers [Tickets]. 

(a) An association may not cancel a win wager for more than $500 on any live or simulcast race offered for wagering by the association, unless: [ticket except as authorized by this section.

(1) the patron requests to cancel the wager before the patron leaves the teller’s window and before the ticket-issuing machines are locked; or 

(2) the stewards or racing judges order the wager to be canceled because of a scratch in the race. 

(b) If a patron desires to cancel a wager that is on the same mutuel ticket as a win wager that may not be canceled under this section, the association may cancel the ticket but must immediately replace the win wager that was on the ticket. [An association may cancel a mutuel ticket for $250 or less on request by the holder of the ticket before the ticket-issuing machines are locked. An association may cancel a ticket for any amount if the holder of the ticket requests that the ticket be canceled before the patron leaves the teller’s window and before the ticket-issuing machines are locked.

(c) An association shall post a notice by each automatic ticket-issuing machine on association grounds that at a minimum states that a win wager for more than $500 may not be canceled except if the stewards or racing judges order the wager to be canceled because of a scratch in the race. [An association may cancel a mutuel ticket if the stewards or racing judges order tickets to be cancel because of a scratch in a race.

(d) An association may adopt a house policy regarding the cancellation of win wagers [mutuel tickets] that is more restrictive than this section, subject to the approval of the executive secretary. 

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal authority to adopt. 

Filed with the Office of the Secretary of State, on January 25, 1999. 

TRD-9900487 

Paula C. Flowerday

Executive Secretary 

Texas Racing Commission 

Proposed date of adoption: March 26, 1999 

For further information, please call: (512) 833–6699