SENATE BILL REPORT

SB 5098

BYSenators Benitz, Stratton, Bluechel, Sutherland, Newhouse, Warnke, von Reichbauer, Matson, Vognild, Smitherman, Johnson, Bauer, Sellar, Saling and Madsen

Regulating telecommunication companies.

Senate Committee on Energy & Utilities

Senate Hearing Date(s):January 24, 1989; February 9, 1989; February 14, 1989; February 21, 1989

Majority Report:  That Substitute Senate Bill No. 5098 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Benitz, Chairman; Bluechel, Vice Chairman; Metcalf, Nelson, Pullen, Stratton, Sutherland.

Senate Staff:Phil Moeller (786-7455)

                  February 21, 1989

AS REPORTED BY COMMITTEE ON ENERGY & UTILITIES, FEBRUARY 21, 1989

BACKGROUND:

The telecommunications industry consists of firms offering services with a wide range of competitiveness.  In 1985 the Legislature enacted legislation which allows the Utilities and Transportation Commission (UTC) to classify companies or services as competitive, a classification which allows pricing freedom.

Unless a service has been declared competitive by the UTC, a telephone company must submit its rates for UTC approval.  This process can last nearly a year, and critics contend the present system lacks effective incentives for companies to become more efficient.

SUMMARY:

The Utilities and Transportation Commission (UTC) may authorize alternative forms of regulation for telecommunication companies other than traditional rate of return regulation.  Alternative forms of regulation may be proposed by the UTC or by a company subject to rate of return regulation.  Once the UTC orders an alternative form, a company has 60 days to withdraw from the proposal.

In certain circumstances, the UTC may authorize an abbreviated formal proceeding.  When using this procedure, the UTC may limit the record to written submissions.

Companies or services classified as competitive are exempt from sections prohibiting pricing preference or discrimination.  The UTC is given primary jurisdiction to determine whether preference or pricing discrimination has occurred.

The UTC is directed to adopt rules on public disclosure of terms and conditions of contracts entered into by telecommunications firms.  The requirement to file price lists may be waived for contracts of competitive services.

The UTC may not suspend rate decreases as long as there are no accompanying and offsetting rate increases.  A rate decrease filing must include information showing the rate is above the long run incremental cost of the service.

When the UTC conducts a proceeding to determine whether a company or service is competitive, the final order shall be entered within ten months of the filing.

EFFECT OF PROPOSED SUBSTITUTE:

The UTC must consider specified conditions before ruling on any proposed alternative form of regulation.  The UTC is granted authority to rescind an alternative form of regulation.  In an abbreviated formal proceeding, the UTC may determine to hold at least one public hearing.

Only the contracts of companies or services classified as competitive are exempt from sections prohibiting preference and pricing discrimination.  The UTC is authorized to continue to require statewide averaged toll rates.

Companies providing noncompetitive services are prohibited from showing preference or price discrimination.  The UTC may determine the conditions for unbundling noncompetitive services.

Contracts shall be for a stated time period and shall cover costs.  Existing contracts remain enforceable.  If a contract covers both competitive and noncompetitive services, the noncompetitive services shall be unbundled and priced separately. Other statutory references to contracts are deleted.

Language is added to clarify that the UTC may waive the requirements of sections prohibiting preference and price discrimination if it finds the competition will protect the public interest.  The UTC shall enter a final order within ten months when complaints are filed by any entity other than the UTC itself.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 16, 1989

Senate Committee - Testified: Steve Wehry, Lyle Williamson, MCI (con); Mark Bloomey, Heart of America NW (con); Pamela Portin, US West (pro); John Jaeger, CWA (pro); Art Butler, Tracer; Mike Woodin, AT&T; John Riewer, IBEW Local 1011 (pro); Steve McLellan, WUTC; Frank Morris, Puget Sound Council of Senior Citizens (con); Bill Jones, Retired Railroad (con)