IX. Billing Adjustment Issues

As set forth in D.03-03-033, Verizon must adjust, or "true-up" the interim rates it has charged since March 2003 for loops and switching to the new rates adopted in this order. In other words, Verizon must calculate whether its interim rates are higher or lower than today's newly adopted rates, and whether it has over or under-collected the appropriate revenues for any UNEs it sold at interim rates.

In the SBC UNE proceeding, a similar true-up process was required to adjust interim rates to permanent levels. In that order, the Commission recognized that because UNE permanent rates were in many cases higher than the interim rates that had been in place for over two years, competitive carriers who had purchased UNEs at the lower interim rates owed SBC a substantial sum. (D.04-09-063 mimeo at 254.) The Commission stayed the effectiveness of any true-up payments pending a review of the size of the actual true-up and consideration of mitigation measures.

In this order, we note that the average 2-wire loop rate has increased from an interim level of $11.62 per month (later modified to $11.36 in D.05-01-057), to the new permanent rate of $14.07. Thus, for UNE loops alone, the permanent statewide average rate has increased 21% from the initial interim rate (in effect from March 2003 through January 2005), and 24% from the current interim rate (in effect February 2005 through the date of this order). UNE switching rates will also require a true-up, and the net effect of these two UNE rate changes must be considered. The initial statewide average interim UNE-P rate was $17.14 per month, increased in February 2005 to $17.62, and is now $17.53 per month. Thus, any UNE-P billing adjustments should consider the 2.3% increase in the permanent rate from the initial interim rate, as well as the fact that the new UNE-P rate is .5% less than the revised interim rate.

Within 60 days of the date of this order, Verizon should calculate any billing adjustments owed to or by interconnecting carriers based on the modification of interim rates set in D.03-03-033 and revised in D.05-01-057. For the same reasons noted in the SBC UNE order, we will stay the effective date of any true-up until its amount can be calculated and further proceedings held to determine payment options or consider other mitigations to minimize negative financial effects of the true-up on competitive carriers.