3. Background

Complainant, who resides in Kings Beach, California, has long subscribed to a Pacific foreign exchange service that permits him to have a telephone number and dial tone exchange associated with the Crystal Bay (Nevada Bell) exchange that serves the nearby Nevada communities of Incline Village and Crystal Bay. Complainant alleges that he and others with similar foreign exchange service had an oral agreement with Pacific and Nevada Bell that the cost of this service, $10.65 per month, would not be increased for the lifetime of those customers who retained ownership of their homes.

Pacific states that the Commission authorized increases in foreign exchange rates effective January 1, 1995, in Decision (D.) 94-09-065, also known as the IRD (Implementation Rate Design) decision. Pacific states that the current rate for complainant's service is $34.15 per month, comprised of Pacific's access line flat rate of $10.69 and a foreign exchange increment of $23.46, plus (in complainant's case) a foreign exchange mileage rate of 47 cents per quarter mile. The rate is set forth in tariff schedule Cal. P.U.C. No. A5.1.5.F.3.b for Crystal Bay Foreign Exchange residence rates.

Pacific admits that, through administrative error, it failed to charge complainant under the new foreign exchange tariff from 1995 until early last year, when it began assessing the correct amount on complainant's bill. Complainant has been refusing to pay what he believes to be the "illegal rate increase" now imposed by Pacific.

Pacific states that shortly after the IRD decision, it notified foreign exchange subscribers of the increased rates authorized by the Commission and offered them the option of switching to residential flat rate service if that would serve their needs at lower cost. Pacific admits that it has no record showing that the notification letter was sent to complainant. The utility also admits that it did not send a notice of billing correction to complainant when it began assessing the tariffed foreign exchange charges.