DISCUSSION

In D.94-09-065, the Commission authorized Pacific to implement the 1995 price cap rate adjustments through the use of a billing surcharge/surcredit mechanism. Specifically, OP 62 of the decision provides as follows:

"Pacific and GTEC shall make modest revenue changes through the Rule 33 and Schedule A-38 surcharges/surcredits of Pacific and GTEC, respectively. However, if the net change from price cap factors and other Commission-ordered surcharges/surcredits totals 5% or more on a cumulative basis, the LEC must revise its rates as directed in D. 89-10-031 by the amount of the net change. Subject to the 5% limitation, the NRF LECs are excused from making the yearly rate adjustments required by D.89-10-031. This provision is effective beginning with changes resulting from the 1995 price cap filing."

D.96-03-020 required Pacific to make available certain retail services to Competitive Local Exchange Carriers (CLECs) for resale at a discount. Business services and residential access services were required to be discounted at 17% and 10%, respectively. However, D.97-04-090 subsequently increased the resale discount for residential basic services to 17%. Since Pacific's resale exchange and toll services are included in Schedule Cal. P.U.C. 175-T, commonly called the Access Tariff, Pacific's billing system has been erroneously applying the access billing surcharge/surcredit to its resale exchange and toll services.

Although Pacific's resale rates for exchange and toll services are required to be set at 17% below its retail rates, resale prices could, in fact, be either more or less than the mandated 17% discount if the resale exchange and toll service rates are adjusted by the access surcharge/surcredit billing adjustment mechanism only.

In 1999 when Pacific exceeded the 5% threshold specified in D.94-09-065, the Commission, in OP 4 of Resolution T-16265 (AL No. 19761), directed Pacific, among other things, to revise its tariffs to reflect the cumulative net change in revenues from price cap factors through the use of its Rule 33 billing surcharge/surcredit mechanism by July 1, 1999. Accordingly, Pacific's AL No. 20400, filed July 1, 1999, and which became effective November 1, 1999, made the required rate reductions in its entire retail tariff rates, namely, 5.009%, 5.179%, and 5.421%, on its exchange, toll, and access services, respectively. However, Pacific has discovered that its existing resale exchange and toll rates do not equate to exactly 17% off the corresponding retail rates. Pacific's current exchange and toll resale rates were adjusted by the 5.421% access billing surcredit instead of 5.009% and 5.179%, respectively.

In order to restore the 17% discount mandated by the Commission, Pacific requests, in AL No. 20469, to use the same billing surcharges/surcredits that are being applied to its retail exchange and toll services as adjustments to its resale exchange and toll services. In addition, Pacific proposes that these surcharge/surcredit billing adjustments be implemented effective June 1, 2001 in order to provide the company sufficient time to reprogram its billing system.

Even though the Telecommunications Division (TD) concurs with Pacific's proposal to apply the same retail exchange and toll service surcharge/surcredit billing adjustments to its corresponding resale exchange and toll service rates, the resale rates will still not be discounted by 17%. As discussed earlier, Pacific's current resale rates for exchange and toll services are based on the previous resale exchange and toll service rates less the 5.421% access billing surcredit adjustment. Consequently, the existing resale rates do not reflect an exact 17% discount. Therefore, in order to restore an exact 17% discount off its retail exchange and toll services rates, TD recommends that Pacific correct its current resale exchange and toll services tariff rates adopted with AL No. 20400. This correction would result in increases of approximately 0.431% and 0.254%, respectively, depending on how the existing rates were rounded. In order for the corrected resale rates to become effective on June 1, 2001, Pacific has indicated to TD staff that it intends to make an AL filing in April 2001. This filing would include the corrected resale exchange and toll services tariff rates.

TD believes that Pacific's request in AL No. 20469 to apply the same retail exchange and toll service surcharge/surcredit billing adjustments to its corresponding resale exchange and toll service rates and charges to reflect an exact 17% discount as mandated by D.96-03-020 and D.97-04-090 is appropriate and reasonable.

In light of the above discussion, we find Pacific's request in AL No. 20469 and TD's recommendation for Pacific to correct its resale rates for exchange and toll services as appropriate remedies to restore and maintain the 17% discount as mandated by D.96-03-020 and D.97-04-090.

The draft resolution of the Telecommunications Division in this matter was mailed to the parties in accordance with PU Code Section 311(g)(1). Comments were filed on (date) by (names of parties) and reply comments were filed on (date) by (names of parties). [disposition of comments/revisions to draft resolution].