Discussion

Pursuant to Section 532,⁷ all utilities must charge for their services in accord with their tariff schedules on file with the Commission. All amounts collected other than in accord with the tariff schedules are unlawful, unreasonable and subject to an order of reparations pursuant to Section 734. Every public utility must "obey and comply with every order, decision, direction, or rule made or prescribed by the Commission." (Section 702.) The Commission may impose a fine of not less than $500 nor more than $20,000 for each violation of the California Constitution, Public Utilities Code or order of the Commission, (Section 2107.) Each day of a continuing violation constitutes a separate violation, (Section 2108.)

The Commission does not exempt new market entrants from compliance with these standards:

We do not condone some sort of "learning period" for new long distance service providers, or any public utility. When we grant a CPCN, we are not necessarily authorizing a research and development effort or a learning opportunity; rather, we are granting authority to the carrier to provide "adequate, efficient, just, and reasonable service . . . as [is] necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public." (Pub. Util. Code § 451.) We expect all certificated public utilities to comply with all applicable requirements at all times.

Communications TeleSystems International, (1997) 72 CPUC2d 621, 629 (D.97-05-089).

MCI Metro has conceded its billing errors.⁸ Billing errors, intentional or not, have serious negative consequences for a utility's customers. As the record in this proceeding shows, billing errors can be difficult to detect and correct.

Returning all improperly collected amounts to the customers is also a

daunting task. The record in this case shows that MCI Metro could not in all instances (1) identify affected customers, (2) precisely calculate the refund owed, and (3) locate the customers. In recognition of these deficiencies, MCI Metro credited all outstanding balances, including those referred to outside collection agencies, as of the customers' January 2000 invoices for all 32,387 customers affected by these billing errors. The total amount credited was $3,515,291. While this action has the important effect of forcing MCI Metro to disgorge all benefits of the erroneous billings, the amount outstanding on an individual customer's January bill may or may not correlate with the amount which resulted from the erroneous billing. Hence, individual customers may have been under- or over-compensated.

Our goal is accurate refunds. Where perfect accuracy is not feasible, however, our equitable authority allows us to utilize the concept of fluid recovery to distribute the funds. See D.00-04-027, mimeo. at pp. 5-10. Thus, we approve the form of credit used by MCI Metro to accomplish these refunds.

Because it is so difficult to correct billing errors, prevention of billing errors must be a high priority for all utilities. The expense and inconvenience of correcting billing errors should constitute an incentive to prevent such errors. When such errors occur, however, particularly on the scale present here, the public interest requires that the Commission use its powers to provide further incentives in ensure accurate billing.

As a general matter, the Commission's priorities in enforcement proceedings, where violations of law or regulations have been established are to: (1) bring to an end any ongoing violations, (2) provide complete restitution to victims of the wrongdoing, and (3) deter future violations through the use of fines. Here, MCI Metro has corrected the billing errors addressed in this proceeding, so our first priority has been met.

Our second objective, providing restitution to victims, is the issue that the parties have been grappling with throughout this proceeding. We expect any entity that obtains funds in violation of the Public Utilities Code or our regulations to promptly and completely return all such funds to customers. Here, the factual stipulation shows that MCI Metro has made an effort to identify each and every overcharge and to make full restitution. The stipulation also shows that it is not possible for MCI Metro to accomplish this goal fully. To address this inadequacy, MCI Metro credited all outstanding unpaid balances as of January 2000 on all accounts affected by the billing errors. Accordingly, MCI Metro credited customers $3,515,291 as proxy for the amounts it could not calculate. UCAN did not seek any further restitution by MCI Metro .Thus, the parties to this case have agreed that, as best can be calculated, customers have received a full refund of all overcharges. We, conclude therefore, that our second objective has been met.

We will next consider our third objective -- the possibility of a fine pursuant to our guidelines -- quite apart from the amounts paid for restitution. The purpose of fines is to deter further violations by the current perpetrator or others. Here, as noted, the administrative burden of identifying and correcting billing errors creates a practical incentive to avoid them. Consistent with our guidelines, however, we will impose a fine as a further deterrent.

The Commission may impose fines payable to the State of California pursuant to § 2107. Such fines must be between $500 and $20,000 per offense. Each day of a continuing offense constitutes a separate and distinct offense. Because the objective of fines is to deter future violations, fines should be set at a level within the range permitted by §2107 that is sufficient to achieve the objective of deterrence without being excessive.

In this case, the factual stipulation shows that the one-minute overcharge issue occurred from February 1, 1997, to May 14, 1998, or approximately 16 months. The lack of notice of rate increase to customers was corrected approximately 6 months after the rate increase was implemented. The inaccurate coding of accounts occurred over "several months" in 1997 and 1998. Imposing a per day and error fine results in the following:

One-minute overcharge

16 months x 30 days/month x $500 = $ 240,000

Lack of Notice

6 months x 30 days/month x $500 = $ 90,000

Inaccurate Coding

6 months⁹ x 30 days/month x $500 = $ 90,000

TOTAL $ 420,000

In recognition of the MCI Metro's cooperation in correcting the billing errors brought to light by this complaint, we will use the low end of the range of permissible fines.