TITLE economic-regulation

Part II. Public Utility Commission of Texas

Chapter 23. Substantive Rules

Subchapter C. Rates

16 TAC §§23.24, 23.25, 23.26, 23.27, 23.28

The Public Utility Commission of Texas adopts the repeal of §23.24, relating to Form and Filing of Tariffs, §23.25, relating to Procedures Applicable to Chapter 58-Electing Incumbent Local Exchange Companies (ILECs), §23.26, relating to New and Experimental Services, §23.27, relating to Rate-Setting Flexibility for Services Subject to Significant Competitive Challenges, and §23.28, relating to Promotional Rates for LEC Services with no changes to the proposed text as published in the January 1, 1999, Texas Register (24 TexReg 19). The repeal is necessary to avoid duplicative rule sections. This repeal is adopted under Project Number 17709.

Under Project Number 20074, the commission adopted new §25.241 relating to Form and Filing of Tariffs to replace §23.24 as it relates to electric service providers. Under Project Number 20075, the commission adopted §§26.207-26.212 concerning tariffs for telecommunications service providers to replace §§23.24-23.28.

The commission received no comments on the proposed repeal.

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

Cross-Index to Statutes: Public Utility Regulatory Act §14.002.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on .June 2, 1999.

TRD-9903256

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: January 1, 1999

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


Subchapter E. Customer Service and Protection

16 TAC §23.50

The Public Utility Commission of Texas adopts the repeal of §23.50, relating to Central System or Nonsubmetered Master Metered Utilities with no changes to the proposed text as published in the March 12, 1999 Texas Register (24 TexReg 1713). The repeal is necessary to avoid duplicative rule sections. The commission has adopted §25.141 of this title (relating to Central System or Nonsubmetered Master Metered Utilities) to replace §23.50. This repeal is adopted under Project Number 17709.

The commission received no comments on the proposed repeal.

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

Cross-Index to Statutes: Public Utility Regulatory Act §14.002.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on .June 2, 1999.

TRD-9903258

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: March 12, 1999

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


Subchapter H. Telephone

16 TAC §23.104

The Public Utility Commission of Texas adopts the repeal of §23.104 relating to Telecommunications Pricing with no changes to the proposal as published in the February 5, 1999 Texas Register (24 TexReg 661). The repeal is necessary to avoid duplicative rule sections. The commission has adopted §26.213 of this title (relating to Telecommunications Pricing) to replace §23.104. This repeal is adopted under Project Number 18846.

The commission received no comments on the proposed repeal.

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

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 2, 1999.

TRD-9903260

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: February 5, 1999

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


Chapter 25. Substantive Rules Applicable to Electric Service Providers

Subchapter G. Submetering

16 TAC §25.141

The Public Utility Commission of Texas (commission) adopts new §25.141 relating to Central System or Nonsubmetered Master Metered Utilities with changes to the proposed text as published in the March 12, 1999 Texas Register (24 TexReg 1714).

This section is necessary to assure that billing systems or methods used by an apartment house owner to prorate or allocate among tenants central system utility cost or nonsubmetered master metered utility service costs are just and reasonable. This section is required by the Texas Utilities Code, §184.052 (Vernon 1998). This section replaces §23.50 of this title (relating to Central System or Nonsubmetered Master Metered Utilities). This section is adopted under Project Number 17709.

The Appropriations Act of 1997, House Bill 1, Article IX, §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 §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 25 has been established for all commission substantive rules applicable to electric service providers.

The commission requested specific comments on the §167 requirement as to whether the reason for adopting or readopting the rule continues to exist. The commission received no comments on the §167 requirement. The commission finds that the reason for adopting this section continues to exist.

The commission received comments on the proposed section from Texas Apartment Association (TAA).

The commission proposed subsection (e)(4)(C) that requires apartment owners to meet the same requirements as electric utilities for disconnection of the ill and disabled, energy assistance grantees, and disconnection during extreme weather conditions. This requirement was made by referencing §25.29(g), (h) and (i) of this title (relating to Disconnection of Service). TAA agreed that this was a reasonable requirement, but requested that these provisions be explicitly stated in §25.141 instead of by referencing §25.29.

Ordinarily, incorporation of another rule by reference avoids inconsistency. However, since apartment owners may not be familiar with other commission rules, the commission has made the change requested by TAA.

This section is adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and specifically Texas Utilities Code §184.052 which requires the commission to adopt rules governing billing systems or methods used by an apartment house owner to prorate or allocate among tenants central system utility costs or nonsubmetered master metered utility service costs.

§25.141. Central System or Nonsubmetered Master Metered Utilities.

(a)

Purpose and scope.

(1)

The provisions of this section are intended to assure that billing systems involving central system or nonsubmetered master metered utilities are just and reasonable.

(2)

For purposes of enforcement, both utilities and apartment house owners are subject to enforcement pursuant to the Public Utility Regulatory Act §§15.021, 15.022, 15.028, 15.029, 15.030, 15.031, 15.032, and 15.033, which may involve civil penalties of up to $5,000 for each offense and criminal penalties for willful and knowing violations.

(b)

Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1)

Apartment house - One or more buildings containing two or more dwelling units rented primarily for nontransient use with rent paid at intervals of one week or longer.

(2)

Apartment house owner - The legal titleholder of an apartment house or an individual, firm, or corporation purporting to be the landlord of tenants in the apartment house.

(3)

Billing unit - Kilowatt-hour for electric service.

(4)

Central system utilities - Electricity consumed by a central air conditioning system, central heating system, central hot water system, or central chilled water system in an apartment house. The term does not include utilities directly consumed by a dwelling unit.

(5)

Customer - The individual, firm, or corporation in whose name a master meter is connected by a utility.

(6)

Dwelling unit - One or more rooms that are suitable for occupancy as a residence and that contain kitchen and bathroom facilities.

(7)

Nonsubmetered master metered utility service - Electric utility service that is master metered for an apartment house but is not submetered.

(8)

Utility - A public, private, or member-owned utility furnishing electricity service to an apartment house served by a master meter.

(c)

Records and reports.

(1)

The apartment house owner shall maintain and make available for inspection by the tenant during normal business hours:

(A)

the billing from the utility to the apartment house owner for the current month and the 12 preceding months; and

(B)

the calculation of the average cost per billing unit (kilowatt-hour) for the current month and the 12 preceding months which was used in assessing tenant utility billings. The average cost per billing unit shall be equal to the charges for the utility service plus applicable tax, less any penalties charged by the utility to the apartment house owner for disconnect, reconnect, late payment or other similar service charges, divided by the total number of billing units.

(2)

All records shall be made available to the commission upon request.

(3)

Records shall be made available at the resident manager's office during reasonable business hours or, if there is no resident manager, at the dwelling unit of the tenant at the convenience of both the apartment house owner and the tenant.

(d)

Calculation of costs. Central system utilities costs shall be calculated based on metered billing units of the central system during the same billing period as that of the utility. The metered billing units of the central system shall be multiplied by the average cost per billing calculated according to subsection (c)(1)(B) of this section. Meters used for central system utilities shall conform to all applicable industry standards. The cost of nonsubmetered master metered utilities shall be the total charges for utility service to the apartment house less any penalties charged by the utility to the apartment house owner for disconnect, reconnect, late payment or other similar service charges.

(e)

Billing. All rental agreements between the apartment house owner and the tenants shall provide a clear written description of the method of the allocation of central system utilities or nonsubmetered master metered utilities for the apartment house. The method of allocation may be changed only after 90 days notice of the change to the tenants. The rental agreement for each apartment unit shall contain a statement of the average monthly bill for the previous calendar year for that apartment unit. If there is no rental agreement, apartment house owners shall provide the method of allocation in a separate written document.

(1)

Rendering and form of bill.

(A)

Bills shall be rendered for the same billing period as that of the utility, generally monthly, unless service is rendered for less than that period.

(B)

The allocation of central system utilities costs or nonsubmetered master metered utilities costs to tenants shall be based on one or a combination of the following methods.

(i)

the total square footage living area of the dwelling unit as a percentage of the total square footage living area of all dwelling units of the apartment house and all heated and/or air conditioned common areas. This percentage shall be stated in the rental agreement for each dwelling unit; and

(ii)

the individually metered or submetered utility usage of the dwelling unit as a percentage of the sum of the individually metered or submetered usage of all dwelling units.

(C)

Methods to allocate central system utility costs or nonsubmetered master metered utilities to tenants, other than the method outlined in this section, must be approved by the commission.

(D)

Billings to the tenant shall not be included as part of the rental payment or as part of billings for any other service to the tenant. A separate billing must be issued or, if issued on a multi-item bill, utility billing information must be separate and distinct from any other charges on the bill. The bill may not include a deposit, late penalty, reconnect charge, or any other charges unless otherwise provided for by this chapter.

(i)

A one-time penalty not to exceed 5.0% may be made on delinquent accounts. If such penalty is applied, the bill shall indicate the amount due if paid by the due date and the amount due if the late penalty is incurred. No late penalty may be applied unless agreed to by the tenant in a written lease which states the exact dollar or percentage amount of such late penalty.

(ii)

A reconnect fee may be applied if service to the tenant is disconnected for nonpayment of submetered bills in accordance with paragraph (4)(A) of this subsection. The reconnect fee shall be calculated based on the average actual cost to the landlord for the expenses associated with the reconnection, but under no circumstance shall exceed $10. No reconnect charge may be applied unless agreed to by the tenant in a written lease which states the exact dollar amount of the reconnect charge.

(E)

An apartment house owner may not impose additional charges on a tenant in excess of the actual charges imposed on the apartment house owner for utility consumption by the apartment house.

(2)

Due date. The due date of the bill shall not be less than seven days after issuance. A bill for service is delinquent if not received by the party indicated on the bill by the due date. The postmark date, if any, on the envelope of the bill or on the bill itself shall constitute proof of the date of issuance. An issuance date on the bill shall constitute proof of the date of issuance if there is no postmark on the envelope or bill. If the due date falls on a holiday or weekend, the due date for payment purposes shall be the next workday after the due date.

(3)

Overbilling and underbilling. If billings are found to be in error, the apartment house owner shall calculate a billing adjustment. If the tenant is due a refund, an adjustment shall be made for the entire period of the overcharges. If the tenant was undercharged, the apartment house owner may backbill the tenant for the amount which was underbilled. The backbilling is not to exceed six months unless the apartment house owner can produce records to identify and justify the additional amount of backbilling. If the underbilling is $25 or more, the apartment house owner shall offer to such tenant a deferred payment plan option, for the same length of time as that of the underbilling. However, the apartment house owner may not disconnect service if the tenant fails to pay charges arising from an underbilling more than six months prior to the date the tenant was initially notified of the amount of the undercharges and the total additional amount due. Furthermore, adjustments for usage by a previous tenant may not be backbilled to the current tenant.

(4)

Discontinuance of service.

(A)

Disconnection for delinquent bills. Utility service may only be disconnected for nonpayment of utility bills. A tenant's utility service may be disconnected if a bill has not been paid within 12 days from the date of issuance and proper notice has been given. Proper notice shall consist of a separate mailing or hand delivery at least five days prior to a stated date of disconnection, with the words "termination notice" or similar language prominently displayed on the notice. The notice shall include the office or street address where a tenant can go during normal working hours to make arrangements for payment of the bill and for reconnection of electric service.

(B)

Disconnection on holidays or weekends. Unless a dangerous condition exists, or unless the tenant requests disconnection, service shall not be disconnected on a day, or on a day immediately preceding a day when personnel of the apartment house are not available for the purpose of making collections and reconnecting service.

(C)

Disconnection under special circumstances. An apartment house owner shall meet the same requirements as an electric utility in the following circumstances:

(i)

Disconnection of ill and disabled. No electric utility may disconnect service at a permanent, individually metered dwelling unit of a delinquent customer when that customer establishes that disconnection of service will cause some person residing at that residence to become seriously ill or more seriously ill;

(I)

Each time a customer seeks to avoid disconnection of service under this subsection, the customer must accomplish all of the following by the stated date of disconnection:

(-a-)

have the person's attending physician (for purposes of this subsection, the term "physician" shall mean any public health official, including medical doctors, doctors of osteopathy, nurse practitioners, registered nurses, and any other similar public health official) call or contact the electric utility by the stated date of disconnection;

(-b-)

have the person's attending physician submit a written statement to the electric utility; and

(-c-)

enter into a deferred payment plan.

(II)

The prohibition against service termination provided by this subsection shall last 63 days from the issuance of the electric utility bill or a shorter period agreed upon by the electric utility and the customer or physician.

(ii)

Disconnection of energy assistance clients. No electric utility may terminate service to a delinquent residential customer for a billing period in which the electric utility receives a pledge, letter of intent, purchase order, or other notification that the energy assistance provider is forwarding sufficient payment to continue service; and

(iii)

Disconnection during extreme weather. An electric utility cannot disconnect a customer anywhere in its service territory on a day when:

(I)

the previous day's highest temperature did not exceed 32 degrees Fahrenheit, and the temperature is predicted to remain at or below that level for the next 24 hours, according to the nearest National Weather Service (NWS) reports; or

(II)

the NWS issues a heat advisory for any county in the electric utility's service territory, or when such advisory has been issued on any one of the preceding two calendar days.

(D)

Disputed bills and complaints. In the event of a dispute between the tenant and the apartment house owner regarding any bill, the apartment house owner shall immediately make such investigation as shall be required by the particular case, and report the results thereof to the tenant. The investigation and report shall be completed within 30 days from the date the tenant notified the apartment house owner of the dispute. If the tenant is dissatisfied with the results of the investigation, the apartment house owner shall inform the tenant of the Public Utility Commission of Texas complaint process, giving the tenant the address and telephone number of the commission's Office of Customer Protection.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 2, 1999.

TRD-9903257

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: March 12, 1999

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


Subchapter J. Costs, Rates and Tariffs

16 TAC §25.241

The Public Utility Commission of Texas (commission) adopts new §25.241 relating to Form and Filing of Tariffs with changes to the proposed text as published in the January 1, 1999 Texas Register (24 TexReg 20). The rule is necessary to clarify the commission's requirements relating to the form and filing of tariffs, and replaces §23.24 of this title (relating to Form and Filing of Tariffs) as it relates to electric service providers. This new section is adopted under Project Number 20074.

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 25 has been established for all commission substantive rules applicable to electric service providers.

The commission requested specific comments on the Section 167 requirement as to whether the reason for adopting or readopting the rule continues to exist. The commission received no comments regarding the Section 167 requirement. The commission finds that the reason for adopting the rule continues to exist.

The commission received comments on the proposed new section from Central and South West Texas Electric Utility Operating Companies (CSW Companies). CSW Companies disagreed with the deletion of existing §23.24(h) from the proposed new rule. Present rule §23.24(h) requires that tariffs not found in compliance by the commission shall be marked and returned to the utility with a brief explanation of the reasons for rejection. The CSW Companies stated that "this requirement is a helpful one, allowing regulated companies to understand current compliance interpretations by the Commission Staff and to promptly and completely correct tariff".

The commission agrees with CSW Companies. Section 23.24(h) has been added back as §25.241(h) with some revision.

This section is adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction; and specifically PURA §32.101 which requires electric utilities to file a tariff, §35.007 which requires electric utilities which own or operate a transmission facility to file a tariff, §36.102 which requires the filing of a tariff with a statement of intent to change rates, §36.108 which relates to suspension of a rate change, §36.305 which requires electric cooperatives to file tariffs, and §36.351 which requires electric utilities to file tariffs reflecting discounted rates for institutions of higher education.

Cross-Index to Statutes: Public Utility Regulatory Act §§14.002, 32.101, 35.007, 36.102, 36.108, 36.305 and 36.351.

§25.241.Form and Filing of Tariffs.

(a)

Application. This section applies to all electric utilities.

(b)

Effective tariff. No utility shall directly or indirectly offer any service, collect any rate or charge, give any compensation or discount to a customer, or impose any classification, practice, or regulation different from that which is prescribed in its effective tariff filed with the commission. The tariff may include mathematical formulas that express the pricing terms for service. Every contract for electric service between an electric utility and a customer shall be deemed to be part of the effective tariff, and shall be filed with the commission upon request.

(c)

Requirements as to size, form, identification and filing of tariffs.

(1)

Every public utility shall file with the commission filing clerk five copies of its tariff containing schedules of all its rates, tolls, charges, rules, and regulations pertaining to all of its utility service . It shall also file five copies of each subsequent revision. Each revision shall be accompanied by a cover page which contains a list of pages being revised, a statement describing each change, its effect if it is a change in an existing rate, and a statement as to impact on rates of the change by customer class, if any. If a proposed tariff revision constitutes an increase in existing rates of a particular customer class or classes, then the commission may require that notice be given.

(2)

All tariffs shall be in loose-leaf form of size 8 1/2 inches by 11 inches and shall be plainly printed or reproduced on paper of good quality. The front page of the tariff shall contain the name of the utility and location of its principal office and the type of service rendered (telephone, electric, etc.).

(3)

Each rate schedule must clearly state the territory, city, county, or exchange wherein said schedule is applicable.

(4)

Tariff sheets are to be numbered consecutively per schedule. Each sheet shall show an effective date, a revision number, section number, sheet number, page number, name of the utility, the name of the tariff, and title of the section in a consistent manner. Sheets issued under new numbers are to be designated as original sheets. Sheets being revised should show the number of the revision, and the sheet numbers shall be the same.

(d)

Composition of tariffs. The tariff shall contain sections and subsections setting forth:

(1)

a table of contents;

(2)

a list of the cities and counties in which service is provided;

(3)

a brief description of the utility's operations;

(4)

the rate schedules; and

(5)

the service regulations, including the service agreement forms.

(e)

Tariff filings in response to commission orders. Tariff filings made in response to an order issued by the commission shall include a transmittal letter stating that the tariffs attached are in compliance with the order, giving the docket number, date of the order, a list of tariff sheets filed, and any other necessary information. The tariff sheets shall comply with all other rules in this chapter and shall include only changes ordered. The effective date and/or wording of said tariffs shall comply with the provisions of the order.

(f)

Symbols for changes. Each proposed tariff sheet shall contain notations in the right-hand margin indicating each change made on these sheets. Notations to be used are: (C) to denote a change in regulations; (D) to denote discontinued rates or regulations; (E) to denote the correction of an error made during a revision (the revision which resulted in the error must be one connected to some material contained in the tariff prior to the revision); (I) to denote a rate increase; (N) to denote a new rate or regulation; (R) to denote a rate reduction; and (T) to denote a change in text, but no change in rate or regulation. In addition to symbols for changes, each changed provision in the tariff shall contain a vertical line in the right-hand margin of the page, which clearly shows the exact number of lines being changed.

(g)

Availability of tariffs. Each utility shall make available to the public at each of its business offices or designated sales offices within Texas all of its tariffs currently on file with the commission, and its employees shall lend assistance to persons seeking information on its tariffs and afford inquirers an opportunity to examine any tariff upon request. The utility also shall provide copies of any portion of its tariffs at a reasonable cost.

(h)

Rejection. If a tariff filed with the commission is found not to be in compliance with these sections, commission Staff shall file a brief explanation of the reasons for rejection.

(i)

Effective date of tariff change. No jurisdictional tariff change may take effect prior to 35 days after filing without commission approval. The requested date will be assumed to be 35 days after filing unless a different date is requested in the application. The commission may suspend the effective date of the tariff change for 120 days after the requested effective date and may extend that suspension another 30 days if required for final determination. In the case of an actual hearing on the merits of a case that exceeds 15 days, the suspension date is extended two days for each one day of actual hearing in excess of 15 actual hearing days.

(j)

Compliance. Electric utilities that file new tariffs or tariff revisions shall comply with the 1998 amendments to this section with respect to the new or revised tariffs.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 2, 1999.

TRD-9903255

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: January 1, 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 §§26.207-26.212

The Public Utility Commission of Texas (commission) adopts new §§26.207 relating to Form and Filing of Tariffs, 26.209 relating to New and Experimental Services, 26.210 relating to Promotional Rates for Local Exchange Company Services, and 26.212 relating to Procedures Applicable to Chapter 58 Electing Incumbent Local Exchange Companies, with no changes to the text as published in the January 1, 1999 Texas Register (24 TexReg 22). Sections 26.208 relating to General Tariff Procedures and 26.211, relating to Rate-Setting Flexibility for Services Subject to Significant Competitive Challenges, are adopted with changes to the proposed text as published in the January 1, 1999 Texas Register (24 TexReg 22). The proposed new sections will replace §§23.24 of this title (relating to Form and Filing of Tariffs); 23.25 of this title (relating to Procedures Applicable to Chapter 58 Electing Incumbent Local Exchange Companies (ILECs)); 23.26 of this title (relating to New and Experimental Services); 23.27 of this title (relating to Rate-Setting Flexibility for Services Subject to Significant Competitive Challenges) and 23.28 of this title (relating to Promotional Rates for LEC Services). These new sections are adopted under Project Number 20075.

Sections 26.207 and 26.208 are necessary to establish consistent standards and procedures for the form, filing, and review of tariffs.

Sections 26.209 and 26.210 are required by §52.058 of the Public Utility Regulatory Act (PURA) to encourage the rapid introduction of new or experimental services and promotional rates.

Section 26.211 specifies the information a local exchange carrier must include in an application to declare a service market subject to significant competitive challenge and to obtain regulatory flexibility pursuant to §52.054 of PURA. The new §26.211 identifies the factors the commission must consider when evaluating such an application and determining whether to declare the market subject to significant competitive challenge and to grant the request for regulatory flexibility. Additionally, §26.211 more clearly sets forth the requirements and standards applicable to the filing, review, and approval of customer-specific contracts.

Finally, §26.212 establishes expedited procedures for electing ILECs to introduce a new service or to modify the rates or tariff terms of an existing service.

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 commission requested specific comments on the Section 167 requirement as to whether the reason for adopting or readopting the rules continues to exist. No comments were received regarding the Section 167 requirement. The commission finds that the reason for adopting the rules continues to exist.

The commission received comments and reply comments on the proposed new sections from Southwestern Bell Telephone Company (SWBT), AT&T Communications of the Southwest, Inc. (AT&T), and the Office of Public Utility Counsel (OPC). No comments were received regarding proposed §§26.207, 26.209, and 26.210.

SWBT filed comments regarding §26.208(h)(1), relating to withdrawal of a service. Section 26.208(h)(1) requires a dominant certificated telecommunications utility (DCTU) to provide in its application the number of current customers in each exchange for a withdrawn service. SWBT proposes that there is no rationale for this provision and instead, proposes that the DCTU be required to provide the total number of customers affected, rather than a breakdown by exchange. SWBT also expressed concern that §26.208(h)(3), relating to withdrawal of a service, requires a DCTU to grandfather existing customers if competitive alternatives are not available. SWBT believes such a provision would discourage DCTUs from launching novel and unique services. SWBT gives an example where a DCTU wishes to withdraw a service because demand is low, but because there are no available alternatives, the DCTU is prohibited from withdrawing the service without grandfathering customers. SWBT proposes this subsection be changed to instead require a DCTU to "address" the issues of grandfathering and competitive alternatives.

Section 26.208(h)(3) states that the DCTU shall provide "(p)rovisions for grandfathering current customers or competitive alternatives available within the exchange locations, including DCTU provided alternatives." Considering both provisions found in §26.208(h)(1) and (h)(3), the commission is concerned that a DCTU's provision of a statewide total number of subscribers, as SWBT suggests, may not reflect a specific geographic or regional need for a service. Competitive alternatives in lieu of grandfathering may be of no aid to existing subscribers if they are not available in, or near, the exchange where service is presently deployed. The provision in §26.208(h)(1) requiring a breakdown by exchange is intended to protect the public interest. Furthermore, although the commission is sensitive to SWBT's concerns regarding §26.208(h)(3), the commission believes that there are certain services that a DCTU may propose to withdraw that may have a low demand, but on which the customers have come to rely or are critical in nature. In such cases, the commission may require the DCTU to grandfather the service while competitive alternatives are explored. However, in making its decision, the commission will consider the costs and benefits, as well as the public interest, in determining whether a service should be grandfathered if competitive alternatives are not available in a particular exchange. The commission declines to make SWBT's recommended changes to §26.208(h)(1) and (h)(3).

AT&T provided a recommendation regarding §26.211, relating to Rate Setting Flexibility for Services Subject to Significant Competitive Challenges. AT&T noted an inconsistency in this section regarding the use of the acronyms ILEC and LEC. Although the rule states in the introduction that it is applicable to ILECs, the remaining body of the rule refers to the acronym LEC. This error was typographical in nature. The commission agrees that changing the remaining acronyms from LEC to ILEC is appropriate.

SWBT recommended adding the word "residential" before the phrase "basic local telecommunications service" in §26.211(d)(1)(D). This subsection, customer-specific contracts, delineates those services that are eligible for ILEC customer-specific contracts. Specifically, this subsection states that an ILEC shall have the authority to enter into customer- specific contracts for customized services, provided that such customized services shall not include basic local telecommunications service. By adding "residential," the rule would allow business basic telecommunications services to be part of a customer-specific contract. SWBT argues for insertion of the word "residential" because basic business local telecommunications services are subject to significant competitive challenges, and should therefore, be included in customer-specific contracts. SWBT insists this modification is consistent with the Texas Utilities Code.

In reply, AT&T responded that the commission's authority to allow ILEC customer-specific contracts is granted by Subchapter B, Chapter 52 of PURA, which specifically provides that this subchapter does not apply to basic local telecommunications services. PURA §51.002(1) defines "basic local telecommunications service" to include flat rate residential and business local exchange service. Thus, per AT&T, a business basic telecommunications service may not be the subject of a customer-specific contract.

SWBT further responded to AT&T's comments that Chapter 51 of PURA provides that customer-specific contracts are a form of pricing flexibility and PURA §51.004 permits basic local telecommunications services to be included in customer-specific contracts, as long as they are not preferential, prejudicial, or discriminatory. Therefore, according to SWBT, PURA permits the inclusion of basic local telecommunications services in customer-specific contracts.

AT&T further asserted that PURA does not allow the flexibility claimed by SWBT. Specifically, PURA §52.052 provides that Subchapter B does not apply to local telecommunications services. Therefore, the commission does not have the authority to allow business basic local telecommunications services to be included in customer-specific contracts.

The commission agrees with AT&T, PURA, Subchapter B (§§52.051-52.060), governs the commission's authority to authorize an ILEC to utilize customer-specific pricing. This subchapter expressly excludes basic local telecommunications services from the services for which such authority has been granted. Business local telecommunications services are specifically included in the definition of basic local telecommunications services (see PURA §51.002(1). As a result, the commission has no authority to allow business basic local telecommunications services to be included in a customer-specific contract. The commission declines to add the word "residential" as suggested by SWBT.

OPC filed comments recommending a revision to §26.211(d)(2), which would require an ILEC to file a copy of its quarterly reports regarding customer-specific contracts with OPC. OPC noted that currently, §23.27(c) requires an ILEC to file a notice of intent to file a customer-specific contract with the commission. OPC is concerned that its role in safeguarding the interests of residential and small commercial ratepayers against potential anti-competitive activities may be compromised without an adequate opportunity to review these applications.

The commission agrees to adopt the recommendation of OPC and revises §26.211(d)(2) to reflect its adoption of the recommendation.

SWBT requested that a reference to §26.208, relating to General Tariff Procedures, found in §26.212(d)(1), relating to Procedures Applicable to Chapter 58 Electing ILECs, be removed. SWBT reasoned that §26.212(e) provides notice requirements for electing ILECs, and therefore, the notice requirements contained in §26.208(c) impose additional and inconsistent requirements on Chapter 58 Electing ILECs.

Section 26.212(d)(1) provides general provisions for tariff filings applicable to Chapter 58 Electing ILECs. It states that tariffs and notices shall conform to the requirements of §26.207 (relating to Form and Filing of Tariffs), as well as §26.208 (relating to General Tariff Procedures). Section 26.208(c), relating to Content of Public Notice, provides that a DCTU shall include public notice plans in its application to the commission. In contrast, §26.212(e), which applies specifically to Chapter 58 electing ILECs, provides that electing ILECs shall notify affected persons that proposed changes in the rates or terms of service are regularly published in the Texas Register. The commission does not seek to impose unnecessary notice requirements upon electing ILECs, but believes that certain electing ILEC tariff applications will require notice to customers and affected parties, beyond that required in the semi-annual notice provision found in §26.212. In those instances, it will be necessary for the ILEC to have a clear understanding of what is required to notify affected parties. Section 26.212(d)(1) refers electing ILECs to the general requirements found in §26.207 and §26.208 for this purpose. The commission believes it is necessary to include this language, and therefore, does not adopt SWBT's suggested revision.

SWBT proposed a number of revisions to the deadlines for filing interventions and staff recommendations found in §26.212 (h), relating to price changes for competitive services, (i), relating to price changes for existing discretionary services, and (k), relating to price decreases for basic network services. Specifically, SWBT believes there is no need to allow additional time for staff to consider interventions or review tariffs. SWBT proposed alternative language for §26.212(h)(3), (h)(4), (i)(3), and (k)(3), which would require staff recommendations to be filed on the same date that intervention requests are due and approval of an application on the following day, if an intervention or a staff recommendation to suspend, docket, or reject the application has not been received.

The commission notes that the timeframes were revised to allow adequate time for staff review and consideration of intervention requests, when applicable. These changes add an additional five days to the current schedules for review and approval in those instances where there is no intervention or recommendation to suspend, docket, or reject an application. The commission does not regard the revised timeframes as an undue burden for Chapter 58 electing companies and believes the revised schedule will result in a more thorough review of applications by staff and interested parties. The commission declines to adopt SWBT's proposed changes for these subsections.

All comments, including any not specifically referenced herein, were fully considered by the commission. In addition, in adopting these sections, the commission makes other minor modifications for the purpose of clarifying its intent.

These new sections are adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction; and specifically, PURA §52.058, relating to new or experimental services or promotional rates; and §§58.051-58.152, relating to basic network services, discretionary services, and competitive services.

Cross-Index to Statutes: Public Utility Regulatory Act §§14.002, 14.052, 52.057, 52.058, 52.251, 53.102, 53.103, 58.051 - 58.152.

§26.208.General Tariff Procedures.

(a)

Application. This section applies to dominant certificated telecommunications utilities (DCTUs) as defined by §26.5 of this title (relating to Definitions).

(b)

Purpose. The procedures outlined in this section establish a process for the review of DCTU tariff applications.

(c)

Content of Public Notice. The DCTU shall include public notice plans in its application to the commission. Notices shall be written in plain language and shall contain sufficient detail to give customers and affected parties adequate notice of the filing. The presiding officer may require notice to be provided to the public in addition to that proposed by the DCTU. Public notice of the application shall include at a minimum:

(1)

a description of the proposed service and rates;

(2)

the proposed effective date of the service or, if the service is promotional or experimental, the time period during which the promotional rates are proposed to be in effect;

(3)

the types of customers likely to be affected if the application is approved;

(4)

the probable effect on the DCTU's revenues if the service is approved;

(5)

and the following language: "Persons with questions or who want more information on this application may contact (DCTU name) at (DCTU address) or call (DCTU toll-free telephone number) during normal business hours. A complete copy of the application is available for inspection at the address listed above. The commission has assigned Control Number (provided by DCTU) to this application. Persons who wish to formally participate in the commission's proceedings concerning this application, or who wish to express their comments concerning this application should contact the Public Utility Commission of Texas, Office of Customer Protection, PO Box 13326, Austin, Texas 78711-3326, or call the Public Utility Commission's Office of Customer Protection at (512) 936-7120 or, toll free, at (888) 782-8477. Hearing- and speech-impaired individuals with text telephones (TTY) may contact the commission at (512) 936- 7136 or reach the commission's toll free number through Relay Texas at (800) 735-2988. Requests to participate in the proceedings and comments should reach the commission no later than (date, ten days before the effective date of the proposed filing)."

(d)

Proof of Notice. Not less than ten days before the effective date of the application, the DCTU shall file a statement indicating the date on which all notice provided to the public was completed and proof of such notice.

(e)

Administrative review. An application filed pursuant to §§26.207 of this title (relating to Form and Filing of Tariffs), 26.209 of this title (relating to New and Experimental Services), 26.210 of this title (relating to Promotional Rates for Local Exchange Company Services), 26.211 of this title (relating to Rate Setting Flexibility for Services Subject to Significant Competitive Challenges), or 26.212 of this title (relating to Procedures Applicable to Chapter 58-Electing Incumbent Local Exchange Companies) shall be reviewed administratively unless the presiding officer, for good cause, determines at any point during the review that the application should be docketed. The operation of the proposed rate schedule may be suspended for 35 days after the effective date of the application. The effective date shall be no earlier than 30 days after the filing date of the application or 30 days after public notice is completed, whichever is later. The application shall be examined for sufficiency. If the presiding officer concludes that material deficiencies exist in the application, the applicant shall be notified within ten working days of the filing date of the specific deficiency in its application, and the earliest possible effective date of the application shall be no less than 30 days after the filing of a sufficient application with substantially complete information as required by the presiding officer. Thereafter, any time deadlines shall be determined from the 30th day after the filing of the sufficient application and information or from the effective date if the presiding officer extends that date. While the application is being administratively reviewed, the commission staff and the staff of the Office of Public Utility Counsel may submit requests for information to the DCTU. Three copies of all answers to such requests for information shall be provided to the commission staff and the Office of Public Utility Counsel within ten days after receipt of the request by the DCTU. No later than 20 days after the filing date of the application, interested persons may provide to the commission staff written comments or recommendations concerning the application. The commission staff shall and the Office of Public Utility Counsel may file with the presiding officer written comments or recommendations concerning the application. No later than 35 days after the effective date of the application, the presiding officer shall complete an administrative review to determine whether the DCTU's application meets the following requirements:

(1)

The proposed service meets all requirements pursuant to the applicable section under which it is filed;

(2)

Notice was provided as required by the presiding officer;

(3)

The proposed rates and terms of the service are not unreasonably preferential, prejudicial, or discriminatory, subsidized directly or indirectly by regulated monopoly services, or predatory or anticompetitive; and

(4)

Provision of the service is consistent with the public interest in a technologically advanced telecommunications system, the preservation of universal service, and the prevention of anticompetitive practices and of subsidization of new and experimental services with revenues from regulated monopoly services.

(f)

Approval or denial of applications. For its application to be approved, the DCTU must meet all of the requirements in the applicable section pursuant to which the application is made, unless such requirements are modified or waived by the presiding officer as provided under provisions of that section. If, based on the administrative review, the presiding officer determines that all requirements not waived have been met, the DCTU shall be permitted to offer the service at the rates and terms approved by the presiding officer. If, based on the administrative review, the presiding officer determines that one or more of the requirements not waived have not been met, the presiding officer may dismiss or, upon prior request of the DCTU, shall docket the application.

(g)

Review of the applications after docketing. If the application is docketed, the operation of the proposed rate schedule shall be automatically suspended to a date 120 days after the applicant has filed all of its direct testimony and exhibits, or 155 days after the effective date, whichever is later. Three copies of all answers to requests for information shall be filed with the commission within ten days after receipt of the request. Affected persons may move to intervene in the docket, and a hearing on the merits shall be scheduled. The application shall be processed in accordance with the commission's rules applicable to docketed proceedings.

(h)

Withdrawal of a service. When a DCTU seeks to withdraw a tariffed service, the application shall be filed pursuant to this subsection and shall be docketed to allow adequate time for review, and completion of notice. The DCTU shall provide direct mail notice to all current customers of the service and shall issue such notice only after the commission has reviewed and approved the notice. The DCTU shall provide the following information in its application:

(1)

The number of current subscribers in each exchange;

(2)

The reason for withdrawing the service;

(3)

Provisions for grandfathering current customers or competitive alternatives available within the exchange locations, including DCTU provided alternatives;

(4)

Annual revenues for the last three years for the service; and

(5)

If the service has no current subscriber, the DCTU shall provide an affidavit to this effect.

§26.211.Rate-Setting Flexibility for Services Subject to Significant Competitive Challenges.

(a)

Application. The provisions of this section apply to incumbent local exchange companies (ILECs), as defined by §26.5 of this title (relating to Definitions).

(b)

Purpose. The purpose of this section is to establish procedures for pricing flexibility for services subject to competition and a process for the review of pricing flexibility applications and customer specific contracts.

(c)

Pricing flexibility.

(1)

The types of pricing flexibility that an incumbent local exchange company (ILEC) may request are set forth in subparagraphs (A)-(D) of this paragraph.

(A)

Banded rates. If an ILEC is granted the authority to charge banded rates, the minimum rates shall yield revenues that are equal to or greater than 105% of the long run incremental cost of the service in the geographic market in which the service will be provided. When an ILEC is granted the authority to charge banded rates, the ILEC shall file a tariff showing the minimum and maximum rates and specifying its current rate. The current rate, as specified in the ILEC's tariff, shall be applied uniformly to all customers of the service in each exchange for which the commission has approved banded rates. If the ILEC desires to charge a rate different from its current rate, but between the minimum and maximum rates, it shall file a revised tariff on or before the effective date of the rate change. The minimum and maximum rates may only be changed as provided for in the Public Utility Regulatory Act, Chapter 53, Subchapters C and D, or G.

(B)

Customer-specific contracts. If an ILEC is granted the authority to enter into customer-specific contracts, the contract shall be filed and approved pursuant to subsection (d) of this section. Customer-specific contracts filed pursuant to subsection (d) of this section may include services in addition to the service for which the ILEC has been granted authority to price on a flexible basis only if each such adjunct service is clearly specified in the contract and provided pursuant to a tariff approved by the commission.

(C)

Detariffing. If an ILEC is granted the authority to detariff a service, the ILEC shall maintain at the commission a current price list for the service, and the commission shall retain authority to regulate the quality, terms and conditions of the detariffed service, other than rates. The commission may determine the appropriate ratemaking treatment of any revenues from or costs of providing a detariffed service in a proceeding under the Public Utility Regulatory Act, Chapter 53, Subchapters C and D, or G.

(D)

Other types of pricing flexibility. If an ILEC is granted the authority to engage in a type of pricing flexibility that the commission finds to be in the public interest other than those specified in subparagraphs (A)-(C) of this paragraph, that pricing flexibility shall be offered under such terms and conditions as the commission orders.

(2)

ILECs have the authority to enter into customer-specific contracts for those services specified in subsection (d) of this section. For those services, ILECs may apply to the commission pursuant to this subsection to obtain a type of pricing flexibility specified in paragraph (1) of this subsection other than customer-specific contracts. For other services, ILECs may apply to the commission pursuant to this subsection to obtain any type of pricing flexibility specified in paragraph (1) of this subsection. However, nothing in this subsection shall permit an ILEC to obtain pricing flexibility for basic local telecommunications service, including local measured service, or for any service that includes as a component a service not subject to significant competitive challenge. Additionally, nothing in this subsection shall permit an ILEC to enter into customer-specific contracts or to obtain detariffing with respect to message telecommunications services, switched access services, or wide area telecommunications service.

(3)

An application for pricing flexibility filed under this paragraph shall:

(A)

include a statement of the ILEC's intention to use the procedures established in this subsection;

(B)

specify the type of pricing flexibility requested and, if the type of pricing flexibility requested is either banded rates or some other type of pricing flexibility pursuant to paragraph (1)(D) of this subsection that involves rate-setting:

(i)

state the proposed rates, and if the type of pricing flexibility is banded rates, state the maximum and minimum rates;

(ii)

include detailed documentation demonstrating that the minimum rates yield revenues that are equal to or greater than 105% of the long run incremental cost of the service in the geographic market in which the service will be provided;

(iii)

demonstrate that the rates are not unreasonably preferential, prejudicial or discriminatory;

(iv)

demonstrate that the rates are such that the service identified pursuant to subparagraph (C) of this paragraph will not be subsidized directly or indirectly by regulated monopoly services; and

(v)

demonstrate that the rates are not predatory or anticompetitive;

(C)

identify the service for which the ILEC is requesting pricing flexibility, including each component thereof, and provide functional and technical descriptions of the service, including:

(i)

the functions that the service is intended to perform for the customer;

(ii)

the types of equipment used to provide the service (including, but not limited to, transmission facilities, switching facilities, customer equipment, software functions, and protocol);

(iii)

the network configurations used to provide the service; and

(iv)

schematics;

(D)

identify each service that is not subject to significant competitive challenge but that, at the time the ILEC files its application for pricing flexibility, the ILEC intends to provide as a tariffed adjunct to the service identified in subparagraph (C) of this paragraph and, for each such service, provide:

(i)

functional and technical descriptions; and

(ii)

citations to the tariff provisions pursuant to which each such service will be provided;

(E)

designate the exchange(s) as to which the ILEC is seeking pricing flexibility;

(F)

include a map or maps of the exchange(s) designated pursuant to subparagraph (E) of this paragraph that can be coordinated with the official commission boundary maps;

(G)

describe the products or services known to the ILEC that are currently available in the exchange(s) designated pursuant to subparagraph (E) of this paragraph, and that are the same, equivalent, or substitutable for the service identified pursuant to subparagraph (C) of this paragraph, and identify the providers of those products or services;

(H)

with respect to the products or services described pursuant to subparagraph (G) of this paragraph, discuss:

(i)

the number and size of telecommunications utilities or other persons providing such products or services;

(ii)

the extent to which such products or services are available;

(iii)

the ability of customers to obtain such products or services at rates, terms, and conditions comparable to those that the ILEC will offer;

(iv)

the ability of telecommunications utilities or other persons to make such products or services readily available at rates, terms, and conditions comparable to those that the ILEC will offer; and

(v)

the existence of any significant barrier to the entry or exit of a provider of such products or services;

(I)

demonstrate that the level of competition with respect to all components of the ILEC's service identified pursuant to subparagraph (C) of this paragraph represents a significant competitive challenge within the exchange(s) designated pursuant to subparagraph (E) of this paragraph that warrants the pricing flexibility specified pursuant to subparagraph (B) of this paragraph;

(J)

demonstrate that the service identified pursuant to subparagraph (C) of this paragraph is not basic local telecommunications service, including local measured service;

(K)

if the type of pricing flexibility requested pursuant to subparagraph (B) of this paragraph is customer-specific pricing or detariffing, demonstrate that the service identified pursuant to subparagraph (C) of this paragraph is not message telecommunications service, switched access service, or wide area telecommunications service;

(L)

to prevent the subsidization of the service identified pursuant to subparagraph (C) of this paragraph with revenues from regulated monopoly services, propose mechanisms to recover costs that may not be identified and recovered in a long run incremental cost study, including but not limited to costs associated with advertising, unsuccessful bids, and all items of plant used in the provision of the service;

(M)

identify and address the impact that approval of the application for pricing flexibility may have on universal service;

(N)

for any type of pricing flexibility other than detariffing, include proposed tariffs and identify any tariff language that restricts the resale, sharing, or joint use of the service identified pursuant to subparagraph (C) of this paragraph and any component thereof and demonstrate why such restrictive tariff language is consistent with the policy established in the Public Utility Regulatory Act §52.001; and

(O)

include any other information that the ILEC wants considered in connection with the review of its application.

(4)

The commission shall allow an incumbent LEC that is not a Tier 1 LEC as of September 1, 1995, at that company's option, to adopt the cost studies approved by the commission for a Tier 1 LEC.

(5)

An application for pricing flexibility shall be docketed and assigned to a presiding officer. No later than ten working days after the filing of an application for pricing flexibility, the presiding officer shall issue an order scheduling a prehearing conference for the purposes of determining notice requirements, establishing a procedural schedule, and addressing other matters as may be appropriate. The commission shall make a final decision no later than 180 days after the completion of notice, as ordered by the presiding officer. However, this 180-day period shall be extended two days for each one day of actual hearing on the merits of the case that exceeds 15 days. The presiding officer or commission, upon a showing of good cause relating to the applicant's failure or refusal to prosecute, including but not limited to the applicant's unreasonable resistance to discovery, may further extend the timeline, provided that the order shall specifically identify the facts found to constitute good cause. This deadline may be expressly waived by the applicant.

(6)

For ILECs with less than 31,000 access lines, the commission shall not be limited under paragraph (7)(D)(i)-(x) of this subsection to considering only competition within the exchange(s) where the ILEC will provide the service. Pursuant to paragraph (3)(O) of this subsection, an ILEC with less than 31,000 access lines may provide information that addresses the criteria of paragraph (3)(G)-(I) of this subsection with respect to products or services available outside the exchange(s) designated in paragraph (3)(E) of this subsection.

(7)

An application for pricing flexibility shall be approved if, after an evidentiary hearing, the commission finds, based on the evidence, that:

(A)

no service for which pricing flexibility is sought is basic local telecommunications service, including local measured service;

(B)

no service for which the ILEC requests detariffing of rates or authority to enter into customer-specific contracts is message telecommunications service, switched access service, or wide area telecommunications service;

(C)

no service for which pricing flexibility is sought includes a component that is not subject to significant competitive challenge;

(D)

the grant of pricing flexibility for the service identified pursuant to paragraph (3)(C) of this subsection within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection is appropriate to allow the ILEC to respond to a significant competitive challenge, based upon consideration of the following:

(i)

the number and size of telecommunications utilities or other persons providing the same, equivalent, or substitutable service within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection;

(ii)

the extent to which the same, equivalent, or substitutable service is available within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection;

(iii)

the ability of customers to obtain the same, equivalent, or substitutable services at comparable rates, terms, and conditions within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection;

(iv)

the ability of telecommunications utilities or other persons to make the same, equivalent, or substitutable service readily available at comparable rates, terms, and conditions within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection;

(v)

the existence of any significant barrier to the entry or exit of a provider of the same, equivalent or substitutable services within the exchange(s) designated pursuant to paragraph (3)(E) of this subsection;

(vi)

whether there are mechanisms to minimize potential anti-competitive practices, to the extent that any such practice has been identified in the record;

(vii)

whether there are mechanisms to prevent the subsidization of the service with revenues from regulated monopoly services;

(viii)

whether the ability of the ILEC to flexibly price the service within the designated exchange(s) would have any significant impact on universal service;

(ix)

whether the type of pricing flexibility requested is appropriate in light of the level and nature of competition within the exchange(s) where the ILEC will provide the service; and

(x)

any other relevant information contained in the record;

(E)

the rates, if the type of pricing flexibility granted is either banded rates or some other type of pricing flexibility pursuant to paragraph (1)(D) of this subsection that involves rate-setting, are just and reasonable and:

(i)

yield revenues that are equal to or greater than 105% of the long run incremental cost of the service in the geographic market in which the service will be provided;

(ii)

are not unreasonably preferential, prejudicial or discriminatory;

(iii)

are such that the service will not be subsidized directly or indirectly by regulated monopoly services; and

(iv)

are not predatory or anticompetitive.

(8)

Nothing in this subsection is intended to prevent the presiding officer from recommending, or the commission from approving based on the record evidence, relief other than that requested in the application.

(d)

Customer-specific contracts.

(1)

An ILEC shall have the authority to enter into customer-specific contracts for:

(A)

central office based PBX-type services for systems of 200 stations or more, as those services compete with customer premises equipment provided by PBX vendors;

(B)

billing and collection services;

(C)

high-speed private line services of 1.544 megabits or greater;

(D)

customized services that are unique because of size or configuration, provided that such customized services shall not include basic local telecommunications service, including local measured service, or message telecommunications services, switched access services, or wide area telecommunications service; and

(E)

any other service for which the commission has authorized the ILEC to enter into customer-specific contracts pursuant to this section.

(2)

An ILEC will file quarterly reports to the commission, and at the same time, serve a copy of those reports on the Office of Public Utility Counsel. The reports will provide the following information regarding all customer specific contracts for services pursuant to paragraph (1)(A)-(E) of this subsection:

(A)

customer name, location and contact;

(B)

type of services, exchange location and quantities;

(C)

terms and rates for services;

(D)

affidavit of the customer attesting to the fact that the customer was aware of the possibility of purchasing of such services from other providers; and

(E)

affidavit of the ILEC attesting that the rates:

(i)

are set at 105% or more of the long run incremental costs of the services;

(ii)

are not unreasonably preferential, prejudicial or discriminatory;

(iii)

are such that the contracted services will not be subsidized directly or indirectly by regulated monopoly services; and

(iv)

are not predatory or anticompetitive.

(e)

Subsequent review. The commission may modify, or revoke, upon notice and hearing, the authorization of any type or types of pricing flexibility granted pursuant to this section.

(f)

Severability. If any provision of this section or the application thereof to any person or any circumstances is held invalid, such invalidity shall not affect other provisions or applications of this section that can be given effect without the invalid provision or application. It is the intent of the commission that the provisions of this section are severable.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 2, 1999.

TRD-9903254

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: January 1, 1999

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


16 TAC §26.213

The Public Utility Commission of Texas (commission) adopts new §26.213 relating to Telecommunications Pricing with changes to the proposed text as published in the February 5, 1999 Texas Register (24 Tex Reg 662). New §26.213 replaces and modifies §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. This section is adopted under Project Number 18846.

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 commission published notice of its intention to review §23.104 in the February 5, 1999 Texas Register (24 Tex Reg 832). In the notice of intention to review, the commission requested specific comments on the Section 167 requirement regarding whether the reason for adopting §23.104 continues to exist in adopting corresponding §26.213 in Chapter 26. The commission received no comments regarding the Section 167 requirement and finds that the reason for adopting §23.104 continues to exist in adopting this new section.

Under the rule as proposed, the initial rate approved by the commission would serve as the price ceiling for a discretionary service initially offered after September 1, 1995, in place of the requirement of stand-alone cost (SAC) as the price ceiling. In the preamble to the proposed rule, the commission invited specific comments regarding whether this proposal for price ceiling provided the intended pricing flexibility for the electing DCTU. In addition, the commission solicited 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?

The commission received comments to the questions from Southwestern Bell Telephone Company (SWBT) and the Office of Public Utility Counsel (OPC). While SWBT's comments addressed both questions, OPC, in late-filed comments, responded to the second question alone. In order to facilitate discussion of the comments, references will be made to three different types of discretionary services: (1) older services (i.e., discretionary services that existed on or before September 1, 1995); (2) recent services (i.e., discretionary services introduced after September 1, 1995); (3) future services (i.e., discretionary services introduced after the effective date of this rule)

Question 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?

In its comments, SWBT supported the use of current price as the price ceiling for recent discretionary services (i.e., discretionary services introduced after September 1, 1995). SWBT commented that this is consistent with the price ceiling for older discretionary services (i.e., discretionary services that existed on or before September 1, 1995). In addition, SWBT suggested that any future changes to the initial price ceiling for recent discretionary services should be governed by the same rules that are applicable to changes to initial price ceiling for older discretionary services.

The commission notes that the initial price ceilings for older discretionary services and the process by which such price ceilings should be adjusted have already been established by the Legislature. Specifically, PURA §58.102(b) sets the initial maximum price for an older discretionary service at the price in effect on September 1, 1995, and PURA §58.102 (c) and (d) authorizes the commission to change the initial maximum price after the proceedings required by PURA Chapter 60 relating to competitive safeguards. The commission agrees with SWBT that in order to be consistent with initial price ceilings for older discretionary services, the price in effect as of the effective date of the rule should serve as the initial price ceiling for recent discretionary services. Furthermore, future changes to the initial price ceiling for recent discretionary services should be governed by the same set of rules applicable to changing the initial price ceiling for older discretionary services, which are set forth in PURA §58.102 (c) and (d). The commission has modified the language in subsection (f)(3) so that the price ceiling for discretionary services offered after September 1, 1995 is set at the rate in effect as of the effective date of the rule. Furthermore, subsection (f)(4) permits changes to the price ceiling for discretionary services after the proceedings required under PURA Chapter 60.

Question 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?

SWBT supported setting the initial price ceiling for future discretionary services at a level that is higher than the initial rate proposed. However, instead of specifying the level to be 10% higher than the initial rate, SWBT recommended that an electing company should be allowed to propose both an initial rate and an initial ceiling rate in its application. SWBT contended that under this approach, the electing company would bear the burden of proof to demonstrate that both its proposed initial rate and initial ceiling rate are just and reasonable. The commission would then determine whether the utility had met that burden.

OPC commented that SWBT's proposal invites needless litigation by requiring the issue of a price ceiling to be decided on a case by case basis. Instead, OPC suggested that the commission should establish a price ceiling for future discretionary services based on some percentage above cost or establish a price ceiling at a level that is 10% higher than the initial rate proposed.

The commission agrees with OPC that SWBT's approach invites needless litigation. The commission also agrees with OPC that a cost based ceiling is ideally preferred. However, the theoretically sound concept for price ceiling is the stand-alone cost. The commission finds that a more administratively reasonable alternative would be to adopt a ceiling at a level that is 10% above the initial proposed rate. The commission believes that for future discretionary services, setting a price ceiling higher than the initial proposed rate is in the public interest. As competition develops, this approach would give electing companies both the incentive and opportunities to introduce new and innovative services at a promotional rate below the price ceiling. Customers will also benefit because of the availability of innovative services at lower prices.

The commission, therefore, adds language in subsection (f)(3) that would permit the establishment of a price ceiling at a level not more than 10% over the initial rate approved by the commission. In the event that the electing LEC does not propose a price ceiling different from initial rate, the initial rate approved by the commission would serve as the price ceiling.

In adopting this section, the commission makes other minor modifications for the purposes of clarifying its intent. All comments, including any not specifically referenced herein, were fully considered by the commission.

This section is adopted under the Public Utility Regulatory Act (PURA), Texas Utilities Code Annotated §14.002, 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; §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 pricing rule to ensure that monopoly services remain affordable and competitive services are not used in a manner that would harm competition in the local market.

Cross-Index to Statutes: Public Utility Commission of Texas §§14.002, 52.001(b), 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 subsidy-free. 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 §26.274 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)

The price ceiling for a discretionary service initially offered on or before September 1, 1995 by an electing LEC is 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. For services initially offered after September 1, 1995, the price ceiling shall be the rate in effect as of the effective date of this section. For services initially offered after the effective date of this rule, the price ceiling may not be set at more than 10% over the initial rate approved by the commission. In the event the electing LEC does not propose a price ceiling that is different from the initial rate for a service initially offered after the effective date of this rule, the initial rate approved by the commission shall serve as the price ceiling.

(4)

The price ceiling may be raised only after the proceedings required under PURA, Chapter 60. Thereafter, on application by the electing LEC 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 the WATS 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 §26.274 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 adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 2, 1999.

TRD-9903259

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Effective date: June 22, 1999

Proposal publication date: February 5, 1999

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