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PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Telecommunications Division RESOLUTION T-16483

Carrier Branch January 4, 2001

R E S O L U T I O N

RESOLUTION T-16483. PACIFIC BELL (1001-C). REQUEST FOR APPROVAL 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 DECISION (D.) 96-03-020 AND D.97-04-090.

BY ADVICE LETTER (AL) NO. 20469, FILED AUGUST 10, 1999. _________________________________________________________________

SUMMARY

Pacific Bell's (Pacific) 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 (rates or prices), is approved. This approval will correct an on-going error created when the access billing surcharge/surcredit, applicable to access services, is used to adjust the rates for resale exchange and toll services contained in Pacific's access tariff schedule.

Pacific's billing surcharge/surcredit changes are reflected in its Tariff Schedule Cal. P.U.C. No. A2, General Regulations, Rule 2.1.33, Rule 33 - Billing Surcharges.

Currently, Pacific is erroneously applying the "access" billing surcharge/surcredit to all its resale services even though Pacific's access tariff schedule contains not only access services, but also resale exchange and toll services, which have different respective retail billing surcharges/surcredits than access services. Consequently, this results in other than a 17% discount on resale service rates as mandated by D.96-03-020 and D.97-04-090.

Pacific is ordered to correct its resale rates in its Tariff Schedule Cal. P.U.C. 175-T, Section 18, to restore the mandated 17% discount pursuant to D.96-03-020 and D.97-04-090. The revised tariff sheets shall be filed in time to become effective on June 4, 2001.

BACKGROUND

With some exceptions, D.96-03-020 requires Pacific to make available to its resale customers the same telecommunications services that are provided to its retail customers. The decision further requires a 17% discount for business services and 10% discount for residential access services when offered for resale. Subsequently, D.97-04-090 changed the resale discount for residential access services from 10% to 17%.

Pacific's resale tariff, Schedule Cal. P.U.C. 175-T, is commonly called the "Access Tariff". Pacific has been erroneously applying the "access" billing surcharge/surcredit to all its resale services even though Pacific's access tariff schedule contains not only access services, but also resale exchange and toll services. The exchange and toll services offered for resale have different respective retail billing surcharges/surcredits than access services. Since the billing surcharges/surcredits for access, exchange and toll services are not identical, Pacific recognized that the exact 17% discount is not being maintained on its resale exchange and toll services. To correct this error, Pacific filed AL No. 20469 on August 10, 1999, seeking Commission authority to revise its Tariff Schedule Cal. P.U.C. A2, General Regulations, Rule 2.1.33, Rule No. 33 - Billing Surcharges, which consists of the billing surcharges/surcredits for access, exchange and toll services. Pacific is requesting that the same Rule 33 billing surcharges/surcredits applicable to its retail exchange and toll services also be applied to its corresponding resale services in order to maintain the Commission mandated 17% discount.

After the adoption of the new regulatory framework in D.89-10-031, Pacific accumulated revenue adjustments associated with its annual price caps filing in the form of a permanent surcharge component in Rule 33 - Billing Surcharges in its Tariff Schedule Cal. P.U.C. No. A2, General Regulations. Ordering Paragraph (OP) 62 of D.94-09-065 provides that when the cumulative permanent surcharge exceeded 5%, Pacific would be required to revise all of its tariffed rates. As a result, OP 4 of Resolution T-16265, dated January 20, 1999, required Pacific to change its rates when its surcharges and/or surcredits exceeded the 5% threshold specified in D.94-09-065 in 1999. Accordingly, Pacific filed AL No. 20400 on July 1, 1999, which became effective November 1, 1999, to make the required reductions in its entire tariff schedules. However, Pacific now advises that one impact of this rate reduction was that only the access billing surcredit for access services of 5.421% was used to adjust all of its resale exchange and toll services rates. Thus, Pacific's existing resale exchange and toll services rates (adopted with AL No. 20400) do not reflect the mandated 17% discount.

NOTICE/PROTESTS

Pacific states that copies of AL No. 20469 were mailed to competing and adjacent utilities/and or other utilities, and interested parties, as requested. In addition, this AL was published in the Commission Daily Calendar of August 16, 1999. There have been no protests.

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:

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 4, 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 4, 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). No comments were received on this resolution.

FINDINGS

1. Pacific, in AL 20469, requests authority to apply the same retail exchange and toll service billing surcharge/surcredit billing adjustments to its corresponding resale exchange and toll service rates to reflect an exact 17% discount as mandated by D.96-03-020 and D.97-04-090.

2. OP 62 of D.94-09-065 authorized Pacific to implement the 1995 price cap rate adjustments through the billing surcharge/surcredit mechanism.

3. D.96-03-020 ordered Pacific to make available certain retail services to CLECs for resale at a 17% discount for business services and 10% for residential access services. Subsequently, D.97-04-090 changed the discount for residential access services from 10% to 17%.

4. Pacific has three different billing surcharge/surcredit billing adjustments applicable to access, exchange, and toll services in Rule 2.1.33, Rule 33 - Billing Surcharges of Tariff Schedule Cal. P.U.C. No. A2, General Regulations.

5. Currently, Pacific is erroneously applying the access billing surcharge/surcredit billing adjustment to its entire resale tariff, Schedule Cal. P.U.C. 175-T, even though services offered for resale include not only intraLATA access services, but also exchange and toll services.

6. Even though 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 only the access billing surcharge/surcredit mechanism.

7. In 1999 Pacific exceeded the 5% threshold specified in OP 62 of D.94-09-065.

8. OP 4 of Resolution T-16265, dated January 20, 1999 (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 billing adjustment mechanism by July 1, 1999.

9. AL No. 20400, filed July 1, 1999, and which became effective November 1, 1999, made the required rate reductions in Pacific's entire retail tariff rates namely, 5.009%, 5.179%, and 5.421%, on its exchange, toll, and access services, respectively.

10. 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.

11. In order to restore an exact 17% discount off Pacific's retail exchange and toll services rates, TD recommends that the company correct its current resale exchange and toll services tariff rates adopted with AL No. 20400.

12. Pacific proposes that the surcharge/surcredit billing adjustments be implemented effective June 4, 2001 in order to provide the company sufficient time to reprogram its billing system.

13. 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 to reflect an exact 17% discount as mandated by D.96-03-020 and D.97-04-090 is appropriate and reasonable.

14. In order for the corrected resale rates to become effective on June 4, 2001, which is the same date that AL No. 20469 will be implemented, 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.

THEREFORE, IT IS ORDERED that:

1. 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 to reflect an exact 17% discount as mandated by D.96-03-020 and D.97-04-090 is approved.

2. Pacific shall correct its existing resale exchange and toll tariff rates, which were adopted with AL No. 20400 in Tariff Schedule Cal. P.U.C. 175-T, Section 18, to restore the mandated 17% discount. The AL must be filed in time to become effective on June 4, 2001, which is the same date that AL No. 20469 shall be implemented.

This Resolution is effective today.

I hereby certify that the Public Utilities Commission, at its regular meeting on January 4, 2001, adopted this Resolution. The following Commissioners approved it:

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