Rules & Regulations of the State of Tennessee
Title 1220 - Tennessee Public Utility Commission
Subtitle 1220-04 - Division of Public Utilities
Chapter 1220-04-02 - Regulations for Telephone Companies
Section 1220-04-02-.55 - REGULATORY REFORM

Universal Citation: TN Comp Rules and Regs 1220-04-02-.55

Current through September 24, 2024

(1) As an alternative to traditional rate making procedures, a local exchange carrier (LEC) may elect to operate under the regulatory reform plan described below. The Authority may modify the plan in order to meet the circumstances of a particular LEC as demonstrated by the record before the agency.

(a) The Authority will project the carrier's earnings over a forecast test period of two to four years which will be the period of the regulatory reform plan. Neither the Authority nor the carrier will initiate proceedings to adjust the carriers earnings during the forecast period except as provided herein.

(b) If under appropriate circumstances and the Authority so directs, all or part of projected earnings in excess of the carriers prescribed return may be placed in an interest bearing deferred revenue account and used to implement the technology schedule described in rules 1220-4-6-.01 through 1220-4-6-.05 or for such other purposes as the Authority directs. Interest on the deferred revenues account shall be calculated using the average monthly balance based on the beginning and ending monthly balances. The interest rate for each calendar quarter used to compute such interest shall be equal to the arithmetic mean (to the nearest one-hundredth of one percent) of the prime rate value published in the Federal Reserve Bulletin or in the Federal Reserve's Selected Interest Rates for the 4th, 3rd, and 2nd months preceding the 1st month of the calendar quarter.

(c) During the forecast period, earnings adjustments for large LECs (70,000 or more access lines) will be made as described in this section. Other LECs may elect to operate under section (1)(c) or under Section (1)(d).
1. If the carrier earns within sixty (60) basis points of its prescribed return on capital. no earnings adjustment will be made.

2. If the carrier earns more than four hundred sixty (460) basis points above its prescribed return, the amount of the excess will be used to benefit the carrier's customers. If the carrier earns more than four hundred sixty (460) points below its prescribed return, the Authority will take appropriate action to make up the amount of the deficit.

3. If the carrier earns between sixty (60) and four hundred fifty (450) points above or below the carriers prescribed return, the excess or deficit will be shared with the carrier's customer on a 40-60, 45-55, 50-50, 55-45, or 60-40 basis depending upon the carrier's service rating level as determined by the Authority in accordance with section (f) of this rule.

(d) For small LECs (less than 70,000 access lines) which do not choose to operate under section (1)(c), no earnings adjustment will be made unless the carrier's earned return on equity during the forecast period is more than two hundred (200) basis points above or below the carriers prescribed return. Should that occur, either the Authority or the carrier may initiate rate review proceedings for prospective relief.

(e) If during the forecast period, changes occur which jeopardize the interests of ratepayers or the financial stability of a carrier, the Authority or the carrier may initiate rate review proceedings for prospective relief.

(f) Subject to Authority review, the Utilities Divisions shall, in cooperation with the carriers, develop appropriate accounting procedures, reporting requirements, and service standards necessary to implement these rules.

(g) Any small LEC choosing to operate under this regulatory reform plan must so notify the Authority at least six (6) months prior to the beginning of the LEC's forecast test period. Any large LEC must notify the Authority at least nine (9) months in advance. For good cause shown, the Authority may amend these time limits.

(2) Intrastate InterLATA services.

(a) Definitions.
1. "Certificated interLATA resellers" are non-facilities based telecommunications companies providing intrastate interLATA service as a reseller which are subject to Rule 1220.4.2..57, and any portion of this rule sub-section in which said resellers are specifically mentioned.

2. Facility-based providers of intrastate interLATA services are companies owning facilities in the state which consist of network elements, switches, or other communication transmission equipment used to carry voice, data, image, and video traffic across the LATA boundaries within Tennessee (i.e., intrastate interLATA communications) or to carry any other communications traffic approved by the Authority for these carriers.

3. "Intrastate interLATA services" are those services that provide two-way voice or data communications between points in different LATAs.

4. "Tariff or price filing date" is the date on which the Authority receives a filing.

(b) Tariff Rules and Regulations.
1. All facility-based providers of intrastate interLATA services shall file tariffs for all intrastate services. Such tariffs shall include a description of every intrastate service offered and terms and conditions for each service. The Authority shall evaluate market share based on data obtained from the Federal Communications Commission and/or other sources as the Authority may require.

2. Each service shall be made available at the rate specified in the tariffs to any customer meeting the terms and conditions for that service.

3. Tariff filings involving new services or rate increases may be suspended by the Authority only upon a showing of good cause.

(c) Rate and Price Setting Requirements.

Section (c) applies to facility-based providers with more than five percent (5%) of the intrastate interLATA market as determined by the Authority.

1. Services will be categorized as Basic Residential Services or All Other Services.

2. The Basic Residential Services category shall include 1+ traffic originated from a residential location, excluding calls made under an optional calling plan. This category shall also include 0+ and 0- calls billed to a residential calling card or residential telephone number and person-to-person residential calls, excluding calls made under an optional calling plan. Operator surcharges and per minute rates are included in this category. The Authority shall designate the associated rate schedules to be included in the Basic Residential Services category.

3. The Authority shall establish a rate cap for the Basic Residential Services category. The initial cap will be the rates in effect on the effective date of this rule. The rate cap shall be adjusted to reflect any changes in switched access charges for services in the Basic Residential Services category within thirty (30) days of said access adjustments. The amount of any access charge change for the Basic Residential Services category shall be the average statewide per minute access reduction multiplied by most recent twelve (12) months-to-date total minutes of use in the Basic Residential Services category of each affected provider. Each provider shall submit evidence to support its calculations of its change in switched access charges.

4. Revenue neutral adjustments within the Basic Residential Services category are permitted as long as a provider of intrastate interLATA services demonstrates to the Authority that said rate adjustments will be revenue neutral to the service provider. Revenue neutral adjustments will be determined by using the most recent twelve (12) months-to-date minutes of use by rate band for each rate in the Basic Residential Services category multiplied by the existing and proposed rates.

5. Rates for the All Other Services category may be established as the provider deems appropriate, but may be reviewed by the Authority in accordance with the provisions of this rule sub-section.

6. Upon a finding by the Authority that existing and potential competition is an effective regulator of the price of Basic Residential Service, the Authority may exempt such service from the rate cap established in 1220-4-2-.55(2)(c) 3.

7. Upon a finding by the Authority that the existing competitive activity is not effectively regulating the price of a service in the All Other Services category to adequately serve the public interest, the Authority may place such service in the Basic Residential Services category.

(d) Price Adjustments.
1. Price reductions shall become effective on the tariff filing date. The Authority may, however, review these reductions upon its own motion or upon the petition of any interested party.

2. No tariff filing submitted pursuant to this rule that increases rates or changes terms and conditions which result in an increase in the billed rate of any service shall take effect sooner than thirty (30) days after notice to the Authority, unless otherwise directed by the Authority. Affected customers shall be notified in a conspicuous manner by direct mail and by publication of a notice in a newspaper of general circulation in the affected service area thirty (30) days prior to the effective date of any rate increases. A copy of such notice shall be filed with the Authority concurrent with the tariff filing.

3. Any change in the previously approved terms and conditions of a service requires thirty (30) days notice to both the Authority and the customer in order to enable the customer sufficient time to qualify for the service. At any time after a change in the terms or conditions of a customer's existing service by the carrier, a customer may cancel service without the application of termination charges.

(e) New Services.
1. New services shall become effective upon filing of tariffs with the Authority. The Authority may, however, review such tariffs upon its own motion or upon the petition of any interested party.

2. Services or calling plans that automatically convert customers from an existing service shall not be classified as a new service. New services are those that are independent from other previously approved services and are filed separately from any existing service or calling plan.

(f) Special Services or Contracts.
1. A summary of all special contracts shall be filed with the Authority. The contract shall be made available to the Authority upon request.

2. Special contracts or special pricing packages shall be permitted provided that the service being provided thereunder is available at the same rate to any customer meeting the special terms and conditions.

(g) Consumer Safeguards
1. No provider of intrastate interLATA services shall de-average rates for interLATA service without prior Authority approval.

2. No provider of intrastate interLATA services shall abandon residential services to any location in the state without prior customer notification and Authority approval.

3. Providers of intrastate interLATA services shall comply with all extended area service toll-free calling plans deemed to be in the public interest by the Authority.

4. Failure to comply with any rule or order adopted by the Authority may result in the investigation of whether a provider of intrastate interLATA services continues to operate in the public interest. The Authority may fine a provider of intrastate interLATA service pursuant to T.C.A. § 65-4-120 for violation of an Authority Order or pursue any other enforcement remedy provided by state law.

5. Nothing in this subsection precludes the Authority from acting on its own motion to suspend a tariff or initiate an investigation into any prices or tariffs filed pursuant to this rule sub-section.

6. Providers of intrastate interLATA services shall participate in any support mechanism for Universal Service as may be approved by the Authority.

(h) Reporting.
1. Providers of intrastate interLATA services are required to maintain books and records in a manner consistent with that required by the Federal Communications Commission for each company unless said reporting requirements are specifically waived or otherwise modified by the Authority.

2. The Authority shall monitor technology applications, quality of service and market share conditions through reports and oral presentations made by the providers of intrastate interLATA services. The Authority may request these reports and presentations on a periodic basis, as required, to evaluate service levels and technology deployment results and plans.

3. Providers of intrastate interLATA services shall respond to customer complaints pursuant to Authority rules.

4. Facility-based providers of intrastate interLATA services with greater than five percent (5%) of the state's interLATA market as determined by the Authority shall file reports annually by April 1st containing:
(1) the previous calendar year's intrastate minutes of use and revenues for the Basic Residential Services category, and

(2) the previous calendar year's total intrastate revenues and minutes of use for the service in the All Other Services category.

5. Nothing in this rule precludes the Authority from requiring additional reports.

Authority: T.C.A. §§ 65-2-102, 65-4-104, 65-4-111, 65-4-201, 65-5-102, and 65-5-103.

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